With inflation, California worries about progress on poverty

By Alejandro Lazo, CalMatters

As Democratic state leaders weigh how to spend a record $97.5 billion budget surplus, they also grapple with how best to protect many vulnerable Californians from poverty as federal stimulus dollars dwindle and high inflation devouring household budgets.

Some supporters say Gov. Gavin Newsom’s revised budget unveiled on Friday won’t be enough. To fight inflation, Newsom proposes spending $18.1 billion in public funds.

His main proposal, estimated at around $11.5 billion, would reimburse most car owners in the state $400 each, in an effort to ease the burden of high gas prices. Newsom also included $750 million to fund free public transit for three months.

Campaigners said the car owner’s reimbursement would not be sufficiently targeted to those who need help the most.

“Ultimately, the state budget should be about ensuring that every Californian can afford housing, food, child care, health care and educational opportunities,” said said Chris Hoene, executive director of the California Budget & Policy Center.

Experts say low-income Californians are struggling the most with a volatile economic recovery marred by high housing costs and more expensive basic necessities. And critics said the budget proposal does not go far enough to help low-income households cope with high inflation.

Mayra Paniagua, a part-time tax preparer in Ventura County whose family of five lives modestly on a combined income of $44,000, said she would welcome any relief as she has seen her expenses soar this year.

“It was difficult,” Paniagua said. “We stretch our money and try to save as much as possible, especially for what we need.”

But California Democrats who control the state government disagree on how they should spend on the state’s poorest.

Some are advocating for the state to extend expiring federal stimulus programs. Others say program eligibility should be expanded to include more people.

They have about a month to reach an agreement, as the legislature is constitutionally required to pass a budget by June 15. Then Newsom has 15 days to act, before the new budget takes effect on July 1.

Republican lawmakers, who are in such a small minority that they have virtually no say in spending, blame inflation on the majority party’s policies. “The Democratic regime has made this state unaffordable,” James Gallagher, the Republican leader of the Yuba City Assembly, said last week.

Gallagher and other Republicans have blamed the state gas tax, which Democrats lifted in 2017 under Brown to fix roads and bridges and expand public transit, of contributing to higher prices in the pump. Gallagher also blamed the state’s climate change program for driving up the cost of utilities.

The state’s poverty rate fell from 16.2% in 2019 to 12.3% in 2020, according to the Public Policy Institute of California.

But experts warn that inflation and expiring federal programs could threaten that progress. Without the child tax credit, for example, 1.7 million children risk falling deeper into poverty, the Budget & Policy Center said.

More than half of California residents with incomes below $50,000 struggled to pay for food, housing and medical bills in March and April. Black, Latino and other families of color were among those most likely to struggle, the center reported.

“We have a strong labor market,” said Sarah Kimberlin, senior policy analyst at the center. “But even if you can get a job, that doesn’t mean you can afford to pay the rent and have food on the table.”

The governor unveiled a variety of other measures he said were aimed at easing the burden of inflation. Those proposals included $2.7 billion in rent assistance and $1.4 billion in assistance with overdue utility bills. He also proposed a waiver of child care fees for low-income families, the cost of which is estimated at $157 million.

Newsom also proposed that $933 million be used to provide cash payments of $1,500 to hospital and nursing home workers, while earmarking $304 million for health insurance premium assistance for families.

To offset transportation costs, the governor proposed a $439 million break on the state’s diesel tax.

The governor also announced that the state’s minimum wage is set to increase to $15.50 an hour next year due to rising inflation.

Some Democratic lawmakers and their allies are pushing Newsom to take a different approach.

Assemblyman Miguel Santiago, a Democrat from Los Angeles, plans to promote a bill he authored that would allow the state to extend the expired federal child tax credit. Santiago’s bill, backed by United Ways of California, would provide a payment of $2,000 per child to families earning $30,000 a year or less.

“This is a chance for the Legislature to send a clear message of prioritization,” said Anna Hasselblad, director of public policy for United Ways of California.

Any form of relief would be welcome for Paniagua, a 38-year-old mother of three living with her husband in a two-bedroom apartment in the coastal town of Port Hueneme, Ventura County.

In a phone interview, Paniagua said her family only survived the pandemic because her husband kept his job at a local nursery. He is undocumented, she said, and therefore would not have qualified for 2020 federal aid.

In 2021, her family benefited from state stimulus checks for undocumented immigrants, she said, and products from a local food pantry and some CalFresh benefits available to her because her son was enrolled in school.

This year, she says, the high cost of living has exhausted her family. With her rent rising from $200 in July to $2,100 a month, she began using the Flipp phone app to search for deals on necessities such as milk, yogurt and formula for her 7 month old baby girl.

Gone are the trips to the movies or the occasional splurge on In-N-Out burgers, a favorite of her kids, she said.

This article is part of the California Divide Project, a collaboration among newsrooms examining income inequality and economic survival in California.