Capitol News & Notes
For Clients & Friends of The Gualco Group, Inc.
IN THIS ISSUE – “Revenues are up, but the outlook ahead is a little more precarious. There’s no capacity for new commitments…we estimate significant deficits in subsequent years” Gabe Petek, Legislative Analyst, briefing reporters on Fiscal Year 2025-26
Legislature Convenes Special Session to Fund Trump Resistance…
What IS a Special Session, Anyway?
- “Precarious” Fiscal Outlook for State Budget, Legislative Analyst Says
- California Jobless Rate Hits Post-Pandemic High; Tax Revenues Remain Above Forecast
- Democrats Keep Supermajority, But GOP Gains Seats in Legislature
- Latino Caucus Takes Heat for Rejecting Republicans
- Fewer Voters Voted & Counting Ballots Still Takes Waaaay Too Long
- Lame Duck Governor, Newsom Moves to Marin; Won’t Release Tax Returns for Now
- California’s Electoral Influence Drops as People Leave State
The Gualco Group’s Capitol 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 NOV. 22, 2024
Capitol News & Notes will not publish next week, resuming with our Dec. 6 issue.
Legislature Convenes Special Session to Fund Trump Resistance
Sacramento Bee
The Legislature will convene in special session on Dec. 2, as Gov. Newsom requested earlier this month, to debate his direction to fund the State Dept. of Justice for litigation against the Trump Administration on multiple issues, including healthcare and environmental programs.
The cost and FY25-26 State Budget impact will be a primary focus.
During the first months of Donald Trump’s first term in 2017, the California Department of Justice devoted more than 13,000 hours of bureaucrats’ time preparing the state for legal battles against the new president.
“California has staked out a position as a leader on environmental protection, expansion of access to quality and affordable health care, and immigrant rights,” read a DOJ budget change request submitted to the Legislature in May 2017. “These hard fought forward-leaning changes are currently under threat from a hostile Federal government.”
To prepare at that time, the DOJ asked for a $6.5 million budget increase and dozens of additional employees. State leaders granted the request. For the rest of Trump’s term, the state’s AG office received annual money to push back against the former president.
It is unclear how much the Legislature and Newsom will consider for Trump 2.0. Neither the DOJ, nor the Governor’s Office, provided an amount.
“In terms of the incoming Trump Administration, our office will work in conjunction with the Governor and the Legislature to ensure we have the resources we need to meet the demands of the moment and robustly defend California’s people, progress, and values,” a DOJ spokesperson said in a statement Tuesday.
The $6.5 million allocated accounts for a fraction of the department’s budget. The DOJ’s Legal Services Division, which accounts for more than half of the department’s total expenses, has a budget of more than $700 million this year.
…What IS a Special Session, Anyway?
Capitol Weekly
A special session is one convened pursuant to a proclamation issued by the Governor. Article IV, Section 3(b) of the state Constitution specifies, in part: “on extraordinary occasions the Governor by proclamation may cause the Legislature to assemble in special session. When so assembled it has power to legislate only on subjects specified in the proclamation but may provide for expenses and other matters incidental to the session.”
A special session can run separately (i.e., outside the regular session) or concurrently with the regular session (i.e., at the same time). Just like in a regular session, officers are elected and rules are adopted by both the Assembly and Senate.
A common misconception is that the Legislature must enact bills when called into special session. While the Legislature must convene the special session once it has been called by the Governor, there is no legal requirement that any legislation be enacted, nor even be voted upon.
However, the state Constitution does limit what the Legislature can consider during a special session — “it has power to legislate only on subjects specified in the proclamation, but may provide for expenses and other matters incidental to the special session.”
Aside from the fact that a special session is limited to the subject matter for which it was called, there are no significant differences in legislative process between a regular and special session.
https://capitolweekly.net/what-you-should-know-about-california-special-sessions/
“Precarious” Fiscal Outlook for State Budget, Legislative Analyst Says
CalMatters & Legislative Analyst Office
With tax revenues from high-earning Californians rebounding in recent months, the Legislature’s nonpartisan fiscal adviser projects that the state budget remains “roughly balanced,” but spending growth is expected to drive increasing deficits in the years ahead.
That could make it difficult for Gov. Gavin Newsom to pursue ideas that he has proposed in recent months to fight back against a second Trump administration and reboot California’s sluggish economy during his final two years in office.
In its annual fiscal outlook, issued today to prepare lawmakers for the upcoming budget process, the Legislative Analyst’s Office estimated that California will face a $2 billion deficit next year, a potential gap that could be resolved with minor solutions — and one that Legislative Analyst Gabriel Petek repeatedly warned leaves no room for new programs.
