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IN THIS ISSUE – “What the Hell is Going On?” Gov. Newsom
- “Jaw-Dropping Price”: Single-Payer Healthcare Showdown in Sacramento
- Newsom Decries Massive LA Railroad Thefts…“Like A Third-World Country”
- Criminal Justice Emerges As 2022 Campaign Issue
- State Senate Leadership Shuffle
- California Spending Limit Poses Major Challenge for FY22-23; Newsom May Ask Voters to Adjust Gann Limit
- Intel Picks Ohio for $20-Billion Chip Complex, Expands in Arizona
- Water Deliveries Increased for Cities & Farms
- State Board Splits Bond Funds with Housing & Infrastructure
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 JAN. 21, 2022
“Jaw-Dropping Price”: Single-Payer Healthcare Showdown in Sacramento
CalMatters
Get ready for a showdown in Sacramento.
A key Assembly committee Thursday approved a controversial proposal to create a state-funded single-payer health care system — a move that could put many Democrats, and ultimately Gov. Gavin Newsom, in a tough bind ahead of this year’s elections.
The bill is now slated to go before the entire Assembly for a vote — and it must pass by Jan. 31 in order to stay alive. That possibility was foreclosed in 2017, the last time a single-payer proposal came up for consideration, when Assembly Speaker Anthony Rendon shelved the measure without a hearing, protecting Democrats from a politically sensitive vote on a progressive priority with no plan to pay for it.
But, as CalMatters political reporter Alexei Koseff notes, lawmakers who have gladly dodged the issue for five years will now have to take a position — and there’s a price tag attached.
A legislative analysis released Thursday estimated single-payer could cost California between $314 billion and $391 billion annually, financed by a series of tax hikes on businesses, workers and high earners. Single-payer supporters, however, say that sum is smaller than what Californians pay for private insurance.
Assemblymember Vince Fong (R-Bakersfield) said, “The jaw-dropping price of this singular program is more than the entire budget proposal of $286 billion proposed by the governor.”
The single-payer proposal is divided between two bills — one that would create a program called California Guaranteed Health Care for All and one that would fund it via increased taxes.
Lawmakers are scheduled to vote on the former — which was amended Thursday to clarify that its ability to actually go into effect is “contingent on a statute to create revenue mechanisms” and a report analyzing its fiscal viability.
But those contingencies don’t make the political calculus any easier — particularly for moderate Democrats caught between the party’s progressive base and an ardent opposition campaign led by the powerful California Chamber of Commerce and health insurers.
Nor does it make things easier for Newsom, who, despite campaigning on single-payer health care in 2018, said last week he hasn’t read Democrats’ proposal to create such a system. I
nstead, he touted the perks of his own plan, which would expand access to Medi-Cal, the state’s health care program for low-income Californians, to all eligible residents regardless of immigration status.
Newsom: “Ours is funded. Ours is budgeted.”
Newsom Decries Massive LA Railroad Thefts…”Like A Third-World Country”
Politico California Playbook & CalMatters
Newsom also ramped up his tough-on-crime rhetoric in a Thursday visit to the Union Pacific railroad in Los Angeles, which became nationally infamous last week after a viral tweet thread illuminated rampant theft along the tracks.
“I see what everybody’s seeing, asking myself: ‘What the hell is going on?’” Newsom said. “I mean, they look like a Third World country, these images.”
It was unusually harsh language for the governor, who moments later slammed “organized gangs of people” for stealing items before backtracking: “Forgive me for saying gangs … that’s not (intended as) a pejorative … they’re organized groups of folks that move from site to site.”
Newsom: “If I’m intense about this, it’s because it gets my blood boiling. … We need to arrest and hold people accountable that are a part of these organized efforts.”
Republicans responded quickly to the governor’s assertion that nobody “particularly cares about who to blame.” Both Newsom’s possible gubernatorial opponent, former San Diego Mayor Kevin Faulconer, and the Assembly Republican Caucus advised Newsom to “look in the mirror.”
Newsom repeatedly decried not just the scourge of organized retail theft operations but also how litter and crime affect people’s views.
The governor said Caltrans will help Union Pacific clean up the blighted tracks and the California Highway Patrol will continue working with local law enforcement to make arrests.
Amid the supply-chain congestion at local ports and elsewhere, trains sometimes sit idle, leaving them vulnerable to thieves in urban rail yards. In Lincoln Heights, a wave of thefts left debris strewn across Union Pacific tracks last week. Scavengers said they found items including Louis Vuitton bags and robot parts.
