CVIndependent

Wed09232020

Last updateMon, 24 Aug 2020 12pm

I have spent most of the last two days basically doing two things:

1. Getting everything ready to send the Independent’s June print edition to press.

2. Checking the state’s “Resilience Roadmap” page every 15 minutes for updates on the counties allowed to move further into Stage 2 of the reopening process—meaning stores can let customers inside, and restaurants can have dine-in customers.

As of 6:45 p.m., 43 of the state’s 58 counties have been given the go-ahead … and Riverside County is NOT one of them, even though the county posted the paperwork to move ahead last Friday.

This really could change at any time; San Joaquin County was added to the list since I started writing this, and about a half-dozen were added last night after business hours—including San Diego County.

Why is this such a big deal? Well, we are heading into Memorial Day weekend, and if Riverside County gets its blessing soon, some restaurants and stores could possibly allow customers inside—with restrictions and social distancing—by the time the weekend arrives. After all, some places are already open in San Diego after word came down late last night.

Also, whether or not you think we should be reopening this much already (and my feelings are beyond mixed), this whole process is undeniably fascinating.

We’ll keep watching and hitting the “refresh” button.

Today’s news:

• What if a second wave of COVID-19 washes across the country? The president said that even if that happens, he won’t close things down again (although, thankfully, it isn’t his call to make).

• A Catch-22, sort of: Educators say budget cuts caused by the pandemic will jeopardize their ability to safely reopen schools in the fall

• From the Independent: Missing concerts? Well, some people have started to do drive-in concerts—including a weekly Sunday show as the sun sets on 15 gorgeous acres in Yucca Valley. Matt King has the details.

• Consider yourself warned that this piece is depressing: According to Stanford economist Nicholas Bloom, a large portion of the jobs lost due to the pandemic are never coming back—even though as of now, employers intend on rehiring most of the people. “We know from the past that these aspirations often don’t turn out to be true,” he told The New York Times.

• Depressingly related: Mitch McConnell said the feds would not extend a boost in unemployment benefits when that increase expires.

• Why are people acting, well, so darn weird? Two psych experts, writing for The Conversation, say that when people are confronted with their own mortality, core beliefs—good and bad—get amplified. It’s a deeply interesting look at human psychology.

• While restaurants have been able to stay open to do takeout, and will be allowed to have customers inside in advanced Stage 2, bars have not, and will not. As the San Francisco Chronicle points out, a lot of bar owners think that’s decidedly unfair.

• Another primer on how numbers can be deceiving: Reported coronavirus cases have been sharply rising in California … while the infection rate has been heading downward. The reason? Significantly increased testing.

• Per usual, I took part in the I Love Gay Palm Springs podcast/videocast today. The hosts and I chatted with the fantastic Dr. Laura Rush; events expert Hugh Hysell; and designer/retailer Christopher Kennedy.

• How weird it is to be a reliable media source these days! Readership is waaaaaay up—but revenue is waaaaaay down. The latest media company to announce layoffs: The Atlantic.

• The CDC now says that you don’t have to worry too much about catching the coronavirus from contaminated surfacesalthough perhaps you should still worry a little bit.

• ABC News and the Mayo Clinic teamed up to see how reliable the various antibody tests are. The results? Not so great.

• The Wheels Are Coming Off, Chapter 987: Some 1,200 pastors across the state say they’ll hold in-person church services on May 31, whether the state allows them or not.

Augustine Casino will not be joining the Agua Caliente properties and Morongo in reopening this weekend: General manager Jef Bauer says a mid-June reopening date is more likely for the Coachella property.

• Local small businesses impacted by the pandemic could get grants of up to $10,000 that do not need to be repaid, according to Supervisor V. Manuel Perez, thanks to the county receiving a big chunk of CARES Act money. Expect more details at the June 2 Board of Supervisors meeting.

Changes are coming to the airport-security process as a result of the virus, the Transportation Security Administration announced today.

Hollywood productions—for starters, all of your favorite TV shows—have been shut down, like most everything else, as a result of COVID-19. The Los Angeles Times looks at what it’s going to take to get things running again.

• What have Americans been spending their stimulus checks/deposits on? CNBC takes a look.

Please be safe. Please be kind. Please wear a mask when you’re out and anywhere near other people. If you like this Daily Digest, and want to support it and the other quality local journalism the Independent provides, think about becoming a Supporter of the Independent, if you’re able. We’ll be back tomorrow.

