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IN THIS ISSUE – “A Fight For the Future, By the Future”
LA Times columnist on campaign between next gen Latino political leaders
POLITICS & MONEY
- Legislature Reaches State Budget Deal
- Assembly Speaker Contest Ends with a Whimper, Not a Gavel Bang
- “Fight for Latino Political Soul” Marks Orange County Campaign
CALIFORNIA ECONOMY
- California Recession Risk Grows – UCLA Forecast
- Ports of LA & LB Face Continuing Container Crunch, Driver Shortage
POWERN & WATER
- Hydro Power Slowing to a Trickle, Natural Gas Fills the Gap
- Statewide Water Conservation Rules Increase
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 client service.
FOR THE WEEK ENDING JUNE 3, 2022
Legislature Reaches State Budget Deal
Sacramento Bee
Senate President Pro Tem Toni Atkins, D-San Diego, and Assembly Speaker Anthony Rendon, D-Lakewood, on Wednesday released their own $300 billion budget agreement.
Their spending blueprint keeps some of Gov. Gavin Newsom’s items, but also deviates from his plan in a few key ways.
Atkins and Rendon continue to push for their own $8 billion gas price and inflation relief plan, which is income-limited and would give $200 to all taxpayers earning $125,000 per year, or $250,000 for joint filers. Families would also get $200 per dependent.
Newsom’s measure is focused on vehicle owners and would give drivers $400 per car, up to a total of $800. The governor has said he wants his relief targeted to the middle class, and he has also proposed grant funding to allow public transit users three months of free rides.
Legislative leaders say this plan leaves out the neediest Californians struggling with the persistently high cost of consumer goods.
Their budget would also provide funds for residents in need who don’t pay taxes and wouldn’t qualify for relief funds, including those who receive Supplemental Security Income and other monthly payments.
Those people were left out of the COVID-19 Golden State Stimulus, which was also limited to taxpayers.
With two very different plans still on the table, it remains to be seen how further negotiations will shape the relief that Newsom, Atkins and Rendon ultimately provide to Californians.
Legislators’ budget also included:
- $10.9 billion for a multi-year transportation funding package
- $1.6 billion for affordable housing programs.
- $75 million in annual funding to “support community-based organizations to reduce health disparities and address the public health impacts of systemic racism.”
- $10 million in one-time funds to “develop and promote high quality peer-to-peer mental health support programs for youth.”
“With this budget, we are spreading our state’s wealth to hard-working Californians and small businesses like never before,” Atkins said in a statement.
Legislature’s budget deal summary:
Assembly Speaker Contest Ends with a Whimper, Not a Gavel Bang
CalMatters & Politico
After a weekend of lobbying, jockeying and speculating, then a flurry of parliamentary maneuvers and a six-hour closed-door caucus meeting on Tuesday, California Assembly Democrats finally came to a decision about who ought to serve as speaker.
The answer: The current speaker, Anthony Rendon.
The announcement came not with a bang but a whimper: At 8 p.m., Rendon and his would-be successor, Salinas Democrat Robert Rivas, issued a joint statement.
From Rivas: “I agree with the majority of our current caucus that Speaker Rendon should remain as Speaker for at least the rest of this legislative session.”
Translation: There’s always 2023.
From Rendon: “I applaud Robert Rivas for securing the support of a majority of the current Democratic Caucus to succeed me as Speaker of the Assembly.”
Translation: Nice try. Maybe next time.
If you need a quick refresher: On Friday, Rivas announced that 34 of the Assembly’s 58 Democrats supported him to become the next speaker. Rendon refused to acknowledge the declaration publicly. All manner of machinations and mishigas ensued.
It may not be entirely bad news for Rivas. A majority of the current caucus really does want him (for now) to become the next speaker (at some point). The question is whether that will still hold true once other ambitious members start jockeying again — and after 13 current Assembly Democrats leave after this session. With the exodus of lawmakers this year, the internal caucus politics could be very different in 2023.
Watch the money: Since 2019, Rivas has transferred $400,000 from his own campaign account to candidates and Democratic Party organizations, including nearly $200,000 to Assembly candidates. But Rendon and other aspiring speakers may want to throw some campaign cash around, too.
