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IN THIS ISSUE – “It is a Painful Moment”
- Water Regulators Begin Drought Cutbacks, Moving to Stop N. Cal. River Diversions
- Tidal Wave of Water Thievery – “Nonstop Game of Whack-a-Mole”
- Cannabis Growers Flout Law; An Australian Solution?
- Newsom Issues Order to Expand Emergency Power Sources
- Blackouts Short-Circuited a Governor
- 4 Top Republican Recall Candidates Debate
- States Braced for Recession, Now Cope with a Bonanza
- Californians Facing Lean Bacon Times – Pork Scarcity Due to New Law
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 service.
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FOR THE WEEK ENDING AUG. 6, 2021
Water Regulators Begin Drought Cutbacks, Moving to Stop N. Cal. River Diversions
Sacramento Bee
California regulators moved to cut off thousands of farmers from their main irrigation supplies, voting to ban them from pulling water from the state’s main rivers and streams as the drought worsens.
The State Water Resources Control Board, following hours of debate and comment, voted 5-0 to issue “emergency curtailment” orders covering the rivers of the Sacramento-San Joaquin Delta watershed — essentially the entire Central Valley.
It’s the most dramatic step taken to date by state regulators since the drought was officially declared in most of California’s counties — and surpasses any of the moves made during the previous drought.
“This is a terrible situation that we’re all in,” said board member Sean Maguire.
It’s the latest blow to California agriculture and the state’s $50 billion-a-year farm economy. Already, most of the farmers who rely on the State Water Project or the federal government’s Central Valley Project have had their allocations slashed to nothing or nearly nothing. The state board’s order affects those with direct legal rights to divert water from the rivers.
The board said it needed to curtail farmers’ usage to preserve river flows for drinking water as well as endangered fish species. Of particular importance, agency officials said, is the need to maintain flows in the rivers to keep saltwater from the Pacific from rushing into the Delta — the estuary through which much of California’s water is pumped to the southern half of the state.
If that water gets too salty, pumping operations could have to stop. “Then we’re in a very different emergency,” said Dorene D’Adamo, vice chair of the board.
The decision is expected to become official in about two weeks, when it’s cleared by the state Office of Administrative Law, and then the board will start issuing the actual curtailment orders.
The state board has been predicting since late March that curtailments were likely, but those warnings haven’t resulted in meaningful reductions in diversions from the rivers. “Depletions have remained high,” said Conny Mitterhofer, a water board engineer.
Some farm groups, while not contesting the decision, said the order underscores the desperate need for more reservoirs and dams to store water. “We can’t ignore our state and federal leaders’ failure to meaningfully prepare for this drought,” the California Farm Water Coalition said in a statement preceding the board’s vote.
The state board imposed emergency curtailment orders on limited in 2014 and 2015, but never on such a broad scale as it did Tuesday. The new order is expected to take effect in about two weeks.
The vote came a day after the board issued a separate order forbidding anyone from pulling water from the Upper Russian River, “except as needed to ensure human health and safety.” The board also warned that it expects to issue a similar order for the Lower Russian next week.
The Russian watershed is arguably in the worst shape of any in California, with rapidly declining levels at Lake Mendocino north of Ukiah, the region’s main reservoir.
And officials with the water board said conditions have turned extreme on the Sacramento and San Joaquin rivers as well. Lisa Hong, a staff engineer with the water board, said demand for water in the San Joaquin River watershed is 16 times greater than supply, and three times greater than supply in the Sacramento Valley.
“It is a painful moment,” Karen Ross, the secretary of the Department of Food and Agriculture, told the board. “We know the impacts are real.”
But while Ross applauded the board’s decision, some in agriculture protested the order and decried the lack of local control. Valerie Kincaid, a lawyer for the San Joaquin Tributaries Authority — an alliance of San Joaquin Valley water districts — said the state is “moving to top-down regulatory control of our systems.”
She added that the order is “overly broad” and tramples the districts’ legal rights. In 2015 several districts were able to get court orders overturning similar orders issued by the water board, she noted.
Yet some in agriculture supported the move. The California Fresh Fruit Association, an alliance of farmers, “understands the necessity and urgency” of the decision, said Adam Borchard, the association’s policy director.
https://www.sacbee.com/news/california/water-and-drought/article253221993.html#storylink=cpy
Tidal Wave of Water Thievery – “Nonstop Game of Whack-a-Mole”
Cannabis Growers Flout Law; An Australian Solution?
CalMatters
One day last spring, water pressure in pipelines suddenly crashed In the Antelope Valley, setting off alarms. Demand had inexplicably spiked, swelling to three and half times normal. Water mains broke open, and storage tanks were drawn down to dangerous levels.