“The revenues are up, but the outlook ahead on that is a little more precarious,” he told reporters during a briefing. “There’s really no capacity for new commitments, because we do estimate there to be these pretty significant operating deficits in the subsequent years.”
Those shortfalls will reach about $30 billion annually by the 2028-29 fiscal year, according to the office’s projections, and there are additional uncertainties related to President-elect Donald Trump’s agenda. California’s economy is particularly vulnerable to plans he has floated to raise tariffs and limit immigration, while Trump has threatened further recriminations to the state on disaster aid and other funding if it bucks him.
Assembly Speaker Robert Rivas, a Salinas Democrat who will negotiate California’s next budget with Newsom and his counterpart in the state Senate, endorsed a cautious approach.
“We need to show restraint with this year’s budget, because California must be prepared for any challenges, including ones from Washington,” Rivas said in a statement. “It’s not a moment for expanding programs, but for protecting and preserving services that truly benefit all Californians.”
Newsom has already called a special session starting in December to appropriate potentially tens of millions of dollars to the state Department of Justice for expected litigation against the Trump administration. He is also developing a proposal for a backup disaster relief fund and wants to double to $750 million annually the tax credit program for the state’s struggling film and television industry, a critical economic sector in Southern California.
H.D. Palmer, a spokesperson for the governor’s Department of Finance, said the state is in far better fiscal condition than it was a year ago even with challenges ahead. He declined to discuss how Newsom would offset proposed new spending in his budget plan, which is expected in early January.
“It reflects his policies and his priorities,” Palmer said, which will be “will be accommodated within the overall framework of a balanced budget proposal.”
Newsom and the Legislature passed a $298 billion budget this summer that aimed to address a major deficit, estimated to be tens of billions of dollars over the next two years, by dipping into reserves, pausing some business tax credits and making widespread cuts to state government operations, prisons, housing programs and health care workforce development in order to maintain California’s social safety net.
Now tax collections are forecast to beat expectations by $7 billion for the year, largely driven by stock market gains, according to the Legislative Analyst’s Office fiscal outlook. Stock compensation for employees of major tech companies such as Nvidia has provided an outsized portion of the income tax windfall.
But that money is projected to be offset by spending more than $10 billion higher than the current state budget assumed, including more guaranteed funding for schools and community colleges from the additional revenue. Other large unexpected costs include for fighting wildfires and an expanding caseload for state health programs for seniors, as well as a November ballot measure approved by voters that raises reimbursement rates for doctors who treat poor residents.
That leaves a “small deficit” of $2 billion for the state to address before the start of the next fiscal year in July, the Legislative Analyst’s Office concluded. “Given the size and unpredictability of the state budget, we view this to mean the budget is roughly balanced.”
Yet there are warning signs in California’s economy, such as soft consumer spending, an uptick in unemployment and hardly any job creation outside of the government and health care. The office questioned the sustainability of the recovery in state income tax revenue.
The annual fiscal outlook by the Legislative Analyst’s Office is merely a forecast and can vary greatly from the projection by the Department of Finance that the governor uses for his budget proposal in January.
Last December, the Legislative Analyst’s Office estimated a $68 billion deficit for the next fiscal year — frustrating Newsom, whose spending plan relied on a smaller $38 billion expected revenue gap. He repeatedly criticized the media for its widespread reporting on the Legislative Analyst’s Office figure.
Seemingly recalling those criticisms, Petek published an essay last week defending his office and “the value of independence” as it helps the Legislature understand the choices it may face.
“Our independent fiscal assessment underlies the Legislature’s ability to assert an informed check on the executive branch, making any added complexity from diverging estimates a worthwhile trade-off,” Petek wrote.
LAO:
California Jobless Rate Hits Post-Pandemic High; Tax Revenues Remain Above Forecast
Legislative Analyst’s Office & State Dept. of Finance
California businesses reported a decline of 5,500 jobs in October. The state’s unemployment rate went up from 5.3 percent to 5.4 percent, its highest level since the pandemic period.
The state’s labor market seems to have weakened a bit recently after showing some signs of stabilizing earlier this year, with softer monthly jobs gains and once-again expanding tally of unemployed workers as the most worrisome signs.
Legislative Democrats Keep Supermajority, But GOP Gains Seats
Politico’s California Playbook
California Democrats are on the verge of securing as big a supermajority in the Legislature as they already had — and with it the power to pass budgets without any Republican votes and control the flow of legislation.
