IN THIS ISSUE – “Political Will From Each & Every One of Us”
- State Cash Flow Drops $2.34 Billion
- Drinking Water Tax Depends on 34 Words
- US-California Fuel Economy Talks Break Down
POLITICAL HICCUPS, TOO
- New Governor’s First Policy Walk-Back
- Outgoing Republican Party Leader: “We Need to Figure Out How to Communicate”
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.
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FOR THE WEEK ENDING FEB, 22, 2019
The Governor’s Office Department of Finance released a monthly report was some surprisingly negative cash flow indicators.
Preliminary General Fund agency cash for the first seven months of the fiscal year is $2.346 billion below the 2019-20 Governor’s Budget forecast of $79.36 billion. Revenues for January were $2.791 billion below the 2019-20 Governor’s Budget forecast, due primarily to a shortfall in personal income tax estimated payments. Since the federal tax law changes enacted in December 2017, the pattern of state estimated payments has likely changed, with higher revenues in April expected to partially offset lower revenues in December and January.
Personal income tax revenues for the first seven months of the year are $2.657 billion below forecast. Personal income tax revenues to the General Fund were $2.661 billion below the month’s forecast of $18.701 billion. Withholding receipts were $563 million below the estimate of $7.372 billion. Other receipts were $2.216 billion below the forecast of $12.211 billion. Refunds issued in January were $70 million below the expected $546 million. Proposition 63 requires that 1.76 percent of total monthly personal income tax collections be transferred to the Mental Health Services Fund (MHSF). The amount transferred to the MHSF in January was $48 million below the forecast of $335 million.
Sales and use tax revenues for the first seven months of the fiscal year are $183 million below forecast. Revenues for January were $271 million below the month’s forecast of $2.486 billion. At least a portion of this shortfall is due to the delayed recognition of some sales tax receipts. January receipts include the final payment for fourth quarter sales, which was due on January 31.
Corporation tax revenues for the first seven months of the fiscal year are $434 million above forecast. Revenues for January were $60 million above the month’s forecast of $531 million. Estimated payments were $27 million above the forecast of $379 million, and other payments were $23 million higher than the $235 million forecast.
Total refunds for the month were $10 million lower than the forecast of $82 million.
And California’s unemployment rate increased 0.1 percentage point to 4.2 percent in December after remaining at a historic low of 4.1 percent in September through November. The U.S. unemployment rate rose 0.2 percentage point to 3.9 percent in December before increasing 0.1 percentage point to 4.0 percent in January. The labor force participation rate in both California and the U.S. increased by 0.2 percentage point in December 2018 to 62.5 percent and 63.1 percent, respectively—their highest levels since September 2013.
Thirty-four words written into California law a few years ago take a strong stance on the most basic of human needs:
“It is hereby declared to be the established policy of the state that every human being has the right to safe, clean, affordable, and accessible water adequate for human consumption, cooking, and sanitary purposes.”
But there’s a catch. The statute, written in 2012, also says it “does not expand any obligation of the state to provide water” beyond existing efforts. Which is where Gov. Gavin Newsom enters a years-long debate on issues central to California’s future — not just water usage, but poverty and, yes, taxation.
“Just this morning, more than a million Californians woke up without clean water to bathe in, let alone drink,” Newsom said in last week’s State of the State speech. “With respect, this is a moral disgrace and a medical emergency.”
To address the issue, Newsom has embraced an idea that has previously failed to gain traction in Sacramento: new taxes totaling as much as $140 million a year for a clean drinking water initiative. Much of it would be spent on short- and long-term solutions for low-income communities without the means to finance operations and maintenance for their water systems.
Recent reports have found water quality problems in systems serving as many as 600,000 Californians. Almost 250 public water agencies were found to be out of compliance when it comes to arsenic or nitrates.
But the money to change that — what’s being called a “water tax” in state Capitol circles — is where the politics get complicated. Newsom’s proposal, which borrows from a failed 2018 effort, would impose a monthly charge of about 95 cents on most Californians — $10 a month for large water users. Smaller fees, in terms of total revenue collected, would be imposed on fertilizer, milk and farming facilities.
“Solving this crisis demands sustained funding,” Newsom told lawmakers. “But more than anything else it’s going to demand political will from each and every one of us.”
