Gov. Newsom’s Rushed, Bloated Budget

We can say this much about the folks in the California Legislative Analyst’s Office: They don’t mince words. After Gov. Gavin Newsom crowed last week about “his” $76 billion surplus, the LAO was standing by with a bucket of cold water to dump on his latest proposed budget.

The Legislative Analyst’s Office is the state legislature’s nonpartisan fiscal and policy advisor, and they had plenty of advice.

First, the LAO states that Newsom’s $76 billion figure is about double what the surplus actually is: “We estimate the state has $38 billion in discretionary state funds to allocate in the 2021-22 budget process, an estimate that is different than the governor’s figure.” The LAO attributes the difference to the fact that most of the $76 billion must be spent on specific purposes including schools and community colleges, reserves, and debt payments. Spending which is constitutionally mandated cannot be considered “surplus.”

Second, the Gann Spending Limit, a constitutional provision requiring surplus funds to be returned to taxpayers, complicates the governor’s plan to provide direct payments to only some of California’s residents. A way to avoid the problem would be to return money directly to taxpayers by reducing taxes, something the LAO has acknowledged is a viable alternative.

Here again, the LAO pushes back against the governor’s assumptions: “The Governor’s May Revision estimates the state will collect $16 billion in revenues in excess of the [Gann] limit this year. However, the ultimate amount of a potential excess will depend on decisions by the Legislature. Ultimately while the [Gann limit] will be an important consideration in this year’s budget process, the Legislature has substantial discretion in how to meet the constitutional requirements.”

Third, and perhaps the most offensive to the taxpaying public, is the governor’s intention to continue drawing down the state’s reserve funds. This makes no sense when we have a multi-billion dollars surplus. The LAO expressly states that such a plan is imprudent: “Despite a historic surge in revenues, the Governor continues to rely on budget tools from last year. Specifically, he uses $12 billion in reserve withdrawals and borrowing to increase spending… We urge the Legislature not to take a step back from its track record of prudent budget management.”

To read the entire column, please click here.

California’s Full-Capacity Reopening

Gov. Gavin Newsom announced last month that California would fully reopen its economy in June if Covid-19 hospitalizations stayed low and the vaccine supply remained high. But it was never clear what fully reopened meant exactly.

On Friday, state health officials provided some specifics.

In just three weeks, on June 15, California, the most populous state in the country, will return to the closest thing to normal since the pandemic began.

There are a few caveats and exceptions, mostly for large indoor and outdoor events. But the memo-style guidelines issued by the state’s Department of Public Health on Friday used a bit of dry, bureaucratic lingo — “all sectors listed in the current Blueprint Activities and Business Tiers Chart may return to usual operations” — to herald the start of post-pandemic California. …

Click here to read the full article from the NY Times.

How O.C. Stumbled In Virus Response

In early 2020, as COVID-19 cases began popping up across Southern California, Rep. Michelle Steel’s message to her constituents brimmed with the optimism that Orange County might be able to avoid an outbreak.

“We will do whatever we can do [to] keep Orange County coronavirus-free,” Steel — then the chair of the county’s Board of Supervisors — said in late February. Less than a month later, the county identified its first COVID-19 infection from community spread. Over the course of 15 months, the virus would infect more than 254,000 people and kill over 5,000 in Orange County alone.

An investigation by the Orange County Grand Jury shows Steel wasn’t alone in thinking it was possible to stem the rising tide of a pandemic. A report released last week showed that county officials for years had largely underestimated the threat of a global pandemic — classifying it as likely as a disaster at the San Onofre nuclear plant or an act of terrorism. That mindset resulted in a response that stymied outreach efforts to hard-hit communities and hindered access to testing and vaccines, according to the report. …

Click here to read the full article from the L.A. Times.

Gas Tax Rising Again, But Road Fixes Remain

Four years after the Legislature boosted the gas tax in order to fix California’s crumbling roads and bridges, the state has spent billions and made some progress in repairs, but officials now say the funding is sufficient only to complete less than half of the work needed.

