For Clients & Friends of The Gualco Group, Inc.
IN THIS ISSUE –
“Why is this necessary to be done at this time with this level of rapidity?” State Sen. John Laird questioning the last-minute crush of bills
“We’re not going to be here, somebody else is going to figure this out.” Asm. Bill Quirk responding to a colleague’s questions on his bill
State Lawmakers Begin a Frantic Weekend Hammering Out Hundreds of Bills
- Voters Like Newsom, But Not California’s Direction
- Air Resources Board Requires Electric Cars in 2035; Average Cost is $66,000
Capital News & Notes (CN&N) harvests California policy, legislative and regulatory insights from dozens of media and official sources for the past week. Please feel free to forward this unique client service.
FOR THE WEEK ENDING AUG. 26, 2022
State Lawmakers Begin a Frantic Weekend Hammering Out Hundreds of Bills: “Next Week’s Cakes Will Need to be Baked”
CalMatters & Politico’s California Playbook
As legislators look to make deals before the onrushing Sept. 2 adjournment deadline, they are today beginning a long weekend, because the next three days are critical.
Time was that compromise language and rejected-then-revived bills would emerge in the final frenetic hours of the state’s legislative session.
Members would be asked to vote on newborn policy proposals with minimal time for vetting. That down-to-the-wire legislating could make it difficult to determine just what the Legislature was passing. Important policies emerging from opaque backroom machinations didn’t bolster public trust in a transparent democratic process.
The 72-hour rule has changed all that. A 2016 ballot initiative required bill amendments to be in print for three days before lawmakers can hold a vote.
Those backroom meetings to hammer out compromises still happen. They just must happen far enough in advance that lawmakers, lobbyists and the public can study what’s about to hit the floor.
Next week’s cakes will need to be baked.
Negotiators also have to keep an eye on the final clock. No one has forgotten the chaotic conclusion of the 2020 session, when bills perished for lack of time — most notably a prominent housing measure that scraped out of the Assembly but couldn’t get a Senate vote before outstanding bills reverted to pumpkins. That means leaving enough time both for new language to make it through floor debates and votes in both houses.
One breakthrough emerged yesterday, when legislative leaders announced a housing production deal with the blessing of the State Building and Construction Trades Council.
Lawmakers will advance two parallel bills that seek to expedite housing development on commercial land: one from Assembly member Buffy Wicks that the Trades had fought, and a Sen. Anna Caballero bill that the Trades had backed.
The Trades didn’t support Wicks’ bill or even quite say they were going neutral. They focused instead on their continued support for the Caballero measure. Nevertheless, Senate President Pro Tem Toni Atkins heralded the dual-bill approach as “one of the most significant efforts to streamline and amplify housing production in decades.”
There’s still much to hammer out. A package of five climate bills remains in flux as Gov. Gavin Newsom and lawmakers scramble on an ambitious package that includes emissions reduction goals, well setbacks and carbon capture technology, with the fate of the contested Diablo Canyon nuclear plant factoring into the larger landscape.
Meanwhile, the lobbying against the environmental bills is heating to maximum temperature.
The Trades have also assailed the measures as anti-worker. The California Chamber of Commerce is busy tagging the climate bills as job killers.
Lawmakers advanced a bill — just two days after it had been put into print — to accelerate cuts to California’s greenhouse gas emissions by requiring a 55% reduction to 1990 levels by 2030, instead of the existing goal of 40%.
Yet, as numerous legislators pointed out during a hearing on the greenhouse gas bill, California is not on track to meet its current emissions reductions goals, according to a 2021 state auditor report and numerous analyses conducted by the nonpartisan Legislative Analyst’s Office and independent experts.
Indeed, at a separate hearing happening simultaneously, state lawmakers considered Newsom’s last-ditch proposal to bolster California’s fragile electric grid — and keep residents’ lights on and electric vehicles powered — by giving PG&E a forgivable loan of as much as $1.4 billion to prolong the life of Diablo Canyon, the state’s last nuclear power plant.
The hearing underscored that Newsom is struggling to muster legislative support for extending Diablo Canyon’s lifespan. Not only are lawmakers circulating their own proposal that would instead funnel the $1.4 billion into renewable energy projects, but there’s also no clear indication that Newsom’s office and key legislators have reached a compromise or that a lawmaker has agreed to author the governor’s proposal.
The speed of the process has also sparked confusion and frustration: State Sen. John Laird, a Monterey Democrat, added, “Why is this necessary to be done at this time with this level of rapidity?”
State Sen. Brian Dahle, a Bieber Republican running for governor who participated in both hearings, said during the one on greenhouse gas emissions cuts: “We are creating this crisis that we’re dealing with in the energy committee on the other floor, and I believe that this bill will do exactly the same thing. … We’ll have another crisis in a few years, because this is not going to work. … We haven’t achieved what we said we’re gonna achieve. That’s why we’re trying to keep Diablo open, because we don’t have the green renewable energy to support California right now.”
