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IN THIS ISSUE – “Here in California, we’re putting in the work….”
Gov. Newsom opens budget talks with the Legislature
STATE FINANCES & POLITICS
- Legislature & Governor Have a Tough Month Ahead – Could You Spend $300.7 Billion in 30 Days?
- Legislative Deadline Day: Hundreds of Bills Live or Die…in the Dark
- Golden State Economy Remains Golden
- June Primary Opens in May – Mail Voting Trends to Watch
- 4 Tax Propositions & TV Ad Landslide – A Look Ahead at November Ballot
ENERGY & WATER
While California Ranks Near Bottom in ZEV Charger Per Capita
- Governor Mandates Local Water-Saving Programs by June 10
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 MAY 20, 2022
Could You Spend $300.7 Billion in 30 Days? Legislature & Governor Have a Tough Month Ahead
CalMatters
Gov. Gavin Newsom and state lawmakers have less than a month to reach an agreement on how they should spend $300.7 billion — an exercise in compromise every bit as existential as it is financial.
The record-breaking updated budget proposal Newsom unveiled Friday was buoyed by a staggering $97.5 billion surplus, a sum larger than the operating budgets of most states and significantly higher than the $76 billion windfall the governor’s administration had predicted in January.
State lawmakers, who have their own budget priorities, now have until June 15 to send a balanced plan to Newsom’s desk for the fiscal year that begins July 1.
Newsom: “While gridlock persists in Congress and right-wing fanatics turn statehouses across the country into laboratories of hate and oppression, here in California, we’re putting in the work to grow our economy and implement real, inclusive policy change to create a brighter future for all.”
But behind the governor’s optimism lurks concerns that California’s unprecedented prosperity could soon give way to a grimmer economic picture — one that would only worsen the gap between wealthy and poor residents upon which the state’s budget depends.
Threat #1: Volatile capital gains. Newsom and legislative staff noted that taxes on capital gains — investment earnings from the state’s wealthiest residents — made up the highest percentage of personal income taxes collected by the state since 1999, right before the dot-com bust that cratered the economy and set off a decade of budget deficits.
Threat #2: A whole host of external factors, including “persistent global supply chain bottlenecks, international economic sanctions in response to the Russian invasion of Ukraine, tighter monetary policy and persistently high inflation,” as a Senate budget analysis put it. (The analysis also noted that California could see accelerated economic recovery if those conditions improve.)
Threat #3: An obscure voter-approved constitutional amendment that blocks the state from spending more tax dollars per person than it did in 1978, once adjusted for inflation. That amendment is a big reason why the state will likely face challenges balancing its budget in the next few years, according to the nonpartisan Legislative Analyst’s Office.
There is growing momentum in Sacramento to modify the rule via a 2024 ballot measure, and Newsom on Friday also floated the idea of asking voters to expand the size of California’s “rainy day fund” — which could allow large growth in long-term government spending, the Los Angeles Times reports.
The proposed budget also illuminates persistent disagreement between Newsom and Democratic legislative leaders on the best way to keep vulnerable Californians out of poverty, CalMatters’ Alejandro Lazo reports.
As part of his $18.1 billion inflation relief package, Newsom wants to send as much as $800 to every eligible registered vehicle owner in the state to offset the soaring price of gas, which in California reached a record per-gallon high of more than $6 yesterday.
But top Democrats say their proposal to send $200 checks to individuals earning less than $125,000 and to each taxpayer and child in households earning less than $250,000 ensures the state’s neediest residents will benefit most.
Senate President Pro Tem Toni Atkins of San Diego: “The Senate is working to make sure Californians get rebates — not just passing along a one-size-fits-all windfall that benefits millionaires.”
Full May Revise Roll-Out story:
Legislative Deadline Day: Hundreds of Bills Live or Die…in the Dark
CalMatters
There wasn’t a lot of light on what state lawmakers got up to on Thursday — literally.
First, there was the power outage that swept across downtown Sacramento, delaying the start of the Assembly and Senate’s floor sessions.
But it would have been understandable if you were left in the dark even after the electricity was restored.
That’s because lawmakers then embarked on an opaque process called the suspense file, a twice-annual procedure in which they rattle through a list of hundreds of bills at breakneck speed, passing or killing them without a word of explanation — and, in the cases of some dead bills, without even mentioning them at all.
Making it even harder to track what’s going on, the Assembly and Senate appropriations committees — which handle the suspense file — met at the same time Thursday, forcing advocates, reporters and curious members of the public to rapidly toggle back and forthbetween screens and spreadsheets.
