A bartender and patron at a San Francisco bar on May 6, 2021.
David Paul Morris | Bloomberg | Getty Images
Californians could see an extra financial boost after Gov. Gavin Newsom unveiled a proposal to send new stimulus checks and renter assistance to residents.
The $100 billion comeback plan announced Monday by Newsom, a Democrat, calls for a total of about $12 billion in direct payments to residents and around $5 billion in renter assistance.
The plan also includes $2 billion to help state residents pay overdue water and utility bills.
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The proposal from Newsom — who’s facing a recall vote, likely this November — comes as the state posts a record $75.7 billion budget surplus.
The plan would have to be passed by the California state legislature in order for the aid to be approved. Lawmakers have until June 15 to act on the budget.
Under the terms of the plan, 2 out of every 3 Californians would get stimulus checks.
The new payments would apply to residents with adjusted gross incomes of $30,000 to $75,000, according to H.D. Palmer, deputy director of the California Department of Finance.
California is already in the process of sending $600 payments to residents who earn less than $30,000 and are thus eligible for the state’s earned income tax credit. Those first payments also went to residents who file their taxes with Individual Taxpayer Identification Numbers, or ITINs, rather than Social Security numbers.
Under the terms of the proposal, people in the $30,000-to-$75,000 income bracket who have children would also qualify for an additional $500. However, that $500 sum is per family, not per dependent, Palmer said. Families earning under $30,000 who received the first $600 stimulus payment would also be eligible for the $500 payment if they claimed a dependent.
Under the plan, ITIN filers would also receive an additional $500 in recognition of the fact that they pay taxes in California and participate in the state’s economic activity but were not eligible for federal stimulus checks because of their filing status, Palmer said.
The $12 billion total for the direct checks includes the previous payments already on their way to Californians. The proposed stimulus checks are expected to cost $8.1 billion, according to Palmer.
The plan also touts “the largest renter assistance package of any state in America,” according to Newsom’s office, totaling $5.2 billion.
The proposal would help low-income renters cover both back rent and rent payments for several months into the future. It also includes aid for tenant legal services.
More details on how Californians can access that assistance are expected to be included in a legislative proposal later this week.
The aid is needed
That California can consider providing this kind of aid reflects both its progressive income tax and the dual nature of how the Covid-19 downturn affected people, according to Richard Auxier, senior policy associate at the Urban Brookings Tax Policy Center.
California’s income tax structure enabled it to collect levies from the wealthy, many of whom did really well in the past year, thus creating the budget surplus, Auxier said. Now, it can pass along that money through programs aimed at lower- and middle-class residents, who were financially harmed by the pandemic.
“The thrust of this makes sense,” Auxier said.
There is a constitutional requirement in California that the surplus is spent, said Natalie Foster, co-chair of the Economic Security Project, an advocate for guaranteed income.
“The way the governor is doing it is the most equitable way to support families who are struggling,” Foster said. “There’s a really strong likelihood it will move forward.”
Residents of other states are unlikely to see this same level of aid.
Hawaii and New York also have progressive income taxes, for example, but have been hit hard in the tourism, leisure and hospitality industries they rely on. Texas has a lot of wealthy residents, but no income tax.
“One state’s success story is in no way emblematic of what’s going on in the other 49 states,” Auxier said. “That has to do with what their economies look like and what their tax structures look like.”
Other states may instead opt to for smaller measures to help residents. That could include expanding state earned income tax credits or sending stimulus checks just to unemployed individuals, Auxier said.
As the vaccine rollout continues and the economy improves, it will still be important to continue to provide aid, as the American Rescue Plan Act and some states are doing, said Michael Leachman, vice president for state fiscal policy at the Center on Budget and Policy Priorities.
“We’re still at the early edges of dealing with this emergency situation and all of its effects on our families and our kids,” Leachman said.