MOORLACH UPDATE — Really Addressing Housing Goals — January 29, 2019

In his swearing-in remarks, Gov. Newsom quoted from my favorite speech, the Sermon on the Mount, exhorting the need to build on a solid rock and not sinking sand.

Watching Sacramento’s salvo shot at Huntington Beach, it reminds me of a question that Jesus asked in Matthew 21:28-31 (see MOORLACH UPDATE — RHNA Retribution — January 26, 2019).

“What do you think? There was a man who had two sons. He went to the first and said, ‘Son, go and work today in the vineyard.’
“ ‘I will not,’ he answered, but later he changed his mind and went.
“Then the father went to the other son and said the same thing. He answered, ‘I will, sir,’ but he did not go.
“Which of the two did what his father wanted?”

I believe many in Sacramento are getting a little tired of cities that say they are going to do what the law requires, but only provide lip service. If Huntington Beach had not changed its original housing plan in 2013, Newsom’s lawsuit would not have presumably occurred. But, when you look at what is actually happening in this city, there is plenty of building occurring, inasmuch as they can accommodate it. At least its leadership was honest in that it was reexamining its official documents.

Cities just giving the minimum on housing and homelessness issues, but not the follow through, is where the legislature and Governor should focus. Let me provide an example. California has numerous cities that have not complied with the requirements of SB 2, to establish a zone where year-round homeless shelters can be built. Many other cities have declared an SB 2 zone, but it is just to satisfy the state requirement. The possibility of an actual shelter being built there is next to zero.

I found this out the hard way with the city of Santa Ana. I watched intently as its city council selected their preferred SB 2 zone. Then I, along with my Supervisorial colleagues, opened escrow on a commercial building in that zone for a 200-bed shelter. What happened next? The Santa Ana City Council went apoplectic and killed the deal.

Were they guilty of lip service? Were they meeting the requirements with no intention of following through? I guess.

So, which is worse? The city that says it’s going to do something and doesn’t? Or the city that tells you the truth and then, after a little reflection, actually does what it is demanded to do?

MyNewsLA provides the City News Service piece below on the latest developments in this saber rattling exercise to get cities to do what they are demanded to do, versus just providing the lip service that is superficial but doesn’t meet the true spirit of the law.

Also, now that we’re on the subject of housing elements, I’ve been enjoying both questions and praise for my co-authorship of Senator Wiener’s bill, SB 50, which tries to incentivize housing being built near transit stations (see MOORLACH UPDATE — 2019-20 Session Underway — December 4, 2018). Providing housing or governmental facilities alongside transit lines, in my opinion, has not fared well in Orange County.

We need to encourage cities to move their development processes along inasmuch as they can do so and eliminate barriers to entry that are so difficult to overcome that little new housing actually gets built in a timely fashion and without additional costs. SB 50 is an attempt to go after the low hanging fruit, but it’s not a perfect alternative.

I’m co-authoring the bill with the understanding that it doesn’t increase prevailing wage requirements. Some question my willingness to address a massive problem through a public, deliberative, legislative process. I find that this is a distinctly different – and I would argue – better way to find housing options rather than by fiat or litigation.

If the bill moves a direction I am not comfortable with or does things that I have consistently opposed, I’ll pull my support to the bill. And Senator Wiener is aware of this. Until then, if any of my constituents have a better idea on how to deal with this problem, you know where to find me.

OC Lawmakers Hope to Settle State’s Suit with Huntington Beach

https://mynewsla.com/orange-county/2019/01/28/oc-lawmakers-hope-to-settle-states-suit-with-huntington-beach/

Two Orange County legislators Monday said they were working to help settle a legal dispute between the state and Huntington Beach over affordable housing.

Gov. Gavin Newsom announced a lawsuit Friday against the city, accusing it of blocking the production of affordable housing and worsening the statewide housing crisis.

Assemblywoman Cottie Petrie-Norris, D-Laguna Beach, said she spent the weekend “connecting with members of the Huntington Beach City Council and the governor’s office.”

“My objective is for us to find a resolution for outside of the courts," Petrie-Norris said. "I think that having this go into litigation is not an efficient or productive way for us to solve this problem.”

Petrie-Norris said meetings with Newsom’s office continued Monday.

“Hopefully, we have more to share tomorrow,” she said.

Newsom spokesman Nathan Click, said the governor is open to a settlement.

“Our goal has always been for Huntington Beach to amend its housing plan to allow for more housing,” Click said.

“The governor supports and encourages all efforts to help the city come into compliance with state housing law, and the state will gladly drop its lawsuit once it does so. California has made repeated attempts to work with the city to bring their housing plan into compliance over the last four years and stands ready to do so once more.”

State Sen. John Moorlach, R-Costa Mesa, said he was “in the process of writing a letter to the governor saying, hey, let’s work together.”

“We’ve got to get everybody to calm down and let cooler heads prevail, and we have to look at the bigger picture,” Moorlach said.

Huntington Beach City Attorney Michael Gates said the lawsuit would bog down efforts to negotiate a settlement.

Newsom’s office accused the city of amending its housing plan– which was in compliance with affordable housing mandates in 2013 — to “significantly” reduce “the number of new housing units able to be built.”

City officials then later rejected a proposed amendment that would have added the ability to build more affordable units, the governor’s office claimed.

“Cities and counties are important partners in addressing this housing crisis, and many cities are making herculean efforts to meet this crisis head-on,” Newsom said. “But some cities are refusing to do their part to address this crisis and willfully stand in violation of California law. Those cities will be held to account.”

Gates responded that the city has been “complying with all applicable state housing and zoning laws and has been, and will continue to, work with the California Department of Housing and Community Development regarding meeting the city’s Regional Housing Needs Assessment.”

Gates said proof of that “is evidenced by the city’s recent court victories in lawsuits challenging the city’s actions to zone for additional housing, including affordable housing.”

Efforts by city officials to improve its zoning “has been caused by the city fighting lawsuits and court appeals filed by plaintiffs such as the Kennedy Commission.”

Gates said the lawsuit was “timed poorly as it now interrupts recent months of discussions with both (Housing and Community Development) and the Kennedy Commission with regard to a resolution to the remaining outstanding disputes.”

Since 2014, the city has “issued permits and filed inspections for over 2,500 new housing units, including approximately 100 very low-income and low-income deed-restricted units,” Gates said.

“Moreover, the city has also permitted or entitled all of its moderate-income (Regional Housing Needs Assessment) target,” Gates said. “The city has also established programs, such as our Tenant Based Rental Assistance program, dedicated to providing assistance to extremely low income and at-risk homeless households.”

Gates said it was “noteworthy” that Huntington Beach has been singled out “while over 50 other cities in California have not yet met their RHNA targets. That raises questions about the motivation for this lawsuit filed only against Huntington Beach.”

The city also is embroiled in a legal battle with the state over the so-called “sanctuary state” law that the city has claimed doesn’t apply to Huntington Beach because it is a charter city.

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MOORLACH UPDATE — California vs. Huntington Beach — January 28, 2019

In a surprise to most of us, the Governor, with the assistance of the Attorney General, filed a lawsuit against the city of Huntington Beach on Friday morning (see MOORLACH UPDATE — RHNA Retribution — January 26, 2019).

Those observing what occurred are weighing in. Despite the Governor’s authority to do so, several commentators make this out to be a petty political play.

What is most irksome is the capriciousness of it all. No formal warning. No filing for the 50 other cities who are also missing housing goals. I believe this could have been done in a more professional manner.

I am willing to meet with the Governor and talk about ways that we can address our housing shortage and do so in a thoughtful, deliberative and cooperative way. Addressing the high cost of obtaining a roof over our heads is something we all are focused on and it deserves a hopeful and productive process.

Dan Morain of CALmatters provides his perspectives in with his world famous daily email in the first piece below (showing just the Huntington Beach segment). He alludes to SB 106, which gave Marin County favorable treatment (and which I also voted against), hinting at my concern about its cities not being subject to litigation as well.

Katy Grimes of California Globe weighs in with the second piece below. She included my press release of Friday afternoon.

Timothy Coyle puts in his two cents in Fox & Hounds, which is the third piece. And Vicki Alger raises great hypocrisy concerns in Independent Women’s Forum, which is the fourth and final piece below.

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Why crack down on Huntington Beach?

housing-2-e1548463044510.jpg

Gavin Newsom sues Huntington Beach over housing.

Making clear that he is serious about building more housing, Gov. Gavin Newsom has taken the extraordinary step of suing Huntington Beach, alleging the Orange County beach town has failed to comply with a requirement that it build affordable housing.

  • Attorney General Xavier Becerra filed the suit at Newsom’s behest on behalf of the California Department of Housing and Community Development, testing a 2017 law giving the state greater power to enforce often-ignored housing requirements.

Newsom: “The huge housing costs and sky-high rents are eroding quality of life for families across this state. California’s housing crisis is an existential threat to our state’s future.”

Two things to know: Huntington Beach, aka “Surf City,” was under Republican control until November, and the city has a recent history of suing the state, which is dominated by Democrats.

  • A lawsuit earlier this month claimed that because it’s a charter city, Huntington Beach need not comply with certain housing requirements. That case is pending.
  • Another suit last year contended California’s so-called “sanctuary” laws limited its authority to properly police its cities. Huntington Beach won early rounds in that litigation.

Huntington Beach Mayor Erik Peterson: “Huntington has won some lawsuits against the state and we will continue to fight for local control.”

Republicans lost sole control of Huntington Beach when Assemblywoman Cottie Petrie-Norris and Sen. Tom Umberg, both Democrats, defeated Republican incumbents as part of the blue wave of 2018.

  • How they respond to the state’s suit—they didn’t return my calls—could have implications for whether Democrats hold those seats in the next election.

Sen. John Moorlach, a Republican who also represents part of Huntington Beach, said he is surprised that Newsom would fire a “cannon ball this big this fast.”

Not a target: Before being elected governor and moving to Sacramento, Newsom lived in the strongly slow-growth Democratic stronghold of Marin County. It’s not being sued. In 2017, Assemblyman Marc Levin, a Marin County Democrat, won an exemption to state housing requirements, as CALmatters columnist Dan Walters detailed in this piece.

Gov. Newsom Singles Out Huntington Beach For Lawsuit on Affordable Housing

Exacerbates the California housing crisis using heavy-handed litigation tactics

By Katy Grimes

https://californiaglobe.com/legislature/gov-newsom-singles-out-huntington-beach-for-lawsuit-on-affordable-housing/

Gov. Gavin Newsom on Friday announced he was singling out the city of Huntington Beach, CA by filing a lawsuit against the city over a lack of affordable housing. “The time for empty promises has come to an end,” said the lawsuit, filed by Attorney General Xavier Becerra. “The City should not be allowed to avoid its statutory obligations any longer.”

Yet there are 50 cities on the list not addressing the housing crisis as the state has mandated. Sen. John Moorlach (R-Costa Mesa) who represents Huntington Beach, took umbrage with Newsom and issued a harsh statement:

Over the 4 years I have served in the State Senate, I have labored diligently to reduce the cost of housing in California so every person and family could afford a roof over their heads. That includes attempts to reform the California Environmental Quality Act, address infill constraints, and create opportunities for denser housing near transit centers. However, the state government continues to erect more burdensome obstacles in the form of higher taxes on real estate transactions and more regulatory hurdles, rather than houses. Additionally, the dark cloud of litigation hangs over the heads of developers who want to make good on the idea of affordable housing.

So that is why I am befuddled that Governor Newsom – a former mayor of a city and county with astronomical housing costs and multitudinous problems – would try and make an example out of my constituents, the City of Huntington Beach, and sue them for not having enough affordable housing.

From my vantage point, Huntington Beach is doing its best to comply with applicable state housing and zoning laws and continues to work on meeting its housing goals and has consistently prevailed in court on this very issue.

I thought that Governor Newsom understood how difficult building more affordable housing was going to be and hoped that he would engage in some goodwill gestures to help cities reach their goals. In one fell – and very awkward – swoop, he made things worse and single-handedly exacerbated the housing crisis by unilaterally announcing a lawsuit on the City of Huntington Beach.

The State of California filing a lawsuit against one of its 482 cities is the first clash between the philosophies of local control versus centralized control out of Sacramento. The issue should be in striking a balance. If the Governor thinks that using heavy-handed litigation tactics that will divert the city’s time, energy and resources to respond to obstructive and otherwise frivolous lawsuits will help them achieve their goals, then he needs to re-evaluate his priorities.

Once this approach is started, then it must be applied to all other cities not in compliance. He should have a policy of no better, no worse. Otherwise, these are strong-arm tactics.

What is really going on?

In 2017, Governor Brown signed several bills strengthen existing laws and increase accountability and enforcement in order to force cities to build more affordable housing.

See AB 72, authored by Assemblyman Freddie Rodriguez (D-Pomona), passed without much Republican support. Sen. Moorlach opposed it.

Huntington Beach and 50 other cities are out of compliance because they don’t have a current/compliant affordable housing element in their general plan. What’s lost in this mandate. is that even if the cities were “in compliance,” there’s no requirement in the legislation to build.

Additionally, cities don’t build houses, developers do. With all the regulatory and licensing obstacles in place, developers already have difficulty building in California, much less “affordable housing.” The estimate of city/county/state fees and licensing costs is $100,000 per home, before ground is even broken, depending on the region.

Even Senator Scott Wiener (D- San Francisco) acknowledged how backwards the system is when he said, “The system is so broken. It gives the public a false sense that a step has been taken toward having more housing when in fact, it’s just an illusion. Many local communities basically run a scam where they spend all sorts of time – lots of public hearings, lots of public discussion – and then it’s over and you have this collection of paper sitting on a shelf. It doesn’t result in any additional housing.”

