Audio Transcript Auto-generated
- 00:01 - 00:01
Hi,
- 00:01 - 00:03
this is Kevin Gordon with capital advisors group
- 00:03 - 00:07
for the San Dab September legislative update.
- 00:07 - 00:10
We're gonna give you a little bit of update on some fiscal issues
- 00:10 - 00:12
and a couple of the bills that are going on and kind of
- 00:12 - 00:15
just what the environment in Sacramento looks like this time of the year.
- 00:15 - 00:18
But first, obviously a little note about Sans,
- 00:18 - 00:20
which is a wonderful coalition
- 00:20 - 00:24
of the school districts all across San Bernardino County
- 00:24 - 00:29
and composed of people that give their time from school boards
- 00:29 - 00:31
where they serve and superintendents who are on San Des.
- 00:32 - 00:34
And of course, our county superintendent Ted Alejandre.
- 00:35 - 00:38
Um, so across the 33 districts that we serve
- 00:38 - 00:42
in San Berardino County, it's a pleasure to be with you again,
- 00:42 - 00:44
to talk to you a little bit about what's going on
- 00:44 - 00:45
in the legislative process.
- 00:45 - 00:50
So first up to bat is the fiscal year off to a positive start.
- 00:50 - 00:52
You might remember just a year ago,
- 00:52 - 00:55
we had started the fiscal year,
- 00:55 - 00:59
the legislature had barely finished the budget process
- 00:59 - 01:01
and they were already upside down for the month of June.
- 01:02 - 01:03
We looked at July,
- 01:03 - 01:06
they were in trouble in terms of being
- 01:06 - 01:09
underneath what the estimates were in terms of revenue
- 01:09 - 01:10
and,
- 01:10 - 01:12
and we were sort of cautioning that things
- 01:12 - 01:14
could potentially get better and they never did.
- 01:14 - 01:17
We had bad numbers virtually every month
- 01:17 - 01:20
that led up to a problem that depending on who you talk to
- 01:20 - 01:25
was between a $50 billion and a $70 billion overall budget gap.
- 01:25 - 01:28
By the time the governor introduced his budget, last January,
- 01:29 - 01:31
that situation is different. Now,
- 01:31 - 01:35
in that, even when the legislature adopted its budget on June 15th
- 01:35 - 01:38
and the governor signed it at the end of that month,
- 01:38 - 01:42
we didn't know what was going to happen with revenues for that month till July.
- 01:42 - 01:46
When obviously we got the results of what actually occurred.
- 01:46 - 01:49
And it turns out that even June
- 01:49 - 01:52
was underestimated in the amount of revenue that
- 01:52 - 01:54
brought in which was an impressive amount.
- 01:54 - 01:59
You combine it with the overage beyond estimates in July
- 01:59 - 02:01
and where we sit today
- 02:01 - 02:06
is uh close to $4.2 billion 4.3 billion dollars.
- 02:06 - 02:11
Beyond what the budget had anticipated we would be at this time.
- 02:12 - 02:14
The goal is of course, to make sure
- 02:14 - 02:19
that what we've done is sort of underestimate because we end up in better shape.
- 02:19 - 02:19
Um
- 02:20 - 02:24
and see what that ends up transpiring to result in in January
- 02:24 - 02:29
right now because of the nuances of the prop 98 guarantee
- 02:29 - 02:31
what we have on the school side of the budget.
- 02:31 - 02:35
And we stand to actually benefit from these overages by a pretty significant amount
- 02:36 - 02:39
in that we did a suspension of prop 98
- 02:39 - 02:41
in order to actually
- 02:41 - 02:45
have a dollar amount. That's even with where we were in the prior year roughly.
- 02:46 - 02:50
Um, and the idea that there was a lot more money that was owed to education,
- 02:50 - 02:53
but the state didn't have the ability to give it to us.
- 02:53 - 02:55
But that after you do a suspension,
- 02:56 - 03:00
every dollar in a rising revenue situation,
- 03:00 - 03:02
the first call on that money comes to us
- 03:02 - 03:06
in education under the way prop 98 suspension works,
- 03:06 - 03:07
it's called maintenance factor money.
- 03:08 - 03:12
And so we know that virtually all of that $4.3 billion would accrue to us,
- 03:12 - 03:16
you know, unless obviously things started going in a reverse direction
- 03:16 - 03:19
in the ensuing months and we'll see what happens with that.
