How to fill a $38 billion hole

Your afternoon must-read briefing on politics and government in the Golden State

Jan 10, 2024 View in browser   By Blake Jones A FEATURE NOT A BUG: California’s budget whiplash — from a nearly $100 billion surplus to a $38 billion deficit in just two years — poses a challenge for lawmakers and Gov. Gavin Newsom. But Newsom makes no apologies for the volatile tax structure behind the violent swing. Newsom gave a full-throated defense today of California’s progressive tax system, which can lead to wild revenue fluctuations due to the shifting circumstances of the state’s wealthiest residents. The governor compared the tax structure favorably to the situation in Florida and Texas. Those states — led by red-state nemeses Gov. Ron DeSantis and Gov. Greg Abbott — are the “most regressive” in the U.S. “They tax low income workers more than we tax the highest. It’s just a value proposition,” Newsom told reporters as he outlined his budget proposal. “We’re a progressive state in that respect, not a regressive state. Part of that progressivity is volatility.” The governor proposed to close the deficit by tapping into general reserves to the tune of about $13 billion and making cuts and delays in spending to cover the rest. Among the approximately $8.5 billion in cuts, climate programs would take the biggest hit — around $3 billion. Newsom said he wouldn’t cut funding for mental health and homelessness programs — two of his key priorities. California Gov. Gavin Newsom displays a chart aimed at refuting critics of California's laws dealing with property crime during a news conference where he unveiled his proposed state budget for the 2024-2025 fiscal year, in Sacramento, Calif., Wednesday, Jan. 10, 2024. (AP Photo/Rich Pedroncelli) | AP His plan also includes borrowing billions from state special funds and delaying or deferring billions more in spending. Newsom said he favors increasing the cap on state rainy-day funds, a reform meant to blunt the impact of future downturns. The problem, he said, is that such a change is hard to sell to the public. The governor also made it clear there would be no changes to income taxes to dig California out of its financial hole. That includes the idea of a wealth tax — a proposal being heard in the Legislature that Newsom has rejected at every turn. The governor lashed out at the editorial page of The Wall Street Journal for implying he might support the progressive proposal. “Are you supporting a wealth tax? No, yet again. Why the hell do you keep writing about that?” he said, as if addressing the editorial board. IT’S WEDNESDAY AFTERNOON. This is California Playbook PM, a POLITICO newsletter that serves as an afternoon temperature check of California politics and a look at what our policy reporters are watching. Got tips or suggestions? Shoot an email to sgtaylor@politico.com or send a shout on X. DMs are open. WE WANT YOUR HELP — POLITICO is co-hosting the first debate for California's Senate race on Monday, Jan. 22. All four major candidates have accepted our invite to appear onstage: Democratic Reps. Adam Schiff, Katie Porter and Barbara Lee and Republican and former Dodgers player Steve Garvey. This will be a televised battle between those top candidates. Tell us what we should ask them, and we just might use your question during the debate. Fill out this form by Wednesday, Jan. 17, to be considered. WHAT YOU NEED TO KNOW TODAY   MORE LABOR TROUBLE: Faculty at the California State University are planning to walk off their jobs after the administration wouldn't budge on a planned wage increase for staff of the largest higher-education system in the country. The California Faculty Association, which represents 29,000 workers at 23 campuses, said Tuesday that the strike would start Jan. 22 and last five days. Administrators made a final offer Tuesday to increase wages by 5 percent. The union, which also includes librarians, coaches and counselors, is seeking 12 percent. CFA President Charles Toombs, who said in December that the union would strike if the wage goal wasn't met, said workers are adamant about the higher figure. “Unlike management, we are unwilling to be complicit in the harming of our colleagues, students, and staff. Our commitment to one another is unshakeable," he said in a statement at the time. CFA began contract negotiations in 2023, though its contract doesn’t expire until 2024, to call for 12 percent this academic year and raises in future years. Leora D. Freedman, vice chancellor for human resources at CSU, said the raises are "well-deserved" but the talks remain stalled. “CFA has shown no movement, leaving us no other option," Freedman said. — Sarah Grace Taylor  Members of the faculty union of the California State University system carry signs while walking the picket line during a one-day strike on Dec. 6, 2023, at the campus in Los Angeles. | AFP via Getty Images ON THE BEATS TACKLING YOUTH FOOTBALL : A proposal to prevent head injuries among children by making California the first state in the nation to ban youth tackle football is headed to the Assembly floor. AB 734, which would prevent children under the age of 12 from participating in a youth tackle football league by 2029, cleared the Assembly Committee on Arts, Entertainment, Sports and Tourism today on a party-line vote. Assemblymember Kevin McCarty, who has been attempting to regulate youth football since 2018, said the science linking football and concussions is clearer today than five years ago when his first attempt to pass the measure was stalled in the same committee. A coalition of youth football leagues opposes the bill, claiming the science is not conclusive and that parents should have the right to make decisions for their kids. “Youth football just became a partisan issue,” Steve Famiano, founder member of the California Youth Football Alliance, told POLITICO after the vote. Assemblymember Mike Gipson, the committee chair, said the bill is not taking away the ability for kids to develop through team sports, citing flag football as a safer alternative. Another lawmaker who played football collegiately at San Jose State and briefly pursued an NFL career, Assemblymember Avelino Valencia, backed the bill, saying he “could not fathom” stepping on the football field today given the data around football and traumatic brain injuries. — Eric He WADING INTO THE FIGHT— Rep. Anna Eshoo is wading into the hotly contested fight for her Silicon Valley House seat. Eshoo today endorsed Joe Simitian, a Santa Clara County supervisor and former state lawmaker. That could give him an edge in a crowded Democratic primary field to replace Eshoo, who is retiring from Congress after nearly three decades. The other candidates include former San Jose Mayor Sam Liccardo, Assemblymember Evan Low and Palo Alto City Councilmember Julie Lythcott-Haims. — Dustin Gardiner  WHAT WE'RE READING TODAY SIERRA AVALANCHE: An avalanche at Palisades Tahoe this morning killed one person and injured three. (The Sacramento Bee) END OF AN ERA: Pea Soup Andersen’s is a familiar roadside sight to anyone who drives on the 101 in Santa Barbara County. The iconic restaurant has quietly and abruptly shut down after 100 years. (SF Gate) PICK UP THE TAB: California and the EPA finalized a $1.67 billion settlement from Cummins, a manufacturer whose engines illegally skirted emissions testing in 600,000 pickup trucks, marking the largest penalty ever under the Clean Air Act. (The Mercury News)   Follow us on Twitter POLITICO California @politicoca   Subscribe to the POLITICO Playbook family Playbook  |  Playbook PM  |  California Playbook  |  Florida Playbook  |  Illinois Playbook  |  Massachusetts Playbook  |  New Jersey Playbook  |  New York Playbook  |  Ottawa Playbook  |  Brussels Playbook  |  London Playbook View all our political and policy newsletters Follow us

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