For Clients & Friends of The Gualco Group, Inc.
IN THIS ISSUE – “When looking at this shrinking, are there less opportunities and people have just stopped looking for work? What will this mean for consumers and businesses?”
Sarah Bohn, Public Policy Institute of California fellow, on the state’s nation-leading unemployment rate
- Primary Election Surprises & Cliffhangers:
- Results Updates from the Secretary of State
- Assembly Seats TBD in November
- Voters Divided on Newsom’s Mental Health Bond…and All Bonds?
- Governor’s Legislative Aide Departs
- California’s Troubling Unemployment Rate Leads Nation
- State Water Board Probes Sinking Canal Impacts
- EV Bus Manufacturers Failing
- Almonds – California’s #1 Crop – No Longer Going Nuts
- First Greenhouse Gas Smuggler Faces Criminal Charges
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 MAR. 8, 2024
Primary Election Surprises & Cliffhangers…
Results Updates from the Secretary of State (scroll down to “District Contests” and click on “State Senate” or “State Assembly”): https://electionresults.sos.ca.gov/
Assembly Seats TBD in November
Sacramento Bee e-newsletter
Several purple California Assembly districts will likely see tight Democrat-versus-Republican competitions in November — including at least one rematch of a 2022 race that came down to the wire.
Initial primary election results show Democrats will once again be duking it out with Republicans in Palm Springs and Santa Clarita. In the Sacramento suburbs, they may get a chance to flip a seat they lost to the GOP two years ago.
Palm Springs Assemblyman Greg Wallis, a Republican, will once again battle Democrat Christy Holstege in the 47th Assembly District. Wallis won the seat by just 85 votes in 2022. Initial tallies showed Holstege with 49% of the vote, while Wallis had about 46%. Another Democrat, Jamie Swain, trailed with just 5.3%.
Santa Clarita Assemblywoman Pilar Schiavo, a Democrat, will defend her 40th Assembly District seat against a challenge from Republican Patrick Gipson. Schiavo won her 2022 election against incumbent Republican Assemblywoman Suzette Martinez Valladares by 522 votes.
Early totals showed Gipson with 54% of the vote, while Schiavo had about 46%
In Folsom and surrounding suburbs east of Sacramento, Republican Assemblyman Josh Hoover will likely be fending off Democrat and Citrus Heights City Council member Portia Middleton. Hoover in 2022 took over the 7th Assembly District seat from longtime Democratic Assemblyman Ken Cooley, winning by nearly 1,400 votes.
Initial results showed Hoover in the lead with nearly 52% of the vote, while Middleton had about 30%. Another Democrat, Folsom City Council member YK Chalamcherla, was in third with nearly 18%.
Voters Divided on Newsom’s Mental Health Bond…and All Bonds?
CalMatters
The razor-thin margin on a $6.4 billion mental health bond isn’t just troubling news for Gov. Gavin Newsom — it could be a warning sign for the slate of other borrowing requests lawmakers want to send voters this fall.
It will likely be days before we know for sure whether Proposition 1 has passed. As of last night, support was hovering around 50 percent. The campaign is staying outwardly optimistic, and as spokesperson Anthony York noted, we are still waiting for millions of votes — many from large, urban counties.
“We know in California that elections aren’t settled on Election Day,” York said in a statement Wednesday.
Regardless of the outcome, the tepid support is troubling for Newsom and Democrats in the Legislature who have been counting on voters to OK billions of dollars for housing, education and climate change-related projects this year — policy goals the state wouldn’t otherwise be in the position to pursue, given California’s estimated $73 billion budget shortfall.
Lawmakers for months have discussed just how much the state can borrow through bonds. Negotiations on who gets to put what on the November ballot are already underway in the Capitol. If voters are reluctant to accrue more debt — as they indicated in the primary — it could make Newsom hesitant to back more bond measures this year.
Assemblymember Al Muratsuchi and state Sen. Steve Glazer want to tackle deferred maintenance in schools. Assemblymember Eduardo Garcia and state Sen. Ben Allen want climate bonds to offset budget cuts. And Assemblymember Buffy Wicks is looking for $10 billion for affordable housing — a top issue for Californians and Democrats.
The proposals, as they currently stand, would total close to $35 billion — and that doesn’t even include the $6.4 billion in Prop 1.
In reality, California can likely take on only about $15 billion to $16 billion in additional bond debt this year, Assembly Speaker Robert Rivas said at a press conference last month, after a meeting with the governor and Senate President pro Tempore Mike McGuire.
Whether or not lawmakers are keen on passing more bonds, we can expect advocates to keep them under steady pressure to do so.
