For Clients of The Gualco Group, Inc.
IN THIS ISSUE – “Gov. Newsom believes there are a lot more societal problems that government should be in the middle of”
Keely Bosler, former Director of Finance for Governors Newsom & Brown
- State Budget Tug-O-War Begins – Progressive Group Urges More Social Services, Fewer “Corporate Tax Breaks”
- LA Fire Recovery Gets $2.5 Billion Emergency Aid; Statewide Wildland Management Funds Debated
- Newsom Expanded State Government + His Office
- Governor Passes Spotlight to Attorney General for Trump Resistance
- “People Over Fish”: President Re-Instates His California Water Rules
To keep our valued clients informed on California political, policy and program issues and trends, The Gualco Group’s trusted advocates daily gather legislative and regulatory insights from dozens of media and official sources for our exclusive Capitol News & Notes (CN&N).
FOR THE WEEK ENDING JAN. 24, 2025
State Budget Tug-O-War Begins – Progressive Group Urges More Social Services, Fewer “Corporate Tax Breaks”
Sacramento Bee
Gov. Gavin Newsom’s proposed budget for the upcoming fiscal year does not go far enough to support programs that would help people afford the increasing cost of living at a time when incoming president Donald Trump is expected to slash federal funding for California, according to experts at a liberal-leaning budget watchdog group.
The governor unveiled a $322 billion balanced budget plan last week that included a small $363 million surplus and a projected $16.5 billion boost in revenue for the fiscal year that begins July 1 and ends June 30, 2026.
It’s far from the previous year, when Newsom had to work with lawmakers to fill a $47 billion deficit. This year’s plan also draws $7 billion from the rainy day fund, provoking criticism from Republicans worried about looming deficits in coming years.
While Newsom’s draft budget funds some signature programs like transitional kindergarten, a state-funded transition program for 4-year-olds. It does not include plans for any “significant revenue raisers” that would allow for more investments in programs like affordable housing and health care that “would help Californians afford the basics,” according to Kayla Kitson, a tax expert at the California Budget and Policy Center.
Center experts gave a presentation on Newsom’s proposed budget, which is a draft of the spending plan the Legislature must pass by June 15. Kitson suggested that one way for the state to generate more revenue was to end programs that grant tax breaks to corporations and wealthy people.
The incoming Trump administration is expected to push to extend its 2017 tax cut law.
“We have previously, many times, highlighted how the state loses tens of billions of dollars each year to tax breaks that are mostly not reauthorized each year through the budget process,” Kitson said. “So policymakers should really take a hard look at these and eliminate or reform inequitable and ineffective breaks.”
She pointed towards corporate tax structure as one example. “There are lots of ways that corporations are able to avoid their state taxes, and that includes things like moving money offshore to avoid taxes,” Kitson said.
Another target was Newsom’s plan to double the amount available for the state film and television tax credit to $750 million, which she said would not show any immediate return on investment until years after production has wrapped.
“The governor has proposed a balanced budget that emphasizes fiscal sustainability and a lean and efficient government,” said Newsom spokesperson Tara Gallegos.
The ongoing wildfires, estimated to be the most destructive in U.S. history, will also cost the state, which has committed to delaying tax filings for impacted victims.
Trump and some congressional Republicans said they seek to delay federal aid for California or condition it, prompting Newsom to expand the special legislative session to include funding for wildfire response.
The overall budget does include $6.4 billion for more mental health housing and treatment beds via Prop. 1, which voters approved last March, but did not include any new investments in affordable housing or more money for low-income housing credits. Social safety net expert Monica Davalos called it “alarming” at a time when such housing programs face funding cliffs and Republicans signal a desire to curtail the federal Affordable Care Act.
Newsom’s proposed spending plan maintains funding to clear homeless encampments and move people into shelters, but does not include new funds for the Homeless Housing, Assistance and Prevention program, which grants homelessness dollars to local governments.
