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IN THIS ISSUE – “We’re losing high-wage jobs that help fund the (state) budget”
Brooke Armour, California Business Roundtable
- California Job Market “Dismal”
- State Late with Key Financial Report…Six Years in a Row
- Californians Say State Budget Deficit is “Big Problem”
- Campaign Experts Rate Newsom’s POTUS Assets & Liabilities
- The $10-Billion Question: Will Voters OK Climate Bond?
- Newsom, Progressive Senators Battle Over Enacting Corporate Climate Laws
- Energy Commission OKs Landmark Offshore Wind Power Plan
- Power Company Can Keep Secrets of Huge Underground Energy Storage Project
Capital News & Notes (CN&N) curates California policy, legislative and regulatory insights from dozens of media and official sources for the past week. Please feel free to forward this unique client service.
FOR THE WEEK ENDING JULY 12, 2024
California Job Market “Dismal”
CalMatters
Gains in public-sector and other jobs largely supported by public money have cloaked a dismal California labor market, which has seen a big decline of private-industry jobs since their post-pandemic peak, a new analysis shows.
The state Legislative Analyst’s Office (LAO) looked at employment data from the U.S. Bureau of Labor Statistics through April, and concluded that private-sector industries in California have lost a total of 340,000 jobs since reaching their peak a couple of years ago.
The tech and finance industries led those losses. Jobs in the information sector — whose major employers include household names such as Google, Apple, Facebook and Disney — have declined 16% since their peak.
There were more than 531,000 such jobs in July 2022, but 98,000 of those have gone away. Employment in the financial sector peaked at 500,000 jobs in December 2021, but it has lost 43,000 jobs, or 8%, since then.
Three other industries each saw a 3% drop in jobs since their peaks: business services, manufacturing, and transportation and warehousing. California has a 5.2% unemployment rate, the highest in the nation for the past four months.
Meanwhile, the health care and social-service industries have gained 240,000 jobs since September 2022, said Chas Alamo, principal fiscal and policy analyst for the Legislative Analyst’s Office.
Alamo said this industry includes private employers such as dentists, child care providers, vocational-rehabilitation centers and more, but is tightly linked to government spending, so his analysis groups these jobs with public-sector jobs, which have grown by 120,000 over the same period. His analysis was based on 12.5 million jobs in the private sector as of April, and a total of 5.5 million jobs about evenly split between the public and publicly supported sectors.
“The jobs picture since late 2022 has been weak,” Alamo told CalMatters, adding that state monthly jobs numbers should be “viewed with caution” because early revisions show the state did not actually add jobs last year, despite what monthly jobs reports said. Monthly jobs reports are based on surveys of businesses; revisions by federal agencies are based on states’ unemployment insurance data.
California is heavily dependent on revenue from personal income taxes, so the type of jobs that it loses or gains is important.
Brooke Armour, president of the California Center for Jobs and the Economy, said “all job growth is good.” But she added that “we’re losing high-wage jobs that help fund the (state) budget. We’re gaining hospitality and service jobs, which are low-wage jobs. We’ve hollowed out the middle-class jobs.”
The center is the information arm of the California Business Roundtable, an advocacy group that includes top executives of the state’s major employers. The group’s most recent analysis of employment data echoes Alamo’s assessment of the state’s job market.
Though the center’s report mentions the group’s recurring complaints about the high costs of doing business in the state, it chalks up tech’s significant job losses mostly to the industry’s pandemic hiring sprees.
“What we’re looking at in tech jobs is a correction,” Armour said.
The center’s report said tech companies continue to prefer to remain in the tech hubs of Silicon Valley and the Bay Area. That is also important to the state’s coffers, which are becoming increasingly dependent on the stock-market performance of the tech industry.
“But while those tech companies are still here, are they growing here or are they growing elsewhere?” Armour asked. “We see a lot of them making investments outside California.”
