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IN THIS ISSUE – “The budget will only pay lip service to the California Constitution”
Dan Walters, California’s senior Capitol commentator
- Governor, Legislative Leaders Finishing State Budget Behind Closed Doors
- Placeholder State Budgets Began in 2009…It’s Complicated Politics
- Newsom Feels Pressure from NY to Cut Climate Change Costs
- Legislators Restore Governor’s Dam Safety Budget Reductions
- Latest Voter Poll: Newsom & Bonds Get Thumbs Down
- Bay Area Tech Workers Suffer Job & Salary Cuts
Capitol News & Notes (CN&N) curates 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 JUNE 14, 2024
Governor, Legislative Leaders Finishing State Budget Behind Closed Doors
CalMatters
After legislative leaders failed to reach an agreement with Gov. Gavin Newsom about how to close California’s projected multibillion-dollar deficit, the Legislature passed a placeholder state budget yesterday, just ahead of a mandatory deadline.
With only a few weeks left until the start of the new fiscal year on July 1, both sides refuse to publicly discuss what specific issues are holding up a deal.
Newsom’s office and his Department of Finance declined to answer questions about the remaining differences with the Legislature that still need to be worked out. Representatives for Senate President Pro Tem Mike McGuire and Assembly Speaker Robert Rivas, who are in charge of negotiating with the governor, would not make them available to the media today after their members approved a spending plan that almost certainly will not be the actual budget.
Newsom presented a plan last month to address what his administration estimates is a remaining funding shortfall of $56 billion over the next two years, including by dipping into reserve accounts, deferring school funding, eliminating government jobs and cutting or delaying money for infrastructure, health and climate programs.
Democratic leaders in the Legislature, where the party holds supermajorities in both houses, released a counterproposal a few weeks later. Among the major discrepancies is a push for more substantial reductions to prison funding to reverse some of Newsom’s proposed cuts to college scholarships for middle-income students, public health programs, subsidized child care slots and housing development.
The governor and the Legislature must also decide whether to repurpose billions of dollars that were earmarked to increase payments for health care providers who treat low-income patients, as Newsom has suggested, and whether to further delay minimum wage increases for health care workers, which could potentially save the state billions of dollars but faces strong opposition from unions.
Despite ongoing negotiations over undisclosed provisions, Democratic lawmakers voted to adopt their version of the spending plan because they must pass a balanced budget by midnight Saturday in order to get paid. The bill passed by a vote of 29-8 in the Senate and 59-14 in the Assembly, along largely partisan lines.
Republicans criticized the proposal as out of touch with Californians’ needs. They raised objections to provisions pausing some tax deductions for businesses to raise additional revenue and reversing previous commitments on expanded health care spending. Several members called out the inclusion of billions of dollars for the state’s troubled high-speed rail project and to expand health care access for undocumented immigrants while other programs are cut.
“This is a shameful budget,” Assemblymember Kate Sanchez, a Rancho Santa Margarita Republican, said during floor debate. “This budget is heartless, it’s divisive and it’s completely detached from the reality and the struggles that Californians are actually facing.”
https://calmatters.org/politics/capitol/2024/06/california-budget-deficit-legislature-newsom/
Placeholder State Budgets Began in 2009…It’s Complicated Politics
CalMatters commentary from Dan Walters
What’s happening on the state budget this week — or, more accurately, not happening — is the latest chapter in a 15-year-long saga of manipulative Capitol politics.
Sometime before Saturday night, the Legislature will pass what its leaders will claim is a state budget for the 2024-25 fiscal year that begins on July 1. Saturday is the June 15 constitutional deadline, and if legislators don’t comply with it, they theoretically could forfeit their paychecks.
However, the budget will only pay lip service to the California Constitution, and may bear only a passing resemblance to the budget that will finally emerge sometime later.
Understanding why this charade exists requires turning the clock back to 2009, when a Republican governor, Arnold Schwarzenegger, was sparring with Democratic legislative leaders over a budget that was hammered by the Great Recession and had been tied up in partisan wrangling for months.
