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Despite speculation about bold moves—in a far-left direction, even for this blue state—Gov. Gavin Newsom and legislative Democrats actually landed a budget Thursday that’s surgical about new taxing and spending while still keeping promises to help poor Californians and working families.

Under the $214.8 billion spending plan, the state inched closer to universal health coverage, expanding Medi-Cal to all low-income young adults regardless of immigration status. State lawmakers also charted a course to increase tax credits to the working poor and boost subsidies to middle-income Californians to buy health coverage. There were significant investments in early education and housing, while a portion of the surplus was diverted to pay down pension liabilities.

While Democrats began the year with a surplus of ideas for taxing Californians, only a few strategic levies survived the negotiation process, specifically a fine on individuals who don’t have health insurance under a state mandate. There’s even a little tax relief: Parents, for instance, will get a temporary tax exemption on diapers.

One hitch? The devil is in the details, some which have yet to be worked out. Though Democrats met their deadline for a balanced spending plan, most of the underlying policy to enact the budget wasn’t hashed out—and may not be for weeks. Call it a learning curve: This was the new governor’s first time negotiating with seasoned legislative leaders who know how to count votes. Look for more action in coming trailer bills.

Here’s what you need to know about California’s new budget—including maybe, just maybe, the first steps toward the establishment of a four-year college in the Coachella Valley.

Yes to Health Care for Undocumented Young Adults

The Legislature agreed to the governor’s plan to expand Medi-Cal, the state’s Medicaid program for low-income people, to young adults ages 19-25. It’s a step toward offering free health care to all undocumented adults since the state already makes Medi-Cal available to children regardless of immigration status.

The Senate had proposed going further by offering Medi-Cal to undocumented seniors 65 and older. However, none of the leaders backed offering health care to all low-income immigrants.

The state expects an estimated 90,000 young adults could gain coverage when the benefit begins next year. Already, 76,000 have registered for a limited version of Medi-Cal that covers emergency services and prenatal care available to low-income people regardless of immigration status. The price tag for this expansion? About $98 million a year.

It’s worth noting the state also affirmed its commitment to restoring optional Medi-Cal benefits. During the recession, coverage for audiology, optical, podiatry, speech therapy and incontinence creams had been taken away.

Obamacare Lives: A $695 State Mandate to Carry Health Coverage

Starting next year, California will join New Jersey, Vermont and the District of Columbia in requiring residents carry health coverage or face a $695 state penalty—a fine that will go up each year with inflation.

The state individual mandate aims to replace the federal one that Republicans repealed in their effort to dismantle the Affordable Care Act. The administration says California needs to act, because without a mandate, the number of Californians without coverage—10.4 percent in 2016—will go back up. Separately, a study conducted by the University of California estimated the uninsurance rate will rise to 12.9% by 2023, or 4.4 million people, without state action.

Money raised from the penalties, about $450 million over three years, will be used to give bigger subsidies to those who purchase private insurance through the state’s health coverage exchange, Covered California.

Newsom and lawmakers hope to expand assistance to 190,000 middle-income Californians making between $48,000 to $72,000 a year, according to Health Access California, a health advocacy group.

Fear of Recall = Not Many New Taxes

The budget includes a plan to impose a fee—that still needs to be voted on—of no more than 80 cents a month on each telephone line to help digitize the state’s 911 system, which is still analog. The next-generation system would improve call delivery, better location data and incoming text capability.

Other than that and the health-care mandate, lawmakers opted against most of the new taxes proposed early in the session. In fact, California parents and women will get a sales tax exemption on diapers and menstrual products (though only for two years).

Notably rejected, given the state’s current $21.5 billion surplus, was Newsom’s push for a 95-cent tax on most residential water bills to fund-clean-drinking water initiatives in the Central Valley. Instead, the Legislature worked out a deal to clean up toxic water by diverting money generated from big polluters under the state’s cap-and-trade program.