As for whether the state’s sizable budget deficit could affect the job growth in public-sector jobs, Alamo said the public-sector industry also includes jobs supported by the federal government. And he said jobs in the health care and social-services industries are likely to continue to grow “despite state-budget challenges.”
https://calmatters.org/economy/2024/07/california-labor-market-jobs/
LAO charts:
https://www.lao.ca.gov/LAOEconTax/Article/Detail/806
State Late with Key Financial Report…Six Years in a Row
CalMatters
California — a state whose officials love to tout it as the world’s fifth largest economy — is a year late in producing a report on its own financial health for the sixth year in a row.
The most recently available such report, from 2022, blamed the chronic lateness of the reports on, among other things, a state software changeover that started in 2005, the year the first YouTube video was uploaded.
The state’s annual comprehensive financial report, which aims to provide insight into California’s financial health, is significant because it helps maintain the state’s credit rating, which is important in situations where the state might need to borrow money.
While there isn’t a specific deadline for the reports under state law, bond certificates and federal funding require reporting by April 1 and March 31, respectively.
State Controller Malia Cohen’s office said it typically tries to meet the March 31 deadline.
This is the sixth consecutive year that the report missed those deadlines. The last available report is for the fiscal year that ended in 2022, published this past March.
Cohen’s office attributed the delay of the 2021-2022 report to the “unanticipated” extension of personal and corporate income taxes by both the federal government and California in 2023, as well as to ongoing challenges with agencies’ transition to FI$Cal, the state’s replacement budgeting and finance platform.
California launched the FI$Cal overhaul in 2005 to bring all of its budgeting and finance systems under one umbrella. If FI$Cal were a person, it would now be old enough to vote. The Legislature passed a bill to deem the project complete as of July 2022, but the state auditor noted that state agencies struggle to use the system, which is disputed by the Dept. of Finance and FI$Cal.
In the 2022 report, the state auditor raised concerns that continued delays could affect California’s ability to maintain a high credit rating and borrow money at low interest.
But the controller’s office told CalMatters via email that the reporting delays haven’t harmed California’s bond ratings yet due to the “availability of data from a number of other sources describing California’s financial position and ability to meet its bond obligations.”
Cohen, who took the helm as controller last year, pledged in the 2022 report published in March of this year to get the reports on track by March 2026.
The statement from her office said she “has taken substantial measures to mitigate the root causes” of delays, including streamlining processes and optimizing technology.
The state also allocated more resources to the controller’s office in the 2023-24 budget to address workload and provide state departments with technical assistance.
“These efforts are part of a comprehensive plan to return the State to timely reporting over the next several reporting cycles,” the email from the controller’s office said.
In April, a report from the Illinois-based government transparency group Truth in Accounting ranked California 48th in financial transparency, based on a mix of factors including the state auditor’s opinion and the timeliness of reports.
https://calmatters.org/politics/2024/07/california-financial-report-late/
Californians Say State Budget Deficit is “Big Problem”
Public Policy Institute of California
The Public Policy Institute of California has released the findings of their 2024 Statewide Survey: Californians and Their Government. The report presents key findings on Californians’ views on state and national issues, including the upcoming election. Among the top issues mentioned by respondents are the economy, housing costs, homelessness, crime and drugs, and government in general. Findings in the report are based on a survey of 1,677 Californian adult residents.
Survey:
https://www.ppic.org/publication/ppic-statewide-survey-californians-and-their-government-june-2024/
Campaign Experts Rate Newsom’s POTUS Assets & Liabilities
CalMatters
While Newsom says he’s standing firmly behind Biden’s re-election and has long publicly denied any presidential ambitions, this chaotic political moment is elevating the national profile that Newsom has spent years cultivating — including through a Fox News debate last fall against Florida Gov. Ron DeSantis and a heretofore unsuccessful bid for a constitutional amendment on gun control.
CalMatters spoke with political consultants and experts — veterans of California elections, swing state organizing and national campaigns — about Newsom’s prospects as a presidential contender.
