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IN THIS ISSUE – “What’s Out There is Darkness…Good Luck, Baby” – Jerry Brown
NEWSOM GETS FISCAL…AND PHYSICAL
- Big Caveats in the State Budget
- Governor Goes National: “America in 2019 is California in the 1990s”
- California Leads Healthcare Reform
- Future of Water
- Local Governments Seek Legislation to Cloak Bond & Tax Proposals
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 JUNE 21, 2019
Commentary from CalMatters
California’s political leaders, Democrats all, are touting a new state budget that expands spending on services for the state’s poor while building reserves.
That’s true, as far as it goes. However, there are some very big caveats in the $213 billion 2019-20 budget, the first by Gov. Gavin Newsom.
The first caveat is that while expanding health insurance coverage (even to some undocumented adults), early childhood education, an expanded “earned income tax credit” and other services may alleviate symptoms, they ignore root causes of California’s highest-in-the-nation poverty.
The most important factor in having 20 percent of Californians living in poverty, according to the Census Bureau, and another 20 percent in “near-poverty,” according to the Public Policy Institute of California, is the state’s ridiculously high cost of living, especially for housing.
How high? Recent calculations by the Council for Community and Economic Research reveal that four of the 10 U.S. metropolitan areas with the highest costs of living are in California, topped by San Francisco, 91.4% above the national average.
Looking at the situation from a different standpoint, California’s high cost of living depresses real personal income growth, according to the U.S. Bureau of Economic Analysis (BEA).
While the state’s economy was booming in 2017, and generating record amounts of taxable income for the state treasury, the BEA says in a new report, its “real personal income” growth, adjusted for cost of living, was just 2.6 percent, lower than all of its neighboring states. Los Angeles-Long Beach had the slowest real income growth of any large metropolitan area at just 1.6 percent.
While nearly all California living costs tend to be high, housing is particularly so, thanks to our chronic inability to keep up with demand and the Capitol’s chronic inability to reduce barriers to construction.
That brings us to the next caveat about the new budget – the increasingly precarious state of California’s economy.
“The California economy is slowing down,” Jerry Nickelsburg, director of the UCLA Anderson Forecast, wrote in a report this month. “The state is, quite simply, running out of people to be employed.”
In decades past, when California’s economy was booming and needed new workers, we would see an influx from elsewhere. But in-migration has slowed to a trickle and we actually have a net loss in state-to-state movements – thanks, again, to our high living costs.
Late last year, economists at Cal Lutheran University issued a report on Ventura County, saying its economy is stagnant because of a lack of workers and blaming housing availability and costs for the situation. What’s true in Ventura is increasingly true of the entire state, recent data indicate.
The new budget plants the seeds of potentially massive “entitlements” that could backfire if recession hits. Although Newsom has characterized much of the budget’s new spending as one-time, he is raising expectations that would be politically difficult to ignore in a crunch.
Reserves are being built to cushion an economic downturn, but they fall way short of fully closing the gaps that even a moderate recession would create, which explains why the Legislature’s budget analyst recommended diverting more of current operating surpluses into reserves.
The Public Policy Institute of California, in its own look into long-term economic and fiscal trends, reminds us that “California’s current mix of revenue streams creates considerable volatility,” particularly since the budget is inordinately dependent on taxing high-income Californians whose personal incomes are extremely variable.
Newsom’s predecessor, Jerry Brown, started building reserves and warned in his final budget, “What’s out there is darkness, uncertainty, decline and recession, so good luck, baby.”
Don’t look now, but Gavin Newsom is making some noise.
He’s coming out swinging at Donald Trump (and Fox News). Emerging from Jerry Brown’s shadow. Pushing an ambitious state policy agenda backed by a fatter-than-ever budget. Preparing the ground, many believe, for his own potential run at national office after the 2020 circus winds down.
The generously coiffed former San Francisco mayor, who spent the better part of the last decade waiting his turn back in the political klieg lights, is on the attack, and on multiple fronts.
