Gas tax increase on the horizon
July 1 is shaping up to be a big day for California.
That's when the Golden State's sky-high gas prices are set to tick up even more due to a scheduled increase to the excise tax rate, which will tack nearly 3 cents per gallon onto prices at the pump. On Wednesday, drivers were already paying an average of $6.44 for a gallon of regular gas, compared to the national average of $5.01.
July 1 also marks the dawn of California's new fiscal year — although the state's spending plan is far from finalized. Lawmakers on Wednesday sent to Gov. Gavin Newsom's desk a $300 billion placeholder budget, which the governor criticized earlier this week for failing to include “more immediate, direct relief to help millions more families with rising gas, groceries and rent prices.”
A similar message was struck Wednesday by a group of Republican lawmakers, who gathered outside the state Capitol in front of a huge “100” constructed out of bright orange traffic cones. According to the GOP legislators, Friday will mark 100 days since Newsom first floated the idea of gas tax relief in his March State of the State speech.
• Assembly Republican Leader James Gallagher of Yuba City: “We are still waiting with no relief in sight, fighting over $400 or $200 that they'll send to you. And that's not enough. We need action now. We've been calling since January to suspend the gas tax, the quickest, easiest way to provide relief to every California consumer on gas prices right now. If we had done it … everyone would have saved over $2,400 right now.”
• GOP Assemblymember Suzette Martinez Valladares of Valencia: “The cost of a gallon of gas in my district is equivalent to five cans of baby formula, or roughly two weeks of feedings. I know single moms are choosing to fill up only half of their tanks so they can make sure they have the money for baby formula. This is heartbreaking.”
But it isn't just Republicans who have pushed to postpone gas taxes during an election year when many voters cite the cost of living as a major issue.
• Newsom earlier this year proposed suspending July's scheduled tax increase and using the state's nearly $100 billion surplus to backfill more than $1 billion in lost revenue for transportation projects. The plan was basically dead on arrival. “We stand ready to act as soon as the governor joins us in supporting a plan that provides stronger relief for California families,” Assembly Speaker Anthony Rendon and Senate President Pro Tem Toni Atkins told CALMatter's Emily Hoeven in April. On Tuesday, Rendon tweeted a photo of him, Atkins and Newsom discussing “our joint efforts on the budget.” “I'm grateful as always for their partnership,” he wrote.
• A bipartisan group of lawmakers also suggested suspending the gas excise tax for one year and ensuring gas companies pass 100% of the savings on to consumers. Their colleagues voted the proposal down.
The California Legislature passed a massive $300 billion budget earlier this week, but negotiations over key sticking points with Gov. Gavin Newsom — including billions of dollars in financial relief payouts — are still at the center of heated negotiations.
Monday's vote approves a placeholder budget sometimes derided as a “sham” budget, which allows the Legislature to meet a June 15 deadline to pass a spending plan to keep getting their paychecks as they hammer out the thorniest appropriation issues ahead of the July 1 fiscal year.
The budget blueprint overwhelmingly approved by Democratic supermajorities in the Senate and Assembly is expected to be amended in the coming weeks to reach a compromise with Newsom, who can veto any item he doesn't like.
“We're still negotiating all aspects of the budget,” Phil Ting of San Francisco, the Assembly's budget committee chair, said in a phone call. “I anticipate having a budget that's going to get signed in the coming weeks.”
Among the divisions between lawmakers and Gov. Newsom is how best to spend the state's record budget surplus — with over $49 billion under Sacramento's discretion — and help Californians with skyrocketing gas prices, which reached a statewide average of $6.44 a gallon on Monday.
Democrats want to send $8 billion back to taxpayers in the form of $200 checks to people at lower and middle-income levels with an additional $200 for each dependent. A family of five that meets the income requirements would get $1,000.
However, Newsom has his own plan. The governor wants to give Californians $400 back for each vehicle they own, capped at $800 for two vehicles, totaling $11 billion in rebates. For people who don't own cars, Newsom wants to spend $750 million to pay for free rides on public transit for three months.
But the state's Democratic leaders in the Senate and Assembly oppose the governor's plan because it excludes people without cars from receiving payments and also sends money back to wealthy Californians.
Scott Graves, research director at the California Budget & Policy Center, said gas relief payments appear to be the major issue holding up the budget. “It's a difficult one to compromise on because they're very different ideas,” said Graves. “Somebody has to give, right?”
Republicans, who have little power to control the state's purse strings, slammed the budget as “kabuki political theatre” saying Sacramento should suspend the state's 51-cent per gallon gas tax and dedicate more money to water storage and the state's rainyday fund.
“Gas prices are crashing family budgets,” said Republican Vince Fong, who sits on the Assembly's budget committee. “There's nothing in today's proposal to bring immediate relief for Californians.”
The threat of a recession also looms over negotiations as worries that government largess — backed by surging tax revenue from wealthy Californians — will run dry during the stock market downturn. Both sides want to dedicate the vast majority of the surplus to one-time payments, so the state is not on the hook for future funds during a recession.