And don’t for a second think you can get up and go to the bathroom, or go get another cup of coffee, or take your eyes off the screen — because you can’t rewind legislative livestreams.
Plus, you aren’t just tracking what lawmakers say — you’re tracking what they don’t.
While the Assembly appropriations committee announced which bills it was tabling — in other words, slaying — the Senate didn’t. So a proposal to shut down the three offshore oil rigs in state waters following last year’s Huntington Beach oil spill died a literally silent death, as did a bill to tighten gun safety requirements for film productions after Alec Baldwin fatally shot photographer Halyna Hutchins on the set of the movie “Rust.”
State Sen. Dave Cortese, the Campbell Democrat who authored the gun safety bill: “It’s a powerful and ruthless industry. First the industry killed Halyna. Then they killed the bill that would’ve made people like her safe.”
Indeed, while the suspense file allows lawmakers to shelve proposals that are too expensive, it also allows them to silently euthanize those that are controversial, opposed by powerful interest groups, or politically inconvenient — concerns that take on additional weight in an election year.
All in all, about 220 bills met their demise Thursday — and Alexei Koseff and the rest of the CalMatters team have a rundown of the most notable measures.
Senate bills:
Assembly bills:
Golden State Economy Remains Golden
State Dept. of Finance
California real GDP grew by 7.8 percent in 2021 —the highest growth rate since 1984—following a decrease of 2.8 percent in 2020 (the largest contraction since 2009). Similarly, U.S. real GDP increased by 5.7 percent in 2021 (also the highest growth rate since 1984) following a decrease of 3.4 percent in 2020 (the largest contraction since 1946).
California’s share of U.S. real GDP increased to 14.8 percent in 2021, growing from 14.5 percent in 2020 and 14.4 percent in 2019. California personal income increased by 8.5 percent in 2021 following 8.6-percent growth in 2020 while U.S. personal income grew by 7.4 percent in 2021 after 6.5-percent growth in 2020.
Total wages and salaries continue to be the main driver of personal income growth for both the state and the nation, with California total wages increasing by 12.5 percent in 2021 (the highest growth rate since 2000) and U.S. total wages increasing by 9.3 percent (the highest growth rate since 1984).
California’s share of U.S. personal income increased to 14.2 percent in 2021, following growth of 14.1 percent in 2020 and 13.8 percent in 2019.
California’s unemployment rate decreased from 5.3 percent in February 2022 to 4.9 percent in March 2022. California added 60,200 nonfarm jobs in March 2022, driven by gains in leisure and hospitality (14,800), followed by professional and business services (10,400), educational and health services (9,000), construction (8,900), trade, transportation, and utilities (5,300), other services (4,900), financial activities (3,600), manufacturing (2,900), information (200), and government (200). The number of jobs in mining and logging remained unchanged.
As of March, California has recovered 89.3 percent of the nearly 2.8 million nonfarm jobs lost in March and April 2020.
MONTHLY CASH REPORT
Preliminary General Fund agency cash receipts for the first nine months of the 2021-22 fiscal year were $17.35 billion above the 2022-23 Governor’s Budget forecast of $138.348 billion. Cash receipts for the month of March were $199 million below the forecast of $21.047 billion.
Of note, $5.446 billion of the total additional revenue through nine months is due to higher-than-expected Pass-Through Entity (PTE) elective tax payments under the corporation tax, a 2021 state tax change designed to allow some taxpayers to reduce their allowable federal tax liability starting with their 2021 tax returns. Every dollar received from the PTE elective tax paid generates a dollar of personal income tax credit. While the amount of PTE elective tax payments can be tracked in monthly cash reports, the extent to which taxpayers will reduce their personal income tax payments to reflect the elective tax credits cannot be determined until tax return data for 2021 is available next year. Therefore, it is reasonable to assume that a portion of this $5.4 billion may overstate the amount of overall revenue strength to date.
Personal income tax cash receipts to the General Fund for the first nine months of the fiscal year were $10.362 billion above the forecast of $88.342 billion. Cash receipts for March were $332 million above the forecast of $7.18 billion. Withholding receipts were $83 million above the forecast of $9.091 billion. Other cash receipts were $474 million above the forecast of $1.874 billion. Refunds issued in March were $219 million above the expected $3.656 billion. Proposition 63 requires that 1.76 percent of total monthly personal income tax collections be transferred to the Mental Health Services Fund (MHSF). The amount transferred to the MHSF in March was $6 million higher than the forecast of $129 million.
Sales and use tax cash receipts for the first nine months of the fiscal year were $992 million above the forecast of $23.428 billion. Cash receipts for March were $311 million below the month’s forecast of $2.791 billion. March cash receipts include the prepayment for first quarter taxable sales.
