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IN THIS ISSUE – “There will be curveballs nature throws at us”
Researcher leader on new study of wildfire air quality catastrophic impacts
- California Campaign Independent Expenditures Go Large
- State Revenue Nearly 15% Below Forecast; Economy Contracts
- Golden State Ex-Pat Survey
- Water Right “Historic Reallocation” Advances
- 2020 Wildfires Reversed 15 Years of Air Quality Gains, New Study Finds
- Tired of Campaign Ads? Election 2024 Ramps Up!
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 OCT. 21, 2022
California Campaign Independent Expenditures Go Large
Politico’s California Playbook
Nothing signifies the climax of campaign season quite like the inevitable surge of independent expenditures. Unencumbered by the individual donation limits that apply to candidates’ campaign accounts, a constellation of committees funded by a cross-section of Sacramento interest groups have uncorked millions in the last month to shape the contents of the next Legislature. By our count on Friday afternoon, they have spent roughly $17 million since September. About a third of that emerged in the last week.
They’re spending money in competitive districts. They’re spending money to boost one Democrat against a same-party rival, perhaps perceiving that contender to be more sympathetic to real estate interests, organized labor, the oil industry, dialysis companies, the medical field, or charter schools.
In some cases, the alignment can be hard to discern, as with the Hawaiian Gardens Casino investing hundreds of thousands of dollars in the Democratic Central Valley Sen. Melissa Hurtado and Democratic Senate contender Angelique Ashby. Some are boosting a single candidate; some span several contests.
The escalating expenditures coincide with ballots arriving at voters’ homes — perhaps you’ve gotten yours, along with a stack of glossy mailers from groups with names like “Californians to Keep California Californiain.” More is surely coming.
Here are some of the most prolific spenders:
Coalition to Restore California’s Middle Class: The oil industry’s main campaign vessel has deployed nearly $5 million in the last week — this with the next Legislature poised to consider a windfall oil profits tax proposed by Gov. Gavin Newsom.
DaVita: The kidney dialysis giant has spent some $1.5 million since mid-September, looking to cultivate allies in the Legislature as it battles a third consecutive ballot initiative.
Keeping Californians Working: This business-backed committee has spent around $1 million since the end of September, drawing on funders like Uber, the pharmaceutical industry, Farmers Insurance, and Edison International.
Californians for Better Priorities: The medical sector has found its Democrat in Dr. Jasmeet Bains, who is contending with fellow Democrat Leticia Perez for the open AD-35. A committee funded by the medical field has spent some $825,000 for Bains, eclipsing an oil-funded committee backing Perez.
Fighting for Our Future: Real estate interests’ committee has spent more than $800,000 since mid-September to push Democrat Ashby past Democrat Dave Jones or defeat Democrat Catherine Blakespear.
Families and Teachers United: Charter schools are playing heavily in this cycle, dropping about $675,000 since mid-September on Democrats and Republican state Sen. Brian Jones.
Building Safe and Healthy Communities: Two earlier funders on this list — charter schools and DaVita — have poured money into this committee, which has spent some $650,000 since mid-September.
California Labor and Business Alliance: Both Democrats and Republicans have benefited from the combined largesse of real estate groups, unionized correctional officers, Chevron, and PG&E, which backed a committee that has spent more than $650,000 since late September.
State Revenue Nearly 15% Below Forecast; Economy Contracts
State Dept. of Finance
STATE ECONOMY
California real GDP contracted at a 0.5-percent seasonally adjusted annualized rate (SAAR) in the second quarter of 2022, following a contraction of 9.5 percent (revised) in the first quarter, as wages and salaries (including bonuses and options) declined from an unusually high level in the fourth quarter of 2021 to a more steady level in the first quarter of 2022. U.S. real GDP contracted by 1.6 percent in the first quarter followed by a contraction of 0.6 percent in the second quarter.
Despite the two quarters of contraction, California’s real GDP has grown 3.4 percent from the fourth quarter of 2019 (just before the COVID -19 Pandemic) to the second quarter of 2022, while U.S. real GDP has grown at a similar rate of 3.5 percent over the same period.