My heroic colleague, Alexei Koseff, spoke to Rivas Tuesday night after all the drama.
Rivas: “This is an important first step in working with Speaker Rendon to build a transition that works…There’s going to be a large class coming in, and I’m excited to work with them and start to plan for the future.”
But some of Rendon’s allies don’t have a transition in mind. Sacramento Democrat Kevin McCarty told Alexei that Rendon plans to run again for speaker next year.
McCarty: Rendon “has a big lead over anyone who wants to be the next speaker.”
It was a dramatic tone shift from five days ago when Rivas declared with confidence he had the votes to secure the speakership. It had appeared, at the time, that he was intent on taking over as soon as possible. But after reaching an apparent stalemate on Tuesday, Rivas insisted it was all part of the plan — a thoughtful transition rather than a power coup.
After most of the lawmakers had left the Capitol, Rivas returned for a quick debrief with reporters, saying the body is in a critical moment as the state prepares to hammer out the behemoth budget. The lengthy caucus meetings, he said, were an “important first step in transitioning the speakership.”
“I’m excited to be the next speaker and I’m very confident in the support we have built up but knowing all along that this was not about Speaker Rendon,” he said standing in the rotunda. “This was about our future, about stability, and about working with our existing colleagues, about working within our caucus now to facilitate a peaceful and collaborative transition moving forward.”
Was this indeed the outcome that Rivas had hoped for? What we do know after the closed-door negotiations is that at least a fraction of those who support Rivas’ speakership also aren’t ready to say goodbye to Rendon, or maybe, they aren’t so dissatisfied with the current speaker’s leadership that they feel an immediate shakeup is necessary.
“Fight for Latino Political Soul” Marks Orange County Campaign
LATimes commentary from Gustavo Arellano
Bulmaro “Boomer” Vicente strode to the podium at Anaheim City Hall last Tuesday to address the City Council and locked eyes with Councilmember Avelino Valencia. The two are running against each other for the open 68th Assembly District seat in the June 7 primary and are expected to advance to the general election in November.
Their signs are all over Anaheim and Santa Ana, where Valencia and Vicente are respectively from and where I’ve spent my entire life. But they had never run into each other on the campaign trail — until now.
The previous week, news broke that the FBI was looking into corruption in the city over the proposed sale of Angel Stadium and by a “cabal” that supposedly rules my hometown. The news made national headlines, and Mayor Harry Sidhu had resigned after Valencia and other councilmembers called for him to step down.
For Vicente, his opponent’s words weren’t good enough.
Reading from a prepared speech, he accused Valencia of being “funded by the same systems” that fouled Anaheim politics. “How can we trust that there’s no political favor with these hundreds of thousands of dollars?” Vicente asked, before asking Valencia to suspend his assembly campaign “for the love of Anaheim” and help “clean up the mess he stayed silent about until now.”
Valencia looked calmly ahead as residents in the packed council chambers applauded.
It was the latest volley in their fight for votes. For my vote — and my political soul too.
The sons of Mexican immigrants represent two sides of the same Latino political coin that the Democratic Party desperately needs to pocket to remain relevant.
Valencia is a 33-year-old millennial — a first-term Anaheim councilmember with roots in the Mexican states of Jalisco and Michoacán who has worked for the past six years as a staffer for retiring Assemblymember Tom Daly, a moderate Democrat.
Vicente is a 26-year-old zillennial — a first-time political candidate whose parents are from Oaxaca and who’s taking a leave of absence from his job as policy director at Chispa, a nonprofit on the vanguard of progressive policies in Santa Ana.
Valencia has raised nearly $326,000 through last week from an assortment of labor unions, Big Business and politicians on both sides of the proverbial aisle, including Speaker of the House Anthony Rendón and former Anaheim Councilmember Kris Murray.
Vicente has raised about $51,000, mostly from small donations. Two Republican candidates haven’t even raised enough money to report to the California secretary of state.
The face-off is drawing regionwide attention, both for what it says about an Orange County too many people still figure as a conservative wasteland, and for what it represents for Latino Democratic politics in Southern California and beyond.