Weiner continued: “State lawmakers have known about the law’s weaknesses for decades but haven’t fixed them. They have added dozens of new planning requirements to the process but have not provided any incentive, such as a greater share of tax dollars, for local governments to meet their housing goals.”

Governor Sues Huntington Beach Over Housing

Timothy L. Coyle

By Timothy L. CoyleConsultant specializing in housing issues

http://www.foxandhoundsdaily.com/2019/01/governor-sues-huntington-beach-over-housing/

In a move that may signal more to come, Governor Newsom is backing up his get-tough language with California communities by announcing that he is taking the City of Huntington Beach to court for failure to meet its housing need. The unprecedented action startled some at the Capitol while pleasing many who remarked that the lawsuit could represent “a turning point” in the state’s struggle to overcome its housing crisis.

Newsom said Huntington Beach has continually refused to meet a state mandate to provide new housing for low-income people – typically the high-density, lower-cost kind. New housing approvals in the Orange County beachside community, dubbed “Surf City”, has typically come in the form of low-density, high-cost homes, the lawsuit says.

“Californians spend more of their income on housing costs than residents of almost any other place in America,” the Governor said in a statement detailing the lawsuit. “Data show these huge costs are driving families further away from their jobs, and often out of the state.”

The lawsuit is the first to be filed under a new state law which authorizes California housing officials to refer communities to the attorney general for legal action if they do not adequately plan for new housing. Cities and counties in the state are required by law to adopt a housing plan that meets their housing needs.

The state Department of Housing and Community Development (HCD) administers the law. HCD judges the communities’ compliance by examining the extent to which an adequate number of “sites for housing” have been zoned.

There are as many as five dozen communities in California that are currently out of compliance with state housing law. Huntington Beach was singled out because while it allegedly had a plan some years ago that got an HCD sign-off it subsequently amended the plan to substantially lower the number of housing units it would approve. While the City’s action to reduce its housing need is reportedly what triggered the lawsuit, some in the community worry that partisan politics is playing a role.

“It is noteworthy that Sacramento is suing only the City of Huntington Beach, while over 50 other cities in California have not yet met their targets,” said City Attorney Michael Gates. “That raises questions about the motivation for this lawsuit filed only against Huntington Beach.”

But, while the City of Huntington Beach is currently represented in the state Senate by the GOP’s John Moorlach representation in the Assembly is split, with Republican Tyler Diep sharing the community with newly elected Democrat Cottie Petrie-Norris. Orange County is the scene of severe Republican losses in the last election and one would assume a partisan Democrat like Gavin Newsom would not want to be responsible for a reversal of fortune there.

The Governor’s legal action advances an aggressive housing agenda that he campaigned on and set in the first weeks of his administration. For instance, on the campaign trail last year, he promised to build roughly 3.5 million housing units by 2025 to meet projected population growth. To accomplish this goal, the Governor knew he’d have to get tough with local governments.

“Cities and counties are important partners in addressing this housing crisis, and many cities are making herculean efforts to meet this crisis head on,” he said. “But some cities are refusing to do their part to address this crisis and willfully stand in violation of California law. Those cities will be held to account.”

The Governor raised the stakes in his recent budget proposal by proposing hundreds of millions in state funding as subsidies for affordable housing, including $500 million to encourage cities and counties to meet their production objectives. He has also suggested limiting transportation funding to locals which don’t meet their goals.

The complaint was filed in Orange County Superior Court by California’s attorney general. The state is seeking an order that would compel Huntington Beach to reverse its recent decision to cut its housing sites.

Lawsuits are typically ugly, time-taxing affairs. Very often they don’t achieve their desired results, either. Governor Newsom would be better off holding transportation dollars hostage. In these cash-strapped times, doing so would certainly get local government’s attention. And, it just might get some new housing built.

But, if filing lawsuits becomes the primary means of accomplishing the Governor’s housing goals, tough times are ahead.

Unaffordable Housing Isn’t an Existential Problem. It’s a Regulatory Problem.

by Vicki E. Alger

http://iwf.org/blog/2808546/Unaffordable-Housing-Isn%E2%80%99t-an-Existential-Problem.-It%E2%80%99s-a-Regulatory-Problem.

California Governor Gavin Newsom says unaffordable housing an “existential threat to our state’s future,” and he’s making an example of Huntington Beach.

State affordable housing mandates have been around since Ronald Reagan was governor, but they’ve seldom been enforced—until now.

The state filed suit against Huntington Beach last Friday to compel city officials to set aside more sites for low-income housing, the first such case to be brought under a law enacted in 2017.

Under that law if cities and counties don’t have affordable housing targets that “substantially” comply with the state Department of Housing and Community Development’s guidelines, they can be deemed out of compliance, and the state can sue.

Yet not only are these guidelines expressly “advisory,” more than 50 other cities haven’t met their state-recommended housing targets, either. Which begs the question: Why single out Huntington Beach?

Perhaps Gov. Newsom’s suit against Huntington Beach would be a little more understandable if his own city of San Francisco were a shining beacon of affordability or livability instead of an overpriced mess.

Its cost of living there is now so high that a family of four making over $117,000 annually is considered low-income and qualifies for government housing assistance. Yet San Francisco’s standard of living is so low residents routinely contend with trash-strewn streets, crime scenes, open-injection drug use, and poop patrols cleaning human feces off the sidewalks.

Little wonder that Bay Area residents, rich and poor alike, are moving away. So are many families with children, citing high costs, long working hours, and cramped living conditions.

Huntington Beach should not be scapegoated for California’s affordable housing morass. If Governor Newsom really wants to fix the problem, he should take housing mandates and regulations to task instead. As California Globe Editor Katy Grimes explains:

What’s lost in this mandate is that even if the cities were “in compliance,” there’s no requirement in the legislation to build. Additionally, cities don’t build houses, developers do. With all the regulatory and licensing obstacles in place, developers already have difficulty building in California, much less “affordable housing.” The estimate of city/county/state fees and licensing costs is $100,000 per home, before ground is even broken, depending on the region.

Even elected city and state officials from the Bay Area, where Governor Newsom served as San Francisco mayor for two terms, admit that the state’s affordable housing mandates are a “shell game,” “an “illusion,” “completely ineffective,” and state lawmakers have known it for years.

Experts also routinely point to California as a cautionary tale about over-regulation. In fact, houses there can cost between $500,000 and $1 million more than they would elsewhere because of the hefty regulatory burdens imposed through environmental, zoning, parking, and other mandates, not to mention expensive, bureaucratic permitting requirements.

Removing regulatory barriers is a leading recommendation for making housing more affordable—one even the Obama administration embraced. But it seems the Governor missed the memo.

Responding to Gov. Newsom’s lawsuit, State Senator John Moorlach (R-Costa Mesa), who represents Huntington Beach, said:

…I have labored diligently to reduce the cost of housing in California so every person and family could afford a roof over their heads. That includes attempts to reform the California Environmental Quality Act, address infill constraints, and create opportunities for denser housing near transit centers. However, the state government continues to erect more burdensome obstacles in the form of higher taxes on real estate transactions and more regulatory hurdles, rather than houses. Additionally, the dark cloud of litigation hangs over the heads of developers who want to make good on the idea of affordable housing. …If the Governor thinks that using heavy-handed litigation tactics that will divert the city’s time, energy and resources to respond to obstructive and otherwise frivolous lawsuits will help them achieve their goals, then he needs to re-evaluate his priorities.

Until that happens, Californians are about as likely to find affordable housing as they are to find a unicorn trotting down the Pacific Coast Highway hauling groceries in plastic bags.

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MOORLACH UPDATE — Health Care Agenda — January 27, 2019

As someone who has reviewed disappointing audit reports on the Department of Motor Vehicles (DMV) and the Department of Transportation (Caltrans), I am understandably not a big fan of having government run the health care industry in California.

I am sincerely concerned about those who cannot afford health care. I’m happy to report that the County of Orange has a robust infrastructure to provide a safety net for these individuals through its independent health clinics (Coalition of Orange County Community Health Centers) and its county operated health system (COHS), CalOptima. I had the privilege of serving on the CalOptima board for four years, during the Great Recession, and assisted in keeping this critical organization financially sound.

I prefer the COHS model. And replicating it around the state would be my recommendation for addressing the health care needs of those who are under-insured.

As an immigrant, I’m also concerned about providing services to those who are not residents in proper standing. With that, Politico provides an overview of Governor Newsom’s current proposed strategy on California’s health care front. My politely stated concerns are included in the piece below.

During my first few months in office as a Senator, the major health care debate was the managed care organization (MCO) tax increase (see MOORLACH UPDATE — SB 1273 and MCO Tax — February 27, 2016). It looks like we’re in for similar technical and financial debates in the coming months on this very complex topic of health care.

HEALTH CARE

Newsom makes health care the centerpiece of California’s resistance to Trump

If his health care innovations work, Newsom could emerge as a hero of the Democratic Party.

By VICTORIA COLLIVER

https://www.politico.com/story/2019/01/27/california-gavin-newsom-health-care-1096727

For California under Gov. Gavin Newsom, the resistance to President Donald Trump is about health care.

Much as his predecessor Jerry Brown made climate change the state’s big challenge to Trump, Newsom has embarked on a health agenda that includes extending care to undocumented adults and direct government negotiation of drug prices.

Unlike the other 2020 candidates pushing universal health care, Newsom’s policies aren’t just theoretical Washington talk, so there’s much more at risk. If his innovations in expanding Obamacare, extending Medicaid to undocumented immigrants — itself a jab at Trump’s hard-line immigration policies — and negotiating lower drug prices work, he could emerge as a hero of the Democratic Party. His policies could be templates for candidates pushing ahead on universal health care — an aspiration shared by Democrats even if they are still divided on what specific policies to pursue and how quickly to pursue them.

“In his first day in office, Gov. Newsom established himself as a major force on health care among Democrats and in the states, and that was never true of Gov. Brown,” said Larry Levitt, a senior vice president at the Kaiser Family Foundation.

But the strategy carries lots of peril. The push to extend care will cost the state hundreds of millions of dollars and could stress health systems by attracting more undocumented immigrants. Meanwhile, Newsom’s reluctance to make single-payer health care his top priority after campaigning on it could antagonize the political left, including the California Nurses Association, which has thwarted past health legislation it deemed too timid.

The emerging 2020 Democratic field as well as governors of other states will be watching.

"He’s among the first to try to do some of these things," said Chris Jennings, who served as a health policy adviser in both the Clinton and Obama administrations. Even though California’s size offers more resources and leverage, "many of the policies he’s pursuing can be replicated through individual states or collaborations, and a number of states are starting to think about those things."

Newsom at his Jan. 7 inauguration announced he wants California to be the first state to extend Medicaid coverage to undocumented adults, building on Brown’s 2016 move to cover undocumented kids through age 18. Newsom also wants to install an Obamacare-style individual mandate, which Congress effectively wiped out nationwide in the 2017 tax law. And he wants the state to harness its buying power to bring down drug prices by eventually creating the largest single direct purchaser of prescription drugs in the country.

The 51-year-old former San Francisco mayor and lieutenant governor is tapping into an issue that resonates with Californians. A new poll from the Kaiser Family Foundation and the California Health Care Foundation found 45 percent of residents surveyed ranked making health care more affordable as “extremely important” — just behind education and ahead of affordable housing as priorities for the governor and Legislature.

Newsom isn’t the first California governor to elevate the issue. Arnold Schwarzenegger a decade ago launched an ambitious bipartisan effort to reshape the state’s health system based on a model pioneered by Massachusetts that later became the basis of the Affordable Care Act. It crashed after encountering resistance from conservatives and single-payer advocates on the left who didn’t think it went far enough.

Newsom’s Medicaid expansion, which will cost the state about $260 million a year, has already prompted pushback from Republicans in Congress, where a group of senators led by Bill Cassidy (R-La) has introduced legislation that would strip a portion of California’s federal Medicaid funding if it’s determined federal dollars are paying for Medi-Cal services for undocumented adults. But California says that’s moot because it’s using its own funds — which also means it doesn’t require the Trump administration’s approval.

Though the response to Newsom’s plan within the state has been more positive, with interest groups eager not to antagonize the new administration, state Republican legislators have questioned the long-term cost of such an open-ended entitlement expansion — and the wisdom of wading into a high-profile immigration debate.

State Sen. John Moorlach, a Republican from Orange County who was born in the Netherlands, said after Newsom unveiled his budget that he’s troubled the Medi-Cal expansion may benefit those “who didn’t come through the front door like my folks and I did.”

“I’m just concerned with how do we pay for it, how does it work and is it fair?” he said.

The governor’s in-your-face start is “vintage Newsom,” according to Ben Tulchin, a Democratic strategist and pollster, who called it a “clear push-off on the Trump administration’s priorities on taking people’s health care away from them and taking on immigrants.”

Tulchin said Newsom, who implemented San Francisco’s landmark universal health access program while he was mayor and issued marriage licenses to same-sex couples just weeks after he was inaugurated, has a “much stronger track record on social services and caring for people" than the frugal Brown, who blocked a number of costly health care initiatives in his last years in office, including legislation to enact a single-payer health system. "It’s how he campaigned and is coming through in how he’s governing.”

"It’s almost impossible to do anything in health care and not ruffle feathers,” added Kaiser’s Levitt. “The governor is walking quite a tightrope so far successfully in not bringing on significant opposition.”

That could yet change.