Budgets then required two-thirds votes in the Legislature, which meant they needed support from at least a few GOP legislators. A Republican state senator, Abel Maldonado, refused to cast the decisive vote unless Democrats agreed to place a measure on the 2010 ballot that would overhaul California’s primary election system.
At the time, nominees were chosen via primaries within the parties. Maldonado, backed by Schwarzenegger, wanted to switch to a jungle primary system in which all candidates — regardless of party — would appear on the same primary ballot, and the top two vote-getters would qualify for a runoff.
Leaders of both parties hated the change, but Democrats finally caved and placed Proposition 14 on the ballot.
“Most Californians are neither far-left nor far-right, but in the middle,” Schwarzenegger said. “We will no longer punish candidates and elected officials for putting the people first, in front of partisan politics.”
He later made Maldonado lieutenant governor when the office became vacant.
Democrats seethed about being forced to accept the top-two primary to get a budget deal and vowed never to let it happen again. With labor union allies, they immediately qualified another ballot measure, Proposition 25, which lowered the vote requirement for budgets to a simple majority. The measure basically cut Republicans out of the budget process, and included a sweetener to attract voters, declaring that legislators’ salaries would be docked if they didn’t enact a budget by June 15.
Just a year later, that proviso was tested when Jerry Brown, who had returned to the governorship after a 28-year absence, vetoed the 2011-12 budget passed by the Legislature, saying “it continues big deficits for years to come and adds billions of dollars of new debt.”
Democratic state Controller John Chiang immediately blocked legislators’ paychecks, costing them about $400 a day. A couple of weeks later, a new budget was passed and signed by Brown and paychecks were issued.
However, the incident outraged legislative leaders, who sued Chiang and later won judicial a ruling that if the Legislature passed a budget by June 15, even if incomplete, they could keep their salaries.
That’s why legislators will pass a budget this week that is far from final, but the threat of losing their paychecks is only theoretical.
What is real is that Gov. Gavin Newsom and legislative leaders are at odds on some fairly significant aspects of the budget, particularly his proposed reductions in many state programs to help cover a $44.9 billion deficit. Legislators want to reduce prison spending and raise some taxes on business to rescind Newsom’s cuts.
Newsom Feels Pressure from NY to Cut Climate Change Costs
Politico CA Playbook
California politicians are feeling the pressure after Greens took a thumping in EU elections last weekend and New York Gov. Kathy Hochul pulled the plug on congestion pricing last week, citing impacts to businesses and drivers.
“I do,” said state Sen. Henry Stern, when asked if he thinks California’s climate policies are vulnerable to the same political headwinds.
Even with California’s Democratic supermajority and legendarily supportive electorate, there are some signs of anxiety. Exhibit A is state regulators’ rescheduling last month of a vote to amend the state’s cap on transportation fuel emissions for Nov. 8, right after the election.
Regulators themselves acknowledge the proposed changes to the low-carbon fuel standard could increase gas prices by as much as 47 cents per gallon over the next two years as oil companies pass on the cost of having to buy permits to cover their fuels’ emissions.
“There’s no question that the low-carbon fuel standard contributes to higher gas prices,” said Ethan Elkind, director of the climate program at University of California, Berkeley’s Center for Law, Energy and the Environment. “It seems pretty clear it is related to the election.”
Exhibit B: Lawmakers are steering clear of an effort this year to reauthorize the state’s cap-and-trade program, which caps industrial carbon emissions. It’s not urgent — the current authorization expires in 2030 — but it’s expected to be a two-year effort, as it was last time.
“You have not heard a peep out of [Gov. Gavin] Newsom about trying to extend that program,” Elkind said. “If we’re going by last decade’s timing, that’s something that he would start to do for 2025, but who knows if he would do that, given national political aspirations and this pushback against higher prices.”
Newsom’s office didn’t respond to a request for comment. His regulators are still planning on approving tweaks to the existing program sometime this year, including an expected trimming of emissions allowances — and commensurate price increases — in order to meet the state’s 2045 climate target.