Perhaps one of the most interesting comments came from Democratic Assemblymember Bill Quirk of Fremont, the author of the bill to slash greenhouse gas emissions.
Asked by Democratic state Sen. Bob Wieckowski, also of Fremont, how California would actually achieve the 55% reduction mandated by the bill, Quirk replied: “Neither one of us will be here next year. You can lobby any senator, any assemblymember you want. We’re not going to be here, somebody else is going to figure this out.”
State Cash Flow Misses Projection
Dept. of Finance
The State Dept. of Finance in its July economic summary, released yesterday, reports that:
Preliminary General Fund agency cash receipts for July, the first month of the 2022-23 fiscal year, were $1.275 billion, or 12.1 percent, below the 2022-23 Budget Act forecast of $10.517 billion. Preliminary General Fund agency cash receipts for the entire 2021-22 fiscal year were $2.183 billion below the Budget Act forecast of $233.987 billion, or 0.9 percent below forecast. Shortfalls in July continued to be largely driven by lower proceeds from personal income tax.
Personal income tax cash receipts to the General Fund for July were $1.057 billion below the month’s forecast of $7.858 billion. July is not a significant month for personal income tax cash receipts, except for withholding, which is significant every month. Notably, withholding receipts fell $731 million short of projections in July, or 10.1 percent. This follows a $437 million, or 5.8 percent, shortfall in withholding in June.
Corporation tax cash receipts for July were $13 million, or 1.6 percent, above the forecast of $807 million. July is also not a significant month for corporation tax cash receipts. A modest shortfall in estimated and other payments was offset by a small amount of unanticipated Pass-Through Entity (PTE) elective payments.
Sales and use tax cash receipts for July were $87 million, or 6 percent, below the month’s forecast of $1.434 billion. July includes a portion of the final payments for second quarter taxable sales, however, the majority of those final payments will be reflected in August given that the due date this year was August 1.
Jobs:
California’s unemployment rate fell to a new record-low of 3.9 percent in July 2022, now 0.2 percentage point lower than the February 2020 pre-pandemic rate of 4.1 percent. California civilian unemployment decreased by 46,000 in July. Civilian employment increased by 23,000, and 23,000 people left the labor force, following an average monthly gain of 116,000 and 67,000, respectively in the first half of 2022. There were 166,000 (0.9 percent) fewer employed and around 209,000 (1.1 percent) fewer persons in the labor force in July 2022 than in February 2020. California added 84,800 nonfarm jobs in July 2022, driven by gains in professional and business services and educational and health services (20,500 jobs each), followed by leisure and hospitality (14,900), construction (11,400), other services (4,900), government (4,500), information (4,400), trade, transportation and utilities (4,100), manufacturing (1,400) and mining and logging (100). Financial activities (-1,900) was the only sector that lost jobs. As of July 2022, California has recovered 97.3 percent of the nearly 2.8 million nonfarm jobs lost in March and April 2020.
Housing:
Year-to-date through June 2022, California permitted 126,000 units on a seasonally adjusted annualized rate (SAAR) basis, up 2.3 percent from May and 3.5 percent from June 2021. June 2022 permits consisted of 70,000 single-family units (down 2.5 percent from May, but up 0.8 percent year over year) and
56,000 multi-family units (up 9.2 percent from May and up 7.0 percent year over year).
The statewide median price of existing single-family homes decreased for a second consecutive month to $833,910 in July 2022, down 3.5 percent from June, but up 2.8 percent from July 2021. Sales of existing single-family homes in California fell to 295,460 units (SAAR) in July 2022, down 14.4 percent from June, and down 31.1 percent from July 2021.
https://dof.ca.gov/wp-content/uploads/Forecasting/Economics/Documents/Aug-2022.pdf
California Losing High-Earners to Low-Taz States
CalMatters commentary by Dan Walters
After 170 years of population growth — occasionally explosive growth — California is now experiencing population loss for the first time.
As foreign immigration and birth rates declined, they no longer offset net losses in state-to-state migration. Since 2010, 7.5 million people have left California while 5.9 million people have come from other states.
That gives rise to a question: Who is leaving California and why?
“Most people who move across state lines do so for housing, job, or family reasons,” Hans Johnson, a demographer for the Public Policy Institute of California, wrote earlier this year. Johnson also notes that those who leave California tend to be poorer and less educated than those who migrate to the state, which is not surprising given that housing and jobs dominate motivations.
There is, however, a less obvious subset of those who leave California — high-income families seeking relief from the state’s notoriously high taxes.
