California Is Awash in Cash, Thanks to a Booming Market

In a single year, the state’s financial outlook has gone from surplus to deficit to surplus as capital gains tax collections have risen amid a soaring stock market and I.P.O. boom.

As the pandemic raged last May, California was reeling. Spending on unemployment assistance and health care had jumped, while tax revenues were on the verge of cratering. State officials, just months earlier counting on a $5.6 billion budget surplus, now anticipated a $54 billion shortfall. Severe cuts would be needed, making an already frightening recession even worse. Gavin Newsom, the Democratic governor of California, warned of dark days ahead. “We are confronted with a steep and unprecedented economic crisis,” he wrote in his budget. Then Wall Street came to the Golden State’s rescue.