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IN THIS ISSUE – From Vanguard to (Nearly) Vanquished?
- Governor & LA Mayor Political Careers Are COVID-19 Negative
- Ink Barely Dry on State Budget…Next Year May Be Worse
- Sacramento Briefs:
Mayor Backs Property Tax Reform Ballot Measure
State Controller Opposes Dem Bill for State Bank
FOR THE WEEK ENDING JULY 17, 2020
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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It’s taken four months and 7,000 deaths for Gov. Gavin Newsom and Los Angeles Mayor Eric Garcetti — high-profile California Democrats with even higher political aspirations — to go from vanguards to nearly vanquished in the fight against Covid-19.
Newsom’s early success in the Covid-19 crisis turned into a sobering reversal Monday after the state flared into a deadly hot spot, prompting the governor to impose the nation’s most sweeping reclosure to contain the alarming outbreak.
Garcetti, likewise vaunted for swift action in March, warned that the nation’s second largest city is now on the brink of emergency “red” status and could face another complete shutdown.
The two leaders have been buffeted throughout the crisis by countervailing demands: businesses and local politicians clamoring to reopen and health officials warning that overly hasty moves would reverse months of painfully earned progress. But now, with numbers exploding, a chorus of critics are second-guessing how the California governor and LA mayor reopened businesses.
The disease resurgence has even deeper implications after the state’s two largest school districts announced they will keep campuses closed when the academic year starts next month.
Many California Democrats blame President Donald Trump for diminishing the dangers of the virus and focusing hard on the economy. But some here suggest that Newsom caved in too soon to business interests and allowed public pressure, rather than science, to dictate his moves.
“The desire for popularity gets in the way of making good choices in a pandemic,’’ said state Sen. Steve Glazer, a Bay Area Democrat who has repeatedly urged the governor to take “command and control’’ of the situation and not rely on a patchwork of local officials to sort it out.
Newsom on Monday shut down bars and indoor dining across California, the first time he has imposed a statewide closure since reopening the economy. In hard-hit counties with a combined 32 million residents — 80 percent of California’s population —the governor also shuttered hair salons, movie theaters, malls, churches and gyms.
Glazer wants even stricter public health controls, more testing, broader contact tracing — and tougher enforcement of rogue businesses — before loosening the reins further. That might be political unpopular, but Glazer said “that bad political instinct toward popularity is a very dangerous one when you need an adult in the room.”
For the first two months of the crisis, Newsom and Garcetti were regularly heralded for containing the virus while the Northeast saw calamitous waves of deaths and hospitalizations. The two were frequent guests on national talk shows, discussing the steps they were taking to avoid the same fate as the East Coast states.
By late April, Newsom came under intense pressure from a long list of business owners, as well as residents frustrated by limitations when the virus seemed under control. Rural counties in particular had avoided the virus more than heavily populated areas like Los Angeles, which emerged as the state’s hot spot but never suffered the depths of the New York City crisis.
Newsom resisted reopening while governors elsewhere moved forward. His first set of reopening requirements was panned by local leaders and some lawmakers as too high a bar, with criteria such as no coronavirus deaths for 14 days.
By mid-May, however, he relaxed some standards and dipped his toe into reopening by allowing indoor dining and retail pickup in some counties. Then he opened churches. Within weeks came a cascade of sectors, all the way down to bars, gyms and tattoo parlors, where social distancing is particularly challenging.
All along, he has said he was guided by science. He has pointed to counties being free to impose stricter rules. And he has described reopening as a “dimmer switch” that turns some sectors off when infections and hospitalizations grow troublesome.
“The dimmer switch goes up and down based upon changing conditions, based upon context or what you’re trying to accomplish,” Newsom said Monday. “So that’s what we’re doing.”
Public Policy Institute of California President Mark Baldassare, a veteran pollster, noted that the signal from Californians was clear: prioritize health and safety over reinvigorating the economy.
Newsom in the early days of the pandemic enjoyed an approval rating as high as 83 percent in one poll. But he may now face a reckoning from constituents who perceive that “priorities have shifted and that has been the cause of this surge,” Baldassare said.
The governor and Garcetti could also face blowback from key constituents: parents who were counting on sending their children back to school in the fall. The state’s two largest school districts — including Los Angeles Unified — announced Monday they will keep campuses closed because of the coronavirus surge. A trending refrain has been schoolkids were less of a priority than reopening bars and other social activities.
