Legislature’s analyst praises, pans Newsom budget

“Plausible, but optimistic.” Those are the words that the nonpartisan Legislative Analyst’s Office used to describe Gov. Gavin Newsom’s revenue projections in its analysis of his January budget proposal — a description that the Legislature will have to consider as it puts together its own budget by June.

As CalMatters’s Mikhail Zinshteyn explains, the analyst’s office double-checks the governor’s budget number-crunching. Its initial review of Newsom’s January budget proposal, released Saturday, puts the state’s budget shortfall at $58 billion for the 2024-25 fiscal year — much deeper than the governor’s $38 billion projection, but slightly better than the office’s earlier $68 billion estimate in December.

There are several reasons for the different numbers: For one, Newsom calculates that the state will collect more in tax revenue. Despite California tax collections falling 20% last year, the governor projects an 8% increase in the current budget year. 

• The report: “While possible, we think this assumption is optimistic. Halfway through the current year, we are yet to see clear signs of such a rebound…. One potential reason for optimism is the rebound in stock prices that occurred over the last year, especially in the spring of 2023. Stock market rallies, however, can reverse as quickly as they start.”

The governor’s proposal also didn’t appropriately account for $15 billion in funding reductions to K-12 education and community colleges, reports the analyst’s office, as well as some other differences in spending that should be part of the deficit equation.

In addition to the different deficit estimates, the analyst’s office disagrees with part of Newsom’s solution to cover the budget hole, such as his proposal to pull $900 million from a reserve account meant to support health insurance and cash aid programs for low-income residents, and failing to lay out how reducing some education-related spending could achieve $8 billion in savings.

But the analyst’s office did align with the governor on some things. It found Newsom’s proposal to pull $13 billion from the state’s reserves as a good move. That would still leave a sizable $11 billion in California’s rainy day fund, which would be “prudent” since both the governor and the office predict deficits of about $30 billion every year through 2027-28.

In response, a Newsom spokesperson told CalMatters that the analyst’s office “outlines one perspective” on California’s budget.

• Brandon Richards, Newsom spokesperson: “The budget is often subject to wild swings in revenue year to year — why the Governor has called for reforming how the state captures future surpluses for our reserves.”

But others found the report to be much more valuable, such as Roseville Republican Sen. Roger Niello who wrote on X (formerly Twitter): “I put much more faith in this analysis than the Governor’s proposal. A budget advisor will always be more objective than a budget writer.”

For more on what the analyst’s office has to say about Newsom’s budget, read Mikhail’s story.

In other budget news: CalMatters’ Adam Echelman writes about how California community colleges have so far spent less than 20% of the $650 million they collectively received from the state in COVID-19 relief money. Though that money could fund various programs such as mental health services, food pantries for students, technological upgrades and professional development for faculty, the schools remain reluctant to spend it. 

That’s because last year, Newsom proposed asking colleges to return the COVID-19 money less than a year after giving it to them to balance the state budget. And while that plan never manifested, the “fear that the rug would be pulled out from under us,” as one assistant superintendent put it, has resulted in about $500 million remaining unspent.

Some community colleges, however, have managed to spend most or nearly all of their COVID relief money. To learn more about these schools and what they spent it on, read Adam’s story.

Assembly Republicans are throwing a penalty flag on a bill to ban tackle football for kids younger than 12, and will rally Wednesday at the state Capitol to propose a measure they call “ridiculous.”

Assemblymember Kevin McCarty, a Sacramento Democrat, is behind Assembly Bill 734, which would prohibit children under 6 from playing tackle football starting in 2025, and bar those younger than 12 by 2029, writes CalMatters Digital Democracy reporter Ryan Sabalow. The bill is headed to the Assembly floor after passing out of committee last week.

Sponsored by the California Neurology Society, the bill aims to protect kids from potential repeated brain trauma. Last year, Boston University researchers found that players who’ve spent more than 11 years playing tackle football have an increased likelihood of brain trauma. Supporters of the bill also point out that players in the National Football League’s signature exhibition game, the Pro Bowl, now play flag football.

Assemblymember Avelino Valencia, an Anaheim Democrat who played football in college and coached in community college, is a reluctant supporter of the bill, Ryan reports.

• Valencia: “It’s because it is a very dangerous and violent sport. There’s no ifs, ands or buts about that.”

In some ways, the bill has become another front in California’s battle over parental rights. Groups such as the California Youth Football Alliance and the conservative group Moms for Liberty have framed the bill as another example of government overreach, similar to vaccine requirements or LGBTQ+ policies at public schools. 