They largely agreed that he was extremely unlikely to become the Democratic nominee this year even if Biden ultimately withdraws, with Vice President Kamala Harris waiting in the wings, but that Newsom could be a strong candidate in the 2028 primary because of his progressive bona fides and extensive political network.
The biggest question mark: Can a California Democrat, the liberal caricature that has been a political punching bag for decades, win a presidential election?
If the last eight years have taught us anything, it’s that the conventional wisdom may no longer apply.
Newsom’s political balance sheet, according to experienced political consultants his assets and liabilities…
MORE:
The $10-Billion Question: Will Voters OK Climate Bond?
Sacramento Bee
Coming to your California ballot this November is a question from the state’s governor and lawmakers: Will you, dear voter, approve $10 billion in state borrowing to help pay for climate and environmental programs?
The bond, or Proposition 4, was approved for the ballot by lawmakers July 3rd and is supported by dozens of environmental advocates, labor unions, renewable energy companies and others. Its main opponent is the Howard Jarvis Taxpayers Association, a longstanding anti-tax group.
It’s also called the Safe Drinking Water, Wildfire Prevention, Drought Preparedness, and Clean Air Bond Act of 2024. To keep things simple, here’s a refresher on how bonds work and a rundown on what this loan would, and wouldn’t, pay for.
Bonds are a form of long-term borrowing that governments uses to raise large sums of money. State general obligation bonds are typically used to finance major infrastructure projects that can be expensive to pay for all at once — such as roads, schools or parks.
This bond, like the $10 billion education bond also slated for the ballot, will be repaid in annual increments from California’s annual budget, funded primarily by income and sales taxes. Unlike local bonds which can require a two-thirds vote, these only need majority approval.
Like any loan, California taxpayers will have to pay back this bond over time with interest. The state’s legislative analyst has estimated it would ultimately cost $650 million a year for the next 30 years, amounting to more than $19 billion when all is said and done.
What does Prop 2 buy?
After big promises were made two years ago, California’s climate and environment budget has seen steep cuts. Of Gov. Gavin Newsom’s 2022 $54 billion commitment to climate spending, roughly $9 billion has been cut — particularly from wildlife conservation and restoration programs.
If voters approve Proposition 2, the state would create a fund in the state treasury that the Legislature could spend on these issues and up to these amounts:
Water and drought, $3.8 billion
More than half will be used to protect and increase water supply, according to a bond analysis. That includes grants for drinking water quality, groundwater storage and sustainability projects, and water recycling programs. Just under half will be for flood risk reduction, dam safety, and restoration of watersheds and wetlands.
Wildfire and forest resilience, $1.5 billion
Much of this money will go to the Natural Resources Agency for grants to improve fire prevention and forest health. Tens of millions will go to other agencies such as Cal Fire for wildfire ignition detection technology and the California Conservation Corps.
Coastal resilience, $1.2 billion
This will fund projects and programs to adapt to sea level rise at a variety of agencies, including the State Coastal Conservancy and Department of Fish and Wildlife. The pot includes money for restoration of kelp forests, removal of obsolete dams, and fish hatchery expansions.
Biodiversity protection, $1.2 billion
The vast majority goes to the Wildlife Conservation Board for grants supporting fish and wildlife, but also includes tribal nature-based solutions.
Clean air programs, $850 million
More than half will support offshore wind power generation, with the rest financing electricity transmission and long-duration battery storage projects to help support the state’s clean energy goals.
Parks and outdoor access, $700 million
California’s State Parks system and Natural Resources Agency are the main beneficiaries of these funds, which would support outdoor recreation and public access to those opportunities.
Extreme heat mitigation, $450 million
Urban greening, urban forests, strategic “community resilience centers,” and local disaster relief community grants are included in this chunk.
Climate smart farms and ranches, $300 million
The main thing here are grants to support climate-friendly technology upgrades for farmers and ranchers, including $15 million for low-income farmworker carpools.
What’s not in it?
Most of California’s carbon emissions that are driving today’s increase in global temperatures come from cars, trucks, homes and heavy industry — all of which are notably absent from this climate bond.