What’s being done to combat the thefts? UP employs its own police force. Budgetary issues, however, have meant as few as half a dozen officers patrol the region. The LAPD and other agencies have been helping, but “it’s like digging sand at the beach,” said one officer. “We are making an arrest and then we see a quarter of a mile down the track someone else taking merchandise.”
The company also said Thursday it’s dealing with significant staffing issues due to workers quarantining and getting the vaccine, impacting operating performance.
Has “The Pendulum Swung Too Far”? Criminal Justice Emerges As 2022 Campaign Issue
CalMatters commentary from columnist Dan Walters
Gov. Gavin Newsom is leading the unsubtle rhetorical shift from criminal justice reform —i.e. reducing punishment for those who transgress — to demanding crackdowns on criminals.
A week before Christmas, with retail stores seeing a wave of smash-and-grab robberies and cities reeling from record levels of homicide, Newsom unveiled what he called a “Real Public Safety Plan” that “focuses on new investments that will bolster local law enforcement response, ensure prosecutors hold perpetrators accountable and get guns and drugs off our streets.”
“Through robust new investments and ongoing coordination with local agencies, this plan will bolster our prevention, deterrence and enforcement efforts to aggressively curb crime, hold bad actors to account and protect Californians from the devastating gun violence epidemic,” Newsom, said.
Newsom sounded more like one of those Republican lock-‘em-up governors of the past, such as George Deukmejian or Pete Wilson, than a governor who has blocked executions of murderers, closed prisons and otherwise backed the criminal justice reform agenda.
Newsom is not the only born-again crimefighter, however.
A few days before his announcement, San Francisco Mayor London Breed did a two-step of her own. Clearly worried that the wave of store invasion robberies would discourage tourists and Christmas shoppers, Breed pledged to end “the reign of criminals who are destroying our city” by becoming “less tolerant” of what she called “bullsh*t.” Breed also declared a state of emergency in the city’s Tenderloin district due to surging street crime.
A similar change of attitude about crime is evident across San Francisco Bay in Oakland, which had embraced the “defund police” movement in response to the 2020 death of George Floyd with a Minneapolis policeman’s knee on his neck.
The Oakland City Council, at the urging of Mayor Libby Schaaf, voted to hire more police officers as the city tallied 134 homicides in 2021, the most in nearly two decades. Perennially, Oakland has one of the nation’s highest homicide rates
Schaaf applauded the vote, saying that residents “spoke up for a comprehensive approach to public safety — one that includes prevention, intervention, and addressing crime’s root causes, as well as an adequately staffed police department.”
The mayor of San Jose joined the anti-crime chorus after a local judge allowed two people charged with homicide to go free while awaiting trial — citing more lenient bail reform rules.
“I appreciate the purpose of bail reform,” Mayor Sam Liccardo said, “but releasing a homicide suspect without bail is outrageous. The pendulum has swung too far, and it’s our neighborhoods that endure the most crime that suffer as a result.”
The tough-on-crime rhetoric from these and other prominent politicians clearly reflects their concerns not only about the surge in crime but a surge of public anger about it, and the possibility of a political backlash.
Although Newsom’s re-election this year is not likely to be affected, there will be tests for other politicians, including Attorney General Rob Bonta, who was appointed by Newsom and will be seeking a full term.
Sacramento County’s district attorney, Anne Marie Schubert, who gained fame for prosecuting serial killer Joseph James DeAngelo, is challenging Bonta by tying him to criminal justice reforms she says have gone too far.
Bonta is allied politically and ideologically with the district attorneys of Los Angeles and San Francisco, George Gascón and Chesa Boudin, both of whom face potential recalls for adopting more lenient policies on prosecuting criminals.
Crime could be the sleeper issue of the year.
State Senate Leadership Shuffle
Associated Press
California Senate Majority Leader Bob Hertzberg, a former Assembly speaker, is moving to an “emeritus” role as he prepares to leave a state Legislature he first joined in 1996, officials said Wednesday.
Hertzberg, of Van Nuys, is termed out of the Legislature after this year. He announced Tuesday that he will compete, along with other lawmakers, for a seat on the Los Angeles County Board of Supervisors.
Sen. Mike McGuire will move from assistant majority leader to take Hertzberg’s place, Senate President pro Tempore Toni Atkins announced. Sen. Susan Talamantes Eggman of Stockton will become assistant majority leader.
All are Democrats in a Legislature dominated by that party.