The emergency was so dire in the water-stressed desert area of Hi Vista, between Los Angeles and Mojave, that county health officials considered ordering residents to boil their tap water before drinking it.
“We said, ‘Holy cow, what’s happening?’” said Anish Saraiya, public works deputy for Los Angeles County Supervisor Kathryn Barger.
It took a while for officials to figure out where all that water was going: Water thieves — likely working for illicit marijuana operations — had pulled water from remote filling stations and tapped into fire hydrants, improperly shutting off valves and triggering a chain reaction that threatened the water supply of nearly 300 homes.
As drought grips most of California, water thievery across the state has increased to record levels. Bandits in water trucks are backing up to rivers and lakes and pumping free water they sell on a burgeoning black market. Others, under cover of darkness, plug into city hydrants and top up. Thieves also steal water from homes, farms and private wells, and some even created an elaborate system of dams, reservoirs and pipelines during the last drought. Others are MacGyvering break-ins directly into pressurized water mains, a dangerous and destructive approach known as hot-tapping.
In Mendocino County, the thefts from rivers and streams are compromising already depleted Russian River waterways. In one water district there, thefts from hydrants could compromise a limited water supply for fighting fires, which is why they have put locks on hydrants.
“Any way that you can imagine that somebody is going to grab water, they’re doing it,” said Mendocino County Sheriff Matt Kendall. “For goodness sakes, everybody knows what is going on.”
It’s as predictable as a dreary economics lesson: When a commodity becomes scarce and demand soars, it’s worth stealing.
Officials say water thefts are increasing at about the same rate as the decline in California’s water supplies. Complaints have risen sharply this year, mirroring the drought’s inexorable advance.
Halfway through this year, 125 Californians have reported thefts to state authorities, more than twice as many as a decade ago. Those numbers don’t capture calls to local officials or small water districts that shoulder the bulk of enforcement responsibility.
The water thefts not only strain police agencies but also damage valuable equipment. In the Antelope Valley, water main breaks, which can cost $10,000 each to repair, had been averaging about two a year. In the past year, there have been a dozen, Saraiya said.
Water users are now proactively protecting their supplies. Many fire hydrants are being locked or removed altogether. Water tank owners have installed security cameras. In rural areas, residents who have no access to municipal water systems and rely on key-activated water stations are finding their critical lifelines are shut down because of incessant tampering. A robust black market for the keys has popped up, and now most stations operate only during daylight hours.
In the Antelope Valley city of Lancaster, impound yards are hosting growing collections of confiscated water trucks. In one area, fire authorities removed 100 of the area’s 176 hydrants deemed not essential to public safety. Remaining hydrants were fitted with locks.
No cache of water is safe. During the last major drought, businesses, schools and even a fire station were victims of water theft. In 2014, thieves pumped water from storage tanks belonging to the North San Juan Fire Protection District in Nevada County, in the mountains northeast of Sacramento.
“I came to the station one morning and there was a big wet spot,” said Boyd Johnson, the district’s former battalion chief. He said the water was taken for several weeks until they locked the system. “We share that water with CalFire, and, obviously, water was critical to firefighting.”
The most-common culprit of water theft: illegal pot farms. While farmers, ranchers and licensed marijuana growers scramble to obtain water through legal channels, clandestine operations are stealing it or purchasing it from illicit trucks.
In the Sierra Nevada, as many as 4,000 illegal grow sites are operating in Nevada County, according to county estimates. In the Antelope Valley, illegal grows have doubled from 200 last year to 400 today, according to county data, while other estimates put the number in the thousands.
While the vast desert affords a degree of privacy to pot operations, it lacks a critical component to growing things: water. One cannabis farmer near Lancaster bought a house simply to run a garden hose across the desert to his illegal grow site. Officials shut off the line, but the ever-resourceful thieves tapped into another underground line and kept watering their plants.
“Most Californians would be shocked and disappointed at the amount of water these unlicensed, illegal grows are using, especially as California suffers from a drought,” Curt Fallin, a federal Drug Enforcement Agency agent, said during a recent news conference. “By our calculation, the illegal grows in Los Angeles, Riverside and San Bernardino counties require an astounding 5.4 million gallons of water a day, every day.”
That’s enough water for 72,000 people, almost half the population of Lancaster, which is so water-short that the city imposed temporary restrictions on lawn sprinklers last month.
In far northern, mountainous Siskiyou County — which is facing extreme drought conditions this year — sheriffs estimated that during the last drought, illegal pot sites consumed two million gallons of water a day. That would supply three-quarters of the county’s residents today.
With climate change driving longer and more severe droughts around the globe, researchers last year estimated that as much as half the world’s water supply is being stolen every year, citing statistics gathered by the United Nations and Interpol in Europe.