Some environmental groups questioned using clean air money to pay for drinking water, but supporters reasoned that water is being contaminated with arsenic and other toxic chemicals from the heavy use of fertilizers, so it makes sense to draw the $100 million for cleanup from the agriculture industry’s portion of the greenhouse gas fund.

One issue that won’t be resolved this week is whether California will conform its tax code to match federal changes made by Republicans in 2017. Newsom is relying on the projected $1.7 billion increase in net revenue from that to expand the state’s earned income tax credit, the centerpiece of his anti-poverty agenda.

Assembly Democrats in swing districts are skittish about limiting deductions and losses that can be claimed by some businesses. They know the fate of former Sen. Josh Newman, who was recalled from his Orange County seat after voting to raise California’s gas tax. Tax conformity requires a two-thirds vote in the Legislature to pass, so the pressure is on.

Paying Debt and Rainy-Day Saving

Lawmakers embraced the governor’s proposal to use some of the surplus to make extra pension payments, a step Newsom says is necessary to tame the state’s $256 billion retirement liability for state workers and teachers.

The Legislature approved supplemental payments of $3 billion to the California Public Employees’ Retirement System and $1.1 billion to the California State Teachers’ Retirement System for the state’s portion of unfunded liability.

To relieve school districts across the state, the Legislature will contribute a total of $3.15 billion toward paying down their liabilities and reducing their payroll contribution rates. One difference is where it will go.

Previously, Newsom had all the extra payments going to the teachers' pension fund—a reaction, in part, to teachers strikes that erupted as he took office. Now a portion of that money will be doled out to CalPERS. The change was made in recognition that while teachers are members of CalSTRS, many other school employees from janitors to bus drivers belong in the state’s other public-employee pension fund.

Besides paying down California’s “wall of debt,” as former Gov. Jerry Brown called it, the state is shoring up for a downturn—or in Newsom-speak, “building budget resiliency.” The new budget carries a roughly $20 billion reserve from several rainy-day funds. This amount, while hefty, would be easily wiped away in a downturn. According to the Legislative Analyst’s Office, the state would need as much as $40 billion to cover the budget in a moderate recession.

Big Spending on Housing

With new commitments topping $2 billion, the budget represents the most important action the governor has taken so far on housing and homelessness. The lion’s share will target the state’s homeless population, including $650 million in grants for cities and counties to build and maintain emergency shelters, and $100 million for wrap-around care for the state’s most vulnerable residents. Another $500 million will go toward quintupling the size of the state’s affordable housing financing fund, plus hundreds of millions earmarked for cities to update their often outdated housing plans.

While lawmakers and Newsom have agreed to cut big checks, it’s not clear who’ll get the money, and with what strings attached. Big-city mayors and lawmakers want homelessness grants directed towards the state’s largest 13 cities, while Newsom wants to spread out the money to include counties.

Newsom also wants to deny transportation funds to cities not building enough housing. As of Thursday, lawmakers were still negotiating a scaled-back version of the proposal. Another Newsom proposal that speeds construction of homeless shelters by sidestepping environmental laws also remains unresolved.

Lending a Hand to Working Families

Expanding California’s earned income tax credit has quickly become one of Newsom’s signature anti-poverty programs, because it gives a cost-of-living refund to low-income working families. Lawmakers are poised to triple the program from $400 million to $1.2 billion to provide a $1,000 refund for families with children under 6 and expand income eligibility from $24,950 to $30,000.

Anti-poverty advocates had wanted Newsom to include undocumented workers who file with individual taxpayer identification numbers instead of Social Security numbers. That proposal did not make the final version of the budget. Still, the administration estimates the current expansion will increase the number of beneficiaries from 2 million to 3 million households.

The budget also will make it easier for low-income families with children to qualify for assistance, increasing the CalWORKs asset limit to $10,000 and the motor vehicle exemption to $25,000—changes that will allow people to save and hang on to cars that can get them to work.