Democratic strategist Garry South, who was a top adviser to former Gov. Gray Davis and has the ear of Newsom, said it was a mistake for both the governor and mayor to reopen such establishments, permitting scenes of beachside bistros filling with crowds of maskless young people.
Enforcement, though likely unpopular, would have been easy because “they’re operating under a liquor license which the state has the power to pull,” he said. But the failure to act not only may have fueled a resurgence in infections — but sent a message to scofflaws everywhere.
Newsom’s team, however, insists he has aggressively moved to address myriad issues in the nation’s most populous and most diverse state.
“We were the first to issue stay at home. We use science and data to do that — and to create a reopening process that accounted for the diversity of the state,’’ said communications director Nathan Click. “But when the governor saw data going in the opposite direction, he took strong action to bend the curve back in the other direction.’’
Political consultant Katie Merrill noted that “a governor, an elected official can only do so much if people are not going to follow the guidance — and I think you’ve seen that in that he has periodically pleaded with the people of California: don’t go to the beaches on Memorial Day, don’t overcrowd certain public spaces.’’
Like Newsom, Garcetti has been pinched in the pandemic between conservatives frustrated by his public health orders and progressives who believe he has not done enough. And the political climate confronting Garcetti has been complicated by the protests following the death of George Floyd — with Black Lives Matter activists pressuring the Los Angeles Police Department and its chief, Michel Moore.
Garcetti, said Michael Trujillo, a political strategist in Los Angeles who advised one of Garcetti’s opponents in the 2013 mayoral race, is caught in “this perfect sandwich with right-wing conservatives on one slice of bread and hardened progressives being the other slice of bread.”
As to whether those forces are reflected in the broader electorate, he said, “That’s the question we don’t know the answer to.”
Darry Sragow, a longtime Democratic strategist based in Los Angeles, said he has seen no evidence of Garcetti suffering politically from the pandemic. Like Newsom, he was praised for his early stay-at-home order, and he has continued to provide regular updates at somber briefings.
“I think right now he’s getting very high grades,” Sragow said. However, “there are risks” to Garcetti if the crisis worsens, potentially exposing him to “a lot of frustration and anger on the part of the voters,” Sragow added.
The immediate effect of the resurgence on Garcetti’s political prospects is unclear. At least two private polls are currently in the field in Los Angeles that will test his favorability — one including only a portion of the city, one citywide.
GOP strategist Luis Alvarado, founder of a Latino-focused political consulting firm — and now an adviser to the Project Lincoln group of Republicans targeting Trump — agreed that Garcetti and Newsom have managed to walk the delicate tightrope between public pressure and political meltdown.
“I think the general feeling is that they are doing the best they can under the circumstances and pressures they’re under — as opposed to the president,’’ with polls showing that overwhelmingly Americans believe “all the blame stands with him.”
Yet when history is written, Glazer warned, the actions of elected officials will be judged not on polls, or popular opinion — but on factors that will withstand the test of time.
“A political career should not be a driver in a pandemic. So you lose your reelect — and you save thousands of lives,’’ Glazer said. “I’d say that’s a helluva tradeoff for your political legacy.”
Last month, Gov. Gavin Newsom signed a 2020-21 state budget he described as “balanced, responsible and protects public safety and health, education, and services to Californians facing the greatest hardships.”
Whatever its other virtues may be, the budget is far from “balanced,” at least as most folks outside the Capitol would define it.
The 2020-21 budget spends far more — at least $20 billion more — than projected revenues, even including billions of dollars from the state’s emergency reserve.
The gap is closed, at least on paper, by running up the state’s credit card with debt of one kind or another, the most spectacular example being how it treats the budget’s largest single expenditure, state aid to school districts for the education of about 6 million kids.
It authorizes those districts to spend more or less what they would spend if the state wasn’t being battered by the COVID-19 pandemic, if its economy wasn’t in recession, and if the state’s revenues aren’t in a nosedive.
However, in actual money, the budget will give them at least $11 billion less than the authorized spending and assumes that local school officials will close the gap from their own reserves or by going into debt themselves. Under the constitution, the deferments must be made up in subsequent years, so in reality the state is borrowing money from the schools.