Newsom’s plan to lower drug prices by having the state negotiate with drug companies on behalf of all state agencies, as well as leverage the power of its Medicaid drug purchasing, is sure to draw strong industry opposition, and possibly litigation. Many details still need to be fleshed out, such as whether the state will need a federal waiver to increase its negotiating might for drugs purchased through Medi-Cal.

Newsom also is proposing to reinstate the Obamacare mandate to buy insurance after Congress zeroed out the penalty for noncompliance. Vermont, New Jersey and Washington, D.C., have weighed similar moves, despite the lingering unpopularity of the penalty. In California’s case, Newsom is wagering the requirement will prod more middle-class residents into the state’s Obamacare exchange, Covered California. Penalties for non-compliance could help subsidize coverage for people with incomes that are 400 to 600 percent of the federal poverty level.

Peter Lee, head of Covered California, said Newsom’s announcement on the mandate demonstrated courage. “Penalties aren’t fun,” the state exchange director told POLITICO. “It really is an act of courage, which was one of the taglines of his campaign.”

Anthony Wright, executive director of Health Access California, said the mandate shouldn’t be the only source of that funding. “Our ideal world is when nobody pays the individual mandate penalty because everybody is signing up for coverage,” he said.

Newsom is also likely to face continued pressure from the California Nurses Associations and other supporters of a "Medicare for All"-style system. Though he supports the concept, Newsom has adopted a go-slow approach that could yet antagonize supporters on the left who want it to remain a signature goal. Rep. Ro Khanna (D-Calif.), said California should pass single-payer legislation before the 2020 election, to establish a model if Democrats pull off a sweep and gain control of the White House and both houses of Congress.

David McCuan, a political analyst and professor at Sonoma State University, said Newsom’s early actions on health appear calculated largely to draw a contrast with Trump and the climate in Washington. “It not only marks Newsom as a progressive champion," McCuan said, "it also sends a shot across the bow to Washington D.C."

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MOORLACH UPDATE — RHNA Retribution — January 26, 2019

California’s new Governor lobbed a hand grenade yesterday morning into the city of Huntington Beach. He called upon the State’s Attorney General to sue Surf City because it was allegedly deficient in its regional housing needs allocation (RHNA, and pronounced ree-nah). The AG complied. Cities and counties are mandated by the state to meet their respective populations’ housing element (see http://www.hcd.ca.gov/community-development/housing-element/index.shtml).

With all the new construction in Huntington Beach, including the recent Pacific City and high density Bella Terra projects (which include low income housing units), Gavin Newsom’s move has me befuddled. The justification for pursuing legal action against a subsidiary without first informing it about the potential threat of litigation is not obvious or clear.

On September 15, 2017, I voted against AB 72 (Santiago), which passed in the Senate 28-8-4 and was the impetus for the Governor’s surprise tactic (see http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180AB72). Here is a portion of the Legislative Counsel’s Digest for the bill, with underlines for emphasis:

This bill would require the [Department of Housing and Community Development] to also review any action or failure to act by the city, county, or city and county that it determines is inconsistent with an adopted housing element or a specified provision and to issue written findings, as specified, whether the action or failure to act substantially complies with the housing element. If the department finds that the action or failure to act by the city, county, or city and county does not substantially comply with the housing element, and if it has issued findings as described above that an amendment to the housing element substantially complies with the housing element, the bill would authorize the department, after allowing no more than 30 days for a local agency response, to revoke its findings until it determines that the city, county, or city and county has come into compliance with the housing element. The bill would also require the department to notify the city, county, or city and county and authorize the department to notify the Office of the Attorney General that the city, county, or city and county is in violation of state law if the department makes certain findings of noncompliance or a violation.

The OC Register and Santa Cruz Sentinel covers the disappointing action in the first piece below. After a couple of interviews, I released a statement, which the remaining publications utilized. The Daily Pilot, the city’s now de facto local paper, is the second piece. The Associated Press, which has a large national distribution, is the third piece. And City News Service, which has a strong coverage of Orange County, is the fourth piece.

Last November, this city found its Republican Congressman was switched out with a Democrat. One of its two State Senators and one of its two State Assemblymembers were also switched out in the same manner. But, somehow, this couldn’t shield Huntington Beach from potentially expensive and, in my view, unnecessary litigation that a Democratic Governor just threw in its lap.

I fully understand going after supposed bad players. But, good form would have been to issue a strong and very public warning, with a due date in which to respond, and then, if necessary, the filing of a lawsuit. Cities, especially Huntington Beach, are already strapped fiscally with rising pension plan contribution costs, thus making it more financially stressful to deal with unanticipated litigation costs.

Governor Brown had a tense relationship with cities during his tenure. It looks like Governor Newsom is willing to follow suit and even escalate. That’s very unfortunate, as all layers of state government should be collaborating in a professional and mutually beneficial manner.

 

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Gov. Gavin Newsom targets Huntington Beach with lawsuit over affordable housing

“Some cities are refusing to do their part” to solve California’s housing crisis, the new governor says

By jhorseman and sgoulding | The Press-Enterprise

https://www.santacruzsentinel.com/2019/01/25/gov-gavin-newsom-says-state-to-sue-huntington-beach-over-affordable-housing-2/

https://www.ocregister.com/2019/01/25/gov-gavin-newsom-says-state-to-sue-huntington-beach-over-affordable-housing/

The state is accusing the city of Huntington Beach of deliberately blocking affordable housing in a lawsuit that signals new Gov. Gavin Newsom’s willingness to take on local governments seen as obstacles to a more affordable California.

“California’s housing crisis is an existential threat to our state’s future and demands an urgent and comprehensive response,” Newsom said in announcing the lawsuit Friday, Jan. 25.

“Cities and counties are important partners in addressing this housing crisis, and many cities are making herculean efforts to meet this crisis head-on. But some cities are refusing to do their part to address this crisis and willfully stand in violation of California law. Those cities will be held to account.”

The governor said the state “doesn’t take this action lightly. The huge housing costs and sky-high rents are eroding quality of life for families across this state. California’s housing crisis is an existential threat to our state’s future and demands an urgent and comprehensive response.”

The lawsuit filed in Orange County Superior Court by Attorney General Xavier Becerra alleges the Huntington Beach City Council, after developing a housing plan in 2013 that met state standards for affordable housing, amended that plan to drastically cut the number of housing units being built.

A state agency ruled Huntington Beach out of compliance in 2015. State law requires cities and counties to adopt housing plans that allow housing for a range of income levels.

https://www.scribd.com/document/398232662/California-Department-of-Housing-and-Community-Development-vs-City-of-Huntington-Beach

The lawsuit seeks to force Huntington Beach to include more housing that a wide range of residents can afford in its housing plan. It’s the first to be filed under a 2018 law that allows the state to revoke a city’s or county’s housing plan and refer noncompliance cases to the attorney general for litigation.

Huntington Beach City Attorney Michael Gates said the city “will review all of its options in order to respond to the lawsuit.”

Gates cited “recent court victories in lawsuits challenging the city’s actions to zone for additional housing, including affordable housing” as evidence that it is in compliance with state laws.

In 2016, Huntington Beach council members voted to scuttle a plan to meet state housing requirements after more than 200 people filled City Hall to oppose adding high-density and low-income housing.

“I urge you to deny any and all action that would amend the housing element or anything that would add one monstrosity development,” resident Cari Swan said at the time.

Huntington Beach has some of the highest housing costs in the region and the state. Census figures show the median gross rent in the city was $1,823 a month in 2017, compared with $1,447 in California as a whole and a nationwide median of $1,012.

Huntington Beach’s median home price average more than $850,000 as of November according to CoreLogic, compared with $522,750 for Southern California as a whole.

With many Californians struggling to find affordable homes, Newsom, who took office this month, allocated $500 million in his first budget in incentives for cities that allow new housing and $250 million for technical help for cities to change zoning and speed up permitting so new homes can be built.

The proposed budget also contains $1 billion for housing construction.

With the carrots comes a stick. Newsom has threatened to withhold transportation money for cities that don’t meet affordable housing targets.

Newsom “has been very clear from the beginning he is done playing small ball on housing,” said David Garcia, policy director at the UC Berkeley Terner Center for Housing Innovation.

The Huntington Beach lawsuit, Garcia added, “(is) going to give cities pause when they are feeling pressured by their residents to reduce their share of planned housing.”

Ninety percent of California cities are in compliance with their housing plans, according to Russ Heimerich, a spokesman for the state Business, Consumer Services and Housing Agency. Fifty-one cities are out of compliance and of those, 14 have revisions that are under review, he said.

California’s latest litigation against Huntington Beach adds to a list of thorny lawsuits the city is battling against the state and other entities.

In 2015, the Kennedy Commission, a nonprofit housing advocacy group based in Irvine, sued Huntington Beach over its decision to limit development of low-income housing. A Superior Court judge sided with the commission.

Huntington Beach appealed, arguing that as a charter city it has greater autonomy in making and enforcing ordinances and resolutions. In 2017, an appellate court agreed with the city. However, the court also allowed the Kennedy Commission to continue pursuing unresolved claims that the city’s housing plan violates the state constitution and is discriminatory.

Since 2014, Huntington Beach has issued permits for about 100 units for lower-income residents. But in order to comply with state law, it must add a total of 533 units, said Cesar Covarrubias, executive director of the Kennedy Commission.

“That’s not a huge number,” Covarrubias said. “But rather than do the right thing, the city’s position has been, ‘We’ll just litigate.’” As a visitors’ destination, Huntington Beach has many employees working in the tourism industry who cannot afford to live there, he added.

Covarrubias said the Kennedy Commission will continue its litigation against Huntington Beach concurrent with the state’s.

The city also is fighting California’s “sanctuary law.” In April 2018, Gates filed a lawsuit against the state claiming that Senate Bill 54 unconstitutionally interferes with the city’s charter authority to enforce local laws and regulations.

An Orange County Superior Court judge ruled in favor of Huntington Beach in September, allowing the city to ignore the state’s immigration legislation that limits interaction between local law enforcement and federal immigration officials. The state has filed an appeal of that ruling.

Gates questioned the state’s “motivation for this lawsuit filed only against Huntington Beach” in the latest round of litigation tied to the city’s claim of autonomy. Other cities, too, “have not yet met their Regional Housing Needs Assessment targets,” he said.

“Any delay experienced by the city in its ability to amend its zoning and make additional progress,” Gates said, “has been caused by the city fighting lawsuits and court appeals filed by plaintiffs such as the Kennedy Commission.”

Democratic lawmakers welcomed the lawsuit.

“For too long, cities that refuse to plan for adequate new housing have flouted their legal and ethical obligations, directly contributing to the housing affordability and homelessness crisis that we now have statewide,” Senate President Pro Tem Toni Atkins, D-San Diego, said in a statement.

Assemblyman Tyler Diep, R-Westminster, who represents part of Huntington Beach, asked the governor and attorney general to reconsider filing the lawsuit, saying the shortage of affordable housing is not exclusive to Huntington Beach.

“Litigation is not the solution, especially when it was because of lawsuits filed under the guise of (the California Environmental Quality Act) that held up numerous housing developments,” he said.

State Sen. John Moorlach, R-Costa Mesa, one of two state senators representing Huntington Beach, said the lawsuit “starts a whole new debate” about local control versus centralized control.

“I’m not sure this is the best way for the governor to start that debate,” he said. “These are tough local issues. So now for the state to say, ‘You’re going to do this whether your citizens like it or not,’ then it begs the question: ‘Why Huntington Beach? Why not a city in Marin County?’”

Asked why Huntington Beach was sued, a spokesman for the governor said: “Probably because it’s one of the most egregious examples in the state.”

Staff Writer Jeff Collins contributed to this report.

State sues Huntington Beach over blocked homebuilding

By PRISCELLA VEGA and LIAM DILLON

HTTPS://WWW.LATIMES.COM/SOCAL/DAILY-PILOT/NEWS/TN-DPT-ME-HB-HOUSING-LAWSUIT-20190125-STORY.HTML

At Gov. Gavin Newsom’s request, California filed a lawsuit Friday against the city of Huntington Beach over what state officials describe as the city’s failure to allow enough homebuilding to accommodate a growing population.

Newsom said the suit is needed to address rising housing costs that threaten economic growth and deepen inequality. The lawsuit accuses Huntington Beach of defying a state law that requires cities and counties to set aside sufficient land for housing development.

The California Department of Housing and Community Development issued letters to the city in 2015 and 2018 requesting that it comply.

“Many cities are taking herculean efforts to meet this crisis head on,” Newsom said in a statement. “But some cities are refusing to do their part to address this crisis and willfully stand in violation of California law. Thosecities will be held to account.”

The state is asking that an Orange County Superior Court judge order Huntington to comply with the law. It also seeks attorney fees and other costs.

But Huntington Beach City Attorney Michael Gates contended “the city has been, in fact, complying with all applicable state housing and zoning laws.”

Huntington “has been and will continue to work with the California Department of Housing and Community Development regarding meeting the city’s Regional Housing Needs Assessment,” Gates said in a statement Friday. “Any delay experienced by the city in its ability to amend its zoning and/or make additional progress has been caused by the city fighting lawsuits and court appeals filed by plaintiffs such as the Kennedy Commission.”

He pointed to recent court victories in an ongoing lawsuit in which the Kennedy Commission, an affordable-housing advocacy group, alleged that an amendment to the city’s development plan for the Beach Boulevard-Edinger Avenue corridor violated state housing law.

Gates called the state’s lawsuit “timed poorly” because it interrupts months of discussions between the Department of Housing and Community Development and the Kennedy Commission toward reaching a resolution of outstanding disputes.