In the state Senate, Democrats held 31 of the 40 Senate seats heading into the election, with 20 seats on the ballot. With two races undecided, Democrats will control at least 30 seats, three more than a supermajority.
In the state Assembly, Democrats had 62 of the 80 Assembly seats before the election. With three contests still up in the air, Democrats will win at least 61 seats, seven more than a supermajority. Democrats have enjoyed supermajorities since the 2018 election.
However, for the first time in a decade, California Republicans are on track to gain seats in the Legislature — a stark shift after losing ground to moderate Democrats cycle after cycle.
Republicans are expected to flip as many as three legislative districts when all the ballots are finally counted — one in the Senate and two in the Assembly.
Democrats will still hold a supermajority in both chambers, and a few more votes won’t be enough to help the GOP flex its muscle on key legislation or the state budget. But the blue-to-red flips offer a jolt of momentum to GOP lawmakers used to living in the shadow of a Democratic trifecta in Sacramento.
They could also embolden the Republican Party — and its donor base — to spend more heavily in future cycles to defend seats in the Inland Empire, Central Valley and Orange County. GOP legislative candidates made inroads despite the party being massively outspent by Democrats’ campaigns.
Republican operatives said the wins speak to a broader shift in the 2024 election: Republicans and President-elect Donald Trump did better in California in large part due to stronger support among Latino and working-class voters — a microcosm of the national trend that fueled Trump’s return to power.
Democrats in the state Senate, meanwhile, are bracing for a major hit: Incumbent Josh Newman is expected to lose to Republican Steven Choi, a conservative former state assemblymember. The race hasn’t been called, but Choi leads by nearly 7,000 votes.
Senate President Pro Tem Mike McGuire had said reelecting Newman was his caucus’ “number one priority” for the cycle. The caucus also spent heavily on targeting Republican Sen. Rosilicie Ochoa Bogh and an open seat in the Santa Clarita area — losing both races.
“It’s really working-class people that are moving to the GOP, and Hispanics are a subset of that. They just don’t like the woke,” said Duane Dichiara, a Republican consultant who worked on several battleground Assembly races in Southern California.
One of the biggest blows to Democrats in the Assembly was the loss of an open Imperial County seat held by Assemblymember Eduardo Garcia, who opted not to run for reelection. The Latino-majority district, in the far southeastern corner of California along the Arizona and Mexico border, has long been a Democratic stronghold.
Republican Jeff Gonzalez, a former Marine, defeated Democrat Jose Acuña Jr. by hammering Democrats over the state’s high cost of living and crime rates.
Republicans are also poised to pick up another open Assembly seat in a Latino-majority Riverside County district — one that Democrats were initially expected to win.
Republican Leticia Castillo, a family therapist, leads Democrat Clarissa Cervantes by 496 votes.
Cervantes’ campaign to succeed her sister, Sabrina Cervantes — who just won her state Senate bid — was derailed by news of two DUI arrests. Castillo also tapped into voters’ frustrations with crime and the cost of living.
There were some bright spots for Democrats in the Assembly. Incumbents Pilar Schiavo and Esmeralda Soria won reelection in two battleground districts — Schiavo in Santa Clarita and Soria in the Central Valley. They also succeeded in holding a suburban San Diego County seat, where Darshana Patel won a tight race to succeed termed-out Assemblymember Brian Maienschein.
That said, the party spent heavily and fell short in its efforts to defeat Republican Assemblymembers Greg Wallis (Inland Empire) and Laurie Davies (Orange County).
Latino Caucus Takes Heat for Rejecting Republicans
Sacramento Bee
Once again, the California Legislative Latino Caucus is drawing heat from the right for apparently precluding Republican lawmakers from joining.
When in 2022 the Legislature added four Latino GOP office-holders to the roster, Republicans criticized the caucus when it declined to let them join.
Now, in 2024, it’s likely Assemblyman-elect Jeff Gonzalez, R-Indio, whom Republicans say is barred from the caucus.
As of Monday afternoon, Gonzalez had received 51.6% of the vote in Assembly District 36, while Democrat Joey Acuña Jr. had 48.4%. The seat is currently held by Democratic Assemblyman Eduardo Garcia.
On X, Assembly Republican Leader James Gallagher, R-Yuba City, called Gonzalez “an incredible candidate.”
“He has a strong message, an amazing record of service to our country, and a passion for his community,” Gallagher wrote.
Republican staffer George Andrews noted on Bluesky that if Gonzalez wins the seat, it will be the first Democrat-to-Republican legislative seat flip in presidential election year since 1992.