Hertzberg has held the chamber’s second-highest post behind Atkins for three years.
He will continue to lead Senate negotiations on pending ballot measures and work on creating a formal training program for incoming senators, Atkins said.
Hertzberg was elected to the Senate in 2014. He previously was in the Assembly from 1996-2002, rising to speaker.
His son, Daniel Hertzberg, is campaigning to follow his father into the Senate.
McGuire, of Healdsburg, also was elected to the Senate in 2014, but isn’t termed out until 2026 because of a change in term limit rules. Atkins is termed out in 2024.
California Spending Limit Poses Major Challenge for FY22-23; Newsom May Ask Voters to Adjust Gann Limit
LA Times’ California Politics enewsletter
Just four months after he helped launch a tax revolt that changed the course of American history, Paul Gann decided it wasn’t enough.
Gann believed the success of Proposition 13, the iconic 1978 property tax cut he co-sponsored with Howard Jarvis, was proof that California voters were willing to do even more to constrain the size and scope of their government.
“The important thing is that something is done to put the brakes on the runaway spending which is sending us to the poorhouse,” he said during an event in Sacramento, reported by The Times on Jan. 17, 1979.
Nearly 43 years later, the spending limit that Gann convinced voters to add to the California Constitution may be more relevant than at any time since the 1980s. Gov. Gavin Newsom made it clear this week in his budget proposal that the constitutional provision poses a major governing challenge.
And he hinted that it might be time to ask voters to modernize the law.
Gann, who died in 1989, was more mild-mannered than the flamboyant Jarvis. But he was no less driven in the quest to shrink the size of California’s local and state governments. He called his spending limit, which qualified for a special statewide election in 1979, the “Spirit of 13.”
“If you want to retain the tax cut you got last year, you should support my initiative,” Gann said in an article in The Times on March 11, 1979.
It wasn’t hard to see why voters would like the “Gann limit,” as it’s still nicknamed today. It not only promised to limit growth in state and local government appropriations to changes in population and cost of living, but any cash above the threshold had to be refunded to taxpayers. More than 74% of voters said yes to the constitutional amendment that November.
But it had no real immediate effect, as high inflation and tepid growth in tax revenue left plenty of room for more government spending. That changed when tax revenues grew strongly in the late 1980s and in the fall of 1987, then-Gov. George Deukmejian agreed to a $1.1-billion taxpayer rebate — the first, and so far only, time that portion of Gann’s dream has been realized.
Things soon changed. In 1988, advocates for California schools convinced voters to require any future excess cash to be evenly split between taxpayers and education. An even bigger change came two years later.
In 1990, Deukmejian and legislators convinced voters to loosen the Gann limit while boosting the state’s gas tax to fund repairs of California’s roadways. Their ballot measure also exempted more categories of government spending from the spending cap’s calculation. And it stretched those calculations over two fiscal years, giving lawmakers more time to rework the budget in ways that avoid a tax refund.
The changes made Gann’s crowning achievement — formally known as the state appropriations limit — all but invisible at the state Capitol for most of the ensuing quarter-century, only briefly coming into view during the peak of California’s dot-com boom of the late 1990s.
But the recent combination of sharply rising revenues and stagnating population growth has brought new urgency to the Gann limit.
In the wake of voter-approved tax increases in 2012 and 2016, room for new spending under the cap’s provisions quickly disappeared. Then-Gov. Jerry Brown floated a variety of ideas, resulting in a 2017 budget that exempted billions of dollars in federal and court mandates from being counted. And last year, Newsom warned lawmakers about spillover revenues before ultimately agreeing to another short-term fix.
This week, the issue resurfaced. The budget Newsom presented to legislators on Monday projects the state is again on course to breach the Gann limit for what would be only the second time in its 42-year history.
The annual process involves three basic steps: adjusting the existing spending limit for inflation and population, tallying up the state’s primary tax revenues and then determining how much spending is exempt from the limit.
But the reality is a lot more complicated.
First, California’s tax revenues have been known to sharply fluctuate and it can take months (or years) to get an accurate calculation. Second, several important spending categories are excluded from the appropriations limit — including some payments made to local governments, debt services, court-ordered mandates and withdrawals from reserve funds.
Last year, lawmakers shoved more spending into the exempt category. That included more than $12 billion given to local governments to fund social services and public safety operations in the current fiscal year; some $18 billion of long-term costs on land and buildings; and more than $4 billion in revisions to the fiscal relationship between the state and school districts.