On a recent hot July day, Charles Bostwick, an assistant field deputy for county Supervisor Barger, piloted his Jeep down mile after mile of dusty roads in the Antelope Valley, past dozens of cannabis grow sites.
Stark white “hoop houses” rise from the flat desert floor. When lit at night, the compounds cast an eerie glow. Operators make little effort to hide the sites, which are littered with trash baking in the Mojave Desert sun and guarded by armed men. Scattered along the road to one site was a porcelain toilet, plastic chairs and a coiled garden hose. Bulldozed Joshua trees lay in haphazard piles. The fender of a rusting truck was spray painted “out” and next to it was another one with “keep” scrawled on the side.
Bostwick drove up to a grow that was recently raided and razed in a multi-agency bust. The thieves were nothing if not industrious: Not only had another marijuana compound sprouted across the rutted road, complete with a water tank and a large RV, but the just-destroyed site was in the midst of rapid rebuilding.
“We bust them and they move somewhere else and begin again,” Bostwick said. “It’s a non-stop game of whack-a-mole.”
He said drought is accelerating water theft in the already water-stressed region.
Law enforcement officials around the state are employing satellite imagery and drones in high-tech stakeouts to track water diversions. But the thieves are brazen, no longer confining themselves to nighttime water raids. Los Angeles County supervisors have allocated more than $250,000 for enhanced sheriff’s patrols, hunting for water trucks.
But, again, the thieves are a step ahead. When it became clear that law enforcement was on the lookout for suspicious water tankers, thieves shifted to putting 275-gallon water cubes in the back of their pickups or on trailers. More recently, they have taken to renting U-Haul vans to hide their cargo. Any conveyance with space to carry is put to work: Bostwick said someone in the area is driving around an old fire truck, and another guy is using what appears to be a converted airline fuel tanker.
The jerry-rigged water haulers are dangerous and road accidents are common, Bostwick said. A cube containing 275 gallons of water weighs a ton. Lashing such a heavy and easy-to-shift cargo on trucks can cause it to tip over. In May, the driver of a pickup truck hauling a water cube died after he lost control on a two-lane road near Lancaster and ran head-on into a semi tractor-trailer.
Some take a more direct approach. Locals in the Antelope Valley report high-pressure tactics to sell land for the wells or water rights.
Gailen Kyle grows alfalfa in the arid desert on a farm he works with his wife, Julie. Their home is surrounded by illicit pot operations, which he finds both frightening and frustrating. He’s had intimidating characters come to his door pressuring him to sell out, he said, and other farmers are already reporting that illegal over-pumping is lowering production in their wells.
“I have zero water, all we have is wells,” said Kyle, whose water allocation has been reduced by 50% this year. “They cut my water and these marijuana grows are operating on stolen water. They are getting water from all over and watering hundreds of acres. This is anarchy.”
The increase in water theft has exposed not only the vulnerabilities in the state systems to secure water, but also the complications of enforcing laws with penalties that no longer reflect the seriousness of the crime.
Authorities in California say they are working with limited tools to understand and combat the problem. In 2016 California law legalized recreational marijuana use by adults, and reduced penalties for cultivation of large quantities of pot from a felony to a misdemeanor. So law enforcement officials say it’s difficult to prosecute water theft for illegal grows because judges are circumspect about issuing search warrants for a low-level crime.
“I don’t mean to be rude, but the state is taking the word ‘criminal’ out of the dictionary,” said Marina West, general manager of the Bighorn-Desert View Water Agency, which serves about 2,000 customers north of Palm Springs.
“We’re here to provide water to this community, we’re not here to provide cheap water to an illegal business that’s making millions of dollars.”
Another impediment to more robust reporting and enforcement: intimidation. According to Kyle, the Antelope Valley farmer, one of his neighbors was shown a photograph of a bullet-riddled truck and warned by an alleged cartel member that it could be her fate if she made official complaints about the illegal cannabis sites. Growers monitor and routinely photograph anyone coming near their operations.
Two managers of Southern California water agencies backed out of interviews with CalMatters, saying they were afraid that going public with information about water theft would put their employees at risk.
The state Water Resources Board, which has a modest cadre of 80 investigators who track water diversion and theft from California’s rivers and streams, cannot begin to keep up with the epidemic of stolen water. Nor is the agency’s $1,000 a day fine for water theft proving to be an effective deterrent to offset the rewards for a multi-billion dollar criminal industry.
After the last drought, in 2018, state officers found nearly 1,000 water rights violations and imposed more than $1 million in fines. Last year, inspection work was severely curtailed because of the pandemic.
“What we are recognizing is that water scarcity is the new norm. It’s offensive to see water go to support this illegal industry when legal industries are struggling for water,” said Yvonne West, the water board’s director of enforcement.