And they’re staying the course on a rule to tighten pollution standards for locomotives despite House Republican pushback. “We are moving toward a future where all transportation operations in the state will be zero emissions,” California Air Resources Board Chair Liane Randolph said in a statement ahead of this Thursday’s House committee hearing.
But there’s sensitivity around November, especially as Republicans point to California as an example of where the country is headed under President Joe Biden’s climate policies.
“Assemblymembers are up for a vote. A number of state senators are up for a vote. And there’s just an effort to stay away from a general narrative that Democratic controlled states are raising your gas prices,” said Elkind.
Stern said he saw the political turbulence as an opportunity to craft policies that can withstand the storms.
“Question is whether we can creatively convert them into new energy or just retreat to our old corners and duck the moment,” he said in a text message. “The whole world may have to count on California to be the stopgap on climate once again.”
Legislators Restore Governor’s Dam Safety Budget Reductions
CalMatters
Several dozen dams throughout California could store up to 107 billion more gallons of water if they underwent repairs to fix safety problems. But facing a staggering state deficit, Gov. Gavin Newsom has proposed cutting funding for a dam repair grant program in half this year, while state legislators want the $50 million restored.
California has an aging network of nearly 1,540 dams — large and small, earthen and concrete — that help store vital water supplies. For 42 of these dams, state officials have restricted the amount of water that can be stored behind them because safety deficiencies would raise the risk to people downstream from earthquakes, storms or other problems.
Owned by cities, counties, utilities, water districts and others, these dams have lost nearly 330,000 acre-feet of storage capacity because of the state’s safety restrictions. That water — equivalent to the amount used by 3.6 million people for a year — could be used to supply communities, farms or hydropower.
Two years ago, in the depths of the most recent drought, Newsom touted dam repairs as a key approach to shore up water supplies squeezed by climate change. In his 2022 Water Supply Strategy, he referenced plans by his administration and the Legislature to create a grant program to “help local water districts regain lost storage capacity and improve public safety” of dams.
The program, created in 2023 and allocated an initial $100 million, is still getting up and running.
But now, reeling from the massive deficit, Newsom has proposed cutting $50 million this year. The Legislature as of Wednesday has kept that money in its proposed budget; negotiations are continuing.
“This investment is the trifecta: It gives you public safety, because you don’t want dams breaking. It gives you climate resilience, because we could have flooding,” said Assemblymember Diane Papan, a Democrat from San Mateo. And, she added, “It will impact our water supply.”
Newsom spokesperson Alex Stack declined to address CalMatters’ questions about dam safety funding, citing the negotiations. “We’ll have more to share soon,” Stack said.
Dam owners facing hundreds of millions to billions of dollars in repairs are urging lawmakers to add more funding for projects in a multi-billion dollar climate bond, which also is being negotiated.
“It’s so important that we have the storage capacity to be able to collect water in wet times, so that we have it during times of drought,” said Cindy Tuck, a deputy executive director of the Association of California Water Agencies, which represents more than 450 public agencies.
Statewide, dams help corral floods, generate power and store water for cities and farms. But California dams on average are more than a decade older than the national average, with 328, roughly a fifth, that are at least 100 years old.
Despite their age, dam disasters are extraordinarily rare. In March 1928, the nearly brand-new St. Francis dam northwest of Los Angeles collapsed — killing more than 450 people in the second-deadliest disaster of California’s history. In 1963, the Baldwin Hills dam in southwest Los Angeles breached, killing 5 people and damaging $15 million in property.
A major earthquake severely damaged the Lower San Fernando Dam in the 1970s — leaving only “a thin dirt wall… between 80,000 people in the San Fernando Valley of southern California and 15 million tons of water,” the U.S. Geological Survey reported. And the Oroville dam’s compromised spillways forced the evacuation of nearly 190,000 people during the storms of 2017. Each major dam failure or near-miss has spurred greater oversight.
