For Clients of The Gualco Group, Inc.
IN THIS ISSUE – “These are astonishing numbers. Like video game level numbers.”
Mike Madrid, political consultant & lecturer, on Latino voter economic worries
- State Departments Fail to Follow Accounting Standards; Auditor Finds Financial Misstatements at EDD, MediCal, Others
- California Unemployment 2nd Highest in US; State Revenue Below Forecast
- Latino Voters “Extremely Concerned” About Cost of Living: New Poll
- 2025 Begins with 1,000 New Laws
- Snowpack Levels Above Average, First Survey Finds
To keep our valued clients informed on California political, policy and program issues and trends, The Gualco Group’s Capitol News & Notes (CN&N) gathers legislative and regulatory insights from dozens of media and official sources for the past week.
FOR THE WEEK ENDING JAN. 3, 2025
State Departments Fail to Follow Accounting Standards;
Auditor Finds Financial Misstatements at EDD, MediCal, Others
Sacramento Bee
The California State Auditor is urging departments to improve financial responsibility after a recent report found several state agencies failed to follow generally accepted accounting principles.
Auditors documented 14 deficiencies in which departments failed to follow, or could not provide evidence they followed, best practices set by the Governmental Accounting Standards Board, a private organization that provides accounting guidance for state and local governments.
The auditors found material weaknesses that could lead to inaccuracy in the state’s financial reporting and less serious, but still notable, accounting issues that they said warrant attention from lawmakers.
Some of those issues, the audit warned, could cause the state to report incorrect information in its Annual Comprehensive Financial Reports, documents that provide an overview of the state’s financial health.
It’s important for the state’s financial reports have minimal errors, the recently published ACFR said, because the documents are used as part of the budgeting process.
The report focused on the financial activities of state departments for fiscal year 2022-23, which ended June 2023. One source of financial misstatements was the Employment Development Department’s inaccurate estimate of how much California paid in ineligible unemployment claims.
The unemployment agency said it overpaid $46 billion in unemployment claims. During the COVID-19 pandemic, illegitimate unemployment claims in California exploded. The state overpaid billions in unemployment claims, which California may never recover.
Auditors found that EDD did not verify eligibility for a significant number of claims, some of which were missing required documentation, while others had conflicting information that the department failed to address.
The state auditors said EDD couldn’t provide “sufficient and appropriate audit evidence” of how much federally funding unemployment benefits were distributed, which meant the auditors couldn’t guarantee the department’s financial reports were accurate.
The auditor recommended the unemployment agency should create a multi-level review system to estimate the amount of ineligible payments made by the state.
The report also noted inconsistencies between statements made by EDD and the U.S. Department of Labor as to whether the federal government will recognize the department’s outstanding liability related to the ineligible payments.
EDD said it is waiting on clarification from the federal Labor Department over this issue. The EDD agreed with the auditor’s recommendation that the department could improve review processes to further prevent ineligible payments.
The EDD declined to comment on the report.
Other deficiencies outlined in the audit included financial misstatements by the Department of Health Care Services. The department that oversees the state’s Medi-Cal program overstated expenses from California’s General Fund by $6.5 billion, according to the audit; simultaneously, DHCS understated the amount of federal dollars the department received and paid by $5.4 billion.
Auditors reported that these inconsistencies partially stemmed from DHCS misstating the amount of federal dollars needed to provide healthcare services for immigrant populations who received limited benefits, such as pregnancy and emergency medical care.
“These errors occurred mainly because of the lack of detailed, GAAP-compliant accrual methodologies and insufficient communication between program and accounting staff,” the report said. DHCS corrected the General Fund and federal fund accruals after the auditor informed the department, the audit said.
Another financial reporting misstep identified by the State Auditor was related to federal reimbursements for disaster response work done by the California Department of Forestry and Fire Protection.
When CalFire performs certain disaster recovery work, it is eligible for reimbursement from the Federal Emergency Management Agency.
In fiscal year 2022-23, CalFire and the California Governor’s Office of Emergency Services asked for a $912 million reimbursement from the federal government. “However, when we initially requested documentation to support the restatement, each department informed us that it was the other department’s responsibility to justify the amounts recorded,” the auditor’s report read.
In response, both departments agreed to continue creating guidelines that outline the responsibilities of CalFire and CalOES to submit accurate financial statements.
