MOORLACH UPDATE — May Revision 2019-20 — May 10, 2019

Gov. Gavin Newsom released his May Budget Revision yesterday morning. As a member of the Senate Budget & Fiscal Review Committee, my calendar will be packed between now and June 15th, the constitutional deadline for the Legislature to send a budget bill to the Governor for signature (followed by a plethora of abusive budget trailer bills to get a lot of legitimate and not so legitimate financial and other efforts passed after the official deadline).

The OC Register and LA Daily News published my immediate reactions to the Governor’s updated budget proposal in the first piece below.

KCRA News Channel 3 addresses the school funding component in the second piece below. My analysis of the 944 school districts in California shows about two-thirds are in fiscal distress. How can a state government that is enjoying such a large budget "surplus" not provide even more funding to the state’s schools? If a recession should raise its ugly head, then Sacramento will start crumbling like a house of cards when the districts show up on the Capitol’s front porch.

The budget also includes the Fairview Developmental Center. Funding for the closure study has already been approved, so the Governor’s request may be redundant (see MOORLACH UPDATE — Senate Bill 59 — February 7, 2017).

However, this is still a win, not because I’ve been advocating for homeless housing on the property (which I have not), but because we’re avoiding other bad things from happening to this property (like a recent budget request from the Department of Developmental Services to have their Southern Regional Center there). Providing services for the mentally ill has been my focus.

The budget narrative for Fairview is consistent with my office’s series of requests, going all the way back to SB 59 in 2017, and the subsequent budget appropriation. It took my office holding the Department of Finance and the Governor’s Administration responsible to get this money for the study, since Legislative Counsel has articulated that the process for the disposition of the land was not all that clear.

The Daily Pilot provides this component of the Governor’s budget discussion in the third piece below. Unfortunately, it’s missing a mention of my recently modified bill, SB 718, which may have changed the tenor of the article (see


Gov. Newsom’s May Revision

helps some, but still spends too


By John Moorlach

My thoughts are not all that different from Gov. Gavin Newsom’s regarding his May Revision budget proposal for fiscal year 2019-20, which begins on July 1. Overall, we have a governor who’s looking at a large, potential budget “surplus” of $21.5 billion. He’s certainly trying to use a decent portion of it for one-time expenses.

Economic trends show that, when the economy is doing well, more revenue than anticipated comes in from higher returns on capital gains and personal income tax receipts. In times of surplus, governors must show restraint and save for rainy days. When they don’t, they get in trouble – as former governors Gray Davis and Arnold Schwarzenegger can attest.

The new proposal warns, “[T]he state must be prepared for the possibility that even a moderate recession could result in revenue declines of nearly $70 billion and a budget deficit of $40 billion over three years.” Yet the state Rainy Day Fund is expected to have only $16.5 billion. Which certainly is better than having no fund at all, the condition before voters passed Proposition 2 in 2014.

Indeed, just hours before his presentation, Bloomberg reported, “The yield on 10-year Treasury notes fell below the 3-month bill yield for the first time since March. The curve between 3 months and 10 years has been hurtling toward zero this week as prospects for a trade agreement between the U.S. and China have dimmed.” Such an “inverted yield curve” historically has been a harbinger of a recession.

So prudence ought to be the word of the day.

The governor only partly dealt with the state’s approximately $256 billion in unfunded pension and retiree health liabilities. We will have a more accurate number later this month when Controller Betty Yee finally releases a late Comprehensive Annual Financial Report for the state for the fiscal year ending June 30, 2018.

He also called for a $140 million new annual tax to pay for clean water, when the record surplus easily could take care of that.

And he called for new regulations on charter schools. In the proposal’s words, “The May Revision proposes a statute to level the playing field for both traditional and charter schools,” supposedly to help minority students. Yet the San Diego NAACP maintained in a recent resolution that charter schools are top priorities for them, and “there are only 10 public schools in California with majority African American student enrollment that perform in the top half of student performance statewide…and eight of those schools are public charter schools.”

If the governor wants to achieve his stated goal of lifting state student test scores, then he should leave charters as they are.

The governor also is making a serious commitment to fighting homelessness. This “epidemic,” as the budget calls it, will be fought with $650 million in spending, up from the $500 million of the governor’s January proposal. Part of the solution is to reduce the cost of living in the state, but that will take discipline to stop increasing taxes and expanding state mandates and regulations that drive people from their homes.