West’s department keeps an eye on 5,000 legal marijuana cultivators, but an estimated 25,000 are operating illegally “outside the program.” The imbalance keeps state enforcement efforts on a constant back foot.
“The numbers speak for themselves,” she said.
As California officials lament the lack of legal teeth to prosecute water thieves, they can find an enforcement model in Australia, the planet’s driest inhabited continent.
Illegally siphoning of the Murray and Darling rivers, which irrigate crops and livestock in Australia’s agricultural heartland, was until a few years ago common — and commonly overlooked. Fruit, grain and cotton growers operated massive pumps at will, often pulling out many times more water than legally permitted and drawing down the river during droughts.
The powerful growers stole water “with no fear of sanction,” said Grant Barnes, chief regulatory officer for the New South Wales’ water enforcement agency. “There were more parking wardens in a town in New South Wales than regulators in the entire state.”
Barnes estimated that tens of billions of dollars worth of water was being stolen. But Australian authorities had little understanding of the volumes pumped illegally because farmers often removed or tampered with meters. “You can’t manage what you don’t measure,” Barnes said.
That changed in 2018 when the new agency led by Barnes clamped down with a large enforcement team backed by fines and the threat of revocation of water licenses. In their three years on the beat, the new water cops — about 100 inspectors and other staffers — have prosecuted 31 cases, compared to 8 in the previous 17 years.
Farmers were told “no meter, no pump.” An accurate meter connected to the state system was mandatory before water could be pumped out of rivers.
The New South Wales team employs satellite images, drones, remote-controlled watercraft and software that compares what’s growing on farms with their legal water allocation.
“To steal water, to make it economically viable, you have to take vast volumes and you have to store it. By virtue of that storage you make yourself open to satellite technology,” Barnes said. “Now you can’t hide it.”
Newsom Issues Order to Expand Emergency Power Sources
CalMatters
In a sign that California is at dire risk of rolling blackouts this summer, Newsom signed an emergency proclamation that orders the state to reimburse utilities for payments made to energy-thirsty industrial customers who agree to reduce their use when the grid is strained. The directive authorizes payments of up to $2 per kilowatt-hour — well above the 14-cent average paid by industrial customers.
The move suggests that conditions have worsened since May, when Elliot Mainzer, president of the state’s electric grid operator, expressed “guarded optimism” that California would be able to avoid blackouts. In the emergency proclamation, Newsom said the state currently faces an energy shortfall of up to 3,500 megawatts — enough to power 2.6 million homes — and could face a deficit of 5,000 megawatts next summer.
Mainzer: “Given the types of deficits we’re facing, we’re going to have to do more.”
To help make up the shortfall, Newsom suspended certain environmental requirements — but said the state would compensate for the extra greenhouse gas emissions by coming up with a plan by November to improve air quality in affected communities. He also directed state agencies to streamline clean energy projects — though they could face local hurdles. The Kern County Board of Supervisors, for example, is reevaluating its approach to approving new solar projects after the Newsom administration denied 21 permits for new oil fracking wells.
Blackouts Short-Circuited a Governor
CalMatters commentary by Dan Walters
Several factors propelled the 2003 recall of then-Gov. Gray Davis, but one of the most powerful was his clumsy handling of an electric power crisis that had resulted in rolling blackouts.
The crisis resulted from the ill-conceived and misnamed “deregulation” of power supplies that the Legislature and Davis’ predecessor, Pete Wilson, had enacted seven years earlier. It virtually invited power suppliers such as Enron to game the system.
When the system failed, Davis was governor and failed to deal with it quickly and effectively. As Davis dithered and power supplies dwindled, one major utility, Pacific Gas and Electric, declared bankruptcy and a second, Southern California Edison, came very close to insolvency.
The state finally stepped into the dysfunctional market and began buying power itself to prevent further blackouts, but the political damage to Davis had been done and the recall campaign was rolling.
This bit of history frames the emergency decree that Gov. Gavin Newsom, who also faces a recall election, issued last Friday.
With high temperatures driving power demand upwards, with drought curtailing hydroelectric generation and with the state more dependent on less reliable solar and wind power, California faces a looming supply shortfall that could force power blackouts.
The state might be 3,500 megawatts short on hot afternoons this summer and as much as 5,000 megawatts short next summer if the drought continues.
Newsom wants the state’s energy regulators, the independent agency that operates the electric grid and the utilities themselves to go all-out in tapping whatever sources they can to avoid blackouts. That would include the natural gas-fired plants that the state wants to phase out and auxiliary diesel- and natural gas-powered standby plants in industrial plants.
Newsom suspends environmental clearances and other regulatory procedures to accelerate new power sources, including battery banks to back up solar and wind projects. He also directs utilities to pay up to $2 per kilowatt-hour — many times the standard rate — to industrial customers for reducing their draw from the grid and shifting to backup generators, promising that the state will reimburse their outlays.
