California legislature holds PPP bill to add tax relief for Covid-restricted industries

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Katy Murphy
·4 min read
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SACRAMENTO, Calif. — California lawmakers passed a massive state economic relief package Monday that Gov. Gavin Newsom said he could sign as soon as Tuesday, less than a week after it was first unveiled.

Newsom touted the agreement during a Monday event in the Bakersfield area on the state's vaccine rollout. As he spoke, state lawmakers hundreds of miles north were holding a hearing on the fast-tracked relief bills.

"Tomorrow, preview, it looks like based upon the vote that's happening as I speak we'll be in position to sign a bill to provide $2 billion of direct small business grants," Newsom said.

Hours later, lawmakers passed a slate of proposals totaling $7.6 billion and held off on one piece of the package — a $2 billion tax cut — as they negotiated amendments.

The Department of Finance said late Monday that the bill would be amended to provide additional tax relief for businesses in the restaurant, barbering and cosmetology, fitness and recreation, health care services, and outdoor entertainment industries that received federal PPP loans of more than $150,000.

Gov. Gavin Newsom wears a face mask in Sacramento, Calif., on Feb. 11, 2021.
Gov. Gavin Newsom wears a face mask in Sacramento, Calif., on Feb. 11, 2021.

Impact: A $9.6 billion deal unveiled Wednesday by the governor and leaders of each house was far larger than Newsom first proposed in January, thanks to a $10.3 billion tax-revenue windfall announced early this month.

The deal funnels $2 billion in grants to small businesses that have been hammered by the pandemic in addition to tax cuts for recipients of federal Paycheck Protection Program loans and fee relief for restaurants, bars and other businesses forced to close or restrict their operations last year.

The Legislature approved the $2 billion small business grant proposal, which state Sen. Dave Min (D-Irvine) said "will be critical for keeping small businesses alive until we get back to normal." It did not vote on the Paycheck Protection Program tax cut, AB 80, which is expected to be taken up next week. Senate President Pro Tem Toni Atkins (D-San Diego) said lawmakers were still hammering out some "tweaks or things we would like to get included" but made assurances that "it's going to be done."

The package also ramps up aid to California families. The Golden State Stimulus will send onetime $600 tax credits and grants to millions of low-income Californians, including those eligible for earned-income tax credits, undocumented workers who pay taxes using Individual Taxpayer Identification Numbers, Californians in the CalWORKs program and seniors and people with disabilities receiving supplemental federal payments.

Advocates for low-income Californians say the inclusion of additional groups, such as CalWORKs recipients, was important, but note that the Golden State Stimulus will not reach everyone in need. Some are urging the Legislature to approve another stimulus package, given the state's larger-than-projected surplus.

“But there are other groups bearing the brunt of the pandemic who are still left out, like CalFresh households and immigrants without ITINs — they need to be included in future stimulus payments," said Western Center on Law & Poverty’s policy advocate, Christopher Sanchez.

One objection: Republicans flagged a $35 million payment in the budget package that would resolve an embarrassing dispute that emerged last year between two Democratic state constitutional officers, former Secretary of State Alex Padilla and Controller Betty Yee. In question was a voter education contract the secretary of state's office awarded last year to SKDK, formerly SKDKnickerbocker, a public relations firm with ties to Biden's presidential campaign. Yee maintained that the state did not have the budgetary authority to pay the firm for its work on the Vote Safe California outreach campaign using local assistance funds, but the new budget language allows the funds to be paid.

Notable exclusion: The package was such a foregone conclusion Monday that the Assembly Budget Committee spent the bulk of its hearing Monday discussing a controversial school reopening bill that has faced opposition from Newsom and pushback from school management groups.

Despite some Democrats' hope of moving that bill Monday, the Assembly kept it off the floor. It remains unclear how far it will get, given Newsom's concerns.

The bills sent to Newsom (some have identical counterparts in the other house):
— AB 81/SB 92: general federal relief and cleanup;
— AB 82/SB 93: a trailer bill ratifying various Covid-19 labor agreements;
— AB 83/SB 94: licensing fee exemptions;
— AB 85/SB 85: “Budget Bill Jr”: Makes budget bill appropriations for this package as well as other technical changes;
— AB 88/SB 88 Golden State Stimulus;
— SB 87, a $2 billion infusion to a new grant program to help small businesses affected by the pandemic.

What's next: Newsom said he could sign the economic relief bills Tuesday. AB 80, the Paycheck Protection Program bill, is undergoing amendments and is expected to come up for a vote next week.

Jeremy B. White and Alexander Nieves contributed to this report.