Why lawmakers aren’t very worried about a deficit

From: POLITICO California Playbook - Thursday Dec 08,2022 02:24 pm

Dec 08, 2022

By Lara Korte , Jeremy B. White , Sakura Cannestra and Owen Tucker-Smith

THE BUZZ — COOL YOUR JETS? The report from the state Legislative Analyst’s Office predicting a $24 billion budget deficit for 2023 rattled Sacramento last month. But in a presentation Wednesday, Assembly Budget Chair Phil Ting (D-San Francisco) was optimistic when he laid out the chamber’s 2023 blueprint — saying the state will be able to protect the last decade of investments in things like education, health care and public safety even if revenues are less-than-peachy.

Ting: “This is a very different situation than the state was faced [with] in 2008 and 2009, where they were running out of cash, and that they didn't really have any options.”

The main source of confidence: budget reserves. Since the Great Recession, the state has managed to build a buffer against future downturns. The LAO says the state’s general fund reserves are roughly equivalent to the predicted deficit, about $23 billion. The Assembly, which calculates reserves differently than the LAO, estimates a total of about $37 billion, including reserves from Proposition 98, which have to be spent on education.

Ting’s office said reserves are sufficient to preserve core programs, including classroom funding. Just how much of the reserves will be needed, however, will depend on the economy in June, when lawmakers will hash out budget specifics. Nevertheless, Ting said he wants to avoid dipping into the reserves, if possible: “Reserves are not going to be the first place we go to balance the budget.”

Assemblymember Phil Ting speaks to lawmakers.

Assemblymember Phil Ting speaks to lawmakers. | AP Photo

There are some alternatives, he said, like spreading out one-time spending across multiple years. Ting’s office also noted that it may be difficult to adjust all programs to keep up with inflation rates.

He didn’t say specifically which programs or spending areas could be affected if the state is forced to make tough decisions.

If you’re wondering how California went from a nearly $100 billion surplus this year to the prospect of a $24 billion deficit, look at the monthly revenue figures. Income taxes account for much of the state’s spending, and since the start of the new fiscal year in July, the state's revenue has been coming in lower than expected nearly every month.

This also presents a whole new set of challenges for Gov. Gavin Newsom, who has enjoyed a flush budget over the past two years, buoyed by a booming stock market and thriving tech sector. The governor is already making moves to balance the budget — including vetoing several costly, ongoing-spending bills this year. We’ll hear more about his plans to keep the state solvent when he presents his first 2023 budget proposal in January.

BUENOS DÍAS, good Thursday morning. This afternoon in San Francisco, three former Twitter employees and their attorney will hold a press conference regarding federal class actions against the social media giant ahead of their first court hearing. The press conference will take place outside the Phillip Burton Federal Building & United States Courthouse and will be livestreamed on Twitter at 12:30 p.m.

QUOTE OF THE DAY: “Their silence is deafening. Or worse they keep perpetrating the same policies and lies that caused the insurrection to happen.” Craig Sicknick, brother of fallen U.S. Capitol Police officer Brian Sicknick, explaining why his family refused to shake the hands of House GOP Leader Kevin McCarthy and Senate Minority Leader Mitch McConnell at a congressional gold medal ceremony Tuesday.

TWEET OF THE DAY:

Today's Tweet of the Day | Twitter

WHERE’S GAVIN? Forgive us — we jumped the gun yesterday by incorrectly stating the governor was in Oregon talking about the nation’s largest river restoration project. That’s actually happening today. Newsom will join Oregon Gov. Kate Brown, Secretary of the Interior Deb Haaland and tribal leaders along the Klamath River.

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Top Talkers

COUNCIL CORNER — “ L.A. City Council votes to reinstate salary of indicted member Mark Ridley-Thomas ,” by the Los Angeles Times’ David Zahniser: “The Los Angeles City Council voted Wednesday to reinstate the salary of indicted Councilmember Mark Ridley-Thomas, more than a year after he was suspended from his post while facing federal corruption charges.”

— “ Twitter’s Duty to Protect Free Speech ,” Opines Ro Khanna for the Wall Street Journal: “Defending free speech is easy when it’s speech you agree with. Defending speech you dislike, or speech that doesn’t advance your interests, is more challenging. But it is in exactly those uncomfortable situations that American democratic principles call on us to protect the free exchange of ideas and freedom of the press.”

CAMPAIGN MODE

PLANNING AHEAD — “ Riverside City Councilmember Ronaldo Fierro to seek Inland Assembly seat ,” by the Press-Enterprise’s Jeff Horseman: “Ronaldo Fierro hopes to go from Riverside City Hall to the state capitol. The Riverside city councilmember has announced plans to run as a Democrat for the 58th Assembly District in 2024. The district includes parts of Riverside, Corona and Eastvale along with all of Jurupa Valley and Grand Terrace.”

— “ Powerful and a little incognito: What it’s like to become an L.A. County ‘supe,’ ” by the Los Angeles Times’ Rebecca Ellis: “It’s a position that comes with immense power. But it’s also a job that most outside the county government don’t fully grasp — even some of the people who have served on the once exclusively male board that earned the sobriquet ‘the five little kings.’”

CALIFORNIA AND THE CAPITOL CORRIDOR

FLEETING FAREWELL — “ California labor secretary abruptly exits post in Gavin Newsom’s cabinet ,” by the Sacramento Bee’s Maggie Angst: “Gov. Gavin Newsom’s top adviser on California labor issues abruptly left her post this week under uncertain circumstances. Natalie Palugyai, who Newsom appointed as secretary of the California Labor and Workforce Development Agency in July 2021, is no longer with the department, the governor’s office and the agency confirmed Wednesday.”

— “ Bye-bye parking requirements: San Jose becomes largest city to abolish minimum parking ,” by the Mercury News’ Eliyahu Kamisher: “The car is no longer king in the Bay Area’s largest city. That’s the message city leaders sent to housing developers as San Jose became the country’s largest municipality to abolish decades-old parking minimums that fueled vast concrete lots and commuter sprawl.”

NORTHERN PRESSURE — “ Sacramento likely can’t force L.A. City Council reform. It’s trying anyway ,” by the Los Angeles Times’ Julia Wick: “In response to the city’s audio leak scandal, a proposed state law could force Los Angeles to establish an independent redistricting commission, curtailing the City Council’s influence over the lines that delineate their districts.”

— “ California rodeo animals face violent and deadly casualties: Broken backs, legs and skulls ,” by the Los Angeles Times’ Susanne Rust: “As the Los Angeles City Council prepares to weigh in on a measure to effectively ban rodeos, a review of 21 years of rodeo animal injury reports shows a hidden, violent and deadly side to a sport heralded as an icon of American tradition.”

PACING PROGRESS — “ Six years after California expanded ballot access, many counties are reluctant to adapt ,” by the Sacramento Bee’s Jenavieve Hatch: “When Brown signed the bill, just 5 counties adopted the new voting model. But in 2022, despite data from the Secretary of State showing that the VCA has substantially improved turnout, fewer than half of California’s counties — 27 of 58 — have signed on.”

WATER WARS — “ He was called the ‘Darth Vader’ of California water. Farmers now want a friendlier face ,” by the Sacramento Bee’s Ari Plachta: “Birmingham spearheaded the agency’s quest to keep water flowing as its longest serving general manager, largely through attempts to loosen environmental regulations. Known for his pugnacious approach backed by mountains of litigation, he is reviled by environmentalists and is perhaps the most polarizing figure in the turbulent world of California water politics.”

10TH & L — “ Capitol Annex project violated environmental regulations, appeals court rules ,” by CapRadio’s Nicole Nixon: “A major overhaul of state offices connected to California’s state Capitol building will likely be delayed after an appeals court ruled the project’s environmental impact report lacked sufficient analysis of its design.”

— “ Emboldened athletes push back on old-school coaching methods ,” by the AP’s Janie McCauley: “[Geoff] Bond left his post earlier this year without any explanation from the school, and his employment status is unclear. In his wake, a debate now rages in college sports and athletics at every level: What constitutes bullying, and what is merely good, hard-nosed coaching that aims to get the most out of young adult athletes?”

POLITICO AT CES 2023 : We are bringing a special edition of our Digital Future Daily newsletter to Las Vegas to cover CES 2023. The newsletter will take you inside the largest and most influential technology event on the planet, featuring every major and emerging industry in the technology ecosystem gathered in one place. The newsletter runs from Jan. 5-7 and will focus on the public policy related aspects of the event. Sign up today to receive exclusive coverage of CES 2023.

BIDEN, HARRIS AND THE HILL

SPRINTING TO THE END — “ 4 priorities Bay Area lawmakers hope to push before Republicans take over the House ,” by the San Francisco Chronicle’s Shira Stein: “Members of the Bay Area delegation are prioritizing measures that would provide a path to legal status and citizenship for immigrant farmworkers, improve federal emergency assistance for wildfires, outline accommodations for pregnant workers and enhance federal cyber protections.”

— ‘An epidemic of hate’: Emhoff hosts White House roundtable amid rising antisemitism , by POLITICO’s Kelly Hooper and Eugene Daniels: Doug Emhoff did not expect to become the face of the Biden administration’s fight against antisemitism when he became second gentleman, but he leaned into the role Wednesday during a roundtable on the issue.

REFLECTION TIME — Republicans have a post-election epiphany on mail voting , by POLITICO’s Meridith McGraw: As Republicans come to terms with their lackluster midterm performance, top GOP officials and conservative luminaries are acknowledging voters were led astray with calls to reject early and absentee voting.

— “ I’m proud to protect marriage as one of my last acts as speaker ,” Opines Nancy Pelosi for the Washington Post: “Our Respect for Marriage Act combats this threat by requiring states to recognize same-sex marriages, as long as they are valid in the state where they were performed. It also finally repeals the discriminatory Defense of Marriage Act, so that no future MAGA majority in Congress or president in the White House can wield this policy as a weapon of bigotry.”

SILICON VALLEYLAND

FOURTH ESTATE FOES — “ Google and Meta embrace full-court strategy against media ad revenue sharing proposal ,” by the Intercept’s Lee Fang: “The Journalism Competition and Preservation Act, a bipartisan bill, would be the first piece of legislation to fundamentally challenge the business model for social media giants, forcing them to give major journalistic organizations a cut of their ad revenue.”

THERANOS FALLOUT — “ Former Theranos COO Sunny Balwani sentenced to nearly 13 years in prison ,” by CNBC’s Rohan Goswami: “Former Theranos chief operating officer and president Ramesh ‘Sunny’ Balwani was sentenced to nearly 13 years in prison Wednesday for fraud, after the unraveling of the blood-testing juggernaut prompted criminal charges in California federal court against both Balwani and Theranos founder Elizabeth Holmes, who on Nov. 18 was sentenced to more than 11 years in prison.”

MIXTAPE

STRIKE A POSE — “ The University of California is Also a Landlord ,” Opines Tracy Rosenthal for the New Republic.

— “ Fall quarter at UC Davis is about to end. What happens to grades if the UC strike doesn’t? ” by CapRadio’s Janelle Salanga.

EAT UP — “ These are the 101 best restaurants in Los Angeles ,” by the Los Angeles Times’ Bill Addison.

— “ Buh-Bye, Gas! Come January, New Buildings In LA Will Have To Be Fully Electric ,” by LAist’s Erin Stone.

LOOKING IN THE MIRROR — “ Here’s what Hallmark’s Christmas movie gets wrong about San Francisco and The Chronicle ,” by the San Francisco Chronicle’s Tony Bravo.

Transitions

— CalMatters’ Emily Hoeven, who authors the outlet’s daily WhatMatters newsletter, will join the San Francisco Chronicle as a columnist and editorial writer in January.

BIRTHDAYS

Microsoft’s Ginny Badanes … Samantha Granville … Austin James … artist Sophia Narrett … Long Ellis … Nancy Meyers

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