Published in Daily Digest

They don’t call it the Golden State for nothing, at least not lately: California’s fiscal health is in extraordinary shape.

Income-tax receipts surpassed expectations for the pivotal month of April. Projections of a $21 billion-plus surplus are not out of the question. Nearly 3 million jobs have been added since the depths of the Great Recession, yielding record low unemployment. And having already met a 10 percent rainy-day fund requirement, the state is socking away billions in additional reserves to buffer against the next downturn. Impending Silicon Valley IPOs could provide an even bigger windfall.

Yet California isn’t as prepared as it may seem for the next recession—and, economists say, there will be a next one. Because voters have willingly taxed the rich, California’s $209 billion budget is more volatile than ever, overly reliant on top earners whose fortunes are tied to Wall Street.

And what’s different this time—and perhaps more worrisome—is that when the next pullback hits, California may have to fight off red ink without a historically crucial ally: Washington, D.C.

It’s not just that there’s no love lost between President Donald Trump and California leaders, or that Congress is gridlocked in its political divisions. Fiscal choices that have been made in the past couple of years may make it tough for the federal government to help states much in the next recession, even if Congress and the Trump administration want to.

Fiscal analysts warn, for example, that the federal deficit is soaring just as historically low interest rates are limiting the Federal Reserve’s monetary firepower.

“Whether it’s because of a worsening fiscal picture at the federal level or just the politics, I wouldn’t be counting on them coming to some agreement about helping out states,” said Gabriel Petek, the Legislature’s nonpartisan budget analyst.

“If you go from that premise, then the state has to be thinking about contingency planning for the next recession and getting through it on its own.”


The Macro View

During the economic downturn that followed the Sept. 11, 2001, terrorist attack and the financial crisis that struck in late 2008, the federal government poured billions of dollars into state coffers by enhancing support for anti-poverty programs, health care and infrastructure.

But Petek and other analysts warn that with U.S. government coffers drawn down by Trump’s tax cuts—and without an extraordinary and unifying cause like a terrorist attack or near-depression—California and other states may not be able to count on the federal government again to backfill fiscally.

Given political priorities, casualties could easily include services that impact millions of Californians: anti-poverty programs such as CalWORKS for working parents, in-home supportive services for low-income seniors, or the state’s Medicaid program known as Medi-Cal, which serves one in three residents.

“Gabe is not alone in having those thoughts,” said John Hicks, executive director of the National Association of State Budget Officers in Washington, D.C. “States did get assistance in the Great Recession and a smaller version of that in the early 2000s. That prevented them from having to make more significant cuts in education or other priority areas or have to raise revenues more.”

Petek, who was appointed in February after two decades at S&P Global Ratings, estimated the state will need $25 billion just to weather a moderate recession. That would wipe out everything the state has been able to save.

According to the Department of Finance, for instance, the state’s general-fund spending on Medi-Cal alone is $22 billion, and trimming that line item in a recession would threaten the $100 billion a year in matching federal money that underpins health care for the poor in California.

“It’s a huge part of how we fund our health-care system,” said Gov. Gavin Newsom’s finance director, Keely Bosler. And that’s just one need among many that would be competing for the state’s surplus should the economy turn.

In addition to the unpredictable economy, Bosler worries about the federal support that hinges on the fate of the Affordable Care Act, which is facing a legal challenge, and the next Census, which would be dramatically impacted if California residents are spooked by a proposed citizenship question.


Recalling the Recession

So as California strides toward the longest economic expansion in state history this July, Newsom and his fiscal advisers are keenly aware of what could happen. Many of them, longtime government staffers, were tasked with making cuts during the last recession and are steering the governor to limit his commitment to ongoing spending.

Bosler, who was a staff consultant in the Senate in 2010, recalls emotional, daylong committee hearings a decade ago when developmentally disabled children, working mothers and destitute patients suffering from chronic illnesses lined up, pleading with state lawmakers to spare them from cuts.

“I remember it so clearly, because it was really, really hard,” said Bosler, who later joined former Gov. Jerry Brown’s finance team.

On the brink of becoming a failed state, California drastically reduced spending on the poor then—with particularly long-lasting impacts on women. From cutting programs that provide child-care assistance to preschool subsidies for mothers holding low-income jobs, the pullback made the dream of self-sufficiency that much harder. For older women and women with disabilities, the state reduced safety-net programs intended to help them stay in their own homes by paying someone to help with housework, shopping and cooking.

