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IN THIS ISSUE – “Don’t Touch the Bear”
NEW LEGISLATURE, NEW GOVERNOR
- Many Hues of Blue in the Legislature
- Brown’s Gift to Newsom: 2019-20 Budget “In Remarkably Good Shape”…
- …But Will California’s Good Times Continue to Roll?
- Brown Tells Newsom “Don’t Touch the Bear” At First Joint News Conference
LAND USE & CANNABIS
Capital News & Notes (CN&N) harvests California legislative and regulatory insights from dozens of media and official sources for the past week, tailored to your business and advocacy interests. Please feel free to forward.
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FOR THE WEEK ENDING NOV. 16, 2018
NOTE: CN&N will not publish next week
Many Hues of Blue in the Legislature
The California Legislature, controlled by Democrats for decades, will be even bluer when the new class is sworn in next month. Exactly how many more Democrats have been elected is still not certain; it takes a long time to count votes in California. But all signs point toward growing Democratic caucuses in both the Assembly and the Senate, and a supermajority that sidelines Republicans to near irrelevancy.
That means the prevailing tension in the statehouse probably won’t be between Republicans and Democrats—but between different shades of blue. It could make for some counterintuitive outcomes, once the results are tallied, including a Legislature that skews more toward business on some fights.
The biggest shift appears to be heading for the state Senate, which in recent years has been the more liberal of the two houses. It is poised to tick toward the center, with two business-backed Democrats winning Los Angeles-area seats previously held by labor-friendly Dems, and two rural Democrats apparently flipping Republican-held seats in the Central Valley.
“It’s very significant,” said Marty Wilson, executive vice president of the California Chamber of Commerce, which lobbies for major business interests.
“We have an opportunity to have a more profound impact on the Senate.”
Business PACs including Wilson’s poured at least $6 million into electing Democrats Susan Rubio of Baldwin Park and Bob Archuleta of Pico Rivera, who secured solid wins on election night.
Two other Democrats—Melissa Hurtado of Sanger and Assemblywoman Anna Caballero of Salinas—pulled ahead of their Republican opponents Monday, in updated vote counts, apparently assuring the Senate of a Democratic supermajority. With Central Valley districts that stretch through California’s farm belt, the pair, if elected, would bring a different perspective to the Senate Democratic caucus, which is now dominated by representatives from big cities and progressive coastal enclaves. That means not only more potential interest in water and farm policy, but also on how proposals impact inland jobs and health care.
“The issues the Central Valley and other parts of rural California face will get more attention in the caucus because there will be more advocates on behalf of those regions,” said Bob Sanders, a Democratic political consultant who worked on campaigns for Hurtado and Caballero.
Caballero gained a track record as a business-friendly moderate during six years in the state Assembly. Democrats poured more than $4 million into her Senate race against Republican Rob Poythress for a Merced-area seat that had previously been held by Anthony Canella, a moderate Republican. Poythress was backed by $1.9 million from the GOP.
Hurtado is a health care advocate who sits on the Sanger City Council. Democrats spent $2.4 million to help her wrest the Fresno-area from GOP Sen. Andy Vidak of Hanford, who was helped by $428,000 from his party.
“What was different this time were the issues,” said Democratic consultant Lisa Gasperoni, who worked on Hurtado’s campaign.
Instead of focusing on water and agriculture, as most politicians do in the Central Valley, Hurtado emphasized health care access and environmental health, Gasperoni said.
“Those issues were way more potent than I’ve ever seen them.”
Wilson, whose PAC supported Vidak, said the Republican likely suffered from blowback by voters upset by President Trump.
“I think a lot of it was attributable to Trump going out there and railing on caravans,” Wilson said. “It does have a negative impact on California.”
With results still being tallied, Democrats have been cautious about declaring victory. Statewide, at least 4.5 million ballots remained to be counted over the weekend. But late ballots generally skew more liberal, so Democrats may pick up additional seats in the Assembly, where they have already flipped two.