He said it also raises questions about the state’s motive, as “50 other cities in California have not yet met their RHNA targets.”

Gates said the city is reviewing its options on how to respond to the lawsuit.

The case against Huntington Beach is a rare legal action by the state against a local government over housing laws. In 2009, when former Gov. Jerry Brown was attorney general, the state intervened in a lawsuit against the Bay Area city of Pleasanton, where voters capped the amount of housing allowed. The case ended with Pleasanton getting rid of its cap, zoning for more homes and owing about $4 million in attorney fees.

Though cities and counties do not build homes, local restrictions on development, such as high fees or a lack of land zoned for residential use, can prevent construction that might otherwise occur. Higher-income coastal communities, including Huntington Beach, often maintain some of the tightest development rules in the state, even as housing costs have soared in the past decade.

The median home value in the beach city of 200,000 people tops $834,000, according to real estate website Zillow. More than half of Huntington Beach’s tenants are rent-burdened, meaning they spend more than 30% of their income on housing, according to U.S. Census data.

Huntington Beach put itself in a shortfall toward its state-mandated target for low-income housing units when the council in 2015 amended the Beach and Edinger Corridors Specific Plan, which was adopted in 2010 to help revitalize Beach Boulevard and Edinger Avenue by streamlining the building approval process.

The amendments reduced the cap on new residential development from 4,500 units to 2,100 and imposed stricter height and setback requirements after many residents complained about the high rate at which high-density residential projects were popping up.

The original Beach and Edinger plan is tied to Huntington Beach’s housing element, a guideline in the city general plan that it uses to identify ways the city can address housing needs for all economic segments as the community grows.

The amendments meant the city no longer had enough land zoned to accommodate low-income residents under state requirements, prompting a lawsuit two months later from the Kennedy Commission.

According to the state’s lawsuit, the Department of Housing and Community Development began working with the city to prepare an amended and “legally compliant” housing element shortly after it issued its first letter in 2015.

But the Kennedy Commission sued Huntington in the midst of the state and city partnership.

“We’re concerned about the opportunities for affordable housing, being that Orange County is among the least affordable counties in the nation and in California,” Cesar Covarrubias, the nonprofit’s executive director, said in 2015. “We believe that every city should have appropriate sites to create opportunities for housing all its residents, especially low-income residents.”

The city argued in court that it was working to amend its housing element and that the Kennedy Commission’s lawsuit was “unnecessary and would soon be moot.” But a proposed plan was unanimously rejected by the City Council in 2016.

Councilman Erik Peterson said at the time that the city should prepare to fight the state regarding the mandated amount of low-income housing in the city.

The legal battle with the Kennedy Commission is continuing, though a state appeals court ruled in favor of the city in 2017 because Huntington is a charter city, exempting it from some state zoning laws.

After Housing and Community Development issued a second notice of noncompliance in 2018, the city said it would create a new housing plan after it resolved its dispute with the Kennedy Commission.

“The time for empty promises has come to an end,” the state’s lawsuit says. “The city should not be allowed to avoid its statutory obligations any longer.”

Huntington Beach has issued permits and filed inspections for more than 2,500 new housing units, including about 100 very-low-income and low-income deed-restricted units, since 2014, according to Gates. The city also established a Tenant Based Rental Assistance Program designed for extremely low-income and homeless people, he said.

State Assemblyman Tyler Diep (R-Westminster) expressed support for Huntington Beach, part of the area he represents, and said litigation isn’t the solution to the housing shortage.

“There are reports on cities in California stating they will not meet their 2040 housing goals until the year 2295 or after,” Diep said in a statement Friday. “Huntington Beach has had a 4% population increase since 2004; meanwhile, some of the fastest-growing cities in California are required to build less housing than this city.”

State Sen. John Moorlach (R-Costa Mesa) said in a statement that he was “befuddled” that Newsom — a former mayor of San Francisco, a city with high housing costs — singled out Huntington Beach with litigation instead of engaging in “goodwill gestures” to help cities reach their housing goals.

“Once this approach is started, then it must be applied to all other cities not in compliance,” Moorlach said. “He should have a policy of no better, no worse. Otherwise, these are strong-arm tactics.”

Priscella Vega is a Daily Pilot staff writer. Liam Dillon writes for the Los Angeles Times.

California sues wealthy coastal city over low-income housing

By:

https://www.nwahomepage.com/news/politics/california-sues-wealthy-coastal-city-over-lowincome-housing/1726953003

Gov. Gavin Newsom used a new law for the first time Friday to try to force a wealthy Southern California coastal city to end its years of opposition to meeting low-income housing goals.

Newsom’s administration sued the Orange County city of Huntington Beach under the law that took effect Jan. 1 after passing in a 2017 package of measures intended to alleviate the state’s severe housing shortage and homelessness problem.

California has more homeless people than any other state and the nation’s highest poverty rate when soaring housing and rental costs are taken into account. Newsom, who took office this month, has proposed building 3.5 million housing units in the state with nearly 40 million residents.

The lawsuit says leaders in Huntington Beach, home to about 200,000 people, have repeatedly refused to amend the city’s housing plan to add state-required low-income housing and are fighting a separate lawsuit by housing advocates. The city says it’s complying with state housing and zoning laws.

It’s the second major issue facing California that the self-styled “Surf City USA” is battling the state over. Huntington Beach also is challenging the sanctuary law that limits cooperation with federal immigration officials.

The city is in a traditionally Republican area that has been shifting more Democratic like the rest of California. State officials say housing negotiations began before Huntington Beach challenged the immigration law and the lawsuit isn’t retaliatory.

“Many cities are taking herculean efforts to meet this crisis head on,” the Democratic governor said in a statement. “But some cities are refusing to do their part.”

City Attorney Michael Gates said it’s following the law, pointing to a victory in a related lawsuit. An appeals court ruled in 2017 that cities like Huntington Beach that have their own charters can approve plans that don’t meet the state’s housing requirements and can eliminate sites zoned for affordable housing.

Former Gov. Jerry Brown signed a law last year closing what housing advocates described as a legal loophole for charter cities. Huntington Beach’s charter led an Orange County judge to rule that it isn’t bound by the state’s sanctuary law because it has greater autonomy to enforce local laws. The state has appealed that ruling.

Gates said the city has approved more than 2,500 new housing units since 2014, including about 100 low-income units, leaving the city about 400 units short of state goals for low-income housing.

Republican state Sen. John Moorlach, who represents Huntington Beach, criticized Newsom’s “heavy-handed litigation tactics that will divert the city’s time, energy and resources to respond to obstructive and otherwise frivolous lawsuits.”

Democratic lawmakers, including Senate President Pro Tem Toni Atkins of San Diego, praised Newsom for opening what she called “a new chapter for housing in California” against cities that “have flouted their legal and ethical obligations.”

Huntington Beach was deemed out of compliance in 2015, and state officials most recently notified the city in November that it was still breaking state law. California sued in Orange County Superior Court under the new law strengthening its ability to require local governments to meet housing goals.

The California Department of Housing and Community Development sets the number of new housing units that a region is projected to need to provide homes for all income levels.

The department says 90 percent of housing plans statewide are in compliance, while Huntington Beach is one of 51 cities and counties that are not.

Newsom said high housing costs and rents “are eroding quality of life for families across this state.” He said the problem is “an existential threat to our state’s future and demands an urgent and comprehensive response.”

He has promised several moves to increase affordable housing, including giving cities more money for housing shelters but taking away transportation money if they fail to meet their goals. The Democratic governor’s budget proposal seeks $1.75 billion to combat homelessness by encouraging new affordable housing.

State Sues Huntington Beach, Accusing it of Blocking Housing Production

The city has refused to comply with state housing law, according to Gov. Newsom’s office.

By City News Service

https://www.nbclosangeles.com/news/local/-State-Sues-Huntington-Beach-Accusing-it-of-Blocking-Housing-Production-504878141.html

Gov. Gavin Newsom announced a lawsuit on Friday against the city of Huntington Beach, accusing the Orange County surfing haven of blocking the production of affordable housing and thus exacerbating the statewide housing crisis.

“The state doesn’t take this action lightly,” Newsom said in a statement. “The huge housing costs and sky-high rents are eroding quality of life for families across this state. California’s housing crisis is an existential threat to our state’s future and demands and urgent and comprehensive response.”

Huntington Beach City Attorney Michael E. Gates said the governor’s statement “contains inaccuracies” and said the move would slow down efforts to negotiate a legal settlement regarding housing issues.

According to Newsom’s office, the city has refused to comply with state housing law, “even after extensive attempts to offer partnership and support from the California Department of Housing and Community Development.”

The state argued that cities are required to enact housing plans that meet “the needs of the broader region and its economy.”

The state Department of Housing and Community Development found Huntington Beach’s housing plan to be deficient in 2015. According to Newsom’s office, the city was in compliance two years earlier, but it then amended its housing plan “and significantly reduced the number of new housing units able to be built.”

The city later rejected a proposed amendment that would have added the ability for more units to be built, according to the governor’s office.

“Cities and counties are important partners in addressing this housing crisis, and many cities are making herculean efforts to meet this crisis head-on,” Newsom said. “But some cities are refusing to do their part to address this crisis and willfully stand in violation of California law. Those cities will be held to account.”

Gates responded that the city has been “complying with all applicable state housing and zoning laws and has been, and will continue to, work with the California Department of Housing and Community Development regarding meeting the city’s Regional Housing Needs Assessment.”

Gates said proof of that “is evidenced by the city’s recent court victories in lawsuits challenging the city’s actions to zone for additional housing, including affordable housing.”

Efforts by city officials to improve its zoning “has been caused by the city fighting lawsuits and court appeals filed by plaintiffs such as the Kennedy Commission.”

Gates said the lawsuit was “timed poorly as it now interrupts recent months of discussions with both (Housing and Community Development) and the Kennedy Commission with regard to a resolution to the remaining outstanding disputes.”

Since 2014, the city has “issued permits and filed inspections for over 2,500 new housing units, including approximately 100 very low-income and low-income deed-restricted units,” Gates said.

“Moreover, the city has also permitted or entitled all of its moderate-income (Regional Housing Needs Assessment) target,” Gates said. “The city has also established programs, such as our Tenant Based Rental Assistance program, dedicated to providing assistance to extremely low income and at-risk homeless households.”

Gates said it was “noteworthy” that Huntington Beach has been singled out “while over 50 other cities in California have not yet met their RHNA targets. That raises questions about the motivation for this lawsuit filed only against Huntington Beach.”

The city also is embroiled in a legal battle with the state over the so-called “sanctuary state” law that the city has claimed doesn’t apply to Huntington Beach since it is a charter city.

State Sen. John Moorlach, R-Costa Mesa, criticized the lawsuit in a statement.

Moorlach said he was “befuddled that Gov. Newsom – a former mayor of a city and county with astronomical housing costs and multitudinous problems – would try and make an example out of my constituents, the city of Huntington Beach, and sue them for not having enough affordable housing.”

Moorlach said he believes the city “is doing its best to comply with applicable state housing and zoning laws and continues to work on meeting its housing goals and has consistently prevailed in court on this very issue.”

The state senator said the governor has “made things worse” and “exacerbated the housing crisis by unilaterally” suing.

Moorlach said Huntington Beach should not be singled out when other cities lag behind affordable housing requirements.

“Otherwise, these are strong-arm tactics,” Moorlach said.

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MOORLACH UPDATE — LAUSD and Future Concerns — January 24, 2019

The LAUSD strike has concluded and teachers returned to their jobs yesterday. Dan Morain, now with CALmatters, and formerly an LA Times reporter and editorial page editor of the Sacramento Bee, provides a must-read email, issued every weekday morning, that covers the news. My biggest concern for the district is shared in the clipping from his daily missive, also of yesterday, and is the first piece below.

Speaking of famous columnists, Jerry Sullivan, editor of the Los Angeles Business Journal, and formerly the editor of the Orange County Business Journal and author of its famous Inside OC page 3 column, has started a subscription email newsletter. A fun and overly generous sample is the second piece below.

Since I’m discussing columns, my latest of the occasional retrospectives on Orange County’s infamous bankruptcy year is provided immediately below.

25th ANNIVERSARY LOOK BACK

The top-of-the-fold headline for the January 19, 1994 Daily Pilot declared “Dozens consider run for city council posts” under the photos of Karen McGlinn, myself, Peter Buffa and Brian Theriot. Two articles followed, one for Newport Beach and the other for Costa Mesa, having the subtitle, “Two incumbents, two perennial candidates say they will seek Costa Mesa seats.” Here was my inclusion in the piece:

Also considering his political options is local businessman John Moorlach, whose name has often been tossed around during prior elections, although he has yet to run.

“I’m not saying definitely not, but I’m not ready to say yes,” he said. “I’ve gotten plenty of phone calls and a lot of people have gotten the rumor mill going that I’m running. I’m really honored that my name is being bounced around.”

I was not considering city council, I was focused on Orange County Treasurer-Tax Collector. Consequently, on January 24th of 1994, I sent the following difficult to write, but transparent, memo to my clients:

Please forgive me the informality of a memorandum, but I need to forward a brief message to you before you hear it somewhere else. As your Certified Public Accountant you are aware of my devotion to my family, practice, and community. If you’ve been in or talked to me since the 1993 Revenue Reconciliation Act passed, you know my anger level with our government and its spending habits. Instead of complaining I want to make a difference.

I will be running for public office in the June 7th primary to make my public contribution. I will be running for the position of Orange County Treasurer-Tax Collector. This position has been held by Robert L. “Bob” Citron since 1966. It is time for a change and a fresh look at how our County is spending its funds.