On paper, this wouldn’t appear difficult to achieve in a Legislature completely controlled by Democrats. The tax would take a supermajority vote in each house — 54 votes in the Assembly (which has 61 Democrats) and 27 votes in the state Senate (which has 28 Democrats). There are two Senate vacancies, one of which is likely to be filled by a Democrat later this year.
But the Senate will be particularly tough, given Democrats saw one of their own, former Orange County Sen. Josh Newman, recalled from office last year after voting for a $52-billion fuel and vehicle tax to finance road and highway repairs. Backers of that 2018 effort have vowed to launch similar campaigns against lawmakers who would vote for a water tax. Some new members of the Assembly, elected from districts previously represented by Republicans, are also unlikely to back the tax.
A key challenge for Newsom is the long-standing belief that most taxes should be paid by those who benefit — a challenge, given the meager means of many of these Californians. A legislative analysis last week also suggested the portion of the total cost to be footed by the agriculture industry, where many of the contaminants come from, might be too small.
The new governor has an ambitious agenda: boosts to early education, aggressive action on housing and homelessness, a master plan on aging. Lawmakers seem eager to give Newsom room to put a lot of ideas on the table.
But political cachet generally can go only so far. And tax increases, even in a state where the electorate seems to have grown more liberal, remain a tough sell.
Already-faltering negotiations between the Trump administration and California aimed at resolving a dispute over fuel-economy standards have broken down completely, according to a top Democratic lawmaker.
Sen. Thomas R. Carper (D-Del.), the senior Democrat on the Environment and Public Works Committee, said Wednesday that the Trump administration confirmed that its talks with California about the EPA’s plans to scale back the standards were over.
The breakdown increases the likelihood that both sides will spend years fighting in the courts over car pollution standards.
“Litigation is not the best option here,” Carper said in a statement. “It wastes time, money, creates uncertainty for American automakers and harms the environment. I encourage automakers to speak out quickly, loudly and clearly against this decision.”
California officials blamed the Trump administration, saying its efforts to reach a compromise were less than genuine.
“It would be fair to say the negotiations never really began in the first place,” said California Air Resources Board spokesman Stanley Young. “We had several meetings but nothing that was meaningful was discussed.”
Officials at the EPA did not respond to a request for comment Wednesday.
Under former EPA Administrator Scott Pruitt, the agency announced plans last year to relax fuel economy and tailpipe emission rules that were designed to cut down on planet-warming greenhouse gases.
Carbon dioxide emissions from vehicles already rank among the major contributors to climate change. The standards were aimed at getting the nation’s cars and trucks to average more than 50 miles per gallon by 2025.
Under Trump, the EPA said it would consider freezing the Obama-era targets at 2020 levels.
The EPA also threatened to take away California’s unique authority to set its own, stricter air pollution standards for vehicles — something the state has been empowered to do since the enactment of the Clean Air Act in 1970.
California vowed to fight back. The state has sued the Trump administration over the proposed fuel-economy rollback and officials have said they will go to court again if the administration requires them to follow its lower standards.
Thirteen states and the District of Columbia have adopted California’s rules, accounting for nearly 40% of all new vehicles sold in the U.S., according to the Union of Concerned Scientists, a nonprofit group.
The California Air Resources Board had been meeting sporadically with officials from the White House, Environmental Protection Agency and the National Highway Traffic Safety Administration, in hopes of persuading them not to roll back the regulations.
The goal was to avoid a lengthy legal battle that would leave automakers subject to conflicting regulations.
Car makers could find themselves having to produce different vehicles for a divided U.S. market — one class of cars that would meet the Trump administration’s scaled-back standard and cleaner vehicles for California and the states that follow its regulations.
Hopes for a compromise were dim from the start.
Although the Trump administration and California officials met several times over the course of months, officials familiar with the talks told The Times that they were so unproductive that they could hardly be considered negotiations.
Administration officials didn’t respond to their California counterparts’ proposals, repeatedly steered the conversation to small talk, and kept federal employees with technical expertise out of the discussions, according to officials briefed on discussions.
Commentary from the LA Times
Gov. Gavin Newsom tripped on high-speed rail and fell flat. Then President Trump rode to the rescue and picked him up.
That’s how I read the latest California-Trump flap, this one over the state’s floundering bullet train project.
Trump, after all, is the Democratic Party’s best friend in California.
