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IN THIS ISSUE – “The Law That Swallowed California”
POLITICS
- Newsom’s 4th State of the State Speech…
- …Was It: “A California Way”
- …Or A Campaign Kickoff?
- …And Why Did the Location Offend Some Legislators?
- Another Lawmaker Quits – 25% of Legislature Will Not Be Back
- CA Dems Convene for “Gut-Check Time” & Clashing Causes
ENVIRONMENT
- “CEQA is the Law That Swallowed California” – Key Senator Calls for Reform
- Green Groups Tell Newsom to Prove Climate Leadership with Faster Electrification
- US EPA Restores California’s Auto Emissions Rules
CA OWES UNCLE SAM $20 BILLION
GRILLIN’ & CHILLIN’
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 service.
READ ALL ABOUT IT!
FOR THE WEEK ENDING MAR. 11, 2022
Newsom’s 4th (and Shortest) State of the State Speech…
Associated Press, Politico & Sacramento Bee
California Gov. Gavin Newsom proposed sending money back to taxpayers to offset record-high gas prices but rejected calls to increase oil drilling, saying he wants to free the state “once and for all from the grasp of petro-dictators.”
The governor gave no specifics, saying he will work with legislative leaders “to put money back in the pockets of Californians to address rising gas prices.”
Dee Dee Myers, Newsom’s senior adviser, told reporters the rebate would likely total in the billions of dollars and be limited to people who have a car. People who are living in the country illegally would also be eligible for the rebate, which could occur as soon as this spring.
Meanwhile, Republican and Democratic lawmakers wrote a letter to Newsom, urging him to support “a stable and affordable energy supply by adopting polices to allow Californians to take advantage of the abundant inland natural resources available in our state that will help ensure we are not dependent on foreign energy sources.”
In a wide-ranging address, Newsom also warned that authoritarianism isn’t just rising overseas, using his election-year speech to offer “a California Way” as the antidote to what he called the “agents of a national anger machine.”
Newsom, a Democrat who handily beat back a mid-term recall campaign last year, also touted his administration’s progress on homelessness, the economy, education and climate change in a speech to assembled lawmakers in an auditorium near the state Capitol.
This year, coronavirus case numbers and hospitalizations are plummeting and the nation’s attention is drawn to the Russian invasion of Ukraine and the accompanying spiraling gas prices. Republicans nationally and in California want to see the Biden administration increase drilling. Newsom rejected that call.
“Drilling even more oil,” he said, “only leads to even more extreme weather, more extreme drought, more wildfire.”
“We need to be fighting polluters, not bolstering them,” Newsom said. “And in the process of so doing, freeing us once and for all from the grasp of petro-dictators.”
As he did throughout the speech, Newsom offered “California’s leadership” as the alternative, calling clean energy “this generation’s greatest economic opportunity.”
California is one of the nation’s most oil-rich states and Republicans, who are a small minority in the Legislature and hold no statewide offices, see high gas prices as an election year issue they can exploit. California taxes gasoline at 51.1 cents per gallon, second only to Pennsylvania, according to the Federation of Tax Administrators.
“Gas prices are out of control. Let’s suspend the gas tax, stop using foreign oil and focus on energy independence policies that don’t place new burdens on working families,” Assemblymember Suzette Martinez Valladares said in the Republican “prebuttal” to Newsom’s speech.
Newsom has additionally proposed pausing a slight increase in the state gas tax scheduled to take effect this summer. But Democratic leaders in the Legislature have balked at that proposal, arguing it would make it harder to maintain the state’s roads while only providing barely noticeable relief at the pump.
Assembly Republican Leader James Gallagher said Republicans, while critical of Newsom in other areas, can work with him on the tax rebate.
“If we have nearly a $60 billion surplus in the state, it means that people are overtaxed and we should be giving the voters and citizens of this state back some of their money, especially in the trying times that we’re in when the cost of living is through the roof,” Gallagher said.
The governor otherwise has been pushing to wean California, famous for its car culture, from the internal combustion engine.
Newsom has ordered the state to ban the sale of new gas-powered cars by 2035 and halt all in-state oil drilling by 2045.
Several environmental groups said Newsom should impose an immediate moratorium on oil and gas development.