But David Weiskopf, senior advisor at progressive research and advocacy group NextGen California, said the bond is less about achieving carbon reductions and more about bolstering the state’s defenses against climate impacts.
“Most of what you see here is either related to helping manage the impacts of climate change or making lands and ecosystems more resilient to those impacts,” he said, though he would have liked to see more support for equitable decarbonization of buildings.
He expects to see continued progress on clean vehicles, buildings and industry through the combination of state regulations and federal investments through the Inflation Reduction Act.
While supportive, he said $10 billion simply does not undo decades of environmental damages done to California’s natural landscapes in the name of fossil fuel profits.
“I think the bond is taking a tool that was available and doing what can be done with it,” Weiskopf added. “The problem is just much, much bigger than the capacity to address it through these means alone.”
https://www.sacbee.com/news/politics-government/capitol-alert/article289850124.html
Newsom, Progressive Senators Battle Over Enacting Corporate Climate Laws
Politico’s Climate newsletter
Gov. Gavin Newsom and the authors of two nation-leading climate laws just can’t seem to get on the same page.
Sens. Scott Wiener and Henry Stern are again on high alert that Newsom may not be thrilled about implementing two landmark corporate emissions and climate-risk disclosure laws after his Department of Finance last week proposed delaying them for two years, until 2028.
“I thought we’d gotten past all this drama,” Stern said in an interview. “I’m just so desperate to get past that posture and really get down to work.”
It’s the latest episode in a choppy, yearlong tug of war over SB 253 and SB 261, which require large companies to disclose their carbon footprints and climate-related financial risks, respectively, and go further than federal rules currently on pause amid legal challenges.
Newsom has long signaled discomfort with the laws, saying even before he signed them that he thought they would require some kind of “cleanup.” He proposed leaving out funding for their implementation this year on the back of a budget deficit in January, before reversing course in May. The implementing agency, the California Air Resources Board, had also suggested weakening them while they were being debated.
A spokesperson for Newsom, Alex Stack, said the proposal “addresses concerns” about cost, timeline and the “entirely new and significant workload for the state and the entities covered by these new requirements.”
Lawmakers have until the end of August to pass budget trailer bills like the one DOF floated last week. As Senate Budget Committee chair, Wiener is in prime position to fend it off — and he says he will.
“We’re not going to delay implementation,” he said in an interview. He declined to speculate on Newsom’s motivations, despite the fact that the two progressive climate hawks with statewide and increasingly national profiles can’t quite align on this issue.
“I don’t read too much into this,” he said. “The governor signed both bills, and we’re very grateful he did. The administration really wants additional delays for the disclosures. And we don’t agree on that.”
Stern also demurred.
“Every time I can get his direct attention on this, there’s no problem. We’re good,” Stern said. “When it slips back into bureaucracy land, it’s like, ‘We have cap and trade coming, we have LCFS coming, we’re really going to need to work for it.’ It’s not so much the governor himself. But it’s when he’s busy on other things, we keep slipping back into this weird, ‘Do you really want it? Can we just wait a little longer?’”
Meanwhile, the California Chamber of Commerce, which had pushed for the delay and is challenging both laws in court, is still hoping to weaken them further administratively. The group’s main aim is to scale back a requirement to report all emissions from a company’s entire value chain, known as Scope 3 emissions.
There’s “a lot more that needs to be done to make it workable,” CalChamber Executive Vice President Ben Golombek said in an interview.
Energy Commission OKs Landmark Offshore Wind Power Plan
CalMatters
The California Energy Commission unanimously approved a sweeping plan to develop a massive floating offshore wind industry in ocean waters — a first-of-its-kind undertaking that will require billions in public and private investments and could transform parts of the coast.
The new state plan sets the path for harnessing wind power from hundreds of giant turbines, each as tall as a 70-story building, floating in the ocean about 20 miles off Humboldt Bay and Morro Bay.
The untapped energy is expected to become a major power source as California electrifies vehicles and switches to clean energy.
