New proposals to give Californians some relief from record high gas prices are thick with politics and blame-shifting.
On Wednesday, Gov. Gavin Newsom announced that because “oil and gas companies continue to rake in record profits” and also “Putin’s invasion of Ukraine,” he’s riding to the rescue with another $11 billion from the state treasury.
“Governor Newsom has allocated billions of dollars in direct relief to Californians over the past two years, including $12 billion in direct checks through the Golden State Stimulus, $5.2 billion in rent relief, and $2 billion in utility relief,” the statement from his office bragged, also noting an expansion of tax credits for the working poor and a $37.6 billion “climate package” to “forge an oil-free future.”
Newsom proposes that the relief from high gas prices will “take the form of $400 debit cards for registered vehicle owners.” Individuals who own multiple vehicles can collect twice. His proposal also includes a suspension of the coming July 1 gas tax increase, three months of free public transportation, “fast-tracking” $1.75 billion to boost electric vehicle sales and $500 million “to support active transportation programs,” such as “walking.”
It would be much simpler, and faster, to cut the gas tax and the sales tax. That’s what states like Connecticut and Maryland have already done. But then voters wouldn’t receive an envelope in the mail containing a pre-paid debit card and a letter from the governor. Unless Newsom issues an emergency order that requires his photo on every cash register, gas pump and online shopping cart, a tax cut wouldn’t have the same political benefit. And it’s an election year.
Left-leaning legislative leaders, also sensitive to the political peril of the moment, don’t like the contours of Newsom’s relief package. Senate President Pro Tem Toni Atkins and Assembly Speaker Anthony Rendon have already expressed opposition to the governor’s January proposal to suspend the upcoming increase in the gas tax, and now they object to the plan to rebate money to taxpayers who don’t “need” the money.
Atkins released a statement saying that the “Senate is focused on ensuring that state money is targeted to those who actually need relief” with a proposal that sends money to “struggling Californians.” A plan put forward by the legislative leaders would be limited to households earning less than $250,000, and it would be calculated based on individuals in the household, not vehicles.
However, the entire debate over providing relief from high gas prices is a misdirection from the true challenge before the state government, a budget surplus that has triggered the Gann spending limit. The 1979 constitutional amendment restricts the growth of state spending, or tries to, by imposing an appropriations limit tied to population growth and inflation. If the state takes in revenue that exceeds what it is allowed to spend under the Gann limit, it must return the excess funds to taxpayers.
There’s some wiggle room on how the money may be returned, but it’s clear that the money can’t simply be spent, and it’s likely that a court would frown on a politically targeted rebate plan that left out the high-earning residents who pay the highest taxes.
The state could simply cut taxes, but instead it seems poised to issue debit cards, pay fees to banks, send mail to 39 million residents and then try to recoup fraudulent payments. That’s the California Way.