- 03:19 - 03:20
What we're optimistic about
- 03:21 - 03:23
is that with a anticipated cut
- 03:23 - 03:24
to the f
- 03:24 - 03:26
the federal interest rate, um
- 03:26 - 03:31
and we could end up getting even two reductions before the end of the calendar year,
- 03:31 - 03:34
that's going to have a real effect on the stock market.
- 03:34 - 03:36
And as we've said to you guys,
- 03:36 - 03:40
many times what happens in the stock market relative to general fund revenues
- 03:40 - 03:43
in California can be incredibly helpful to
- 03:43 - 03:45
the overall fiscal condition of the state
- 03:45 - 03:50
and certainly helpful in terms of making up for those dollar amounts
- 03:50 - 03:52
that we did not get in this last budget act
- 03:53 - 03:56
that we would like to improve the overall situation for schools.
- 03:56 - 03:59
As you might remember, in order to put the budget together, that was a break,
- 03:59 - 04:00
even budget,
- 04:01 - 04:04
there was an amount that would be owed to us in the future.
- 04:04 - 04:06
But there are also sacrifices in the near term
- 04:06 - 04:09
that are part of that including some minor deferrals
- 04:09 - 04:13
that do not involve the necessity of any district
- 04:13 - 04:15
to do any short term borrowing to accommodate it.
- 04:15 - 04:16
But nonetheless,
- 04:16 - 04:19
there are these deferrals that are wrapped into the budget
- 04:19 - 04:23
process that move money literally over a fiscal year by
- 04:23 - 04:29
a week or a matter of days that we're going to see at the end of the coming fiscal year,
- 04:29 - 04:30
we'll see that transaction
- 04:30 - 04:33
and you see those little maneuvers that are done like
- 04:33 - 04:37
that in this budget and the ensuing budgets that we get
- 04:37 - 04:39
in order to make all the puzzle pieces fit together.
- 04:39 - 04:41
So that's all anticipated
- 04:41 - 04:44
we're going to be looking for in November,
- 04:44 - 04:46
a report by the nonpartisan legislative analyst
- 04:47 - 04:49
on kind of where they see the overall
- 04:49 - 04:52
economy and their estimates of where budgets might
- 04:52 - 04:57
be headed in advance of the governor doing his budget proposal in January.
- 04:57 - 05:00
So we we'll watch for that report in November
- 05:00 - 05:03
and obviously, we'll give you any updates about this trend line
- 05:04 - 05:05
when we get to October as well.
- 05:06 - 05:09
So with that, I want to move on to our next topic, which is that
- 05:09 - 05:11
the legislature just finished its two
- 05:11 - 05:16
year legislative session that coincides with obviously an election cycle.
- 05:16 - 05:19
And so we have a bunch of lawmakers that are up for election.
- 05:19 - 05:22
We think we're probably going to see 32
- 05:22 - 05:24
new phases between the Assembly and the Senate
- 05:24 - 05:27
when the legislature returns in December.
- 05:27 - 05:28
Um
- 05:28 - 05:30
because of that movement and what will then happen
- 05:30 - 05:33
is the beginning of another two year legislative session
- 05:34 - 05:35
and legislative cycle.
- 05:35 - 05:39
But as this one finished out literally in the last few weeks,
- 05:39 - 05:42
there was a mad rush with all kinds of pieces of legislation,
- 05:42 - 05:46
with the idea that they had to finish all of their business by midnight
- 05:46 - 05:48
uh at the end of the month,
- 05:48 - 05:51
on the last day of the month. And they did do that
- 05:51 - 05:55
and they killed some bills that were kind of surprising that didn't make it.
- 05:55 - 05:57
And they did send a bunch of bills to the governor.
- 05:57 - 06:02
The governor will have 30 days to act on any legislation
- 06:02 - 06:04
that was passed in the last 12 days of session.
- 06:04 - 06:07
So we'll kind of see how that all ends up.
- 06:07 - 06:08
Let me give you a little breakdown of
- 06:08 - 06:10
some of the key bills that everybody's watching.
- 06:10 - 06:15
There's the bill by Kevin mccarty assembly member on classified hiring.
- 06:15 - 06:16
That's 2088.
- 06:16 - 06:21
That assembly bill is the one that basically says we got to give first rate of refusal
- 06:21 - 06:22
uh to
- 06:22 - 06:26
uh on a classified opening to a classified staff member.
- 06:26 - 06:28
And only then if you don't have that,
- 06:28 - 06:31
could you then go out and look for someone to fill that position outside.
- 06:31 - 06:34
There's a lot of opposition to this bill. This is legislation
- 06:35 - 06:40
that is very close in terms of its content to a bill the governor vetoed last year.