Billions more dollars counted as revenues in the budget are actually loans from dozens of state special funds — money collected for specific purposes, such as licensing fees — that also must be repaid eventually with interest.
The most interesting special fund raid is money set aside to rebuild the east wing of the state Capitol, which houses Newsom’s own office and those of legislators, as well as committee hearing rooms. The budget grabs $734 million and authorizes the issuance of bonds — borrowed money — for the construction project.
The budget counts about $4.5 billion in revenue from suspending a couple of corporate income tax breaks. But the suspension will be in effect for several years, generating about $9 billion for the budget. It’s really a massive loan from the affected corporations that would have to be repaid when they claim the accumulated tax credits after the suspension expires.
The sneakiest bit of borrowing is an assumption that the budget will save $2.8 billion, half in the general fund, by reducing the pay of state workers via deals negotiated with their unions. The details differ from union to union, but generally, workers will be required to work two days each month without pay, offset somewhat by reducing their contributions for fringe benefits.
The kicker is that those unpaid work days will go onto the books as time-off to be taken with pay later and doubles the ceiling on accumulated time-off. So eventually the state will be repaying workers, and probably at hourly rates substantially higher than their current salaries.
The budget declares that the extra time-off must be taken before an employee retires or resigns, but that’s a polite fiction. A smart worker will use up the extra time-off first and bank other vacation or time-off days, which will then become larger lump-sum payments when employment ends.
When the reduced fringe benefit contributions are included in the equation, it’s really a multi-billion-dollar, high-interest loan from workers.
All of these loans assume that the state’s economy and tax revenues will recover in subsequent years, so they can be easily repaid. It’s a multi-billion-dollar wager, with taxpayers on the hook if it’s a loser.
Sacramento Mayor Darrell Steinberg is getting behind a California ballot initiative that would raise property taxes on businesses and bring in billions of dollars every year for public services.
The measure – arriving on November’s ballot as Proposition 15 – would end restrictions on assessments for commercial property worth more than $3 million, allowing them to be taxed based on their current value instead of their purchase price.
The “split-roll” initiative would exempt residential property and small businesses, meaning they would continue to be assessed at their purchase price.
The concept represents a break from California’s 1978 property tax law, Proposition 13, which prohibits new assessments unless a property changes ownership.
California shouldn’t join North Dakota in creating its own public bank, State Controller Betty Yee argues in a letter to Sen. Mike McGuire, D-Healdsburg, who chairs the Senate Governance and Finance Committee.
In the letter, Yee called AB 310, which would turn the California Infrastructure and Economic Development Bank into a public depository institution, a “proposal (that) is fraught with risk.”
In her letter, Yee listed several criticisms of the proposal.
For one thing, the bill would undermine the intent of the Pooled Money Investment Account, “which is – among other things – the state’s general fund,” Yee wrote.
She added that using that account as both the state’s checkbook and as capital for a public bank “would affect the safety and liquidity of the PMIA, and threaten my team’s ability to manage the state’s cash flow.”
AB 310 also wouldn’t require the public bank to get Federal Deposit Insurance Corporation insurance, Yee wrote, instead allowing the bank to self-insure “and leave taxpayers on the hook for all the risk.”
Finally, she said AB 310 doesn’t follow the Federal Reserve’s best practices for governance structure, “which would help avoid conflicts and politicization of lending decisions.”
“I am mindful of the intent to provide equitable access to financing for small and minority-owned businesses. Unfortunately, AB 310 is not the solution,” Yee wrote. “The Legislature could address this more directly by prioritizing such financing through the annual budget process.”
Land O’Lakes Inc. and Microsoft Corp. on this week announced a multiyear strategic alliance to pioneer new innovations in agriculture and enhance the supply chain, expand sustainability practices for farmers and the food system, and close the rural broadband gap.
As one of the nation’s largest farmer-owned cooperatives with 150 million acres of productive cropland in its network, Land O’Lakes is deeply connected to rural America and has a unique understanding of farmers’ needs and the communities where they and their families live and work.
Combined with Microsoft’s trusted cloud technologies and AI capabilities, the companies will deliver solutions that help farmers’ profit potential and adoption of sustainable agricultural practices.
According to the U.S. Department of Agriculture, U.S. farms contribute more than $130 billion to the economy, emphasizing the critical role farmers play in our nation’s food supply.