He previously withheld $1 billion in HHAP funding after he said cities were not being aggressive enough in tackling homelessness, but eventually relented. The governor’s spending plan reflects that shift towards accountability and administrative reform, Davalos said, through its creation of a Homelessness and Housing Agency that will streamline programs.
The administration submitted a reorganization plan to the Little Hoover Commission, an independent state oversight agency, and will publish details later this spring.
“A lot of this funding that localities have gotten is, you know, a good part of the reason why our systems are serving more Californians than ever before,” Davalos said. “But the problem still lies that more Californians are falling into homelessness today than can be housed by our systems.”
Article ($):
https://www.sacbee.com/news/politics-government/capitol-alert/article298726718.html#storylink=cpy
LA Fire Recovery Gets $2.5 Billion Emergency Aid; Statewide Wildland Management Funds Debated
CalMatters
As recovery efforts in the Palisades and Eaton fires begin, California’s Legislature passed a set of bills Thursday to expedite $2.5 billion in “bridge funding” intended to help state and local agencies respond to relief efforts.
The bills passed unanimously in both the Assembly and the Senate as part of an extended special session called by Gov. Gavin Newsom in response to the Los Angeles area wildfires. Newsom signed the bills at a press conference in Pasadena Thursday afternoon, releasing the funds immediately.
“This is about distilling a sense of hopefulness,” he said.
The money will come from the state’s reserve fund dedicated to economic uncertainties, which had about $8.3 billion as of Jan. 10, according to the H.D. Palmer, spokesperson for California’s Department of Finance.
The bills are part of “a much larger conversation that we’re going to need to have about recovery and rebuilding in these devastated communities, and also about how we protect communities across the state of California,” said Jesse Gabriel, chair of the Assembly’s budget committee and one of a few lawmakers who live in neighborhoods that were under evacuated. “This is the first of many steps that we will take on a long journey as we progress through this conversation.”
The two fires — the largest in the recent spate in Southern California, totaling nearly 40,000 acres — killed 27 people, destroyed 12,000 structures and displaced tens of thousands of people. The early estimate of the total damage is more than $250 billion, according to AccuWeather.
The funding is in addition to other state and federal government relief efforts, such as extending tax filing deadlines and placing a moratorium on evictions.
Senate President Pro Tem Mike McGuire said at the afternoon press conference that he expects the Legislature will pass more bills for relief money within the next few weeks.
Former President Joe Biden said on Jan. 12 that the federal government would reimburse 100% of state funds that are spent within 180 days. State officials expect the $2.5 billion will be reimbursed, though President Donald Trump repeated threats Wednesday to withhold federal aid.
The funding package includes $2.5 billion for use by state and local agencies for a range of recovery efforts: shelters for those evacuated, hazardous waste removal, air quality testing and to fund safety tests for post-fire hazards, such as mudslides.
The bills also include $4 million for the Department of Housing and Community Development to help local governments expedite building permits, $1 million to school districts to facilitate rebuilding, and an additional $1 million to support construction of schools and other public buildings.
Lawmakers stressed during Wednesday’s hearings that the state must require detailed tracking of how the money is spent, and that those most in need should be prioritized, including the historic Black community in Altadena.
Heath Flora, a Republican from Ripon and vice chair of the budget committee, recommended that the Legislature reintroduce two wildfire prevention and emergency management bills by Democratic Assemblymembers that Newsom previously vetoed: one would have fully staffed the state fire department year-round versus in the nine-month fire season, and another would have expedited permits for vegetation management.
Lawmakers have proposed a number of other wildfire-related bills this session.
“Like our chair said, we have so much further to go,” said Flora. “And these are not issues that came up just in the last 10 days — we’ve known these issues literally since 2004. It’s time that we do some things, and I think right now we have the motivation and the ability to do so.”
Newsom Expanded State Government + His Office
CalMatters
In his six years in the governor’s office, Newsom has steadily guided California’s government to expand its mission and scope: launching flashy initiatives, creating new departments and offering more services to more people, even during periods of deficit.
The number of employees per capita — a measurement of the size of state government compared to the population it serves — has reached its highest level in more than five decades of tracking by the state Finance Department.