Newsom punched back at Republicans blaming Democratic policies for rising crime. He said California is funding increased crime-fighting efforts but will not “revert to heavy-handed policies that have marked the failures of the past.”
Newsom began and ended his speech as if addressing a national audience as he decried developments elsewhere while promoting California’s efforts at “finding new solutions to big problems.” Democracy is in danger, Newsom warned.
“While we might not have strongmen literally waging war in our country, we are plagued by agents of a national anger machine, fueling division, weaponizing grievance,” he said. “Powerful forces and loud voices — stoking fear and seeking to divide us, weakening the institutions of our democracy.”
He offered as an alternative California’s history of “expanding the horizon of what’s possible.”
“We know that government cannot be the entire solution, but we also know that government has always been part of the solution,” Newsom said.
He said governments’ goals should include promoting the private sector, encouraging diversity and “unifying toward common purpose.”
Polls routinely show homelessness as one of the most pressing issue for California voters. The state has the largest homeless population in the nation and Newsom has budgeted a record $12 billion for various programs and initiatives but encampments still proliferate.
In his speech, Newsom touted his plan unveiled last week to create new Care Courts in each county that could force those with mental health issues off the street and into treatment.
But Gallagher, the GOP leader, said Newsom has already spent billions of dollars to fight homelessness, “and the problem has gotten worse. You can’t just show up and do some cleanups with the camera around and another photo op and say, ‘Mission accomplished.’ That’s not working.”
State of the State speech (aka “SOTS” in the Governor’s Office):
https://www.gov.ca.gov/2022/03/08/governor-newsom-delivers-state-of-the-state-address-3-8-22/
Commentary from Dan Walters in CalMatters
California is a shining example of economic and social progress, a beacon to the rest of the nation and the rest of the world.
Doubt it? It must be true because Gov. Gavin Newsom said it Tuesday in his fourth State of the State address, declaring, “now, in the midst of so much turmoil with stacking stresses and dramatic social and economic change, California is doing what we have done for generations, lighting out the territory ahead of the rest, expanding the horizon of what’s possible.”
He called it “The California Way” and said it “means rejecting old binaries and finding new solutions to big problems … ”
However, Newsom ignored many “big problems” as he portrayed a state on the cutting edge of virtually everything positive.
By any measure, the state has an immense shortage of housing that has driven costs through the roof and given California the nation’s highest poverty rate. But neither the housing crisis nor the poverty rate crossed his lips.
He also sidestepped another crisis — a drought that threatens to devastate California’s agricultural industry and, in the longer run, clobber the entire economy.
Instead, Newsom portrayed the economy in the rosiest terms, saying, “When it comes to the economy, California is unmatched.
“We dominate in research, innovation, entrepreneurialism, venture capital — and remain the world’s fifth largest economy. Our GDP growth has consistently outpaced not only the rest of the country — but most other large, western democracies. Nearly a million new jobs in the last 12 months. In December alone, 25% of America’s jobs were created right here in California. More new business starts during the worst of the pandemic than Texas and Florida combined.”
Sounds great, right? But Newsom avoided the fact that California has the nation’s highest unemployment rate at 6.5%, nearly three percentage points higher than the national rate and three times as high as some states.
How about education?
“I’m talking about a real transformation of our public education system, like we’re doing right here in California,” Newsom claimed. “By creating choices — real choices — for parents and unprecedented support for their kids.”
What about the devastation that COVID-19 visited upon the state’s nearly six million public school students, and the widening “achievement gap” between poor students and their more advantaged classmates? What about California’s chronically poor performance on nationwide academic tests? Not a word.
Newsom bragged about the state’s leading role in reducing greenhouse gases and reducing the dominance of hydrocarbons in transportation and utilities.
“At a time when we’ve been heating up and burning up, one thing we cannot do is repeat the mistakes of the past,” Newsom said. “Embracing polluters. Drilling even more oil, which only leads to even more extreme weather, more extreme drought, more wildfire.”
However, he said nothing about California’s looming shortage of electrical power, already evident on hot summer days. Nor has he spelled out how the economic impacts of the conversion to an all-electric society will be alleviated.
Newsom did mention crime, at least in passing, but offered faint solace to victims of the state’s rising crime rates, particularly the wave of homicide in the major cities.