Across the country, young progressive Latinos are mounting vocal challenges against established pols. In South Texas, longtime Rep. Henry Cuellar — the only Democrat in Congress to openly oppose abortion — is in a deadlock with 29-year-old Jessica Cisneros. In Los Angeles, Eunisses Hernandez has cast incumbent Gil Cedillo as little better than a vendido in her race against the L.A. councilmember. Michael Ortega is doing the same against Rep. Lou Correa, whose congressional district covers the cities that Valencia and Vicente would represent.
They offer something different: a fight for the future, by the future.
“I’m thrilled that O.C. has more Latinos on the ballot,” said Ada Briceño, chair of the Democratic Party of Orange County, which declined to endorse either candidate. “I’m excited that we will have a Latino representative, regardless of who wins.”
All my Anaheim friends support Valencia, whose mailers have choked up my Anaheim post office box all this month. All my Santa Ana pals support Vicente and have flooded my social media feeds with photos of his get-out-the-vote walks. After the council meeting, each side texted me their thoughts: the former group trashed what they said was Vicente’s grandstanding, the latter made him out to be a modern-day Emiliano Zapata.
The breakdown of their respective support doesn’t surprise me: the Anaheimers of my generation are mostly from Jalisco and Zacatecas, hotbeds of the rancho libertarian politics with which I was born and still largely subscribe to. The santaneros I kick it with are from other states with more radical traditions and who sparked my political awakening in college.
I know Valencia and Vicente well enough that when I met them to talk about their efforts before the Anaheim council meeting, we comfortably exchanged chocas (Chicano slang for a soul handshake) and bro hugs.
Both immediately tied when I asked each to pick a Mexican restaurant where we could meet the weekend before the Anaheim council meeting. Vicente chose Taqueria Los Grandes, an old-school spot with a legendary salsa macha that’s fire.
Valencia went with Tacos Los Cholos, a social-media sensation that’s worth the hype and long lines.
I met Vicente first, and he offered a preview of his council speech without revealing his plans. Noting the hundreds of thousands of dollars in contributions Valencia has received, he said that voters in the 68th are sick of it.
“People can’t afford rent or gas, yet politicians are instead paying attention to special interests,” he said while digging into an enchilada plate. “The old ways aren’t working for us anymore.”
Vicente got into politics as an undergrad at UC Berkeley after police tear-gassed him and others during a solidarity march for Ferguson, Mo., in 2014. He applied for and received a spot on the city of Berkeley’s police oversight committee, where “the second oldest person was in their 40s.”
“It was important to be that young voice,” he continued, “because I was a voice for folks who really weren’t heard.”
But Vicente returned to Santa Ana in 2018 “jaded” by politics and with no real plans until he read an article by Chispa showing how the Santa Ana Police Officers Assn. influenced that year’s city elections.
He reached out to the group and offered his expertise, which they quickly leaned on to press the Santa Ana City Council to pass a rent-control measure last year and look into creating a police oversight commission.
When it came to lobbying Orange County’s state assemblymembers and senators for similar reforms in Sacramento, though, Vicente said he and his fellow Chispa members were ignored.
“Our generation is being impacted by the politics of that generation,” he said. “If this current establishment isn’t going to fight for us, then we have to fight. And our way has been winning.”
Establishment politics was what Valencia and I mostly talked about when we met.
“They clearly didn’t know me,” he said, while scarfing down a beef rib taco. “I can talk to all people, take in their input, and at the end of the day not be persuaded by them and do what’s best by my constituents.”
He said that perspective came from working throughout his childhood in a Little Saigon mini-mart owned by his dad that specialized in products from across Latin America. “You should be able to meet people where they’re at,” Valencia said. “You never know who’s going to walk into the door and how their day has been.”
After attending Fullerton College, Valencia went to San Jose State on a football scholarship as a tight end, and thought about becoming a lawyer.
Everything changed when he took an internship with Gardena-area Assemblymember Steve Bradford in the early 2010s, in lieu of writing a senior thesis. “Seeing how laws were made, as opposed to being defended, changed me profoundly,” he said. “I wanted to be part of that, to give back to where I was from.”