California’s wind farms represent a giant experiment: No other place in the world has floating wind operations in such deep waters — more than a half-mile deep — so far from shore.
The commission’s vote Wednesday came after representatives of various industries, environmentalists, community leaders and others mostly expressed support for offshore wind, although some voiced concerns.
“I feel the urgency to move forward swiftly,’ said energy commissioner Patty Monahan. “The climate crisis is upon us. Offshore wind is a real opportunity for us to move forward with clean energy.”
She added, though, that the plan “is a starting point…There are a lot of uncertainties about environmental impacts. We need to be clear-eyed and engage the right scientific interests and move carefully.”
The five energy companies are now assessing sites within the 583 square miles, which is expected to take five years. That will be followed by about two years of design, construction and environmental and technical reviews.
Energy Commission Chairman David Hochschild recently called it “one of the single most complex processes I’ve been involved with.”
That complexity was reflected in the heft of the strategic plan, which includes three volumes and 500 pages of public comment. The breadth of the document — which involved coordination among 10 state agencies — reflects the sheer size and scope of what’s being envisioned. State officials said offshore wind requires an unprecedented level of planning and policy development in California.
The offshore wind industry must be created almost from scratch: a new manufacturing base for the still-evolving technology; a robust and reliable supply chain; transportation networks on land and sea; specially configured ports to make, assemble and maintain the gargantuan seagoing platforms; finding and training a highly specialized workforce; building a large transmission network where none exists and beefing up those that operate now.
The Energy Commission’s plan estimates that just the work to upgrade California’s ports will cost $11-$12 billion, much of it publicly funded. The plan identifies the large ports of Humboldt, Long Beach and Los Angeles as viable for storing, staging and assembling parts needed for offshore wind operations.
By 2045, 16 large and 10 small ports will be needed along California’s coast for various aspects of development and support, according to the plan. “Funding and permitting for these projects are a critical challenge to address,” the plan says. An estimated $475 million would be set aside for port infrastructure in a climate bond measure that will be on the November ballot.
Some people at the hearing raised concerns about increased activity around major ports, where ships and trucks already create serious air pollution problems that can trigger asthma and heart attacks.
“This plan does not alleviate that. It increases that,” said Therai Golden, who lives near the Port of Long Beach. “We have a 75 to 100 year legacy of death with the current pollution. It is insane. We don’t oppose offshore wind. We oppose the development in our backyard, where we are already dying.”
Another pressing challenge is transmission — the complex job of getting the power onshore and distributing it to users. The Humboldt area presents the biggest challenge, the report says, given the rural region’s already sparse transmission network.
MORE:
https://calmatters.org/environment/2024/07/california-offshore-wind-plan-approved/
Power Company Can Keep Secrets of Huge Underground Energy Storage Project
Bakersfield Californian
A Canadian company proposing a $1.5 billion energy storage project in eastern Kern will get to keep one of its most valuable technological secrets under an administrative decision issued by the California Energy Commission.
Toronto-based Hydrostor Inc. requested earlier this year that the commission keep confidential the company’s diagram on how it would balance heat and mass as part of a 500-megawatt compressed-air storage facility next to Edwards Air Force Base.
In a little-noticed decision May 13, commission Executive Director Drew Bohan agreed not to disclose the diagram to anyone asking for public information about Hydrostor’s proposed Willow Rock Energy Storage Center.
Temperature is a key consideration in the plant’s operation because of the thermal dynamics behind compressed air: Squeezing air together generates a great deal of heat — and conversely, allowing it to expand can cause the air to freeze.
Willow Rock would store renewably produced electricity during peak hours of production by using that power to inject compressed air deep underground and keep it there by deploying hydrostatic pressure.
Later, when renewable energy production tapers off but demand for electricity continues, Hydrostor would release the air upward to power turbines that would, in turn, feed energy through a nearby interconnection to the state power grid.
Hydrostor, which runs a similar but smaller plant in Canada, expects Willow Rock to store enough air to power about 400,000 homes for eight hours, or about twice as long as batteries can.