“These, effectively, reduce appropriations subject to the limit on a one-time basis,” the Legislative Analyst’s Office noted in a report last summer.
Perhaps the most artful workaround to the Gann limit was to send millions of Californians a “Golden State Stimulus” check, limiting eligibility to those with annual reported incomes of $75,000 or less. Sounds like a rebate, right? Wrong, because the cash disbursements were categorized as emergency payments in response to the COVID-19 pandemic.
Last summer’s budget solutions weren’t enough to really solve the problem. And this week, the governor’s team announced the state is now poised to breach the Gann limit by at least $2.6 billion, largely due to the magnitude of tax revenues collected in the fiscal year that ended some six months ago.
Keely Martin Bosler, the governor’s budget director, told reporters on Monday that Newsom has asked his staff to come up with a robust solution to the spending limit challenges by the time he proposes a revised budget in May. She also noted more of the state’s surplus could be socked away for lean years if not for the way Paul Gann’s constitutional amendment works.
If the state wants to add extra cash into its “rainy day” reserve fund, for example, the Gann limit defines that action as spending and counts it toward the two-year cap on appropriations — even though some categories of actual spending, such as infrastructure, often don’t count toward the cap.
“I know it sounds very strange,” Bosler said.
And Newsom hinted that it might be time to formally rewrite the constitutional provision and go back to voters to ask for changes to the rules rooted in the anti-tax activism of 1978 and 1979.
“I am open to reforms and discussions,” he said.
Changes won’t be easy. For starters, the 1979 law applies to local governments too, including school districts, and modifications could have a significant effect in communities a long way from Sacramento. Meanwhile, government skeptics would no doubt wonder whose special interests might be in mind when cryptic details are written — especially if there’s any possibility that the changes might block future tax rebates.
Voters will have the final say. And that’s probably how Gann would have wanted it.
“We the people do control our own destiny,” The Times reported him telling a Long Beach crowd in the fall of 1979, “if we can get off our butts and do something about it.”
Intel Picks Ohio for $20-Billion Chip Complex, Expands in Arizona
NY Times
Intel has selected Ohio for a new chip manufacturing complex that would cost at least $20 billion, ramping up an effort to increase U.S. production of computer chips as users grapple with a lingering shortage of the vital components.
Intel said Friday that the new site near Columbus would initially have two chip factories and would directly employ 3,000 people, while creating additional jobs in construction and at nearby businesses.
Patrick Gelsinger, who became Intel’s chief executive last year, has rapidly increased the company’s investments in manufacturing to help reduce U.S. reliance on foreign chip makers while lobbying Congress to pass incentives aimed at increasing domestic chip production. He has said that Intel might invest as much as $100 billion over a decade in its next U.S. manufacturing campus, linking the scope and speed of that expansion to expected federal grants if Congress approves a spending package known as the CHIPS Act.
The move is Intel’s first to a new state for manufacturing in more than 40 years. The company, based in Silicon Valley, has U.S. factories in Oregon, New Mexico and Arizona. Last March, Mr. Gelsinger chose an existing complex near Phoenix for a $20 billion expansion, which is now underway.
But Mr. Gelsinger had also asserted that a new location was needed to provide additional talent, water, electrical power and other resources for the complex process of making chips. Intel has combed the country for sites, prompting states to compete for one of the biggest economic development prizes in recent memory.
The site chosen for the new plant, in New Albany, a suburb east of Columbus, is in an area known for inexpensive land and housing. Nearby Ohio State University is a major source of graduates with engineering degrees whom Intel could recruit. Columbus is also centrally located for receiving supplies and for shipping finished chips.
Construction of the first two factories is expected to begin later this year with production to start by 2025, Intel said. The site is more than 1,000 acres — enough space to hold up to eight total factories and related operations, Intel said.
“Intel’s new facilities will be transformative for our state, creating thousands of good-paying jobs in Ohio manufacturing strategically vital semiconductors,” Mike DeWine, the governor of Ohio, said in a statement.
Ohio has not previously had a chip manufacturing presence. Moving to a state without existing chip factories presents challenges, such as obtaining permits and persuading suppliers of gases, chemicals and production machines to set up nearby offices, said Dan Hutcheson, an analyst at VLSI Research. On the other hand, having plants in more states provides lobbying leverage in Washington, he said.
Intel is not the only company expanding U.S. production. T.S.M.C. began construction last year on a $12 billion complex about 50 miles from Intel’s site near Phoenix. Samsung Electronics selected Taylor, Texas, for a $17 billion factory, with construction set to begin in 2022.