With supermajorities in both chambers, Democrats—in theory—could pass taxes, change the state’s political ethics law, and put constitutional amendments on the ballot without any Republican support. In reality, however, it’s difficult to get all Democrats to agree on controversial proposals, a challenge that could complicate Gov.-elect Gavin Newsom’s agenda, which is ambitious, expensive and could require a tax increase. Many legislators are spooked by the successful recall this year of Democratic Sen. Josh Newman over his vote to increase the gas tax.
Still, with a union-backed governor-elect whose leanings are more progressive than Gov. Jerry Brown’s were, organized labor sees benefits to the growing number of Democrats in Sacramento, even if some of them come with backing from more conservative business interests.
“We’ve got a good situation with a very pro-worker Legislature in both chambers,” said Steve Smith, spokesman for the California Labor Federation, a union group.
But he acknowledged that with more Democrats come more factions—and disagreements that may not fall along traditional fault lines that, for example, pit environmentalists versus the oil industry. The gig economy presents new political issues that may divide Democrats next year, as tech companies will likely push to change a court ruling that limits the use of independent contractors, and labor unions work to hold it intact. Some Democrats who are progressive on environmental issues may skew more business-friendly when it comes to pressure from Silicon Valley or charter schools.
“This is not your grandfather’s labor versus business fight any more,” Smith said. “There are all kinds of layers that didn’t exist 20 years ago.”
Brown’s Gift to Newsom: A 2019-20 Budget “In Remarkably Good Shape”…
Gov. Jerry Brown’s parting gift to Gov. elect Gavin Newsom is a state budget so flush with unrestricted tax revenue that top fiscal analysts struggled to find the right words to describe it.
“The budget is in remarkably good shape,” reads the annual fiscal outlook by the Legislative Analyst’s Office. “It is difficult to overstate how good the budget’s condition is today.”
Economic trends are so sunny that the analyst’s office projects a state budget surplus of $14.8 billion next year, unless the Legislature chooses to spend the money or cut taxes.
The Legislature and Newsom could follow Brown’s lead and use that money to continue preparing for a recession. If so, the state would have about $30 billion in reserves to weather a recession by the summer of 2020.
Or lawmakers could use the money to seed some of the proposals that Brown repeatedly nixed in last years in offices, such as expanding health care coverage to undocumented immigrants or putting more funds into programs aimed at helping low-income Californians.
The analyst’s report sounds one significant note of caution. It warns that California government finances can change suddenly because it is dependent on income taxes from high-earners, which can plummet in a downturn.
For instance, the same office in November 2000 projected that state government would accumulate a $10.3 billion surplus in the 2001-2002 budget years.
Instead, the dot com recession hit and lawmakers faced a $12.4 billion recession.
That history weighs on Democratic lawmakers, who so far are not revealing whether they’re ready to fund new programs.
“We have to be very, very careful about ongoing spending,” said Assembly Budget Committee Chairman Phil Ting of San Francisco. “My takeaway is clearly we need to save more money.”
If a mild recession hits in 2021, the Legislative Analyst’s Office projects that lawmakers might have to cut spending by as much as $46 billion over two years.
State leaders, most prominently Brown, have been warning that a recession is on the horizon. His office reports that the state’s longest economic expansion took place between 19991 and 2001.
The current one, dating back to the lowest point of the most recent recession, is heading into its 10th year.
Brown took office in 2011 facing a $27 billion deficit. He’s leaving office with almost a $9 billion surplus.
Brown signed a $201 billion state budget in July. It’s general fund approached $139 billion, or $70 billion more than the state spent from that fund in 2011-12.
the state’s constitutional reserve would reach $14.5 billion by the end of 2019-20. In addition, we project the Legislature will have nearly $15 billion in resources available to allocate in the 2019-20 budget process. The Legislature can use these funds to build more reserves or make new one-time and/or ongoing budget commitments.
The longer-term outlook for the state also is positive. Under our economic growth scenario, the state would have operating surpluses averaging around $4.5 billion per year (but declining over time). Under our recession scenario, the state would have enough reserves to cover a budget problem—provided the Legislature used all of the available resources in 2019-20 to build more reserves.
LAO Report to the Legislature:
Bee Story:
https://www.sacbee.com/news/politics-government/capitol-alert/article221653225.html#storylink=cpy
…But Will California’s Good Times Continue to Roll?