Article ($):
https://www.sacbee.com/news/politics-government/the-state-worker/article297499583.html#storylink=cpy
Report:
https://www.auditor.ca.gov/wp-content/uploads/2024/12/2023-001.1-Report.pdf
California Unemployment 2nd Highest in US; State Revenue Below Forecast
Dept. of Finance & Legislative Analyst’s Office
California’s unemployment rate in November was 5.4%, the nation’s second highest state figure. Only Nevada, at 5.7%, was higher, according to the federal Bureau of Labor Statistics. The national rate was 4.2%.
The California rate matched October’s number, but was higher than the 5.1% of November 2023, according to the state Employment Development Department. Five of the state’s 11 industry sectors saw gains last month, led by education and health services. Healthcare-related industry groups were a key reason for the 13,100-person job increase in this category. Also up was the trade, transportation and utilities category. Much of the increase came because of jobs in retail, courier and messengers during the holiday season. The biggest job loss was in the financial activities area, notably real estate and rental and leasing, and some financial investment-related areas.
Preliminary General Fund agency cash receipts were $1 billion, or 7.9 percent, below the Budget Act forecast for November. This shortfall was the result of timing factors affecting the personal income tax and sales tax forecasts, which were $593 million and $488 million lower than expected, respectively.
Additionally, corporation tax receipts were $186 million below forecast due to higher refunds.
Since the forecast was finalized in April, preliminary General Fund agency cash receipts were cumulatively $7.5 billion above projections, including an overage of $3.2 billion in cash collected during the 2023-24 fiscal year.
Personal income tax cash receipts were $593 million, or 8.1 percent, below forecast in November but remained $4.9 billion, or 6.4 percent, above forecast cumulatively since April.
The shortfall was due to a $856 million shortfall in withholding that was partially offset by lower-than-expected refunds. Withholding receipts were impacted by timing issues that shifted some receipts expected in November into October and December.
Year-to-date withholding growth for the first 11 months of the calendar year was 7.6 percent, higher than the 6.5-percent growth projected for the entire year.
Corporation tax cash receipts were $186 million, or 62 percent, below forecast in November due to higher refunds of $345 million, which more than offset the overage of $159 million from payments.
The higher refunds were related to earlier tax years and were the result of audits and settlements. Cumulatively since April, refunds exceeded the forecast by $755 million. Other payments exceeded the forecast by $121 million in November and were $1.1 billion above forecast cumulatively since April. Estimated payments exceeded the forecast by $23 million in November and were $1.6 billion above forecast cumulatively since April. Corporation tax receipts were $2 billion, or 10.4 percent, above forecast cumulatively since April.
Preliminary sales and use tax receipts were $488 million, or 12 percent, below forecast in November and $708 million, or 3 percent, below forecast cumulatively since April. However, roughly $600 million of this cumulative shortfall is due to timing, as a higher-than-expected portion of sales tax payments shifted from November to December due to the Thanksgiving holiday falling at the end of the month.
Year-to-date through October 2024, California has permitted nearly 100,000 housing units (SAAR), 3.5 percent lower than September 2024 and down 9.4 percent from October 2023. Annualized total permits through October consisted of 59,000 single-family units and 41,000 multi-family units, up 7.4 percent and down 26.3 percent from the previous year, respectively.
The statewide median sale price of existing single-family homes decreased to $852,880 in November 2024, down 4 percent from October 2024, but up 3.8 percent from $821,710 in November 2023. Sales of existing single-family homes in California were 267,800 (SAAR) in November 2024, up 1.1 percent from October 2024, and up 19.5 percent from November 2023.
Dept. of Finance monthly report:
https://dof.ca.gov/wp-content/uploads/sites/352/2024/12/Finance-Bulletin-December-2024.pdf
Legislative Analyst’s Office job market analysis:
Latino Voters “Extremely Concerned” About Cost of Living: New Poll
Sacramento Bee
California GOP consultant Mike Madrid and polling firm David Binder Research teamed up to offer a post-election glimpse at what Latino voters are thinking – after the 2024 election in which they turned in a conservative direction.
Binder polled for President Joe Biden late in his campaign, and also did polling for Vice President Kamala Harris.
Madrid, who co-founded the anti-Trump Lincoln Project and who is widely sought-after for his understanding of Latino voter sentiment, shared the findings of the poll on his Substack blog.
“This poll was for California Latinos only because the rightward shift has now hit California’s shores and the changing Democratic coalition that will result will be felt most pronounced in the Golden State,” Madrid wrote.