And parents of all incomes will get a longer paid family leave to care for new babies—eight weeks, up from the current six weeks, starting in July of next year. The goal will be to boost the benefit to 90 percent of most wages, up from the current maximum of 70 percent.

The K-14 Kids Did All Right

As required by law, the lion’s share of the budget goes to public schools, with nearly $102 billion in state money to be pumped into California classrooms and community colleges, plus another $389 million in a special reserve fund for schools. Though the figure is an all-time high, California is still viewed as lagging in per-pupil spending, in part because of the high cost of living.

Democrats are also demanding more stringent oversight of charter schools, which can operate like private schools, tend to be non-union and have proliferated in big cities such as Oakland and Los Angeles. Newsom proposed prohibiting charter schools from blocking or disenrolling special-education students who require more support for disabilities. Lawmakers readily embraced that change.

The budget includes $300 million to build more kindergarten classrooms in an effort to boost full-day kindergarten programs. Newsom had initially proposed $750 million but that was reduced after a study found most part-day kindergarten programs are in wealthier communities.

After-school programs will get a $50 million boost over the $600 million or so the state is currently spending. The money will help cover the cost of minimum wage increases enacted during Brown’s tenure.

So Did the Little Ones

In emphasizing early education, Newsom and lawmakers agreed to expand day care and preschool slots by the thousands while investing in training for child care providers.

Newsom gets $50 million in seed money to start child savings accounts for college and post-secondary education. He initially asked that all of it go toward pilot projects with First 5 California and local governments, but the Legislature is designating $25 million to that. The other $25 million will create a state program with the Scholarshare program in the Treasurer’s Office.

More Free College and Help for Student Parents

Newsom and legislators delivered on a $45 million promise to fund a second year of tuition-free community college for first-time, full-time students at campuses participating in the state’s College Promise program.

Other big winners include students with children, who will be eligible to receive grants of up to $6,000 to help cover their families’ living expenses. The budget boosts by about 15,000 the number of competitive Cal Grants—a significant jump, but far less than the 400,000 qualified students who applied for the state scholarships last year and didn’t receive them.

The University of California and California State University systems will receive money to increase enrollment, and waive tuition during the summer to help low-income students graduate faster. Lawmakers also set aside funds for campuses to combat hunger and homelessness, strengthen veterans resource centers, and provide more mental health counseling. A center at the University of California San Francisco is getting a $3.5 million earmark for dyslexia screening and early intervention.

Backers of the state’s controversial new online community college fended off an effort to slash the college’s funding, clearing the way to enroll its first class this fall. And CSU will get $4 million to study five possible locations for a new campus: Stockton, Chula Vista, San Mateo, Concord and Palm Desert.

Lots for Police Training; a Little for Police Records

Reflecting the Legislature’s focus this year on reducing police shootings, the budget includes $20 million to train police officers on de-escalation tactics, and how and when to use force. Outside the budget, bills to set a tougher standard for police to use deadly force and require more officer training are advancing through the Legislature, reflecting a compromise between civil rights advocates and law enforcement groups.

Attorney General Xavier Becerra’s office will get $155,000 to implement the new state law he’d been resisting: making law-enforcement misconduct records public. Becerra will also have to report to the Legislature on how many requests his office processes, and how much time is spent on that. A judge ruled in May that Becerra must produce the records; previously he had said he would not release them until the courts clarified whether he had to.

Powering Down to Cope With Wildfires

Besides beefing up the state’s firefighting capability and disaster preparedness, California will add powering down to its to-do list for coping with climate change-driven wildfires.

The budget doles out $75 million to state and local agencies whenever investor-owned utilities decide to shut off electricity during red flag weather warnings. One note: The Assembly added language to track how the money is used.

CALmatters reporters Matt Levin, Felicia Mello and Laurel Rosenhall contributed to this report. CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Politics

Although California can’t do much to block the Trump administration’s controversial immigration policies, opponents in the “Resistance State” keep finding ways to chip away at their foundations.