The San Francisco Chronicle shed some light on that phenomenon when one of its reporters dove into Internal Revenue Service data that revealed favorite destinations of high-income former San Franciscans.
The newspaper found that 39,000 San Franciscans who had filed federal tax returns for 2018 had moved out of the city before filing 2019 returns. Collectively, they took $10.6 billion in income with them while people who moved to the city during that period reported just $3.8 billion in income.
“The county that saw the wealthiest movers from San Francisco on average was Teton County, Wyoming, home to Jackson Hole and its famed ski resorts,” the Chronicle reported. “The data showed that 40 different families, comprising 63 people total, filed their 2019 taxes in San Francisco and then filed their 2020 taxes in Teton County, accounting for a total of $37 million in income moving from San Francisco to Teton. That is an average of $586,000 per person, according to the IRS data.”
Two other ski resort-heavy counties made the top 10 destinations of San Francisco’s wealthiest movers. Washoe County, Nevada, which includes Lake Tahoe’s Incline Village, was No. 2 while Summit County, Utah, site of the Park City ski resort, was No. 6. Palm Beach, Florida, was No. 3.
While the Chronicle article cited the popularity of resorts as a destination for wealthy expatriates, the more glaring fact is that their favored new homes are often in states that levy little or no personal income taxes. No-tax states include Wyoming, Nevada, Washington, Texas and Florida. Utah has a flat 4.85% rate.
California’s top income tax rate, 13.3% on taxable incomes over $1 million, is by far the nation’s highest and when added to the top federal rate of 37% pushes the overall bite to more than 50%. Moreover, a tax overhaul during the Donald Trump presidency basically ended the ability to deduct state income taxes on federal returns.
If anything, California’s taxes on the wealthy are likely to increase. Proposition 30, a measure on the November ballot, would boost the top marginal rate to over 15%, raising money for programs to battle climate change, and another tax hike is headed for the 2024 ballot.
The wealthy are quite capable of protecting themselves, including moving to another state. However, they are vitally important to California’s schools, health care and myriad other public services. Income taxes account for three-quarters of California’s general fund revenues and the top 1% of California taxpayers generate nearly half of those taxes.
That’s just 150,000 taxpayers in a state of 40 million, so even a trickle of departures has a potentially huge impact on the budget.
Voters Like Newsom, But Not California’s Direction
Berkeley Institute of Government Studies Poll
The latest Berkeley IGS Poll finds Governor Gavin Newsom holding a commanding lead inhis fall re-election bid against Republican challenger, state Senator Brian Dahle. The poll finds Newsom currently leading by 27 points among the state’s registered voters and 24 points among voters considered most likely to vote in the November general election.
Newsom finished first among a field of 26 candidates in the state’s June top-two primary for governor, capturing 55.9% of the vote. He will face off in the November general election against second place finisher Dahle, who received 17.7% of the primary vote.
While the incumbent Governor is nearly universally known to the electorate, a majority of voters (58%) is unable to offer an opinion of Dahle. Both candidates are viewed more positively than negatively among those offering an opinion.
The poll also finds that 53% of the state’s voters approve of the job Newsom is doing overall while 42% disapprove. This is slightly better than the last time the Berkeley IGS Poll asked voters about the Governor’s job performance in February. However, more voters continue to believe that things in the state are moving in the wrong direction than those that feel California is heading in the right direction by 52% to 40%.
Opinions about the job Newsom is doing and his re-election bid are highly partisan with
Democrats offering a very positive assessment of the job performance and solidly backing his reelection. By contrast, Republicans hold a decidedly negative view of the Governor’s performance in office and overwhelmingly oppose his re-election.
Said IGS co-director Eric Schickler of the findings, “Newsom is in a strong position for
reelection, with Republicans facing an uphill climb given the huge partisan advantage that the Democrats hold over the GOP in party registration across the state.”
Newsom holds big lead over Dahle in the November gubernatorial election
When voters are asked their voting preferences for governor in the fall general election the poll finds Newsom holding a commanding twenty-seven-point lead over Dahle (52% to 25%) among the overall electorate and leading by twenty-four points (55% to 31%) among those considered most likely to participate in the election.
Support for Newsom’s reelection is greatest among registered voters in his home region, the San Francisco Bay Area (64%) as well as voters in the state’s Central Coast region (55%), Los Angeles County (55%) and San Diego County (54%).
Newsom’s support is broad-based across the major demographic subgroups of the state
electorate. Newsom holds a huge lead over Dahle among the state’s Democratic voters, who outnumber Republicans greater than two to one. Other subgroups where Newsom receives strong backing include voters registered as No Party Preference, liberals, Blacks, and college graduates.