Newsom’s own office has more than doubled in size. At the end of 2024, the governor’s office employed 381 people, according to payroll data provided by the State Controller’s Office, compared to 150 at the end of 2018, before Newsom was sworn in.
“Gov. Newsom believes there are a lot more societal problems that government should be in the middle of,” Keely Bosler, who served as finance director during his first term, told CalMatters.
Marybel Batjer, who was Newsom’s first government operations secretary and launched the Office of Data and Innovation, said he has expanded state government not because he is an “old dog Democrat who thinks government is good,” but because he wants to help people.
Yet embracing government efficiency, at least rhetorically, could be a boon to Newsom, who has sought ways to moderate his image after a tough November election for Democrats in which the party lost ground with working-class voters.
Ever eager to be on the vanguard of the Democratic Party, especially as he reportedly mulls a future campaign for president, Newsom embarked on a tour to promote jobs and economic development in communities that voted for Trump. His budget preview in Turlock was the latest stop.
Newsom’s early tenure as governor coincided with surging tax revenues and then federal aid from the COVID pandemic, which ballooned the state budget by tens of billions of dollars and underwrote an ambitious and wide-ranging agenda. Total budget expenditures are nearly $100 billion more this fiscal year than before Newsom took office.
Some of that money has gone to one-time projects or to extending existing services, whether because of ideology (making undocumented immigrants eligible for health care and free transitional kindergarten available to all children) or necessity (hiring thousands more state firefighters).
But Newsom, known for his “big, hairy audacious goals” and love of making history, has also consistently added programs and positions with entirely new objectives for state government, swelling its ranks as he transformed its role in Californians’ lives.
The impulse was visible on Newsom’s very first day in January 2019, when shortly after being sworn in, he established the position of California surgeon general to address the root causes of health conditions, alongside an executive order that would allow the state to more broadly negotiate with pharmaceutical companies to lower the costs of prescription drugs.
In his first budget a few months later, Newsom created his 50-person Office of Data and Innovation (then known as the Office of Digital Innovation) and spun off a Department of Youth and Community Restoration to focus on supporting young people in the corrections system.
New government infrastructure has followed regularly in the years since. These include:
- A 106-person Wildfire Safety Division in the California Public Utilities Commission, which grew into the Office of Energy Infrastructure Safety at the California Natural Resources Agency, with nearly twice as many funded positions.
- The Department of Finance Protection and Innovation, a reboot of a business oversight department, with dozens of new employees in divisions to combat consumer financial abuse and study emergency financial services technologies.
- A 13-person office of equity and a 14-person disaster cost tracking unit within the Governor’s Office of Emergency Services.
- The Office of Community Partnerships and Strategic Communications, with more than two dozen staff to manage community engagement and public awareness campaigns.
- California’s first chief equity officer, tasked with developing a statewide equity and inclusion framework.
Additional expansions represent major pieces of Newsom’s platform, including his recent battle against the oil industry. In 2023, he strong-armed the Legislature to create the Division of Petroleum Market Oversight within the California Energy Commission, a watchdog to investigate alleged price gouging.
Though he has not followed through on his campaign promise to set up a single-payer system in California, the governor in 2022 did launch the Office of Health Care Affordability, a regulator that aims to slow the rising cost of care. The California Volunteers office has quintupled in size under Newsom to manage his new initiatives to engage young people in community service and climate action.
Even in his latest budget plan unveiled last week, Newsom proposed creating two new state agencies, to oversee housing and homelessness programs and consumer protection programs. Additional details are not yet available, though state officials said these would largely be a reorganization of departments that already exist.
It’s difficult to get a comprehensive picture of how Newsom’s priorities have enlarged state government.
His Finance Department was unable to answer questions about whether several of his biggest and most expensive initiatives added new positions to the state payroll, including CalAIM, a first-of-its-kind overhaul of medical care for low-income patients; Homekey, which funds the conversion of hotels and motels into homeless housing; the trash pickup program Clean California; and CARE Court, a system to push people with mental illness off the streets and into treatment.