Valencia brushed off any idea that he’s an establishment politician despite, well, the Democratic establishment supporting him.
“My constituents understand and believe in my ability to make the right decision,” he said. “They want to look past statements and focus on achieving actions,” which he said has included voting against the Angel Stadium deal and in favor of COVID relief.
Both Valencia and Vicente came off as smart, sincere and knowledgeable about what the 68th District needs. If they melded into a super-candidate, they would be perfect — which is to say I’m still not sure who I’ll vote for.
So I’ll just go with Vicente’s concluding words.
“Hopefully, we’ll both make it into the top two,” he said with a smile, “and then we’ll battle it out.”
California Recession Risk Grows – UCLA Forecast
Sacramento Bee
The risk of a recession has grown in recent months, according to a new UCLA economic forecast released Wednesday. It sees “real risks” to the California economy from the war in Ukraine, Covid-related problems and other factors. Nationally, “We expect the depth of this economic slowdown and the highest risk of recession to occur in the middle of 2023, although we still think a recession is unlikely at this time.,” said Leo Feler, forecast senior economist. A national recession would be acutely felt in California, which is not only the country’s largest economy but the fifth largest in the world. The forecast from the UCLA Anderson School of Management did have some encouraging news. Price increases in the state are likely to cool, and unemployment should remain at low levels. Yet the key message from the forecast remained guarded — that the outlook for the state’s economy is full of potential danger. “It is no longer all about the pandemic, though pandemic-induced economic disruption in California is still a major factor,” said Jerry Nickelsburg, forecast director, in his report on the state’s economy. Supply chain disruptions are affecting consumers, business and agriculture. Higher energy prices because of the Russian invasion of Ukraine add “additional headwinds to the state’s economic growth,” Nickelsburg said.
And back home, “On Wall Street uncertainty about the Fed and the economy will now be impacting funding for entrepreneurial technology firms,” he reported.
The Federal Reserve has raised key interest rates twice this year, and further increases are expected this month and next, as well as later this year. Financial markets have rebounded somewhat lately, but only after the Dow Jones industrial Average fell for eight straight weeks. Gasoline prices continue to climb, setting records almost daily. The average price per gallon in California Tuesday was a new high of $6.16 per gallon of regular, as oil prices flirted with $120 a barrel. While many experts see potential for a recession within the next two years, Nickelsburg and Feler were more circumspect. Nationally, “while we do not expect a recession in the next two years, the risk of a recession has grown,” Feler said..
“It is possible that continued global economic shocks will pull down the U.S. economic recovery and that the Fed will tighten too quickly, which could lead us into a mild recession. We do not expect this to be the case: a recession has become more possible, but it is still not likely,” he said. While prices are increasing at their steepest levels in about 40 years-an average of 9.2% in the state this spring-the forecast saw a leveling off. It predicted increases of 5.8% in the summer quarter and 4% in the fall quarter. Next year, the forecast sees a 3.5% increase..
Unemployment remains somewhat above the national average. The state’s jobless rate was 4.6% in April, while the national rate was 3.6%. The UCLA forecast saw the state rate averaging 4.5% this year, dropping to 4.1% in 2023. That would still be higher than the 3.8% national rate UCLA predicts. Disruptions caused by the pandemic are waning, Nickelsburg said. “But it is not over yet. Importantly, the waning of the economic impact of the pandemic is more about changes in domestic consumer behavior than an easing of supply chain constraints,” he said.
The forecast does see strong hiring in retail trade, health care and social services, technology and construction. Demand for technology and more defense spending will also help spur employment growth. What could hold back growth are several other factors. “The concentration of tech and office related employment in the state creates a situation where work-from-home is more prevalent than in many other states,” Nickelsburg said. “When offices are empty, so are the restaurants and stores nearby. Without offices to visit, business travel to these employment centers is lacking as well.” The state also needs a rebound in tourism from Asian, Canadian and Mexican visitors.
Ports of LA & LB Face Continuing Container Crunch, Driver Shortage
Wall Street Journal excerpt
Ship operators are trying to add millions of new containers to address a severe capacity crunch, but the boxes are stuck on liners and at ports as shipping moves into its busiest period.
