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IN THIS ISSUE – “We Can’t Afford to Dither Any Longer”

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 DEC. 18, 2020

 

Golden State Population Growth Rate Lowest in 120 Years

State Dept. of Finance

The state’s population growth rate sank to a new low from July 1, 2018, to July 1 of this year, to just 0.35 percent. That’s down from 0.57 percent in the previous year, which was the lowest recorded rate since 1900.

Experts have said that the slowing of California’s once stratospheric population growth is caused by dwindling immigration into the state, coupled with larger numbers of people moving to other states.

State officials reported that for the first time since the 2010 census, more people moved out of the state than into it by 39,500.

Natural increase—births minus deaths—added 156,600 people to the state over the period with 436,700 births and 280,100 deaths. Births were down from 451,200 in the year ending July 1, 2019, while deaths were up from 267,300 in the preceding year. Some of the above average deaths are due to the COVID-19 pandemic. There were more than 12,800 more deaths in 2019- 2020 compared to the same period of 2018-19. While deaths increased due to an aging population, this is much higher than the 3-year average death increase of 4,800 persons per year from 2017 to 2020.

The gains from natural increase were offset mostly by losses in net migration—total migration into the state minus total out-migration. Though net international migration added population during this period, negative domestic net migration outweighed those gains, resulting in an overall net migration loss of 135,600 residents (net migration was also negative during 1993-96 and 2005-10). While domestic out-migration tended to be similar to the previous year, domestic in-migration slowed in 2019-2020, especially the last three months from April to June when the stay-at-home order was in effect. Similarly, international migration also slowed down.

Highlights of the July 1, 2020 county population report include:

  • –  The state’s ten largest counties were Los Angeles, San Diego, Orange, Riverside, San Bernardino, Santa Clara, Alameda, Sacramento, Contra Costa, and Fresno, with each having more than one million residents. These ten counties represented 72 percent of California’s population. Of these counties, most reported negative net migration even with the net gains from international migration. Only Fresno, Riverside, and Sacramento counties had positive population growth from net migration. It is the first time this decade where a majority of these large counties reported loss in net domestic migration.
  • –  Among top ten counties with high numeric change, Riverside and Sacramento counties posted the highest numeric population gains, with growth largely from net international migration (Sacramento) and net domestic migration (Riverside). Fresno County reported population growth from natural increase and moderate positive net migration. In contrast, San Bernardino and San Diego counties depended mainly on natural increase as the source of population growth.

http://www.dof.ca.gov/Forecasting/Demographics/Estimates/E-2/documents/PressRelease_July2020.pdf

 

Employers & Billionaires Exit California; “We May Have Reached a Tipping Point”

CalMatters commentary

The timing could not have been more ironic.

As veteran Democratic operative Dee Dee Myers — she was Bill Clinton’s press secretary at one point in her lengthy career — became Gov. Gavin Newsom’s new ambassador to business this month, three of California’s biggest and best known corporate entities announced moves to arch-rival Texas.

The splashiest émigré is Elon Musk, founder of the Tesla electric car company and other high-technology firms, who had already chosen Texas for expansions of his automobile and space businesses.

Musk revealed his personal move at a business conference and compared California to a sports team with a long winning streak, saying, “they do tend to get a little complacent, a little entitled, and then they don’t win the championship anymore.” California, he said, “has been winning for a long time. And I think they’re taking them for granted a little bit.”

Very quickly, two other stalwarts of the San Francisco Bay Area’s high-tech community also announced departures to Texas, Hewlett-Packard Enterprise Co. and software giant Oracle and CEO Larry Ellison (Hawaii).

Hewlett Packard Enterprise is building a “state-of-the-art” campus near Houston for 2,600 workers and said, “HPE’s largest U.S. employment hub, Houston, is an attractive market to recruit and retain future diverse talent.”

Oracle, which is moving its headquarters to Austin, said, “We believe these moves best position Oracle for growth and provide our personnel with more flexibility about where and how they work.”

The three announcements — and Musk’s comments especially — renew a question that has hovered over California for several years: Do the state’s high taxes, high operating and living costs and a political drift to the left make it hostile to business? And, parenthetically, does Texas, which has no personal income tax and is a reliably conservative, pro-business state, benefit from that perceived hostility?

“Anyone who doesn’t believe that this latest departure isn’t a threat to California’s economy is a business climate denier,” Jim Wunderman, president and CEO of the Bay Area Council, said in a statement. “We are watching the unraveling on one of the world’s mightiest economies and the consequences will be devastating. California for too long has willfully ignored our awful business climate, even as we’ve enjoyed incredible success and prosperity.”

Wunderman added, “We can’t afford to dither any longer or California will permanently lose hundreds of thousands if not millions of jobs to states like Texas that place value on business and investment.”

