The California state budget, already about to be supplied with higher than expected tax revenues, will receive an additional cash injection of $ 26 billion under the COVID-19 relief bill that President Biden signed on Thursday, generating demands for a wide range of new efforts to help those most affected by the pandemic.
The bill that received final Congressional approval by the House on Wednesday offers significant relief to state and local governments across the country, with California receiving a total of $ 42 billion earmarked for state government, counties and cities. While local governments would share nearly $ 16 billion of that amount – and a sizeable portion will go to large urban centers like Los Angeles – most will be spent using decisions made during annual state budget negotiations between Governor Gavin Newsom and the Legislature .
“With this infusion of federal stimulus, California can make more rapid progress in responding to COVID by supporting small businesses, putting money in people’s pockets and strengthening elementary, middle and high school,” said Newsom in a written statement. “All of these responses to the pandemic contribute to a brighter future for California.”
State budget officials said on Wednesday that they are still reviewing the rules that govern how the $ 26 billion can be spent, but noted that the bill makes it clear that states cannot use the money to pay for new tax cuts or delay tax increases already planned. In addition, the initial view is that California officials will have broad discretion over how to use the money – the amount is equal to more than 11% of all state spending on the budget proposal that Newsom sent to lawmakers in January.
“It gives us a lot of options,” said Congressman Phil Ting (D-San Francisco), chairman of the Assembly’s budget committee. “And we know that lean years are coming.”
But total state government revenues could easily be greater than Newsom’s first estimate, which included an estimated $ 15 billion in tax revenue. Although millions of Californians struggled with job loss or decline during the pandemic, those who earn the most in the state – who are responsible for most of the tax revenue – have not experienced much, if any, loss of income.
Last month, the governor’s budget office reported that preliminary reports show that tax collection in the first seven months of the current fiscal year was $ 10.5 billion above expectations. Part of that money, according to existing law, will be set aside for cash reserves or must be spent on K-12 schools and community colleges.
“This state is about to make an incredible recovery,” said Newsom on Wednesday, during a visit to a vaccination clinic in Los Angeles. “We are managing record bookings. We are managing a huge operating surplus that allows us to invest billions and billions of dollars to help the most vulnerable small businesses and get our kids back to school safely. ”
Federal money for state government services accounts for about 17% of assistance for California under the COVID-19 relief bill directed at the president’s desk. An overview compiled by the California Department of Finance estimates that nearly $ 152 billion will be available to help state residents, with more than half that amount covering a new round of stimulus checks, extended unemployment benefits and financial aid for schools. .
In many cases, the flow of funds will be managed through various state agencies. This includes money set aside for the distribution of the COVID-19 vaccine and testing needs. For the dollars over which they have control, state and local governments will also have substantial time to decide how best to use the money, with relief funds available for costs incurred by the end of 2024.
Even before Biden signed the bill, state lawmakers and advocacy groups were already offering ideas on how to spend the $ 26 billion. On Tuesday, Sen. Jim Nielsen (R-Red Bluff) said state officials should commit to using part of the money to cover unpaid water, electricity and internet bills for struggling Californians.
“With this unexpected influx of money, the state of California has an opportunity to further assist ordinary Californians in overcoming this crisis,” wrote Nielsen in a letter to the Senate budget committee.
Assembly President Anthony Rendon (D-Lakewood) said on Wednesday that the money could complement existing funds for drinking water, forest fire prevention efforts and environmental protection needs in low-income communities.
Cathy Senderling-McDonald, executive director, County Welfare Directors Assn. from California, said state officials should focus on low-income communities, where the dangers of the pandemic are most pronounced. For example, she said that additional funds are needed for services that prevent struggling adults and families from becoming homeless. The proposed eviction moratorium promulgated by lawmakers in January expires in June, and even then, some tenants may struggle to pay the portion of the rent that will ultimately come.
“The eviction results in a series of even worse results, including job loss, health repercussions and, for the elderly, premature death,” said Senderling.
Ting, whose Assembly committee is reviewing January’s Newsom spending plan, said the state may want to consider using a portion of the $ 26 billion federal payment for single infrastructure projects – most notably, long-discussed efforts to significantly expand access to broadband in underserved neighborhoods and rural areas.
“We saw how important this is,” he said, noting the dependence on distance learning for students in public schools and telemedicine during the pandemic. “This need for broadband is not ending.”
And state leaders could fill the gaps in existing pandemic assistance for Californians without legal immigration status, said Chris Hoene, executive director of the California Budget and Policy Center. It is something the state has done with the recent law to offer Californians $ 600 payments, he said, and “could continue to do more in the future with federal aid”.