Governor’s Legislative Aide Departs
Sacramento Bee
After two years in the governor’s office, Legislative Affairs Secretary Christy Bouma is retiring today, handing off one of the top positions on Newsom’s team to Deputy Legislative Secretary Christine Aurre.
Bouma was appointed in 2022 following Angie Wei’s departure.
As the governor’s chief liaison in the Capitol, she negotiated with lawmakers and championed his agenda in the chambers. During her time in the administration, Bouma oversaw some of Newsom’s landmark legislative achievements, including a law to protect against price gouging by oil companies, CARE Courts, and an effort to modernize the state’s mental health services system.
Newsom, in a statement, said he’s deeply grateful for her service and partnership.
“Christy’s strong leadership and remarkable collaboration with our partners in the Legislature has been indispensable in delivering monumental wins for Californians and the future of our state,” Newsom said in a statement.
Aurre, who has worked in the governor’s office since 2022, came up through the Legislature, serving for then-Assembly Speakers John Pérez and Toni Atkins before joining Assemblymember Patrick O’Donnell’s office and later, Senate Majority Leader Bob Hertzberg’s.
California’s Troubling Unemployment Rate Leads Nation
NY Times
For decades, California’s behemoth economy has outpaced those of most nations, holding an outsize role in shaping global trends in tech, entertainment and agriculture.
While that reputation remains, the state has a less enviable distinction: one of the nation’s highest unemployment rates.
Nationwide, the rate is 3.7 percent, and in January, the country added 353,000 jobs. California’s job growth has been slower than the nationwide average over the last year, and the unemployment rate remains stubbornly high — 5.1 percent in the latest data, a percentage point higher than a year earlier and outpaced only by Nevada’s 5.4 percent.
With layoffs in the tech-centered Bay Area, a slow rebound in Southern California from prolonged strikes in the entertainment industry and varying demand for agricultural workers, California is facing economic headwinds in the new year. And residents feel it.
The state has historically had higher unemployment than the U.S. average because of a work force that is younger and fast growing, said Sarah Bohn, a senior fellow at the Public Policy Institute of California. Still, she noted, the labor force shrank in California in the past six months — a troubling trend.
“When looking at this shrinking, are there less opportunities and people have just stopped looking for work?” Ms. Bohn asked. “What will this mean for consumers and businesses?”
During the early part of the pandemic recovery, the unemployment rate in California was not an outlier — 4 percent in May 2022 versus 3.6 percent nationwide, according to the Bureau of Labor Statistics. But the situation deteriorated.
Roughly 36,000 Californians who work in the information industry, which includes tech, lost their jobs last year. Several powerhouse companies based in the state — Google, Meta and X, formerly known as Twitter — cut tens of thousands of positions to reduce costs as the industry increasingly pivoted its focus toward artificial intelligence.
In recent weeks, Snap, the Santa Monica-based parent of the Snapchat messaging app, announced it would cut about 500 employees, 10 percent of its global work force. And Northrop Grumman, the aerospace giant, signaled it planned to lay off 1,000 workers in the Los Angeles area.
Despite a bruising several months, the unemployment rate in San Francisco and Silicon Valley remained relatively low — 3.5 percent in the city and 3.2 percent in San Mateo County — indicating that many workers found new jobs relatively quickly.
The outlook is worse in Southern California, where the ripple effects from last year’s entertainment industry strikes are still having an impact.
Nearly 25,000 workers lost their jobs in Hollywood, according to a report released in December by the Otis College of Art and Design in Los Angeles. While the prolonged work stoppages by the Writers Guild of America and SAG-AFTRA ended last fall, some jobs dependent on the industry never returned, and many people have struggled to land full-time work.
The unemployment rate in Los Angeles County is around 5 percent, with jobs in the information industry, which includes motion picture and sound recording jobs, accounting for a large portion of the hole.
During the strikes, some restaurants and other small businesses that relied on Hollywood workers closed for good, and others that scaled back on staff haven’t built back to previous levels, said Kevin Klowden, an executive director at the Milken Institute, an economic think tank in Santa Monica.
In a survey released in the fall by the Public Policy Institute of California, roughly one in four Californians said the availability of well-paying jobs was a big problem in the local area.
There are economic bright spots. The state has seen job growth in education and health care, along with the leisure and hospitality industries.
“California is the tent pole of the American economy in terms of American recovery — in terms of job creation, innovation, entrepreneurial spirit,” Gov. Gavin Newsom said in January as he unveiled his budget.
Mr. Newsom’s office released an analysis of the state’s economic outlook for the year ahead, noting that “while unemployment in California may be rising somewhat faster than the nation, it is increasing from an extraordinarily low level, reflective of a tight labor market that is adjusting to more sustainable growth after rebounding so swiftly in the wake of the pandemic-induced recession.”