- 06:40 - 06:45
My expectation is it's very, very likely the governor ends up vetoing that bill
- 06:45 - 06:47
again when it gets to his desk.
- 06:47 - 06:48
Um,
- 06:48 - 06:53
then there's also 3216, this cell phone use bill by Josh Hoover,
- 06:53 - 06:56
a Republican in the legislature that championed this issue.
- 06:56 - 06:59
And this bill actually is supposed by CS B A,
- 06:59 - 07:02
but it has a lot more local control in it than you might think.
- 07:02 - 07:05
It basically says that by 2026
- 07:05 - 07:08
districts will have to adopt a policy
- 07:08 - 07:10
that uh either limits
- 07:11 - 07:14
or ban cell phone use uh in schools.
- 07:14 - 07:18
That limitation is not really defined in the bill. So it's pretty open ended.
- 07:19 - 07:22
So districts that want to have very, very few limitations if they have any at all,
- 07:22 - 07:25
you know, very, very slight limitation
- 07:25 - 07:29
could be very much in compliance with a measure like that.
- 07:29 - 07:31
It will be interesting to see where the legislature goes in the future.
- 07:31 - 07:33
The chairman of the assembly ed committee,
- 07:33 - 07:35
assembly member Almer Tucci
- 07:35 - 07:37
would have liked to have seen a total ban
- 07:37 - 07:39
on cell phones
- 07:39 - 07:41
in school, which is what the governor had called for
- 07:42 - 07:44
the Hoover Bill, I think represents a compromise on this
- 07:44 - 07:47
and I'm actually anticipating that it does get signed
- 07:48 - 07:50
in mandatory kindergarten.
- 07:50 - 07:53
There were two Bills on this one by the chairman again, Almar Tucci,
- 07:53 - 07:57
and then, uh also by Susan Rubio in the Senate,
- 07:57 - 08:00
those two bills did not make it out of the legislature,
- 08:00 - 08:01
so it didn't make it to the governor's desk.
- 08:01 - 08:06
So this sort of perennial attempt to try to get kindergarten mandated,
- 08:06 - 08:07
um
- 08:07 - 08:09
is something that continues to be undone
- 08:09 - 08:11
that we will expect to see
- 08:11 - 08:13
legislatures
- 08:13 - 08:18
uh continue to embrace and look for uh as they, they cycle through proposals
- 08:19 - 08:20
in the coming session.
- 08:20 - 08:23
So I I will not be surprised at all if we see that legislation again.
- 08:24 - 08:25
And then finally, there's the bill by
- 08:26 - 08:27
Aar Curry.
- 08:27 - 08:30
Um The assembly member had this bill on pregnancy
- 08:31 - 08:32
leave this 14
- 08:32 - 08:34
week a paid
- 08:34 - 08:36
uh basically pregnancy leave
- 08:37 - 08:38
was held by the legislature.
- 08:39 - 08:41
And I think they were heeding the advice of the governor that said
- 08:41 - 08:44
no matter the social good you might be pursuing.
- 08:44 - 08:48
If there's a pretty significant expense, any piece of legislation
- 08:49 - 08:52
that you're anticipating that you want passed after the budget's
- 08:52 - 08:55
been negotiated and it's not already in the budget,
- 08:55 - 08:58
he's very likely to veto that bill.
- 08:58 - 09:00
So the legislature ended up holding that bill
- 09:00 - 09:03
and primarily probably because of fiscal issues.
- 09:03 - 09:08
So let me go to kind of one of the last thoughts that I had before we touch on,
- 09:08 - 09:09
kind of what's going on back east
- 09:10 - 09:13
is a little of the grumpiness at the end of the session that some of you may read about
- 09:13 - 09:14
where
- 09:14 - 09:17
the governor wanted to call a special session to do something about
- 09:18 - 09:21
the price of gas at the pump and do something kind of regulate or
- 09:21 - 09:26
put in some guardrails around what goes on with the oil industry in California.
- 09:26 - 09:29
And the State Senate said you could have gotten this done earlier.
- 09:29 - 09:33
It was really frustration by both houses of the legislature to some extent
- 09:33 - 09:35
over the fact that the governor, they say
- 09:36 - 09:39
too often does major policy at the last minute
- 09:39 - 09:42
while they're extremely busy on lots of other things and tries to jam it
- 09:42 - 09:46
and they weren't too crazy about that. The assembly wanted to give it a hearing.