Speaking to POLITICO in his office at the state Capitol, California’s new governor uses superlatives like “magnificent” to describe his achievements in his first six months, basks in the bliss (for now) of leading a Democratic super-majority in Sacramento and wastes no opportunity to score points on the national stage.
“America in 2019 is California in the 1990s,” Newsom says, not approvingly. “The xenophobia, the nativism, the fear of ‘the other.’ Scapegoating. Talking down or past people. The hysteria. And so, we’re not going to put up with that. We are going to push back.”
If Newsom doesn’t yet have the national profile he might want, he also knows California’s status as a virtual nation-state, as so many pols and pundits here are fond of saying, makes him more than just one of 50 governors. He demands to be watched, and will be.
There will be multiple ways for Newsom to trip up in the months ahead. The Democratic supermajority in Sacramento could easily push him to overreach, and that could backfire on him, fiscally speaking, if the state economy turns sour. His expansive policy agenda easily could turn unfocused. The state’s realities — the highest poverty rate in the country, a housing crisis, vicious identity politics that place it to the further left of the nation as a whole — risk becoming serious liabilities for this ambitious governor.
An hour with the governor reveals five dynamics at play in Newsom-world, including some challenges that he views as potential opportunities for California (and, naturally, himself).
Donald Trump loves slamming Newsom’s California — and that’s as good for the Newsom brand as it is for the Trump brand.
Long connected to some of California’s most prominent families — a photo of Bobby Kennedy and Newsom’s late father, William, a state appeals court judge and manager of the Getty family oil fortune, adorns the governor’s office wall — the charismatic Newsom has been a man on the rise for two decades now. He emerged relatively unscathed from scandal — an affair during his time as mayor of San Francisco – and waited out two terms as Brown’s lieutenant governor before winning election handily last November.
It’s a given in California political circles that Newsom wants someday to run for president — and while 2020 is too soon, 2024 could work just fine, the theory goes…if Trump wins re-election, of course.
Newsom seems to relish a public fight with the president — and Fox News and conservative commentator Tucker Carlson, who often takes aim at California, and whom Newsom name-checks repeatedly in the course of an hour. He shrugs off concerns that Trump and the Republicans will exploit the deal Newsom and California lawmakers cut last week on health care for some undocumented immigrants.
“If it’s not this, it’s ten other things,’’ he says. “If I’m going to be worried about Donald Trump’s feelings and Tucker Carson’s feelings and Fox News’ feelings, then I won’t be taking care of the people in this state,’’ he adds. “I won’t be doing justice to millions and millions of Californians who will benefit from our health care expansions, the biggest expansion [to benefit] the middle class – something no one thought was achievable few years back.”
Still, Newsom clearly pays close attention to the daily drama of Trump’s White House. “[Trump] says he has a great [health care] plan, and maybe it’s in the left pocket, not the right one. He pulled out the deal with Mexico today; maybe he has a deal on health care,” Newsom says.
As any California governor should, Newsom has the “as goes California, so goes the nation” message down pat. After all, California’s politics do have a way of presaging things to come to the rest of American politics — think the Proposition 187 vote on immigration in 1994 or the state’s early debates over fuel efficiency standards.
And in Newsom’s view, there’s a message there: Under Trump, national Republicans “are into the politics of what California was into in the 1990s..and they’ll go the same direction — into the waste bin of history, the way Republicans of the ’90s have gone. That’s exactly what will happen to this crop of national Republicans.”
Still, he’s cautious on the impeachment question. Newsom, who is close to fellow San Franciscan and House Speaker Nancy Pelosi, defends her reluctance to start impeachment proceedings. “What’s so remarkable about someone with the experience and temperament of Speaker Pelosi is that she’s seen a lot of movies,’’ he says. “She’s been there. She’s got a better sense than a lot of folks. So I think we should stay the course. What we’re doing is working…I think Democrats are winning right now.”
Newsom wants you to know he’s a policy wonk, and he’s using his perch to move the needle on hot-button policy issues that Democratic 2020 contenders — and the House Democratic majority — have far less ability to affect. As the most populous state and the country’s biggest economy, Newsom’s actions carry outsize weight – and are guaranteed outsize publicity.