Newsom’s order declares that “conditions of extreme peril to the safety of persons and property exist due to rapid, unforeseen, sudden, and severe energy shortages throughout California caused by these climate events…”
The key word is “unforeseen,” a not-so-subtle disclaimer of political responsibility if blackouts occur. But in reality, he had plenty of warning that California was short of electric energy.
Last summer, the state experienced brief blackouts during late afternoon and early evening hours as solar power production began its daily decline and the state could not procure enough backup power from the regional grid to cover the deficit.
It was a wakeup call about the state’s growing dependence on solar, wind and other emission-free sources that lack the dependability of more traditional generation — unless the state has sufficient battery banks or other ways to store and supply power when needed the most.
“These blackouts, which occurred without prior warning or enough time for preparation, are unacceptable and unbefitting of the nation’s largest and most innovative state. This cannot stand,” Newsom said at the time.
If Newsom had heeded the 2020 warning and done then what he wants to do now to improve resiliency, the state would have been better equipped to deal with the current shortfall. He has to hope that California will avoid blackouts in the six weeks between now and the close of voting on September 14, or that if the lights do go out, voters won’t punish him as they did Gray Davis 18 years ago.
https://calmatters.org/commentary/2021/08/newsom-recall-electric-power-blackouts/
4 Top Republican Recall Candidates Debate
Politico
After months of skewering Gov. Gavin Newsom on everything from Covid-19 response to homelessness, a quartet of Republican gubernatorial hopefuls formally made their case Wednesday to oust him from office at their first televised recall debate.
The four candidates — former San Diego Mayor Kevin Faulconer, Assemblymember Kevin Kiley, former Rep. Doug Ose, and businessman John Cox — bashed Newsom over Covid mandates, crime and housing costs. But they notably left unscathed the leading GOP contender, talk show host Larry Elder, who did not appear because he said he was obligated to attend a fundraiser Wednesday night.
The 90-minute event at the Richard Nixon Presidential Library, hosted by Fox LA, allowed the four candidates to go toe-to-toe for the first time. With less than six weeks remaining until the Sept. 14 recall election, polls show the race is tight enough that Newsom could be ousted if he doesn’t convince enough Democrats to vote.
Faulconer, the former San Diego mayor who was a frontrunner before Elder entered the race in July, focused on two issues where polls suggest Newsom may be vulnerable: crime and homelessness.
“Every California family deserves to be safe, feel safe and have a safe neighborhood. That is not a reality under Gavin Newsom’s California,” Faulconer said. “We have a governor who won’t talk about it … who supports the defunding the police movement.”
Faulconer, who has made his city’s response to homelessness a linchpin of his campaign, said his own record on that issue “made a real difference in the quality of life of our city.”
But it was Ose, a farmer and former Sacramento-area congressman, who appeared to win the crowd of GOP stalwarts in the Nixon Library audience with his folksy approach and snappy soundbites.
Asked about a massive unemployment benefit backlog at the California Employment Development Department, he fumed to a sea of nodding heads that there’s only one way to satisfy California taxpayers: “Answer the damn phone! Just answer the damn phone!”
“We need to stop paying people to stay home,” he added. “We need those people back to work.”
Cox, whom Newsom defeated by nearly 24 percentage points in 2018, returned to many of the same themes and ideas that he put forward three years ago. He argued that he is “an outsider and a businessman” and that he would provide “common sense” policies, unlike the “politicians and celebrities.”
“We need to provide common sense solutions … not just throw up our hands and blame climate change,” Cox said.
Asked whom he would fire as governor, Cox said he would clean house and there would be “no shortage” of places and people to consider.
“Caltrans would be one of the first places I’d look at,” he said, referring to the state transportation agency. “We know how bad the EDD is … that agency should be completely audited and that agency should go.”
He said the Department of Motor Vehicles would be another target. “We can go on and on,” he said.
Kiley, the only current officeholder among the GOP candidates, repeatedly attacked Newsom’s dealings in Sacramento, pointing to his signature on a bill restricting contractor employment and his use of emergency powers.
On immigration, Kiley said that the issue has “become untenable,” and that “the sanctuary state is an example of that.” And “we have done way too much in terms of expanding benefits” to undocumented immigrants, “something no other state has done,” he added.
In a revealing moment, Faulconer pivoted toward bipartisanship when asked if he was still a Trump supporter.
“What happened on Jan. 6 was abhorrent to our country … wrong in every way imaginable,” Faulconer said. “What Gavin Newsom wants to do is to make this all about Donald Trump … I’ve been very upfront about how it’s not about partisanship, it’s about leadership.”