The gas tax has been a political hot potato since it was passed in 2017, resulting in the recall of a Democratic state senator who voted for the legislation and an unsuccessful attempt by Republicans in 2018 to ask voters to repeal the higher charges.

Now, with the gas tax set to increase again July 1, the campaign to fix roads and bridges is again stirring contention, drawing criticism from some lawmakers who say repairs have been too slow and the effort has lagged behind other states in maintaining and improving transportation systems.

The program to fix roads has been hampered by California’s high cost of repairs compared with other states and by the COVID-19 pandemic, which resulted in less driving and therefore hundreds of millions fewer gas-tax dollars than expected. In addition, with people driving more electric and fuel-efficient cars, state officials are studying ways to make up for the loss of gas tax revenue, possibly with fees tied to miles driven. …

Click here to read the full article from the L.A. Times.

Gavin Newsom’s Surplus of Bad Ideas

Facing a likely recall election, California Gov. Gavin Newsom is in the enviable position of having a state budget that’s awash in cash and the ability to shower residents with stimulus checks and other giveaways. In announcing the California Comeback Plan, the governor detailed his proposal to spend $100 billion in additional revenue — $75 billion in a budget surplus plus $25 billion in federal aid. It’s Christmastime in May, which just might ameliorate voter anger.

“Every Californian has been impacted by this pandemic, and the sacrifices we all made this past year have resulted in a historic surplus — I’m here to announce that we’re investing in you,” the governor said last week. He promised “the nation’s largest state tax rebate and small business relief programs in history” as well as “unprecedented investments … to address California’s most-persistent challenges.” It’s bad budgeting, but good politics.

Heading into the coronavirus shutdowns, California officials had predicted a coming $54 billion budget deficit and enacted a variety of cutbacks and budget sleights of hand to help the state get through this crisis without having to change its free-spending ways. In January, Gov. Gavin Newsom had predicted a $15 billion surplus. The latest Department of Finance surplus numbers, revealed in the May budget revision, astounded almost everyone.

We certainly can debate the wisdom of the direct cash payments. I almost always oppose such giveaways, of course, but the state did in fact shutter businesses for more than a year and reduce the ability of millions of Californians to earn a living. We might think of some of these dollars as the equivalent of a government reimbursement for a “taking.”

And it’s hard to complain about any tax rebate (provided it’s an actual rebate and not a redistribution) — even if it would be far better to permanently lower the state’s highest-in-the-nation income-tax burden. As usual, though, Newsom’s rhetoric vastly exceeded his actual proposals. For starters, the nonpartisan Legislative Analyst’s Office (LAO) threw cold water on the surplus figures by pinning the number at around half of the governor’s estimates.

The governor included in his figure “constitutionally required spending on schools and community colleges, reserves and debt payments,” according to the LAO. “We do not consider these spending amounts part of the surplus because they must be allocated to specified purposes.” More significantly, the LAO dinged him for fiscally imprudent steps — namely, using “$12 billion in reserve withdrawals and borrowing to increase spending.”

In other words, Newsom is digging a deeper hole to help finance these giveaways. And it doesn’t take any sophisticated budget analysis to see that the governor’s promise to rebuild California’s crumbling infrastructure through “unprecedented investments” is equally overstated. Recent surveys place California near the bottom of state-by-state lists for the condition of its roads, freeways, bridges, and other crucial infrastructure.

Every Californian understands our long-standing highway mess. An unexpected influx of cash would provide an unprecedented opportunity to clean up some of the backlog and catch up for decades of inaction. Buried on page 181 of his 235-page budget document, the governor finally details his “significant” new transportation investments.

Primarily, the investments “move the state away from yesterday’s fossil fuel-based technologies,” “advance projects statewide to improve rail and transit,” “help complete high-priority projects to move people throughout the state seamlessly in time for the Los Angeles Olympics in 2028,” “create thousands of good-paying jobs,” and “reduce at least 26 million metric tons of CO2 from the environment.” They also “make investments that address inequities in the transportation system.”

Few of those spending projects involve what most of us would consider actual infrastructure investments. Specifically, the new spending earmarks $1 billion for the Olympics, $500 million to promote walking and biking, $1.4 billion for zero-emission buses and trucks, and $407 million to fund zero-emission rail and transit equipment purchases. It also invests in highway beautification.

The budget directs $2 billion (nearly half of it from federal dollars) for local roads and bridges and spends a whopping $4.2 billion to keep alive the state’s preeminent boondoggle — a high-speed rail system that currently plans to move people from the bustling metropolises of Merced to Bakersfield. It’s hard to see how this amounts to “building infrastructure for the next century.”

Prior to the governor’s budget announcement, he detailed his bold plan to spare Californians from the effects of the latest drought. “This package of bold investments will equip the state with the tools we need to tackle the drought emergency head-on while addressing long-standing water challenges and helping to secure vital and limited water supplies to sustain our state into the future,” the governor said with his usual hyperbole.

Since the last drought, the administration has done little to rebuild our water conveyance system, increase water-storage capacity, and push through desalination, water recycling, and other necessary projects that actually funnel more water into the system. This $5.1 billion package includes some long-needed expenditures, such as funding to provide potable drinking water in some impoverished communities in the San Joaquin Valley. But little of it will boost water supplies.

The proposal is filled with earmarks for wildlife corridors, fish-passage projects, data collection efforts, water-efficiency grants, habitat restoration, land repurposing, and cleaning up groundwater contamination. Many of these projects are useful or at least defensible — but they’re not really about nuts-and-bolts water investments. As always, you’ve got to check the fine print whenever California officials promise to rebuild “infrastructure.”

Consider the budget windfall another missed opportunity for California to right its ship of state by, say, using the surplus to lower its overall tax burden, pay down its unfunded liabilities, and rebuild its long-neglected infrastructure. Instead, we get a tsunami of new spending that will mainly serve the purpose of derailing an effort to recall the governor.

Steven Greenhut is Western region director for the R Street Institute. Write to him at [email protected]

This article was originally published by the American Spectator.

California Delays Debate On Easing Virus Rules For Workers

California workforce regulators will aim for a mid-June easing of workplace mask and social distancing requirements to conform with a broader state order, postponing a vote on whether to revise coronavirus safety rules for employees.

Cal/OSHA’s staff said it would aim “to make possible a targeted effective date of June 15, 2021,” instead of proceeding with a proposal that would have made businesses wait until July 31 to ease some pandemic restrictions.

The same regulations also would impose new requirements that dozens of business groups called too onerous during a hearing Thursday by the California Occupational Safety and Health Standards Board.

Having two conflicting enforcement dates would be “a huge source of confusion and problems,” California Chamber of Commerce policy advocate Rob Moutrie told the board. …

Click here to read the full article from AP News.

Gov. Newsom Sending Vax Checkers Door to Door

Photo by Daniel Schludi on Unsplash

Thousands of people hired by the State of California are out knocking on doors asking residents if they’ve been vaccinated. The goal is to target the “vaccine hesitant” and to get as many Californians vaccinated as possible, the Sacramento Bee reports.

This feels rather authoritarian – and a HIPAA violation.

The state is paying $10 million to fund the effort, “which is being led by Healthy Future California and UCLA, in partnership with 70 community-based organizations.”

Healthy Future California is a California Domestic Non-Profit Corporation filed On April 1, 2021. The company’s filing status is listed as Active and its File Number is C4727729. This is weird – Healthy Future California was just created last month?

According to Gov. Gavin Newsom’s office, they’ve hired 2,000 people “to make peer-to-peer appeals and provide support to help overcome barriers to vaccinations.”

There are no “barriers” to vaccinations, only people who don’t want to take the vaccine.

These door-to-door vax checks are taking place in Alameda, Fresno, Kern, Los Angeles, Merced, Orange, Riverside, San Bernardino, Sacramento, San Diego, Santa Barbara, Tulare and Ventura counties.

34,804,886 total vaccines have been administered in California. 

In California, 39% of residents are fully vaccinated, while another 12% are partially vaccinated, according to the California Department of Public Health. Public health officials have said that at least 70% of the population must be vaccinated in order to achieve herd immunity.

There are reports that 40-50% of health care workers are not taking the vaccine, along with an 40-50% of teachers, and even  40-50% employees at the CDC.

According to the Bee:

Veronica Carrizales, with Healthy Future California, said that community-based organizations are hiring people from the targeted communities to reach out to those very same communities.

Canvassers have so far knocked on more than 231,000 doors, completed more than 1.3 million calls, and have made 13,000 appointments, according to Carrizales.

“For most part people are happy to see us there are their doors,” Carrizales said.

Really? I seriously doubt that.

Katy Grimes, the Editor of the California Globe, is a long-time Investigative Journalist covering the California State Capitol, and the co-author of California’s War Against Donald Trump: Who Wins? Who Loses?

This article was originally published by the California Globe.

Gov. Newsom’s Latest Binge

“It is our hope that all schools will be able to physically open for five days per week in the fall but local conditions will determine whether that is possible.”
– Cecily Myart-Cruz, President, United Teachers of Los Angeles (UTLA Update 5/14/2021)

It’s impossible to know what “local conditions” are going to look like when kids go back to school this Fall, but two things are certain: Whatever the United Teachers of Los Angeles want, the United Teachers of Los Angeles are going to get, and to the extent “local conditions” involves money, there’s going to be plenty of it.

California’s budget bonanza, just announced last week, capitalizes on conditions unique to California that in retrospect are obvious. The COVID lockdown may have decimated California’s working families and small businesses, but the explosion in online activity delivered stupendous windfalls to California’s high tech industry. In California’s top heavy income tax model, the more money California’s super rich make, the more money pours into the state treasury. And pour it did. Quoting from the May Revision of California’s 2021-22 state budget:

“Compared to a projected budget deficit of $54 billion a year ago, the state now has a projected $75.7 billion surplus. Combined with over $25 billion in federal relief, this supports a $100 billion California Comeback Plan — a once-in-a-lifetime opportunity.”

This hundred billion dollar binge is a welcome distraction for the embattled Governor Newsom, who faces a recall election later this year. And of course, spreading an extra $100 billion around the state should certainly offer short-term relief, even in California’s $2.7 trillion economy. But as always, how this money is spent is more important than how much is spent. For example, Newsom is dumping an extra $4.2 billion into High Speed Rail, but only another $2.4 billion to repair highways and bridges. And in a sop to the teachers unions, Newsom is dumping tens of billions of increased funding into California’s public schools.

For decades, the universal solution to improving public education in California has been to spend more money. Mostly prior to the COVID disaster, during the 2019-20 school year, the estimated spending in California’s K-12 public schools – when taking into account capital spending and the state’s supplemental contribution to CalSTRS – was already nearly $21,000 per pupil. So now that Newsom has these windfall revenues, how much more will K-12 students be getting?

The base for California’s K-14 student funding is governed by Prop. 98, passed by voters in 1988. The complicated formula is generally summarized as guaranteeing that 40 percent of California’s general fund budget is allocated to K-14 education. In Newsom’s original 2020-21 budget, the K-12 portion of Prop. 98 funding was $84 billion. In the May revision, this amount swelled to 93.7 billion. Per student, that represents a rise of over $1,500. But that’s not all.

According to Politico, Newsom has promised that $27 billion of the surplus will go to K-12 schools and community colleges, an amount well in excess of the Prop. 98 increase. According to Capitol Public Radio, supplemental Federal funding of $15 billion will be going to California’s K-12 schools. Newsom also announced “$20 billion to transform California public schools into gateways of equity and opportunity,” including establishing “universal pre-k and college savings accounts for 3.7 million low-income children in public schools.”

With the revised budget just released days ago, it’s too soon to specify to what extent some of these reported numbers overlap, but it is indisputable that Newsom’s new plan for California’s K-12 public schools involves spending spending closer to $25,000 per pupil than $20,000 per pupil. Will it ever be enough?

After the Binge Comes the Bust

The problem with setting up vast new categories of public spending on education – universal pre-K, college savings accounts, massive new hiring for school counselors and other support personnel, is that these new programs create new structural, perennial costs, and that additional burden makes it even harder to adapt when the economy slows down. And someday it will, even in sunny California.

Heading into the COVID pandemic, California’s state and local government budgets were already strained. A California Policy Center study conducted in 2019, looking at the most recent available data on the state’s finances, estimated the total state and local government debt at an eye popping $1.5 trillion. The chart used in that study is presented here:

While this data is now nearly four years old, the overall picture has not changed.  Californians have continued to approve new local bonds, almost all of them for K-12 construction, adding billions in new debt at much faster rate than old debt is being retired. At the same time, California’s beleaguered public employee pension funds, notably including CalSTRS, have failed to crawl up from their officially recognized funding at about 70 percent of what is required for long-term solvency.

This is the dismal balance sheet that is being ignored by Newsom, the California Teachers Association, and every participant in today’s spending binge. Optimism is easy when you’re intoxicated, but the morning hangover is as predictable as the sunrise. What goes up, must come down. And why should public schools cost so much in California?

Private Schools Cost Less. A Lot Less.

Relying on estimates from the Sacramento Beecorroborated by California Dept. of Education data, there are roughly 475,000 K-12 students in California that attend private schools. Parents pay for their children to attend these schools because they offer a better education than the public schools. Otherwise, they wouldn’t pay the tuition. They’d just send them down the street to the local public school. And how much do private schools cost?

According to EducationData.org, the average tuition for a private school in California is $12,860 per year. That number is corroborated by PrivateSchoolReview.com, which offers a 2021 estimate of $14,821 per year. This is substantially less than California’s public per pupil spending averages, for a private school. Bearing in mind the handful of private schools that are catering to a wealthy clientele, skewing these averages, it’s important to explore some of the more cost effective private school solutions in California.

The availability of affordable private education in California is validated when reviewing a 2021 directory showing the annual tuition rates for 897 private schools. All located in California, there are 17 very expensive schools, with tuition over $50,000 per year, 26 with tuition over $40,000 but under $50,000 per year, 79 with tuition between $30,000 and $40,000 per year, and 113 with tuition between $20,000 and $30,000 per year. In all, only 235 schools, or 26 percent of the 897 private schools surveyed, had tuition over $20,000 per year.

Of the remainder, 456 private schools, or more than half of the private schools surveyed, had annual tuition of under $10,000 per year. This is a telling statistic. More than half of California’s private schools charge tuition that is less than half what California’s public schools spend per pupil. Moreover, it is possible this tuition could cost even less if California’s K-12 system of education were competitive.

For example, an interesting 2018 analysis published by Education Next asked the question “Why Can’t the Middle Class Afford Catholic School Anymore?” The author surveyed the causes of tuition increases in Catholic schools. One of them, difficult to counter, was the gradual replacement of teachers who were members of religious orders or clergy with lay people. As they put it, there was “a decline in religious vocations and the subsequent disappearance of low-cost labor from priests, nuns, and brothers on staff.” But then the author makes a fascinating point, noting that as nationwide enrollment in Catholic schools declined from over 5.0 million in 1960 to just under 2 million in 2018, staffing levels stayed the same. Why?

The author speculates that a positive feedback loop occurred. As staff costs went up, to make ends meet, Catholic schools began to prioritize attracting affluent clientele. These affluent parents in-turn had an expectation of a high teacher/student ratio, which increased costs further, which created still more incentive to cater to parents with greater means. But in reality, as the author points out, the relationship between class size and educational opportunity is at best “complicated,” and in fact the quality of the teacher is far more determinative of student achievement than class size.

Don’t tell that to the teachers’ unions. Shrink the class size, hire more staff, spend more money. There is no amount of money that can achieve true educational “equity,” and for the education spending binge machine that Governor Newsom is feeding without reservation, that’s a good thing. Until it isn’t. School choice, in the form of schools of all types competing for students, cannot come to California too soon.

This article originally appeared on the website California Globe.

California Weighs Electric Car Mandate For Uber And Lyft

Ninety percent of miles logged by Uber and Lyft drivers in California will have to be in electric vehicles by 2030 under a state mandate to be considered Thursday. 

The California Air Resources Board’s proposed regulation aims to curb the climate impacts of emissions from ride-hailing trips. It’s an ambitious target: In 2018, electric vehicles accounted for less than 1% of miles traveled by Uber and Lyft drivers in California.

The big question for the gig-economy fleets is: Who will pay for the cleaner cars? 

Representatives of Uber and Lyft told the air board that they support the 90% mandate, but are pushing for state funding and flexibility if they encounter delays meeting the targets.

“We support this regulation and we support the ambitions that it sets out,” said Adam Gromis, global lead on sustainability policy at Uber. “We do think that there’s work to be done in terms of pairing and marrying the regulation side with supportive policies that can ensure a fair transition for drivers.” 

Lyft wrote in a letter to the board: “While we are pleased to see aggressive environmental targets, we are disappointed that the efforts of the past years have culminated in metaphorical sticks with no carrots.”

Environmental groups, labor advocates and drivers are calling for California regulators to ensure that the companies, not the drivers, cover the costs of electrifying their fleets.

“Yearly costs for ride-hailing companies and drivers, including electricity and home chargers, could reach roughly $400 million in 2030, according to an air board staff report. But staff predicts that savings, including on gasoline and maintenance, will far outstrip them — leading to net benefits of $215 million in 2030.”

Still, an air board analysis of driver ZIP codes estimates that about 56% of ride-hailing drivers could be from low-income or disadvantaged communities who may not be able to afford the switch to an electric vehicle. …

Click here to read the full article from CalMatters.org

California To End Its Mask Mandate — Sort Of

Photo by engin akyurt on Unsplash

June 15 will be a big day for California.

That’s when the state will ease its mask mandate to allow fully vaccinated people to forgo face coverings in most places, Dr. Mark Ghaly, the state’s health and human services secretary, said Monday. It’s also when California will lift capacity limits on businesses, permitting the state to fully reopen for the first time in more than a year.

  • Ghaly: “California has made amazing progress in our fight against COVID-19 … with more than 34 million vaccines administered, we now have one of the lowest case and positivity rates in the nation.”

That California will not follow new guidance from the U.S. Centers for Disease Control and Prevention for another month underscores the political and logistical complexities of changing the Golden State’s mask rules. And don’t expect the complexities to end on June 15: Ghaly emphasized Monday that counties and private businesses can choose to keep tougher mask rules in place. He also noted that the state’s workplace safety agency, which is meeting later this week to consider changes to its emergency coronavirus rules, may set its own standards for employers and workplaces. Meanwhile, masks will be required in schools “throughout the rest of this calendar year,” Ghaly said.

Adding to the confusion, the state is still figuring out whether Californians should be required to show proof of vaccination in order to walk maskless into a store, and if so, how. Although California has incentivized businesses to use vaccine passports, it’s shied away from creating a statewide system — though Ghaly said officials are “continuing to watch and see how these technologies can be used to help support public health in our state.”

Another reason the state is waiting a month to loosen its mask rules: It wants more Californians to get vaccinated first. Just under half of the state’s eligible population was fully vaccinated as of Monday. And when it comes to herd immunity, only two of 58 counties are close to reaching the vaccination levels experts say are necessary to keep COVID-19 at bay — while most trail far behind with less than half of their eligible population vaccinated, CalMatters’ Ana Ibarra reports.

This article was originally published by CalMatters.org