Car owners or taxpayers? Newsom, Democrats still at odds over who gets inflation relief

California’s budget will send inflation relief dollars to many residents’ bank accounts — but Democrats remain divided over exactly who should get the money and how.

The Legislature on Monday passed its version of the state’s budget ahead of the June 15 deadline. But lawmakers continue to negotiate with Gov. Gavin Newsom to reconcile their spending plan with the revised version he presented in May.

An Assembly Budget Committee meeting before the votes showed both sides dug in, even as U.S. inflation levels reach a 40-year high, with consumer prices up 8.6% from 2021.

The governor’s $11.5 billion proposal would send $400 checks to vehicle owners, capped at $800 for up to two vehicles.

The $8 billion Better for Families Rebates plan from Senate President Pro Tem Toni Atkins, D-San Diego, and Assembly Speaker Anthony Rendon, D-Lakewood, would give $200 to all California taxpayers earning up to $125,000 per year and $250,000 for joint filers. It would also give families an additional $200 per dependent.

Who should get inflation relief?

The governor’s administration has “some significant concerns” regarding the legislative relief plan, said Erica Li, the Department of Finance chief deputy of budgets, at the committee hearing.

“While the legislature’s budget includes a very important relief proposal to address these rising costs, as it’s currently structured, it will take longer to implement the smaller $8 billion and will not reach as many Californians when compared to the governor’s $11.5 billion proposal,” Li said.

But lawmakers insist that their idea is more equitable, given that it targets lower-income Californians and isn’t limited to those who own cars.

Assemblyman Alex Lee, D-San Jose, criticized Newsom’s plan and said the legislature’s proposal would make “a big impact” on Californians.

“We cannot control the price of gasoline right now,” Lee said. “What we can control is evident in this budget ... direct economic stimulus to working class Californians, and I think this is something that my constituents are appreciative of and want to see as quickly as possible. This is a much more equitable proposal than what the administration had proposed.”

Who should distribute relief funds?

Li said Newsom’s proposal would get money to Californians faster. But the timing of both plans is uncertain, said Brian Uhler, deputy legislative analyst for the Legislative Analyst’s Office.

“It’s hard to say exactly what the implementation time will be,” Uhler said. “All of them will involve some period of implementation lag.”

Newsom wants to use the Department of Motor Vehicles (DMV) and a third-party vendor to distribute funds using debit cards. Lawmakers’ relief would go through the Franchise Tax Board (FTB), the same agency that distributed California’s Golden State Stimulus payments last year.

Uhler said the state has experience with the legislature’s method of dispersal. Meanwhile, Newsom’s proposal to send funds through the DMV “is a little bit more untested.”

Lawmakers also questioned the logistics of the governor’s plan to distribute funds to vehicle owners.

Li said data on vehicle owners would be provided to “a third party vendor” by the DMV. This third party would send out debit cards to each funding recipient. When questioned on who this vendor would be, Li said that the state has yet to decide.

But California has recently come under scrutiny for its partnership with Bank of America, which sends the state’s unemployment benefits through prepaid debit cards.

In February 2021, a federal lawsuit charged the bank with failing to protect unemployed Californians’ debit card accounts as fraud surged during the pandemic. News followed that the bank wanted to end the contract with the state.

“With EDD and with BofA and the debit cards, we saw a lot of fraud,” said Assemblywoman Wendy Carrillo, D-Los Angeles.

“There’s nothing that stops anybody from going into someone’s mailbox and taking those debit cards. We saw that happen throughout the past few years ... whoever the vendor ends up being, I want to make sure that there’s transparency in how that vendor is selected.”

This story was originally published June 14, 2022 at 3:00 AM with the headline "Car owners or taxpayers? Newsom, Democrats still at odds over who gets inflation relief."