When pressed again if he would welcome Trump’s backing, Faulconer said, “I would proudly take the support of any Republican or Democrat who wants to get rid of Gavin Newsom and make California a better state.”
The candidates saved their toughest jabs for Newsom over the Covid-19 response, charging that his business closures, conflicting directives and changing standards damaged the economy and public confidence.
Faulconer said he strongly supported vaccinations but that the governor’s approach to businesses and schools was haphazard and ineffective.
“When we went through last year — open and close, open and close — five and six different times,” Faulconer said. “Then it went to color-coded charts … it’s the type of stuff where you lose confidence.”
Ose went further, charging that under Newsom, “the government is engaged in a significant overreach” on Covid vaccinations.
Newsom strategist Ace Smith responded on Twitter: “These Republicans at this debate are handing out maps for how to drive off the Florida Covid cliff — what a disaster.”
In the end, the evening lacked for drama and any real clashes. Two of the most widely known GOP players in California’s historic recall, Elder and reality TV star Caitlyn Jenner, did not attend.
Jenner’s campaign has confirmed that she went to Australia for multiple weeks, which media there have said was to appear on “Big Brother VIP Australia.” Elder said Wednesday that he was attending a Central Valley fundraiser hosted by state Sen. Shannon Grove (R-Bakersfield).
Newsom rejected the invite for the GOP-sponsored event altogether. The event had a strong Republican tinge compared to past gubernatorial debates; it was presided over by conservative broadcaster Hugh Hewitt, the moderator and president of the Richard Nixon Foundation, and Robert O’Brien, who was national security adviser under President Donald Trump. Both infused GOP undertones in their questioning compared to two Los Angeles-based Fox LA journalists on the panel, Christine Devine and Elex Michaelson.
The debate occurred as the recall stakes have ramped up in recent weeks. A major poll from the UC Berkeley Institute of Governmental Studies and the Los Angeles Times last week showed that even in overwhelmingly Democratic California, voters are now nearly split on the recall of Newsom.
The numbers have alarmed Democrats and boosted calls for Newsom’s team to take a more aggressive stance to fire up his base as election officials prepare to mail ballots to millions of voters. Newsom’s team in recent days has targeted Elder specifically on Twitter, raising the specter of a Republican governor who this week reiterated his stance that there should be no minimum wage.
States Braced for Recession, Now Cope with a Bonanza
Pew Trust
When legislative sessions ended last year, governors and state lawmakers were braced for a prolonged recession caused by the COVID-19 pandemic. They’d frozen hiring for government jobs and cut funding for services such as education, expecting tax revenue to plummet along with the economy.
But the recession lasted just two months. State tax collections came in so much higher than expected last fiscal year—and are expected to grow so much this year—that lawmakers were able this session to restore past cuts, save money for future emergencies and spend more on everything from housing to income tax reductions.
The bonanza doesn’t stop there. States are receiving more than $195 billion in additional money from the American Rescue Plan, the COVID-19 aid package signed by President Joe Biden in March.
Now, rather than fretting about a downturn, state budget writers are wondering how long the boom can last. Some lawmakers worry new spending and tax cuts this year went too far, with criticism falling along familiar partisan lines.
In Idaho, for instance, Democrats say the state may not be able to afford income tax cuts approved this year by the Republican-controlled legislature. “This perception that we’re so flush and have these record surpluses has driven some revenue reductions that I think can actually cause long-term problems,” said state Rep. Ilana Rubel, the assistant minority leader.
In California, Republicans say the state will struggle to pay for new programs enacted by the Democratic-controlled legislature, once federal relief dollars dry up. “The budget is not sustainable,” said Assembly Member Vince Fong, vice-chair of the Assembly Budget Committee.
Forty-eight states have enacted a budget so far this year, according to the National Conference of State Legislatures, an organization that advises state legislators. Most states begin their fiscal years July 1. Lawmakers are required to pass balanced budgets in every state but Vermont.
State budget writers nationwide scrambled to match spending with expected revenues this year. The economists who advise governors and legislatures kept revising their revenue forecasts as summer approached.
“This recession didn’t look like past recessions, at least so far, and I think that has surprised us,” said Colorado state Rep. Julie McCluskie, a Democrat and vice-chair of the Joint Budget Committee. “I think it’s such an unprecedented moment that trying to predict and project has just been very difficult.”
Most governors released budgets in December, January and February, when COVID-19 cases were high and the economic recovery seemed fragile. Governors at the time estimated fiscal 2021 revenue would come in, on average, at 2.7% below pre-pandemic projections, according to the latest survey from the National Association of State Budget Officers, a membership group.
But as budget negotiations continued into the spring, the national COVID-19 vaccination campaign ramped up, business activity rose and budget analysts released new reports anticipating more economic and tax revenue growth.