Corporation tax cash receipts for the first nine months of the fiscal year were $8.124 billion above the forecast of $20.297 billion. Cash receipts for March were $9 million above the month’s forecast of $9.95 billion. Estimated payments were $248 million above the forecast of $950 million, other payments were $652 million above the $997 million forecast, and Pass-Through Entity (PTE) elective tax payments were $819 million below the $8.19 billion forecast. Despite the lower-than-forecast PTE elective tax payments in March, year-to-date payments are still significantly above forecast due to very high PTE elective tax payments received in December and January. Total refunds for the month were $72 million higher than the forecast of $187 million.
BUILDING ACTIVITY & REAL ESTATE
California permitted 136,000 units on a seasonally adjusted annualized rate (SAAR) basis in February 2022, up 27.6 percent from January 2022, and up 17.4 percent from February 2021. February 2022 permits consisted of 72,000 single-family units (up 6.5 percent from January 2022, but down 0.6 percent year-over-year) and 64,000 multi-family units (up 64.6 percent from January 2022 and also up 47.7 percent year-over-year).
The statewide median price of existing single-family homes reached a new record-high of $849,080 in March 2022, up 10.1 percent from February 2022 and up 11.9 percent from March 2021. This was 2.6 percent higher than the previous record of $827,940 set in August 2021. Sales of existing single-family homes in California totaled 426,970 units (SAAR) in March 2022, up 0.5 percent from February 2022, but down
4.4 percent from March 2021. Year-to-date through March, sales volume averaged 432,050 units (SAAR), which was 7 percent lower than in the same period in 2021 but 12.3 percent above the first quarter of 2019.
State Dept of Finance report:
https://dof.ca.gov/wp-content/uploads/Forecasting/Economics/Documents/Apr-22.pdf
June Primary Opens in May – Mail Voting Trends to Watch
Capital Weekly & Political Data
For the 2022 primary we already have seen the state’s 22 million voters receiving ballots and we should be getting significant returns in the coming days.
The elephant in the room for early vote watchers is how Republicans and independents use the vote-by-mail system.
In polling conducted by Capitol Weekly prior to the 2020 general, we asked Republican voters if they were planning on voting by mail, or returning their ballot to a dropbox or to the polls. At the time only 37% of Republican likely voters said they would vote by mail, with 21% saying they would use a dropbox and 42% saying they would go to the polls.
In contrast, half of Democratic voters said they would vote by mail, 41% favored a dropbox and only 9% said they would wait to vote at the polls.
Heading into this primary we have asked voters the same questions, and we are finding similar results.
Only 44% of Republicans say they will vote by mail, while 22% are favoring a dropbox and 34% are saying they will vote at a local polling location. As in 2020, roughly half of Republicans do not believe their ballot would be safe if they mailed it in, with the greatest fear that someone is going to take their ballot and change their votes.
Among Democrats surveyed this week, 60% say they will vote by mail, 34% say they will use a dropbox and only 7% say they will vote at the polls. Nearly all (92%) of Democratic voters say they are confident that their ballot will be counted, with 77% “extremely confident.”
If Republicans can get past the 2020 sentiment against vote by mail, the early returns would likely look like the 2018 primary, with Republicans outperforming in the early vote, Democrats holding their rate of registration, and independents coming in with slightly lower early participation.
However, if Republicans continue to carry this anti-mail-ballot sentiment, as the current polling suggests, this could be a very challenging election for their candidates and present a serious crisis for party leaders.
In this scenario, we should see an elevated Democratic share of the early vote throughout the early voting period, and any Republican strength could be limited to the very late and in-person voters.
In the 2020 General we saw the impact of this shift to later voting, and that was in an environment where every voter was inundated with wall-to-wall coverage of the election, and nobody was forgetting when the election was going to be held. It was also seen as incredibly competitive all the way to the finish line.
This year’s primary and general elections are unlikely to have the same attention or competitiveness – and Republicans can’t afford to have their ranks simply forget to vote.
Other important factors to consider include:
–Given the lack of exciting elections on the statewide ballot, we could see a relatively low turnout election, which could impact the relative rate of returns. The top of the ticket includes few household names, and even reporters are struggling to make something like the Attorney General or State Controller races interesting.
–With a higher rate of registration than any time in the last 100 years, we could have a lot more infrequent voters on the rolls, decreasing the percentage of voters who return ballots. However, the by-mail system likely increases turnout a bit, given how it reduces barriers to participation.
