California state lawmakers approved a $300 billion budget this week, but several key sticking points remain between Governor Gavin Newsom and lawmakers, which could drag out negotiations on a final spending plan.
Under California law, the Legislature must approve a budget by June 15 or forfeit their pay and per diem until they do. The governor must sign the spending plan by June 30, in time for the state’s new fiscal year to begin on July 1.
Often, many budget details are worked out and approved in the weeks following those constitutional deadlines, which are referred to as “budget trailer bills.”
That appears to be the case once again this year, as top lawmakers and Newsom continue to negotiate over exactly how to spend a historic $98 billion surplus.
The budget approved by the Legislature Monday includes a record amount of money for public schools and higher education, as well as a total of $37.8 billion for budgetary reserves — nearly double the amount in savings before the pandemic in 2019.
It also includes $40 billion for infrastructure projects and funding to make Medi-Cal available for every low-income undocumented resident.
Despite the budget’s monstrous size, there are still many details for lawmakers and the governor to work out.
Republican Assembly member Vince Fong (R—Bakersfield) said the approved budget “fails to adequately address critical and core crises facing our state from the devastating drought to catastrophic wildfires, to a potentially crippling power shortage.”
Fong, who is the top Republican on the Assembly Budget Committee, criticized Democrats for passing an incomplete spending plan to meet their deadline and planning to fill in the gaps later. The practice has become the norm in state budget-making over the past decade, though Republicans say it lacks transparency.
Other unresolved issues include rebates to address skyrocketing gas prices and inflation, as well as reimbursement rate increases for state-sponsored child care providers and disability insurance, which received a temporary boost during the pandemic. Lawmakers want to increase those rates, but the Newsom administration is reportedly hesitant.
“It's not a big surprise that when there's a lot of money on the table, there might be more points of contention,” said Chris Hoene, executive director of the California Budget and Policy Center. “There's often more contention about how to spend money during the good times because you're expanding programs or you're creating new programs or you're doing one-time things.”
Another sticking point between top lawmakers and Newsom is the size and eligibility for a tax relief package aimed at helping Californians cope with inflation and record-high gas prices.
In March, Newsom proposed sending $400 per vehicle — up to $800 — to car owners to offset the rising cost of fuel. Leaders in the Assembly and state Senate have insisted on targeting tax relief to lower-income residents, who spend a higher percentage of their income on necessities like housing and transportation and are hit harder by inflation. Senate pro Tem Toni Atkins (D-San Diego) and Speaker Anthony Rendon (D-Lakewood) unveiled their own plan to send $200 per person, with an additional $200 per dependent, for individuals earning up to $125,000 or families with incomes up to $250,000.
But three months later, neither side appears to have budged. In a statement after the Legislature’s budget was passed, Newsom’s office said the governor “would like to see more immediate, direct relief to help millions more families with rising gas, groceries and rent prices” and noting Newsom’s plan would spend $3.5 billion more on tax relief.
Meanwhile, Republicans continue to call on Newsom and Democrats who control the legislature to suspend the state’s gas tax, which is set to increase from 51 cents per gallon to 54 on July 1.
“At a time when we have the highest gas prices not only in the nation, but in U.S. history, we need real solutions that will ease the burden on families, not increase the load,” Assembly member Suzette Valladares (R-Santa Clarita) said at a press conference Wednesday. “My colleagues and I are here … to remind Governor Newsom that it has been nearly 100 days since he promised he would bring Californians relief from the highest gas prices in the nation.”
Valladares told stories of constituents who had to sleep in their cars or skip university classes because they couldn’t afford fuel.
Republican state lawmakers argue suspending the gas tax would provide near-immediate relief to those most impacted by high gas prices.
Democrats have refused to cut the gas tax, citing the funding it provides for infrastructure projects. They also say there’s no way to guarantee oil companies and gas stations would not keep prices high and pocket the difference. A bipartisan bill attempts to address that issue by requiring fuel stations to pass on their savings and by backfilling lost revenue from the state’s burgeoning general fund.
Hoene said as an organization focused on improving life for the state’s lower- and middle-class residents, the California Budget Center prefers the Legislature’s approach of targeting relief based on income. He also thinks the state should deliver the fund through the Franchise Tax Board, which doled out millions of Golden State Stimulus checks last year.
“The best way to get aid into the hands of people who need it most is to base it on their income level,” Hoene said, “and deliver them a check — electronically or in other forms — which is exactly what we did two times over the past year, very successfully in the state.”
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