The latest: pushing the state and its Democratic leaders to cancel its business deals with, investments in, and campaign donations from private companies with federal immigration contracts:

• A group of K-12 teachers are urging their retirement system to divest from GEO Group, CoreCivic and General Dynamics.

• Some University of California students and workers are pressing the UC system to sever ties with General Dynamics Information Technology. The company helps the system administer a placement test for incoming first-year students.

• Politicians and the state Democratic Party are shedding donations from CoreCivic, operator of private prisons and detention facilities.

“I don’t think we should profit off of the lives of other people,” said Adrianna Betti, one of hundreds of teachers who are urging CalSTRS, the organization responsible for the pensions of California K-12 teachers, to divest from the private prison companies. “The concept that I’m going to retire off of this type of money—it bothers me immensely.”

Betti told a recent CalSTRS investment meeting that the organization needs to provide more transparency about its portfolio and realize they are making moral choices with their dollars.

“Nobody with a moral lens would have made this decision ever,” she said.

Amid public outcry last month, President Donald Trump backed off of his initial policy of separating undocumented parents from their children at the border. “So we’re keeping families together, and this will solve that problem,” he said. “At the same time, we are keeping a very powerful border, and it continues to be a zero-tolerance. We have zero tolerance for people that enter our country illegally.”

More than 1,800 children have been reunited with families after being separated at the border, but more than 700 still remain separated—and some of those may be in California.

The state—which Trump branded “out of control” in its immigration defiance—passed a trio of laws last year designed to make California a “sanctuary state” for undocumented immigrants who don’t commit serious crimes. Although the Trump administration sued to have the laws overturned, it has not yet been successful.

But the emotional family separations posed a particular frustration in Democrat-dominated California. Attorney General Xavier Becerra joined 17 other states in contesting the Trump administration’s “zero tolerance” policy last month, arguing in the complaint that family separation is causing severe trauma that state resources will be strained to address.

The federal government “does have the right to decide how to conduct immigration processes. They’ve done a very poor job obviously—very harshly,” Becerra said on KQED earlier this month. “We are more limited there in what we can do as far as allowing these kids to be free.”

One move the state could make: divestment. It’s a tactic that various activists have proposed against gun manufacturers, tobacco companies and fossil-fuel firms. Successes include the UC divestment effort in the 1980s against South Africa, which Nelson Mandela credited with helping bring an end to the racist apartheid regime.

CalSTRS said it is determining potential risk factors the private prison companies may post to pensions. At its meeting, investment committee chairman Harry Keiley said he’s asked the chief investment officer update the board on the issue by September.

CoreCivic said in a statement that none of its facilities provide housing for children who aren’t under the supervision of a parent, adding, “We also do not enforce immigration laws or policies or have any say whatsoever in an individual’s deportation or release.”

“We are proud that for over the past 30 years, we have assisted both Democrat and Republican administrations across the country as they address a myriad of public-policy challenges,” said the company spokeswoman Amanda Gilchrist. “CoreCivic has a strong commitment to caring for each person respectfully and humanely.”

Other educators are urging the UC system to sever ties with General Dynamics Information Technology. The University Council-AFT—the labor union that represents librarians, lecturers and other university faculty members—sent such a letter to UC president Janet Napolitano in June, who also received a similar letter from the Council of UC Faculty Associations, the umbrella organization that represents the different faculty associations at each campus.

The University of California Student Association, an organization that represents students across UC campuses, is also pressing the UC system to end its contract. “To work with a company actively taking part in the state sanctioned violence of separating families seeking asylum, and profiting from it is to be complicit in the inhumanity of their actions,” the association said in a letter to the president.

“This is still happening, and they’re not doing as much as they could,” said Stephanie Luna-Lopez, a third-year student at UC Berkeley and associate chief of community development for the Associated Students of the University of California, the student association for UC Berkeley. “We actually cannot do anything, because it’s out of our control.”

