For Clients & Friends of The Gualco Group, Inc.

IN THIS ISSUE – “I get it — you want to see progress, and you want to see it now.”

Gov. Newsom launches his statewide tour

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 MAR. 17, 2023

 

Newsom Spotlights Homeless Housing & Prison Reform In His State of the State Trek

Politico’s California Playbook

For the first installment of a multi-day State of California tour, the governor Thursday announced the state will purchase 1,200 tiny homes to serve as temporary housing in Sacramento, San Diego, San Jose and Los Angeles. It’s welcome news for local leaders who are struggling to find enough beds for homeless residents, but it’s also only a small piece in the massive, convoluted puzzle that is the housing crisis.

In 2020, when the governor delivered a State of the State address devoted entirely to homelessness, he vowed to end the decades-long culture of apathy from the state government and funnel serious resources toward shelter and services for folks languishing on streets and sidewalks. “The State of California can no longer treat homelessness and housing insecurity as someone else’s problem,” he declared back then. “It is our responsibility.”

Three years, $15 billion and one global pandemic later, California has seen nearly 10,000 more people become homeless. It wouldn’t be correct to say the crisis is Newsom’s fault — but it certainly is his problem.

“I’m deeply mindful … of how angry we are as Californians about what’s going on in the streets and sidewalks in our state,” Newsom said Thursday to a room of state and local officials at the state fairgrounds in Sacramento.

“I get it — you want to see progress, and you want to see it now.”

There’s a real temptation with State of the State addresses (or tours, for that matter) to lean toward self-congratulation — especially for a leader fresh off a slam-dunk reelection. But in the first half of his reimagined annual address, Newsom is both attempting to acknowledge the uncomfortable reality around two of California’s thorniest issues, while also convincing voters that he’s got the right plan to fix it.

Today, on the second stop in his tour, he heads to San Quentin State Prison, where he’ll unveil a plan to transform one of the notorious prisons into a center for inmate education and rehabilitation.

The Scandavian-modeled overhaul of the facility will remodel the historic death row housing unit and a Prison Industry Authority warehouse into facilities focused on “breaking cycles of crime.”

The proposal, in many ways, is classic Newsom. Californians, especially those who lean to the right, have been slamming the governor for what they say is a soft-on-crime approach that puts the public at risk. Rather than answering their calls by tightening laws or increasing sentencing, Newsom is taking a swing at an ambitious new model. One that, if successful, could serve as a model for other prison systems around the country.

Newsom’s tour will continue into the weekend with stops in Los Angeles and San Diego on Saturday and Sunday.

 

Latino Voters Trend Right; “CA Democrats Have a Major Challenge”

Sacramento Bee

A new report shows Republicans are gaining footholds in some California electoral districts where Latinos make up the majority population, a development that might concern some Democrats moving forward.

The report from Third Way, a self-described “center-left” national think tank, shows although those areas lagged in voter turnout last year, Republicans saw marginal gains. One expert says the results are an indicator Republicans are continuing to receive a higher level of support from one of America’s fastest-growing voting blocs.

The data examines heavily concentrated Latino congressional districts in seven states — California, Arizona, New York, Texas, Nevada, New Mexico and Florida.

In California’s 14 Latino-majority districts, for example, where a Democrat and a Republican both made the 2022 ballot, 10.8% more voters swung Republican from 2020 to 2022, compared to 7.1% from 2018 to 2022, the data shows.

Most of the districts were located in Central and Southern California. The report highlighted the Central Valley’s 13th and 22nd Congressional Districts, where conservatives Rep. David Valadao, R-Hanford, and Rep. John Duarte, R-Turlock, triumphed over Democratic competitors in close November races respectively.

Lucas Holtz, political analyst and author of the report, said the research differentiates midterm and presidential election results as they are “ideologically varied” as midterms are generally known for receiving less turnout.

“California Democrats have a major challenge on their hands,” Holtz said. “They’re not driving turnout … even with an insane amount of investments and those that they are turning out, they’re clearly not persuading.”

Holtz warned against making broad conclusions about the Latino vote, since the report only examines voting at the geographic level.

Regardless, Holtz said the report reveals Democrats will need to improve at persuading Latino voters as 2024 approaches.

Matt Barreto, president of BSP Research in Los Angeles, which studies Latino voting trends, also cautioned against making definitive statements about what the data says about how Latinos as a group are voting.

