Gov. Gavin Newsom on Thursday signed key elements of a new $307.9 billion state budget, a spending plan focused on gas refunds for 17.5 million taxpayers to ease the sting of high fuel prices and the cost of living.
The rebates, which range from just $200 for individuals to $1,050 for couples with children, mark the state’s effort to return part of the expected $101.4 billion surplus to Californians. The governor and lawmakers also invested heavily in K-12 public education, initiated billions of dollars to secure enough electricity to keep lights on during heat waves, and allocated $47 billion for infrastructure projects over the next three years.
“This budget invests in our core values at a pivotal moment, protecting women’s right to vote, expanding access to healthcare for all and supporting the most vulnerable among us as we shore up our future with means to fight the climate crisis, strengthen our energy grid, transform it our schools and protect the communities,” Newsom said in a statement.
The budget covers fiscal year 2022-23, which begins on Friday. It’s a time when economists are warning that the Russian invasion of Ukraine, interest rates and inflation could weaken the US economy and lead to a recession. That would certainly put a damper on the record earnings that California has received largely from the income taxes of its top earners in recent years.
The spending plan approved by Newsom and lawmakers includes a $17 billion relief package to help families, seniors, low-income Californians and small businesses. The package includes $9.5 billion in gas refunds, $1.4 billion in utility payment support, $250 million in expanded tax credits for paid sick leave grants, a diesel sales tax stay at a cost of $439 million $100,000 for the state and $75 million in drought relief grants.
Newsom and lawmakers disagreed for months on income eligibility for gas refunds and how much Californians should receive, a debate that delayed the timeline for payments to begin until October. Many lawmakers wanted to channel more of the surplus into infrastructure funding, which ultimately included a multi-year investment of $14.8 billion in transportation, $2 billion in student housing through 2025, more specific projects in their home counties, and other spending priorities.
The governor agreed with lawmakers on the final refund plan, abandoning his push to offer money exclusively to drivers. The legislature agreed to raise the originally proposed income limits while sticking to its original intention of giving higher payments to families who earn less.
The plan provides refunds on a sliding scale based on three income levels: single taxpayers earning up to $75,000 or joint taxpayers reporting as much as $150,000, individuals earning up to $125,000, or couples up to $250,000 and individual taxpayers earning $250,000, or $500,000 for joint filers.
The lowest income bracket is entitled to $350 per taxpayer and an additional $350 for those claiming at least one dependent. The corresponding payments drop to $250 for the middle income level and $200 for the highest.
The plan leaves out the state’s top earners and those at the bottom who don’t make enough money to file taxes. To help some, but not all, who don’t file taxes, the budget is increasing supplemental security income grants by about $39 a month for individuals and $100 for couples on January 1. Beginning in October, CalWORKs grants for low-income families will also increase by 21%, lawmakers said.
“Any year, that would be a great budget,” said Senate President Pro Tem Toni Atkins (D-Sacramento). “In a world where we face global inflation and ongoing pandemic problems, this budget is equally noteworthy and responsible.”
But while the budget expands the safety net, pro-poverty advocates said the state can and should do more with its surplus to help its most vulnerable residents, calling for further expansion of eligibility for tax credits and food benefits.
The budget provides $1.5 billion over two years for bridge shelters for people suffering from homelessness and serious mental illness, $300 million in the coming year for local government grants for camps, and billions for miscellaneous Affordable housing programs. To help first-time homebuyers, the budget allocates $500 million to establish the California Dream For All program, which offers assistance with down payments and lower monthly mortgage costs.
“Even with these important programs, there is still work to be done to empower disadvantaged communities, disrupt the setup, and ensure prosperity is pervasive,” said Assemblyman Isaac Bryan (D-Los Angeles) this week at the first meeting of the select committee the Poverty and Economic Inclusion Legislature.
The committee was formed earlier this year to focus policy on the state’s growing wealth gap. The state is grappling with a California homelessness crisis and the highest child poverty rates in the US when adjusting for the cost of living while also celebrating the state’s record surplus.
“These stark disparities are hard to tolerate in the world’s fifth-largest economy, in a state with more millionaires and billionaires than any other country,” Bryan said.
Jerry Nickelsburg, director of the UCLA Anderson Forecast and economics professor, said California continues to have fewer jobs in retail, one of several low-income service sectors hardest hit in the 2020 recession, compared to before the pandemic.
“Across the income spectrum, there are differences in where the pain lies,” he said.
The state economy is expected to continue growing faster than the U.S. in the coming year on strength in logistics, recovery in leisure and hospitality, the technology sector and an expected increase in demand for construction and infrastructure work, Nickelsburg said.
But California, like the rest of the nation, could be vulnerable if the Federal Reserve hikes rates again as expected. If financial markets continue to suffer, there could be fewer IPOs, stock option exercises and executive bonuses, boosting the incomes of wealthy earners and the state’s income tax revenues, he said.
Nickelsburg said the state’s $37.2 billion general fund reserves should serve as a backup contingency fund in the event of a limited pullback in financial markets. State officials expect California’s Rainy Day fund to grow to $23.3 billion by the end of the year.
California will repay debt, including $1 billion over two years on a $17.8 billion federal loan the state used to fill a hole left by a surge in jobless claims during the worst of the pandemic is. The Treasury Department said the budget also provides for additional payments to reduce the state pension liability by $3.4 billion in 2022-23.
Several lawmakers raved about investments in education and a $4.3 billion increase for school districts and charter schools on adjusting the cost of living under the local control funding formula – student funding.
A controversial draft budget to facilitate the emergency power supply received less praise, especially from environmentalists. Several lawmakers with a track record of supporting climate policy were clearly torn by the measure, acknowledging that it is imperative for the state to keep electricity running during heatwaves but lamenting that California will rely on fossil fuels and relax its environmental protections to do so .
The budget also breaks a long standoff between Newsom and Assembly Democrats over funding for high-speed trains. Legislators agreed to release $4.2 billion in Proposition 1A funding to the California High Speed Rail Authority, with $2 billion prioritized for construction of the Merced to Bakersfield section, with a new independent bureau of the Inspector General takes over the supervision of the project.
Most spending on new programs in the 2022-23 state budget is one-off, with a commitment of funding for just one year. A downturn could threaten the ability to fund these programs again next year.
Economic turmoil could also jeopardize budget commitments that Newsom and lawmakers have pledged for the future, such as B. Planned expansion in 2024 of Medi-Cal coverage to all eligible Californians, regardless of immigration status, and the Cal Grant financial assistance program to earn approximately 150,000 more California college students who are eligible for federal assistance to cover tuition and living expenses cover up.
“We are in a time of heightened uncertainty,” Nickelsburg said. “There is more political uncertainty today. There is more economic uncertainty today, and that means that while we expect California to continue growing, albeit at a slower pace than last year, there is more uncertainty surrounding that forecast.”
Times contributors Mackenzie Mays and Melody Gutierrez contributed to this report from Sacramento. Teresa Watanabe and Sammy Roth contributed from Los Angeles.
https://www.latimes.com/california/story/2022-06-30/newsom-signs-state-budget-confirming-gas-refunds-to-17-5-million-california-taxpayers Newsom OKs budget with gas refunds for California taxpayers