California has billions to spend on gas-price relief — and no deal on help

SACRAMENTO — California Gov. Gavin Newsom and Democratic legislators can agree on one thing: They should channel billions of dollars from the state’s overflowing budget to Californians pinched by high gas prices.

But for months they have been at odds over how to get that money into people’s pocketbooks — and who should get it.

Newsom is insisting the relief be tied to car ownership and sent to all vehicle-owning Californians, regardless of their income, which — critics are quick to point out — could include some of the state’s 189 billionaires.

Legislative leaders, who want to send the cash to lower-income residents, including those who don’t own cars, are not budging either.

The governor promised in an early March speech that he was taking “immediate action” to offer relief. In mid-June, as gas tops $6 a gallon — the highest in the nation — Californians are still waiting.

“I’m confused and frustrated that here we are months later and nothing’s happened, and we haven’t gotten a single dollar into a single pocket,” said Assemblymember Cottie Petrie Norris (D-Laguna Beach), who represents a slice of the perpetual battleground of Orange County and was part of a group of moderate Democrats who pitched an alternative proposal this spring. “I think Californians are super pissed off by what they see as inaction and what they perceive as indifference.”

The Sacramento dispute cuts to the vast socioeconomic divides — and paradoxes — of a high-cost state known for its powerhouse economy and progressive politics. The unfettered economic success of California’s wealthiest residents has triggered a record state budget surplus, even as sharply rising prices heap hardship on millions who were already barely hanging on.

California’s ability to bridge that gap could shape midterm elections in a period of growing economic anxiety. It could also affect Newsom’s political prospects as the Democratic governor, all but assured of re-election, looks to boost other Democrats on the ballot while working to boost his profile as a national Democratic leader.

Newsom, who has called for banning the sale of gas-powered vehicles by 2035, now wants to steer economic relief to car owners — with double the cash for people who have two. (The governor has signaled an openness to excluding luxury vehicles from the aid, but has not established the maximum value.)

The governor’s plan would send $11.5 billion back to Californians, while the Legislature’s would total $8 billion. Newsom has argued that limiting the relief to those making less than $125,000 per year, as Democratic lawmakers want to do, would freeze out some middle-class residents. But legislative leaders are adamant that relief be targeted to Californians who need help the most.

“We’re not going to give Elon Musk or whoever $400,” said a Democratic staffer who spoke on background because of the sensitivity of the talks. “It’s never going to happen under this Democratic Legislature.”

Lawmakers want to link the aid to individuals, with additional relief for dependents — $400 for a family of two, $1,000 for a family of five. Newsom has never budged from his public stance that it should be tied to car ownership, offering $400 per vehicle.

Another sticking point is over how to get the money out. Newsom has argued going through the Department of Motor Vehicles would be swifter than relying on another overworked state agency, the Legislature’s choice, which was still getting out stimulus checks from last year’s budget bonanza well into this year.

In other words: a debate on the fastest way to pay people has delayed a deal to pay people.

“It’s size, scope and speed. Those are the three issues we’re focused on,” Newsom spokesperson Anthony York said. “If this had been done 100 days ago we’d be 100 days closer, but the Legislature didn’t want to do this outside of the budget process.”

Budget negotiations almost always take months. But Newsom “probably jumped the gun” by proclaiming in March that help was coming, said Chris Hoene, executive director of the progressive California Budget & Policy Center.

“There weren’t going to be checks cut in the next three weeks after that announcement, but it certainly had created an expectation of something faster,” said Hoene. “They announced a plan that didn’t have a lot of details, didn’t have a lot of contours, they hadn’t vetted it with the Legislature.”

But the lack of compromise has been striking, with both sides dug in for months. Newsom first proposed relief in his early March State of the State speech, after which an aide introduced the linkage to cars. Legislative leaders made their counteroffer soon after.

“I have confidence we’ll land very, very quickly on an agreement,” Newsom told reporters over a month ago.

On Monday, Speaker Anthony Rendon (D-Lakewood) said he expected relief checks to start going out “before October,” which could mean money and general election ballots landing in voters’ mailboxes around the same time.