CalMatters Commentary
Gavin Newsom is one lucky fellow.
Not only did he coast into the governorship of the nation’s richest and most populous state with token opposition, but he will be only the second governor of the past half-century to be inaugurated without a severe budgetary crisis.
Leaving whopping deficits to successors, thus forcing them to raise taxes, has been something of a tradition among California governors in recent decades. But Brown, who left one for his first successor, Republican George Deukmejian, in 1983, isn’t imposing that affliction on Newsom.
Annual general fund revenues jumped $30 billion or nearly one-third in seven years, mostly from personal income taxes on upper-income Californians. While spending also increased sharply, especially a 50 percent increase in per-pupil spending on K-12 education, Brown tempered ambitions in a liberal Legislature for vast new entitlement programs and insisted on creating and filling a “rainy day fund” to cushion the impact of a future recession.
Through September, revenues for the 2018-19 fiscal year were running a billion dollars over the budget’s forecast. Newsom, therefore, should easily fashion a balanced 2019-20 budget for introduction just three days after his inauguration in January.
That said, it doesn’t mean that Newsom can continue to coast on the budget, easily the single most important aspect of governing California.
For one thing, the economic boom that Brown enjoyed during his second governorship has already lasted much longer than normal and, as he continuously warns, California is overdue for a recession.
For another, Brown’s rainy day fund tops out at about $16 billion but his Department of Finance has calculated that even a moderate recession could cut annual general fund revenues by $60 billion over three years. That reflects the state’s utter dependence on taxes from a relative handful of very high-income Californians, a syndrome that Brown’s 2012 tax increase, later extended by voters, has increased.
Ironically, therefore, the factors that allowed Brown to right the state’s fiscal ship could make balancing the budget more difficult for Newsom when the inevitable economic downturn occurs.
Finally, there are Newsom’s own ambitions, reflecting his left-of-center political base. As he claimed victory in the June primary, Newsom laid out his agenda for cheering supporters, to wit:
“Guaranteed health care for all. A ‘Marshall Plan’ for affordable housing. A master plan for aging with dignity. A middle-class workforce strategy. A cradle-to-college promise for the next generation. An all-hands approach to ending child poverty.”
The Newsom wish list would be costly, easily tens of billions of dollars. But he’s been coy about paying for it, suggesting that somehow his managerial acumen would make it happen.
Late in the campaign, with victory in sight, he pulled back a little, saying he wanted to emulate Brown’s cautious approach to state finances.
Newsom can probably juggle his seemingly contradictory budgetary positions for a while. Brown and the Legislature bought him some time on health care by passing a budget “trailer bill” that creates a blue-ribbon commission to study health care for a few years.
However, sooner or later he must put up or shut up on that and other items on the expansionist agenda that pleased liberal voters.
In that sense, a recession would almost be another lucky break for Newsom, allowing him the fudge on his promises without bearing the political onus for reneging.
https://calmatters.org/articles/commentary/newsom-wont-have-budget-crisis-but-can-it-last/
Brown Tells Newsom “Don’t Touch the Bear” At First Joint News Conference
As he prepares to take office in less than two months, Governor-elect Gavin Newsom met privately this week with Gov. Jerry Brown to discuss the transition.
At a (very brief) joint press conference following their meeting, Newsom thanked Brown and his staff for their “incredible generosity of energy and spirit and collaboration” that has kept the process moving smoothly amid the mass shooting and major wildfires that dominated the week since his election.
“This transition started off with a reality check,” Newsom said.
The two Democrats talked about both policy and personnel, according to Newsom, including which staff members in the governor’s office may want to stay for the new administration: “We’re moving from the how business to the who business.”
Brown, ever the philosophical sage, reflected on how a Newsom governorship would differ from his own.
“Times change and we have to change with them,” he said. “The new governor will take California in a very positive and a very creative direction.”
Standing next to the enormous bronze bear that former Gov. Arnold Schwarzenegger had installed outside the governor’s office in 2009, affectionately dubbed “bacteria bear,” Newsom said he received “one key piece of advice” from Brown.
“Don’t touch the bear,” Newsom said. “Keep the hands off the bear.”