Consider the national attention it garnered when Newsom signed an executive order in March halting executions – sparing 737 people on California’s death row. Witness the proclamation his office wrote last month “welcoming women to California to fully exercise their reproductive rights” after a wave of conservative states took steps to limit abortion. Newsom is outspoken on immigration, traveling to El Salvador earlier this year in his first international trip as governor.
Newsom is remembered by many for leading the way on same-sex marriage during his days as San Francisco mayor. And now, he is determined to plant the flag on universal health care – something that was not seen as a top priority for Brown — including for all undocumented immigrants.
“We’re going to get it,’’ Newsom insists. “We’re committed to universal health care. Universal health care means everybody…We will lead a massive expansion of health care, and that’s a major deviation from the past.’’
“That’s the real story coming out of California,” Newsom says. “A lot of the think tanks that are informing these presidential candidates, are informing their policies. But California is doing. We’re implementing.”
One of Newsom’s biggest challenges is coming out of the shadow of his predecessor, Brown, who spent four terms governing California – from 1975 to 1983 and then from 2011 to 2019. That’s why Newsom is trying hard to project an aura of fiscal prudence amid a laundry list of expensive campaign promises.
Notwithstanding his national “Moonbeam” caricature as an unapologetic liberal, Brown was known in California as a penny-pincher — the proverbial “adult in the room” willing to say no to more free-spending legislators. That approach helped the nation’s largest economy and state budget emerge solvent and successful from the financial crisis and the recession.
And while Newsom’s rein in San Francisco was solidly pro-business, he entered office in January with the Republican party decimated — Democrats now enjoy two-thirds supermajorities in both chambers, and political and policy fights are largely intra-party, with factions of moderate Democrats holding the balance of power on any given issue. Plus, there’s the prospect of an inevitable economic downturn. So the big question in Sacramento has been whether Newsom will be able to withstand the pressure to spend — or whether a newly empowered legislature would run roughshod over him.
Five months in, Newsom and the legislature just agreed on a $215 billion budget, and he argues that they’re toeing the line fiscally. The budget would expand health care for middle-income families and undocumented immigrants, clean up drinking water in rural communities and pay down teacher pension debt, while leaving the state with $19.4 billion in reserve funds.
“We wanted to really get ready to prove our critics wrong — that we could govern without being profligate, that we can be progressive in our values,” Newsom says. “We can’t do everything overnight. But we can do more than people think.”
With the budget situation still rosy, Newsom and the Democratic legislature — including Assembly Speaker Anthony Rendon and state Senate President Pro Tempore Toni Atkins — are still largely in honeymoon mode and there hasn’t yet been a knock-down intra-party fight. “We all are sort of prone to friction, and I don’t think we’re providing much of it,” Newsom says with a smile.
But that’s unlikely to last, particularly if the economic situation shifts, and California’s budget — which is particularly sensitive to national economic trends — takes a hit.
Either way, it’s clear Newsom is more than a little eager to move beyond the Brown comparisons. Asked about his failure to get a housing bill through this year, Newsom noted that the effort’s been going for three years. “The previous two years you were running headlines about how Jerry Brown fell short, getting that to his desk…right? Forgive me.”
For all of Newsom’s California-dreaming, he’s well aware that the state’s Democrats have their own problems. Nowhere is that more apparent than in the state’s enormous income equality gap — California had the highest poverty rate in the country last year, according to Census data — and its housing and homeless problem.
Both are on display in the Bay Area, where the riches of Silicon Valley – and the skyrocketing housing prices they’ve driven – sit uneasily next to growing encampments. Amid the expanding homeless population in cities like Los Angeles and San Francisco, Newsom has repeatedly warned legislators that the issue is a stain on the state — and “we own it.”
Asked this week his most effective efforts to date, the governor — whose budget proposes a $1 billion investment to tackle the issue — ticked off a list of policy responses. Among them: “something that’s never been done in our state’s history,’’ a survey of all California surplus property” — including “44,000 specific parcels” that have been analyzed over the last five months for potential housing development.
