The Golden State was facing a budget crunch and expected a shortfall of more than $50 billion just a year ago.
But as the economic recovery turned into a stock-market boom, creating new millionaires in many segments of business, California – stunningly — rode the wave to a budget surplus.
The primary driver was not a clever government strategy nor a federal recovery plan; the state rode the wave on the backs of its high-earning individual taxpayers and businesses.
California suffered greatly during the early months of the pandemic, with its own budget strained by directing funds to jobs and health care.
The New York Times reported state officials had been counting on a $5.6 billion budget surplus, but soon were expecting a $54 billion shortfall.
Financial fortunes turned in a hurry, though, as the stock market roared back to life following its plummet in March 2020.
California companies such as Apple (more than $1 trillion in gains the past year), Alphabet and Facebook (combined for another $1 trillion in value) and Tesla ($500 billion) formed a serious cash cow.
The optimism inspired a rush from companies to go public – and those companies, too, were rewarded handsomely.
California’s taxes on stock-based gains are the highest of any state, and personal income taxes from the top 1 percent of state earners make up almost 50% of the income-tax revenue.
The Times reports California now expects “a roughly $15 billion budget surplus next fiscal year” and can now reverse deep cuts that included wages of state workers.
Also, “The state is so flush that it is running its own stimulus program, writing one-time checks of $600 or $1,200 to poorer households and spending some $2 billion on aid for small businesses.”
Thanks, Wall Street.