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IN THIS ISSUE – “A Governor Operating from a Compass of Action”
LESS THAN A MONTH ON THE JOB, AND…
- Newsom Triages “Healthcare for All”
- Governor Builds an Aggressive Case for Housing
- Silicon Valley Leaders Mobilize to Accelerate Home-Building
Capital News & Notes (CN&N) harvests California legislative and regulatory insights from dozens of media and official sources for the past week, tailored to your business and advocacy interests. Please feel free to forward.
READ ALL ABOUT IT!!
FOR THE WEEK ENDING FEB, 1, 2019
It was way easier for candidate Gavin Newsom to endorse single-payer health care coverage for everyone than it is now for Gov. Newsom to deliver it.
Yet hardcore advocates say they’re pleased with the moves he’s made thus far—even if it may take years to come to fruition.
“This is a governor that is operating from a compass of action,” said Stephanie Roberson, government relations director for the politically powerful California Nurses Association, which hasn’t exactly been known for its patienceon the issue.
Newsom has taken two tacts. He’s asking the Trump administration to let the state create its own single-payer system offering coverage to all Californians—a move almost everyone regards as a very long shot. And he’s also pushing specific ideas to expand health care coverage to hundreds of thousands of still-uninsured Californians—a move that seems much more do-able.
During his campaign, Newsom promised the nurses that he would make it happen. But the state can’t do it alone. That’s why he sent a letter to the federal government right out of the gate, asking the administration and Congress to set up an “innovation waiver” to allow California to create its own single-payer system.
Experts say there is little chance the Trump administration will give the state the go-ahead on this.
“He’s making a statement and sometimes making statements is important—even if there’s little chance of making progress in the immediate future,” said Gerald Kominski, senior fellow at the UCLA Center for Health Policy Research. “It’s a way of drawing a line in the sand.”
It’s also a way to stave off criticism from advocates, said Jesus Ramirez-Valles, director of the Health Equity Institute at San Francisco State University. “He can say ‘I tried it’ and there is no risk on him. If he doesn’t do what he promised, then he is risking opposition.”
Federal permission would also require Congress to support a new waiver system—one that would allow the state to redirect funds that usually go to the federal government, such as Medicare income taxes, to a state funding authority that would manage and pay for a single-payer health care system, Kominski said. Current waiver systems do not allow for this type of financial management by the state. Other states have used existing waiver programs for permission to set prices or to implement additional requirements, but not to collect federal money.
“You have to ask for the money,” said Roberson of the nurses union. “We are not going to sit on our hands and hope something is going to happen. This strengthens the governor’s commitment to Medicare for all.”
Meantime, Newsom is tackling the block of 3 million uninsured California residents by chipping away at the edges—proposing spending to help struggling middle-income families buy health insurance, and providing state coverage to some undocumented young adults.
He’ll need approval from the Legislature, now a supermajority of Democrats, many of whom have supported similar ideas in recent years.
Two intertwined proposals in his budget would offer hundreds of thousands of middle-income families additional state subsidies to buy health insurance, and require every Californian to obtain health coverage or pay a tax penalty.
This “state mandate” would replace the controversial federal mandate—a central component of the Affordable Care Act, or Obamacare— that the Trump administration recently canceled. A few other blue states were quicker to create a replacement state mandate, but California’s progressive lawmakers were wary of penalizing people who failed to buy health insurance unless the state also cushioned the blow by offering people more subsidies to lower the costs.
Newsom also proposes to use $260 million in state funds to extend Medi-Cal, the government health program for people who can’t afford insurance, to low-income undocumented immigrants ages 18 to 26.
It’s a classic “Resistance State” action for Newsom, as California tries to counteract the Trump administration’s federal moves to undermine Obamacare. Last year a joint UCLA and UC Berkeley study found that the uninsured rate in California would rise to nearly 13 percent by 2023 if nothing is done at the state level to prevent it.
Since the Affordable Care Act known as Obamacare was enacted, California’s uninsured rate has dropped from about 17 percent to roughly 7 percent. Roughly half of those 3 million remaining uninsured are undocumented immigrant adults who don’t qualify for assistance.
