For Clients & Friends of The Gualco Group, Inc.
IN THIS ISSUE – “His mind leans business, but his heart leans working people.”
Public employee union leader on Gov. Newsom
- Governor’s 2nd Inaugural Today – Pomp Absent Due to Fiscal Circumstances
- Newsom: A “Nuanced” Politician
- Tax Revenues Plummet; 2023 Crisis #1 for Governor & Legislature
- CA Economy Hit As Tech Lay-Offs Escalate
- State’s Population Continues to Shrink
- Legislature Off to a Slow Start Answering California’s Key Questions
- Senate & Assembly Leaders Appoint Supporting Casts
- Legislative Analyst Criticizes Air Board’s New Climate Change Plan
- CalMatters’ 2022 Review
- The Gualco Group Elevates Lisa Rodriguez to Principal
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 JAN. 6, 2023
Governor’s 2nd Inaugural Today – Pomp Absent Due to Fiscal Circumstances
Sacramento Bee
Gov. Gavin Newsom, who assailed conservative Republican leaders and their policies while celebrating California’s progressive values during his first four years in office, is launching his second term in similar fashion.
Today, Newsom will kick off his second inauguration with a march to the state Capitol, where he will be sworn in for another four years in California’s highest elected office. The celebration falls on the two-year anniversary of the Jan. 6, 2021 insurrection at the U.S. Capitol, giving California’s Democratic governor another opportunity to portray the Golden State’s case as a bulwark against far-right extremism.
“This observance of the California spirit of opportunity and inclusion — ‘the California Way’ — will stand in peaceful contrast to the violent insurrection and assault on our democracy which occurred two years ago,” Newsom’s inaugural committee wrote in a statement. Few details about the event have been made public.
The inauguration plans were first unveiled in an email to Newsom’s re-election campaign supporters on December 20, announcing a vague intention of holding a march and swearing-in ceremony on Jan. 6.
Those interested in attending were asked to RSVP online to reserve spots. The invitation stated event staff would be checking IDs for ticketed attendees.
The festivities are expected to begin late Friday morning with a march down the Capitol Mall, ending at the traffic circle west of the Capitol building.
Newsom will then be sworn-in and speak about his ambitions for the new term. A permit approved by California Highway Patrol’s capitol protection agency allows for up to 1,000 attendees.
Newsom’s second inauguration will look noticeably different than the first. He took office in 2019 amid nearly a decade of economic expansion that swelled the state budget to a remarkable surplus.
His initial swearing-in ceremony was the most extravagant and star-studded for a California governor in two decades. It lasted two days and culminated the governor taking an oath of office on the Capitol steps.
The weekend of celebrations featured a charity concert headlined by Pitbull to raise money for wildfire victims, a luncheon at Sacramento’s Crocker Art Museum and a children’s event at the California State Railroad Museum in Old Sacramento.
The San Francisco Chronicle reported at the time that ticket packages were being sold for up to $200,000 for the inaugural festivities and up to $1 million for corporate sponsorships of the charity concert.
But this time around, as the state faces a projected $25 billion budget deficit, the celebration appears to be noticeably subdued. It falls just days before he’s set to unveil his plan to address the anticipated shortfall in the upcoming budget.
https://www.sacbee.com/news/politics-government/capitol-alert/article270718747.html#storylink=cpy
Politico
While often portrayed as a “socialist” on Fox News, the liberal Newsom has long been known for pragmatism on economic matters. He regularly exchanges text messages with corporate executives, is known to tell his staff “you can’t be pro-job and anti-business” and has become a counterbalance to a legislature where Democrats wield wide margins.
“Philosophically, he’s a moderate,” said Jim Wunderman, a leader of the Bay Area Council, a business coalition who has known Newsom for decades.
In the space of several weeks this year, the governor secured an ambitious climate change package, despite formidable industry opposition. He also overrode environmentalist concerns and worked with Republicans to keep older power plants running. And he vehemently opposed a proposed income tax increase on wealthy Californians to fund electric vehicle infrastructure, aligning himself with Republicans rather than the California Democratic Party.
“It’s too easy to mistakenly assume he’s a tax-and-spend Democrat, and he’s clearly not and never has been,” said longtime political adviser Dan Newman.
Attacking the oil industry, along with a slew of liberal actions over the years and the antipathy of Republicans and right-wing media, has helped bolster the governor’s reputation as a solid member of the progressive wing of the Democratic Party.
The reality, however, is more nuanced. Newsom, despite the rhetoric, is pro-business and a centrist at heart, according to dozens of interviews with those who have followed his career and a review of his record. And that’s how he’s likely to govern over the next four years after winning reelection in a landslide last month.