“Our approach is to be neither indifferent to the realities of the present day, nor revert to heavy-handed policies that have marked the failures of the past,” Newsom said, citing more money for both law enforcement and “new programs to tackle the root causes of crime, doubling down on proven violence prevention programs.”
Bottom line: As a State of State speech, it was shockingly deficient. It sounded more like a kickoff to his re-election campaign.
https://calmatters.org/commentary/2022/03/newsom-paints-rosy-picture-ignores-big-issues/
…And Why Did the Location Offend Some Legislators?
Politico
It also was not lost on some lawmakers that, a year after choosing the backdrop of an empty Dodgers Stadium, Newsom once again eschewed the traditional State of the State Speech location of Assembly chambers. This time he skipped the statehouse for a state agency building instead.
It left some lawmakers feeling slighted. “Legislators like myself just don’t understand the rationale of having the State of the State indoors, in a small room, just blocks from the Capitol,” a Democratic state lawmaker told POLITICO. “Does the governor not want to be seen as co-governing with us?”
Another Lawmaker Quits – 25% of Legislature Will Not Be Back
CalMatters
Up to 35 state lawmakers who began the 2021-2022 session in the Legislature will be gone by next year. Assemblymember Tom Daly on Thursday said he wouldn’t seek another term — the latest Class of 2012 ally of Speaker Anthony Rendon to leave. Only a fraction of the departures were forced out by term limits. The bulk have either snagged appointments, abruptly resigned, decided not to seek reelection or set their sights on the House, statewide office or other posts. That’s around a quarter of the Legislature turning over.
But we won’t see any Democrat-on-Democrat incumbent clashes. The major fights have deliquesced, as Sen. Connie Leyva decided to run for San Bernardino supervisor rather than face Sen. Susan Rubio, Sen. Melissa Hurtado shifted districts to avoid matching up with Sen. Anna Caballero, and Assemblymember Adrin Nazarian bowed out of clashing with Assemblymember Laura Friedman, as Nazarian looks to the L.A. City Council race in 2024. But Democratic Sens. Henry Stern and the termed-out Bob Hertzberg are vying for the same L.A. supervisors’ seat; Assemblymember Richard Bloom dropped out of that race.
CA Dems Convene for “Gut-Check Time” & Clashing Causes
Sacramento Bee & Politico CA Playbook
California Democrats gathered virtually this past weekend for their annual endorsing convention, hoping to mobilize a party that in recent weeks has focused on internal fights.
At stake are several competitive house seats that are critical to holding power in Congress. To win them, Democrats will need big money and big voter turnout.
“It’s gut-check time,” party Controller April Verrett told delegates. “We are down by six, the ball is on their 30, and it’s the two-minute warning… We must have each other’s backs… It is not the time to argue over who gets the ball. We all just have to do our part to ensure the win.”
Delegates heard from top party brass, including Gov. Gavin Newsom, House Speaker Nancy Pelosi, and Vice President Kamala Harris, who warned that a loss of power in Congress could threaten progress on climate change, abortion and voting rights.
But the more liberal party members weren’t stirred by calls to unity. Last month, an effort to prohibit the party from accepting money from law enforcement and fossil fuel companies came up short of what they wanted. Coupled with the demise of single-payer healthcare under AB 1400 in the Legislature, liberal-leaning activists weren’t sympathetic to party leaders’ pleas.
“Progressive Democrats should NOT contribute to the California Democratic Party so long as it cleans corporate money for Corporate Democrats that block bills that would decrease human suffering,” tweeted Progressive Caucus Chair Amar Shergill. “Give your money directly to corporate-free Democrats that represent real people.”
While most endorsements landed on the consent agenda without fuss, there was some competition for insurance commissioner, controller, and legislative district races.
Organized labor frustrations registered clearly, both from and against the influential Building and Construction Trades umbrella. Outgoing longtime California Labor Federation Executive Secretary-Treasurer Art Pulaski lamented the now-commonplace tactic of corporate interests cultivating friendly Democrats in lieu of the sidelined state GOP. “They don’t just count on Republicans to carry their water anymore. They turn to Democrats to do their dirty work,” Pulaski said. “I’m so sick and tired of that bulls—.” More strife surrounded party platform language embracing some charter schools.
