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Your guide to California policy and politics
BY Emily Hoeven October 20, 2022
Presented by Climate-Smart Agricultural Partnership, Californians Against Higher Taxes, Save our Capitol and Sutter Health

An ominous warning for California economy

Economic warning signs are mounting in California — foreshadowing potentially tough budget decisions for the state officials and policymakers who emerge victorious from the Nov. 8 election.

One particularly eye-popping statistic: Just nine companies headquartered in the Golden State went public in the first three quarters of 2022, compared to 81 during the same period last year, according to a Bloomberg News analysis.

Bloomberg also found that:

  • As of Sept. 30, initial public offerings in California had raised just $177 million, compared to an average of $16 billion during the same period over the past five years.
  • The $177 million figure represents just 2% of funds generated by U.S. companies that went public through the end of September. Last year at this time, California accounted for 39% of funds nationally.
  • If this trend continues, it could spell an end to the streak California has maintained since 2003 of generating more IPOs than any other state.

“We are already seeing an immediate effect,” Brian Uhler, deputy legislative analyst for the state Legislative Analyst’s Office, told Bloomberg. “And it does appear to be significant,” contributing to a 5% decline in California employers’ income tax withholding payments in September compared to last year.

Indeed, California collected about $2.8 billion less in taxes in September than it thought it would, marking the third straight month of revenues coming in below projections, according to a report released this week by Gov. Gavin Newsom’s Department of Finance.

The problem is also pronounced at the local level. In San Francisco, for example, revenues from a new business tax have plunged as companies struggle to emerge from the pandemic, leading to a shortfall of tens of millions of dollars for homelessness, mental health and substance abuse programs, the San Francisco Chronicle reports.

In a Monday interview with Bloomberg, San Francisco Mayor London Breed said the city needs to become less reliant on tech companies — some of which have downsized or left the area altogether as many employees continue to work from home — in order to stabilize the economy and avoid losing further tax revenue.

Breed said she wants to lure more biotechnology and life sciences companies into empty office buildings downtown, noting that Salesforce — the city’s largest private employer — continues to allow remote work.

  • Breed: Salesforce CEO Marc Benioff is “very supportive of the city, continues to contribute that support to schools and to other great causes, but the building is empty, and that’s a real problem.”
  • A Salesforce spokesperson declined to comment to Bloomberg.

Meanwhile, five of San Francisco’s 11 supervisors are calling for changes to a local ordinance banning city employees from traveling to or contracting with companies based in 30 states that have enacted anti-LGBTQ, anti-abortion or anti-voting-rights laws, according to the San Francisco Chronicle.

  • The supervisors: “By prohibiting the city from doing business with half the nation, this policy has resulted in significant administrative costs and potentially far more significant contracting costs by limiting bidder competition.”
  • The state of California has a similar law that came under renewed scrutiny after Newsom took a family vacation to Montana, a state on the travel ban list.

One last financial factoid for the road: Democratic Assemblymember Matt Haney of San Francisco announced Wednesday that he had secured $1.7 million in state funds to build a local public bathroom — though it probably won’t be completed until 2025. “Why is a public bathroom so insanely expensive, and why does it take so long to build?” San Francisco Chronicle columnist Heather Knight asked in exasperation.

Some things never change: I attempted to answer that very same question in a 2019 article for the San Francisco Business Times, headlined: “Building a bathroom cost San Francisco $2 million. Why does a restroom cost as much as a luxury condo to construct?”

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1 Will community colleges get more $$ for remedial class reforms?

Assemblymember Jacqui Irwin speaks on the Assembly floor on Sept. 10, 2021. Photo by Anne Wernikoff, CalMatters

From CalMatters higher-education reporter Mikhail Zinshteyn: A new California law taking effect in January says community colleges must enroll most students in math and English courses that are required to transfer into the University of California or the California State University systems.

  • Many viewed the bill’s passage as an equity win, citing data that show placing students in remedial classes prevents them from reaching their academic goals.
  • But faculty groups opposed the bill. Among their biggest gripes:  It didn’t come with any extra ongoing funding for tutoring that happens during class while instructors are teaching. The groups say the new law puts pressure on instructors by requiring them to teach students who would otherwise have been placed in remedial classes alongside their more academically prepared peers. (A separate bill that Gov. Gavin Newsom signed this year will expand other forms of tutoring, which backers say can lead to more students passing their courses.) 