Papan said as the chair of the Assembly’s water, parks and wildlife committee, the threat of deteriorating dams keeps her awake at night. “I don’t want somebody to look back and say ‘They knew this was going to be an issue, but they didn’t put any money towards it.’”
“We are finding deficiencies faster than the dam owners can address the deficiencies.”
SHAWN JONES, CALIFORNIA’S DIVISION OF SAFETY OF DAMS
The American Society of Civil Engineers gave California’s dams a C- on its most recent infrastructure report card in 2019. And in 2021 the state’s auditor said “the condition of some of the State’s potentially most hazardous dams remained a concern.” Dam safety inspectors have rated conditions at 133 of them as less than “satisfactory.”
According to the grant program’s guidelines, “in many cases, these dams pose a significant threat to communities downstream.” The state restrictions aim to reduce that threat by limiting the amount of water they can store.
Shawn Jones, assistant manager of the state’s Division of Safety of Dams, said California has the largest dam safety program in the nation, overseeing roughly 1,230 dams with more funding and staffing than any other state.
Jones said that he wouldn’t characterize the 42 dams that have storage restrictions, which average around 100 years old, as “unsafe.” “All dams provide some sort of risk downstream,” he said. “These dams have an additional risk, and we’re driving it down in the interim” with the storage restrictions.
But repairs are often slow-moving because of lengthy environmental permitting processes and massive costs.
“We are finding deficiencies faster than the dam owners can address the deficiencies,” Jones said.
Latest Voter Poll: Newsom & Bonds Get Thumbs Down
Politico CA Playbook
California residents are clutching their pocketbooks and souring on the economy as the state scrambles to get its fiscal ducks in a row. At least, that’s what the results of a new poll suggest.
The statewide survey, released last night by the Public Policy Institute of California (PPIC), shows the rising cost-of-living and a $27.6 billion state budget deficit have voters pessimistic on the Golden State’s future. Nearly 6 in 10 likely voters surveyed think the state is headed in the wrong direction, and 64 percent expect bad economic times over the next 12 months. Both numbers are up from a year ago.
Voters don’t want the state to borrow its way out of trouble, either: nearly two-thirds of likely voters said it’s a bad time to issue bonds for state programs and infrastructure projects.
Some other highlights from the survey:
Newsom’s approval rating continues to sink: He’s 5 points under with likely voters, with 47 percent approving of his job performance and 52 percent disapproving. Newsom was doing slightly better in PPIC’s poll in February, at 48 percent and 50 percent, respectively.
Newsom’s May budget revision is more popular. Likely voters support it, with 55 percent in favor and 41 percent against.
Dems lead among voters in competitive California congressional races, 59 percent to 39 percent. But take this with a grain of salt: the sample size was 200 people, and there’s no individual district breakdown.
Democrats have big leads in top-ticket races in November, as expected. President Joe Biden leads Donald Trump 55 to 31 percent; and Rep. Adam Schiff leads Republican Steve Garvey 62 to 37 percent. Only 1 in 5 likely voters say they are “very interested” in having a series of Senate debates and town halls with the candidates.
Voters’ gloomy mood is worse on a national level. Nearly three-quarters of likely voters said the country is on the wrong track.
PPIC Poll Summary:
Bay Area Tech Workers Suffer Job & Salary Cuts
San Jose Mercury
The past year has been tough for the Bay Area, as thousands of layoffs skittered across the region. Even workers at Silicon Valley’s tech titans — including Meta, Apple and Google — have faced job cuts. Since 2022, tech companies in the region have slashed roughly 40,000 jobs. And with each layoff, workers are entering a market that is less friendly to job seekers than it used to be.
New research from tech advocacy organization Women Impact Tech, which examined job and salary data nationwide from 2020 to 2023, affirmed what many people already know: companies are tightening their belts — slicing jobs and salaries alike — and many people are struggling to find work that pays enough to live comfortably in the Bay Area.
Despite having the highest tech salaries in the country, Silicon Valley has experienced the biggest drop in pay compared to other tech hubs, falling 15% from 2022 to 2023, according to Women Impact Tech.