Company President Jon Norman said Tuesday Hydrostor would rather not empower competitors by allowing them access to drawings and technical details on its approach to heat transfer and compression. At the same time, the commission needs to review those materials as part of its review of the project.
MORE:
Dangerous Dams a National Crisis
Associated Press
Early last week, floodwater in rural Minnesota pushed debris against a more than century-old dam and then carved a path around it, eroding so much of the riverbank that most of a house fell into the river. Several days later, intense rain damaged a dam that holds drinking water for Houston, forcing officials to issue a potential failure warning.
“Something like this could happen, and it has happened, all over the country,” said Del Shannon, former president of the U.S. Society on Dams.
There are roughly 90,000 significant dams in the U.S. At least 4,000 are in poor or unsatisfactory condition and could kill people or only harm the environment if they failed, according to data from the U.S. Army Corps of Engineers. They need inspections, upgrades and even emergency repairs.
It’s a difficult problem in part because dams in the U.S. are roughly 60 years old, on average. It requires costly maintenance to keep decades of wear and tear from degrading dams, and resources to fix problems are often scarce, Shannon said.
The vast majority of dams are safe, and even when one does fail, deaths are rare. But large dams hold back tremendous amounts of water and energy, so they carry enormous potential for downstream destruction. That’s why even rare problems are such a concern for state and federal regulators.
In 2017, for example, heavy rain damaged the spillway at the Oroville Dam in California, forcing nearly 190,000 downstream residents to evacuate. And after storms in 2020, the Edenville Dam in Michigan breached. Water rushed downstream and overwhelmed another dam, causing it to fail, too.
John France is an engineering consultant who led teams that investigated both of those incidents. He said that when many dams were built decades ago, engineers knew less about designing them to withstand floods. And although many were constructed far from populated areas, circumstances changed as cities and towns spread.
“There’s this gradual building up of the hazard,” France said.
After his teams’ investigations, he’s seen some improvements. The Federal Energy Regulatory Commission, which licenses hydroelectric dams, added more thorough inspections that review a dam’s design and construction to find weaknesses. Some states have looked at incorporating these reviews and France hopes FERC’s broader approach will spread to state oversight programs.
Just fixing many of the country’s most important dams could cost $34 billion, according to a report by the Association of State Dam Safety Officials. Minnesota, for example, regulates about 1,000 dams and helps provide some funding, but officials said there’s “a difference between demonstrated need and funds available.”
The Biden administration’s infrastructure law provided a rare boost for upgrades. Dam owners are responsible for keeping their dams safe and they can be held liable if something goes wrong.
Dams are designed to withstand a lot of stress, but sometimes a flood will be too much and cause damage, according to Martin McCann Jr., director of the National Performance of Dams Program at Stanford University.
Climate change may be making the problem worse in some parts of the country. A warming atmosphere holds more moisture, so bad rainstorms can release more water.
“We are one step away from holding bake sales to help the dam owners,” quipped John Roche, a board member with the Association of State Dam Safety Officials. State officials try to help owners find grants so they can afford improvements. There is help, but there is even more need.
Blue Earth County owns the Rapidan dam, a 1910 hydroelectric dam in Minnesota that is still standing but was badly damaged last week by the second-worst flood in its history.
The dam hasn’t been producing power, as previous floods knocked out that small source of revenue. The county of roughly 70,000 people had been considering spending $15 million on repairs or removing the dam at a cost of $82 million.
A federal inspection in May didn’t find major problems at the Rapidan dam, which isn’t considered to pose a major threat to people if it fully fails. A federal investigation is now expected. Debris clogged the dam during flooding, forcing the river to divert around it — the damage likely wasn’t related to the dam’s repair needs, Meyer said.
In Texas, officials said flooding damaged the Lake Livingston Dam’s spillway about 65 miles (105 kilometers) northeast of Houston. They reassured the public that the dam is not in any immediate danger of failing.