Yet the industry faces challenges that threaten its viability, including climate change, trade issues and an evolving workforce. With the emergence of COVID-19, the industry is increasingly facing production and supply-chain issues, and many farmers are facing new economic challenges for their family-owned businesses.
PORTLAND, Ore. (AP) — Federal regulators on Thursday threw a significant curveball at a coalition that has been planning for years to demolish four massive hydroelectric dams on a river along the Oregon-California border to save salmon populations that have dwindled to almost nothing.
The deal, which would be the largest dam demolition project in U.S. history, relies on a delicate calculus: The power company that operates the Klamath River dams will transfer its hydroelectric license and contribute $250 million in order to sever itself from the removal project and avoid any further liability or unanticipated costs.
The Federal Energy Regulatory Commission, however, on Thursday approved the license transfer on the condition that PacifiCorp remain a co-licensee along with the Klamath River Renewal Corporation, the non-profit coalition assembled to oversee the dams’ demolition.
That stipulation could kill or drastically alter the deal because removing PacifiCorp from the deal entirely better protects the utility’s ratepayers — an element that was necessary to gain the support from public utility commissions in both Oregon and California.
“Although we are generally satisfied that the Renewal Corporation has the capacity to carry out the proposed decommissioning, for the reasons discussed above, we find that the public interest would be best served by approving a partial transfer of the license and requiring PacifiCorp to remain as a co-licensee,” the commission wrote in a 31-page ruling.
The commission’s decision could be devastating for Northern California tribes that rely on salmon if it blows up the long-negotiated deal to tear down the dams that block the migration of fish along miles of the Klamath River.
In a statement, a coalition of tribes, environmentalists and salmon-fishing interests said although the ruling was a twist, they were optimistic because the commission found that “there is a significant likelihood KRRC will complete the dam removal process without relying on PacifiCorp for additional funding or expertise.”
“We can work with this,” Karuk Chairman Russell “Buster” Attebery said. “We understand that we will need to reconvene settlement parties and make adjustments as needed to reflect PacifiCorp’s goals. We remain committed to our partnership with PacifiCorp as we remain committed to Klamath dam removal.”
The ruling nonetheless puts PacifiCorp in an awkward position. The dams currently make up just a small part of the utility’s power portfolio. But under federal law, if it retains the hydroelectric license it will have to pay itself to install fish ladders to help the imperiled salmon return to their spawning grounds upstream — an amount likely far greater than the $250 million now in question.
PacifiCorp said in a statement that the ruling denied its customers the protections it had negotiated that were one of the “bedrock principles” of the agreement.
“PacifiCorp is continuing to fully examine the order and will consult with our settlement partners to assess its impact,” the utility said. “We expect to reconvene with our settlement parties to determine next steps for continued agreement implementation.”
The Klamath River Renewal Corporation said in a short statement that it was reviewing the order with its partners to determine the next steps.
The project, estimated at nearly $450 million, would reshape California’s second-largest river and empty giant reservoirs. It could also revive plummeting salmon populations by reopening hundreds of miles of potential habitat that has been blocked for more than a century, bringing relief to a half-dozen tribes that rely on salmon fishing that are spread across hundreds of miles in southern Oregon and northern California.
The transfer of PacifiCorp’s hydroelectric license was seen as the first major hurdle to getting the dams removed on the lower reaches of the Klamath River. Federal regulators must also approve a request to decommission the dams before work can begin, possibly as early as 2022.
The structures at the center of the debate are the four southernmost dams in a string of six constructed in southern Oregon and far northern California beginning in 1918.
They were built solely for power generation. They are not used for irrigation, they are not managed for flood control, and none has “fish ladders,” concrete chutes fish can pass through.
Two dams to the north are not targeted for demolition. Those dams have fish passage and are part of a massive irrigation system that straddles the Oregon-California border and provides water to more than 300 square miles (777 square kilometers) of alfalfa, potatoes, barley and other crops.
The proposal fits into a trend toward dam demolition in the U.S. that has been accelerating as these infrastructure projects age and become less economically viable. The removals are also popular with environmentalists who are fighting for the return of native fish species to rivers long blocked by concrete.
More than 1,700 dams have been dismantled around the U.S. since 2012, according to American Rivers, and the Klamath River project would be the largest by far if it proceeds.