Madrid and Binder surveyed 600 Latino California voters, in English and Spanish, by phone and online, between Nov. 18-21.
The poll has a margin of error of 4%. Affordability was a top issue for California Latino voters — they were either extremely or very concerned about the price of housing (86%), groceries (87%), gas (75%), electricity and utilities (80%); another 74% were extremely or very concerned about high taxes in California.
“‘Affordability’ and the cost of living were by far and away the most intense priority for Latinos.
The condescending attacks from the online Left about voters who made decisions in the presidential race on ‘the price of eggs’ illustrates just how out of touch Democratic influencers are with working class voters. They should continue to judge at their own peril,” Madrid wrote.
Nearly everyone surveyed (90%) said they were extremely or very concerned about the price of everything. That’s more than homelessness (86%), immigration (71%), jobs (81%), crime (87%) or climate change (63%).
“These are astonishing numbers. Like video game level numbers,” Madrid wrote. This poll comes at a time when many Democrats are doing some soul-searching on the best path forward in 2026 and 2028. You can read the full results here.
Article ($):
https://www.sacbee.com/news/politics-government/capitol-alert/article297504458.html#storylink=cpy
Access to Madrid’s Substack; poll and commentary ($):
https://substack.com/@madridmike/note/c-82813585
2025 Begins with 1,000 New Laws
CalMatters
Lawmakers passed about 1,200 bills in 2024 and Gov. Gavin Newsom vetoed 200 of those. Most of these incoming laws are technical, fix previous laws or are narrow in scope.
But there are some that affect lots of Californians, or are just plain interesting.
There are the consumer finance protection laws, numerous education-related laws — including one to expand alcohol education that was written by a former lawmaker arrested for a DUI — as well as a law banning local voter ID rules and another granting a few more days to fight an eviction. Paris Hilton makes a cameo, too.
CalMatters reporters describe some of the noteworthy laws taking effect Jan. 1. Dive in to stay informed about the changes that matter to you — and keep coming back as we add more stories about new laws before 2024 rides off into the California sunset.
MORE:
https://calmatters.org/politics/2024/12/california-new-laws-2025/
Snowpack Levels Above Average, First Survey Finds
Sacramento Bee
California’s first snowpack measurement of 2025 on Thursday showed promising figures for the water year, complemented by high storage levels in some of the state’s most critical reservoirs.
However, uneven snow distribution across the Sierra Nevada highlights lingering concerns as the state moves into its peak precipitation season.
The Department of Water Resources reported that statewide snow water equivalent — considered a key measure of the snowpack’s water content — is at 110% of the average for this time of year.
The findings collected from data sensors across the Sierra reinforced what was observed by the Department of Water Resources’ first survey of the water year at Phillips Station in El Dorado County.
Four analysts trudged across a snowy field to see just how much snow had collected since Oct. 1 — 24 inches of snow and 9 inches of water content, said Andy Reising, manager of snow surveys for DWR.
He said Tuesday’s measurement was 91% of average for the station, which has been used by the state to manually analyze its water storage since 1941. “That result is 91% of average for this date,” he said.
“And 37% of an April 1 average. And we use April 1 because that’s typically when our snow pack peaks about that beginning of April, end of March, time frame. And so we reference that and use that in our forecasting.
Statewide, the snowpack’s snow water equivalent stands at 10.7 inches, 39% of the average state officials are expecting by April 1, when the snowpack typically reaches its peak and serves as a vital water source during the state’s dry summer months.
Reising said the precipitation the state has received to date was 115% of average, with stronger figures in the northern portions of California’s watershed.
The northern Sierra and Trinity region, which covers the Sacramento and Feather watersheds, reported the strongest snowpack conditions, with snow water equivalent at 161% of the average for early January and 57% of the April 1 average.
In the Central Sierra region, which measured 94% of the normal for this date but only 35% of the April goal.
The Southern Sierra lagged significantly, with snow water content at 75% of the January norm and 27% of April’s average.
“There’s been quite a gradient in the amount of precipitation in California from north to south,” he said. “So far this year, for snow on this date, the northern region is above 160%. … The (Interstate) 80 corridor got a ton of snow with those atmospheric rivers, but it was less and less as we moved south through the state.”
The snowpack provides about 30% of California’s water supply, replenishing reservoirs that support agricultural irrigation and urban water demands.
Article ($):
https://www.sacbee.com/news/local/article297884208.html#storylink=cpy