His budget, which includes millions for tenant protection, assistance to homeless university students and mental health investments, will be supplemented by “novel strategies for new housing types and developments,’’ and helping major cities with planning and infrastructure to build them, he said.
“We’re not naive about our systemic challenges as it relates to income inequality and issues of affordability,” he said. “That didn’t happen overnight, that’s a 20-30-year trend. We own it now, we’re owning up to that. That’s at least a change: no one is denying the crisis.”
California is beefing up Obamacare, restoring an individual mandate, expanding health insurance subsidies well into the middle class and covering some undocumented adults through Medicaid. It’s an incremental step toward universal coverage that can animate the Democrats’ party-defining debate over how best to cover everyone — through a mixed public-private system or through “Medicare for All.”
The Democratic-controlled state legislature on Thursday approved a budget, clearing the path for a statewide penalty for failing to purchase health insurance, which will help subsidize coverage for middle-income people earning too much to receive federal financial help from Obamacare. California will also become the first state to extend Medicaid coverage to low-income undocumented adults up to age 26, defying the Trump administration’s efforts to shrink government benefits to immigrants.
The moves fall well short of a sweeping Medicare for All-style system vigorously supported by the party’s progressive wing here in California and across the country — and viewed much more cautiously by much of the Democratic establishment.
The idea of expanding Obamacare subsidies could gain traction among more moderate Democrats in Washington who would rather build on the Affordable Care Act than engage in another protracted health reform battle should the party take back control in Washington. And they can sell it as a practical move toward expanding coverage immediately while the party weighs more progressive health plans.
“I view California as a model state that’s likely to be used as a best practices example for how Congress can move ahead in a new Democratic administration without in any way creating barriers to do more aggressive policies in the future,” said Chris Jennings, who was a health policy adviser in the Clinton and Obama administrations.
Case in point: California’s new progressive governor, Gavin Newsom, said he remains committed to setting up a single-payer system in the state, but he made the Obamacare expansion and coverage for undocumented immigrants a priority his first year.
Peter Lee, executive director of Covered California, the state’s Obamacare marketplace, said the legislature’s coverage expansion was an indication “we can’t stand still” while others debate more sweeping overhauls of the health care system.
California’s plan isn’t a done deal. Having cleared the $215 billion budget, state lawmakers in the coming days must pass a series of bills approving the health measures through an expedited process.
House Democratic leaders in Washington, wary of a pursuing a fully government-run single-payer system, have embraced a key element of the California plan. They unveiled a package this spring that would vastly expand eligibility for health insurance subsidies, though it didn’t include reviving Obamacare’s requirement to purchase coverage.
The proposed California mandate largely mirrors the federal penalty that was eliminated by Congress in late 2017. But California’s mandate would be pegged to the state’s income tax filing threshold, which is higher than the federal level, meaning more people would be exempt from the penalty.
The mandate penalty, along with $450 million from the state’s general fund over the next three years, helps pay for the expanded subsidies. The penalty is expected to generate an estimated $295 million this coming fiscal year, and as much as $380 million in 2022.
Under Obamacare, health insurance subsidies are cut off for people earning above four times the federal poverty level, or about $50,000 for an individual. California is extending subsidies to those earning six times the poverty level, or about $75,000 for an individual. About 190,000 Californians would be eligible for those expanded subsidies.
Even if the individual mandate is eventually approved as expected, some observers say it could face challenges in the courts — and possibly come at a political price. Opponents of the idea have criticized California for restoring the unpopular individual mandate while also extending Medicaid coverage to about 90,000 undocumented immigrants.
“How, for Pete’s sake, do you impose an individual mandate on contributing taxpayers who are citizens of California and subsidize undocumented immigrants by giving them free health care?” said Jon Coupal, president of the Howard Jarvis Taxpayers Association in California. “There’s an equity issue here that’s going to be part of the political miss.”
California is covering most of the cost of Medicaid coverage for young undocumented adults, estimated at $98 million this year. Still, the state is planning to draw some federal funds for this group, which could spark pushback from the Trump administration.
Coupal said the way the Legislature is advancing the mandate makes it ripe for a legal challenge. He said it amounts to a new tax, meaning it should go through regular legislative order instead of the fast-track budget process.