Environmentalist-labor discord from a tense platform meeting also spilled over into floor speeches. New Trades chief Andrew Meredith, who took over from the formidable Robbie Hunter, spoke of “open hostility” toward labor and of members who felt their “livelihoods are under attack” from a party that risked becoming a “mouthpiece for unrealistic policy goals that hurt the working class.” He emphasized the Trades are “not the enemy” of the housing and environmental advocates with whom they have clashed — but he cautioned Democrats that “we aren’t a charity, and our support is never a given.” The Trades later warned that a divided platform vote “doesn’t bode well for Dems.”
Beyond platform disputes, temperatures ran high over thwarted progressive pushes to deny incumbents endorsements and an ongoing effort to cut off money from law enforcement groups, health plans and utilities. And all of that was shadowed by the fallout from the collapse of single-payer health care legislation earlier this year.
“Too often we allow ourselves to be distracted by the petty disagreements that divide us,” Hicks told his troops. Secretary Melahat Rafiei pleaded for a party that can accommodate different factions. “We must build this party up instead of tearing it apart,” she said. “We can do better.”
“CEQA is the Law That Swallowed California” – Key Senator Calls for Reform
Politco
As state lawmakers rush to find a legislative solution to help UC Berkeley avoid a court order to cap its enrollment for the upcoming academic year, state Sen. Scott Wiener, the San Francisco Democrat who leads the Senate Housing Committee, had some choice words for CEQA — the state’s landmark environmental law that formed the basis for the enrollment cap.
Here’s a look at key excerpts from Wiener’s interview with Politico, which suggests that some prominent California Democrats are increasingly souring on CEQA:
- On CEQA spiraling out of control:“CEQA is an incredibly important law in terms of environmental protection and making sure that we’re analyzing projects that may actually harm the environment, such as building a new dam or expanding a highway. Unfortunately … at this point, CEQA is the law that swallowed California. … CEQA has really spiraled, and I think the general public is now seeing in a very real way what’s been happening for a long time.”
- On preserving CEQA’s core:“I’m not advocating to eliminate CEQA or anything like that. But we do want to focus CEQA on actual environmental protection, and we don’t want CEQA to be used as a tool to undermine environmental protection.”
- On the difficulty of CEQA reform:“This train wreck has definitely highlighted for the broader public the problems with never-ending CEQA expansion. … But, with that said, CEQA is big and expansive, and a lot of stakeholders have an interest here. … At certain times, you have outrageous situations that show a significant public policy failure, and you have broad public support for change, but the politics still drag down reform efforts.”
Full interview:
Green Groups Urge Newsom to Prove Climate Leadership With Faster Electrification
Reuters
More than 80 environmental groups and other organizations urged California Governor Gavin Newsom to impose tougher rules promoting electric vehicles even as the state is moving faster than President Joe Biden’s administration.
“Californians being punished by high gas prices and climate disasters deserve the fastest all-electric future Gov. Newsom can deliver,” said Scott Hochberg of the Center for Biological Diversity’s Climate Law Institute, one of the groups signing the letter. (Link at the bottom of this item.)
The groups want Newsom and California air regulators to back requiring more electric vehicles faster than the current plans and to set more stringent annual emissions reductions for gasoline-powered vehicles. They called for 7% annual increases in emissions reductions for gasoline vehicles compared with 5% on average under standards adopted under President Barack Obama.
Hochberg said Newsom “needs to prove the state’s climate leadership with a much faster electrification timeline.”
In 2020, Newsom said the state planned to phaseout the sale of new light duty internal combustion vehicles by 2035.
California accounts for about 11% of all U.S. vehicle sales, the biggest individual state market, and many states adopt its green vehicle mandates.
California aims to reach 61% zero emission electric vehicle (EV) sales by 2030, the groups noted. President Joe Biden has set a goal of 50% of new vehicle sales being electric or plug-in electric, but has not endorsed a date to phaseout gasoline-vehicle sales.
The letter, also signed by Greenpeace USA, the California Democratic Party Environmental Caucus and Friends of the Earth, want Newsom to consider requiring 80% or more zero emission vehicles by 2030.
Newsom’s office did not immediately comment.