Barreto said historically, in areas with a growing Latino population, white voters will turn out to vote at higher rates. This would mean that white voters in a congressional district could result in a rightward shift. Case in point: A district heavily composed of Latinos does not necessarily mean they are the majority voting.

More conclusive numbers on the Latino vote will be available in the coming months, with the release of the precinct and individual data.

Latino support for Republicans has fluctuated over the years, but a rightward trend became apparent during the Trump administration. Between 2016 and 2020, Trump garnered 37% support to Joe Biden’s 63%. California Latinos were regarded as the exception to the trend, reflecting the legacy of the anti-immigrant rhetoric Republicans employed in the 1990s.

Most notably, Proposition 187 in 1994 sought to ban immigrants from receiving social services, health care and education. The measure is regarded for setting a decades-long anti-Republican narrative.

But that may soon change, according to a Republican Latino voting trends expert Mike Madrid. “It is more pronounced outside of California, but it is now finally happening,” Madrid said. “One of the great ironies of California is that it prides itself on being sort of the preview of coming attractions, but in the largest demographic shift in the history of the country, California is behind the rest of the country.”

Madrid believes Latinos in the Golden State are entering a post-Prop. 187 era, where Democrats will need to improve their economic agenda to drive the Latino electorate. He said Latino lawmakers, in particular, have for too long focused on issues that won’t help solve the economic concerns of the community.

Madrid added that Democrats also need to invest money to fix the “Latino turnout problem.” “Democrats just never had to worry about it, because the Republicans have never been a viable alternative,” Madrid said. “But now when you see a rightward shift, some alarm bells go off.”

While Latinos make up almost 40% of the state’s adult population, they only account for 22% of likely voters, according to an August 2022 report from the Public Policy Institute of California.

Mindy Romero, director of USC’s Center for Inclusive Democracy, called the 2022 midterm election turnout for California Latinos “deeply disappointing.” She said, unlike other states, California saw a reduction in turnout compared to 2018.

https://www.sacbee.com/news/equity-lab/article273105465.html#storylink=cpy

 

Governor Drops Oil Tax; Favors Energy Commission Watchdog Authority

CalMatters

Facing public skepticism from lawmakers over his push to penalize oil companies for excessive profits, Gov. Gavin Newsom has dropped that proposal in favor of an alternative that would pursue a similar aim through regulations.

The governor’s office said late Wednesday that it plans to put forward an amended bill in the coming days that would create a watchdog division within the California Energy Commission to investigate alleged price gouging by the oil industry and authorize the commission to set through its rule-making process a threshold above which profits would be penalized.

Dana Williamson, Newsom’s chief of staff, said the shift in approach was the result of months of consultation with legislators, who broadly felt that an appropriate penalty would best be determined by industry experts.

“We feel like this is stronger from where we started,” Williamson said. “It is the only one of its kind in the country. And it’s really going to set up a watchdog entity that is going to watch the industry every single day.”

The amendments, for which language is not yet available, would establish requirements for oil refiners in California to regularly report information on factors that can contribute to massive price spikes like those the state saw last summer, such as maintenance schedules, inventory and import and export levels.

The watchdog division within the energy commission, which would have an independent director appointed by the governor, would be granted subpoena power as it conducts investigations and could refer suspected price gouging to the attorney general’s office for prosecution.

Greater access to this data that oil companies have historically withheld as proprietary would enable experts to more deeply consider what is the right threshold for a penalty on profits, according to the governor’s office, and inform a rule-making process through the California Energy Commission.

“What we’re asking for is simple: transparency and accountability to drive the oil industry out of the shadows,” Newsom said in a statement. “Now it’s time to choose whether to stand with California families or with Big Oil in our fight to make them play by the rules.”

This announcement takes the governor even further from the concept that he urgently laid out in October, when he called for a special legislative session to pass a tax on oil company profits, punishing the industry an “inexplicable” gap between gas prices in California and the national average that had grown to more than $2.50 a gallon. Prices, and the gap, have dropped since then, along with the political momentum.

The idea has also faced relentless criticism from the oil industry, Republican lawmakers and some economists. Even many of Newsom’s Democratic allies in the Legislature have been reluctant to embrace it, as during a hearing last month where several state senators expressed doubt that a financial penalty would have the desired effect of driving down prices.

The governor already abandoned his tax for the more politically palatable, and easier to pass, penalty. Now, even if lawmakers approve this revised measure — his office made clear Wednesday that the plan does not represent a deal with legislative leaders — it could be years before any new regulations are adopted, if the California Energy Commission pursues a rule at all.