I will be maintaining my practice throughout tax season and beyond. Rest assured that your tax preparation and accounting needs will be met with the same professional attention as in the past. I plan on taking the month of May off to campaign, but will be available to handle urgent client issues should they arise.

At this time we are sure that Mr. Citron will run for an eighth term. Running against a long-term incumbent is one of the most difficult of campaigns to pursue. This challenge will not be easy and success is not assured. Accordingly, my top priority will be my practice to make sure it is there should I not prevail. If I do win the seat, then I plan to take a leave of absence from the firm effective January 1995. I want to come back. Working for you truly is the most fulfilling occupation I would ever want to pursue.

Thank you for your patronage, support, prayers and understanding.

By January 29th, Steve Marble, the Managing Editor of the Daily Pilot, would opine the following about serious “contenders”:

John Moorlach is another leading candidate, though he may opt out to preserve time to spend with his family or make a run for the Assembly. Strong conservative, civic-minded, decent soul. Though he may be political opposite of [Karen] McGlinn, Moorlach is a consensus builder and likely could work as well with McGlinn as a conservative soul-mate like [rerunning current City Councilman Peter] Buffa.

Karen McGlinn would go on to assume the role as Chief Executive Officer of Share Our Selves (SOS) in Costa Mesa and we would work very closely on addressing homelessness and the health care safety net dependent on County funding and we continue to maintain a great working relationship to this day.

The reason Steve Marble mentioned the Assembly seat was due to another headline that day, but in the LA Times: “[Gil] Ferguson Will Not Seek Reelection to Assembly — Politics: After five years, he hopes to move to the state Senate. Would-be replacements line up.” The reporters, Dave Lesher and Mary Lou Pickel, contacted me and all I stated was that they were welcome to come to my upcoming press conference. Here’s what they wrote (it is fun to recollect and to realize that I am still in contact with most of these individuals as well):

 

Within a few hours of Ferguson’s morning announcement, Republican insiders identified nearly a dozen potential candidates.

Tom Reinecke, an attorney and the son of a former California lieutenant governor, was the first to announce that he will definitely seek the office. By Friday afternoon, the candidate issued a press release announcing his plans under the campaign letterhead: “Reinecke, conservative for Assembly.”

Other Republicans who said they are considering a bid for Ferguson’s seat included Chuck DeVore, a former congressional staffer and White House aide in the Reagan Administration; Jo Ellen Allen [Chatham], a former Assembly candidate and California director of the Eagle Forum; John Moorlach, an accountant and the assistant treasurer for the county Republican Party; Bruce Peotter, a Newport Beach lawyer, and Phillip B. Greer, an Irvine lawyer.

“This is no doubt one of the most attractive seats in the entire state,” DeVore said. “You’ve got a dynamic business-oriented, entrepreneurial district. This is not a depressed area.”

GOP officials also offered a list of potential candidates that included Newport Beach City Councilwoman Evelyn R. Hart; Costa Mesa Councilwoman Mary Hornbuckle and Marilyn Brewer, a staff assistant to County Supervisor Thomas F. Riley.

Jim Toledano, an Irvine lawyer, said he plans to run as a Democratic candidate.

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https://calmatters.org/articles/newsletters/climate-change-electricity-crisis-lausd-school-strike/

L.A. school strike ends but issues remain

Los Angeles teachers were back at work today, after a six-day strike at California’s largest school district. Legislators will have a hand in at least some aspects of the settlement, CALmatters’ Ricardo Cano writes.

  • The Los Angeles Unified School District board, which has been controlled by charter school advocates, is being called upon to urge legislators to place a cap on the growth of new charter public schools in Los Angeles.
  • Legislators also will be urged to increase public school funding, though Gov. Gavin Newsom already is proposing to allot $80 billion to that line item in his $209 billion spending plan for 2019-2020.

L.A. Superintendent Austin Beutner: “Public education is now the topic in every household in our community. Let’s capitalize on that. Let’s fix it.”

The L.A. Times: “The union leader hailed the strike as a success and a national model, as did L.A. Mayor Eric Garcetti, who mediated the talks that led to a deal. Even Beutner, who had tried to stop the strike, said the job action had put an important focus on public education, beginning a community conversation.”

Republican Sen. John Moorlach of Orange County said the settlement does nothing to solve L.A. Unified’s long-term financial problem.

Citing billions in unfunded retiree medical benefits, Moorlach said: “There is a train wreck coming.”

SULLIVAN SAYS
The Smartest Conversation in Town
Jerry Sullivan
http://sullivansayssocal.com/sears-exit-sparks-speculation-at-south-coast-la-weekly-off-the-street-cheung-adds-laedc-duties-bonus-column-timing-key-on-huizar-coverage/

Speaking of South Coast Metro

State Senator John Moorlach is slated to address the annual luncheon meeting of the South Coast Metro Alliance, a long-serving advocacy group for businesses in the area, on Feb. 8 at the Center Club.

Speaking of Moorlach

John Moorlach

Any Republicans struggling to see a future for the party in California—and that’s not a clear picture at all—should give some serious thought to Moorlach for statewide office. State Controller or Treasurer would be natural spots for the one-time CPA, but the GOP just might be hard-pressed to find a better candidate for governor next time around. Check out Moorlach’s review of Gov. Gavin Newsom’s proposed budget at moorlach.cssrc.us and note the command of facts and financials as well as the reasonable tone. No partisan lean on my part here—just an assessment of what looks to be prime political horse flesh, with a note that everyone is better off if California has at least two viable political parties competing for votes.

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MOORLACH UPDATE — LAUSD Comes Calling — January 19, 2019

This past week, Sacramento found LAUSD and PG&E knocking on the Capitol’s front door.

I pursued an effort to prevent the deadly wildfires caused by sparking electric lines, which has now subjected Pacific Gas & Electric to an enormous liability exposure, with SB 1463 (see MOORLACH UPDATE — SB 1463 And The Facts — November 19, 2018).

I also recently provided a complete listing of California’s school districts in order for my colleagues to have measurements from which to manage. The Golden State’s school districts have reasonable revenue streams, but it appears most have allowed their teachers’ unions to overreach with salary increases, defined benefit pensions, and retiree medical benefits. I would defy you to find a large employer in the private sector that comes close to maxing out on all three of these fronts.

I am sympathetic. One of my two brothers is a school teacher. One of my two sisters-in-law was also a teacher. Both for districts in Orange County. I was the Treasurer for Orange County’s school districts for nearly a dozen years. I want school teachers to be compensated fairly, but I also want school districts with balanced budgets and strong balance sheets. Otherwise, total compensation packages are in jeopardy.

Obviously, something is amiss. A fiscally strapped school district cannot make additional hires or provide pay increases. Consequently, the United Teachers of Los Angeles is doing additional harm to a governmental agency that is already on the proverbial ropes.

The LA School Report returns with another review of the numbers; nine numbers to be specific (see http://laschoolreport.com/painful-truth-9-numbers-haunting-lausd-as-strike-continues/ and/or https://www.the74million.org/article/57-million-later-the-painful-truth-of-the-ongoing-teacher-strike-in-los-angeles-as-told-by-9-dire-numbers/). I’m mentioned in the piece, but it repeats a previous mention (see MOORLACH UPDATE — Dealing With Tensions — January 10, 2019).

The California Globe provides a review of my recent quotes and editorial submissions in the piece below. The MOORLACH UPDATE is having an impact. And you can see that Republicans in the super-minority are addressing the issues of the day in areas where the Democrats have been languishing for decades.

The students of LAUSD have already missed out on a week of services. Let’s hope next week finds the two parties appreciate the fiscal realities, realize the school board is negotiating in good faith, and stand down.

Wishing you a solemn Martin Luther King, Jr. three-day weekend.

Senator: LAUSD Budget Crisis Could Take Down State Budget

Moorlach warns crippling long-term debt may doom the school district and the state

By Katy Grimes

https://californiaglobe.com/legislature/senator-lausd-budget-crisis-could-take-down-state-budget/

While the Los Angeles Unified School District contract negotiations with the Unified Teachers of Los Angeles labor union led to a massive strike this week, the fight over hiring more teachers and school staff in the nation’s second largest school district may likely be a moot point if LAUSD’s total $25.9 billion deficit is not dealt with.

California State Sen. John Moorlach (R-Costa Mesa) has issued many warnings about the Los Angeles Unified School District budget crisis, saying it is so big it could wipe out the California budget surplus… and perhaps the state budget.

“The main culprit in negative CAFRs is unfunded pension liabilities,” Moorlach wrote in a recent op-ed for California Globe.

The LAUSD has the largest unrestricted net deficit of any California school district, at $10.9 billion, Moorlach said. And now that the district has to report the retiree medical unfunded liability on the balance sheet means it will increase LAUSD’s deficit by another $15 billion… the amount of the state’s budget surplus, which is “a mirage,” says Steven Greenhut for R Street.org. “The budget surplus doesn’t take into account the size of California’s unfunded pension and medical liabilities for public employees.”

“LAUSD doesn’t have two nickels to rub together,’ Moorlach told LA School Report. His research ranked the district’s per-person contribution cost as one of the highest among California’s 944 public school districts.

Moorlach’s 2018 report, “Financial Soundness Rankings for California’s Public School Districts, Colleges & Universities,” found two-thirds of the 944 state school districts “bleed red ink.”

The Senator’s report found the worst school district was Los Angeles Unified at $10.9 billion in the red. Closely behind is San Diego Unified at -$1.5 billion, Fresno Unified at -$849 million, San Francisco Unified at -$770 million, Long Beach Unified at -$564 million, and Sacramento City Unified at -$540 million.

Sen. John Moorlach. (Katy Grimes for California Globe)

Moorlach’s report found only seven districts in the whole state with enrollment of 2,000 or more were in the black.

“School districts that utilize California’s Financial Crisis & Management Assistance Team (FCMAT) for emergency loans usually request amounts that are at a minimum two times, with most multiple times more, the size of their unrestricted net deficits,” Moorlach warns. “Oakland Unified’s unrestricted net deficit in 2003 was $48.7 million when it was loaned $100 million. South Monterey County Joint Union High’s unrestricted net deficit was less than $2 million when it borrowed $13 million,” he said.

“It looks like LAUSD will have an unrestricted net deficit of $25 billion!” Moorlach said. “If it comes to the state for a loan from FCMAT, where will Sacramento find $50 billion to lend it?”

While Moorlach recommended offering early retirement incentives as a cost-cutting measure, one of the demands the striking LA teachers union has is more teachers, staff and administrators. Moorlach said when a San Diego area school district board voted in December to offer early retirement incentives, the San Diego County Office of Education voted to take away the school board’s decision-making control.

“United Teachers Los Angeles has rejected the district’s proposal to shave off costs by adding two years to how long it takes new employees to become eligible for free lifetime health benefits — something other L.A. Unified unions have already accepted,” said the LA School Report.

Sen. Moorlach warns against a blanket bailout of school districts by the state. “He’d support increasing education spending if he had some assurances that unions would give ground on negotiable benefits like retiree health care,” the Sacramento Bee reported. “We can’t just give districts that have not been good stewards more money. You have to ask for something in return,” Moorlach said.

On his own blog, JOHN MOORLACH’S POSTINGS, he writes:

“Sacramento City Unified has a population of close to 350,000 and covers a significant amount of real estate in the Capital area. It is also having issues… but at least its teacher’s bargaining unit is not as out of touch as LAUSD’s and has not called a strike. But it threatened to strike in 2017. The school district board of trustees gave in and granted wage increases, but now look where that has brought them.”

“I warned that the new Governor’s first crisis may be the school districts. The drum beats on this topic continue to grow louder with each passing week.”

Gov. Gavin Newsom has not involved himself in the LAUSD strike, and has issued only one statement: “Last week, I submitted a budget to the Legislature that would make the largest ever investment in K through 12 education, help pay down billions in school district pension debt and provide substantial new funding for special education and early education,” Newsom said.

“LAUSD’s Unrestricted Net Positions per capita is three times that of the average for the entire Orange County!” Moorlach said. “That’s how massive LAUSD’s fiscal hole is… So, this CPA doesn’t know where the union demanded pay raises are going to come from.”

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MOORLACH UPDATE — Senator Robert M. Hertzberg — January 15, 2019

After arriving in Sacramento in March of 2015, my first legislative hug was from Senator Bob Hertzberg. Senator Hertzberg is very sociable and warm to both sides of the aisle.

He has had a longstanding relationship with former Republican Assembly Leader Scott Baugh of Orange County. A couple of years ago Scott brought his son, Jackson, up to visit and spent some time with the good Senator. They referred to it as a “Baugh Mitzvah.”

I, too, enjoy my relationship with the good Democratic Senator from Los Angeles and the LA Daily News provides a glimpse of it in the profile piece below.

Bob Hertzberg embraces an active final term in California Legislature

Former Assembly speaker is a leader again, unbowed by political changes, his #MeToo controversy

By kmodesti | Daily News

https://www.dailynews.com/2019/01/15/bob-hertzberg-embraces-an-active-final-term-in-california-legislature/

After more than a decade out of public office, Bob Hertzberg strode back into Sacramento four years ago to find state politics had changed. The game was different, with new rules and a new online playing field. The players were new, too, and no longer called him Mr. Speaker.

Not all of them enjoyed what he viewed as a friendly hug, the way human beings used to.

The one-time California Assembly boss, one-time Los Angeles mayoral contender and all-time big thinker said recently of his first term in the state Senate: “It’s been much harder than I anticipated.”

If you think this discouraged Hertzberg, you don’t know Hertzberg.