Dee Dee Myers, director of the Governor’s Office of Business and Economic Development, said in a statement, “There is ample reason to believe that California’s economy will continue to grow more quickly than the nation’s.”
She noted a recent directive by Mr. Newsom to create a master plan for career education that connects students to job opportunities. One priority is to reduce barriers for people seeking state jobs — including college degree requirements unnecessary for some duties, according to an outline of the directive.
But elevated unemployment will have a ripple effect on the state for a while, said Robert Fairlie, a professor of economics and public policy at the University of California, Los Angeles. Joblessness reduces overall earnings, he said, which translates into lower consumer demand and investment.
“There is a negative multiplier effect on the state economy from the higher unemployment rates we are seeing,” Mr. Fairlie said.
State Water Board Probes Sinking Canal Impacts
GVWire
Fallout over the ever-sinking Friant-Kern Canal could affect growers throughout the Tule subbasin regardless of whether they get water from the canal.
The state Water Resources Control Board already has the subbasin in its crosshairs for neglecting to create a coordinated plan to bring aquifers into balance under the Sustainable Groundwater Management Act. A hearing for the Tule subbasin is scheduled for September.
Now, new — and worsened — subsidence (land sinking) beneath the Friant-Kern Canal has prompted the canal’s operator to seek help from the Water Board.
“We’re in a corner so yeah we’re talking to the State Board and we’re asking them to review what’s happening and that we need intervention — soon,” said Jason Phillips, general manager of the Friant Water Authority, which manages the federal canal and has been the lead agency for a massive two-phase construction project to fix a 33-mile sagging section of the canal.
The sag was created by groundwater overpumping, largely by farmers not served by water districts that contract for water from Friant.
Phillips said Friant hasn’t made a formal complaint to the Water Board but it is pointing the board’s attention to the actions of the Eastern Tule Groundwater Sustainability Agency, which covers most of the land along the canal where subsidence is ongoing.
Friant’s contention to the Water Board, and laid out in a recent lawsuit, is that Eastern Tule is allowing its farmers to continue over-pumping at such a furious pace that land beneath the newly rebuilt section of the canal is collapsing faster than anticipated — about a foot a year.
Even more concerning, new “cones of depression” from over-pumping have been discovered just north of the rebuilt canal. Those new areas of subsidence had not been predicted, nor planned for, during the engineering phase of the approximately $500 million project.
Friant is still trying to figure out how to shore up the newly rebuilt sections of canal and how much that will cost. It has no idea what costs will be to handle the unanticipated sinking further north, said Johnny Amaral, Friant’s chief operating officer.
“This is a major problem,” he said. “We’re four years into the implementation of groundwater sustainability plans and there’s no slowdown in subsidence?
“This has everyone’s attention.”
LA Daily News
In an era when clean public transportation has seemingly huge support, how can the makers of low-emission buses fail?
The latest casualty is a Southern California factory where environmentally friendly buses were made. It’s being shut down by its Wisconsin-based owners.
REV Group – which makes everything from RVs to fire trucks – decided in January to exit the mass transit business, announcing the closure of its ENC bus business and its plant in Jurupa Valley. State documents show 425 jobs will be lost after the business winds down after completing outstanding orders.
Now, you probably don’t know ENC, but you’ve likely ridden in one of their products. Their legacy product was the ubiquitous airport shuttle. The manufacturer then evolved into manufacturing mass-transit buses.
LA Metro runs 295 of ENC’s natural gas-fueled vehicles. San Francisco Municipal Transportation Agency has 30 electric-hybrid mini-buses. And just last year, Foothill Transit – serving riders around Pomona – ordered 19 electric ENC buses.
The company blames a slew of challenges for the factory shuttering.
“Delays in the supply of critical components and the build out of infrastructure to support EV adoption, as well as the financial health of key suppliers, has created a competitive bidding environment for diesel and CNG buses that has made it difficult for ENC to compete profitably versus peers of greater scale,” REV CEO Mark Skonieczny said in a statement. “The decision to wind down operations was not made lightly; however, based on the options available to us, we believe this is the best path forward for our business.”
Clean-running buses ride along with plenty of government cash.
There were 6,147 electric buses in use nationwide in September 2023, up 85% in two years, according to CalStart. And California has 1,946 – nearly one-third of the national fleet.
Yet the road to business success seems rough.
Each transit district requires distinct specifications for what they buy, and that is no easy chore.
Like all vehicle makers, supply chain disruptions have become routine. And for green-vehicle makers, the parts shortage is especially problematic.
Also, like most businesses, the costs of doing business has soared – a big problem in an industry where companies bid for contracts that take years to execute.