Assemblyman Joe Patterson, R-Rocklin, in a post on X criticized the caucus for preemptively barring Gonzalez from joining.
“Democrats will not allow Jeff (a Marine Corps veteran) to join the Latino Caucus despite being Latino and representing a Latino district. It’s sad that the caucuses have become tools of the majority party to simply defeat Republicans, rather than advance policies to improve lives,” Patterson wrote.
Reached for comment, Caucus Chair Sen. Lena Gonzalez, D-Long Beach, said in an email statement that the caucus “per our bylaws and since its inception over 50 years ago has always been Democratic.”
“Republican Latinos can and have created their own caucus, in the past,” she said.
Lena Gonzalez called on the media to ask her GOP colleagues “as to why they have refused to create their own Latino Caucus.”
“This type of media sensationalism detracts from the real issues that our Latino communities are facing daily in California and beyond: inflation, immigration, housing insecurity and more,” she said.
The senator added that the Legislative Latino Caucus will not compromise on its core values, including fighting mass deportation, “nor will we stand by idly while our communities have been discriminated against and threatened, by Donald Trump.”
Fewer Voters Voted & Counting Ballots Still Takes Waaaay Too Long
Public Policy Institute of California & CalMatters
The nonpartisan Public Policy Institute of California looked at the state turnout for the election and found that the results were underwhelming.
“Based on the most recent estimate, a little over 16 million Californians voted in the 2024 election. If this number holds, it would mark a significant decline in turnout: roughly 1.7 million fewer ballots than 2020, despite 550,000 more registered voters and 1.8 million more eligible residents,” wrote PPIC’s Mark McGhee in a Monday blog post.
“As a share of eligible residents, it would be the largest decline in any presidential election in the last 50 years (-11.3%) — and it would easily outpace the best estimates for this year’s nationwide decline in turnout (-2.9%),” McGhee wrote.
As always, the caveat holds that not every vote has been counted yet. More than 780,000 California ballots remain to be counted, according to the California Secretary of State’s Office.
But McGhee wrote that this information can be informative, because it suggests better voter engagement is possible.
“Many of those who stayed home this year might have voted in a different environment, since so many of them did so four years ago. Understanding all the factors that contributed to the decline in turnout will be an important topic moving forward,” he wrote.
https://www.ppic.org/blog/californias-voter-turnout-sank-in-2024/
The complaints and questions surface after every election: It takes California way too long to count all the votes. It’s unfair to candidates and their supporters in close races to make them wait. Is there something nefarious going on?
It’s all happening again, further eroding public confidence in elections: In California’s 45th Congressional District, Republican U.S. Rep. Michelle Steel and Democratic challenger Derek Tran are neck and neck, with Tran leading by a mere 314 votes as of late Tuesday. But because Steel was leading by more than 11,000 votes days after the election, some congressional Republicans are decrying the flip as evidence of Democrats “stealing the seat.”
And while Assemblymember Joe Patterson easily won his bid for reelection, the Rocklin Republican is taking issue with being sworn in for his second term on Dec. 2, a day before county elections officials must certify the results and nearly two weeks before the Secretary of State’s deadline.
In 2022 Christy Holstege went through the Assembly’s freshmen orientation, only to find out later that her opponent, Republican Assemblymember Greg Wallis of Rancho Mirage, won after all the votes were tallied.
Now, their rematch is one of five legislative races that still haven’t been called — and one of the contests being tracked by the California Voter Foundation. Its goal: To rebuild public trust in the vote count.
Kim Alexander, foundation president: “If someone came along later and said, ‘Something hinky is going on here,’ there would be a reliable source of information people could turn to to see how the vote count evolved over time.”
The reasons why California takes so long to count votes are varied. But it doesn’t always have to be this way, says Alexander. For instance, the state could allow voters to opt out of vote-by-mail; provide more staffing and better equipment to county election officials; and invest in more voter outreach that emphasizes submitting ballots sooner.
MORE:
https://calmatters.org/politics/elections/2024/11/california-election-results-slow-vote-count/
Lame Duck Governor, Newsom Moves to Marin; Won’t Release Tax Returns for Now
Sacramento Bee & CalMatters
California Gov. Gavin Newsom has relocated to a home in Marin County. The governor signaled that he would make the move back to the Bay Area this summer.
According to the San Francisco Chronicle, Newsom’s new digs are a $9.1 million six-bedroom home in the unincorporated community of Kentfield.
Newsom’s office declined to discuss the move, or whether Newsom personally bought the property, but a spokesperson did tell the Chronicle that “the family continues to split their time between Sacramento and Marin counties.”