The now-gray-haired Democrat recently sat in the backyard of the Van Nuys home he shares with his girlfriend, Cal State L.A. criminology professor Katharine Tellis, as well as female mutt named Quinn and mementos of five decades in politics. He talked about the Senate term just past, and the one that started Jan. 7. He was the same ticking package of personality and brainpower as he ever was.

He would lean forward to discuss such gripping topics as bail reform and the political effect of legislative rule changes that allow a budget to pass with a simple majority. He would recede into his soft chair when forced to address the run-in with the #MeToo movement that might have cost him a shot at the Senate presidency.

But he could sit in one place for only so long. He would bounce to his feet, leading an interviewer to his office-at-home to show off a book proposal he’d written and a token of his parallel life in the alternative energy business, a huge wall photo of the Cardiff, Wales, headquarters of a flexible low-light solar company he founded. Then, walking over to flip a wall switch to raise what looks like an innocent garage door, he reveals a well-appointed backyard bar, its walls painted with images of tequila bottles bearing the names of political luminaries who’ve visited.

Hertzberg’s district office on Van Nuys Boulevard shows a similar obsession with meaningful detail, from its welcoming open design to its San Fernando Valley historical photos and unofficial Valley Hall of Fame, to its staff play area done in bright kindergarten colors. One thing you don’t see is photos of Hertzberg with famous people, a traditional hallmark of politicians’ lairs. The “ego photos” are displayed out of public view, in the little room with the copy machine.

The play area might be necessary for a staff that’s used to receiving 2 a.m. phone calls from the boss, a round-the-clock idea machine undeterred by political setbacks.

“I like to legislate,” Hertzberg said. “I like to work on the big ideas.”

“You have to keep fighting on the things you care about, and not let (politics) dampen your enthusiasm,” said Barbara O’Connor, who observes the capitol as director emeritus of Sacramento State’s Institute for the Study of Politics and Media. “And (Hertzberg) hasn’t let it dampen his enthusiasm.”

Reprimanded

Hertzberg could be known for any of a number of distinctions:

He was Assembly speaker in 2002-04. He ran for mayor of L.A. in 2005, softening up incumbent James Hahn before Antonio Villaraigosa swooped in and edged Hertzberg out of the runoff, which Villaraigosa won. He’s the guy who, while an undergraduate at the University of Redlands, wrote a 400-page book called “A Commonsense Approach to English.” (He still has a copy around somewhere.) He was ranked one of the top 10 lawyers in L.A. by the Los Angeles Business Journal.

But in 2018 he was mostly known as the politician who was ordered to stop hugging people so much.

In March, the Senate Rules Committee reprimanded Hertzberg after three female lawmakers and a male sergeant at arms said his frequent hugs made them uncomfortable. Investigators concluded the hugs weren’t intended to be sexual. Still, the episode came to be lumped in with the sexual-harassment scandals that led to the resignations of Assemblymen Raul Bocanegra and Matt Dababneh and state Sen. Tony Mendoza, and sanctions against Assemblywoman Cristina Garcia. So much for Hertzberg succeeding Kevin de Leon as Senate president pro tem.

Hertzberg accepted the reprimand and welcomed the election of Toni Atkins, D-San Diego, with whom he gets along, as Senate president. But he’s clearly bruised by the controversy, arguing that his hugs were always “about warmth, about humanity.”

He still exchanges hugs with people, if they are people who’ve known him for a long time and welcome Hertzberg’s personal touch.

In December, Atkins completed Hertzberg’s speedy rehabilitation by appointing him as Senate majority leader.

If he survived the flap relatively unscathed, it might be because his hugs had long been a kind of personal trademark, and because he’s almost universally well-liked in the Legislature, said Marcia Godwin, a professor of public administration at the University of La Verne.

Hertzberg started in politics in 1973 as a driver for then-state Sen. (and later Lt. Gov. and Rep.) Mervyn Dymally. First elected to the Assembly in 1996, he has been in and out of state office longer than any current capitol colleague except Tom Umberg, D-Garden Grove. He has honed the craft of legislating.

“When he was speaker, he would get people into a room on different sides of a bill at 1 a.m. to come to a solution,” said Stuart Waldman, a former Hertzberg chief of staff who now is president of the San Fernando Valley Industry & Commerce Association.

“Many times you had both sides walking out unhappy. But something got done.”

The top legislative accomplishment of Hertzberg’s first term in the Senate was passage of a bill that ends cash bail in California, allowing judges — not a defendant’s ability to pay — determine when a defendant can be released from custody before trial. The bill, SB10, received broad Democratic support and one Republican’s vote.

“Obviously his position was persuasive enough to sway me,” said the one, Sen. John Moorlach, R-Costa Mesa. “I thought his argument that (the cash-bail system) penalized the poor was an accurate one.”

Persuasion, Moorlach said, is a “passion” for Hertzberg.

“If he doesn’t see his bill passing, he kicks it up a notch,” Moorlach said. “He’ll pull you aside, he’ll talk to you, he’ll put the pressure on. He’s professional about it.”

‘Speeding it up’

Hertzberg saw his appointment as majority leader as confirmation that, four years after returning to Sacramento, he had become “part of the partnership, helping to lead the Senate.” It also was confirmation that he’ll get along better with Atkins than with her senate president predecessor, de Leon. This portends a potential big finish for Hertzberg’s lawmaking career.

Asked about his legislative priorities, he launches into a list that includes efforts to promote tax reform, economic opportunity zones, earthquake retrofitting, utilities’ wildfire liability issues, storm water capture, and simplification of government forms. And polishing the bail-reform law, depending on what data show about how judges handle the new rules.

His fourth-floor district office affords a scenic view of the bail-bonds stores in the Van Nuys civic center.

“They’re all going to be Starbucks soon,” Hertzberg said, envisioning that his legislation will put bail bondsmen out of business.

Hertzberg is 64, divorced since 2005 from Cynthia Ann Telles, a clinical psychologist. One son, David, 28, is an acclaimed opera composer, and the other, Daniel, 27, is in hotel sales.

In five elections for Assembly and Senate, Hertzberg has never received less than 59 percent of the vote, and he topped himself on Nov. 6 by getting 78.1 percent against Republican Rudy Melendez — the highest percentage for any candidate in a contested California Senate race in 2018.

That’s not the kind of showing that would have a politician thinking retirement, which is why Hertzberg-watchers don’t imagine him loosening his embrace of elected office.

“I wonder if Hertzberg doesn’t have the governorship on his mind, or maybe trying again for mayor of Los Angeles,” said Tom Hogen-Esch, a political science professor at Cal State Northridge, which is in Hertzberg’s 18th Senate District. “I have a feeling this (the Legislature) isn’t where he’ll end his career.”

Former staffer Waldman, referring to 2022, when Hertzberg will be termed out of his current job, put it this way: “The sky is the limit. It wouldn’t shock me if he wound up running for statewide office or county supervisor or even mayor again.”

Of the possibility of campaigning to succeed L.A. Mayor Eric Garcetti, whose own term is up in 2022, Hertzberg said: “I don’t want to say ‘no,’ but I highly doubt it.”

He has always said he runs because he thinks he can use the power to tackle big issues.

That means this is no time to think about what’s next, whether it’s political retirement or a run for higher office.

“Just because I’m in my last term doesn’t mean I’m going to be slowing it up,” he said. “I’m going to be speeding it up.”

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MOORLACH UPDATE — Sacramento County School Districts — January 14, 2019

After revealing the per capita unrestricted net position of California’s 944 public school districts to measure the range of where they are financially, we found that Los Angeles Unified (LAUSD) was near the bottom. Sacramento City Unified (SCUSD) was also.

SCUSD has a population of close to 350,000 and covers a significant amount of real estate in the Capital area. It is also having issues (see MOORLACH UPDATE — The Tarnished State — December 17, 2018). But, at least its teacher’s bargaining unit is not as out of touch as LAUSD’s and has not called a strike. But it threatened to strike in 2017. The school district board of trustees gave in and granted wage increases, but now look where that has brought them.

I warned that the new Governor’s first crisis may be the school districts (see MOORLACH UPDATE — Broke Schools — January 7, 2019). The drum beats on this topic continue to grow louder with each passing week. With the LAUSD strike occurring today, the California Globe provides my submission on Sacramento County’s school districts in the piece below.

Sacramento City Unified Financial Crisis Is No Surprise One of the lowest-ranked among 944 school districts

By Senator John Moorlach

https://californiaglobe.com/legislature/sacramento-city-unified-financial-crisis-is-no-surprise/

Sacramento City Unified School District recently announced it could run out of money by the end of 2019. Its statement warned it “would not have enough cash to cover employee payroll, payments to vendors and others.”

I’m not surprised. It was one of the lowest-ranked among the 944 school districts I analyzed in my October 3, 2018 report, “Financial Soundness Rankings for California’s Public School Districts, Colleges & Universities.” The report found two-thirds of state school districts “bleed red ink.”

It examined each district’s Unrestricted Net Position, a key number showing fiscal soundness. The numbers are found in each district’s latest Comprehensive Annual Financial Report, called a CAFR.

Sacramento City Unified’s UNP ranked sixth worst, at ($540 million) – parentheses around a number indicate a negative. The worst of all was Los Angeles Unified ($10.9 billion), followed by San Diego Unified ($1.5 billion), Fresno Unified ($849 million), San Francisco Unified ($770 million) and Long Beach Unified ($564 million).

The financial problems of these districts have worsened despite leaps in spending. For example, according to Sacramento City Unified’s 2017 CAFR (the same one I used for my report), Total Government Funds revenues were $647 million, up 40 percent from the $461 million on the 2010 CAFR.

Another way to look at CAFR numbers is the per capita UNP, based on the number of residents in a school district, as provided by the California Department of Education.

That also rang an alarm bell for Sacramento City Unified, at ($1,588) per capita, 867th worst among the 944 California public school districts.

From my overall state report, I broke out all 13 pubic school districts in Sacramento County and tallied their per capita UNPs. Note that only one district, Robla Elementary, is in positive territory. Three districts are even in worse shape than Sacramento City Unified:

District UNP Per Capita
1 Robla Elementary $128
2 Arcohe Union Elementary ($208)
3 Galt Joint Union High ($438)
4 Elverta Joint Elementary ($735)
5 Twin Rivers Unified ($1,045)
6 Galt Joint Union Elementary ($1,082)
7 River Delta Joint Unified ($1,217)
8 San Juan Unified ($1,265)
9 Elk Grove Unified ($1,284)
10 Sacramento City Unified ($1,558)
11 Folsom-Cordova Unified ($1,684)
12 Natomas Unified ($1,708)
13 Center Joint Unified ($2,387)

The main culprit in negative CAFRs is unfunded pension liabilities.

New CAFRs soon will be coming out for all districts for the fiscal year that ended last June 30, 2018. The numbers should prove even more challenging as, for the first time, CAFRs will be required to also include retiree medical liabilities on their balance sheets.

The warnings in my reports are intended to give officials, administrators, teachers, parents and students data to prevent financial disasters by searching now for solutions.

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MOORLACH UPDATE — Proposed Budget Observations — January 12, 2019

New Session. New Governor. New Budget. Wow! What a packed first week. Gov. Newsom, when being questioned by reporters during his proposed budget presentation, reminded them that it was only his fourth day on the job.

The Davis Enterprise carries the CalMatters piece covering the emphasis by the Governor to start a habit of prepaying, or paying more, every year toward the unfunded pension liabilities. This is an excellent strategy. One that I strongly encourage. Although this is a good start, if there is any criticism, it’s more should and could be applied to this massive and expensive financing cost debt hanging over the state’s children and grandchildren. It is the first piece below.

The Orange County Breeze provides a number of press releases on the newly proposed budget, including state cash flow data, which confirms my cautionary posture. It includes the CalMatters quote source. It is the second piece below.

25th ANNIVERSARY LOOK BACK

On January 14, 1994, the OC Register published the following piece, titled “County Treasurer Will Seek Reelection.” I’m sure the incumbent was hearing rumblings about a potential opponent. So, he decided to rerun. The other option was to have his Assistant Treasurer, Matt Raabe, run for the position. But, it would be easier for an incumbent to win against an unknown opponent. Then Citron could resign and have the Board of Supervisors appoint his assistant to replace him.

With the benefit of hindsight, so much pops out from the announcement, like the dramatically high amount of interest revenue; spinning off some of these earnings for a specific program (a very unusual strategy); and the biggest red flag, earnings at “the highest levels in the . . . nation.” But you can appreciate why nearly 160 non-county public agencies from within the county and around the state were participants in the scheme.

Orange County Treasurer-Tax Collector Robert L. Citron, whose management of government revenues in lean fiscal times has won him praise from officials, said Thursday that he will seek a seventh term in office.

In a written notice announcing his reelection bid, Citron, 68, stated that investments made by his office had generated $344 million for the county last year.

A portion of those investment earnings will be used to fund a $2-million anti-gang strategy called TARGET that will send teams of police, prosecutors and probation officers into the county’s most troubled neighborhoods.

“The investment strategies and programs that have carried Orange County’s annual interest rate on tax dollars to the highest levels in the state and the nation must be continued,” Citron said.

“Because of this sound investment strategy, the people who pay taxes had their tax load lightened by tens of millions of dollars,” he added.

The treasurer’s office manages an investment portfolio valued at $7.5 billion in taxes from 187 public agencies, including cities, school districts, special districts and county government.

