For Clients & Friends of The Gualco Group, Inc.
IN THIS ISSUE – “Ten years from now, when we look back to this day…we can say California has changed the world”
State Air Board Member on approving planet’s first diesel truck ban
- Assembly, Senate Split Over State Spending as Final Budget Deadline Nears
- Californians Still Exiting, But Officials Predict Growth Will Return
- Air Board Bans Diesel Trucks by 2036 – Another Global First
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 CINCO de MAYO, 2023
Assembly, Senate Split Over State Spending as Final Budget Deadline Nears
CalMatters commentary by Dan Walters
California’s tax revenues continue to fall short of expectations, its deficit continues to grow and with the June 15 deadline for enacting a new budget, there’s a three-way split among the Capitol’s top Democrats.
In January, Gov. Gavin Newsom declared that the state had a $22.5 billion deficit, just months after bragging about a nearly $100 billion surplus. However, revenues – particularly personal income taxes – have grown even softer since then. When Newsom unveils a revised 2023-24 budget later this month, he’s expected to declare a wider income/outgo gap.
The problem is exacerbated by two factors: the spending expectations that were raised by last year’s phantom surplus and the lack of revenue clarity because the deadline for filing income tax returns, originally April 18, was extended by six months due to winter storms.
The current budget, passed when surplus projections were soaring, contains dozens of appropriations to create new projects or services, or to expand existing ones, particularly in social welfare and health care fields.
The cornucopia of cash pleased advocates for those services, but they were disappointed in January when Newsom proposed to claw back many allocations to close the newly discovered deficit.
Since then, budget stakeholders have been pressing the Legislature not only to resist Newsom’s cuts but increase spending even more. Some of the heaviest pressure is coming from hospitals and mass transit systems, both of which say they face financial collapse if they don’t get billions of dollars from the state.
Last week, state Senate leaders issued their budget plan, entitled “Protect Our Progress,” that, they said, would close the state’s deficit while maintaining last year’s new spending – principally by borrowing money from the state’s stash of uncommitted cash and raising corporate income taxes by more than $7 billion.
“We are, in effect, getting our biggest corporations closer to pay their fair share,” said Sen. Nancy Skinner, an East Bay Democrat who chairs the Senate budget committee.
Spending advocates immediately issued statements of praise for the Senate’s budget framework.
“Senate Democrats’ plan acknowledges that California’s projected budget shortfall will never be solved by putting more burden on those who are struggling, but by asking California corporations to chip in more of their vast wealth – created by working people – to create a stronger economy and deliver on our state’s shared commitment to equity,” Tia Orr of the Service Employees International Union said in one of many supportive statements.
However, business groups denounced the proposed corporate tax increase. “Now is not the time to test California’s ability to withstand the impact of an economic downturn or a recession by placing our economic success at risk,” said Jennifer Barrera, president of the California Chamber of Commerce.
More importantly, Newsom immediately rejected the tax increase. “Governor Newsom cannot support the new tax increases and massive ongoing spending proposed by the Senate today,” spokesperson Anthony York said in a statement. “It would be irresponsible to jeopardize the progress we’ve all made together over the last decade to protect the most vulnerable while putting our state on sound fiscal footing.”
Significantly, the Senate’s plan didn’t have an endorsement from Assembly leaders. In January, Assembly Speaker Anthony Rendon, a Democrat from Lakewood, said he would prefer to tap the state’s “rainy day” reserves if the deficit widened.
“That’s what it’s there for,” Rendon told POLITICO.
So what’s it going to be? Deeper spending cuts? New taxes? Dipping into the reserves?
Whatever they do, Newsom and legislators will be shooting in the dark. They missed badly last year when the supposed surplus turned to dust, and the state’s fiscal picture is even cloudier this year.
https://calmatters.org/commentary/2023/05/democrats-at-odds-budget-deficit/
ASSEMBLY BUDGET PLAN:
https://abgt.assembly.ca.gov/sites/abgt.assembly.ca.gov/files/2023%20Budget%20Blueprint%20Final.pdf
SENATE BUDGET PLAN:
Californians Still Exiting, But Officials Predict Growth Will Return
NY Times & State Dept. of Finance
It was big news a few years ago when, for the first time in more than a century, California’s population shrank.
The small but still startling decline in 2020 was driven by Covid-19 deaths and falling immigration and birth rates, and it was something of a turning point for a huge state founded on rapid growth and long accustomed to it. The population slowdown even cost California a congressional seat.
Well, the state’s population dipped yet again in 2022, for the third year in a row. The number of people living in California fell by 138,443 last year, to 38.94 million, according to state data released this week.