His classless demeanor was largely responsible for Republicans losing half their California congressional seats in November — seven.
Only 36% of the state’s likely voters approved of the president’s job performance in a January poll by the Public Policy Institute of California.
Conversely, Trump loves California Democrats. The left coasters are easy marks and ripe fodder for red state Trumpsters.
California Democrats and Trump feed off each other.
After Newsom delivered an excellent State of the State address last week and then mucked it up by essentially denying he said what he did, Trump was right there with a helping hand.
He makes almost any Democrat look good by comparison. And if anyone could restore the bullet train’s popularity in California, it would be Trump by ridiculing it, even if justified. It’s $44 billion over budget and 13 years behind schedule.
Let’s back up.
Newsom said during his campaign for governor last year that he wanted to scale back the $77-billion Los Angeles-to-San Francisco high-speed rail project.
And in his first State of the State speech, Newsom scaled it back — or so it seemed — using firm language. He wanted to complete a 171-mile line from Bakersfield to Merced and indefinitely shelve the rest.
“Let’s be real,” Newsom said. “The project as planned would cost too much and take too long…. Right now there simply isn’t a path to get from … San Francisco to L.A…. However, we do have the capacity to complete a high-speed rail link between Merced and Bakersfield.”
“Look,” he added, “we will continue our regional projects north and south.” He was referring to environmental planning, electrifying a commuter line from San Jose to San Francisco and modernizing L.A.’s Union Station. “We’ll connect the revitalized Central Valley to other parts of the state and continue to push for more federal funding and private dollars.
“But let’s just get something done once and for all.”
The message seemed clear.
Internet headlines read “Newsom puts brakes on bullet train” and “Newsom pledges to scale back high-speed rail.” An Associated Press lead paragraph said that the governor was “abandoning” the L.A.-to-San Francisco line.
No one I’ve talked to understands what then afflicted Newsom and his staff. His spokesman won’t try to explain. But they objected to the news coverage. Aides called reporters to “clarify” his speech. Chief of Staff Ann O’Leary tweeted, “Gov. Newsom fully committed to high-speed rail….”
Trump and Newsom then got into a ping-pong match on Twitter.
The president tweeted that “California has been forced to cancel the massive bullet train project after having spent and wasted many billions of dollars. They owe the federal government three and a half billion dollars. We want that money back now. Whole project is a ‘green’ disaster.”
Newsom tweeted back, calling Trump’s words “fake news” and proclaiming: “This is CA’s money…. We’re not giving it back.”
Two days after his speech, Newsom told Los Angeles Times reporter Taryn Luna that any confusion about his rail stance was the media’s fault.
“I just think people in the media should pause before they run headlines and actually consider the facts,” the governor said.
Newsom deserved and got rave reviews for his speech. Then he overreacted to the coverage and botched it. Aides should have advised him to chill out, but they either didn’t know enough to do that or were too timid. Everyone showed their inexperience in a governor’s office.
Plus, Newsom may be getting weary and could need rest after hopping all over the state for photo ops since taking office. He has said that being governor isn’t “a desk job.” But mostly it is. It’s not the best venue for campaigning, but it’s a good place to think and get things done.
Maybe Newsom was trying to please everyone on high-speed rail. But that’s not always possible for a governor who leads.
Newsom might have been edgy about giving Trump an excuse for trying to grab back $3.5 billion in federal rail grants from California. But Trump doesn’t need an excuse for anything.
On Monday, the president canceled $929 million in grants and announced he’ll try to seize an additional $2.5 billion. He made Newsom look like a heroic protector of California money.
“You’ve got to give the governor a mulligan,” says Republican consultant Mike Madrid, using a golf term for a second-chance shot. “Hopefully he is going to govern more like the guy who gave the speech than the guy who mopped up after it.”
Has Newsom been wounded?
“It doesn’t hurt him at all,” says Bob Shrum, a longtime Democratic strategist who is director of the Jesse M. Unruh Institute of Politics at USC.
“It only hurts if it becomes a pattern. He seems to be a smart guy. My guess is he’ll learn from this.”
Anyway, for almost two more years at least, there’ll be a helping hand in the White House to make this California governor look good by comparison.