David McCuan, a California political analyst, said the state’s health proposals “mark California as a barometer of where health care can go,” but he also expects to see “numerous” legal challenges, particularly over the mandate.
Several health experts pointed out that a handful of states have passed individual mandates since Congress gutted Obamacare’s — including New Jersey, Vermont and Washington, D.C — and none have been challenged in court. Rhode Island lawmakers are also considering mandate legislation this year. Massachusetts was the first state to pass an individual mandate in 2006, and it became the model for the Affordable Care Act.
Welcome to the latest issue of Trend from The Pew Charitable Trusts. Trend offers perspectives from eminent voices about the global challenges facing our world today. In this edition, we look at how fresh water is being used throughout the world, in many places faster than it can be naturally replenished. This behavior will affect access to drinking water and water for irrigation, with risks to global food production—and it poses new opportunities and challenges for policymakers.
We also interviewed two leading experts about the future of water for a short video conversation. In this video, you can hear insights from Jay Famiglietti, professor and executive director of the Global Institute for Water Security at the University of Saskatchewan, and Sandra Postel, the director and founder of the Global Water Policy Project and the author of Replenish, The Virtuous Cycle of Water and Prosperity.
Given their druthers, many government officials would prefer to do their business – our business, actually – behind closed doors and provide sanitized, self-serving versions of their actions after the fact.
Journalists and governmental watchdogs struggle constantly to overcome the tendency toward secrecy and obfuscation, sometimes winning and often losing.
Two years ago, in a rare display of support for transparency in governmental finance, the Legislature and then-Gov. Jerry Brown required local governments and school districts to tell voters how proposed bond and tax issues would affect constituents’ tax bills.
That’s common sense and good government, but local officials complained that the new law, Assembly Bill 195, would be too difficult to implement.
More likely, however, they feared that including an estimate of tax consequences in the brief ballot summary would crowd out their pitches for passage and that telling voters that their tax bills would increase might discourage them from approving the measures.
Last year, the disdain of local officials for the law manifested itself in a budget “trailer bill” that would suspend the transparency law for two years – thereby exempting hundreds of 2018 bond and tax measures.
The author of AB 195, Assemblyman Jay Obernolte, a Big Bear Lake Republican, said the trailer bill was drafted by the Legislature’s Democratic leadership without his knowledge.
For whatever reason, the exemption bill was not taken to a floor vote. Therefore, Obernolte’s disclosure law remained in effect for local tax and bond measures in 2018.
Local officials still don’t like the law and have waged a low-profile drive in the Legislature to get it repealed or watered down and, not surprisingly, a new bill has popped up to fulfill their hopes.
Last week, Sen. Scott Wiener, a San Francisco Democrat, did a “gut-and-amend” maneuver on one of his bills, Senate Bill 268. The measure, which had dealt with welfare benefits and already had passed the Senate, was stripped of its contents and a new bill was inserted.
It would allow local officials to remove the required information about tax consequences from the ballot summary that voters read before casting their votes and place it, instead, in the voter pamphlet or another separate statement, where it would get much less attention.
Moreover, the bill declares, “Failure to comply with this chapter shall not affect the validity of any bond issue following the sale and delivery of the bonds,” which basically lets local officials entirely off the hook.
SB 268 is just what local officialdom wants – a new law that purports to give voters vital information about tax and bond measures but ensures that the data will be buried in official paperwork and that failure to provide it won’t be penalized.
A Wiener spokesman, however, said the senator’s motive is “to make it clear what they (voters) are voting on,” asserting that the 75-word limit on ballot summaries isn’t enough space to adequately explain tax consequences of ballot measures and thus voters might reject taxes and bonds they otherwise would support. “A 75-word limit confuses voters,” he said.
That rationale parrots what local officials have been saying. One might suspect that Wiener is carrying the bill to placate those officials because they had been angered by his authorship of a highly controversial housing bill. That measure, Senate Bill 50, would have overridden local zoning laws to authorize high-density housing near public transit services but was buried in an avalanche of local government opposition.