Several trends that were made worse by the pandemic are contributing to the decline: a higher-than-normal death rate, a falling birthrate, a drop in international migration and a flow of Californians moving to other states.
Even after three years of decline, though, California remains by far the nation’s most populous state, home to one in eight U.S. residents. And the latest annual drop is the smallest since the downward trend began in 2020, suggesting another reversal of fortunes could be in store, according to H.D. Palmer, spokesman for the California Department of Finance.
“We see this slowing of the year-over-year declines,” Palmer told me. “We would expect to get back to a period of positive growth in the next 18 months, where we’d see a resumption of year-over-year growth in the state’s population.”
But there’s no guarantee.
The primary driver of the state’s population loss has been Californians moving to other states, like Texas, Nevada, Idaho or Oregon, according to Hans Johnson, a senior fellow at the Public Policy Institute of California. Between July 2021 and July 2022, the net movement out of California was a record 407,000 people, he said.
California has been losing residents to other states for decades, though that was usually offset by arriving immigrants, whose numbers plummeted in 2020. The growth in remote work has also allowed more people to seek cheaper housing in other states, enticing high-income and highly educated Californians to join the net exodus, according to Johnson’s analysis.
“In the past, California had continued to gain college graduates and people who had higher incomes, even as we were losing a very large number of less educated adults,” he said. “And then in the most recent couple years we’ve seen an outflow for every group.”
So, as the future of workplaces remains uncertain, so do the future demographics of California. While rates of international immigration will play a role, the key to the future population trend in the state is likely to be whether Californians continue to relocate to more affordable states or have to stay in the state (or return) to keep their jobs.
The state’s population peaked at 39,648,938 in January 2020 — just below the threshold of 40 million residents.
California continued to lose residents in 2022, but the state’s population decline is slowing as immigration ramps up again following the COVID-19 pandemic. The state is currently home to about 38.9 million people, down more than 138,400 year-over-year, according to the California Department of Finance.
The 0.35% decline from 2022 to 2023 is an improvement over the 0.53% decrease that occurred between 2021 and 2022, when California lost more than 200,000 people. The Department of Finance calculates the population numbers using data collected from birth and death records, driver license address changes, tax return information, Medicare and Medi-Cal enrollment, immigration reports, school enrollments and other sources.
The agency attributes the slowdown in the population decline to a significant uptick in immigration and “natural increase,” or net births minus deaths.
Almost three times as many immigrants came to California in 2022, compared to 2021. That took the state from a net gain of 31,300 in 2021 to more than 90,000 in 2022. On the natural increase side, births decreased slightly, while deaths also declined.
Lower- and middle-income earners are more likely to move away due to family, cost of living and job factors.
“While foreign immigration to California has nearly returned to pre-pandemic levels, natural increase has not rebounded,” the department said in a statement. “Total births remain low due to fertility declines; while deaths have eased gradually from their pandemic peak, they remain elevated.”
California in 2022 lost population in all but 12 of its 58 counties and in 356 of 483 cities. Growth in inland counties, including those in the Central Valley and Inland Empire, “slowed but remained positive,” the agency reported.
With one exception — San Benito County on the northern Central Coast — all coastal counties, known for their higher cost of living, lost population. Lassen (-4.3%), Del Norte (-1.3%) and Plumas (-1.2%) counties in Northern California lost the most people. Los Angeles County saw a 0.75% population decline, San Diego County a 0.2% dip and Orange County a 0.5% decrease.
The Department of Finance attributes the continuing population decline to fewer people moving to California and more moving out. The departures have been highly politicized, with Republicans claiming Democrats’ liberal policies are driving away the wealthy and the taxes they pay. However, the Public Policy Institute of California tends to agree with the Department of Finance’s assessment that remote work options created during the pandemic have led people to move to less expensive places.
DEPT. OF FINANCE REPORT:
Air Board Bans Diesel Trucks by 2036 – Another Global First
CalMatters
In a move that will transform California’s economy and end diesel’s decades-long dominance in goods movement, the Air Resources Board unanimously approved an ambitious, contentious mandate to shift big rigs and other trucks to zero-emissions.
California’s newest effort to accelerate the transition to electric vehicles is arguably one of the most meaningful steps the state has ever taken to clean up its severe smog and toxic diesel exhaust, reduce greenhouse gases and wean itself off fossil fuels.
The mandate, approved last Friday, is the first in the world to ban new diesel trucks and require a switch to zero-emission big rigs, garbage trucks, delivery trucks and other medium and heavy-duty vehicles.
