California budgets up to $12 million for reparations bills, a milestone in atoning for racist legacy

SACRAMENTO, Calif. (AP) — California plans to spend up to $12 million on reparations legislation under a budget signed by Democratic Gov. Gavin Newsom, marking a milestone in the state's efforts to atone for a legacy of racism and discrimination against Black Californians.

The reparations funding in the $297.9 billion budget Newsom signed over the weekend does not specify what programs the money would go toward. Lawmakers are not considering widespread direct payments to Black Californians this year.

The state Legislature is weighing proposals to issue a formal apology for California's role in perpetuating discrimination against Black residents, to create an agency to administer reparations programs, and to identify families whose property was unjustly seized through eminent domain.

The funding comes after federal reparations efforts have stalled for decades.

“We often say the budget is a reflection of our values and our priorities, so the fact that there's any money for reparations should be a reason for celebrating,” said state Sen. Steven Bradford, a Los Angeles-area Democrat, noting he hoped the allocation would have been larger.

No state has gotten further along in its consideration of reparations proposals for Black residents than California, but some have made significant strides. Illinois and New York passed laws in recent years to study reparations proposals for African Americans. Florida passed a law in the 1990s creating a college scholarship fund for descendants of Black residents who were killed in a 1923 massacre initiated by a white mob.

But some opponents of reparations proposals being considered by lawmakers in California say taxpayers should not have to have to pay to address policies and practices from a long time ago.

“Slavery was a stain on our nation’s history, but I don’t believe it’s fair to try to right the wrongs on the past at the expense of the people today who did nothing wrong,” Assembly Republican Leader James Gallagher said in a statement. “More than a quarter of Californians are immigrants — how can we look at those people, who are struggling as it is, and say it’s on them to make up for something that happened more than 150 years ago?”

Senate President Pro Tempore Mike McGuire, a Democrat, said at an event Monday that “the $12 million is not nearly enough” but that lawmakers worked closely to secure the money during a tough budget year.

It could cost the state between $3 million and $5 million annually to run the reparations agency, according to an estimate reported by the Assembly Committee on Appropriations. The Legislature hasn't released an estimated cost to implement the eminent domain bill, but the Senate Appropriations Committee said it could cost the state hundreds of thousands of dollars to investigate claims by families who say their land was taken because of racially discriminatory motives.

Bradford introduced proposals to give property tax and housing assistance to descendants of enslaved Black people, but those were blocked in May by a key committee.

Kamilah Moore, who chaired a first-in-the-nation state reparations task force, was disappointed that lawmakers also did not introduce legislation this year to provide free tuition at public colleges for descendants of enslaved Black people, which the group recommended in its final report.

But Moore said it was still “good news” to see $12 million for reparations included in the budget as a starting point.

“It means that they're taking accountability and responsibility, and they're acknowledging the harms and the atrocities to this particular population,” she said. “That's a huge step that should not be overlooked.”

This story was first published on Jul. 1, 2024. It was updated on Jul. 3, 2024 to correct that Senate President Pro Tempore Mike McGuire said the budget included $12 million for reparations legislation, not $12 billion.

Associated Press writer Trân Nguyễn contributed to this report.

Austin is a corps member for The Associated Press/Report for America Statehouse News Initiative. Report for America is a nonprofit national service program that places journalists in local newsrooms to report on undercovered issues. Follow Austin on X: @sophieadanna

FILE - Copies of the interim report issued by California's first-in-the-nation task force on reparations for African Americans are seen at the Capitol in Sacramento, Calif., on June 16, 2022. California plans to spend up to $12 million on reparations legislation under a budget signed by Gov. Gavin Newsom, marking a milestone in the state's efforts to atone for a legacy of racism and discrimination against Black Californians. (AP Photo/Rich Pedroncelli, File)

FILE - A crowd listens to speakers at a reparations rally outside of City Hall in San Francisco, on March 14, 2023. California plans to spend up to $12 million on reparations legislation under a budget signed by Gov. Gavin Newsom, marking a milestone in the state's efforts to atone for a legacy of racism and discrimination against Black Californians. (AP Photo/Jeff Chiu, File)

LOS ANGELES (AP) — The average rate on a 30-year mortgage rose this week, pushing up borrowing costs on a home loan for the first time since late May.

The rate rose to 6.95% from 6.86% last week, mortgage buyer Freddie Mac said Wednesday. A year ago, the rate averaged 6.81%.

The uptick follows a four-week pullback in the average rate, which has mostly hovered around 7% this year.

When rates rise they can add hundreds of dollars a month in costs for borrowers. The elevated mortgage rates have been a major drag on home sales, which remain in a slump dating back to 2022.

Borrowing costs on 15-year fixed-rate mortgages, popular with homeowners refinancing their home loans, also rose this week, pushing the average rate to 6.25% from 6.16% last week. A year ago, it averaged 6.24%, Freddie Mac said.

Mortgage rates are influenced by several factors, including how the bond market reacts to the Federal Reserve’s interest rate policy and the moves in the 10-year Treasury yield, which lenders use as a guide to pricing home loans.

The yield, which topped 4.7% in late April, has been generally declining since then on hopes that inflation is slowing enough to get the Fed to lower its main interest rate from the highest level in more than two decades.

Fed officials have said that inflation has moved closer to the Fed’s target level of 2% in recent months and signaled that they expect to cut the central bank’s benchmark rate once this year.

But until the Fed begins lowering its short-term rate, long-term mortgage rates are unlikely to budge from where they are now.

Most economists think the Fed’s first rate cut will occur in September, with potentially another cut by year’s end. But mortgage rates could begin easing in coming weeks, if bond yields move lower in anticipation of a Fed rate cut, said Lisa Sturtevant, chief economist at Bright MLS.

“While today’s report is not what homebuyers were hoping for, we may actually start to see rates fall sooner than expected,” she said.

Mortgage rates fell to historic lows during the pandemic, setting off a homebuying frenzy that sent home prices soaring. Between 2019 and 2023, the median national sales price of previously occupied U.S. homes jumped more than 43%. And despite declining sales this year, home prices hit an all-time high in May of $419,300.

High home loan borrowing costs and record-high home prices discouraged many would-be homebuyers this spring, traditionally the busiest period of the year for the housing market.

Sales of previously occupied U.S. homes fell in May for the third month in a row, and indications are that June saw a pullback as well.

Most economists' projections call for the average rate on a 30-year home loan to remain above 6% this year. That’s still double what the average rate was just three years ago.

“We are still expecting rates to moderately decrease in the second half of the year and given additional inventory, price growth should temper, boding well for interested homebuyers,” said Sam Khater, Freddie Mac’s chief economist.

A for sale sign stands outside a residence in Niles, Ill., Monday, July 1, 2024. On Wednesday, July 3, 2024, the Labor Department reports on the number of people who applied for unemployment benefits last week. (AP Photo/Nam Y. Huh)