MONTHLY REVENUES
Preliminary General Fund agency cash receipts for September were $2.785 billion, or 14.7 percent, below the 2022-23 Budget Act forecast of $18.906 billion. Cash receipts for the first three months of the 2022-23 fiscal year were $4.781 billion, or 11.1 percent, below the forecast of $42.946 billion. Combined with the $2.186-billion shortfall relative to forecast for the 2021-22 fiscal year, the cumulative deficit was $6.967 billion through September. Shortfalls in September continued to be driven by lower proceeds from personal income tax.
Personal income tax cash receipts to the General Fund for September were $3.045 billion, or 22.9 percent, below the month’s forecast of $13.317 billion. September is a significant month for personal income tax cash receipts as many taxpayers pay their third quarter estimated payments. September estimated payments fell significantly below projections, coming in $2.246 billion, or 42.3 percent, below the Budget Act forecast. Withholding receipts were $892 million, or 11.3 percent, below the forecast in September. This was the fourth consecutive month that withholding receipts fell below projections and followed a combined shortfall of $1.869 billion, or 8.3 percent, from June to August.
Corporation tax cash receipts for September were $160 million, or 6.7 percent, above the forecast of $2.378 billion. As seen in previous months since July, unanticipated Pass-Through Entity (PTE) elective payments offset lower receipts and higher-than-expected refunds.
Sales and use tax cash receipts for September were $2 million, or 0.1 percent, below the month’s forecast of $2.827 billion. September receipts included the second prepayment for third quarter taxable sales.
BUILDING
Through August 2022, California permitted 121,000 units (SAAR), up 1.9 percent from July and also up 0.8 percent from August 2021. August 2022 permits consisted of 66,000 single-family units (the same as July but down 1.8 percent year over year) and 55,000 multi-family units (up 4.2 percent from July and also up 4.1 percent year over year).
The statewide median price of existing single-family homes increased to $839,460 in August 2022, up 0.7 percent from July and also up 1.4 percent from August 2021. Sales of existing single-family homes in California increased to 313,540 units (SAAR) in August 2022, up 6.1 percent from July but down 24.4 percent from August 2021.
Golden State Ex-Pat Survey
Sacramento Bee
Critics of California’s Democratic establishment love to paint a picture of residents fleeing in record numbers, disgusted with the state’s liberal policies and high taxes.
While it’s true that last year saw the largest net migration out of California in 40 years, according to the Public Policy Institute of California that is the result of a large (but not record) loss of Californians to other states and a sizable reduction in international immigration.
But what of those people who do leave the state? Does politics really play a role in their decision to depart?
According to PPIC, signs point to yes.
In a recent blog post, the PPIC wrote that, “Conservatives feeling unrepresented in state government might be drawn to states that they see as a better ideological fit. For people already inclined to leave California for other reasons, politics might push them to finally pack their bags.”
PPIC survey data shows that while 26% of very liberal poll respondents said that the state’s high housing costs made them seriously consider moving out-of-state, 39% of independents and 45% of very conservative respondents said it did.
It appears as Gov. Gavin Newsom might also factor into one’s considering to leave. More than half, 56%, of those who said they disapprove of Newsom said that they were thinking of leaving the state, according to PPIC. That’s compared to a little less than a third (28%) of everyone else.
Likewise, taxation seems to play a role. Half (51%) of those who said that they pay much more than they should in taxes said that they were thinking of moving, compared to just 23% of those who didn’t think they were over-taxed.
“These patterns emerge despite the fact that the survey question asked about moving in the context of housing costs and makes no reference to Governor Newsom, tax rates, or any other hot-button political issues,” according to the post.
The PPIC notes that not everyone who leaves the state is conservative, nor is thinking about leaving the same as actually leaving.
“For most respondents, thoughts about moving may not be an action plan so much as a cry of frustration. A large share of Californians feel like they want to live somewhere else, and dissatisfaction with the state’s politics is at least part of the reason why,” according to the post. “This dynamic probably pushes a few who might otherwise stay to leave the state. The result may be a politically skewed departure that nudges the state’s politics ever so slightly to the left.”
