News : From surplus to scarcity

Friday, May 12, 2023

From surplus to scarcity

May 12, 2023

By Lara Korte, Jeremy B. White, Ramon Castanos and Matthew Brown

Presented by Southern California Edison Company

THE BUZZ: In a few hours, Gov. Gavin Newsom will debut his revised 2023 budget, starting the clock on what could be one of the most difficult four weeks of spending negotiations Sacramento has seen in years.

California lawmakers have been spoiled. The current outlook is a far cry from the ghosts of budgets past, when the dollars were plenty and worries were few. For nearly a decade, revenues have been on the rise and — save for a mild panic about a pandemic-induced downturn that never materialized — California’s coffers in recent years have been overflowing.

But in just a year, the state’s $100 billion surplus has turned into a $22.5 billion deficit, an estimate that is expected to get worse today after months of disappointing income tax revenues. In January, Newsom laid out his preliminary plan for keeping the ship afloat, including billions of dollars of funding delays and cuts. Lawmakers, lobbyists and advocates have spent the last five months reorienting to the regrettable reality, but after today, it’s crunch time to get a final plan in place before the constitutional deadline on June 15.

For many, this is uncharted territory. Few current lawmakers were around for the 2009 budget crisis, when the Great Recession backed California into a $42 billion budget hole and forced Democrats in the Legislature to negotiate with Republican Gov. Arnold Schwarzenegger on a painful combination of tax hikes and spending cuts. In 2012, Democratic Gov. Jerry Brown ran a similar gambit to make up a $15 billion deficit— slashing billions in funding while also putting a tax increase on the ballot.

Newsom and the Legislature have been widely insulated from having to make those kinds of difficult decisions, until now.

"I think the Great Recession was very scarring to the members that were here at the time,” said Gabriel Petek of the Legislative Analyst’s Office. “But we've had turnover. The composition of the body has changed, and not a lot of them were around during that time. So, the scarring effects aren't as evident."

The biggest throwdown will be over how to backfill the deficit, specifically whether to tap into the $100 billion hanging out in the state’s savings accounts. Senate Democrats proposed a plan earlier this month that avoids dipping into the reserves by levying a tax on big business, an idea that was immediately shot down by Newsom as “irresponsible.”

Another factor to consider — things could get worse. Part of the hesitancy of dipping into the reserves stems from the possibility of a recession in the years to come. If lawmakers can avoid tapping into their savings now, it could come in handy if the budget picture sours later on.

BUENOS DÍAS, good Friday morning. Newsom’s budget proposal goes live at 10 a.m. You can watch the livestream here or follow along with us on Twitter. Look for our full rundown later today.

Got a tip or story idea for California Playbook? Hit us up at jwhite@politico.com and lkorte@politico.com or follow us on Twitter @JeremyBWhite and @Lara_Korte.

A message from Southern California Edison Company:

We believe in the power of dreams. The power to change lives and make a difference. Which is why Edison International will award $50,000 college scholarships to 30 high school seniors to help them follow their dreams in science, technology, engineering or math. We’ve awarded $15 million in scholarships to 760 students through the Edison Scholars Program since 2006. Part of our own dream to build a brighter future for all our communities.

WHERE’S GAVIN? Nothing official announced.

QUOTE OF THE DAY: “I think I speak for all of us with feelings of relief and support for our colleague Senator Feinstein.” Senate Judiciary Chair Dick Durbin (D-Ill.) in committee Thursday.

TWEET OF THE DAY:

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TOP TALKERS

— “U.S.-Mexico border towns brace for Title 42 expiration as migrant arrivals push capacity limits,” by the Los Angeles Times’ Andrea Castillo, Hamed Aleaziz, Patrick J. McDonnell and Kate Morrissey: “Across the southern border with Mexico on Wednesday, communities, migrants and border agents braced for the long-anticipated end of Title 42 orders. Most U.S. Customs and Border Protection facilities were already overcapacity. Hundreds of other migrants lined up near ports of entry in Arizona and Texas to see if they would finally be let in.”

— The drug-fueled protest in Dianne Feinstein’s office you haven’t heard about, by Ben Terris for POLITICO Magazine: Purley’s act of rebellion wasn’t getting as much attention as he’d hoped. Manríquez’s article on the act of protest had been widely read, as far as Latino Rebels stories go, and yet the story hadn’t really been picked up by the mainstream press.

CAMPAIGN MODE

— “GOP voters in liberal bastions could have outsize role in California's presidential primary,” by the Los Angeles Times’ Seema Mehta: “A quarter-century ago, conservatives hoping to make the state more competitive and attractive for Republican presidential candidates proposed drastically overhauling the primary system, awarding three delegates per congressional district. Another 13 delegates would be awarded proportionally based on statewide results.”

