SACRAMENTO, Calif. — Californians are once again talking about the “Gann Limit” after Governor Gavin Newsom announced the California Comeback Plan Monday, promising stimulus money and payments for a majority of residents.
Newsom's proposal to give money back to taxpayers is rooted in a 1979 spending law that requires the government to give money to the taxpayers once appropriations reach a certain limit.
ABC10 reached out to Chris Hoene, the executive director of the California Budget and Policy Center to better understand the initiative.
“The Gann Limit is a constitutional measure that voters approved back in 1979,” explained Hoene. “It limits the state’s spending to its 1978-79 levels. But allowing for some growth based on population and growth on personal income.”
This growth has allowed the state to stay within the limit most years. The threshold has only been exceeded once — in 1987.
Monday, the Newsom administration estimated the state would be $16 billion past the limit that's named after Paul Gann, a conservative political activist who campaigned for the law.
“The way the limit works is if we then exceed the limit, the amount of money we exceed the limit by goes to two pots. Half of it goes to K-12 education. And the other half of it has to be used to reduce the tax bills of Californians,” said Hoene.
Right now, California is in a unique situation.
“The state’s revenues are growing so dramatically and in unexpected ways, given that we’re in the middle of a pandemic, and state leaders had projected the revenues would be a lot lower.”
He said it’s likely the state would be over the limit this year if it wasn’t for the pandemic. Right now, that would be around $17 billion dollars over. Newsom likely would have proposed the spending regardless of the limit. But his administration says the proposal satisfies the law's requirements.
“However, there’s a provision in the limit that says if the state is operating in an emergency, and the pandemic itself would count as an emergency, the state can remove all of the funding that it is using to spend on responding to the emergency from the equation that generates the limits,” explained Hoene.
This is what allows Governor Newsom the freedom to move boldly forward with his spending in the California Comeback Plan.
Hoene said going forward, this looks like it could happen repeatedly.
“It seems likely that we’ll be over the limit the next few years in some way or another.”