In health, California slashed payments to doctors, dentists and clinics seeing patients covered by Medi-Cal, a move that discouraged providers from seeing them. The developmentally disabled were told to take generic drugs and prevented from participating in experimental treatments. And podiatry and optometry were no longer covered, because they were deemed optional.

Those cuts have lasting impacts. “No program was spared,” recalled Bosler. “Significant damage was done to core state services.” Welfare advocates are still fighting today to restore medical benefits slashed during the recession.

So the Democratic governor and the Democratic-controlled Legislature are making a conscious choice to build reserves now.


Building Resiliency

When Newsom updates his spending plan in mid-May, he is expected to maintain his three-pronged approach for savings, paying down debt and making targeted investments in affordable housing and early education.

One bucket of about $3 billion would be used to expand ongoing services for the poor, particularly in-home supportive services program and CalWORKs. A portion would be used to boost higher education to stave off a tuition hike in the University of California and California State University systems, as well as fund a second year of free community college.

The second bucket would be targeted for affordable housing and to confront California’s homeless epidemic; lay the ground groundwork for extending full-day kindergarten to all Californians; and provide an extra $3 billion toward districts’ teacher pension payments.

The last and largest bucket would be used to help the state weather a potential economic downturn for what Newsom has termed “budget resiliency.” He would finish paying off the state’s Wall of Debt that had accumulated from years of internal borrowing and undo a 9-year-old accounting trick that pushed the June state payroll into July so it looked like the state was spending less.


A Safety Net

Last year, the state put $200 million toward seeding a new account intended to protect anti-poverty programs in a downturn. Newsom has embraced the safety-net reserve by proposing to increase the fund to $900 million.

Senate President Pro Tem Toni Atkins, a Democrat from San Diego, told a crowd of policy advocates in Sacramento in March that even though Newsom’s style is much different from his predecessor Brown’s, their underlying strategy is similar.

“If you look at what Gov. Newsom has done in terms of the rainy-day fund, paying down debt, and those kinds of issues, and if you extrapolate that, then what you see is a fairly conservative approach to resources to make sure that we are trying to keep a sustainable, resilient foundation of a budget going forward,” Atkins said.

Atkins credits that extra safety-net reserve to the Senate’s budget committee chair, Sen. Holly Mitchell. Both lawmakers indicated they would like to go beyond $900 million, because the money would protect just a fraction of those in need.

If the state were to set aside $900 million, it would protect roughly 435,000 Medi-Cal recipients or 132,000 CalWORKS families for a year based on the state’s average spending on those programs. Currently, about 13 million people are on Medi-Cal, and nearly 400,000 families rely on CalWORKS—with demand growing when people fall on hard times.

Lawmakers haven’t said how much they will try to set aside. “It’s a technical term: A whole lot of money,” Atkins quipped.


The Course Ahead

Petek, the Legislature’s budget analyst, suggests lawmakers could do even more. He notes, for example, that while paying off California’s so-called Wall of Debt sounds nice, lawmakers may not want to undo that payroll accounting trick, because it’s administratively burdensome to do it again if the state needs to free up cash.

All this prevention is ironic, says Jeffrey Michael, director of the Center for Business and Policy Research at the University of the Pacific in Stockton. If the state is overly reactive to economic cycles, Californians have no one to blame but themselves.

It’s voters, he notes, who have decided again and again to tax the rich, a choice that has made the system more reliant on the investment income of high earners and therefore more volatile.

And for the record, he doubts that California will have any more or less to worry about than any state should a recession hit during the Trump administration.

“While California is acting to oppose or counteract the president’s policies in many areas, I don’t believe the federal fiscal response to a downturn is an area where California needs to take special precautions against the actions of Congress or the president,” he said.

But polls show the state is generally in sync with Newsom’s mix of priorities for the current surplus. A recent survey by the Public Policy Institute of California found majorities support additional funding for working poor tax credits, wildfire preparedness and developing more housing. Only 47 percent approved of one-time spending to pay down unfunded pension liabilities.

And, like the governor, a lot of taxpayers remember the last two recessions, and remain cautious.

“If they’re not going to give (the surplus) back in a refund,” said Charles McLaughlin, a board member of the Ventura County Taxpayers' Association, “then they should save it for a rainy day.”

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

Published in Politics