Early vote support for Dahle is coming primarily from fellow Republicans, who back his
candidacy 71% to 7%. On a regional basis, Dahle does best among voters in the sparsely populated counties of the North Coast and Sierras, his home region.
https://escholarship.org/uc/item/0fs4r1kt
Air Resources Board Requires Electric Cars in 2035; Average Cost is $66,000
Sacramento Bee
The California Air Resources Board approved sweeping new regulations on Thursday afternoon that would require 35% of new cars sold in the state to be electric vehicles by 2026 — and 100% by 2035.
The regulations, the first of its kind, would end the sale of new solely gasoline or diesel cars in California in just 13 years. “This is transformative,” said Daniel Sperling, a member of the air resources board and a founding director of the UC Davis Institute of Transportation Studies.
He said California’s efforts in approving the rules and reducing pollution will be remembered as a historical event and will likely be followed by other states. The vote may be considered extreme by others, said John Balmes, the physician member of the board, but he said board members were doing the right thing, putting the path forward to eliminate polluting gas-powered vehicles.
He compared it to the change from horse-powered transportation to automobiles at the turn of the 20th century.
The electric vehicle future will come quickly in California because manufacturers will have to start limiting the sales of gas-powered cars in four years. But there will be a host of challenges. including affordability of electric vehicles for many, a shortage of cars, and a lack of car chargers, producing vehicle range anxiety.
CARB’s plan increases the number of new cars that must be electric to 35% in 2026, 51% of all new car sales in 2028 and 68% in 2030, until 100% is reached in 2035. The ruling would not force motorists already owning gas- or diesel-powered vehicles off the road.
But it might be more difficult to buy a gas-powered vehicle in California by 2026. Car manufacturers will face $20,000 fines per vehicle if they don’t meet the new requirements that 35% of the new cars they sell are zero-emission vehicles.
If California dealers run out of their gas-powered or diesel vehicle allocation, motorists would have to go to Arizona or another state that has not adopted the California regulations.
There would be one exception. Manufacturers will be allowed to sell plug-in hybrid models — up to 20% of the vehicles sold — as meeting zero-emission requirements. Those vehicles, however, will have to feature larger batteries to ensure increased capacity for the cars to run longer on an electric charge.
Vehicle manufacturers speaking at Thursday’s air resources board meeting said they supported the electric car mandate but questioned whether regulations were moving too fast and whether they could meet the requirements for large numbers of zero-emission vehicles quickly.
“Automakers could have significant difficulties meeting the set targets given elements outside of the control of industry, “ said Laurie Holmes, senior manager for government and regulatory affairs for automaker Kia. “These include, but are not limited to, significantly higher material costs, stressed supply chain and sourcing, inconsistent consumer incentives and inadequate charging infrastructure.”
Numerous business groups spoke out against the proposal Thursday, including those representing Hispanic business owners. They said the added costs of buying an electric vehicle will put a burden on small businesses.
The average cost of a new electric vehicle in California is $66,000. While electric car sales in California exceeded 15% in the first half of 2022, there are months-long waiting lists for some models. One of the issues that will have to be sorted out is a shortage of chargers to power the vehicles, particularly in California rental complexes, where one-third of the state’s residents live.
This raises potential equity issues over whether poorer and middle-class residents will have the same ability to buy an electric car. Last year, a state subsidy program to provide a minimum of $4,500 in grants for electric car purchasers ran out of money around mid-year.
“It was very frustrating,” said Keith Hamilton, co-executive director of the Central California Asthma Collaborative, which runs an electric car equity program. California officials say billions of dollars in new state and federal subsidies will be available for electric car purchasers.
State regulators say they are also studying new rules to increase the number of chargers required. beyond a few parking spaces in rental complexes. Overall in California, a state report found that 1.2 million chargers will be needed for the 8 million zero-emission vehicles expected in California by 2030.
Around 70,000 public chargers are currently in operation in California.
Another issue: Can the California power grid support the charging of millions of more vehicles? Thursday’s action by CARB was no surprise — and was essentially a sure thing — after a 2020 executive order by Gov. Gavin Newsom requiring 100% of new car sales to be zero-emission vehicles by 2035. Newsom controls 12 of the 16 seats on board. Seventeen other states — including New York, New Jersey, Oregon and Washington — follow California rules that mandate stricter tailgate emissions standards, and at least some of those states are expected to adopt California’s rules to eliminate the sale of gas-powered cars.
California operates under a waiver from the federal Environmental Protection Agency for the cleaner tailgate standards and another waiver, which is expected, will be needed from President Joe Biden’s administration to finalize the zero-emission car rules. Former President Donald Trump had stripped California of the right to set its own climate tailpipe standards but it was restored earlier this year by the Biden administration.
https://www.sacbee.com/news/politics-government/capitol-alert/article264912319.html#storylink=cpy