The March COVID-19 relief package may be sending states more cash than they can easily spend, said Jared Walczak, vice president of state projects at the Tax Foundation, a conservative-leaning Washington, D.C., think tank.
“For most states, the fiscal relief in the American Rescue Plan Act is the very large cherry on top,” he said. “The cherry they don’t know what to do with.”
Tax revenues declined in about half the states from April to December 2020, according to the Urban Institute, a left-leaning Washington, D.C., think tank. States with tourism-dependent economies, such as Nevada and Hawaii, were hit particularly hard by business shutdowns and travel restrictions. Energy-producing states such as Alaska and Wyoming were pummeled by low energy prices.
But overall, state budgets fared better than analysts expected. And some states experienced huge increases in tax collections.
“We really didn’t, at any point during COVID, see a drop-off in our revenue,” said Alex Adams, Idaho’s chief budget officer and head of the state Division of Financial Management.
Idaho’s fiscal 2021 tax revenues came in 24% higher than the prior year’s, he said. “That makes that the single largest revenue growth year in state history.”
California collected 20% more in personal income, sales and corporation taxes last fiscal year than it did the year before, according to the state legislative analyst’s office, which advises the state legislature.
“Such growth would have been extraordinary in a normal year, let alone during a pandemic,” office analysts said in an article discussing their May revenue outlook. They expect California to have $7.2 billion more to spend this year than in the prior fiscal year.
Tax revenue grew because the COVID-19 recession wasn’t like past downturns. It primarily affected workers with low incomes. High earners, who pay the lion’s share of income taxes, mostly kept their jobs. Stock prices rose. In California, tech companies rushed to make initial public offerings, further enriching the state’s elite.
Meanwhile, Congress pumped trillions of dollars into the economy, from small business loans to stimulus checks. That helped people pay the bills and splurge on new purchases. Some laid-off workers who went on unemployment actually increased their incomes, thanks to expanded benefits.
Recent tax revenue gains—and a rosy outlook for this fiscal year—allowed lawmakers to spend big on a slew of priorities this session.
Idaho lawmakers put $263 million into the state rainy-day fund and invested in transportation, education, workforce development and broadband. They also approved $220 million in income tax rebates and $163 million in ongoing tax cuts for individuals and businesses.
California lawmakers increased spending on child care, affordable housing, health care, schools and higher education. They approved $12 billion in tax rebates for middle- and lower-income residents.
And Colorado lawmakers restored cuts made last year, boosted budget reserves to a record 13.4% of the state budget, and announced $800 million in additional economic stimulus spending. “Colorado, as far as I know, has not had reserves that high in decades,” McCluskie said.
Even struggling states such as Nevada were able to increase spending this year. Although Nevada Gov. Steve Sisolak, a Democrat, in January proposed slashing $187 million from the state budget, by May economic projections showed the cuts were no longer necessary.
“Basically, the budget had to do a 180,” said Nevada state Rep. Maggie Carlton, a Democrat and chair of the Ways and Means Committee. The final enacted budget avoided most cuts—some were made, mostly to reflect a drop in caseload for certain social services, Carlton said—and included half a billion dollars in new education spending.
The American Rescue Plan further boosted state budgets.
Among other things, the behemoth $1.9 trillion federal law extended pandemic unemployment benefits, issued additional stimulus checks to middle- and low-income families, provided schools with more funds to support in-person learning and set aside $350 billion in flexible funds for states, localities, tribes and territories to use to recover from the pandemic. States get $195 billion of the cash.
States where the unemployment rate has grown by more than 2 percentage points since February 2020 will receive their entire share of the funds this year, while the rest will get half this year and the rest in 2022. All states get $500 million plus additional money based on their unemployment situation.
The money can be spent on efforts to decrease the spread of COVID-19, replace lost government revenue, help people and businesses that are struggling economically, and upgrade water, sewer and broadband infrastructure. It can’t be used to pay for pensions or tax cuts.
For less populous states, it’s a stunning windfall. Wyoming is getting federal aid equivalent to over 22% of total state spending in fiscal 2020, according to research by The Pew Charitable Trusts. (Pew also funds Stateline.) Nevada, New Hampshire, North Dakota, South Dakota and Vermont will receive funds equivalent to more than 14% of their fiscal 2020 spending.
But governors and legislators have until 2026 to spend the money, and many aren’t in a rush to do so. For one thing, the funding arrived at an awkward time. The U.S. Treasury Department adopted its interim final rule on how the money can be spent and invited states to request funds in May—when lawmakers in many states already had finalized their budgets for the next fiscal year.
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Californians Facing Lean Bacon Times – Pork Scarcity Due to New Law
Fresno Bee
Thanks to a reworked menu and long hours, Jeannie Kim managed to keep her San Francisco restaurant alive during the coronavirus pandemic.