While the shortage was partly rooted in the pandemic, another long-term factor was the shifting of chip manufacturing to Asian countries that offer subsidies to companies that build factories there. The United States accounts for about 12 percent of global chip production, down from 37 percent in 1990. Europe’s share has declined to 9 percent from 40 percent over that period.
https://www.nytimes.com/2022/01/21/technology/intel-chip-factories-ohio.html
Water Deliveries Increased for Cities & Farms
Sacramento Bee
State officials said Thursday they will increase deliveries to farms and cities that belong to the State Water Project — a sign that this winter’s rain and snow has eased drought conditions in California.
The Department of Water Resources said farm and municipal water districts can expect to receive 15% of requested supplies this year from the state project, an elaborate network of dams and canals.
The announcement came weeks after the department announced an initial allocation of zero, saying it would only deliver enough water to meet “critical health and safety needs” to a handful of urban districts such as the Metropolitan Water District of Southern California. It marked the first time in the State Water Project’s history that the initial allocation was zero.
December’s storms made the difference. San Luis Reservoir in Merced County, which plays a key role in feeding the San Joaquin Valley and Southern California, has added 310,000 acre-feet of water since Dec. 1. An acre-foot is 326,000 gallons.
Still, the reservoir is at just 55% of average for mid-January.
Karla Nemeth, director of the Department of Water Resources, said “severe drought is not over. Dry conditions have already returned in January. Californians must continue to conserve as the state plans for a third dry year.”
Earlier this month the State Water Resources Control Board approved new regulations that could result in $500 fines for Californians who over-water their lawns, wash their cars without a shutoff nozzle or engage in other wasteful practices.
State officials have warned that if dry conditions persist this year, Gov. Gavin Newsom’s administration would likely impose broader mandatory conservation rules on urban Californians.
During the last drought, then-Gov. Jerry Brown ordered urban customers to reduce usage by 25%. The State Water Project delivered just a 5% allocation for all of 2021. The other big water provider in California, the federal government’s Central Valley Project, has yet to announce an initial allocation for this year.
https://www.sacbee.com/news/california/water-and-drought/article257563873.html#storylink=cpy
State Board Splits Bond Funds with Housing & Infrastructure
Bloomberg
A California agency voted to reserve some of the state’s limited private activity bonds to non-housing uses, providing an opportunity for projects such as a private-equity backed train to Las Vegas and a controversial desalination plant to apply for the coveted financing.
At its meeting, the California Debt Limit Allocation Committee in a split vote approved divvying up $4.3 billion of its bond capacity, an amount determined under population-based federal guidelines, mostly to projects that boost affordable housing.
Of that, $510.4 million will go toward qualifying non-housing projects such as the electric rail proposed by a company backed by Fortress Investment Group and Poseidon Water’s seawater facility in Huntington Beach that has drawn the ire of environmental groups.
Since late 2019, demand for the bonds has outstripped what the state can give out. This year, the committee anticipates requests totaling $13.2 billion, the bulk from housing developers.
Tony Sertich, representing State Controller Betty Yee on the three-member board, supported giving all of the state’s allocation to housing since such projects draw additional federal subsidies. Sertich was the only vote against the measure reserving bonds for non-housing uses.
Many people, particularly advocates against the development of the desalination plant, also pressed the committee for the same, citing the state’s deepening homelessness and affordability crises. Housing developers are anticipated to need about $9 billion of bonds this year, far more than what’s available.
Still, Gayle Miller, representing Governor Gavin Newsom, said California has other needs and that no other governor has invested more in housing. She also noted that rail projects when awarded bonds draw significant federal leverage as well.
“Without infrastructure, we can’t build more housing,” said Treasurer Fiona Ma, chair of the board. She had initially proposed giving $600 million of the state’s allotment to non-housing but agreed to the Newsom administration’s wish to carve out $89.6 million from that amount to go to a housing program for veterans.
The committee had previously awarded 15% of its annual bond allotment to the Las Vegas train project from developer Brightline Holdings. But the company failed to entice investors for its September 2020 debt offering.
It then pulled an application last year with the intention of reapplying in 2022 while it worked to establish a California station closer to Los Angeles, which would make the project more palatable to potential investors.
Meanwhile, Poseidon Water, which already operates a desalination plant in Carlsbad, is working on another facility to produce 50 million gallons of water daily. It had previously said it would apply for $1.1 billion of the state’s private activity bonds.