Sacramento County Sheriff Jim Cooper, a former Democratic Assemblymember, also spoke out against the bill at last week’s committee meeting, arguing that the sport is a valuable outlet for young Black children.

• Cooper: “Black male children engage in youth tackle football at higher rates than any other race. To my knowledge, there’s been no pressure to limit participation in lacrosse, soccer or ice hockey, which all have concussion rates similar to youth tackle football but are prevalent in more affluent and exclusive communities.”

For more on the youth tackle football bill, read Ryan’s story.

Speaking of youth sports: Democratic Assemblymember Akilah Weber of La Mesa introduced a bill modeled after the California Fair Employment and Housing Act, which currently bans employers from discriminating against individuals based on race and “ traits historically associated with race” such as certain hair textures and hairstyles. Weber’s proposal would bar youth sports organizations and competitions from doing the same, saying that “discrimination does not take place only in schools and the workplace but also on the sports field.”

Developments in two key court cases — one with potential big impacts on California’s approach to encampments going forward, and the other stemming from what is supposed to be part of the state’s answer to building more shelter — have put the homelessness crisis back in the spotlight.

CalMatters’ Jeanne Kuang explains that the U.S. Supreme Court agreed Friday to hear a case that could widely affect how cities respond to homeless encampments. The case originates in Grants Pass, Oregon, and could dramatically change a 2018 federal appeals court ruling that limited how much cities in Western states could criminalize those who sleep on the streets when there aren’t enough shelter spaces available. 

Since that ruling, judges have either delayed or outright halted camping bans from being enforced in cities including San Francisco, Sacramento and Chico because the cities failed to provide what the courts deem as adequate shelter. This has left city officials and Gov. Newsom frustrated.

• Newsom, in a statement responding to Friday’s action: “California has invested billions to address homelessness, but rulings from the bench have tied the hands of state and local governments to address this issue. The Supreme Court can now correct course and end the costly delays from lawsuits that have plagued our efforts to clear encampments and deliver services to those in need.”

Meanwhile, California’s housing department is suing Los Angeles developer Shangri-La Industries LLC for defaulting on private loans last year. Funds for those loans were from the state’s Homekey program, which is intended to house homeless residents. Shangri-La took out loans for seven state-funded motel conversions, then defaulted on them, putting the motels at risk of “imminent foreclosure.”

The civil lawsuit accuses Shangri-La of contractual fraud and seeks the return of $114 million in state grants that the company received during the pandemic, Jeanne reports. Shangri-La won those grants to build housing projects in San Bernardino, Ventura and Monterey counties, which were supposed to create a total of 500 permanent housing units.

With those projects currently in jeopardy, the state argues the developer should not have needed additional funds beyond the grants to buy the motels and complete the projects. Shangri-La has not yet responded to the suit in court. 

To learn more, read Jeanne’s stories on the Supreme Court taking the case on homeless encampments and the state’s lawsuit against Shangri-La.

While the U.S. Senate race is grabbing most of the attention in California’s 2024 election, we have more reminders that the U.S. House races could mean more for the balance of power in Washington, D.C. — just as they did in 2022.

The political strategists at the national Democratic and Republican parties certainly think so.

The National Republican Congressional Committee is setting up “battle stations” in 21 GOP-held swing districts, including six in California, Axios reports. They are the seats now held by Reps. Ken Calvert, John Duarte, Mike Garcia, Young Kim, Michelle Steel and David Valadao.

The GOP plans to spend eight figures on the blitz and enlist more than 1,000 volunteers to contact 5 million voters before Nov. 5, according to Axios.

Not to be outdone, the Democratic Congressional Campaign Committee just announced it’s launching a $35 million campaign to mobilize Asian, Black and Latino voters. The effort comes as the party is seeking to shore up support among Latino voters in particular, in California and elsewhere.

The effort will entail research and polling; print, TV, digital and other ads; and voter education, including against disinformation aimed at voters of color, especially online.

• Mariafernanda “Marifer” Zacarias, the committee’s national engagement director, in a statement: “The DCCC is making an historic investment to persuade and engage voters of color who are critical for Democrats’ path to taking back the House. 

The numbers game: One recent analysis puts 10 of California’s 52 congressional seats in play this November, depending on the results of the March 5 primary, where the top two finishers, regardless of party, move on. 

In the November 2022 election, Republicans flipped two seats in California, winning a total of 12 compared to 40 for Democrats and holding a slim overall 221-213 margin in the House (a majority is 218). With last month’s resignation of former House Speaker Kevin McCarthy of Bakersfield and the expulsion of the infamous Rep. George Santos of New York, it’s now 220-213.