On Monday, Governor Newsom announced that President Donald Trump’s stimulus Executive Order would devastate the California budget by the state having to pay unemployed Californians $700 million a week out of budget.
Governor Newsom balks at paying Californians an extra $700 million per week
Under Trump’s plan, the federal weekly unemployment assistance would be lowered from $600 to $400 per week, with states covering 25% of the funding. California, still reeling from a slashed budget as well as extra COVID-19 and unemployment costs, had to fill a $54.3 billion budget gap earlier this year. Trump’s 25% state contribution would cost California roughly an additional $700 million a week.
While most states aren’t complaining of the added burden due to the President proposing that they use CARES Act funding to pay for it, California has already allocated 75% of that funding to COVID-19 projects, education, and other state health programs. Since the COVID-19 outbreak, California has received billions of federal dollars, including well over $10 billion in the federal CARES Act payment alone, indicating that the state wants more of a federal bailout over piecemeal assistance.
Californian leaders have been up in arms about the additional burden since the order was announced.
On Monday, Governor Newsom made that clear, as well as highlighting the massive budget cuts that would be needed to make the plan feasible.
“That state does not have an identified resource of $700 million per week that we haven’t already obliged,” stated Governor Newsom. “There is not money sitting in the piggy bank of the previous CARES Act to be reprioritized or reconstituted for this purpose. Simply, it does not exist.
“This would cause enormous economic strife and enormous stress. It would create a burden the likes which even a state as large as California could never absorb without, again, massive cuts to important services. Usually the federal government fronts the money, recognizing the scarcity of resources during an economic crisis.”
A state stimulus plan and complications
While Governor Newsom and other officials have noted the difficulties and expressed outrage over the plan, critics have noted that California has had their own plan in the works since July. The $100 billion state stimulus proposal by Democratic legislators would, among other things, fill in the gap of whatever weekly federal unemployment payment was passed. This means that if the extra $400 a month sticks, California would add $200 a week to make up for that amount, costing $1.4 billion a week.
“Max,” an aide in the State Capitol who has been on the periphery of the stimulus proposal, told the Globe that this is quite unusual.
“A lot of money is being shored up, but the Governor has decried paying that extra,” explained Max. “It just became political. California can pass a huge stimulus to make money up, but when they need to pay half that all of the sudden they have no where to turn.”
“And it really isn’t a great place for California to be in, but they keep proposing things to get extra money at the same time they are balking at not paying things. Add up what California will need to keep up that extra $600 a week and that’s $2.1 billion a week based on what the state said about paying a quarter of the $400 proposed by Trump.”
“Trump wants to get people back to work despite people needing that extra money because their jobs don’t exist anymore, and Newsom wants to go the compassionate route and get people the same amount at the risk of not incentivizing people to return to work, making the economy slower to recovery. That’s the heart of the issue now.”
“Californian leaders have already indicated that they are willing to shell out $1.4 billion a week to keep that up. Would they be willing to add another $700 million a week more? Newsom has said it will ruin the state, but since California has shown it’s willing, how valid is that?”
The Executive Order will most likely be challenged in court soon, with Congress nearing a stimulus deal that could change what, if anything, extra California would need to contribute. California’s stimulus plan will likely not move forward until a permanent federal stimulus amount is announced.