Poverty in California Declined During the Pandemic. Now Inflation Is Threatening That Progress

As the state’s Democratic leaders weigh how to spend a record $97.5 billion budget surplus, they also are grappling with how best to keep many vulnerable Californians out of poverty, with federal stimulus dollars waning and high inflation devouring household budgets.

Some advocates say the revised budget Gov. Gavin Newsom unveiled Friday won’t do enough. To address inflation, Newsom is proposing to devote $18.1 billion in state funds.

His lead proposal, estimated to cost about $11.5 billion, would refund $400 each to most of the state’s car owners, with the aim of easing the burden of high gas prices. Newsom also included $750 million to make public transit free for three months.

Activists said the car-owner refund would not be targeted enough toward those needing the most help.

“At the end of the day, the state budget should be about ensuring every Californian can afford housing, food, child care, health care and education opportunities,” said Chris Hoene, executive director of the California Budget and Policy Center.

Experts say lower-income Californians are struggling the most with a volatile economic recovery marred by high housing costs and pricier basic necessities. And critics said the budget proposal doesn’t go far enough to help lower-income households weather high inflation.

Mayra Paniagua, a part-time tax preparer in Ventura County whose family of five lives frugally on a combined income of $44,000, said she would welcome any relief, as she has seen expenses climb this year.

“It’s been hard,” Paniagua said. “We stretch our money, and try to save as much as possible, especially for what we need.”

But the California Democrats who control state government are at odds over how they should spend on the state’s lowest-income residents.

Some are advocating the state extend expiring federal stimulus programs. Others say the eligibility of programs should be expanded to include more people.

They have about a month to come to an agreement, as the Legislature is constitutionally required to pass a budget by June 15. Then, Newsom has 15 days to act, before the new budget takes effect July 1.

Republican lawmakers, who are so small a minority they have virtually no say over spending, blame inflation on the policies of the majority party. “Democrat-rule has made this state unaffordable,” James Gallagher, the Assembly Republican leader from Yuba City, said last week.

Gallagher and other Republicans have blamed the state’s gas tax, which Democrats raised in 2017 under Brown to repair roads and bridges and expand mass transit, as a contributor to higher prices at the pump. Gallagher also has blamed the state’s climate change agenda for driving up the cost of utilities.

The federal stimulus is credited with boosting the fortune of the state’s least well-off.


The state’s poverty rate fell from 16.2% in 2019 to 12.3% in 2020, according to the Public Policy Institute of California.

But experts caution that inflation and the expiration of federal programs could threaten that progress. Without the child tax credit, for instance, 1.7 million children are at risk of falling deeper into poverty, the Budget and Policy Center has said.

More than half of California’s residents with incomes below $50,000 were struggling to pay for food, housing and medical costs in March and April. Black and Latino families and other families of color were among those most likely to be struggling, the center reported.

“We’ve got a strong labor market,” said Sara Kimberlin, a senior policy analyst with the center. “But even if you can find a job, that doesn’t mean that you can afford to pay the rent and get food on the table.”

The governor unveiled a variety of other measures he said were aimed at easing the inflation burden. Those proposals included $2.7 billion in rental assistance and $1.4 billion in past-due utility bill assistance. He also proposed a waiver of child care fees for lower-income families estimated to cost $157 million.

Newsom also proposed $933 million be used to provide cash payments of $1,500 for hospital and nursing home workers, while reserving $304 million for health insurance premium assistance for families.

To offset freighting costs, the governor proposed a $439 million pause on the state’s diesel tax.

The governor also announced that the state’s minimum wage is set to increase to $15.50 an hour next year due to the inflation hike.

Some Democratic legislators and their allies are pushing Newsom to take a different approach.

Assemblymember Miguel Santiago, a Los Angeles Democrat, plans to promote a bill he authored that would enable the state to extend the expired federal child tax credit. Santiago’s bill, backed by United Ways of California, would provide a $2,000 payment per child to families that earn $30,000 a year or less.

“It is a chance for the Legislature to send a clear message of prioritization,” said Anna Hasselblad, director of public policy for United Ways of California.

Any form of relief would be welcome to Paniagua, a 38-year-old mother of three living with her husband in a two-bedroom apartment in the coastal Ventura County city of Port Hueneme.

In a phone interview, Paniagua said her family survived the pandemic only because her husband kept his job at a local nursery. He is undocumented, she said, and so would not have qualified for 2020 federal relief.

In 2021, her family benefited from state stimulus checks for the undocumented, she said, and from goods from a local food pantry and some CalFresh benefits available to her because her son was enrolled in school.

This year, she said, the high cost of living has stretched her family thin. With her rent increasing $200 in July to $2,100 a month, she has taken to using the Flipp phone app to search for deals on necessities such as milk, yogurt and baby formula for her 7-month-old girl.

Gone are any trips to the movies, or the occasional splurge on In-N-Out burgers, a favorite of her children, she said.

This article is part of the California Divide project, a collaboration among newsrooms examining income inequality and economic survival in California.