Water Right “Historic Reallocation” Advances
CalMatters commentary from Dan Walters
While it’s not yet formal policy, those who manage California’s vast water system are edging toward a historic reallocation of the state’s shrinking supply that could have a life-altering impact on its largest-in-the-nation agricultural industry.
For many years, farmers have used about 80% of the water diverted from rivers for human use, with the rest going to urban areas for drinking, watering lawns, maintaining swimming pools, taking showers, cooking and commercial or industrial use.
Prolonged drought has compelled all users to make do with less. However, the biggest loser has been the environment — free flows to maintain habitat for fish and other aquatic species — which generally gets about 50% of the total flow.
In recent years, federal judges have ordered cuts in agricultural water diversions to enforce the Endangered Species Act and the state Water Resources Control Board has moved in the same direction on an emergency basis due to drought. However, environmental groups want permanent habitat-enhancing reductions.
Former Gov. Jerry Brown and his successor, Gavin Newsom, have sought “voluntary agreements” by which agricultural water agencies would curtail diversions to maintain river flows, but results have been scanty at best.
Without such agreements, the water board could implement mandatory reductions, but they would be viewed by farmers as an assault on their historic water rights and probably trigger massive legal battles.
The key principle in these conflicts is that water belongs to the public as a whole and must be put to “beneficial use,” as defined in a 1943 law that implemented a constitutional declaration passed by voters in 1928. The law commands authorities to prevent “waste or unreasonable use or unreasonable method of use of water…”
Environmentalists believe the constitution thus authorizes the state water board to curtail agricultural diversions for the protection of habitat, but the 1943 law also declares, “In the enactment of this code the Legislature does not intend thereby to effect any change in the law relating to water rights.”
That obvious legal dichotomy is the crux of the situation.
Whether, indeed, the state water board is gearing up for a showdown over water rights, some of which stretch back to the 19th century, is the subject of much speculation in water circles.
Early this year, water board chairman Joaquin Esquivel told a gathering of water officials, “We know we have to change the system. Water rights can be there as a tool to be able to manage supplies through not just a drought but when there is water again. Our water rights system can be there to facilitate decisions on projects and help us make decisions, or they can be a hindrance.”
While the water rights issue percolates in Northern California, there’s a similar conflict underway in Southern California over how much water the state diverts from a severely threatened Colorado River.
California is legally entitled to 4.4 million acre-feet per year, with the vast majority of that going to the Imperial Irrigation District and other agricultural users, but the Colorado’s flow has dropped dramatically.
The federal government demands that California and other states that draw from the river, principally Nevada and Arizona, reduce diversions by 2-to-4 million acre-feet per year, and threatens to mandate cuts under the “beneficial use” doctrine if they cannot agree.
California has offered a 400,000 acre-foot reduction, only 9%, but that’s not enough to satisfy the other states and the outcome is very much in doubt. Meanwhile, the feds are offering Colorado water users $400 for every acre-foot of water they don’t take.
Farmers’ water rights are clearly not as sacrosanct as they once seemed to be, and as drought persists the stage is being set for a monumental reckoning of some kind.
2020 Wildfires Reversed 15 Years of Air Quality Gains, New Study Finds
Science Direct
California’s record-setting wildfires of 2020 destroyed 4.2 million acres of forest — and erased years of progress the state made on battling climate change. A study by researchers at UCLA and the University of Chicago says the 2020 wildfires released nearly 140 million tons of carbon dioxide into the air. That was nearly as much greenhouse gas emissions as all the passenger vehicles in California generate in a typical year.
Put another way: Between 2003 and 2019, through a variety of measures, California managed to reduce annual carbon emissions by 71 million tons. The 2020 wildfire emissions doubled that figure, according to the study, which was published in the October issue of the academic journal Environmental Pollution.