During a Tuesday ceremony at Moorpark College, the bill’s author told Mikhail she’s not really in a hurry to push for that ongoing funding. “We have a very uncertain budget outlook” next year, said Assemblymember Jacqui Irwin, a Camarillo Democrat. Even in this year’s bonanza of a budget, 95% of the surplus paid for things on a one-time basis, like construction or pilot programs.

Irwin added that a 2017 law she authored to reduce remedial classes at community colleges didn’t come with extra funding for tutoring that happens alongside instructors while classes are in session, and most campuses switched to enrolling students into transferable math and English anyway. 

  • Irwin: The law “was very successfully implemented at a very large number of schools with resources that they had.”

Learn more about legislators mentioned in this story

D

Jacqui Irwin

State Assembly, District 44 (Camarillo)

State Assembly, District 44 (Camarillo)

How she voted 2019-2020
Liberal Conservative
District 44 Demographics

Race/Ethnicity

Latino 44%
White 43%
Asian 8%
Black 2%
Multi-race 3%

Voter Registration

Dem 43%
GOP 29%
No party 22%
Other 6%
Campaign Contributions

Asm. Jacqui Irwin has taken at least $1.8 million from the Party sector since she was elected to the legislature. That represents 25% of her total campaign contributions.

Predictably, as tens of thousands more students began taking these transferable courses, a slightly higher percentage have been failing them. But overall almost twice as many students are passing transferable math courses because of the reforms Irwin’s 2017 bill initiated.

This year’s budget deal still included $64 million in one-time spending for things like tutoring and faculty training to better implement these transfer-course reforms. The community college system is seeking to make that money permanent and grow it to $70 million in next year’s budget. 

  • Irwin: “We have to see how successfully the ($64 million) this year is used.” 

2 Why Los Angeles is at center of housing crisis

A panoramic view of Los Angeles.

When it comes to the housing crisis, Los Angeles tends to hog the spotlight — and for good reason. It’s both the capital of single-family-home suburban sprawl and the most crowded place to live, as highlighted by a new investigation by the Los Angeles Times. The series found that more people are squeezing into fewer rooms in Los Angeles County than in any other place in the United States, with deadly consequences for its poorest residents. For more, check out the latest episode of Gimme Shelter: The California Housing Crisis podcast. And while you’re at it, give a listen to another recent podcast episode on how California’s new parking law could lower housing costs.

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Other things worth your time


Some stories may require a subscription to read

‘No, I will not resign’: Kevin de León defends himself in TV interview. // Los Angeles Times

Pandemic-related fraud totaled billions. California is trying to get some of it back. // NPR

Woman charged with EDD benefits scam using Scott Peterson’s name. // Associated Press

Riverside County mailed out 5,000 duplicate ballots in error, but double votes won’t go through. // Los Angeles Times

In secret testimony, Los Angeles mayoral candidate Rick Caruso was grilled about what USC knew about disgraced gynecologist. // Los Angeles Times

S.F. DA Brooke Jenkins removes one of California’s most veteran judges from new juvenile cases. // San Francisco Chronicle

New conflict after Boudin recall: Jenkins accuses fired prosecutor of removing confidential files. // San Francisco Chronicle

San Jose gun owners to be fined up to $1,000 for breaking new firearm law. // Mercury News

Tesla wants new trial over ‘Jim Crow-era racism’ at Fremont factory. // Mercury News

The gig law causing chaos in California strip clubs. // WIRED

Students, legal scholars push California universities to hire undocumented students. // New York Times

L.A. Unified enrollment continues to fall, but drop is cushioned by influx of 4-year-olds. // Los Angeles Times

Sacramento high school student tests positive for active tuberculosis. // Sacramento Bee

Repairs could halt California rail service into December. // Associated Press

Marin County moving to require new construction be all-electric. // Marin Independent Journal

‘Builder’s remedy’ law could pressure cities resistant to additional housing. // San Diego Union-Tribune

California is trying to house the homeless through a health insurance program. It worked for this man. // Los Angeles Times

See you tomorrow

Tips, insight or feedback? Email emily@calmatters.org.

Follow me on Twitter: @emily_hoeven

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