The great disappearing budget solution

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

Jul 31, 2024 View in browser   By Rachel Bluth California Gov. Gavin Newsom presents a budget plan during a news conference in Sacramento, Calif., Monday, Jan. 10, 2022. | AP Photo / Rich Pedroncelli BUDGET MAGIC: It was a small miracle when Gov. Gavin Newsom and California lawmakers found a way to close a $48 billion budget deficit without massive cuts. They did so, in part, with billions in proceeds from an enormous tax on health insurance plans. But a November ballot measure would take away that budgeting magic trick by requiring the bulk of those funds to be spent on health care, blowing a hole in the precariously-balanced budget deal. Newsom’s Department of Finance estimates the initiative would sideline money each year until 2027, amounting to $12 billion the state had planned on using to balance the budget. The governor has made no secret about his aversion to Proposition 35. “This initiative hamstrings our ability to have the kind of flexibility that’s required at the moment we’re living in,” he told reporters earlier this month. “I haven’t come out publicly against it, but I’m implying a point of view. Perhaps you can read between those many, many lines.” His opinion holds a lot of weight on a crowded ballot. The budget pressure is amping up the stakes on Prop 35, which has no formal opposition but is driving a wedge between the governor and some of his closest allies. The measure was crafted by some of the most powerful health care players in California, like Planned Parenthood, SEIU, The California Medical Association and the California Hospital Association. Prop 35 would require most of the money — known to nerds as the MCO tax — to be funneled into the state’s Medi-Cal program, raising pay for certain doctors, facilities and services like ambulances that serve low-income people in the state. Its champions say the spending plan is essential to funding Medi-Cal programs Newsom and the Legislature have implemented in recent years — but that it also leaves plenty of room to contribute to the general fund. In 2025 and 2026, the initiative sets aside $2 billion per year for the budget. The tax, they argue, shouldn’t be viewed as a limitless source of money to balance the budget. It’s health care money, and it should be used for health care, said Jodi Hicks, the Prop 35 committee co-chair and CEO of Planned Parenthood Affiliates of California. The Prop 35 campaign is pointing to a different analysis it says is the most accurate, which puts the overall cost to the state between $1 billion and $2 billion annually if it passes. Though the initiative language can’t be changed anymore, Hicks said she is still talking to Newsom to get him comfortable with it and that she will work with his administration to implement Prop 35 if voters approve it. “Every year the budget has a finite amount of dollars, and it’s the choices that we have to spend them,” Hicks said. “These dollars were always intended to go back into health care.” — Blake Jones contributed to this report. IT’S WEDNESDAY AFTERNOON. This is California Playbook PM, a POLITICO newsletter that serves as an afternoon temperature check on California politics and a look at what our policy reporters are watching. Got tips or suggestions? Shoot an email to rbluth@politico.com. WHAT YOU NEED TO KNOW TODAY University of California President Michael V. Drake answers questions during an interview in Columbus, Ohio on May 17, 2019. | Jay LaPrete/AP STEPPING ASIDE: University of California President Michael V. Drake will retire after the upcoming academic year, capping a challenging five-year tenure atop one of the country’s most prestigious higher education systems. Drake, 74, has led the 10-campus UC system and its mammoth hospital network through student enrollment growth, the bulk of the coronavirus pandemic and intense protests over the war in Gaza. UC under Drake has added 10,000 students, slightly increased its share of undergraduates who are California residents and accepted a record number of applicants for the fall 2024 term. Drake’s administration has navigated adversarial relationships with the system’s numerous labor unions, including the nation’s largest-ever higher education strike in 2022 led by the United Auto Workers Local 4811. This past academic year brought even more scrutiny and dueling pressures from student activists and elected officials who criticized the UC’s governing board handling of pro-Palestinian demonstrations. UAW once again led a walkout over the system’s approach to these protesters. Before the controversy, Drake also faced racist attacks, including vandalism of his home. He is the first Black president of the 295,000-student system. After a sabbatical, Drake plans to return to a faculty post. Read more here. — Blake Jones ON THE BEATS Republican vice presidential candidate Sen. JD Vance during a campaign event in Reno, Nevada. | AP Photo/Jae C. Hong MOOOOOVE OVER, HARRIS — Vice President Kamala Harris has been feeling the love from Californians since announcing her bid for the White House, but down in cattle country today, it was a far different story. Republican vice presidential candidate JD Vance traveled to the Central Valley this afternoon for the time-honored tradition of speaking at Harris Ranch, the iconic hotel/restaurant resort along I-5 known for hosting political candidates and its pungent scent of the nearby cattle yards. Hosted by owner John Harris, the $3,300-per-person event drew in farmers, donors and Republican officials across the valley. Stan Ellis, a Bakersfield Republican who owns a quantum physics lab, was one of about 15 donors who got to sit down with Vance for a roundtable discussion, where they spoke about the valley's water issues and other problems facing the agriculture industry. During an address to a larger crowd, Vance told attendees he intends to deliver "the truth" about Harris' campaign, according to multiple people, referencing the cost of living and border security. "I like him because he's straightforward," Ellis said. "He delivered his message well, and he's young." — Lara Korte Vice President Kamala Harris | Getty Images / Montinique Monroe VENTURE VEEP: Harris has become the darling of the venture capitalist and startup set. More than 200 Silicon Valley-types signed onto a “VCs for Kamala” letter, including big names like Mark Cuban, Vinod Khosla, Ron Conway and LinkedIn founder Reid Hoffman (who has already donated $7 million to the Harris campaign). As POLITICO’s Brendan Bordelon and Jeremy B. White note, their votes in deep-blue California matter a lot less than their dollars. And though Harris began her political career in San Francisco, she still represents a huge unknown for tech-sector people who care about tax policy, immigration and antitrust enforcement. Tech titans like Aaron Levie, CEO of content management software firm Box, told POLITICO that he and many of his tech-exec compatriots are waiting on more details before they open their wallets. WHAT WE'RE READING TODAY — Data on U.S. employment and the economy suggests a recent surge of international migrants into California has buoyed job creation, aided business growth and boosted tax revenues on the local, state and federal levels. (Los Angeles Times) — How Kamala Harris helped a California man become the nation’s first undocumented lawyer during her tenure as the state’s attorney general. (Sacramento Bee) — The California Public Utilities Commission may soon allow undocumented immigrants to access cell service subsidies. (CalMatters) AROUND THE STATE — Attorney General Rob Bonta and Secretary of State Shirley Weber are suing Fresno County over a recently passed ballot measure to keep sheriff and district attorney elections in non-presidential election years. Bonta said the measure conflicts with state law and could suppress voter turnout. (Fresno Bee) — The Park Fire has spread to two of the three remaining creeks where wild spring-run Chinook populations spawn in the Central Valley. It could deliver a deathblow to the threatened species if things get worse. (CalMatters) — San Diego has declared the city’s lack of homeless shelters a crisis — again — as multiple facilities with more than 700 total beds are slated to close by January 2025. (San Diego Union-Tribune) — Intel, a Santa Clara-based computer chip company, plans to cut thousands of jobs in a bid to reduce costs following an earnings slump and recent market share losses. (Bloomberg) — compiled by Tyler Katzenberger   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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