If Newsom’s plan is approved, California would offer additional subsidies to families that earn between 250 and 400 percent of the federal poverty level and already receive some federal help. The state would also start offering state-sponsored subsidies to households that earn between 400 and 600 percent of the federal poverty level, up to $150,600 for a family of four, who currently do not qualify for any assistance. Families that earn above 400 percent of the federal poverty level make up 23 percent of the state’s uninsured, according to data from the UCLA AskCHISprogram.
The federal poverty level for 2019 is set at earnings of $12,140 for one person and $25,100 for a family of four.
The budget does not include cost estimates for the additional subsidies but Newsom intends to pay for the expansion by having the state collect penalties from Californians who forego insurance. His budget proposal estimates that the mandate penalty could raise about $500 million a year, similar to what about 600,000 Californians paid to the federal government when it had a mandate and collected its own penalties.
“Not only does his initiative propose an individual penalty show courage,” he said, “it shows some thoughtfulness about the challenges that middle-class Americans face.”
Enrollment for Covered California, which recently ended, was down 15 percent over last year. Lee said the elimination of the federal penalty is partly to blame.
A draft affordability report Covered California is preparing for the Legislature concludes that if Newsom’s two proposals—expanded subsidies and a mandate—are adopted, enrollment could rise by nearly 650,000 people.
Funding the subsidies with penalties is, of course, a bit of a Catch-22: The more successful California is in getting people to obtain health care, the smaller the penalty fund to pay for the subsidies that help fund that care.
“You’re accomplishing your goal, but you’re taking away revenue,” Kominski said. “This is the kind of problem we should be happy to have.”
The conundrum is reminiscent of the state’s tobacco tax, which was intended to deter people from smoking. Success has meant a drop in the amount of money the tax brings in.
Despite what many see as dismal prospects for single-payer in California so long as the Trump administration can quash the state’s waiver request, the California Nurses Association is undaunted. They’re working on a soon-to-be-introduced single-payer bill, more detailed than the version that died in 2017. That one carried a $400 billion price tag, more than three times the state’s annual budget, lacked support from then-Gov. Jerry Brown and was scant on details. The new version, nurses union rep Roberson said, will be specific about how single-payer would work and how it would be paid for.
“We’re not eradicating providers, we are not seeking to dismantle hospitals,” she said. “The fundamental structure of healthcare delivery will stay in place, what we are changing is how healthcare is financed.”
And if the Trump administration rejects the waiver request? Roberson sees other paths to a state single-payer system, including petitioning the Centers for Medicare and Medicaid, or trying to set up a system under Affordable Care Act provisions.
If the nurses union and other single-payer advocates end up pursuing those other avenues, the question becomes whether Newsom will as well.
In his latest effort to flex the state’s muscles over homebuilding, Gov. Gavin Newsom announced that California was suing an Orange County city over what he said was its failure to allow enough new homebuilding to accommodate a growing population.
The lawsuit accuses Huntington Beach of defying a state law that requires cities and counties to set aside sufficient land for housing development. Newsom said the suit, scheduled to be filed Friday in Orange County Superior Court, was needed to address rising housing costs that threaten economic growth and deepen inequality.
The case against Huntington Beach is a rare legal action by the state against a local government over housing laws. In 2009, when former Gov. Jerry Brown was attorney general, the state intervened in a lawsuit against the Bay Area city of Pleasanton, where voters capped the amount of housing allowed. The case ended with Pleasanton getting rid of its cap, zoning for more homes and owing about $4 million in attorney’s fees.
“Many cities are taking herculean efforts to meet this crisis head on,” Newsom said in a statement. “But some cities are refusing to do their part to address this crisis and willfully stand in violation of California law. Those cities will be held to account.”
Before being elected governor and moving to Sacramento, Newsom lived in the strongly slow-growth Democratic stronghold of Marin County. It’s not being sued. In 2017, Assemblyman Marc Levin, a Marin County Democrat, won an exemption to state housing requirements,
Although cities and counties do not build homes, local restrictions on development, such as high fees or a lack of land zoned for residential use, can prevent construction that might otherwise occur. Higher-income coastal communities, including Huntington Beach, often maintain some of the tightest development rules in the state, even as housing costs have soared over the last decade.
