How California’s budget depends on staggering wealth gap

Posted by Jackie Botts, The California Divide at Wednesday, January 13, 2021 at 2:24 PM

Gov. Gavin Newsom’s $227 billion California spending plan is setting records in more ways than one.

Were his budget proposal approved by lawmakers as is, the state would spend an unprecedented amount to fend off poverty, eviction and K-12 education loss for California’s most vulnerable residents in the 2021-22 fiscal year. And that would be funded, in part, by unparalleled tax revenues from the soaring income growth and stock market gains that the richest Californians enjoyed this year.

“Folks at the top are doing pretty damn well,” Newsom said Friday. “But I don’t begrudge that success, I admire and respect it.”

The last recession led to a major dip in state tax revenue. This one is on track to top its spending limit for only the second time in California history. Under the arcane cap known as the Gann Limit, the state can’t spend more tax revenue per Californian than it did in 1978, adjusted for inflation. Any state revenue over that cap must be split between investments in schools and rebates to taxpayers, which could pencil out to roughly $1.70 per person.

Two main factors drive the governor’s predictions of Gann-limit-busting revenue.

First, California’s tax system is considered among the most progressive in the country, meaning that state taxes take a bigger bite, as a percentage, out of wealthy Californians’ incomes and wealth gains than most other states and invest it in social programs. Depending on your fiscal attitude, you may view this form of income redistribution as a sign of California’s commitment to equity. Or you might see an unhealthy reliance on a tiny sliver of the population to fund social programs, while throttling economic growth.

Second, California’s top earners, largely tech moguls in the Bay Area, have made a killing during the pandemic. One in four American billionaires live in California. They gleaned about 40% of the wealth that U.S. billionaires added between Mar. 18 and Dec. 7, according to a CalMatters analysis of Forbes’ billionaires database. In fact, the riches that California billionaires gained during those nine months could almost fund two years of state spending.

In a sense, the state’s progressive tax structure is doing exactly what it’s supposed to do: reap billions from the wealthiest to fund the state’s safety net — and that’s without a wealth tax that some progressive lawmakers have rallied around and that Newsom definitively promised is “not part of the conversation.” But it reveals the deep irony of how a pandemic that has stripped livelihoods, good health and housing security from millions of Californians has also helped fatten the pockets of California’s wealthiest and, thus, the state’s coffers.

While Newsom is asking that lawmakers vote to approve about $5 billion immediately — to help schools reopen safely, send $600 stimulus payments to low-wage workers who file taxes, and keep small businesses afloat with loans — and another $6.5 billion this spring, lawmakers have until mid-June to negotiate a finalized budget before the the new fiscal year kicks off on July 1.

These five charts pulled from Newsom’s spending plan show how California’s wealth gap is getting worse:

This article is part of the California Divide, a collaboration among newsrooms examining income inequality and economic survival in California.

CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

UCLA Football Wins Its Third Straight Game Ahead of Ranked Matchup
UCLA keeps rolling. After edging Maryland 20–17 at the Rose Bowl, the Bruins have quietly stacked three straight wins and are heading into another ranked showdown. Charlie Gonzalez breaks down the grind, the grit, and the moments that mattered.
What Are We Cheering For?
Every holiday, every weekend, every so-called American ritual came with a side of football. The game would be on, and we were supposed to care. I didn’t. Not really. Not until I almost did. For a brief stretch, when my dad worked with the Clippers during the Lob City era, I started to believe. Chris Paul, Blake Griffin, DeAndre Jordan — it felt like swagger, like culture, like something to belong to. Then the trades came, the team got gutted, and the curtain dropped. It wasn’t family. It wasn’t culture. It was business. That moment stuck. The more I watched, the more the wires showed: how ritual gets packaged, sold, and weaponized. How meaning becomes merchandise. How attention becomes empire.
When AI Replaced Our Comics
When AI replaced hand-drawn comics in our newsroom, I saw more than ugly art — I saw the erosion of what makes journalism worth doing.
Farewell to Sister Assumpta Oturu, Champion of African Voices
Celebrating the life and legacy of Sister Assumpta Oturu, who amplified African stories and built bridges across continents through decades of fearless broadcasting.

What's On Now

All Of The Above
2:00am - 4:00am

Transmitting live from the West Coast of the Milky Way, our weekly radio show explores high quality music of every genre. With no commercials and no playlist, All Of The Above is a non-stop journey through sound unlike any other found on today’s airwa

Upcoming Events

Third Coast Percussion and Salar Nader, Tabla Live at The Nimoy December 6, 2025 Dec 6, 2025 at The Nimoy
Gregory Porter Performs "Christmas Wish" December 6, 2025 Live At The Soraya Dec 6, 2025 at The Soraya at CSUN
WAR, Tower of Power, and Poncho Sanchez LIVE at the YouTube Theater December 20, 2025 Dec 20, 2025 at YouTube Theater

Program Schedule

Nightscapes
4:00am - 6:00am
Edna Tatum's Gospel Classics
6:00am - 8:00am
Alan Watts
8:00am - 8:30am
Chris Hedges Report. The
8:30am - 9:00am

Follow us on Social Media

KPFK is powered by people—not corporations.
Your donation fuels independent journalism, radical culture, and a voice for the voiceless.
Support the media you believe in.