YOLO COUNTY NEWS

Governor seeks extra pension payments

By Judy Lin
CALmatters

https://www.davisenterprise.com/local-news/state-government/newsom-seeks-extra-pension-payments/

https://calmatters.org/articles/blog/newsom-wants-extra-pension-payments-as-retirement-liability-tops-256b/

Following Jerry Brown’s footsteps, Gov. Gavin Newsom announced Thursday he wants to make extra pension payments even as California’s retirement liabilities for state workers and teachers top $256 billion.

In unveiling his first budget, flush with a surprisingly large surplus from a robust economy, Newsom said he wants to put an extra $3 billion into the California Public Employees’ Retirement System (CalPERS) and an extra $2.9 billion over four years into the California State Teachers’ Retirement System (CalSTRS).

His administration estimates the extra payments would generate a savings of $7.2 billion in CalPERS over the next three decades and $7.4 billion in CalSTRS over the same period.

“That’s about building resiliency,” Newsom said about being prepared for an economic downturn.

In addition, the governor is offering $3 billion to help school districts meet their obligations, which would be used to reduce their CalSTRS payments and free up cash for the classroom.

Specifically, $2.3 billion of that money would be used to pay down school districts’ long-term unfunded liability and the remainder would be used to lower employer contribution rates over the next three years.

At Los Angeles Unified School District, the move lifted hopes of possibly avoiding a looming teacher strike.

Moments after Newsom’s presentation, the district announced it would be sending the L.A. teachers’ union a fresh proposal “to further reduce class size,” and urged state lawmakers to “provide additional funding for Los Angeles Unified.”

“Gov. Newsom is tackling the No. 1 financial dilemma that districts are facing across the state, and he’s doing it in his first budget,” said Derick Lenox with Capitol Advisors Group, which lobbies for school districts. “And by the way, it’s not sexy to prepay pension contributions, it’s just financially smart.”

Conservatives gave Newsom credit for the extra payment but noted the size of the long-term liability. California’s retirement liabilities now add up to $256.5 billion, according to Newsom’s finance department.

“That’s a great start, but hardly adequate to address the growing pension and retiree healthcare costs that state and local governments are now required to acknowledge in their (financial reports),” said state Sen. John Moorlach, a Republican from Costa Mesa.

— CALmatters education reporter Ricardo Cano contributed to this report.

Politicians react to governor’s 2019-20 budget proposal

As Governor Releases First Budget Proposal, CA Controller Reports State Closed 2018 Short of Expectations

http://www.oc-breeze.com/2019/01/12/133303_politicians-react-to-governors-2019-20-budget-proposal/

On the day Governor Gavin Newsom proposed his first budget, State Controller Betty T. Yee reported California’s revenues in December fell short of assumptions in the 2018-19 fiscal year budget by $4.82 billion. For the fiscal year, revenues of $55.63 billion are 4.4 percent ($2.54 billion) less than projected in the budget, which was enacted at the end of June.

“With our economy continuing to hover on the brink of a downturn, I applaud Governor Newsom’s budget planning with an eye towards building a strong foundation of long-term cost savings and fiscal discipline. The Governor’s proposals for debt and pension liability reduction; bold programming investments for education, health care, child care, and housing; and rainy day savings will pay dividends,” said Controller Yee, the state’s chief fiscal officer. “With thoughtful allocation of finite resources, we can shape solutions to one of our most vexing challenges—the widening inequality that plagues our state.”

Personal income tax (PIT), sales tax, and corporation tax –– the state’s “big three” revenue sources –– all were lower than projected in the FY 2018-19 budget. The shortfall in December could be partly due to lags in taxpayer filings at the end of the tax year as a result of federal tax deduction changes. Consequently, January receipts are expected to catch up to the FY 2018-19 budget forecast.

For December, PIT receipts of $6.76 billion were $3.45 billion less than expected in the FY 2018-19 Budget Act. PIT receipts in December 2017 were $11.50 billion.

Sales tax receipts of $1.16 billion for December were $1.42 billion less than anticipated in the FY 2018-19 budget. Last month’s corporation taxes of $2.09 billion were $179.5 million lower than FY 2018-19 Budget Act estimates.

The General Fund ended December with an internal loan borrowing balance of $11.80 billion, which was $4.85 billion less than anticipated in the FY 2018-19 budget.

For more details and comparisons, read the monthly cash report. This month’s edition of the Controller’s California Fiscal Focus newsletter examines the effects of U.S.-China tariffs and federal tax changes on the State of California.

As the chief fiscal officer of California, Controller Yee is responsible for accountability and disbursement of the state’s financial resources. The Controller also safeguards many types of property until claimed by the rightful owners, and has independent auditing authority over government agencies that spend state funds. She is a member of numerous financing authorities, and fiscal and financial oversight entities including the Franchise Tax Board. She also serves on the boards for the nation’s two largest public pension funds. Elected in 2014 and reelected in 2018, Controller Yee is only the tenth woman elected to a statewide office in California’s history. Follow the Controller on Twitter at @CAController and on Facebook at California State Controller’s Office.

Senator John Moorlach Commends Gov. Newsom’s Budget Proposal for Rainy Day Fund, Cautions about Economic Assumptions

Sen. John M.W. Moorlach released the following statement in response to Gov. Gavin Newsom’s state budget introduction:

As the only trained CPA in the California Legislature, I am looking forward to working with Gov. Gavin Newsom on his state budget proposal for fiscal year 2019-20. I hope it represents a fresh start for all 40 million Californians and their aspirations. As I do a quick top-line review, here are eight commendations and concerns:

Commendably, the governor makes note that the economy is slowing, so spending must be restrained. I would add that the yield curve is inverted, which usually means an economic slowdown is imminent. Consequently, a total budget growth of 3.2 percent may be an optimistic assumption.

He spends $7.7 billion, “across multiple departments and programs,” on programs to address the state’s homeless and mental illness crises.

He includes $213.6 million for wildfire mitigation and hardening our electrical infrastructure. Almost all that is from SB 901, passed last year, which required $200 million a year for five years from cap-and-trade funds for such programs. I think the amount should be higher, but that’s a start. Given how greenhouse gases from three days of wildfires equal the entire amount of greenhouse gasesfrom all the automobilesin the state for a year, the cost-benefit advantage here is substantial.

It’s excellent the governor is continuing to fill the Rainy Day Fund at $15 billion, slightly higher than the 10 percent of the general-fund budget as required by Proposition 2 from 2014. The budget proposal anticipates that will rise to $19.4 billion in the 2022-23 budget. An economic downturn may be just around the corner. Gov. Gray Davis found out quickly how hard it is to keep money in the bank as he blew through the $13 billion surplus Gov. Wilson left him.

The governor wants to put a one-time payment of $3 billion into CalPERS and $2.9 billion into CalSTRS over the next four years to reduce state pension and retiree medical liabilities. That’s a great start, but hardly adequate to address the growing pension and retiree healthcare costs that state and local governments are now required to acknowledge in their Comprehensive Annual Financial Reports.

On the negative side, the governor missed an opportunity to put money into the Public School System Stabilization Account, also required by Proposition 2. According to the Legislative Analyst’s Office, there is currently no money in the account. My own analysis of school district balance sheets tallies more than two-thirds of school districts running red ink. Many districts, the worst being the Los Angeles Unified School District at $19.6 billion, run deep into the red.

The Governor is acting more like a Chief Executive Officer than his predecessor. Instead of giving the Department of Motor Vehicles whatever it takes to shorten the waiting lines, Gov. Newsom is sending in a strike team and implementing better management practices. This is very encouraging.

Finally, I hope my slowing-economy concerns are addressed in the May Revision of the budget proposal. By then we will better see if the recent downturn in the stock market, especially the sharp decline of Silicon Valley companies, was an anomaly or part of a trend.

Senators Patricia Bates and Jim Nielsen React to Governor’s 2019-20 Budget Proposal

Today, Senate Republican Leader Patricia Bates (R-Laguna Niguel) and the Vice Chair of the Senate Budget & Fiscal Review Committee, Senator Jim Nielsen (R-Tehama) provided the following statements on Governor Newsom’s 2019-20 budget proposal:

Senate Republican Leader Patricia Bates:
“In Governor Newsom’s first budget there is a lot to applaud, including expanded efforts to pay off debt, build the state’s reserves, and increase the Earned Income Tax Credit. The budget also includes fulfilling the will of the voters in expending voter-approved bond and tax funds to build and modernize schools and increase rate reimbursements for medical providers that will result in greater access to health care for California citizens.

“The Governor’s budget would spend a record-high $209 billion, an increase of $8 billion over last year. I remain concerned with massive unfunded liabilities and also the new proposals to expand services and obligations that the state will not be able to afford when the economy slows down. Democratic state legislators have already proposed $40 billion in new spending, much of which would be above and beyond what the Governor has proposed. Hopefully the final budget will reflect more caution.”

Senator Jim Nielsen:
“The Governor got off to a good start. It is encouraging that Governor Gavin Newsom proposed funding to help survivors and communities rebuild. Governor Newsom pledged three years of property tax reimbursement to Butte County. This is important for the citizens and the stability of our communities.

“Debt retirement and paying into the pension liabilities will be very helpful for future generations.

“We have to be cautious in expanding the state’s spending so we don’t repeat mistakes of the past, when a big surplus was squandered and resulted in a $45 billion deficit.

“Californians cannot afford to repeat this mistake. It is encouraging that Governor Newsom is sensitive to that.”

Statement from California Treasurer Fiona Ma on Gov. Gavin Newsom’s 2019-2020 Budget Proposal

For more news about the State Treasurer’s Office, please follow Treasurer Ma on Twitter at @CalTreasurer, and on Facebook at California State Treasurer’s Office.

“Our collective efforts to end California’s housing crisis just got a very big boost from Governor Newsom in his proposed state budget today,” said Treasurer Fiona Ma. “Building more affordable housing is one of my top priorities. But let’s not fool ourselves. More is needed. We need creative and innovative out-of-the-box thinking. And, of course, we need to move at warp speed.”

Governor Gavin Newsom, has called for 3.5 million new housing units by 2025, which amounts to 500,000 new homes each year. That’s 6.25 times more than California currently produces – an average of 80,000 homes a year.

Under Treasurer Ma, the California Debt Limit Allocation Committee (CDLAC) manages the state’s tax-exempt bond allocations for affordable housing projects and the Single-Family First-Time Homebuyer Program. In 2017, CDLAC’s allocation for tax-exempt bonds helped to finance more than 12,000 units of housing, including more than 10,000 affordable units, and assisted over 2,000 new homebuyers. Another program offered by the State Treasurer’s Office is the California Tax Credit Allocation Committee (CTCAC), which administers the federal and state Low-Income Housing Tax Credit Programs. In 2017, between CTCAC’s three Federal Credit Awards programs more than 13,000 low-income housing units were financed.

Statement from OCYD on the Governor’s Proposed Budget

In response to Governor Gavin Newsom’s 2019 budget, OCYD released the following statement:

“This morning Governor Newsom released the first budget of his administration. OCYD applauds the bold progressive values reflected in this budget—from major investments in preschool and kindergarten classrooms, to an expansion of paid family leave and the creation of a Working Families Tax Credit, to new resources to empower community-based and non-profit organizations providing services to undocumented immigrants at the border, and finally to a record-setting 7.7 billion dollar investment in California’s housing and homelessness crisis–Governor Newsom has shown us that he will be delivering in his campaign promises.

We especially applaud Governor Newsom for his progressive budget policies while also maintaining a strong focus on fiscal responsibility. Governor Newsom has shown our State and democratic leadership across the country that is possible to make progressive investments while also allocating 13.8 billion in building budget resiliency through pension liability payments and additional contributions to the State’s Rainy Day Fund. We look forward to working for the Orange County Legislative Delegation is helping shape the proposed budget into a reality over the next six months.”

OCYD is one of the largest Young Democratic organizations in the state with an active membership of over 300. Last night, OCYD elected the largest and most diverse board in the organization’s history.

The full budget is available here: http://www.ebudget.ca.gov/

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MOORLACH UPDATE — First Budget Presentation — January 11, 2019

Gov. Gavin Newsom’s first budget presentation was a sight to behold. It provided him with the bully pulpit to outline his areas of concern and where his priorities will be. It was very detailed and, for a few reporters, very lengthy. I enjoyed it.

The overall view is that our new Governor is concerned about the economy and unfunded liabilities, which I share, but also willing to project that he will have an additional $21 billion to spend, which seems inconsistent with what the current fiscal trends are telling me. This executive summary seems to be a common theme in the two pieces below.

Remember, the January 10 budget proposal is the only bill the state constitution mandates the legislature to consider. It’s a first shot announcing the governor’s priorities and will likely go through significant changes. Most reaction comes from a very high-level view of the concepts and it’s going to be the committee process where everything is fleshed out.

The Governor decided to anticipate as many objections as he could and front loaded the negotiations by including pieces from previous legislative sessions, something that the previous Governor was want to do. I find that to be a more genuine and honest approach, but we’ll have to see how it holds. The real test will be in the May Revision. I will actively review the details and provide regular accounting for what our state’s priorities should be. Until then, I think that discreet commentary is in order.

The San Francisco Chronicle provides its perspectives in the first piece, which shares my cautionary view of what lies ahead. Remember, California does not control international or national economic cycles. So, if the Chinese decide to purchase fewer Apple iPhones, we feel it here in the Golden State.

Politico takes a very deep dive into the entire budget and is a great read if you, too, like detail and getting into the weeds. It is the second piece below.

The Governor is echoing many of my policy priorities and legislative themes from the last few years which have major budget implications, like maintaining the Rainy Day Fund, addressing unfunded pension and retiree medical liabilities, appreciating the fiscal distress impacting California’s school districts, and even establishing and funding accounts for students in preparation for college (which sounds like my SB 1344 proposal from last year — https://moorlach.cssrc.us/content/senate-bill-1344-senate-constitutional-amendment-16-education-savings-account-act-2020).

