A pandemic-induced recession

Good morning, California. It’s Monday, March 23.

Goodbye California rainy day fund

The marquee at Grand Lake Theatre in Oakland announces their temporary closure on March 16, 2020. Today, seven counties enacted a shelter in place order until April 7 to curb the spread of novel coronavirus.
The marquee at Grand Lake Theatre in Oakland announces its temporary closure. (Photo by Anne Wernikoff for CalMatters)

Coronavirus is almost certainly causing the first pandemic-induced recession in modern times. It’s still unclear just how big of a hit it will have on the economy, but experts say possibilities range from “very bad” to “very, very bad,” CalMatters’ Ben Christopher reports.

  • Jesse Rothstein, UC Berkeley professor of public policy: “It’s so much larger than anything we’ve encountered before. I think this is going to be larger than the Great Recession. I hope it doesn’t last as long, but the magnitude of the shock is bigger.”

It’s also what one economist calls the first “services recession” in world history — meaning that it’s hitting the retail, hospitality, food and travel industries hardest as restaurants, bars and gyms shut down and people shelter in place. The services sector employs 86% of American workers, and 20% of California jobs are in the tourism, hospitality and retail sectors.

Gov. Gavin Newsom said over 135,000 Californians filed for state unemployment insurance on a single day last week. Typically, that daily figure is less than 6,000.

  • For more information on who is considered an “essential worker” and allowed to keep going to work, check out CalMatters’ explainer.

To pass a state budget in June, lawmakers will likely have to dip into the state’s $18 billion rainy day fund. They’re also turning to the federal government for help. On Sunday, President Trump declared California to be in a state of “emergency disaster” at Newsom’s request, saying the federal government will ship a number of mobile hospital units to the state, pay for National Guard deployments, and deploy the San Diego-based naval hospital ship Mercy to Los Angeles.

Long term, though, things aren’t looking so good for the state’s fiscal future. As stock prices collapsed, the California Public Employees’ Retirement System, used to fund public employees’ pensions, saw its balance drop by $69 billion from last month. To make up the deficit, local governments and schools will have to pay CalPERS more in coming years, likely forcing them to raise taxes or cut public services.

Exclusive CalMatters coronavirus content:

  • Mark your calendars for March 26 at 1 p.m. for the next CalMatters webinar in the “Getting Through Coronavirus, Explained” series. We’ll chat with the California Labor and Workforce Development Agency about filing for unemployment and figuring out sick and family leave.
  • Check out CalMatters’ podcast on best coronavirus practices for seniors with Kim McCoy Wade of the state Department of Aging.

The Bottom Line: As of 7 p.m. Sunday night, California had 1,799 confirmed coronavirus cases and 35 deaths from the virus, according to a Los Angeles Times tracker.

Other stories you should know

1. What the coronavirus pandemic reveals about Newsom’s governing strategy

Gov. Gavin Newsom at a press conference in the state capitol following the first COVID-19 death in California. Photo by Anne Wernikoff for CalMatters
Gov. Gavin Newsom at a press conference following the first COVID-19 death in California. (Photo by Anne Wernikoff for CalMatters)

Two themes have emerged in the California governor’s leadership strategy: defer to local governments, and “speak softly and carry a big stick,” CalMatters’ Laurel Rosenhall reports. By gradually escalating California’s response to the coronavirus pandemic and letting local governments institute stricter rules first, Newsom influenced companies like Disneyland to voluntarily shut down their parks and got greater buy-in for a statewide shelter-in-place order. And if Californians don’t listen to his soft speech and stay home, Newsom said he will bring out the “big stick” — martial law.

2. On first weekend of statewide shelter-in-place, Californians desperate to go outside

Park goers enjoy the sunshine while maintaining social distance a Dolores Park in San Francisco on March 20, 2020. On Thursday, Gov. Gavin Newsom ordered all of California to shelter in place and avoid leaving home except for essential needs. Photo by Anne Wernikoff for CalMatter
Parkgoers enjoy the sunshine at Dolores Park in San Francisco on Friday. (Photo by Anne Wernikoff for CalMatters)

People in Los Angeles, San Diego and the Bay Area had one thing in mind this weekend: going outdoors. Keeping in mind that Newsom’s statewide shelter-in-place order allows for exercise, walking the dog, and getting fresh air, Californians headed to the beach, parks and hiking trails across the state to ease their cabin fever. The problem: So many went that it was difficult to maintain social distancing — to the point that bystanders called the police to complain. In addition, East Bay parks are considering shutting down because of overcrowded trails and parking lots, as well as hikers stealing toilet paper and hand sanitizer from park bathrooms.

  • Bob Doyle, general manager of the East Bay Regional Park District: “Visitation is insane. In my 45 years of park work, I’ve never seen these type of crowds, not ever. People are desperate to get outside.” He added, “This is a health emergency.”

3. Child care centers are staying open, but major challenges remain

Childrens’ cubbies at Happy face family preschool. Director/Owner Elena Ramirez hopes to fill vacancies with the children of first responders and other essential workers who must still go to work. Photo by Anne Wernikoff for CalMatters
Children’s cubbies at Happy Face Family Preschool in San Francisco. (Photo by Anne Wernikoff for CalMatters)

Despite California’s statewide shelter-in-place order, daycare and child care sites remain open to care for the children of essential workers. But challenges remain, CalMatters’ Elizabeth Aguilera reports: The kids have to be kept in small groups, practice social distancing and do lots of washing, washing, washing. And as more kids stay home, child care workers are confronting an uncertain financial future, with some centers shuttering altogether.

4. Newsom and PG&E strike a bankruptcy deal after yearlong battle

Newsom signed off Friday on PG&E’s $58 billion reorganization plan in a deal that includes no shareholder dividends for three years — a forfeiture of about $4 billion — and increased regulatory oversight of the utility, CalMatters’ Judy Lin reports. Next steps? The California Public Utilities Commission needs to sign off on the plan so PG&E can exit bankruptcy and access a $21 billion state fund to pay back wildfire victims. “This is the end of business as usual for PG&E,” Newsom said.

CalMatters commentary

CalMatters columnist Dan Walters: Coronavirus has reminded us just how valuable teachers are. But unfortunately, there are efforts within the Legislature and the education bureaucracy to dumb down teaching license standards, which will only hurt kids already falling behind.

Homeless encampments on levees: The Legislature and public should support a state Assembly bill that would enable the relocation of homeless camps that are damaging levees and endangering communities, argue Sacramento Vice Mayor Jeff Harris and Trustee for Reclamation District 1000 Elena Lee Reeder.

A “Marshall Plan” for homelessness: We’ve been doing our best to tackle homelessness, but it hasn’t been enough. Enter California’s Roadmap HOME 2030, which will draw on experts to propose a comprehensive framework of policy solutions to address the homelessness and housing crisis, write Executive Director of Housing California Lisa Hershey and President and CEO of California Housing Partnership Matt Schwartz.

Other things worth your time

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See you tomorrow.

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