THE BUZZ: CLOCKING IN — Lawmakers return to the California Capitol today for an annual session that will be defined by a new era of leadership in both the state Assembly and Senate. It’s Speaker Robert Rivas’ first full year leading the Assembly, and Sen. Mike McGuire will soon succeed Senate President Pro Tem Toni Atkins in the upper chamber. But don’t expect much of a honeymoon period. Democratic lawmakers will have to quickly come to terms with a gigantic budget deficit, estimated at $68 billion. The state’s March 5 primary election is also right around the corner, and numerous legislators are also auditioning for higher office. Here are four dynamics that POLITICO’s California team will be watching in the year ahead: FISCAL PROBLEMS: The projected deficit is the state’s largest since the Great Recession, and Sacramento insiders have been fretting for weeks about the depth of spending cuts that could be required. Few staffers or lawmakers (due to term limits) have been around long enough to have seen cuts of that scale — which could put many special interests on the chopping block after years of budget surpluses. “It will be pretty hot before we know it,” said Andrew Acosta, a Democratic consultant who’s worked on numerous legislative and congressional campaigns. “You’ll see groups try to protect their turf. They were probably on offense a couple of years ago because we had money. Now, they’re on defense.” Gov. Gavin Newsom is expected to release his plan to balance the budget next week. Lawmakers will be negotiating the details with the governor as they navigate a significant power shift. RIVAS IN THE HOUSE: Rivas became speaker six months ago, but he's had little time to make an imprint, as he was sworn in near the end of the session. He still hasn’t articulated his full legislative agenda. But he has been making moves in recent months, picking his new leadership team and shuffling committee chairs. He also showed his ability to forge deals when he helped build support for a bill to raise the minimum wage for health care workers and another to require large corporations to report carbon emissions. Still, many questions remain about what kind of leader Rivas will be. How much power will he give committee chairs? What spending programs will he go to the mat for? As our colleague Jeremy B. White reports for POLITICO Pro today, Rivas could have a long tenure if he’s able to hold together a large and fractured Democratic caucus. He isn’t termed out until 2030. SENATE SUCCESSION: The leadership handoff in the Senate — slated for Feb. 5 — will have significant ripple effects. McGuire, a close ally of outgoing Pro Tem Atkins, must decide to what extent he wants to shuffle committee chairs and build his own leadership team mid-year. Many Capitol insiders are questioning if he will leave powerful committee heads in place or supplant some with close allies, such as Sens. Angelique Ashby or Anna Caballero. The incoming pro tem could face pressure to avoid making too many dramatic changes, especially with fiscal committees, as the state navigates a tough budget. “There’s a lot of unknown in addition to your traditional unknown,” said Kristina Bas Hamilton, a lobbyist who works with labor and progressive groups. “‘There’s definitely an understanding that there will be a learning curve.” AI SHOWDOWN — The other big fight shaping up this year: how to regulate artificial intelligence. Tech and labor interests will face off over the use and development of AI in a battle that’s sure to be one for the history books. As we reported last year, lawmakers could consider upwards of a dozen bills on regulating the fast-moving technology. Labor groups are keen on setting up guardrails to stave off the growing rate of job replacement, and the giants of Silicon Valley want to ensure any new laws don’t stifle innovation. With Congress notably absent on the AI front, any legislation California passes has the potential to set the tone for the industry’s national standards. We’re monitoring a handful of bills from Democrats on this front, including a multi-year effort by the new Assembly Privacy Chair Rebecca Bauer-Kahan to regulate automated decision making tools and a measure from Assemblymember Gail Pellerin that would ban the use of AI in political communication, including mailers, robo calls and video advertisements. State Sen. Scott Wiener is also preparing to introduce more details on the wide-ranging AI framework he proposed late last year. GOOD MORNING. Happy Wednesday. PLAYBOOK TIP LINE — What are you hearing around the halls of the Legislature? Give us a ring or drop us a line. Now you can text us at 916-562-0685 — save it as “CA Playbook” in your contacts now. Or drop us a line at lkorte@politico.com and dgardiner@politico.com, or on Twitter —@DustinGardiner and @Lara_Korte WHERE’S GAVIN? In Los Angeles to kick off the campaign for Proposition 1, a ballot measure to fund mental health treatment. He'll also make a "major science and technology announcement" in LA County with representatives from Google and the University of California.
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