That makes it all the more frustrating that she fears her breakfast-focused diner could be ruined within months by new rules that could make one of her top menu items — bacon — hard to get in California.
“Our number one seller is bacon, eggs and hash browns,” said Kim, who for 15 years has run SAMS American Eatery on the city’s busy Market Street. “It could be devastating for us.”
At the beginning of next year, California will begin enforcing an animal welfare proposition approved overwhelmingly by voters in 2018 that requires more space for breeding pigs, egg-laying chickens and veal calves. National veal and egg producers are optimistic they can meet the new standards, but only 4% of hog operations now comply with the new rules. Unless the courts intervene or the state temporarily allows non-compliant meat to be sold in the state, California will lose almost all of its pork supply, much of which comes from Iowa, and pork producers will face higher costs to regain a key market.
Animal welfare organizations for years have been pushing for more humane treatment of farm animals but the California rules could be a rare case of consumers clearly paying a price for their beliefs.
With little time left to build new facilities, inseminate sows and process the offspring by January, it’s hard to see how the pork industry can adequately supply California, which consumes roughly 15% of all pork produced in the country.
“We are very concerned about the potential supply impacts and therefore cost increases,” said Matt Sutton, the public policy director for the California Restaurant Association.
California’s restaurants and groceries use about 255 million pounds of pork a month, but its farms produce only 45 million pounds, according to Rabobank, a global food and agriculture financial services company.
The National Pork Producers Council has asked the U.S. Department of Agriculture for federal aid to help pay for retrofitting hog facilities around the nation to fill the gap. Hog farmers said they haven’t complied because of the cost and because California hasn’t yet issued formal regulations on how the new standards will be administered and enforced.
Barry Goodwin, an economist at North Carolina State University, estimated the extra costs at 15% more per animal for a farm with 1,000 breeding pigs.
If half the pork supply was suddenly lost in California, bacon prices would jump 60%, meaning a $6 package would rise to about $9.60, according to a study by the Hatamiya Group, a consulting firm hired by opponents of the state proposition.
At one typical hog farm in Iowa, sows are kept in open-air crates measuring 14-square-feet when they join a herd and then for a week as part of the insemination process before moving to larger, roughly 20-square foot group pens with other hogs. Both are less than the 24 square feet required by the California law to give breeding pigs enough room to turn around and to extend their limbs. Other operations keep sows in the crates nearly all of the time so also wouldn’t be in compliance.
The California Department of Food and Agriculture said that although the detailed regulations aren’t finished, the key rules about space have been known for years.
“It is important to note that the law itself cannot be changed by regulations and the law has been in place since the Farm Animal Confinement Proposition (Prop 12) passed by a wide margin in 2018,” the agency said in response to questions from the AP.
The pork industry has filed lawsuits but so far courts have supported the California law. The National Pork Producers Council and a coalition of California restaurants and business groups have asked Gov. Gavin Newsom to delay the new requirements. The council also is holding out hope that meat already in the supply chain could be sold, potentially delaying shortages.
Josh Balk, who leads farm animal protection efforts at the Humane Society of the United States, said the pork industry should accept the overwhelming view of Californians who want animals treated more humanely.
“Why are pork producers constantly trying to overturn laws relating to cruelty to animals?” Balk asked. “It says something about the pork industry when it seems its business operandi is to lose at the ballot when they try to defend the practices and then when animal cruelty laws are passed, to try to overturn them.”
In Iowa, which raises about one-third of the nation’s hogs, farmer Dwight Mogler estimates the changes would cost him $3 million and allow room for 250 pigs in a space that now holds 300.
To afford the expense, Mogler said, he’d need to earn an extra $20 per pig and so far, processors are offering far less.
“The question to us is, if we do these changes, what is the next change going to be in the rules two years, three years, five years ahead?” Mogler asked.
The California rules also create a challenge for slaughterhouses, which now may send different cuts of a single hog to locations around the nation and to other countries. Processors will need to design new systems to track California-compliant hogs and separate those premium cuts from standard pork that can serve the rest of the country.
At least initially, analysts predict that even as California pork prices soar, customers elsewhere in the country will see little difference. Eventually, California’s new rules could become a national standard because processors can’t afford to ignore the market in such a large state.
Kim, the San Francisco restaurant owner, said she survived the pandemic by paring back her menu, driving hundreds of miles herself through the Bay Area to deliver food and reducing staff.
Kim, who is Korean-American, said she’s especially worried for small restaurants whose customers can’t afford big price increases and that specialize in Asian and Hispanic dishes that typically include pork.
“You know, I work and live with a lot of Asian and Hispanic populations in the city and their diet consists of pork. Pork is huge,” Kim said. “It’s almost like bread and butter.”
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