The median home value in the beach city of 200,000 people tops $834,000, according to real estate website Zillow. Over half of Huntington Beach’s tenants are rent-burdened, meaning they spend more than 30% of their income on housing, U.S. Census data show.
For more than three years, Huntington Beach has ignored the state law aimed at encouraging housing production.
In 2015, its City Council reduced the amount of housing allowed under zoning codes along two major streets by more than 2,000 homes. Residents had complained that the city was growing too quickly and took aim at plans that allowed for apartment and condominium development.
“We want to reclaim our town,” resident Lilli Wells said at the 2015 council meeting, according to the Orange County Register. “We want to keep the culture and flavor of our community.”
The decision meant the city no longer had enough land zoned to accommodate low-income residents under state requirements, prompting a lawsuit from affordable housing activists. An appellate court ruled in Huntington Beach’s favor because it’s one of a small number of California cities organized under rules that give it sweeping authority over its own practices, including land-use policies. The city has yet to pass a new plan to comply with the state zoning requirements.
The lawsuit is another sign the governor sees local policies restricting growth as a major cause of the state’s affordability problems, and the administration has not ruled out filing similar lawsuits against other cities. Over the last decade, millions of new jobs have been created in California, but home production hasn’t kept pace, exacerbating an imbalance between the supply of available homes and demand.
Newsom has threatened to withhold state transportation dollars from cities and counties that reject development while also allocating $1.3 billion in his budget proposal as incentive for local governments to accommodate growth and homeless services.
He has also pledged to revamp the state’s housing supply goals. A 2017 Times investigation showed that although state law requires local governments to zone for housing, it does not hold them accountable for resulting homebuilding.
Legislators have recently taken their own steps toward strengthening housing laws by forcing cities that are behind on their supply goals to approve specific projects and giving the state Department of Housing and Community Development greater authority to investigate compliance.
Under a 2018 law by Sen. Bob Wieckowski (D-Fremont), which was in response to the Huntington Beach court decision, cities are no longer able to delete areas zoned for low-income housing if doing so conflicts with their state housing plan.
No other state faces a housing shortage as deep and wide as California. Fees, regulations and delays have pushed building costs to among the highest in the nation, and the state adds far fewer new units than it needs each year to meet demand. As a result, median home prices have about doubled since the end of the Great Recession, to $558,000. Two in five households in the state are considered “cost-burdened,” paying more than 30 percent of their income on housing. Homelessness has reached crisis proportions.
Huntington Beach is in Orange County, once a Republican stronghold that has seen its edge slip after the 2018 elections. The Republican congressman representing the city, Dana Rohrabacher, lost to a Democrat. Becerra and Newsom are Democrats.
In Friday’s complaint, the state’s housing agency said the Huntington Beach city council voted unanimously in March 2016 to defeat a proposal that would have committed the city to more affordable housing. When the state told the city in November 2018 that it still wasn’t in compliance, city officials said they wanted to first resolve a 2015 lawsuit brought by affordable housing advocates.
“The time for empty promises has come to an end,” according to the complaint. “The city should not be allowed to avoid its statutory obligations any longer.”
Huntington Beach officials didn’t immediately respond to a request for comment on the suit.
This isn’t Becerra’s first court showdown with Huntington Beach. The city sued the attorney general and Newsom’s predecessor, Jerry Brown, last April over a 2017 law that bars local police from telling federal officials when immigrants subject to deportation are about to be released from custody.
Huntington Beach supported a legal challenge by then-U.S. Attorney General Jeff Sessions to California’s immigrant sanctuary laws that was largely rejected by a federal judge in Sacramento.
The case is California Department of Housing and Community Development v. City of Huntington Beach, California Superior Court, Orange County.
With new options on the table to solve the Bay Area’s housing shortage, local elected officials and employers need to pick their favorites and make them happen.
That was the message behind a gathering of 200 politicians, corporate leaders, developers and transit providers in Mountain View. Attendees heard from three panels of housing heavyweights about a range of options: from multiple housing bills in the works, to dozens of ripe-for-development properties owned by VTA and other transit agencies, to Gov. Gavin Newsom’s challenge to local tech companies to invest in housing. At the end of the event, each attendee was asked to commit time and money to at least three specific solutions, which they wrote down on a piece of paper and turned in to organizers.