–The lack of any big cliffhanger elections, ones in which we are waiting for other states to vote, or where there are big competitive statewide contests, could allow for an earlier vote. There also aren’t a litany of confusing ballot measures on the primary ballot. Those traditionally have caused voters to wait while considering how they will vote.
–Residents of Los Angeles may vote a bit later given their historical late voting patterns, with some holding on to their ballots to decide in the mayoral contest. But most voters aren’t sitting on the edge of their seat waiting for the latest breaking news out of the State Controller or Attorney General race.
–The move by the Supreme Court to potentially end Roe v. Wade could have impacts on turnout among Democrats and other progressives, even if abortion isn’t expressly on the June ballot. Even if the wave of current attention abides, it is expected that the court could announce the decision before the June 7 primary election.
–There’s the hidden factor of the mechanics of the election systems. Over the past 20 years counties have made great strides in receiving and processing early ballots. We must always be careful to take early returns with a grain of salt — a few counties simply processing their ballots quicker can look to an outside observer like accelerated rates of voting.
As always, with all these caveats and unknowns it is important to take any early vote data with a grain of salt.
We could be seeing a large Democratic advantage in the early stages of the voting period – but that may not truly mean a massive overall Democratic turnout if they are simply cannibalizing their late vote. And any potential Republican loss in early voting could easily be made up in the last weekend and on Election Day.
Remember, these return patterns will also impact election night results. If, as has been seen in 2018 and many elections before, Democrats are the late returns and poll voters, we will see a “blue shift,” in which Democrats who were slightly behind on election night will begin winning races in the days and weeks after the election.
If the pattern is flipped, as our polling suggests, we would see a “red shift,” with Democrats who have leads on election night watching those advantages evaporate in the days and weeks after the election.
https://capitolweekly.net/ca120-reading-the-tea-leaves-as-early-votes-come-in/
4 Tax Propositions & TV Ad Landslide – A Look Ahead at November Ballot
LA Times California Politics e-newsletter
Statewide primary ballots may have arrived in mailboxes, but the big political money is aimed at November.
In 2012, then-Gov. Jerry Brown signed a law moving all voter-circulated ballot measures to November elections. The change was needed, Democrats said, to ensure important propositions weren’t decided in June elections when voter turnout is often tepid. Or worse.
(Reality check: Democrats also wanted to strike a blow against politically conservative ballot measures because older, white voters reliably show up for primaries and the state’s diverse, liberal electorate often does not.)
Only legislative proposals can now be considered in primary elections. This time, there are none — making the June 7 primary the first in California since 1964 without a single statewide ballot measure.
So what’s in store for November? A lot.
The size of the ballot won’t set a record — the conventional wisdom is voters will see 10, maybe 11, statewide propositions this fall. But the campaign spending might hit new highs. Led by a quartet of measures to expand taxes and raise taxes, voters will probably be inundated with TV ads, online videos and a mountain of political mailers.
Two ballot measures would impose tax increases on California’s highest earners with the money earmarked for specific new government services.
One seeks a decade’s worth of taxes on incomes above $5 million to fund a broad array of state pandemic prevention and mitigation programs. A second ballot measure would impose a new tax on incomes above $2 million to fund an expansion of zero-emission vehicles and a portion of the money spent on wildfire prevention and suppression programs.
These two tax measures could presumably both take effect — in fact, the electric vehicles initiative explicitly says there’s no conflict with the pandemic prevention proposal. That would mean two new taxes on some of California’s uber-wealthy, a small group of taxpayers who account for a large portion of state budget revenue.
A recycling measure, which has already qualified for the ballot, seeks to impose a variety of efforts that have previously failed to gain tractionin the Legislature. It would ban plastic foam food containers, impose new recycling standards for single-use plastics and create new consumer dropoff and deposit recycling efforts.
Two late arrivals on the scene. On Thursday, the campaign led by wealthy L.A. investor Joe Sanburg submitted more than 1 million signatures on a ballot measure to raise California’s minimum wage to $18 an hour over a three-year period. The effort was one of the last ones to hit the streets for signature gathering and could be the last campaign to submit the petitions to elections officials — leaving less time for the verification process that must end before late June.
Late, too, is the recently announced effort by Newsom and Democratic lawmakers to offer an abortion rights amendment to the California Constitution. The proposal, a state Senate constitutional amendment, must clear both legislative houses before June 30.
Should all of these proposals clear their final electoral hurdles, voters would see 11 propositions on California’s Nov. 8 ballot. But the list could have been much longer.