Kevin Slagle, spokesperson for the Western States Petroleum Association, which represents the oil industry in California, criticized the new proposal for empowering unelected bureaucrats to increase energy costs and for potentially making confidential trade information public.

“At the end of the day, this proposal does not solve California’s gasoline supply problem and will likely lead to the very same unintended consequences legislators have reiterated to the Governor: less investment, less supply, and higher costs for Californians,” Slagle said in a statement. “This is simply just another tax wrapped in unchecked and expensive bureaucracy.”

Republican leaders in both the Senate and Assembly immediately labeled the plan a tax increase, highlighting a major messaging obstacle for Newsom as he tries to shepherd the bill through a dubious Legislature.

“As Governor Newsom attempts to hide his efforts behind clever words, Californians will see this for what it really is — a gas tax increase amid record-high inflation and an economic downturn,” Senate Republican Leader Brian Jones of Santee said in a statement.

https://calmatters.org/politics/2023/03/california-oil-profits-newsom/

 

2nd-Largest Lake in West to Re-Appear; Hint: It’s in CA

CalMatters commentary from Dan Walters

Spanish soldier and California explorer Pedro Fages was chasing deserters in 1772 when he came across a vast marshy lake and named it Los Tules for the reeds and rushes that lined its shore.

Situated between the later cities of Fresno and Bakersfield, Tulare Lake, as it was named in English, was the nation’s largest freshwater lake west of the Mississippi River. It spread out to as much as 1,000 square miles as snow in the Sierra melted each spring, feeding five rivers flowing into the lake.

Its abundance of fish and other wildlife supported several Native American tribes, who built boats from the lake’s reeds to gather its bounty.

When the snowmelt was particularly heavy, the lake rose high enough that a natural spillway would divert water into the San Joaquin River and thence to the Pacific Ocean through the Sacramento-San Joaquin Delta and San Francisco Bay.

It was a fairly common phenomenon in the 19th century, but the last time it happened naturally was in 1878. With the arrival of the railroad, the region was becoming an agricultural center and farmers were diverting water from Tulare’s tributaries for irrigation.

As those diversions expanded in the 20th century, Tulare Lake gradually shrank and disappeared altogether after World War II, when Pine Flat Dam blocked the Kings River, its major tributary, and levees channeled natural flows.

Once dry, the lakebed became the site of immense cotton farms, principally those of the Boswell and Salyer families. However, every few decades nature would reassert itself, piling up so much snow in the Sierra that the dams and levees were unable to contain the Kings and other rivers and Tulare Lake would be recreated.

I personally witnessed one such recreation, in the spring of 1970, as editor of the Hanford Sentinel. The Kings River runoff was so intense that Pine Flat Dam came within a few feet of being overtopped. I visited the dam during that period to report on what was happening and was taken inside the concrete structure, which was groaning and slightly leaking – a bizarre and somewhat eerie experience.

Pine Flat Dam held but water roared down the mountains in the Kings and other rivers and very quickly, or so it seemed, Tulare Lake reappeared.

The Boswell and Salyer families, which had feuded for years, battled over whose lands would be flooded. Guards with shotguns patrolled the Tulare Basin Water Storage District’s levees as rumors spread about clandestine plans to dynamite them. That didn’t happen, but the Salyer holdings were inundated and the two agribusiness giants waged a legal battle that went all the way to the U.S. Supreme Court.

The most spectacular re-emergence of Tulare Lake in recent years occurred in 1983 as record snows in the Sierra once again overcame human efforts to control its rivers. The lake was so high that two men, Bill Cooper and John Sweetser, kayaked 450 miles in 11 days from central Bakersfield to San Francisco Bay. They paddled down the Kern River, across Tulare Lake, up the Kings River and through the Fresno Slough into the San Joaquin River for a downstream run into the Delta and San Francisco Bay.

This bit of California history is offered because snowfall in the watersheds of the Kings and other rivers that flow naturally into the Tulare Lake basin is surpassing the record level of 1982-83. It’s almost certain that Tulare Lake will once again spring to life.

The probability is even generating some hopeful, if unrealistic, speculation that state and/or federal governments could buy up the lakebed’s fields and bring back Tulare Lake permanently.

https://calmatters.org/commentary/2023/03/tulare-lake-water-california/

 

Silicon Valley Bank Collapse Cascades in California

NY Times

As the fallout of the collapse of Silicon Valley Bank continued to spread, it became clear that some of the worst casualties were companies developing solutions for the climate crisis.