“The future is not pretty. Our present is not pretty,” Steve Heminger, executive director of MTC, told the crowd. “If you don’t like what traffic looks like today, just you wait if we don’t deal with this housing question.”
Heminger spoke at LinkedIn’s office during the Housing Solutions Forum organized by the Silicon Valley Leadership Group. The event built on momentum that’s growing as Sacramento, Bay Area tech companies and local foundations are ramping up their efforts to produce more housing. On Thursday, the Chan Zuckerberg Initiative and several local partners launched a $500 million affordable housing fund — the Bay Area’s largest to date.
Carl Guardino, president and CEO of the Silicon Valley Leadership Group, kicked off the event with a plea: “Let’s find areas to work together today for the common good of the citizens in our communities.”
The Leadership Group will follow up with attendees and encourage them to honor their commitments, Guardino said.
A major topic of discussion Friday was a 10-point housing plan recently approved by the Committee to House the Bay Area, or CASA. That plan, drafted by 50 stakeholders including local officials and transit agencies, calls for an emergency rent cap, just cause eviction protections, new zoning rules near transit hubs and other changes. Those ideas will translate into 15 new bills, drafts of which will be ready by next month, two CASA leaders said Friday.
“We are full speed ahead. We’re ready to go,” said CASA co-chair Leslye Corsiglia, executive director of SV@Home. “And we’re going to need a lot of help.”
Heminger also hopes to get at least one CASA initiative on the 2020 ballot.
Sen. Scott Wiener warned “the pushback is coming” from local cities unhappy with the group’s goals, and called on those in the audience Friday to rally behind the 10-point plan.
Wiener also was optimistic about Sacramento’s chances for imposing new renter protections this legislative session.
“We’re going to see a big push for more tenant protections at the state level, which has really stalled out for so many years,” he said. “I think there’s actually more opening this time.”
The increased activity from state officials has local companies breathing a sigh of relief, said Menka Sethi, global mobility manager of Facebook, which has contributed to housing development through its Catalyst Housing Fund.
“We in the private sector can fund, fund, fund all we want, but at the end of the day, that doesn’t get the housing built,” she said. “So it’s refreshing to see true stepping-up from the public sector.”
Panelists also stressed the importance of building housing around transportation hubs, and attendees heard from representatives of BART, VTA, Muni, Caltrain and other major Bay Area transit providers.
VTA owns 25 sites that could be developed into up to 6,000 homes, including 2,000 affordable units, said Nuria Fernandez, general manager and CEO of VTA. But half of those properties are not zoned for residential use, meaning the transit agency needs city governments to re-zone the parcels.
Russians hack Ukraine’s electricity network, turning lights off and on at will, rendering the country’s best tech hands helpless to intervene. North Korea takes over the controls of a South Korean nuclear power plant. Snipers with high-velocity rifles unleash a fusillade on a transmission station near San Jose, inflicting $15 million in damage.
It’s not the plot of the latest spy novel. Rather, it’s small sampling of actual attacks, the kind of sabotage against vulnerable energy systems that can cut off power with the click of a mouse and bring officials to their knees.
Experts say energy grids are the new front in cyber-terrorism. Although the wildfires that periodically dominate the news are a serious threat to California’s power supply, cyber-invaders are an around-the clock danger, trying to penetrate grid security every minute of every day. An all-hands-on-deck battle is being waged against them, and the network that serves nearly 40 million people’s homes, industries and public-safety agencies depends on a successful defense.
Should the grid be hijacked, the entire state could be held hostage, experts say. Can the state prevent what one utility executive likened to “a hostile takeover?”
Never has California’s aging electricity infrastructure been more vulnerable, even as the government plans to rely on it more completely with 5 million electric cars and, eventually, to fully operate the world’s fifth-largest economy. Moreover, fire and sophisticated hacking aren’t the only risks to the consistent flow of electrical power: The grid can also be undone by California’s formidable natural forces—wind, earthquakes, floods—and the most humble of creatures.