Napolitano contends that UC has contracted with the company for years; that it assured her they were providing case work for unaccompanied minors to facilitate reuniting families; and that breaking ties would be “detrimental” and “disruptive.” (Although she presided over significant numbers of deportations as head of Homeland Security in the Obama administration, Napolitano has denounced Trump’s separation policy.)

General Dynamics Information Technology has worked with the Office of Refugee Resettlement since 2000, providing casework support for the Department of Health and Human Services. It says it has no role in the family separation policy, but facilitates reunifications.

Democratic legislators and the Democratic Party have, since Jan. 1, 2017, collected some $250,000 from private-prison companies that incarcerate undocumented immigrants. Now they’re distancing themselves.

Assembly Speaker Anthony Rendon tweeted last month that he would donate campaign money received from CoreCivic to the Anti-Recidivism Coalition, which works with formerly incarcerated people to reform the justice system.

After CALmatters noted that Lt. Gov. Gavin Newsom received private prison money in his campaign for governor, an aide said Newsom donated $5,000 to the National Domestic Workers Alliance’s Families Belong Together project, which protests Trump’s immigration policies.

The California Democratic Party has also announced it will no longer accept contributions from organizations that run private prisons or other incarceration services.

“The private-prison system represents so much of what is wrong with our criminal justice system,” said CDP chair Eric C. Bauman in a statement. “Accepting donations from companies that profit from the systemic injustices and suffering that results from them is incompatible with the values and platform of our party.”

CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Published in Politics

SAN FRANCISCO (Reuters)—The California Public Employees’ Retirement System should maintain its investments in the controversial Dakota Access oil pipeline project in order to exert influence over the companies involved, staff for the largest U.S. public pension fund said on Monday, Feb. 6.

Proposed state legislation would require CalPERS, a $300 billion fund, to divest from companies involved in the building and financing of the 1,168-mile-long underground pipeline project, which would affect an estimated $4 billion in CalPERS holdings, according to staff.

CalPERS staff said that while divesting stocks of companies involved in the project may reduce stakeholder perception that the fund’s investments contribute to climate change, the move would limit CalPERS ability to change corporate behavior through engagement.

“There is considerable evidence that divesting is an ineffective strategy for achieving social or political goals, since the consequence is generally a mere transfer of ownership of divested assets from one investor to another,” staff said in its recommendation, which was published on its website.

In order to comply with the legislation, CalPERS would have to sell off shares in the pipeline builder Dakota Access LLC and Energy Transfer Partners. In addition, the bill calls for divesting from the banks financing the $3.78 billion project. Those banks include Bank of America, Wells Fargo, JPMorgan Chase and Citibank.

The pipeline would carry crude from Stanley, N.D., to Pakota, Ill. It has been the target of intense protests by those concerned that a spill could contaminate water supplies underneath Native American tribal lands. The CalPERS Investment Committee will meet on Feb. 13 in Sacramento to discuss the bill.

President Donald Trump has signaled his support for the project, which faced setbacks under the Obama administration. In December, the government under Obama requested a full environmental review by the Army Corp of Engineers.

The U.S. Army secretary could make a decision on the final permit needed to complete the pipeline as soon as Friday, the government’s lawyer told a Washington, D.C., court on Monday.

CalPERS is a frequent target of divestment campaigns. In the past, it has pulled cash out of tobacco and firearm companies as well as investments in countries including Iran, Sudan and South Africa on political grounds.
The legislation, proposed by Assemblymember Ash Kalra of San Jose, also calls on California State Teachers’ Retirement System (CalSTRS) to divest from the pipeline project.

A spokesperson for CalSTRS said the $188 billion fund has not yet taken a position on the legislation.

(Reporting by Rory Carroll; Editing by Daniel Bases and Cynthia Osterman)

Published in Politics