At his press conference on the budget, Newsom mentioned mental health, the primary cause of homelessness, was a personal interest. So it has been for me.

I’m hoping he will support Senate Bill 640, which I authored, to change the definition of “gravely disabled” to help those whose mental illness won’t allow them to get adequate treatment without spending time in jail.

We’re finding out the state’s solution to mental institutions in the 1960’s only moved the problem to our streets and jails. And we are increasingly grappling with how to help the mentally ill who truly need care, while not forcing care on those who actually do need it. I believe SB 640 would be a significant step in the right direction.

On homelessness in general, I concur with the governor that we need to support local efforts. And his budget proposal would spend $2.2 million to complete the review of the disposition of Fairview Developmental Center, in the 37th District of the Senate which I represent. As we had requested several years ago – and had approved in a previous budget – we will finally have the ability to better understand the options in using the property. And we will be able to consult with our partners in Costa Mesa and Orange County to see if there is a proper and effective use of the facility for those with mental illness issues who may also struggle with their housing needs.

In sum, we have a state that’s got a surplus. But we have cities, counties and school districts still trying to make things come together and balance budgets, even though we have a thriving economy. The governor is trying to set aside reserves, but may find they are not adequate if we have a blip in the economy.

As a member of the Senate Budget and Fiscal Review Committee and the only CPA in the Legislature, I look forward to working with the governor on crafting a budget for our great state. The surplus rolling in is an opportunity both to deal with current needs and prepare for a future when the cupboard is bare.

John M. W. Moorlach, R-Costa Mesa, represents the 37th District in the California Senate

3 things to know about Gov. Newsom’s proposed education budget

Mike Luery

California Gov. Gavin Newsom proposed a $213 billion state budget Thursday that boosts spending on K-14 education, wildfires and ending homelessness while putting more money toward state reserves and debt.

Why is education the big winner in Newsom’s budget proposal?

“Forty-five percent of the budget is going to education,” Newsom said during his budget proposal Thursday. “We will have the highest investment in our K-14 education system in California history.”

The governor’s May Revision calls for $101.8 billion in spending on education. The general fund provides $58.9 billion of that, while $42.9 billion comes from other funds.

Newsom’s spending plan includes $696.2 million in funding for special education. That’s an increase of $119.2 million from the governor’s budget proposal in January.

There is also extra money for recruiting and retaining quality teachers.

“By some estimates, upwards of 8,000 teachers have been hired that have not had adequate training or that have been credentialed under the waiver program," Newsom said. “We are having that kind of trouble keeping teachers in the state of California.”

As for higher education, the governor’s May budget plan provides $240 million for the University of California from the general fund – plus an extra $153 million in one-time funding, with the understanding that UC will not raise tuition for California residents in school year 2019-20.

California State University and its 23 campuses will get $300 million from the general fund, plus $264 million in one-time funds, again with the expectation of no tuition increases for California students in the upcoming fiscal year.

Community colleges, with 115 campuses statewide, will be getting an extra $45 million under Newsom’s plan to extend free tuition from one year to two years.

“That would be so helpful,” said Sara Sanchez, a student at Sacramento City College. “I have so many bills at home. My parents don’t have that kind of money to help us with school.”

“So there’s just one less thing to be worried about,” said Sacramento City College student Julia Macay. “We can just focus on get all those A’s, you know?”

Is the extra money for public schools going to the classroom or to pay for teacher health care and pensions?

“Well, the health care reduces the costs overall to each district,” Newsom said.

The governor’s plan originally called for reducing employer contributions to CalSTRS from 18.3 % to 17.1% in the upcoming fiscal years. But now, Newsom plans to add $150 million more in one-time spending to reduce employer contributions to 16.7 percent.

But Newsom indicated some of the additional spending would be used on teachers.

“We talk about enhancements for teacher training,” Newsom said. “The enhancements for kindergarten and other related enhancements. We think that’s part of a larger bucket.”

Newsom’s budget would provide approximately $5,000 more per student compared to eight years ago.

How do Republicans feel about the governor’s spending plan on education?

“We need more money going directly to the classrooms,” Senate Republican leader Shannon Grove said.

“And for the students, we need more local control with our dollars for education,” Grove said.