Gnawing squirrels have brought stock trading to a halt more than once by chewing electricity lines and disrupting NASDAQ computers. Rodents also interrupted some operations at Los Angeles International Airport on Thanksgiving Day in 2015, briefly stopping elevators, baggage screening and other functions.
A widespread, sustained power outage is frightening to contemplate, with the tools we use to navigate our lives taken from us: no lights, telephone service or charging capacity; no heating or cooling; no computers, working gas pumps or ATMs.
“Think of the internet as a weapon of mass destruction,” says former news anchor Ted Koppel, whose book “Lights Out” explores threats to U.S. electricity grids.
The scale of the challenge to keep the lights on was drawn in sharp relief in November at Stanford University, where experts gathered to peer into the energy future. Hint–it’s murky and potentially dark, including ransom schemes and even grid attacks intended to sow chaos ahead of terrorist ground assaults.
“Our adversaries are advancing at a rapid clip,” said Sue Gordon, principal deputy director of national intelligence, the federal government’s leading cybersecurity agency and a conference participant. “Within a few years Russia and China will have the ability to conduct on-demand, localized disruption of service, including of control systems in multiple sectors, simultaneously.”
California’s vulnerable electricity infrastructure has the attention of lawmakers in Sacramento. Some have faulted the oversight of safety procedures at power companies, a displeasure that has brought new scrutiny to the Public Utilities Commission, which regulates those businesses.
A new state law requires utilities to undertake broader, more aggressive planning for reducing fire risks associated with utility equipment, though regulators say they have neither funding nor technology to comprehensively monitor even the measures companies already have in place.
In addition, the state operates two entities tasked with analyzing and addressing potential hacking threats, particularly to critical infrastructure such as power stations and the dams where hydroelectric power is generated, and coordinating their efforts with utility companies.
Still, state Senator Bob Hertzberg, who has an extensive background in the power sector, worries that California is underprepared.
“It’s unbelievable, oh my God; there are so many things that can go wrong,” said the Democrat from Van Nuys, who authored a law last year pinpointing threats to the grid from electromagnetic attacks. “Security is a big deal, and it’s become a big deal because we rely on electricity for everything.”
The California Independent System Operator, the private company that is the state’s grid overlord, is obsessed with security. A spokeswoman said it has significantly increased investment in cybersecurity in recent years and regularly conducts internal testing. It even relocated its fortress-like facility to cocoon its operations against harm—sited on high ground, away from known seismic faults, close (but not too close) to Sacramento and a highway.
Like every utility and power company in the state, the grid operator has marauders at its cyber-gate every minute of every day.
“We are always being attacked,” said Mark Rothleder, a CAISO vice president, gazing down at the gymnasium-sized control room where electricity supply and demand are constantly monitored. “We have mechanisms in place … but it’s constantly changing. It’s a constantly evolving threat we have to defend against.”
Security managers universally seem to adopt a “security through obscurity” approach, not wishing to discuss specific strategies other than to say they are in place. In addition, the state’s largest investor-owned utilities—Pacific Gas and Electric, Southern California Edison and San Diego Gas & Electric—all have specific departments to defend against cyber-incursions.
It can take three to six months to detect a computer breach, according to David Goeckeler, Executive Vice President of San Jose-based CISCO, the computer networking giant with cybersecurity expertise.
Just as often, hackers bang on the digital front door, on the off-chance it will be mistakenly opened. Goeckeler, speaking at the Stanford energy forum, said saboteurs attempt to hack CISCO’s systems 20 billion times a day. Yes, billion.
Such threats have become a priority for the federal government. California utilities participate with those of other states in federal exercises such as GridEx, a war game that simulates grid attacks and coordinates potential responses with local and state emergency agencies, law enforcement, the Department of Defense and telecommunications and banking firms.
At SDG&E, which has 3.6 million electricity customers, “there’s always some type of an intrusion attempt daily,” said Zoraya Griffin, the company’s emergency operations manager. “It’s not a matter of if we have them, but how many.”
In addition to threats that are difficult to see, such as those posed by hackers, some vulnerabilities are literally before our eyes. Aging equipment. Poorly maintained circuits and other key equipment. Miles of wires surrounded by overgrown vegetation and tinder-dry trees that can ignite in a flash.