In April, the EPA said it was moving to restore legal authority to California to set tough vehicle emission rules and zero-emission vehicle mandates. In 2013, the EPA granted California a waiver to set vehicle rules. Under former President Donald Trump, it revoked the waiver in 2019.
EPA spokesman Nick Conger said Monday the agency is “working to finalize a decision on the California waiver and expects to issue a decision in the near future.”
Some automakers have raised concerns if the EPA makes the waiver retroactive and the impact it could have on emissions requirements.
The EPA in December finalized new vehicle emissions rules restoring targets undone by Trump and require a 28.3% reduction in vehicle emissions through 2026.
Biden’s push in Congress to boost EV tax credits to up to $12,500 per vehicle and reinstate them for General Motors (GM.N) and Tesla (TSLA.O) remains stalled along with other provisions to boost EVs.
Letter:
US EPA Restores California’s Auto Emissions Rules
NY Times
The Biden administration restored California’s legal authority to set auto pollution and mileage rules that are tighter than federal standards, a potent climate policy that had been stripped away by former President Donald J. Trump.
The return of one of California’s most powerful environmental prerogatives could have a significant impact on the type of cars Americans will drive in the coming decade, the amount of gasoline the nation consumes and its ability to reduce the tailpipe emissions that contribute heavily to climate change.
As the most populous state, and with the world’s fifth-largest economy, California has been able to influence automobile makers and set the pace for the rest of the country. Seventeen other states and the District of Columbia have adopted the California rules, turning them into de facto national standards. Twelve other states are following California’s mandate to sell only zero-emissions vehicles after 2035.
With that leverage, California’s actions become pivotal to Mr. Biden’s broader push to accelerate the transition away from gasoline-powered vehicles toward electric vehicles, which require no oil and produce no emissions.
“Today we proudly reaffirm California’s longstanding authority to lead in addressing pollution from cars and trucks,” said Michael S. Regan, the administrator of the Environmental Protection Agency. “Our partnership with states to confront the climate crisis has never been more important.
With today’s action, we reinstate an approach that, for years, has helped advance clean technologies and cut air pollution for people not just in California, but for the U.S. as a whole.”
California’s leaders say they intend to write an auto pollution rule that will phase out the internal combustion engine and replace it with zero-emission batteries.
“I thank the Biden Administration for righting the reckless wrongs of the Trump administration and recognizing our decades-old authority to protect Californians and our planet,” said Gov. Gavin Newsom, a Democrat, adding that the move “comes at a pivotal moment underscoring the need to end our reliance on fossil fuels. California looks forward to partnering with the Biden Administration to make a zero-emission future a reality for all Americans.”
Electric vehicles today make up just 4 percent of new car sales in the United States.
More:
State’s Unemployment Insurance Debt to US Equals Other 49 States Combined
CalMatters
California owes the federal government nearly $20 billion for unemployment benefits paid out to jobless workers during the pandemic — a sum about as large as the combined debt owed by all other states. The stunning figure illuminates what experts say are the problematic tax policies underlying California’s unemployment insurance fund — earning it the distinction of the least progressive and most fiscally irresponsible system in the nation,
Under the current system, it’s going to take years of higher taxes on employers, who fund the benefits, to pay it back. Gov. Gavin Newsom proposed using $3 billion of the state’s projected $21 billion surplus to take a bite out of that debt, in addition to hundreds of millions to cover the loan’s interest payment, when he unveiled his budget proposal in January. While that proposal is intended primarily to help businesses, there’s no guarantee businesses will reap a benefit directly, especially in the short term.
California’s unemployment system was on dicey footing even before the pandemic, rated as the least financially stable system of all 50 states in February of 2020 by the U.S. Department of Labor.
The sharp economic shock of a pandemic was hard to predict. But California’s unemployment system, it now appears, is having a uniquely hard time clawing its way back to normal. If the way California funds unemployment doesn’t change, economists say, we could see the unemployment system go into debt again and again.
California’s unemployment system has an important piggy bank: the unemployment insurance trust fund. Employers put money into it on a regular basis via taxes. Workers receive money from it when they get unemployment benefits.
The federal government loaned money to many states early in the pandemic to shore up their unemployment funds. But two years later, several states have paid off their federal loans, while California’s balance remains the highest of any state.