Plus, mass transit in the post-pandemic world is by no means a growth business, as more workers do their jobs at home to avoid commutes.
The electric-bus industry heavyweight – Proterra, based in Burlingame – went bankrupt last year. Apparently, the logistics and costs of making small orders for numerous transit districts proved too daunting.
MORE:
Almonds – California’s #1 Crop – No Longer Going Nuts
LA Times e-newsletter
California grows about 80% of the world’s almonds, with thousands of orchards spanning the state — many of them in the Central Valley. The state exports the majority of the crop and the tree nuts have become a staple of many pantries and fridges — and not just in trail mix. Think almond milk, almond butter and almond flour.
But after roughly a decade-long boom, the market is in a slump, The Times’ Ian James reported this week.
“Prices have dropped over the last several years, and the state’s total almond acreage has started to decrease as growers have begun to tear out orchards and plant other crops,” Ian wrote. “In a sign of the troubles besetting the industry, one large almond-growing conglomerate has declared bankruptcy.”
That corporation, Trinitas Farming, cited record-low prices and high interest rates on land purchases. The total acreage devoted to almond growing has shrunk in the last two years as some farmers opt to plant other crops, while some orchards have been abandoned.
One factor in the price drop: too many almonds, not enough demand.
“It’s possible that we have hit peak almond,” Caity Peterson, associate director of the Public Policy Institute of California’s Water Policy Center, told Ian. “The industry will probably right-size itself to where the supply better meets the demand and it’s not oversupply, like we’ve got right now.”
So what could the future of almond growing look like in California?
Although some industry experts Ian spoke with expect a rebound, some critics see the thirsty crop’s downturn as an opportunity to rethink agricultural priorities as California works to build water resiliency.
As the almond industry blossomed, more growers were using more groundwater to cultivate the water-intensive crop, tapping an already depleted supply during drought years. New state rules in the pipeline aim to limit agricultural water use to help recharge aquifers after years of overpumping and drought.
“Researchers with the Public Policy Institute of California have estimated that addressing the groundwater deficit in the San Joaquin Valley will probably require taking at least half a million acres of farmland out of production,” Ian noted. “They’ve called for expanding efforts to help convert farmland to other uses, such as solar development or habitat areas.”
First Greenhouse Gas Smuggler Faces Criminal Charges
NY Times
The unusual contraband is sold on Craigslist and Facebook for hundreds of dollars: canisters of a banned refrigerant, for use in outdated refrigerators and air-conditioners, that is also a potent planet-warming gas.
A California man became the first in the nation to be arrested and charged with smuggling the powerful gases into the United States, a felony offense, according to the United States Attorney’s Office for the Southern District of California this week.
Michael Hart, 58, of San Diego, is accused of buying coolants in Mexico and smuggling them over the border in his vehicle, concealing the canisters under a tarp and tools. Mr. Hart then posted the refrigerants for sale on OfferUp, Facebook Marketplace and other sites, and sold them for a profit, federal agents say.
Mr. Hart pleaded not guilty. He faces charges of conspiracy, importation contrary to law and sale of merchandise imported contrary to law. Attempts to reach lawyers for Mr. Hart were unsuccessful.
“This is the first time the Department of Justice is prosecuting someone for illegally importing greenhouse gases, and it will not be the last,” Tara McGrath, a U.S. attorney, said in a statement. “We are using every means possible to protect our planet from the harm caused by toxic pollutants, including bringing criminal charges.”
The refrigerant gases in question, called hydrofluorocarbons, or HFCs, came into use in the 1990s to replace a different kind of coolant that was depleting the ozone layer, the part of the earth’s atmosphere that protects life from harmful portions of solar radiation. But scientists found that HFCs can warm the planet hundreds or even thousands of times as much as carbon dioxide, driving climate change.
Nations agreed in 2016 to start phasing out HFCs, and, since 2020, the United States has banned imports of the refrigerant without authorization. It is also phasing out domestic HFC production.
But environmental regulators and investigators have for years warned of an illicit global trade in HFCs, used to keep older refrigeration and air-conditioning systems running. They are also used in building foam insulation, fire-extinguishing systems and aerosols.
In 2019 and 2020, the authorities in the European Union, which began to phase out HFCs nearly a decade ago, recovered more than 250 tons of illicit HFCs in nearly 600 seizures across 24 countries.
Conspiracy carries a maximum penalty of five years in prison and a $250,000 fine. The other two counts Mr. Hart faces carry a maximum penalty of twenty years in prison and a $250,000 fine.
David M. Uhlmann, head of enforcement at the Environmental Protection Agency, said in a statement that the illegal smuggling of these gases “undermines international efforts to combat climate change.”