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CALIFORNIA AND THE CAPITOL CORRIDOR

— Tech lobbyists score wins in state kids’ safety laws, by POLITICO’s Rebecca Kern: In addition to the Arkansas and Utah bills, California’s Democrat-controlled legislature, which enacted the country’s first kids’ online safety law, recently removed a key provision in a new kids online safety bill that would have let Californians sue tech companies over “addictive design features,” following lobbying from tech companies.

— “Liberal California is actually a hotbed for right-wing extremist activity, report says,” by The Sacramento Bee’s Andrew Sheeler: “The ADL report, which looks at incidents in 2021 and 2022, found significant increases in white supremacist and antisemitic incidents, including collaboration between the two groups. Among the extremist organizations continuing to operate openly in the Golden State are the Proud Boys and the Rise Above Movement, a white supremacist group based in Southern California.”

OINK, OINK — “Supreme Court upholds California animal cruelty law that bans narrow cages for pigs,” by the Los Angeles Times’ David G. Savage: “Justice Neil M. Gorsuch, writing for the court, said the Constitution leaves it to states and their voters to decide on the products that will be sold there. He said these questions should not be decided by federal judges.”

— “Sen. Aisha Wahab on caste discrimination and recall effort,” by The Sacramento Bee’s Jenavieve Hatch: “One of Tandon’s biggest objections is to Wahab’s civil rights bill, SB 403, which would ban discrimination on the basis of caste — a person’s assigned position in the social hierarchy based on family “purity and status”. In other words, wealth and skin color.”

— “One of the world's most famous chefs wants to open a Bay Area restaurant. A gas stove ban may prevent it,” by the San Francisco Chronicle’s Elena Kadvany: “The owner of Stanford Shopping Center in Palo Alto, where Andrés recently announced he plans to open an outpost of his restaurant Zaytinya, has threatened to sue the City of Palo Alto over a new building code that prohibits natural gas connections in all new buildings. The dispute was first reported by Palo Alto Online.”

BIDEN, HARRIS AND THE HILL

— “Feinstein breaks stalemate over three judges in return to Judiciary Committee,” by the San Francisco Chronicle’s Shira Stein: “Feinstein, who returned to the Senate Wednesday after a nearly three-month absence, was wheeled into the Senate Judiciary Committee over an hour late to a standing ovation from both sides of the aisle and met by the flock of reporters and photographers that have closely followed her return.”

— “R-E-S-P-E-C-T, Kevin McCarthy finds out what it means to him,” by The Washington Post’s Paul Kane: “McCarthy, now four months into his tenure as speaker, craves the respect that he believes should come with an office that is enshrined in the Constitution and next in line behind the vice president in presidential succession.”

DON’T MISS THE POLITICO ENERGY SUMMIT: A new world energy order is emerging and America’s place in it is at a critical juncture. Join POLITICO on Thursday, May 18 for our first-ever energy summit to explore how the U.S. is positioning itself in a complicated energy future. We’ll explore progress on infrastructure and climate funding dedicated to building a renewable energy economy, Biden’s environmental justice proposals, and so much more. REGISTER HERE.

MIXTAPE

MIXTAPE:

— “California created the nation's only pension for aging boxers. But it's failing to deliver,” by the Los Angeles Times’ Melody Gutierrez.

— “'Overreach beyond belief'? One California city's ban would limit even backyard bird feeders,” by the San Francisco Chronicle’s Jessica Flores.

— “Community oversight of San Diego police grinds to a halt,” KPBS’ Scott Rodd.

BIRTHDAYS

— Penny Lee of the Financial Technology Association … Forbes’ Alexandra Levine … Amanda Christine Miller of PayPal … Erica Arbetter of Google … Kevin Fox of Rep. Ro Khanna’s (D-Calif.) office … Andrew Thorne … May Li

A message from Southern California Edison Company:

The power of a dream. It’s that spark deep inside. That shining beacon up ahead, calling on one’s gifts and potential. Like a compass – defining purpose and charting a path to the future. At Edison International, we believe in the power of dreams to change lives and make a difference. Which is why we awarded $50,000 college scholarships to 30 high school seniors to help them follow their dreams in science, technology, engineering or math (STEM).

We’ve awarded $15 million in scholarships to 760 students through the Edison Scholars Program since 2006. Part of our own big dream to build a brighter and more prosperous future for all our communities.

CALIFORNIA POLICY IS ALWAYS CHANGING: Know your next move. From Sacramento to Silicon Valley, POLITICO California Pro provides policy professionals with the in-depth reporting and tools they need to get ahead of policy trends and political developments shaping the Golden State. To learn more about the exclusive insight and analysis this subscriber-only service offers, click here.

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