One key problem is that while California lawmakers have increased unemployment benefits over past decades, in part to keep up with inflation, the money flowing into the system from employers has not kept pace, said Audrey Guo, an economist at Santa Clara University who studies unemployment insurance.
On top of that, more Californians have been out of work throughout the pandemic compared to the national average. The national unemployment rate surged to 14.7% in April of 2020, and had come down to 8.4% by August of 2020, according to data from the Bureau of Labor Statistics.
But California’s jobless rate shot higher and didn’t fall back as quickly. It reached 15.9% in April of 2020, and was still at 11.9% by August. In December 2021, California still had one of the highest unemployment rates in the nation.
In addition, many states used federal COVID relief money to pay off some or all of their unemployment insurance debt, but California hasn’t done that.
One reason the money from employers hasn’t kept up is that California taxes employers only on the first $7,000 a worker earns each year. For example, a business that employs a part-time sanitation worker making $8,000 per year and an accountant making $100,000 per year would pay the same amount into the unemployment piggy bank for both workers each year.
But unemployment benefits cover 50% of a worker’s wages, up to a limit of $450 per week. The average weekly benefit paid out in California in 2021 was less than $320, according to federal Labor Department data. About 28% of Californians working full time earned less than $35,000 in 2019, according to Census estimates.
So, if those two workers both got laid off and started receiving unemployment benefits, the accountant would get much larger checks than the sanitation worker.
The $7,000 figure — called a taxable wage base — is “preposterous,” said Mark Duggan, an economist at Stanford who studies unemployment insurance. It’s the lowest amount allowed by federal law, only a few other states use it, and it hasn’t changed since at least 1984. Since then, the internet has become widely available, mom jeans have gone out of style and come back again, and, importantly, wages and unemployment benefits have increased.
Other states have made adjustments. Washington taxes employers on the first $56,500 a worker makes, while Oregon’s taxable wage base is $43,800. And it’s not just blue states: North Dakota and Utah both have tax bases over $38,000.
This doesn’t mean California employers are necessarily cheapskates by comparison. In fact, the taxes California employers pay as a share of total wages workers make is close to the national average: They’re paying a higher tax rate on a smaller amount of wages.
This isn’t the first time California’s unemployment piggy bank has had to turn to the federal government for loans. In the wake of the Great Recession, the fund went into about $10 billion of debt, and it took California employers roughly a decade to dig the fund out. Taxpayers wound up footing a roughly $1.4 billion dollar bill for interest payments on that loan. In fact, in 2016, when California employers were still paying down the Great Recession debt, analysts at the nonpartisan Legislative Analyst’s Office warned that the fund could go into debt again during the next recession.
To start chipping away at the debt, federal law will automatically increase the federal taxes California employers pay in 2023 by 0.3%, or $21 per employee. The tax will continue to go up by an additional $21 per employee each year until the debt is repaid, which could be in the early 2030s assuming there’s not another recession before then.
Whether that’s a small or large increase depends on where you stand.
It’s a small increase relative to the salaries employers are already paying their workers annually, according to a California Budget and Policy Center analysis shared with CalMatters. For companies paying workers minimum wage full time, the tax increase would amount to less than a .5% increase in annual payroll costs in 2029, after the tax has ratcheted up for several years. For companies paying workers higher than minimum wage, the proportional increase would be smaller.
But a cohort of nearly 20 business groups argued in a letter to Newsom last December that the tax increase is large enough to negatively impact hiring in the coming years.
Economic research does bear out that when the cost of employing people goes up, employment goes down, said Andrew Johnston, an economist at UC Merced who studies unemployment insurance. The usual estimate, he said, is that if you increase labor costs by 10%, companies will reduce employment by about 5%.
Unique BBQ Style Sizzlin’ in Golden State
NYTimes
I spent most of the summer driving from pits to pickup points all over the state, trying to glean a sense of what makes California barbecue what it is.
If you plot California barbecue out on a timeline, it doesn’t simply start at one point and end at another. It swirls and zigzags and folds back onto itself — layers and layers of styles swaying, coexisting, branching and overlapping in a great big cloud of sweet red-oak smoke.
This is what I mean about the overlapping of styles, about how it’s impossible to start at one point and end at another. The pit was first, and the pit never went away.
MORE, yum: