DRIVING THE DAY: BUDGET ANXIETY — The extent of the fiscal pain that lawmakers and Gov. Gavin Newsom must confront next year is about to come into better focus. The nonpartisan Legislative Analyst’s Office is expected to release its report this morning projecting the size of the deficit. Lawmakers and lobbyists are already bracing for spending cuts. THE BUZZ — California Republicans just can’t catch a break. Former Speaker Kevin McCarthy will resign from Congress at the end of the year, he announced in an op-ed on Wednesday, throwing his own political future — and the fates of vulnerable California Republicans — into murky territory. His resignation comes as a disappointment, but not a surprise to his loyal supporters in Congress. McCarthy is well-liked in his district, but he would have faced withering campaign attacks over a dysfunctional Congress and his failure to rein in far-right members. It doesn’t exactly make for a great mailer. “He’s the hometown boy who made good, but then he had a tragic end,” Mark Salvaggio, a former Bakersfield City Council member, told POLITICO. “The reaction here locally is sadness, disappointment … but people understand. They respect his decision.” McCarthy aimed to strike an optimistic tone in announcing his departure, promising to stay “in the fight” even though he’ll no longer be in a position to do much fighting. He can still attempt to recruit candidates and raise money for them, but there’s a big difference between having the speaker in your corner and having a former member. As our colleague Sejal Govindarao pointed out earlier this year, McCarthy’s personal struggles have left Republicans in Biden-won House districts rudderless, especially in fundraising. “It’s going to be hard for them to replicate the operation that Kevin had,” said Rob Stutzman, a top Republican operative in California who has known McCarthy since his time in the statehouse in Sacramento. “They won’t be able to. Johnson doesn’t have the relationships and fundraising prowess.” As speaker, McCarthy also elevated the California GOP, in both visibility and power. Without him even in the building, incumbents like Reps. David Valadao, Mike Garcia, John Duarte, Ken Calvert and Michelle Steel could be in serious trouble. Mike Madrid, a California Republican consultant who makes no secret of his disdain for the Trump-era version of his own party, put it in simple terms. “Investing in the California Republican party is like investing in Blockbuster,” he said. “The only reason people would was because they had a relationship with Kevin." Madrid said the bigger impact could be on the state party infrastructure. He said he expects Republicans will be able to fully fund candidates in battleground races without McCarthy (worth noting: GOP candidates have more cash on hand than Democrats in seven of the state’s 10 most-watched House districts). The logistics: The governor is expected to call a special election for the remainder of McCarthy's term. It would be held simultaneously as the March primary and November general election, meaning the candidates would likely appear multiple times on the ballot. The contenders: Potential replacements include state Sen. Shannon Grove and Assemblymember Vince Fong. Grove, one of the more right-leaning Republicans in the statehouse, received huge recognition this year for forcing passage of a human trafficking bill. Fong, who used to work as McCarthy’s district director, maintains close ties to the former speaker, and even called him “one of my best friends” in an Instagram post on Wednesday. Neither Grove nor Fong returned our messages asking about a bid for the seat, but both released public statements praising McCarthy for his years of leadership. — with help from Jeremy B. White and Melanie Mason GOOD MORNING. Happy Thursday. Thanks for waking up with Playbook. | 