Clearly the COVID-19 pandemic has had an effect on corporate attitudes. Many employers are now embracing work-at-home arrangements that make physical location less important and the Bay Area has been seeing an outward migration to communities, such as Sacramento, with less congestion and lower housing costs as a result. In that sense, moving headquarters staff to low-cost Texas buys more bang for the buck and makes perfect sense.

But there are other recent developments that may have a cumulative effect. They include state legislators’ calls for higher personal and corporate taxes, political efforts to help unions organize workers in the high-tech sector, legislation to dictate corporate board memberships, and direct slaps such as San Francisco’s new tax on corporations whose chief executives are paid over 100 times more than their rank-and-file workers.

We may have reached a tipping point in which the disadvantages of doing business in California outweigh the advantages. We should remember what happened to Detroit, which was the Silicon Valley of its day a century ago, but took its prosperity for granted and paid a heavy financial and social price for its complacency.

Good luck, Dee Dee. You’ll need it.

https://calmatters.org/commentary/2020/12/california-texas-business-climate-oracle-musk-hewlett/

 

Cities & Counties Confront Huge Spending Cuts & Layoffs

CalMatters

Even as California cities face yawning budget deficits, many are still on the hook for raises promised to public employee unions — leaving local governments with little choice but to lay off employees or slash services.

The cities of San Francisco and Los Angeles are facing projected budget deficits of $653 million and $675 million, respectively. Amid declining revenues and increasing pandemic costs, both cities attempted to negotiate with unions to defer raises — but have largely been unsuccessful.

In August, the San Francisco Board of Supervisors voted to use $37 million in reserves to fund 3% raises for the majority of unions, and is on the hook for another 3% raise in July and 0.5% raise in January 2022.

In Los Angeles, the police union is set to receive a 3.25% raise in January, while other unions will get a 2% raise in January and June.

The vast majority of California’s local governments are facing deficits. In 2010, 45 of California’s 58 counties had more money than they owed. But in 2020, 55 counties owed more money than they had, largely due to the compounding costs of public employee pensions and health benefits for retired workers, according to a recent analysis by former state Sen. John Moorlach, an Orange County Republican and certified public accountant. Moorlach’s analysis was based on pre-pandemic numbers, meaning counties’ budgets are likely even worse off now.

Moorlach: “Counties are slowly slipping in the wrong direction en masse. … And the failure to push … in the right direction will hit … hard as (they deal) with the coronavirus fallout.”

Still, layoffs loom for public employees. The Los Angeles Police Department is set to lose 628 positions as the city tries to patch its deficit — but the department’s largest union is fighting back. It’s asking members to donate $22 per paycheck for the next 48 weeks to launch a $10 million “Protecting our Profession” campaign targeting elected officials.

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Ex-San Diego Mayor Emerges as Newsom’s Leading 2022 Challenger

San Diego Tribune

When he was younger, Kevin Faulconer had a job cleaning carpets. He walked in after messes happened.

That experience served him well in his political career, winning special elections for San Diego City Council and then San Diego mayor after scandals forced the incumbents out of office.

Now, with his seven-year term as mayor just concluded, the 53-year-old Republican is positioning himself to run for California governor, and the planets of electoral disarray may be aligning again.

Gov. Gavin Newsom, under fire for his handling of the COVID-19 pandemic, is the subject of a recall effort, the sixth attempt by various conservatives to unseat him since his election in 2018. The first five fizzled.

The newest one, which started in June, has collected 800,000 signatures, according to organizers. They would need almost 700,000 more by March 17 to qualify for the ballot, and probably closer to 1 million more to account for disqualified petition-signers.

That’s unlikely, political analysts say, because the pandemic makes it harder to solicit signatures and because the recall backers haven’t raised enough money to fund the effort.

But renewed lockdowns in the state, designed to curb a surge in coronavirus infections that is filling hospital beds, have distressed already-struggling businesses, churches, parents of school-age children, and others. Some are openly defying the orders and directing their ire at Newsom.

Others remain critical of his attendance at a fancy-restaurant dinner partywhile he was urging Californians to avoid large gatherings. And a widening scandal over hundreds of millions of dollars of unemployment benefits fraudulently paid to prison inmates has people questioning the competence of his administration.

All that’s left the 53-year-old Democrat “facing the biggest political troubles so far in his governorship,” according to a recent story by POLITICO. The article said his team is “increasingly concerned” about the recall effort.

Watching this unfold is Faulconer, who’s been talked about as a possible gubernatorial candidate ever since he became mayor in 2014, riding into office in the wake of the sexual harassment scandal that chased out Bob Filner.

He said he is seriously considering a run, whether it happens as part of a recall next year or in 2022, when Newsom would be up for re-election. Judging from Faulconer’s public comments touting his accomplishments as he leaves office and his social media posts in recent months criticizing the governor, he’s already honing campaign talking points.

“Faulconer has not only put his toes in the water of the governor’s race,” said Dan Schnur, a former consultant who teaches political communications at USC and UC Berkeley, “he’s waded in up to his waist.”

Because of how blue California is now — almost twice as many registered voters are Democrats as Republicans — the general thinking among political analysts is that the chaos of a recall might be Faulconer’s best chance to become governor.

Two years ago, Newsom got elected with 62 percent of the vote, the largest share by a Democratic candidate for governor in state history. A recent survey, conducted before the recent shutdowns, showed that while Californians are pessimistic about the state’s financial future, almost 60 percent still approve of Newsom’s handling of the economy.

And then there’s this: No Republican has been elected to statewide office since 2006, when Schwarzenegger won a second term as governor.

“The problem for Faulconer is that he’s too moderate for the modern Trump Republican Party, and he’s a Republican in a very blue state,” said Carl Luna, a political science professor at Mesa College. “I don’t see many options for him at the statewide level.”

But Jack Pitney, a professor of politics at Claremont McKenna College, pointed to Republican governors in Democratic-majority states — Massachusetts and Maryland — as proof that it can be done, even in these highly partisan times.

“If he was running for U.S. Senate, I’d say no way,” Pitney said. “But governors are different. And Faulconer has positioned himself well, so if Newsom continues to have troubles, he could have a shot.”

Faulconer positioning himself includes walking a line when it comes to President Donald Trump, who figures to remain a force among Republican loyalists even after he leaves the White House in January.

In June 2016, after Faulconer won re-election as mayor, he was asked what he thought about Trump, who was five months away from defeating Hillary Clinton for the presidency.

“I could never vote for Trump,” Faulconer said then. “His divisive rhetoric is unacceptable and I just could never support him.”

Except that he did, last month, when Trump lost to Joe Biden.

“For me, it was a clear choice on what we needed to do to rebound from COVID,” Faulconer said. “I voted for the president because I thought he was the best person to help restore and energize our economy.”

His support for Trump doesn’t surprise political analysts. “He has to say that, to appeal to the Republican base,” Pitney said. “Otherwise he’d be in trouble in the primary” for governor.

Faulconer said there are limits to his embrace of the president, though, and it stops short of supporting Trump’s ongoing efforts to overturn Biden’s victory.

“I’ve said very clearly, and I’ll say it again: The election is over, and it’s time to come together and move forward as a country.”

In late 2016, as potential candidates jockeyed to replace termed-out Jerry Brown as governor, a Field Poll showed Faulconer in second place, behind Newsom.

He said he wasn’t interested, that there was unfinished business for him in San Diego. And then the city got rocked by a Hepatitis A outbreak among the homeless that killed 20 people, sickened nearly 600 more, and muted any speculation about the mayor seeking higher office.

Faulconer, criticized for being slow to react, looks back now on that time as a turning point, “when we decided we had to change, and that what we needed was a bias toward action.”

Backed by funding from Padres executive Peter Seidler and others, the city put up tent shelters to reduce the number of people sleeping on sidewalks, and began, through police sweeps, pressuring the homeless to use them. They opened lots for people living in cars and expanded facilities where homeless people can store belongings.

The result has been a drop in the number of homeless people here, at least as measured by an annual, one-night, “point-in-time” count. The tally has limitations, and who to include in it has changed from year to year. But other big counties do a similar survey, and their numbers have gone up.

“San Diego is leading the way,” Faulconer said. It’s not hard to imagine homelessness being a centerpiece of any campaign he runs for governor — especially since polls show the public giving Newsom low marks on that front.

In exit interviews with the Union-Tribune and other local media last week, Faulconer also pointed to improvements in street repairs, police department staffing, parks, climate change, affordable housing and community planning as highlights of his tenure as mayor.

“My job was to leave our city a better place, and I think we’ve done that,” Faulconer said.

Left unmentioned were several controversial real estate deals, including the lease-to-purchase agreement for a downtown high rise at 101 Ash St. that has cost the city more than $23 million in rent for a building it can’t occupy because of asbestos and other issues.

Luna, the Mesa College professor, said Faulconer was a “mainstream, very cautious mayor” in the Susan Golding mold: “A moderate Republican with a no-frills, no-excitement approach.”

Luna also cited street repairs and homelessness issues as Faulconer achievements, but noted that “the big swings he took — on a new Chargers stadium and the convention center expansion — never came to fruition. And another big project, the Qualcomm stadium redevelopment in Mission Valley, went forward without him” — winning at the polls over a competing proposal the mayor endorsed.

Vladimir Kogan, an associate professor of political science at Ohio State University and co-author of the 2011 book “Paradise Plundered: Fiscal Crisis and Governance Failures in San Diego,” said Faulconer’s record is mixed.