Not that he’s counting down his days to freedom or anything, but Jim Brulte seemed keenly aware that the end of his time as California Republican Party chairman was 11 days away — not 10, not an even dozen — as he sat for an interview Thursday at his house in Fontana.
Brulte’s successor will be chosen Feb. 24 by delegates to the state party convention in Sacramento, and take over the next morning. He’s staying neutral in the election among declared candidates Travis Allen, Jessica Patterson and Steve Frank. Whoever wins, he said, he’ll offer congratulations and some sobering advice.
“Make sure you disengage your ego,” Brulte said he’ll tell the next man or woman. “You play one part in an electoral (production) that has many leading actors. And, at best, you can win an award for best supporting actor.”
It’s a lesson Brulte has learned the hard way — and might still be learning.
Six years ago, he entered the party-chairman job admired for his tactical acumen, a reputation built as Republican leader in both the California Assembly and state Senate during 14 years representing parts of San Bernardino County.
It has proven to be the toughest job of his life. And he knows some casual observers will think of him as the man who presided over the California GOP’s decline to record lows in voter-registration and catastrophic electoral defeats.
In what sounds like a combination of ego-soothing and reality check, Brulte, 62, claims some success during the longest tenure of any California GOP chairman in history. He also admits a major measure of failure. And he offers more ominous advice for future party leaders and candidates.
He has led a rebuilding effort for a state party organization that was in disarray. When he took over from chairman Tom Del Beccaro, in March 2013, the state party had $1.3 million in unpaid bills (most more than 300 days overdue), 40,000 emails unanswered over an eight-month period, and a shuttered Sacramento headquarters.
And he has fulfilled a promise to his mother to define success in his political career by more than victories and defeats.
“I’m now 11 days from no longer being chairman of the party,” Brulte said. “I’ve worked about as hard as I can work. I haven’t compromised my principles. I haven’t shredded my integrity. And so from a personal point of view, my job has been a success.”
“My biggest failure was (not) convincing enough candidates to talk about issues that the fastest-growing voter groups care about,” Brulte said.
Casual in a salmon-colored shirt open at the neck, Brulte spoke from a sofa in the living room of a house he owns in the hills of Fontana, in southwest San Bernardino County, though he lives primarily at a townhouse he owns in San Juan Capistrano. Still, the decor offers hints that the owner is big in the Republican Party.
An elephant sculpture holds down center space on the fireplace mantle. One of the signs that marked the California delegation at the 2016 GOP national convention in Cleveland stands nearby. Here and there are photos of Brulte with political allies, and a framed collection of Reagan-Bush ’84 campaign buttons in dozens of languages.
The buttons might be symbolic for a man who has been preaching for years that California Republicans must do more to expand its base of support.
“Unless and until Republicans can figure out how to communicate much more effectively to non-white voters, we’re going to have trouble in states like California,” said Brulte.
It’s not impossible, he said. He pointed to charter schools — something the GOP has backed — as an example of a conservative cause that can find an audience among Latino, Asian and black voters.
But his party hasn’t spread many messages like that, and has lost ground among non-white voters.
California is one of five “majority minority” states today, but projections say that by 2044 more than half of the United States population will be non-white. Minorities tend not to register and vote Republican, turned off in part by the image and actions of the party that, in recent years, has been shaped by policies out of Washington, D.C.
In a widely quoted op-ed on The Hill political website in December, Brulte warned that the California GOP’s unpopularity in California should be viewed by national Republicans as a “canary in the coal mine.”
As bad as 2018 was for his party, Brulte suggested said Republicans in California are likely to continue their more than two-decade decline.
“It’s going to get worse before it gets better,” Brulte said, his voice rising above its usual calm, careful tone.
“That is not defeatist. That is a clear-eyed, rational look at what’s happening. I said it in the ’90s. I said it in the 2000s.”
The 2018 election saw California Democrats pick up seven U.S. House seats, add to their already huge majorities in state Assembly and Senate, and again sweep statewide elections. Republicans also slipped from second to third in California voter registration last year, the GOP’s 24 percent trailing not only the Democrats’ 43.5 percent but also “No Party Preference’s” 27.5 percent, according to state data.
It’s pretty bad when John Cox’s 23.8 percent loss to governor Gavin Newsom was actually the closest race for any Republican seeking state office in California last year — and that Cox has been invited to be keynote speaker at the GOP state convention to talk about growing the party’s base.