According to Politico, Newsom’s four children already are enrolled in school in their new county. Newsom’s six-bedroom Fair Oaks home was purchased by a limited liability company owned by Newsom’s cousin, Jeremy Scherer, in 2019 for $3.7 million.
The governor’s relocation comes as he enters the “lame duck” portion of his administration, the final two years of his second four-year term. He leaves office at the beginning of 2027.
The Newsom family briefly lived in the governor’s mansion, in downtown Sacramento, while their Fair Oaks home was being renovated. The previous governor to live in that mansion was Newsom’s immediate predecessor, Democratic Gov. Jerry Brown.
https://www.sacbee.com/news/politics-government/capitol-alert/article295739634.html#storylink=cpy
Despite pledging to be the first California governor to release his tax returns every year while in office, Gov. Gavin Newsom has yet to make any additional filings public during his second term.
Newsom last disclosed a tax return nearly three years ago, in March 2022, as he was running for re-election. Under a state law, signed by Newsom himself, that requires gubernatorial candidates to release their five most recent income tax returns, the governor shared filings through 2020, when he and wife Jennifer Siebel Newsom earned nearly $1.5 million and paid about $480,000 in taxes.
A spokesperson for Newsom declined to provide CalMatters with any of his tax returns since then. Nathan Click said the governor’s team would organize an opportunity for reporters to review the documents in a controlled setting, as it has in the past, but did not provide a date or respond to any follow-up questions.
MORE:
California’s Electoral Influence Drops as People Leave State
CalMatters commentary from Dan Walters
Kamala Harris could count on winning California’s 54 electoral college votes as she campaigned for president, and the state’s voters delivered. In fact, California’s electoral votes were almost a quarter of the 226 she won nationwide, 44 short of what she needed to defeat Donald Trump.
Simultaneously, however, Harris’s party fell short of regaining control of the House of Representatives, thanks in part to failing to flip as many seats in California as party leaders, such as Speaker Emerita Nancy Pelosi, had hoped.
Those outcomes illustrate the powerful role that the nation’s most populous state plays in determining who controls the federal government.
Looking ahead, however, California’s clout in both presidential and congressional elections — and therefore in the rooms where post-election policy decisions are made — is shrinking. It’s a stark reminder of the old adage that demography drives destiny.
California experienced strong population growth for the first 150 years of the state’s existence, largely due to migration from other states and nations and a high birthrate.
The state’s decades-long expansion reached a high point in the 1980s when its population exploded by more than 25%, from 23.8 million to 30 million, due to strong foreign immigration and a new baby boom.
There was a newborn every minute.
The decade’s population growth granted it seven new congressional seats after the 1990 census, increasing from 45 to 52. In 1992, Bill Clinton claimed the state’s 54 electoral votes, becoming only the fourth Democrat to win the state in the 20th century.
Democratic nominees have continued to win California’s electoral votes in every presidential election since, but they could no longer count on a new harvest every decade.
Population growth began to slow in the late 1990s, thanks largely to out-migration of Southern California aerospace workers and their families as defense spending dried up after the breakup of the Soviet Union.
It gained one seat after the 2000 census, but population growth stagnated during the 2010 decade, with a net increase of 2.4 million, just 10% of what occurred in the 1980s.
The state lost a congressional seat after the 2020 census, so California now has 52 districts. The COVID-19 pandemic and other factors, such as a declining birthrate and increasing death rate, have led to population stagnation since then.
“California lost 433,000 people between July 2020 and July 2023,” the Public Policy Institute of California calculated. “Most of the loss occurred during the first year of the pandemic and was driven by a sharp rise in residents moving to other states. But fewer births, higher deaths and lower international migration also played a role.”
That’s where we are now: roughly 39 million, a bit under the 2020 census number. But the future looks like slow growth at best, which means the state will likely lose four or more congressional seats, and therefore electoral votes, after the 2030 census.
A 2023 analysis by the liberal Brennan Center estimated that California will lose four seats, while the conservative American Redistricting Project pegged the likely loss at five seats.
It’s a major chunk of a wider shift of population, congressional seats and electoral votes from blue states — New York will also be a big loser — to red states such as Texas and Florida, whose economies are growing smartly and where housing is affordable.
By either 2030 projection, were the 2032 Democratic nominee for president to carry the same states that Harris did this year, he or she would win 12 fewer electoral votes.
Demography is destiny.
https://calmatters.org/commentary/2024/11/california-political-clout-population-growth/