He noted that one of the city’s long-running financial problems — a projected deficit in pension payments to retired city workers — remains unsolved, as does a backlog of deferred maintenance in city buildings at Balboa Park and elsewhere.

On the plus side, he pointed to changes in community plans, rental-unit preservation policies, and construction regulations aimed at boosting affordable housing, an ever-pressing concern in a county where the median resale price for a single-family home hit $715,000 in September.

“Those actions could make a difference in the city for a long time to come,” Kogan said.

Faulconer said there’s no timetable for a decision on whether to run for governor.

“I’m going to take some time off and enjoy the holidays with my family,” he said. He joked about a long list of “to do” items at their Point Loma home.

He’s been appointed as a visiting professor at Pepperdine University, in the School of Public Policy, where he will teach a graduate course called “Innovative Local Leadership.” His appointment begins in January.

One likely topic: Working across party lines.

He sees that as one of his strengths, getting things done as the rare Republican mayor of a major city whose voters are predominantly Democrats. And with a Democratic-majority City Council. He used his ability to speak Spanish to make in-roads with Hispanic voters who have traditionally favored Democrats.

“If you treat people with dignity and respect, even if you have differences, you can find common ground on a way forward,” he said.

A Faulconer run for governor would be a test of that proposition, according to Schnur, the college lecturer who served as communications director for Pete Wilson, another former San Diego mayor who went on to the top job in Sacramento.

“Faulconer would actually be testing two political questions,” Schnur said. “One is how far right have California Republicans moved, and the second is, how far left has California as a state moved? It’s entirely possible that in the Trump era, California Republicans have moved further right than he can go. It’s also possible that the state has moved so far left over the past decade that he would have a difficult time competing against a Democratic incumbent.

“But if both questions break for him? He has the potential to be a very formidable candidate.”

https://www.sandiegouniontribune.com/news/politics/story/2020-12-13/faulconer-eyes-next-chapter

 

California Leads the Planet in Super-Size Batteries

Yale e-360

California is currently the global leader in the effort to balance the intermittency of renewable energy in electric grids with high-capacity batteries. But the rest of the world is rapidly following suit. Recently announced plans range from a 409-megawatt system in South Florida, to a 320-megawatt plant near London, England, to a 200-megawatt facility in Lithuania and a 112-megawatt unit in Chile.

The twin smokestacks of the Moss Landing Power Plant tower over Monterey Bay. Visible for miles along this picturesque stretch of the Northern California coast, the 500-foot-tall pillars crown what was once California’s largest electric power station — a behemoth natural gas-fired generator.

As California steadily moves to decarbonize its economy, those stacks are idle and the plant is largely mothballed. Instead, the site is about to begin a new life as the world’s largest battery, storing excess energy when solar panels and wind farms are producing electricity and feeding it back into the grid when they’re not.

Inside a cavernous turbine building, a 300-megawatt lithium-ion battery is currently being readied for operation, with another 100-megawatt battery to come online in 2021. Together, they will be able to discharge enough electricity to power roughly 300,000 California homes for four hours during evenings, heatwaves, and other times when energy demand outstrips supply, according to project developer Vistra Energy.

These aren’t the only super-sized batteries that will soon be operating at the Moss Landing plant. An additional 182.5 megawatts produced by 256 Tesla megapack batteries are scheduled to begin feeding into California’s electric grid in mid-2021, with plans to eventually add enough capacity at the site to power every home in nearby San Francisco for six hours, according to the Bay Area utility, Pacific Gas & Electric, which will own and operate the system.

Elsewhere in California, a 250-megawatt storage project went online this year in San Diego, construction has begun on a 150-megawatt system near San Francisco, a 100-megawatt battery project is nearing completion in Long Beach, and a number of others are in various stages of development around the state.

California is currently the global leader in the deployment of high-capacity batteries.

Driven by steeply falling prices and technological progress that allows batteries to store ever-larger amounts of energy, grid-scale systems are seeing record growth in the U.S. and around the world. Many of the gains are spillovers from  the auto industry’s race to build smaller, cheaper, and more powerful lithium-ion batteries for electric cars. In the U.S., state clean energy mandates, along with tax incentives for storage systems that are paired with solar installations, are also playing an important role.

The mass deployment of storage could overcome one of the biggest obstacles to renewable energy — its cycling between oversupply when the sun shines or the wind blows, and shortage when the sun sets or the wind drops. By smoothing imbalances between supply and demand, proponents say, batteries can replace fossil fuel “peaker” plants that kick in for a few hours a day when energy demands soar. Experts say that widespread energy storage is key to expanding the reach of renewables and speeding the transition to a carbon-free power grid.

“Energy storage is actually the true bridge to a clean-energy future,” says Bernadette Del Chiaro, executive director of the California Solar and Storage Association.

https://e360.yale.edu/features/in-boost-for-renewables-grid-scale-battery-storage-is-on-the-rise