The state’s response to the issue has been accelerated by the wildfire threat.
Officials have ordered utilities to “harden” their equipment with such measures as replacing wooden power poles with metal or composite ones, swathing lines in more robust insulation and wrapping other equipment in metal or other fire-resistant material.
The Public Utilities Commission is awaiting companies’ specific fire-mitigation plans, due in early February. Those reports are to detail how the utilities will construct, maintain and operate their equipment to minimize its risk of causing catastrophic blazes.
The work will carry a sobering price tag. For example, a federal judge has proposed that PG&E inspect its entire transmission system–including nearly 100,000 miles of power lines–and make its equipment more fire-safe. The utility balked, saying the work would cost $150 billion.
But why expose equipment and circuits to fire danger in the first place? Money. It makes the most financial sense for utilities to traverse California’s steep mountain passes and broad deserts by erecting power towers that march with giant steps across those vast landscapes.
And although companies tend to locate power lines underground in new housing tracts, relocating above-ground lines under the earth is expensive–as much as $3 million a mile. In addition, digging new trenches in established neighborhoods and congested areas typically meets local resistance.
Utilities have stepped up their resiliency efforts, clearing brush and cutting trees, installing cameras to monitor far-flung equipment and focusing more on the potential of weather to cause problems. But one company, San Diego Gas & Electric, is ahead of the pack in elevating weather forecasting to a high priority, investing billions of dollars to respond to threats from nature.
The company’s first line of defense begins 20 feet up on power poles, with compact but complex remote weather stations. The utility has the state’s most extensive weather-monitoring network, with 177 stations across 4,000 square miles.
Every 10 minutes the stations beam real-time information about temperature, humidity and wind speed and direction to a command center in San Diego. The data is also available to the public on the company’s website.
In conditions of high wildfire risk—excessive heat or wind, for example—the information is folded into twice-daily emails shared with the state firefighting agency and local responders. The weather forecast is also included in a separate email dispatched every morning at 6:30 to company leaders.
Remote-controlled cameras provide a picture of what’s happening not only with the company’s equipment but also with the surrounding landscape. Trouble can be spotted more quickly, crews can be better positioned and power shutoffs can occur earlier when necessary. Control of the cameras can be handed off to fire officials during emergencies. In a revenge-of-the-nerds moment, meteorologists and fire forecasters now have a seat at the company table alongside the brass and the engineers when emergencies arise.
“Understanding the weather enables decision making,” said Chris Arends, who manages the utility’s meteorology program.
David Nahai is the former head of another company, the Los Angeles Department of Water and Power, the largest municipal utility in the United States. He said keeping the lights on requires investment, planning and constant vigilance.
“You think about natural disaster all the time. You think about fires all the time. It’s an everyday priority,” Nahai said. “That doesn’t mean you can withstand everything that we are vulnerable to.”
Fewer than 15 percent of California workers were members of a union in 2018, the lowest union membership rate in at least 35 years, according to new data from the U.S. Bureau of Labor Statistics.
About 14.7 percent of the state’s workers belong to a union in 2018, down from 15.5 percent in 2017. The number of California union members fell by about 85,000 from 2017 to 2018, even as the state added more than 300,000 new workers.
California union membership has dropped by almost 4 percentage points in the past decade, and by about 7 percentage points since 1983.
Union membership also declined nationwide last year, dropping from 10.7 percent to 10.5 percent.
In 1983, more than 20 percent of American workers belonged to a union. The decline in membership has corresponded with manufacturing companies moving production overseas, and with an employment shift to service industries, which are less likely to employ union members.
Union membership remains strongest among government workers — public workers are about five times more likely to be union members than private-sector workers.
Public union membership was threatened by the Supreme Court’s recent decision in Janus v. AFSCME, which prohibited unions from collecting fees from government workers who don’t want to be in the union, even if they receive union benefits. But the nationwide Bureau of Labor Statistics data only showed a modest decline in union membership among public workers in 2018.
Largely due to the strong presence of public sector unions, California remains among the 10 states with the highest proportion of workers who are members of unions.