As the stalemate has continued, Republicans — who wield little power in the Democratic-supermajority statehouse — have tried to capitalize on the dispute, repeatedly trying to force votes on suspending the state’s gas tax.

Democratic lawmakers also rejected Newsom’s proposal to delay a scheduled 3-cent hike, which is set to take effect on July 1. They argue that blocking gas tax revenue would starve transit projects and undermine construction jobs with no guarantee that oil companies would pass on savings to consumers. Progressive Silicon Valley Rep. Ro Khanna echoed that argument this week, warning that focusing on tax repeals “feeds into a far right narrative that the problem is government, not Big Oil gouging consumers.”

Many Democrats in Sacramento have focused instead on scrutinizing oil company profits. They amended a GOP gas tax suspension bill so it would instead impose a new windfall tax on oil companies. Rendon and other Democrats this week urged state officials to investigate why prices had climbed so swiftly.

But some Democrats are continuing to push for immediate tax relief, including by arguing a final budget deal should include a gas tax holiday in the budget deal. The debate took another turn this week when President Joe Biden called for a suspension of federal gas taxes and urged states to follow suit. Some legislative Democrats lauded Biden, and Republicans leaped on the appearance of Democratic daylight.

“The President and the U.S. Secretary of the Treasury see the benefits. Why are Sacramento Democrats so resistant to providing immediate relief?” Senate Republican Leader Scott Wilk (R-Santa Clarita) said in a statement.

The governor’s centering of cars approach has bewildered some observers in particular because it seems to run contrary to the state’s aggressive climate change goals.

“Money for families doesn’t have to come at the expense of protecting the planet,” Democratic Assemblymember Isaac Bryan (D-Los Angeles) tweeted last week.

Melissa Romero, senior legislative manager for California Environmental Voters, said decoupling relief from car ownership could help struggling Californians and suit the state’s broader climate goals.

“There is a real opportunity here to make sure that we’re targeting and focusing the relief for people who need it most, and also not deepening the state’s reliance on polluting fossil fuels and rewarding the oil industry at a time when they’re seeing record profits,” Romero said.

A desire for relief and lack of an immediate state response has helped Republicans swing a political cudgel in a campaign season that features numerous contested California races and pervasive anxiety about inflation. Republican lawmakers recently rallied at the Capitol to mark 100 days since Newsom promised help.

“We are frustrated as much as every Californian who is facing all the consequences of rising costs,” said Assemblymember Vince Fong (Bakersfield), the Assembly’s top Republican budget official. “The Democrats control every aspect of state government, so it’s very frustrating and odd to me that they can’t come to some type of agreement.”

It’s not just Republicans clamoring for something to happen. A group of moderate Democrats led by Petrie-Norris preempted legislative leaders in March by introducing their own proposal, arguing they shouldn’t wait for the budget process to play out. A growing number of Democrats are also bucking leadership by pushing to suspend the state’s gas tax, now 51 cents per gallon, or to delay the planned increase, effectively aligning themselves with Republicans or with Newsom.

“California gas prices could be jeopardizing the House majority. I think it’s going to have major ramifications,” Petrie-Norris said in an interview. “It feels like political malpractice for us to raise gas prices when they’re as high as they are right now.”

Several of the Democrats pushing back on gas taxes are facing competitive elections. Among them are frontline Rep. Josh Harder and Assemblymember Adam Gray (D-Merced), who are vying for newly drawn House seats in the state’s Central Valley, and Assemblymember Rudy Salas from Bakersfield, who is challenging GOP Rep. David Valadao and called this week for Newsom and the Legislature to block a gas tax increase.

“People are living their daily lives and they’re not spending every minute on the ins and outs of Sacramento policymaking, but it’s very clear voters want us to take action,” Gray said. “It’s going to be on people’s minds when they go to the polls and that’s why I continue to go out there and advocate for action.”

CORRECTION: An earlier version of this report inaccurately described the district represented by California Senate Republican Leader Scott Wilk.