Shipping’s peak season usually starts at the end of June when importers begin ordering products for the back-to-school and holiday seasons. This year, orders went out in mid-May as companies tried to head off the product shortages that plagued them last year. The early start has added to the challenges of getting the supply chain unclogged.
“Importers are now bringing in cargo just in case, not just in time, and it makes up for more boxes sitting at the port,” said Gene Seroka, executive director of the Port of Los Angeles. “They will continue to be tight until early next year if we don’t increase the velocity of getting them off the ships and off the port.”
Mr. Seroka said boxes are gradually picking up and the port will have to handle substantially more cargo as Shanghai, the world’s biggest port, is opening after a two-month citywide closure to fight a Covid outbreak.
Ship brokers and consultants estimate about 12% of the world’s boxships are stuck outside congested ports for weeks longer than normal, and inland distribution—especially in the U.S.—is still hampered by a lack of trains, truck drivers and limited warehousing space.
Ship operators and brokers say that at the start of 2022, there were around 50.5 million available containers, eight million more than before the pandemic.
The increase came on the back of surging demand for Asian imports by big American retailers, which collectively make up more than one-quarter of all container imports in the U.S.
It normally takes an average of 45 days for products to be shipped from an exporter in China to an importer in the U.S. Now it is more than 100 days, according to liner executives.
“At export ports the Shanghai ships wait longer to get loaded, and at import ports like Los Angeles they are stuck because there is no space at container depots,” said Lars Jensen, chief executive of Denmark-based consulting firm Vespucci Maritime. “There were enough containers and a lot more were added, but it won’t help if every part of the supply chain moves slower.”
At Los Angeles, 40% of the incoming boxes are designated to be moved by rail, but only about half are loaded up every day. Major rail companies furloughed large segments of their workforces during the pandemic and struggled to get them back after many moved to better-paying jobs, shipping executives said.
“The time a container takes to go on a train is more than six days. It should be two, and the volume of imported boxes designated for rail is up six times since February,” Mr. Seroka said. “During the pandemic, there was crazy demand; now there is too much inventory still coming in.”
Mr. Seroka said there aren’t enough rail drivers and wagons, while half of the port’s gate capacity for trucks goes unused because many cargo owners don’t pick up their boxes due to a lack of warehousing space. Container warehouses and distribution centers in Southern California are more than 95% full.
In some ways things are getting better. It is now easier to find containers, and the line of ships waiting to dock at Los Angeles and Long Beach is around 30, down from more than 100 back in January, when importers were in a race to replenish dwindling inventories.
Hydro Power Slowing to a Trickle, Natural Gas Fills the Gap
Grist
The U.S. Energy Information Administration, or EIA, reports that as reservoir levels dip far below their historic averages, Electricity generation from California’s hydroelectric dams could be cut in half this summer. The shortfall is likely to be made up in part by an increase in natural gas-fired power, EIA said, sending more carbon dioxide and pollution into the air and pushing up summer electricity prices in the state.
“There is a growing recognition that hydropower may not be the reliable resource that it has been historically,” said Mike O’Boyle, director of electricity policy at the think tank Energy Innovation.
In 2019, prior to the current drought, 19 percent of in-state electricity generation came from hydroelectric dams, according to data from the California Energy Commission. In 2020, hydro dropped to just over 11 percent of the in-state power mix due to the effects of heat and drought. Now, EIA predicts that number could drop to just 8 percent this summer.
Hydropower plants are typically a crucial source of clean, “dispatchable” energy for the grid. Dam operators can ramp up or down electricity production by releasing more water to meet the grid’s needs as wind and solar output varies. But with reservoirs low, this flexibility will likely be compromised, EIA writes. The state’s two largest reservoirs, Lake Shasta and Lake Oroville, are at 48 percent and 67 percent of their historical average, respectively. As of April 1, snowpack throughout the state was just a third to half of normal levels, meaning there will be less melting snow to recharge already depleted reservoirs.