But some Republican lawmakers wondered why a state with a $21 billion surplus could have so many school districts, like Sacramento City Unified, that are running out of money.

“These districts, either they’ve been mismanaged or they have overpromised,” said Sen. John Moorlach, a Republican from Costa Mesa. “And so that is something that is lingering. It’s in the shadows."

“The state is flush (in money), but school districts are not,” Moorlach said. “So why isn’t the state allocating more to the kids?”

State looks to explore developing homeless services at Fairview Developmental Center in Costa Mesa


Though the long-term future of the Fairview Developmental Center is still to be determined, state officials are again raising the possibility of using the Costa Mesa property to provide services for the homeless.

In a revised budget proposal released Thursday, Gov. Gavin Newsom called for designating $2.2 million “to complete a site evaluation of disposition options” for the 114-acre, state-owned center at 2501 Harbor Blvd.

That effort would “include identifying constraints and opportunities, working with the city of Costa Mesa and Orange County to identify local stakeholder interest in the reuse of the property, particularly related to meeting housing and homelessness needs, and identifying options that will generate the greatest benefit to the state,” according to the budget summary.

At the same time, the state would “explore options to immediately enter into a long-term lease with a local jurisdiction to provide housing and supportive services for up to 200 individuals with cognitive disabilities who are currently homeless.” Fairview would be considered for that purpose.

Assemblywoman Sharon Quirk-Silva (D-Fullerton), who previously proposed the concept through her Assembly Bill 1295, said in a statement Thursday that “these men and women are our hidden neighbors; they come from all over Orange County and need shelter and medical care in order to find stability and hope.”

However, Costa Mesa leaders were cooler to the concept. Mayor Katrina Foley said she believes a better tactic would be for the state to help fund the city’s ongoing efforts to address homelessness — such as a recently opened 50-bed temporary shelter at Lighthouse Church of the Nazarene — “to help us help people immediately.”

“From our perspective, we would rather have the governor redirect funding from studying options at Fairview Developmental Center to investing in a plan that we have community support for,” Foley said Thursday. “We have a system of care that has been shown to be effective already, just since we opened in April.”

Assemblywoman Cottie Petrie-Norris (D-Laguna Beach), whose district includes Costa Mesa, also said she favors the state putting its resources toward supporting more-immediate, locally based solutions to combat Orange County homelessness.

“We have a list of projects that need funding now, will start to get people off the streets now and will save lives now,” she said in a statement. “The quickest and most effective way for us to build capacity is to invest in existing local programs that are working.”

Petrie-Norris said in an interview that it’s vital for the local community to play a major role in determining the next chapter for Fairview so “we come up with a future use that … does good and serves a positive purpose for Orange County.”

“I think it’s premature to determine the specific use of that property given how far away that use would be and given how urgent I feel the need is here and now,” she said. “As state leaders, I think the most powerful role that we can play is to use our capacity to amplify the work of the groups that are already getting results on the ground.”

Fairview — like similar facilities around the state that serve adults with intellectual and developmental disabilities — is scheduled to close as part of an effort to transition people out of institutional-style centers and into smaller accommodations that are more integrated into communities. As of April 24, 57 people were living in the Fairview center, according to the state Department of Developmental Services.

Fairview’s remaining clients are expected to move out by the end of this year, according to the state budget summary.

Previous proposals to house regional homeless services at the developmental center have been met with swift and fierce community condemnation.

In March 2018, then-county Supervisor Shawn Nelson announced that he and state Sen. John Moorlach (R-Costa Mesa) were looking into the potential of using the site as an emergency homeless shelter. Costa Mesa City Council members responded by quickly convening a special meeting to voice their unanimous disapproval.

Since then, the city has spent millions of dollars to develop its temporary homeless shelter at Lighthouse Church and purchase a property near John Wayne Airport for potential use as a long-term location.

“We’re having to dip into our reserves to pay for the permanent shelter,” Foley said. “We certainly agree with the governor that the homeless crisis and solutions for people who are suffering mental illness are incredibly important, and we have a plan. We’d love to have him partner with us to implement our plan today instead of someday in the future.”

It’s incumbent on all Orange County cities to “do their fair share in terms of addressing homelessness in their community,” she added, because “if we all participate, then there isn’t one city that has to become a regional space for caring for the most vulnerable in our county.”


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