But the overall trend is up. There are 436,435 government positions in the state budget that Newsom just proposed, including at the public university systems, according to the Finance Department, or about 11.1 state employees per 1,000 Californians. That number has increased from 9.5 before Newsom took office — and is a record high going back to at least 1970, when the Finance Department’s tracking begins.
His office did not respond to a question about how efficiency fits into Newsom’s governing philosophy. But a spokesperson provided a list of initiatives from the Office of Data and Innovation “that are building efficiencies across state departments,” including new tools to forecast community water systems at risk of running dry, evaluate housing projects for streamlined approval, and enhance public participation in the permitting process for toxic substance storage.
Now the trajectory appears to be shifting course. With growing budget deficits projected in the coming years, Newsom has been forced to tighten California’s belt.
His administration has identified about 6,500 vacant positions that it plans to eliminate and imposed a nearly 8% cut to state operations, which it projects will collectively save almost $5 billion.
In 2004, then-Gov. Arnold Schwarzenegger, a Republican, commissioned the California Performance Review to overhaul state bureaucracy. The 2,500-page report recommended more than 1,000 steps to shrink the state government and save billions of dollars annually, including consolidating departments and agencies, eliminating 118 boards and commissions, and cutting 12,000 jobs.
Eight years later, Democratic Gov. Jerry Brown did push through a reorganization and consolidation plan to “make government more efficient,” aided by a political environment in which an economic recession and steep budget deficits were the prevailing concern. It included eliminating 20 departments, offices and boards, merging the state’s personnel agencies and slashing funding for employee travel and cell phones.
MORE:
Governor Passes Spotlight to Attorney General for Trump Resistance
Politico
President Donald Trump’s hardline immigration actions have quickly made Rob Bonta the state’s chief border antagonist.
The California attorney general was a state legislator without a megaphone during Trump’s first term and then a cooperative Biden ally early in his tenure atop the state Department of Justice. But when he tried to lead on suing oil companies and protecting abortion rights, he was vastly overshadowed by Gov. Gavin Newsom.
Now Trump’s promises of mass deportations have rocketed Bonta, himself an immigrant from the Philippines who Newsom initially appointed to the job, to a new level of prominence.
Last week, Bonta warned local law enforcement against cooperating with federal authorities when prohibited by state law. He vowed to defend undocumented immigrants in front of the Golden Gate Bridge. And on Tuesday, he sued Trump over his executive order to end birthright citizenship.
The Bay Area Democrat is poised to become even more central to the immigration fight as legislators prepare to send his office $25 million to fight the White House in court and as Trump’s team prepares an onslaught of executive orders and enforcement actions.
Newsom has not been nearly as outspoken on Trump’s immigration plans — clearing space for Bonta to lead the debate.
More than a dozen other attorneys general joined the birthright citizenship suit. Illinois Attorney General Kwame Raoul, whose mother emigrated from Haiti to Chicago, has spoken about his personal connection to the issue while criticizing Trump.
“He’ll just be one of many to do this, and I’m not too sure California is the right place to lead the fight politically,” Mike Madrid, an anti-Trump Republican political consultant who writes about immigration politics, said of Bonta. The AG’s positions are “notable and virtuous and probably representative of the people of California, so it’s the right place to be. But in terms of building a national political platform, I don’t see that.”
Bonta’s moment in the spotlight comes just as he must decide whether to run to succeed Newsom in a packed 2026 field or vie for what would likely be an easy reelection.
He has already had senior aides depart from his political orbit. An entrance into the governor’s race by former Rep. Katie Porter would almost certainly make that contest less appealing. And if former Vice President Kamala Harris decides to run for governor, it would effectively close the door for Bonta and many other Democrats, including Porter.
In either case, Trump’s presidency is an opportune moment for California’s top cop to boost his name recognition in the state and beyond it.