- 09:47 - 09:48
The speaker Robert Revis,
- 09:48 - 09:50
who you can see over here on the right of the screen,
- 09:51 - 09:51
um,
- 09:52 - 09:56
really wanted to do more vetting of it was totally ok with a special session.
- 09:56 - 09:57
Um,
- 09:57 - 10:00
um, Senator mcguire, who's the president of the Senate and the Center.
- 10:00 - 10:03
There was not crazy about doing a special session, but
- 10:03 - 10:08
suffice it to know that they will be doing a special session convening on this topic.
- 10:08 - 10:12
The Senate has said let the assembly go first to tackle this issue
- 10:12 - 10:14
and then when they get a solution in sight,
- 10:14 - 10:16
the Senate would convene,
- 10:16 - 10:20
consider what that proposal is and get something to the governor.
- 10:20 - 10:22
So we will be having a special session after all.
- 10:22 - 10:25
But there is grumpiness between the two houses,
- 10:25 - 10:28
Democrats in each of the houses sort of jockeying for different positions
- 10:29 - 10:32
and then general grumpiness between those two houses and their governor.
- 10:32 - 10:37
The question is, what does that bode for the final two years of the news
- 10:37 - 10:40
of administration in terms of those relationships?
- 10:40 - 10:43
And I suspect it all gets ironed out a little bit
- 10:43 - 10:46
and perhaps by, in some ways, by the governor
- 10:46 - 10:50
working, uh, a little bit more with some advanced notice for these legislators
- 10:50 - 10:52
that don't like to be handed stuff at the last minute.
- 10:52 - 10:54
So we'll end up seeing what happens with that.
- 10:55 - 10:57
Um, the feds are focused
- 10:57 - 11:00
now back on keeping the government open again.
- 11:00 - 11:02
It just seems like every other report that I give to you guys,
- 11:02 - 11:05
it's about a potential looming government shutdown.
- 11:05 - 11:09
Um There was in the last month, a lot of attention
- 11:09 - 11:12
on the appropriations process where the House of Representatives had
- 11:13 - 11:16
an appropriations bill that when you looked at what was contained for education
- 11:16 - 11:18
had very, very big cuts again.
- 11:19 - 11:19
Um,
- 11:19 - 11:23
not unlike the fact that they wanted to go after major cuts last year where they're
- 11:23 - 11:27
back with pretty deep cuts to education on the house side and on the Senate side,
- 11:27 - 11:30
it would actually end up being increases to education.
- 11:30 - 11:33
Of course, one house is represented by our Republican friends and
- 11:33 - 11:37
the Senate controls, uh, is controlled by the Democrats.
- 11:37 - 11:40
So you can see sort of the characteristics of those differences and that
- 11:40 - 11:44
normally when we get the two houses together to work out the differences,
- 11:44 - 11:47
sort of where we end up is as about flat funding.
- 11:47 - 11:50
So it's hard to say where this will all turn out.
- 11:50 - 11:52
But one of the things that I know House Republicans
- 11:52 - 11:56
have articulated this week after a five week break,
- 11:56 - 12:01
they're back dealing with keeping the government open is that they just as soon punt
- 12:01 - 12:03
on any of the issues with regard to
- 12:03 - 12:06
appropriations till next year betting that there's a
- 12:06 - 12:09
President Trump and that maybe they have even
- 12:09 - 12:11
more control in Congress than they do today.
- 12:11 - 12:12
And if that were the case,
- 12:12 - 12:14
then they could get 100% of what they want
- 12:14 - 12:17
rather than doing any kind of negotiated deal now.
- 12:17 - 12:22
So there's sort of a reluctance to take bills up for a vote at the current moment
- 12:22 - 12:25
and instead try to get leadership in the two houses to try to agree on something.
- 12:26 - 12:28
I'm not going to hold my breath. I think they're going to have plenty of,
- 12:29 - 12:31
uh, focus or rather distraction. I should say,
- 12:32 - 12:32
uh,
- 12:32 - 12:36
on the keeping the government open question rather than on appropriations bills.
- 12:36 - 12:36
But
- 12:36 - 12:38
we'll keep you posted on where this is headed,
- 12:39 - 12:42
uh, as we get toward the, the end part of this calendar year.
- 12:43 - 12:46
So I think that's it. That's my update for this month
- 12:46 - 12:50
and, uh, we will end up seeing you again in October when we come back
- 12:50 - 12:54
and for now, uh, thank you so much for being part of
- 12:54 - 12:54
sandes
- 12:54 - 12:57
and paying attention to these vital issues. At the state and federal level.
- 12:58 - 12:59
Good day.