“There’s only one governor at a time and I think that’s important to reinforce particularly at this moment with so much anxiety around these fires,” Newsom said, standing next to Brown outside the governor’s office. “I want to reinforce that and I want to be respectful of the governor.”
Newsom called Senate Bill 901, a wide-ranging law approved this year to address wildfire liability and forest management, a good first step and work in progress, suggesting the possibility of additional proposals under his watch.
“Some things only God can do and we’re doing everything we can,” Brown said. “The winds are faster, the temperature are hotter, the soil and vegetation is drier. This is unprecedented and it’s a tragedy and we as human beings have to be humble in the face of it but also resolute and determined.”
Historic Wildfires Challenge Land-Use Planning
Climate change contributes to the growing destruction from California wildfires. Hot, dry weather conditions that help carry fires for thousands of acres are often present nearly year-round now. The state’s urban sprawl and encroachment into formerly undeveloped land is the real catalyst, though, said former Sacramento Metropolitan Fire District chief Kurt Henke.
A recent Villanova University study found there are about 7 million homes in fire-prone areas in the West, more than 10 times the 600,000 or so that were present in 1940. That includes nearly 2,000 homes in Folsom and about 4,600 in the greater Sacramento region. Environmental scientists believe 1.2 million more could be built in the highest-risk areas statewide between 2000 and 2050.
The same bucolic landscape that earned Paradise its name can magnify the effects of natural disasters, Cal Fire spokesman Rick Carhart said. Paradise is built atop a ridge, with canyons descending on either side. Carhart said fires that reach the bottom of canyons have every intention of climbing back to the top. Those kinds of geographic features are present in many foothill towns, where development continues to push dense housing deeper into rural areas.
The infrastructure necessary for housing also brings dangers. Overhead power lines have been cited or suspected as the cause of some of California’s most deadly wildfires, prompting PG&E to try pre-emptive outages when high winds kick in. At this point, Henke said, house hunters should view future blazes as inevitable when buying in places such as the Sierra Nevada foothills and Central Valley.
“In these places, it’s not if a fire is going to happen, it’s when it’s going to happen,” said Henke, who now consults with fire departments. “We’re basically building structures right in the path of firestorms. There’s just some places a subdivison shouldn’t be built.”
Fire experts use the term wildlife urban interface, or WUI, to refer to the area where human building meets or intermingles with undeveloped natural land. California’s WUI zone grew 20 percent from 1990 to 2010, according to U.S. Forest Service data.
Paved streets have replaced underbrush, but most developments on natural land keep some native trees and other vegetation intact, said Keith Gillies, dean emeritus and a current professor of forest economics in UC Berkeley’s College of Natural Resources.
When fires get large enough that they “crown” — spread from treetop to treetop — they’ll move nearly as quickly in a vegetation-rich residential neighborhood as they would in the woods, Gillies said.
“We have a lot of people living in ‘urban forest’ conditions,” Gillies said. “It’s sort of a mixed bag. If you have a forest canopy and put homes under it and roads under it, that can help (limit the fire) … but in an extreme fire, homes become fuel themselves.”
State officials have taken steps to limit people’s exposure to wildfires in recent years.
Cal Fire requires new developments near wilderness areas to be built out of fire-resistant materials and requires owners to keep easily combustible vegetation at least 100 feet from walls. The state budget funded “pre-positioning,” or mobilizing strike teams to vulnerable locations before a wildfire ignites, for the first time in 2018.
Pre-positioning gets difficult, though, when multiple parts of the state are under threat of simultaneous ignition. The California Office of Emergency Services sent preemptive strike teams to 10 counties earlier this week. Five were in the Bay Area, four were in greater Los Angeles and the other was in Lake County.