The bank, the largest to fail since 2008, worked with more than 1,550 technology firms that are creating solar, hydrogen and battery storage projects. According to its website, the bank issued them billions in loans.

“Silicon Valley Bank was in many ways a climate bank,” said Kiran Bhatraju, chief executive of Arcadia, the largest community solar manager in the country. “When you have the majority of the market banking through one institution, there’s going to be a lot of collateral damage.”

Community solar projects appear to be especially hard hit. Silicon Valley Bank said that it led or participated in 62 percent of financing deals for community solar projects, which are smaller-scale solar projects that often serve lower-income residential areas.

The devastation comes at a critical moment for a nascent industry that is central to the effort to cut the greenhouse gases dangerously heating the planet. The federal government depends on climate tech companies to develop the innovations needed, and has promised billions in tax breaks to help them grow and mature.

“If the flywheel of financing for early-stage climate innovation stops during these critical years, that’s going to be a big problem,” said Daniel Firger, founder of Great Circle Capital Advisors, which consults on sustainable finance issues.

The collapse of Silicon Valley Bank threatens to derail what was a fast and growing part of the venture capital sector. More than $28 billion was invested in climate technology start-ups last year, up sharply from the year before, according to HolonIQ, a data provider.

Peter Reinhardt, the chief executive of Charm Industrial, a five-year-old carbon removal company, said he pulled a few million dollars in deposits from the bank last week.

“We got most of our cash out on Thursday,” said Mr. Reinhardt, whose company uses plants to absorb carbon dioxide, then liquefies it and stores it underground. “When it became clear that everyone was withdrawing their money, the psychology requires you to run, too.”

Others were less fortunate. Ethan Cohen-Cole, chief executive of Capture6, said his company had about $4 million of deposits in money market accounts managed by Silicon Valley Bank. The company, based in Berkeley, Calif., makes devices that remove carbon from the atmosphere.

Mr. Cohen-Cole said he expected to make monthly payroll for his 20 or so employees, thanks to the $250,000 insurance provided by the Federal Deposit Insurance Corporation.

But even as he expressed confidence that Capture6 would eventually recover most of its money, Mr. Cohen-Cole worried that the prospect of delays in accessing the rest of his company’s funds — or even the threat of some unrecoverable losses — could complicate relationships with some suppliers and partners.

“It’s fine to make payroll, but you also have to build something as well,” he said. “If your money is tied up, that possibility could spook partners. Being exposed to this leads to commercial risks.”

For many companies, it is this uncertainty about the ability to make substantial investments in the next few months that is the greatest concern.

“You don’t know if you should keep building your lab or investing in research and development, or need to ration out the money you still have for the next few months,” Mr. Kra said. “Are suppliers or partners going to look at you askance, or are things going to get delayed or more expensive?”

Many of the companies that are currently working on scaling their operations were poised to take advantage of the tax credits included in the Inflation Reduction Act, the federal climate legislation signed by President Biden last year.

Should those companies fail or fall behind, the overall impact of the climate law could be diminished, said Varun Sivaram, an executive at Orsted, a renewable power company. Until recently Mr. Sivaram worked with John Kerry, Mr. Biden’s special envoy for climate.

“Climate tech companies may have problems making major investments in demonstration projects, pilot lines and research and development,” Mr. Sivaram said. “All of those investments are necessary to scale as quickly as possible and take advantage of the I.R.A.”

Mr. Bhatraju said his company was able to retrieve most of its deposits from the bank last week. His bigger concern was that solar developers, which relied on Silicon Valley Bank for loans and lines of credit to build their projects, would now have to search for new funding.

“Projects will likely be delayed significantly as developers go to find new sources of capital,” he said.

With the future of Silicon Valley Bank uncertain, investors and executives were racing to find options for companies in need of quick cash.

Dimitry Gershenson, chief executive of Enduring Planet, a small lender to climate companies, said he was working with other investors to create a fund that would provide short-term capital to affected companies. In just 24 hours, he said, the group had received nearly 100 applications for help, representing more than $500 million in assets at risk.

“You don’t typically stand up in a fund in two days, but we’re going to do it,” he said.

There are signs that, when the dust settles, the climate tech industry will have a new lender of choice.

“I’ve already gotten calls from a number of banks who have said, ‘Can we fill the space?’” Mr. Cohen-Cole said. “But the problem is that it’s not going to happen in an hour.”

https://www.nytimes.com/2023/03/12/climate/silicon-valley-bank-climate.html