The governor’s office declined to make him available for an interview for this story.
He’ll likely get an opportunity to test his moderate credentials in the coming months, with the state facing the possibility of a budget deficit in July after several years of nearly uninterrupted surpluses that have allowed California to expand spending on schools and ambitious programs like health insurance for all undocumented immigrants. Persistent issues like homelessness and a soaring cost of living will also continue to test his economic vision.
Newsom’s energy agenda poses the highest-stakes test of his economic vision. He wants to prove a state can prosper while abandoning fossil fuels.
California, under his leadership, has committed to eliminating sales of new gas-powered vehicles by 2035 and achieving carbon neutrality a decade later. He signed legislation to ban new oil wells near homes and schools.
But the state still has to pay for those goals while pulling off a tricky transition to an all-renewable electricity grid.
“We see everything he does on his economic agenda through energy policy,” said Rob Lapsley, president of the California Business Roundtable, “because it just drives everything.”
Business executives and political operatives who have known Newsom for years say his basic orientation has not changed. He entered politics as a self-described “dogmatic fiscal conservative and a social liberal” representing the wealthiest slice of San Francisco on the board of supervisors. He built his burgeoning hospitality business with investment from the Getty family, heirs to an oil fortune who would later throw him a six-figure wedding.
Newsom was a villain to the left when he ran for San Francisco mayor in 2002 on his signature “Care not Cash” initiative — to reduce welfare payments to homeless San Franciscans and reroute the money to services — to the point that he was burned in effigy. But that solidified his support from business groups and voters considered conservative by Bay Area standards. When supervisors pushed to offer universal health insurance, Newsom worked to assuage business concerns by delaying the proposal and fighting unsuccessfully to make employer contributions voluntary.
That tendency to both advance and quietly temper a labor-aligned economic agenda has continued in Sacramento. Newsom has handed labor major victories in areas like wages, worker classification, and paid leave. But he has also sought to dull the impact on businesses.
“I do believe he has a business mind. I think his mind leans business, but his heart leans working people and people who are the most vulnerable,” said Tia Orr, executive director of the labor powerhouse SEIU California. “There always are some changes we have to make to be mindful of unintended consequences.”
Some longtime Newsom observers believe he has undergone a fundamental shift. Former adviser Eric Jaye, who broke from Newsom during his mayorship and went on to work for a gubernatorial rival, said Newsom had for years supported “social policies that don’t threaten economic privilege.”
But Newsom has moved left along with the Democratic Party writ large, Jaye argued, as shown by his positions on oil companies and regulating wages in the fast food sector.
“You would not have recognized the Gavin Newsom of 20 years ago when he went on television and accused the oil companies of price gouging,” Jaye said. “He would not have done that 20 years ago. But we don’t live in the world of 20 years ago.”
MORE:
Tax Revenues Plummet; 2023 Crisis #1 for Governor & Legislature
CalMatters commentary from Dan Walters
While California has a surplus of critical issues demanding political attention – housing, homelessness and water to mention the most obvious – it faces a deficit of financial resources to deal with them.
Gov. Gavin Newsom will soon reveal a proposed budget for the 2023-24 fiscal year that begins July 1, and it’s likely to greatly differ from the 2022-23 version he and the Legislature adopted just six months ago.
The current budget reflected what Newsom said would be a massive surplus, thanks mostly to a flood of tax revenues from high-income Californians who were enjoying big gains on their investments.
Pegging the surplus at $97.5 billion, Newsom bragged that “no other state in American history has ever experienced a surplus as large as this.”
He and the Legislature enacted a $300-plus billion budget that committed much of the supposed surplus to expanding an array of social and educational services, including what he said was achieving universal health care by extending coverage to all undocumented immigrants.
Just a few weeks later, however, Newsom began acknowledging that the surplus might not be as large as he had boasted. He vetoed a number of spending bills, citing indications that a recession might be on the horizon.
In November, the Legislature’s budget analyst, Gabe Patek, made the reversal of fortune official in his annual report on the state’s finances, saying the healthy surplus that Newsom projected is really a “$24 billion budget problem.”
“The budget problem is mainly attributable to lower revenue estimates, which are lower than budget act projections from 2021‑22 through 2023‑24 by $41 billion,” Patek said, stressing that the deficit would occur even if there’s no recession but would become worse if the economy does, indeed, “turn sour.”
Whether the nation is headed for recession is a much-debated question.
The Federal Reserve System has hiked interest rates sharply in hopes of cooling off the economy and lowering a soaring inflation rate. While it hopes for a “soft landing,” some economists believe that it could become a full-blown recession.
California’s budget is particularly sensitive to larger economic currents because it is inordinately dependent on taxing incomes of a relative few wealthy Californians. Income taxes are three-quarters of the state’s general fund revenues and 1% of taxpayers generate nearly half of those taxes.
“Based on historical experience, should a recession occur soon, revenues could be $30 billion to $50 billion below our revenue outlook in the budget window,” Patek said. Because of the looming threat of recession, Patek urged the Legislature to adopt a very conservative approach to the 2023-24 budget, balancing it without relying on the state’s reserves.
It’s good advice, but will the Legislature heed it? Backpedaling is a hard sell in a Legislature dominated by left-leaning Democrats and allies in advocacy groups that had been elated by the budget’s provisions.
Initial indications are that legislators would prefer to continue the programmatic enhancements even if it means dipping into reserves or borrowing money to cover the deficit.
The Assembly Budget Committee said as much in a “budget blueprint” issued after Patek made his report. The document devotes much verbiage to self-congratulation about the current budget’s largesse and calls for protecting it by using the “state balance sheet to continue key investments.” That’s defined as shifting some spending to special funds and “borrowing from special funds, especially if revenue situation worsens.”
So where does Newsom stand between these two conflicting approaches? Will he adopt Patek’s conservative advice or side with the Legislature, even if it means deficit spending and debt? We’ll know in about a week.
CA Economy Hit as Tech Lay-Offs Escalate
Wall Street Journal & SF Chronicle
Technology-driven companies across industries have been laying off workers at the fastest pace since the Covid-19 pandemic shocked the global economy in 2020, according to one data tracker.
Collectively, employers in the slumping tech sector cut more than 150,000 jobs in 2022, based on estimates from Layoffs.fyi, a website that tracks the events as they surface in media reports and company releases.
That figure compares with about 80,000 layoffs in March-December 2020 and 15,000 in all of 2021, based on data compiled on the site.
The tally was created by San Francisco internet entrepreneur Roger Lee, who launched the tracker after the pandemic struck “as a side project to create awareness around all of these tech layoffs, in the hopes of helping laid-off employees find a home.”
The estimates include large employers such as Facebook parent Meta Platforms Inc. (more than 11,000 layoffs announced in November) and Amazon.com Inc. (about 10,000 possible job cuts), as well as smaller businesses in the U.S. and abroad.
And Salesforce yesterday announced it will cut around 10 percent of its nearly 80,000-person workforce in one of the biggest rounds of tech layoffs in years. The cloud computing giant, which is San Francisco’s largest private employer, also plans to close an unspecified number of offices after growing too much during the pandemic, according to a regulatory filing.
State’s Population Continues to Shrink
Sacramento Bee
Births outnumber deaths in California, and yet the U.S. Census Bureau says the population shrank again as more than 300,000 people moved out of the Golden State. The federal agency released these new numbers showing a third consecutive year of decline. In 2020, California’s population contracted for the first time in state history, a drop that contributed to the state losing a seat in the House of Representatives.
Between July 2021 and July 2022, the number of California residents dropped from 39,142,991 to 39,029,342 — a loss of about 114,000 people, the new data shows. There were more births than deaths in the state, and 125,715 immigrants made their homes here in that one-year span. Most of the population decline was explained by the 343,230 people who moved to other U.S. states.
H.D. Palmer, deputy director of external affairs at the California Department of Finance, said the rate of decline had slowed, a sign, he said, that net growth was in the future. California has had a net loss of residents to “domestic migration” for years, he said, and the more recent numbers are “relatively in line with what the historical trend has been.” Palmer said that “some people — for reasons other than demographics, and more politics — try to jump on some of the out-migration numbers.”
But the population decline also partly reflects failures in state policy: California is in a housing affordability crisis. “If you talk to demographers, they’ll say that one of the factors is the cost of housing,” Palmer said. “And that’s continued to be a challenging issue for the state.”
The Public Policy Institute of California reported that between 2015 and 2021, 413,000 adults cited housing as a primary reason they moved out of state; a majority of those leaving were middle- or low-income people.
The institute’s state survey found that 64% of adults in California say housing affordability is “a big problem” where they live. The out-migration may be partly attributable to work-from-home policies instituted during the pandemic.
Those policies fueled in-state migration out of expensive housing markets such as the Bay Area and to more affordable places, including Sacramento. Palmer said it’s likely that some people also left the state altogether.
https://www.sacbee.com/news/politics-government/capitol-alert/article270354472.html#storylink=cpy
Legislature Off to a Slow Start Answering California’s Key Questions
CalMatters
A soaring homeless population. A bitter battle with the oil industry over gasoline prices. A spending plan for a state with the world’s fifth-largest economy as threats of a recession hover.
There’s a lot for the California Legislature to deal with this year — and it made little headway Wednesday, its first day back at the Capitol since swearing-in a new class of members last month. The brief floor sessions in the state Senate and Assembly focused more on the dearly departed than the challenges ahead.
The slow start to the legislative session is nothing new, but it does leave plenty of time for reflection. Here are some key questions for the year to come:
By the afternoon, Senate and Assembly staff reported that just two new measures had been introduced in each house. (More than 140 were already submitted last month.) With a bill introduction deadline of Feb. 17, committee hearings and votes for most proposals are still months away.
So until then, floor sessions are mostly an opportunity for lawmakers to check in — and receive their per diem, the supplemental $214 paid daily to legislators for housing and living expenses, as long as they don’t leave Sacramento more than three days at a time.
The first floor sessions on Wednesday, for example, lasted about a half hour each in the Senate and Assembly, largely taken up by speeches memorializing friends and family who had died. Assemblymember Greg Wallis, a Bermuda Dunes Republican who won his seat by 85 votes, made his inaugural appearance on the floor; his race had not yet been called in time for the ceremonial swearing-in on Dec. 5.
So…What will be the Legislature’s priorities?:
https://calmatters.org/politics/california-legislature/2023/01/california-legislature-key-questions/
Senate & Assembly Leaders Appoint Supporting Casts
State Senate & Assembly
Senate President pro Tempore, Toni G. Atkins (D-San Diego), today announced the Senate’s committee membership assignments for the 2023-24 Legislative session. The Senate Rules Committee will ratify the committee memberships on Wednesday, January 11, 2023.
Atkins also announced the Senate’s Democratic Leadership Team and Senate Rules Committee members for the 2023-24 Legislative session.
Assembly Speaker Anthony Rendon (D- Lakewood) announced he has made the following committee appointments for the 2023-24 Regular Session:
Legislative Analyst Criticizes Air Board’s New Climate Change Plan
CalMatters
California’s recently adopted blueprint for tackling climate change has major flaws that could derail the state’s ability to meet its ambitious goals, according to a scathing report from the Legislature’s nonpartisan fiscal advisers.
One major issue: Although the plan calls for slashing greenhouse gas emissions 48% below 1990 levels by 2030, California isn’t even on track to achieve the 40% reduction currently required under state law, the Legislative Analyst’s Office found.
The office also slammed the blueprint for its “lack of focus” on specific policies, accused it of focusing too much on achieving a long-term goal of carbon neutrality by 2045 instead of the near-term 2030 milestones, and said California’s landmark cap-and-trade program — which allows big polluters such as oil refineries and power plants to buy credits to offset their emissions — isn’t stringent enough to help the state meet its 2030 goal.
To address these concerns, the office recommended the Legislature require the California Air Resources Board to submit a report by July 31 detailing specific programs, policies and strategies to meet the 2030 goal. It also suggested sweeping reforms to cap-and-trade, including extending the program past 2030 when it’s scheduled to end.
This isn’t the first time these criticisms have been aired: A 2021 state audit found California wasn’t on track to meet its 2030 emissions reductions goals. And last year, experts told state lawmakers that parts of California’s cap-and-trade program are deeply flawed.
Matthew Botill, a division chief who oversees climate programs at the California Air Resources Board: “One of the things that the Legislative Analyst’s Office fails to recognize is really that deep list of programs and policies that the state has already enacted. That’s what we referenced in the scoping plan — the ability for that work that we’ve done in the past to be leveraged to help us, not just hit our 2030 target, but go further than just the statutory target to get us to that carbon neutrality that we need to get to in 2045.” As for cap and trade, “it’s an important policy, but it’s one policy in a big portfolio of policies that the state is pushing.”
Analyst’s report:
https://www.lao.ca.gov/Publications/Report/4656
In this comprehensive, concise guide, CalMatters breaks down key 2022 developments:
The Gualco Group Elevates Lisa Rodriguez to Principal
California Morning Report
Jackson Gualco, president of The Gualco Group, Inc. advocacy and strategic advisory firm, announces the promotion of Lisa C. Rodriguez to principal from senior government relations advisor. Rodriguez is a former legislative committee and member staffer who joined The Gualco Group in 1996. “Lisa is a recognized pillar of the Capitol community,” Gualco said, “and all of us at the firm extend our heartfelt congratulations.” She serves on the board/exec committee of the Institute of Government Advocates and is a graduate of the Hispanas Organized for Political Equality leadership program, UC Davis business administration certificate program and holds a polisci BA from Sac State.