CalMatters commentary from Dan Walters
Gov. Gavin Newsom and the California Air Resources Board publicly boasted last week about making great strides toward eliminating fossil fuels and their greenhouse gases.
The board released “a draft plan that, when final, will guide the state’s transition to a clean energy economy, drastically reduce the use of fossil fuels, achieve carbon neutrality by 2045 or sooner, and significantly clean the state’s air especially in disadvantaged communities disproportionately burdened by persistent pollution.”
Much of the plan is concentrated on transportation — particularly cars and trucks — which is the largest single emitter of carbon dioxide and other pollutants.
“That means rapidly moving to zero-emission transportation, electrifying the cars, buses, trains, and trucks that now constitute California’s single largest source of planet-warming pollution,” ARB said.
Newsom, meanwhile, crowed that with new state subsidies, sales of battery-powered
zero-emission vehicles (ZEVs) have exceeded 16% of all new vehicle sales so far this year, more than double the proportion in 2020. He also noted that Californians make half of nationwide purchases of electric vehicles.
“Our state is on the frontlines of extreme weather, and we’re taking aggressive steps to protect Californians from the costs of climate change — transitioning away from the big polluters fueling this crisis and towards clean energy,” Newsom said. “These incentives make it easier and cheaper to make that transition.”
This year’s increase in electric car sales was, no doubt, spurred in part by a steep hike in gasoline prices, as well as subsidies – which poses an interesting dichotomy. Newsom has decried those fuel price spikes and wants the state to offset them with payments to motorists, which would reduce some of their motivation to buy electric cars.
Moreover, were California to eventually ban sales of gasoline- and diesel-powered vehicles and go 100% ZEVs, as Newsom also advocates, charging their batteries would impose immense new burdens on an electric power grid that’s already strained to meet demand.
By happenstance, as Newsom and the air board were issuing their upbeat messages about the shift, a financial data website, Forbes Advisor, was revealing that California has one of the nation’s worst records on providing recharging sites for ZEV owners.
Its study, drawn from U.S. Department of Energy data and numbers from all 50 states, found that North Dakota is the nation’s most ZEV-friendly state with one charging station for every 3.18 electric vehicles.
Wyoming, Rhode Island, Maine and West Virginia round out the top five.
And California? It has the fourth highest ratio, just one station for every 31.2 ZEVs. New Jersey is the least accommodating to ZEV owners, with one station for every 46.16 electric vehicles.
Okay, so California is lacking when it comes to infrastructure needed to support the ZEV nirvana that Newsom and the ARB envision, both in terms of electrical power supply and sites to connect that power to electric cars.
However, the situation may actually be worse.
Again by happenstance, last week brought us evidence that not only is California failing to provide enough ZEV charging stations, but those it does have often don’t work.
David Rempel, a retired professor of bioengineering from UC Berkeley, and a team of volunteers tested 181 public Bay Area charging stations with 657 plug-in kiosks and found 73% in working order but 23% had inoperable screens, payment failures or broken connector cables and in 5% cables were too short to reach vehicles recharging inlets.
California’s much-vaunted shift to electric cars may turn out to be one of the state government’s many high-concept programs that become managerial disasters.
https://calmatters.org/commentary/2022/05/electric-cars-california-newsom/
Governor Mandates Local Water-Saving Programs by June 10
CalMatters
Californians should gear up for a water conservation “mandate for mandates,” Gov. Gavin Newsom said during a visit to a Carson water recycling facility. By that, he meant his order to water suppliers to step up by June 10 their local responses to California’s devastating drought — a move that might not go over too well, given that residents in March recorded the biggest jump in water use since the drought began.
Newsom: “I hope folks just pause and reflect on two things. We’re remarkably resilient and resourceful. We got through a five-year drought, 2012 to 2016. We’ll get through this year. That requires us to do things a little differently, be a little more creative. … The approach this year is different than the old administration. It’s bottom-up, not top-down. State vision will be realized at the local level, local flexibility, local strategies, lessons learned from the previous drought … and scaling those plans and best practices all across this diverse state.”
The governor’s office also encouraged Californians to limit outdoor watering, take showers as short as five minutes, avoid baths, use a broom instead of a hose to clean outdoor areas and only wash full loads of laundry.
The news comes as California braces for a spate of hot, dry, windy weather that could see temperatures soar to triple digits and gusts reach 45 miles per hour in some parts of the state — or, as the National Weather Service’s Sacramento office put it, “critical fire weather conditions” on Thursday and Friday. Incidentally, new researchaccounting only for the impact of climate change found that the number of California properties facing severe wildfire risk could grow sixfold over the next 30 years to 600,000, the Los Angeles Times reports.