State leaders propose dramatic rent relief
Tenants bailed out would get 10 years to repay the money
SACRAMENTO — State Senate leaders proposed a massive economic relief package Tuesday to guide California through its coronavirus budget woes by encouraging residents to prepay their future state income taxes and offering struggling tenants more than a decade to make up the rent they owe.
The plan was Senate Democrats’ opening salvo in an abbreviated state budget negotiation that will require lawmakers and Gov. Gavin Newsom to close an expected deficit of tens of billions of dollars before a constitutionally mandated deadline of June 15 to pass a balanced budget.
Newsom, whose administration is projecting a $54 billion deficit through the next fiscal year, will unveil his revised budget proposal Thursday. Assembly budget officials, set to begin hearings next week, released a memo Monday acknowledging that deep cuts were likely and tax increases are under consideration.
Senate leaders said they were looking for a path forward that would avoid causing additional economic harm to Californians through major cuts to state programs or a broad tax hike on the middle class.
“We will not become a part of the problem,” said state Sen. Holly Mitchell, the Los Angeles Demo
crat who chairs the Senate Budget Committee.
She said Senate budget officials had identified about $95 billion in potential fiscal solutions over the next two years, more than the projected deficit, including spending cuts, dipping into reserves and deferring payments. But that plan counts on receiving another $33 billion federal bailout — what Newsom has sought as part of a stimulus for state and local governments. That is far from assured as the proposal is debated in Congress.
Senate President Pro Tem Toni Atkins, DSan Diego, said the economic relief package developed by Senate Democrats is a “conscientious approach to spending” that would give the state a healthier fiscal outlook going forward.
“We will not look to just cobble together a budget that is precariously balanced for 2021,” she said.
One of their ideas is to create a $25 billion economic recovery fund by giving Californians a tax incentive to front the state cash.
Residents would be offered a slight discount to pay their future state income taxes now and, in exchange, would receive vouchers to lower their tax burden between 2024 and 2033. Those vouchers could also be sold to other taxpayers at any time. Senate officials estimate it would reduce revenue by about $3 billion annually over the course of that decade.
The money the state raised now would support small businesses, worker retraining, cleanenergy investments, wildfire prevention, homeless services, school spending and other programs to cushion the economic blows of the coronavirus pandemic.
“How do we, independently of the budget, figure out a way forward that gets people back to work as quickly as possible?” said Sen. Bob
Hertzberg, DLos Angeles. “The ultimate effect, of course, would enable taxpayers to invest in California to help Californians struggling during this very challenging crisis and to accelerate resources for better times ahead.”
A separate rent stabilization program would give tax credits to landlords to forgive the rent of tenants who cannot pay because of financial hardships related to the coronavirus, keeping them from being evicted.
The tax credits would be equal to the amount of rent, spread out over 10 years starting in 2024, though landlords who needed immediate cash could sell them to other taxpayers. Tenants would pay back their rent interestfree to the state, also over the course of 10 years starting in 2024. Those who continued to struggle financially would be given exemptions.
Major details of the program, including how many months of rent would be covered, still need to be worked out. But Senate officials said it could benefit about 2.3 million renter households that have at least one worker in a sector of the economy that has seen major job losses during the pandemic. Forgiving that rent would cost the state between $300 million and $500 million annually, if none of it were paid back by tenants.
“This is not a giveaway to anyone. It’s not a free ride,” said Sen. Steven Bradford, DGardena (Los Angeles County). “The Senate is giving tenants and landlords a hand up, not a handout.”
The California Apartment Association, which represents owners and developers of rental properties, said it would work with the Senate to refine the proposal.
“During these unprecedented times, we appreciate the Senate pro tem’s creative effort to help tenants and rental property owners,” Tom Bannon, chief executive officer of the apartment association, said in a statement.
Other rent relief proposals that lawmakers have floated include AB828, by Assemblyman Phil Ting, DSan Francisco, which would freeze evictions and allow courts to set up repayment plans for tenants, and SB1410 by Sen. Lena Gonzalez, DLong Beach, which would create a fund to cover at least 80% of the rent that a tenant could not afford because of the pandemic, for up to seven months, if the landlord forgives the rest.