The rules will dramatically change the commercial trucks that are driven on California’s roads, affecting about 1.8 million trucks, including ones operated by the U.S. Postal Service, FedEx, UPS and Amazon.
“Ten years from now, when we look back to this day…we can say that California has changed the world,” said air board member Gideon Kracov, who is an environmental lawyer based in Los Angeles. “We can say that California did this right.”
Starting in 2036, no new fossil-fueled medium-duty and heavy-duty trucks will be sold in the state. Large trucking companies also must convert to electric or hydrogen models by 2042. The board decided to review progress and obstacles in meeting the deadlines two and a half years from now.
Diesel-powered engines, known for their high energy efficiency and ability to carry heavy loads long distances, have dominated the nation’s goods movement since the 1950s. But the noxious fumes spewed from these trucks have for decades afflicted communities near ports, railways, freeways and warehouses. Diesel exhaust is linked to cancer and contains fine particles that can lodge in lungs, triggering heart attacks and other respiratory problems.
The move comes 25 years after California declared diesel exhaust a dangerous, toxic contaminant because it contains more than 40 chemicals linked to cancer. While diesel engines have been getting cleaner for decades under California’s earlier rules, they are still a major source of air pollution and greenhouse gases.
During a seven-hour board hearing last Friday , truckers, local government leaders and fleet operators vehemently opposed the new timelines.
A top executive of the trucking industry in an interview with CalMatters predicted economic chaos and dysfunction and said the mandate is likely to “fail pretty spectacularly.” Local officials from city and county governments, which manage fleets of garbage trucks and other vehicles, told the board that its deadlines are “impossible” to meet.
Jim Verburg of the Western States Petroleum Association, representing oil companies that produce diesel fuel and gasoline, told the board that the measure will hinder the state’s move towards zero-emission vehicles if many businesses can’t comply and are driven out of the state.
“We do not want to see this regulation compromise the delivery of essential goods and services to Californians or compromise the state’s economy,” he said.
Trucking companies say electric models are more than twice the cost of a diesel truck, take hours to charge, can’t travel the range that many companies need to transport cargo and lack a sufficient statewide network of charging stations.
The new rules offer some exemptions if there is a lack of available models by the deadlines. As more electric trucks hit the market, air board staff project that the costs of new trucks and other drawbacks will ease over time.
While the upfront costs are very high to buy an electric truck, the lower maintenance and operational costs are expected to save fleet operators money over time. The air board calculated that operating and managing fleets is expected to result in $48 billion in economic savings.
In 2035, buying and operating an electric semi-truck over its lifespan could range between $765,000 and $1.1 million compared to a gas or diesel truck’s $919,000 to $1.2 million, according to air board calculations. (These totals exclude state and federal subsidies that some companies could receive when they buy zero-emission vehicles.)
Some expensive electric big rigs have already hit the market. PepsiCo last month received delivery of 21 Tesla all-electric trucks at its Sacramento bottling plant. Most were paid for by the local air quality district with $4.5 million in grants. The cost of a Tesla semi is around $250,000, twice the cost of a diesel truck. PepsiCo has ordered 100.
Under the new rules:
- By 2036, truck manufacturers will only be allowed to sell zero-emission models of heavy-duty and medium-duty trucks.
- Large trucking companies in California must convert their fleets to electric models. Timelines vary based on the type of truck, but companies will have to buy more over time until all trucks are zero-emissions by 2042.
- Drayage trucks, which carry cargo to and from the ports of Los Angeles, Long Beach and Oakland, have one of the strictest timelines: All must be converted to electric models by 2035 and new sales beginning in 2024 must be zero emissions.
- The gradual conversion to zero emission modelsonly applies to fleets that are owned or operated by companies with 50 or more trucks or $50 million or more in annual revenue, and federal agencies, including the U.S. Postal Service. Included are trucks weighing 8,500 lbs or more and delivery van vehicles.
- Emergency vehicles such as ambulances and fire trucks are exempted.
The mandate is considered one of the powerful air board’s most controversial acts in recent years, even more so than the newly enacted 2035 ban on new sales of gas-powered cars. It builds on a previous state clean trucks regulation, enacted in 2020, that mandated the number of zero-emission trucks that manufacturers must sell from 2024 through 2035.
The Biden administration is also tackling emissions from vehicles. Earlier this month, the U.S. Environmental Protection Agency proposed new stringent greenhouse gas standards on cars nationwide.
Environmentalists tried but failed to persuade the air board to expand the rule to smaller fleets with fewer than 50 trucks. Instead, the board expects to propose a separate rule for smaller companies.