It was great to hear him addressing homelessness and mental illness, something I offered to work with him on

(see MOORLACH UPDATE — Working With the Governor-Elect — November 8, 2018). He even mentioned CEQA reforms to expedite the construction of homeless shelters. Thank you, Governor.

His speech made me reminisce about many of my legislative attempts and how they fit into his budget narrative. Here’s a few that I will suggest he review:

* Senate Bill 1248 (2016) – California Environmental Quality Act, Litigation Disclosure

* Senate Bill 32 (2017) – California Public Employees’ Pension Reform Act of 2018 (PEPRA II)

* Senate Bill 454 (2017) – Retiree Medical Costs

* Senate Bill 590 (2017) – School Reserve Cap Repeal

* Senate Bill 671 (2017) – Advanced Pension Payments

* Senate Bill 681 (2017) – Local Pension Control

* Senate Bill 656 (2018) – Judicial Retirement System

* Senate Bill 1031 (2018) – Cost of Living Adjustments Freeze

* Senate Bill 1032 (2018) – Eliminate the Terminated Agency Pool

* Senate Bill 1033 (2018) – Pension Reciprocity

* Senate Bill 1344 & Senate Constitutional Amendment 16 (2018) – Education Savings Account Act of 2020

* Senate Bill 1433 (2018) – Restrict the Deferred Retirement Option Program

As I once again sit on the Senate Budget and Fiscal Review Committee, this year serving on Sub 5, Public Safety, versus Sub 1, Education, I’ll enjoy the process of debating the components of the budget over the next five months. The Governor’s May Budget Revision may bring many of his proposals down to reality as current economic trends become clearer. Other than that, it was an amazing first week of the new Session and it promises to be a fun adventure.

Gov. Gavin Newsom’s budget: More money for education, Navigation Centers

Joe Garofoli and John Wildermuth
https://www.sfchronicle.com/politics/article/Gov-Gavin-Newsom-s-budget-More-money-for-13524362.php

Gov. Gavin Newsom proposed a $209 billion state budget Thursday, a 4 percent increase over the previous year that includes more spending for education and Navigation Center homeless shelters and an increase in California’s rainy-day reserve.

Newsom proposed a record $80.7 billion for K-12 education and money for a second year of free community college for full-time students. His fiscal 2019-20 budget also includes money for an expansion of preschool education and $750 million to fund more all-day kindergarten programs.

Newsom would pay for some of his new initiatives with an anticipated $21.6 billion surplus, $6.5 billion more than what the nonpartisan Legislative Analyst’s Office projected in November. The governor said the more optimistic numbers were based on updated statistics.

On housing, Newsom proposed $500 million in state aid to cities to open Navigation Centers like those pioneered by San Francisco, where homeless people have access to programs such as drug and mental health counseling and job searches. He proposed waiving environmental requirements for building such shelters, much as cities do for stadium projects.

He also said he would withhold transportation funding from communities that do not achieve their local housing-creation goals.

“Everyone has to step up,” Newsom said. “If they don’t, don’t ask us for more money.”

Newsom also called on the business community to help solve the state’s housing crunch. He said he has been having a “quiet conversation” with Silicon Valley leaders to “step up and match our contribution.”

Even as he proposed a 4 percent overall budget increase, Newsom invoked former Gov. Jerry Brown’s warning to sock away money for an expected economic downturn. Newsom’s budget calls for putting $1.8 billion into the state’s rainy-day fund, which would increase it to a total of $15.3 billion. Newsom said he plans to increase the fund to $19.4 billion by fiscal 2022-23.

Newsom’s budget also includes $4.8 billion to pay down some of the state’s unfunded retirement liabilities and $4 billion to pay off all the state’s budget debts and deferrals. California still has $256 billion in unfunded retirement benefits for state employees.

“We are preparing for uncertain times,” Newsom said. His budget assumes a 3.2 percent growth in the state’s economy, compared with 5 percent projections in past years.

State Sen. John Moorlach, R-Costa Mesa (Orange County), called Newsom’s growth projections “a little bit optimistic, based on current trends.” He’d prefer to bank on zero growth.

“When the market turns, it doesn’t give you a couple years’ notice, it turns on a dime,” Moorlach said. “You could lose your rainy-day fund within a matter of months.”

Budget hawks like Moorlach and GOP Assemblyman Jay Obernolte of Big Bear Lake (San Bernardino County), vice chair of the Budget Committee, applauded Newsom’s suggestion to use the state’s surplus to pay down debts. But Obernolte cautioned that “we must remember that creating new programs that would only have to be cut in a recession would be foolish.”

Newsom said “90 percent” of his proposals are policy ideas that the Legislature already supports. Assembly Budget Committee Chair Phil Ting, D-San Francisco, said that “I don’t know if that’s completely true, but on the big issues we absolutely agree. … We all want universal health care, we want universal preschool, we want full-day kindergarten.”

One big-ticket item was conspicuously absent. Although Newsom said this week that he wanted to expand state-paid family leave to six months for parents of newborn children, his budget did not include funding for it. He said he would create a task force to study the idea.

The budget Newsom unveiled Thursday is just the first step in a months-long process, a starting point for negotiations with the Legislature. The governor will provide a revised budget proposal in May, which will include spending and revenue from the next few months. The Legislature then must approve the budget in June.

In what may be his most popular proposal, Newsom said the Department of Motor Vehicles should start accepting credit card payments. Newsom joked that he couldn’t believe that a governor would be making news with that statement in 2019.

“That,” Newsom said, “is in the you-can’t-make-this-up department.”

Newsom earned a reputation for wonkishness long before he was sworn in as governor — as San Francisco mayor, he famously delivered a seven-hour State of the City presentation on YouTube — and that enthusiasm for eye-glazing detail was fully evident Thursday.

Ten minutes into his 105-minute presentation and question-and-answer session, Newsom enthusiastically touted the money he was proposing for a “longitudinal data system” to track student progress.

“Wait till next year,” he said. “You’ll have to listen for four hours. I love this stuff.”

Joe Garofoli and John Wildermuth are San Francisco Chronicle staff writers. Email: jgarofoli, jwildermuth Twitter: @joegarofoli @jfwildermuth

Newsom seeks changes across government in first budget

By KEVIN YAMAMURA and CARLA MARINUCCI

https://www.politico.com/states/california/story/2019/01/10/newsom-seeks-changes-across-government-in-first-budget-784401

Enjoying the tailwinds of a massive surplus and large Democratic supermajorities in both houses, Gov. Gavin Newsom is using his first budget proposal to put his policy stamp on nearly every sector of California government.

The Democratic governor described Thursday — in detail, for nearly two hours — how he would use his $209 billion spending plan to shape California’s future, focusing heavily on early childhood, housing and health care.

While Newsom used some of his estimated $21.4 billion surplus to lay the groundwork for future program expansion, he also directed much of it to pay off debts and reverse borrowing gimmicks from as far back as the Gov. Arnold Schwarzenegger era during the worst of the recession, taking a page from famously frugal Gov. Jerry Brown’s playbook.

“The message we are advancing here is discipline, building a strong foundation on which everything else can be built,” he said at the Secretary of State’s auditorium, a bigger venue needed to accommodate the greater number of reporters and state officials on hand to watch Newsom’s first budget presentation.

The notes of discipline in Newsom’s proposal won him plaudits from even some Republicans. But a key question, perhaps, is whether Newsom’s nascent administration will have the bandwidth to execute on the vast array of proposals he’s put on the table — a list that seemed to grow as his Thursday budget briefing went on and the new governor offered to provide jobless benefits to furloughed federal workers.

“It’s always challenging when you have a two-year campaign, you need to be talking about a lot of things. … You’re talking to a lot of constituency groups, you’re trying to be very aspirational,’’ said Assemblyman Phil Ting (D-San Francisco), who chairs the Assembly Budget Committee, one of the panels that will now prepare to dig into the fiscal blueprint. He added that “for some of the heavier lifts, it’s really up to see how much he and his team are willing to push it.”

Newsom, a father of four, drafted his spending plan with a clear focus on more money for programs focused on young children. He devoted the opening policy section of his budget summary to early childhood, likely the first time a governor has done so.

He proposed nearly $2 billion in spending on kindergarten and child care facilities, as well as home visits and parental aid. But he also called for a $500 earned income tax credit bonus for families with children younger than 6, paid family leave up to six months and additional Cal Grant aid for parents attending college.

Newsom proposed a fund for safe drinking water — a problem plaguing low-income, rural communities in California. He called for major incentives designed to spur housing construction in California. He proposed several measures that attempt to expand health coverage to the remaining 7 percent of Californians who are uninsured, including subsidies for upper-middle-class residents and Medi-Cal for undocumented immigrants between ages 19 and 25.

Newsom starts with perhaps the biggest fiscal advantage enjoyed by any California governor in recent history — a rainy-day reserve projected to grow to $15.3 billion and a surplus he now estimates at $21.4 billion — more than $6 billion higher than the Legislative Analyst’s Office forecast in November. The Department of Finance said that’s largely due to more revenues and fewer expenses than predicted in the current fiscal year, as well as unforeseen Medi-Cal savings. The LAO will now review the Newsom budget.

Newsom touted his unprecedented $13.6 billion to pay down pension liabilities, debt and accounting gimmicks from years ago, which his plan calls “building budgetary resiliency.” The governor has proposed $3 billion to pay down CalPERS pension liabilities for public employees and $3 billion to relieve school districts of CalSTRS payments.

The Department of Finance says that his budget only adds $2.9 billion in permanent budget growth. That’s just under the $3 billion level that the Analyst’s Office suggested would be prudent to get through a moderate recession unscathed.

“None of us are naïve,’’ and California may soon be “overdue for a correction” in the booming economy, Newsom warned.

While his plan doesn’t bake in massive program expansions now, it would require billions more in ongoing spending down the road to carry out his grand vision. That list was topped by proposals to establish full-day kindergarten across the state and provide public preschool for all low-income 4-year-olds.

He said he laid out a strategy to accomplish these goals in three or more years, “but we’re going to be sober and honest about how much we can do.”

Likewise, Newsom opted to use some of the surplus to modernize the state’s analog 911 emergency call system and create pilot projects to establish savings accounts for young children. Both would eventually require hundreds of millions of dollars — and possibly new taxes in the case of the 911 overhaul.

California Budget and Policy Center Executive Director Chris Hoene said Newsom made a savvy move by focusing on finite commitments that could clear the way for sustained changes as the new governor’s tenure unfolds.

“It’s not as if all of his promises are going to be delivered in year one,” Hoene said, noting that offering more early childhood services, for example, means building the “capacity to serve more children.”

“Before you have universal kindergarten for 4-year-olds, you need to invest in the facilities and the staff and the infrastructure,” Hoene said. “There’s a trend of committing one time investments while the budget is in good shape, while doing some stage-setting for future investments.”

Newsom’s first budget generally received favorable reviews from lawmakers, even from some Republicans.

“He’s got his eyes wide open and I appreciate that,” said state Sen. John Moorlach (R-Costa Mesa). “So, I want to encourage him with his big plans, but he’s got to be able to hit the reverse gear. It would be a disservice to build an infrastructure for Pre-K and then have those buildings empty because we had to eliminate that program.”

In the weeks after Newsom’s election, some veteran budget experts speculated that he might use his January budget as a placeholder to buy time to develop the initiatives he promoted on the campaign trail. But he instead used the rollout to map out his agenda.

Unlike Brown, who generally waited for lawmakers to propose spending plans before reacting to them, the former San Francisco mayor and lieutenant governor cast himself as an unusually proactive chief executive.

The stark differences weren’t lost on some legislators, who — while lauding Newsom’s enthusiasm and energy — also said there may be a reality check ahead now that he’s no longer a candidate.

Assemblyman Ting noted that “one of Gov. Brown’s strengths was having a really narrow list of things to work on, and get done. And because of that, he was able to get them done.”

At times, Newsom sprinkled his presentation with remarks that seemed to indicate he was trying to outdo Brown, who won his biggest praise for putting the state budget on a stable path after deep recessionary cuts that started a decade ago.

Newsom said his budget added less to permanent spending growth than any of Brown’s spending plans did. He said his budget is “structurally balanced over the next four years. And forgive me, this is not an indictment, and please don’t consider it as such, but that has not always been the case with presentations by governors — even recently.”

Later, he observed that Brown didn’t pursue tax reform, but that he would because the state’s revenues are too volatile. Newsom suggested that California isn’t doing enough to capture revenues from the modern service economy.

The governor’s least dramatic budget section, perhaps, was the largest: K-12 schools. While previous governors regularly enjoyed making a splash with big classroom initiatives, Newsom focused more on under-the-hood work that will probably win more plaudits from district accountants than from parents.

Start with the $3 billion payment to CalSTRS, which will help more districts balance their increasingly shaky budgets, though it won’t necessarily reduce class sizes or result in new arts and science programs. District leaders have been clamoring for help paying their pension obligations, said veteran schools lobbyist Kevin Gordon.

Another popular piece among the green eyeshade crowd: reversing controversial formula changes signed by Brown that limited growth in the education budget, Gordon said. And Newsom’s $576 million in additional special education funding will be appreciated by district leaders who have seen costs balloon for students with disabilities.

“Gavin went after the hottest button issues the education community has been screaming about the last five years and pushed every one of them in a positive direction,” Gordon said.

Jeremy B. White and Alexander Nieves contributed to this report.

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