Yet, using apples-to-apples comparisons of Republican candidates’ results in similar districts, Brulte can make a case that the GOP’s losses in California last year were no worse than in many other states.
And although Republicans’ voter-registration deficit versus Democrats has grown from 15.0 percentage points before Brulte took over to 19.4 percentage points in October, the decline hardly began on his watch. The current 1-point-a-year rate of decline is actually less than the rate in the six years before Brulte.
Dan Schnur, a former Republican spokesman and strategist who now is a professor at USC’s Annenberg Center, said Brulte shouldn’t be blamed for the GOP’s woes.
“He’s one of the smartest political minds in California — who happened to coincide with the Republican Party’s worst stretch here in its history,” Schnur said. “He didn’t cause those problems. They were the result of forces far beyond his control.
“If California Republicans ever decide to remake themselves to be competitive in the state, Brulte has provided them with an infrastructure that can make that happen,” Schnur added.
The state party seemed to recognize that. It extended a usual two-year term limit to allow Brulte to win two more terms as chairman. And Schnur said Brulte couldn’t have stayed popular with party activists if he’d pushed back too hard against their drift to the right. While always insisting state party leaders’ job was “nuts and bolts,” and that decisions about ideological direction must be left to candidates, Brulte wasn’t shy about supporting Donald Trump for president.
Brulte was recruited to run for state party chair and won the position in a vote of delegates to the California Republican convention in March 2013. Prior to that, he’d served 14 years in the Legislature. He’d been Assembly Republican leader from 1992 to 1995, missing out on being speaker when a Republican’s defection to the Democratic Party cost the GOP a majority. He’d led the Senate minority from 2000 to 2004.
In Sacramento, he played hardball. In 2003, for example, he angered some Republican senators by threatening to oppose their re-elections if they voted to raise taxes to attack a state budget deficit. He made some missteps, such as a 1996 electricity industry deregulation bill he authored, a plan later blamed for the electricity shortages that led to Gov. Gray Davis’ recall in 2003.
Brulte teared up Thursday as he talked about his favorite piece of legislation, a 2000 bill he sponsored that allows mothers to anonymously abandon newborns at hospitals without fear of prosecution.
Legislative colleagues viewed him fondly.
“Jim was never an ideologue. It was almost like, ‘Nothing personal, I’m just representing my party,’ ” said Sheila Kuehl, a Democrat who served with Brulte in the Assembly and Senate and now is a member of the Los Angeles County Board of Supervisors.
Kuehl, who was the first openly gay person in the California Legislature, remembered meeting Brulte for the first time in 1994, when it appeared Brulte was going to be Assembly speaker. Brulte joked that he would seat her next to Republican David Knowles, whom Kuehl remembers as “one of the worst homophobes in the Assembly.”
“I looked him in the eye and said, ‘Would that be punishing me or him?’ ” Kuehl said Friday. “He paused, and then he laughed. I think he was surprised this person he saw as a grim feminist had a sense of humor.”
Brulte had to go along with immoderate party policies, such as Republican fundraising “based on fighting the ‘gay agenda,’ ” in order to maintain his influence and try to make the GOP more inclusive, Kuehl said.
Jim’s first political activity was placing Ronald Reagan-for-governor stickers on cars in 1966.
“I was 10. I didn’t know you had to get people’s permission,” he said.
Before running for the Assembly in 1990, Brulte worked for U.S. Sen. S.I. Hayakawa, President George H.W. Bush and the Republican National Committee. He later was the top California strategist for President George W. Bush’s 2000 campaign for the White House.
What he’ll do after leaving the California GOP chairman’s office is an unanswered question.
Still single as he nears his 63rd birthday in April — he has “a wonderful relationship with a woman in San Juan Capistrano” — Brulte said he doesn’t know what he’ll do next besides tending to two consulting firms he’s involved with. He views his adult life in four acts, the first two of which were public service and building his businesses.
“The fourth act is heaven,” Brulte said. “I’m trying to figure out what the third act will be.”
It will have something to do with public service, he said, but it will not involve running for office again.
One thing he knows for sure: He and the next state GOP leader will be in touch.
“I predict,” Brulte said, “whoever replaces me will call me sometime in the future and say, ‘Geez, I didn’t realize how tough this job is.’ “