But the numbers still balance out as California has a forecast surplus of $ 45.7 billion, driven by incredible growth in tax revenue during the pandemic. California taxes the rich more than the low-income people, so much so that in 2019 the top 1% paid almost 45% of all state income tax collections.

This top 1% only got richer during the pandemic. While California has the highest unemployment rate in the country, it is on track to collect at least $ 25 billion in capital gains taxes in 2021, the most ever. A “capital gain” is income that comes from the sale of an asset, such as a stock, and that is how most wealthy people earn their money.

“We have the ability to invest in our growth engines, to invest in the future and to prepare for the uncertainties of the future. Newsom said, touting his plan to put $ 34.6 billion in reserves.

California taxpayers are already paying the health costs of low-income immigrants 26 and under, and plan to cover those 50 and over in May. Newsom’s proposal would cover everyone from January 2024.

Immigrant health advocates have been pushing for this since the federal Affordable Care Act came into effect in 2014. It has dramatically reduced the number of people in California without health insurance.

“The glaring divide was those who were left behind due to immigration status,” said Sarah Dar, director of health and public policy for the California Immigrant Policy Center.

Newsom’s plan, if it becomes law, would cover nearly 700,000 additional people. California Health and Human Services Secretary Mark Ghaly said the state is already supporting these people through charity, emergency and other forms of free care, and officials believe securing this population, over time, will reduce these costs.

The biggest tax cut would be for businesses. At the start of the pandemic in 2020, California temporarily increased corporate taxes to help offset what it believed to be a huge deficit. Instead, California posted record surpluses. This tax increase was due to expire at the end of this year. Newsom wants to end it a year earlier, which would cost the state around $ 5.5 billion in revenue.

But the tax cut that will get the most attention is at the pump, where Californians pay the highest gas prices in the country. California taxes gasoline at 51.1 cents per gallon. This tax is expected to increase on July 1 due to inflation.

Newsom wants to stop this increase, at least for this year. It would cost the state about $ 523 million in revenue for things like roads and bridges. But Newsom says the state can cover that loss with its surplus.

Last year California spent billions of dollars on stimulus checks, with most people receiving around $ 1,000 on top of the federal stimulus package. This year, Newsom wants to donate $ 1,000 to every low-income family with a child aged 5 or under.

The state did so last year, but families with no income were not eligible. This year, Newsom also wants to give this money to families without income. It would cost around $ 55 million per year. He also wants to give $ 1,000 to people who have gone through the state foster care system but are still 25 years old or younger. It would cost around $ 20 million.

But it’s possible California will issue stimulus checks to residents again this year. Newsom said revenues are growing so rapidly that the state is expected to exceed a constitutional spending limit by about $ 2.6 billion. If that happens, the state could return some of that money to taxpayers.

Newsom has warned that the calculations for the spending limit are complex, saying the figure will change significantly by May when it updates its proposal before lawmakers vote on it.

“There will likely be substantial contributions to taxpayers,” Newsom said. “What form they come in, we’ll work with the legislature.”

Newsom’s proposal is now heading to the state legislature, where Democrats have majorities so large they can pass any spending plan without Republican votes. Several Democratic leaders issued statements on Monday praising Newsom’s plan but pledging to work with him over the next month on changes.

For example, Newsom is calling on the legislature to pass a law giving workers more paid time off if they fall ill with the coronavirus. California had a law like this last year, but it expired in September.

Last year, companies could be reimbursed by the federal government for money they paid to workers who took coronavirus leave. But the federal government no longer does it. Assembly Speaker Anthony Rendon, a Democrat from Los Angeles, said if California were to require companies to give workers more paid time off, the state should help them pay for it.

“I support increasing the governor’s budget to add state funding for this purpose, and we’ve already had a productive discussion on this,” Rendon said.

Republican Senate Leader Scott Wilk praised Newsom for proposals such as stopping gasoline tax increases, increasing law enforcement spending to investigate and prevent theft in retail and tax reduction for businesses. But in general, Republicans criticized Newsom for spending money to fix the state’s problems.

“The mentality that success is defined by the amount spent rather than real, measurable and real results is mind-boggling,” said Vince Fong, Republican vice chairman of the assembly’s budget committee. “Californians are living a different reality and seeing the problems escalate.”

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Associated Press writer Amy Taxin in Orange County contributed to this report.