My understanding is that it causes legal issues for the state when the budget surplus is too high (they legally have to spend more or reduce taxes). The current surplus is sort of a windfall due to people taking capital gains (which CA taxes as regular income), and Newsom doesn't think that's sustainable in the future.

That's why he was ok with giving one-off $1000 checks based on income (which is probably mostly redistributed cap gains revenue), while also veto'ing relatively cheap improvements to the education system due to their cost. I'd imagine that a $1000 check also goes over better with voters than kindergarten for everyone or improved mental health resources in schools.

In general lower income people spend a higher proportion of their money than people who are ineligible for the $1000 checks, so I can see how it might possibly still drive inflation.