On Tuesday, Democrats from the California State Senate released a
budget proposal with recommendations to address the economic
fallout from the COVID-19 pandemic. The plan is headlined by two
specific recommendations, one which would address renter-landlord
stabilization and one to establish a new $25 billion Economic
Recovery Fund.
They propose creating a $25 billion Economic Recovery Fund by
selling taxpayers prepaid future tax vouchers from 2024 through
2033. Residents would be offered a slight discount to pay their
future state income taxes now and, in exchange, would receive
vouchers to lower their tax burden in the future. This program is
estimated to reduce revenues by about $3 billion annually between
2024 and 2033, however, would allow the state to get cash upfront
to invest in economic development like supporting small
businesses, workforce development, clean-energy investments,
wildfire prevention, homeless services, and school spending. The
vouchers would be fully transferrable, allowing them to be traded
like a bond or security.
The renter-landlord stabilization proposal would allow renters to
receive immediate relief for unpaid rent by repaying past rents
to the state over a 10-year period, without interest, beginning
in 2024. Landlords would be incentivized to provide rent relief
and a commitment not to evict tenants in exchange for tax credits
equal to the value of the lost rents, spread equally over tax
years 2024 through 2033. Like the tax vouchers in the other plan,
these credits would be fully transferable, allowing the property
owner to sell them to an outside investor and get cash
immediately.
It remains to be seen how the Governor, the Assembly, and the
public react to these proposals in light of the Governor’s May
Revision released yesterday. No doubt many will see the tax
voucher plan as preferable to deep cuts to state and local
services, though the similarity to borrowing is sure to give
pause to budget hawks. These conversations will take place
between now and June 15, the Legislature’s constitutional
deadline to pass a balance budget, if not beyond.