To make up for the shortfall, California’s grid operators will purchase more out-of-state power, but they will also turn to one of the only other sources of dispatchable power at their disposal: natural gas power plants. The EIA predicts that natural gas will rise to 50 percent of in-state generation this summer, increasing carbon dioxide emissions by 978,000 metric tons, or the equivalent of putting about 211,000 more cars on the road for a year.
In addition to the environmental and public health consequences, this switch to natural gas will also be felt by Californians’ wallets. The study finds that wholesale electricity prices — the price that utilities pay for power — could increase by 7 percent in Northern California and 5 percent in Southern California.
The shrinking prospects for hydropower on a warming planet is something California will need to contend with as it forges a path to 100 percent clean electricity by 2045. California Energy Commission staff told Grist in an email that currently, the state uses the 15-year historic average of hydroelectric availability in its models — a metric that may not capture the challenge that lies ahead. But they are “expecting to run more scenarios to capture potential impacts of droughts in long term planning.”
Michael Colvin, an expert on California energy policy at the nonprofit Environmental Defense Fund, told Grist that in the long run, hydropower shortfalls could lead the state to delay the retirement of some existing natural gas plants, though it’s unlikely to build new ones. “When you look at what the load-serving entities are buying, they are almost all utility scale solar and storage (or just stand alone storage) contracts,” he said in an email.
Statewide Water Conservation Rules Increase
CalMatters
As a third year of drought continues, California officialdom is increasing pressure for more water conservation.
Last week, the state Water Resources Control Board imposed a statewide ban on watering of “non-functional” turf, such as grass around commercial buildings, and directed local water agencies to implement water use restrictions.
“California is facing a drought crisis and every local water agency and Californian needs to step up on conservation efforts,” Gov. Gavin Newsom said in a supportive statement.
Despite the official ballyhoo, last week’s actions were tepid at best, stopping well short of the mandatory reductions that Newsom’s predecessor, Jerry Brown, imposed during a previous drought.
It appears that Newsom, running for re-election, does not want to be the guy who tells Californians they can’t water their lawns as much as they would like. He’d rather leave it to local water officials to crack down.
However, no matter how they are framed, the new directives are highly unlikely to have more than a marginal impact on California’s increasingly dire water shortage for the simple reason that residential use is a relatively tiny factor in the water equation. California’s largest-in-the-nation agricultural industry is by far the largest user of developed and managed water supplies.
The larger question is whether the state is doing anything to confront the longer-term gap between water supply and water demand as climate change alters precipitation patterns. Conservation will help, particularly more efficient use of agricultural water, but we need more storage, such as the long-delayed Sites Reservoir, to take advantage of wet years.
Newsom’s latest budget proposal claims to make big investments in improving water security, but most of the money would go to small-scale projects that tinker on the margins. It proposes just a half-billion additional dollars for water storage while dumping several billion more dollars into the state’s ill-conceived and ill-managed bullet train project.
If we’re serious about dealing with semi-permanent drought conditions, the most important — and the most controversial — step would be to reconsider how limited supplies are allocated among agriculture, urban users and flows needed to support endangered species such as salmon.
By necessity, such a comprehensive approach — more or less starting with a clean sheet of paper — would require a fresh look at the state’s bewilderingly complex water rights.
Those who hold such rights consider them to be sacrosanct. But drought is so severe that even senior rights holders are feeling the pinch, as CalMatters writer Rachel Becker details in a recent article on drought’s impacts in the Sacramento Valley.
Reconsideration of water rights seems to be gaining momentum in water policy circles.
A water policy paper issued by the state Senate leadership this month proposes that the state purchase rights from agricultural holders to provide more water for habitat improvement as part of a $7.5 billion plan “to build a climate resilient water system.”
As the state water board was pushing for more conservation last week, a coalition of Indian tribes and environmental groups demanded that it become more aggressive about enforcing water quality standards in the Sacramento-San Joaquin Delta “and restructure water rights as necessary to implement these standards.”
The demand cites the history of white settlers appropriating water supplies from native peoples in the 19th century and suggests that water rights can be reconfigured under the state constitution’s provision that only “reasonable use” of water is legal.
The water board had been considering such direct action, but put it on hold while the Newsom administration has attempted to forge so-called “voluntary agreements” that would divert more water from agriculture to enhance river flows.