Sparring with Trump also elevated the stature of Bonta’s predecessor, Xavier Becerra, a Jerry Brown appointee who sued the Trump administration more than 120 times as head of the state’s DOJ. Becerra opted to become Biden’s U.S. Health and Human Services secretary rather than remain in the AG role and pursue higher office. He, too, was considering a 2026 run for governor.
Bonta’s new role is sure to bolster his profile in California, but there’s formidable competition for national relevance.
MORE:
https://www.politico.com/news/2025/01/22/bonta-trump-immigration-california-00199881
“People Over Fish”: President Re-Instates His California Water Rules
CalMatters
President Donald Trump lost no time in advancing his agenda for California’s water supply with a “presidential action” intended to send more Delta water south to millions of Southern Californians and San Joaquin Valley farms.
The memo calls on the Secretary of Commerce and the Secretary of the Interior to develop a new plan within 90 days “to route more water from the Sacramento-San Joaquin Delta to other parts of the state for use by the people there who desperately need a reliable water supply.”
Entitled “Putting People Over Fish: Stopping Radical Environmentalism to Provide Water to Southern California,” Trump’s order calls for reinstating 2019 regulations drafted by his first administration.
At stake are the rules that guide operation of the federal Central Valley Project and State Water Project, the two systems that deliver water from Northern California rivers to San Joaquin Valley farmers, Southern California residents and other water users in the southern half of the state.
Because the two systems harm salmon and other protected fish, the regulations have been highly contentious and debated among federal and state officials, environmentalists, farm groups, tribes and scientists for decades.
Trump apparently is asking his agencies to override the latest version, years in the making, that the Biden administration, with the support of Gov. Gavin Newsom’s administration, announced in December.
Karla Nemeth, director of the state Department of Water Resources, said returning to the earlier Trump rules “has the potential to harm Central Valley farms and Southern California communities that depend upon water delivered from the Delta, and it will do nothing to improve current water supplies in the Los Angeles basin.”
She said the rules from the Biden and Newsom administrations are the product of a three-year, labor-intensive process “to balance the needs of tens of millions of Californians, businesses, and agriculture while protecting the environment.”
The Biden-Newsom plan is supported by urban water districts and many Central Valley agriculture groups, including the Metropolitan Water District of Southern California, the State Water Contractors and the Sacramento River Settlement Contractors, which represents farmers.
Jennifer Pierre, general manager of the State Water Contractors — which relays Delta water to 27 million Californians and 750,000 acres of farmland — pointed out that longfin smelt was federally listed as an endangered species in 2024. This, she said, would complicate any potential efforts to restore Trump’s 2019 water management rules, known as biological opinions.
“Can you go back to the 2019 rules?” she said. “I’m not sure. We’ve got a new species listed.”
However, the Westlands Water District — representing a large San Joaquin Valley farming region in parts of Kings and Fresno counties — welcomed the President’s message.
“We are grateful to see that the water supply issues facing California are a priority of the Trump Administration,” Allison Febbo, the district’s general manager, said in a statement. “We look forward to working with the State and incoming Federal administrations to find a path forward that benefits all.”
Trump in his memo recounts how the Newsom administration, attempting to protect endangered fish, “filed a lawsuit to stop my Administration from implementing improvements to California’s water infrastructure.” He wrote that his plan “would have allowed enormous amounts of water to flow from the snow melt and rainwater in rivers in Northern California to beneficial use in the Central Valley and Southern California. … Today, this enormous water supply flows wastefully into the Pacific Ocean.”
But the rules that Biden and Newsom agreed upon in December would actually send more water to Southern California than the Trump rules that they replaced, according to an environmental analysis of the plan.
Some farmers say they want a fair allocation that gives water to them as well as the environment.
“There’s no question there needs to be a balance for both sides,” said Sarah Woolf, a farmer in Fresno and Madera counties, where farmers have long voiced dissatisfaction with rules limiting water deliveries. “We continue to have a real supply bottleneck in the Delta that hasn’t benefited species or the water users and just causes gridlock in delivering water.”
MORE: https://calmatters.org/environment/water/2025/01/trump-california-water-delta-rules/