Lead author Michael Jerrett said the devastation of 2020 — and the fact that fire seasons are generally getting worse in California — will put pressure on policymakers to reduce greenhouse gas emissions in other segments of society, such as motor vehicles, if the state can’t curb damage from wildfires. “If you look at the runs, these are becoming much more common, these very large wildfire years,” said Jerrett, an environmental health sciences professor at UCLA.
“That means we’ve got to look at these other emissions sources and see if we can get other reductions there.”
Most of the big 2020 wildfires were caused by freak lightning storms that blanketed much of Northern California over several days in August. “There will be these curveballs that nature throws at us,” said the study’s co-author Amir Jina, a public policy assistant professor at the University of Chicago.
“We’re going to have these extra shocks coming along.” The emissions from the 2020 fires haven’t completely reversed the gains California has achieved in reducing its carbon emissions — far from it.
Using 2003 as a baseline, California eliminated a total of more than 400 million tons of carbon that would have otherwise spewed into the air, according to state data.
The study, titled “Up in Smoke,” was published weeks after Gov. Gavin Newsom signed legislation designed to accelerate California’s fight against climate change. One of the bills he signed commits California to reducing carbon emissions by 2045 to a level that’s 85% below what was in the air in 1990.
In terms of meeting the state’s near-term climate targets, the California Air Resources Board, which oversees pollution regulations, doesn’t count wildfire emissions. That’s because the agency, taking direction from the Legislature, has been focusing on human-caused greenhouse gases, like those from power plants or tailpipes, said agency spokesman Dave Clegern.
However, because of recent guidance from the Intergovernmental Panel on Climate Change, the state will include emissions from wildfires when tracking the state’s progress on achieving the 2045 goals, Clegern said.
Jerrett believes distinguishing between fires and other sources of carbon emissions has been a flawed approach, given that many wildfires are caused by humans in some way. Some of the worst wildfires of recent years have been ignited by power lines and other utility eq
uipment, and California’s wildfire problem “has human fingerprints all over it,” he said. On the other hand, Stanford University climate-policy expert Michael Wara said the study erred in equating carbon from wildfires with carbon from exhaust pipes.
Wara, who’s advised the Legislature on climate and wildfire issues, said wildfire carbon probably isn’t as harmful to the climate because most of the trees will eventually grow back and begin soaking up carbon again.
Jerrett, however, said it will take decades for forests to recover from California’s new era of massive wildfires. “That’s not going to help us meet our climate imperatives now,” he said.
Scientists warn that without immediate, major reductions in carbon emissions, average global temperatures will soon rise to more than 1.5 degrees Celsius above pre-industrial levels — a threshold that will lead to disastrous results for the climate.
Study abstract:
https://www.sciencedirect.com/science/article/pii/S0269749122011022
Tired of Campaign Ads? Election 2024 Ramps Up!
Politico’s California Playbook
Intrigue around 2024 is ramping up. An oil industry group announced yesterday that it had raised more than $8 million for a referendum overturning California’s new law requiring new wells to be set back from homes and schools. A franchise restaurant group has channeled millions toward having voters reverse a new law creating an industry workplace regulator. Both efforts would spur enormous spending if they qualify (we’ll know in December).
Leftovers from this cycle are already set to land on voters’ plates. Already qualified for 2024: measures to boost California’s minimum wage to $18 an hour; to fund pandemic detection by taxing the rich; and to nullify a law (PAGA) enabling private lawsuits for labor violations. We’ll know soon if a business coalition’s effort to raise the bar for new taxes had enough support to qualify for 2024.
All of that will inform the Legislature’s work next session , which will in turn affect the 2024 ballot. Maybe the prospect of a pricey PAGA fight will spur a deal in Sacramento that gets the initiative off the ballot. The expensive failure of both sports betting measures could give players like tribes, platforms and card rooms an incentive to forge a legislative compromise – although the product would still need to go before voters. Dialysis firm DaVita has boosted legislative candidates with $3.8 million worth of independent expenditures this cycle, a 22-fold increase from last time. Perhaps a dialysis deal could avert a fourth ballot fight.