Even if OES strike teams had pre-positioned in Butte County, Carhart said he didn’t think it would have made much difference because the Camp Fire started as a 10-acre blaze in an extremely remote area and quickly spread via high winds and heavy fuel. Even if firefighters made an unlikely early push to tamp down the blaze, Carhart said, the fire was always going to be difficult to control.
https://www.sacbee.com/news/state/california/fires/article221385910.html#storylink=cpy
Between 1940 and 2000, nearly 10 million housing units were constructed throughout California. This increased interaction between human and natural communities creates a number of significant socio-ecological challenges. Here we present a novel spatially explicit model that allows better characterization of the extent and intensity of future housing settlements using three development scenarios between 2000 and 2050. We estimate that California’s exurban land classes will replace nearly 12 million acres of wild and agricultural lands. This will increase threats to ecosystems and those presented by wildfire, as the number of houses in ‘very high’ wildfire severity zones increases by nearly 1 million.
https://www.sciencedirect.com/science/article/pii/S0264837714001409#
Cannabis Regulations Near Completion
California is on the verge of putting a massive set of regulations in place to govern commercial marijuana cultivation, distribution, manufacturing, testing and sales – but not all of the rules proposed since the passage of Proposition 64 two years ago are sitting well with cities and counties.
Lori Ajax, chief of the state’s Bureau of Cannabis Control, was in Fresno on Thursday for a meeting of her agency’s Cannabis Advisory Committee.
She addressed a luncheon meeting of the Maddy Institute, a public policy and leadership program at Fresno State. Her visit came just two days after voters in Fresno appeared to approve Measure A, which authorizes the Fresno City Council to establish taxes on marijuana businesses.
Ajax noted that sentiment among most cities and counties in the Valley “is to ban commercial cannabis activity, and that’s OK because the law gives you local control to do that.”
But for cities like Fresno that are beginning to take steps toward potentially allowing some marijuana businesses, she added, “there’s benefit to being able to regulate this, for the locals to have control about what licenses come into your city or county and how you regulate that.”
Where the state and many city and county agencies are at odds, however, involves how and where marijuana delivery operations can do business.
“One of the things we have in our regs that’s been very controversial, and it’s a challenge, is the delivery piece,” Ajax said. “If we issue a license for delivery, which is a retail license, they can deliver anywhere in the state, regardless of whether there’s a ban in place (locally) or not. …”
“Of course, a lot of cities don’t feel that way,” she added. “They feel that if they have a ban, we’re eroding their local control at that point. The state looks at it as, when we issue a license, we don’t issue just to a premises, but you can conduct commercial activity all over the state.”
Marijuana industries favor the state’s interpretation. “They don’t know when they’re driving down the street, sometimes you cross a street and go from the city to the county” or from one city to another with different local rules,” Ajax said.
The state cannot issue licenses to businesses, however, unless the applicant first has won the approval of the city or county in which they want to do business.
And there are three different licensing agencies, depending on which segment of the industry is involved: the state Department of Food and Agriculture for cultivation operations, the Department of Public Health for the manufacture of cannabis products like edibles and ointments, and the Bureau of Cannabis Control for distribution, sales, and testing.
Two public officials listening to Ajax, Rep. Jim Costa, D-Fresno, and Fresno City Councilman Clint Olivier, both referenced the potential for regulatory and tax burdens to contribute to a continuation of the illegal marijuana trade, much as Prohibition did for illegal alcohol and bootlegging in the 1920s and ‘30s.
“Some local officials can get greedy and see this as a cash cow, but then it creates a huge overhead for the businesses,” Olivier said. “We don’t want to force people back to the illicit market.”
“If communities choose, for understandable reasons, not to allow dispensaries, when it’s harder to access I think … you continue to keep the black market thriving,” Costa added.
“There’s a tradeoff between people who want to have access to cannabis and find it extremely difficult to do. They have their sources as they had before in the black market, the people who are growing in the hills and keeping that market alive.”
Ajax acknowledged the need to find the right balance on regulation and taxation.
“Our regulations currently are 170 pages of text of requirements, just for the bureau,” she said. “And then you look at them paying license fees, at the local level and at the state level, and our licensing fees range from $500 to over $120,000 every year. And then you add on the state cultivation tax and excise tax and the retail sales tax. And you see that the price of cannabis is going down, so they’re not making the profits they probably once were.”
“Regulation costs businesses, it really does, and we all have to be mindful of that, even the state and how we set our fees,” Ajax added.
https://www.fresnobee.com/news/local/article221376395.html#storylink=cpy