California lawmakers and Gov. Gavin Newsom broadly agree on a proposed $213 billion state budget that would spend more on immigrants and the poor by expanding tax credits, health care and child care.
But they’re still debating how far those program expansions should go and how best to pay for them.
They’re now in the final days of negotiations ahead of a June 15 deadline for lawmakers to approve the budget or stop getting paid.
California law requires legislation to be in print for 72 hours before lawmakers take a vote, which means any deal would have to be struck by Wednesday.
Newsom wants to spend roughly $800 million to expand a tax credit program for low-income people with children under the age of 6. The program is known as the earned income tax credit, but Newsom prefers to call it a “cost-of-living refund.”
His plan would increase the credit to $1,000 a year and allow more people to access it. He wants the state to pay it out on a monthly basis, something no state has won federal approval to do.
He acknowledged it might not happen this year if California can’t win approval from the Trump administration.
The Senate and Assembly want to expand the credit even further by allowing people living in the country illegally to claim it. Newsom has suggested that would be too expensive.
TAX LAW CHANGES
To pay for a tax credit expansion, Newsom wants California to adopt some of the changes to the federal tax code signed in 2017 by President Donald Trump. California is one of three states that haven’t yet conformed.
Newsom wants to generate about $1 billion a year through changes that would mostly raise taxes on businesses. Lawmakers have not included the changes in their version of the budget and want to use existing tax dollars to cover the expanded program. State officials have predicted a surplus of $21.5 billion.
Changing the tax code would require a two-thirds vote in each chamber, and many lawmakers are skittish to approve a tax increase.
Newsom tried to ease those concerns by getting the head of the California Taxpayers Association to publicly declare his organization is neutral on the proposal.
HEALTH CARE FOR IMMIGRANTS
California Democrats say they want to reduce the state’s uninsured rate to zero, a goal that would require opening Medicaid — the joint federal and state health insurance program for the poor and disabled — to people living in the country illegally.
Newsom’s proposal would do that for adults 19 to 25. The state Senate went a step further and expanded the plan to include people 65 and older.
Newsom opposes the Senate plan, saying it puts too much pressure on the general fund.
Newsom wants to spend nearly $300 million to make California the first state to expand subsidies for premiums under the federal health care law to people who make at least six times the U.S. poverty level.
That would make a family of four earning up to $150,600 a year eligible for help.
To pay for it, Newsom wants to tax people who don’t have health insurance.
The Senate wants to double Newsom’s proposed spending to expand subsidies for people making less than twice the federal poverty limit. They already get help from the federal government and the state Senate’s proposal would also give them state dollars.
The Senate proposal also calls for keeping the tax on the uninsured, but it does not tie that money to subsidies.
HEALTH PROVIDER TAX
A health provider tax would affect companies that manage the California Medicaid program. Those companies, called managed care organizations, pay a tax for every person they enroll.
The tax could bring the state about $1.8 billion next year, but it’s set to expire June 30.
California would need permission from the Trump administration to extend the tax. Newsom is not sure that will happen, so he did not include the money in his budget proposal. The state Senate and Assembly did.
Activists say more than 1 million Californians don’t have clean drinking water.
Newsom wants to impose a 95-cent tax on most monthly residential water bills, as well as fees on dairies, animal farms and fertilizer sellers, to help water districts pay for improvements and boost supplies.
The Senate has rejected the tax that Newsom estimates would generate $104 million a year. The Senate does want to clean up water systems and would use existing money to do it.
The Assembly says lawmakers should delay action until later in the year.
DIAPER AND TAMPON TAX
Newsom and the Senate want to exempt diapers, tampons and other menstrual hygiene products from the state sales tax for two years. Assembly lawmakers say the tax exemption should last a decade.
PAID FAMILY LEAVE
Newsom and the Senate want to expand paid family leave from six weeks to eight weeks, beginning July 1, 2020. The Assembly did not put the expansion in its budget proposal, preferring to debate the issue later this year.