Coronavirus puts Gavin Newsom in tough spot on California progressives' biggest priorities

2020-04-18 | San Francisco Chronicle

April 18-- Apr. 18--SACRAMENTO -- A soaring economy gave Gov. Gavin Newsom wide latitude during his first year in office to set California on a path to the sweeping liberal agenda he outlined during his campaign.

Now, as the coronavirus pandemic plays plays havoc with the state budget, Newsom suddenly faces tough and unexpected choices that may require him to temporarily abandon key policy goals and disappoint allies.

Advocates are pushing to expand social services just as tax revenue is drying up. Industries teetering on the edge are seeking regulatory relief from laws revered by organized labor. And all are hoping their needs won't be forgotten as Newsom charts a course out of his statewide stay-at-home order.

"No one is fighting for something that they feel can be pushed off," said Sarah Dar, director of health and public benefits policy at the California Immigrant Policy Center.

The organization recently shifted online its years-long campaign to open the state health care program and tax credit for the working poor to people who are living in the country illegally. Dar acknowledged the challenge of asking for that aid while Newsom is "staring down the barrel of cuts."

"There will be people at the end of this who see some promises as broken. It's a difficult position to be in," she said.

With record numbers of Californians now applying for unemployment insurance and consumer spending shriveling, the state appears to be hurtling into a severe recession. The legislative analyst warned last week that the pandemic could blow a $35 billion hole in next year's budget, with additional losses of $85 billion in the years that follow.

Newsom has scrapped his $222 billion January budget proposal and plans to continue the state's current spending levels into the 2020-21 fiscal year, with the expectation that further adjustments, including potential cuts, will come in the months ahead. Legislative leaders have said there is unlikely to be time or money to focus on anything other than the coronavirus response, wildfire prevention and homelessness.

"The world is radically changed since the January budget was proposed," Newsom told reporters this month. "So everything is on the table. That's an honest and sober reflection of that reality."

That includes an expansive health care plan meant to get California closer to Newsom's goal of providing universal coverage. One of his central proposals was making Medi-Cal, the state's health insurance for the poor, available to all income-eligible seniors, regardless of their immigration status. The governor and lawmakers extended the program last year to undocumented young adults.

Newsom's administration projected the new plan would add 27,000 people to Medi-Cal, eventually costing taxpayers about $320 million annually. Newsom said in January that it was not only "the right thing to do morally and ethically," but would also save money in the long run by reducing emergency medical expenses.

Anthony Wright, executive director of the consumer advocacy group Health Access California, said expanding Medi-Cal, as well as state subsidies for other insurance options, would be more important than ever during the coronavirus pandemic, when people are losing health coverage they had through their employers.

Last week, Newsom unveiled his plan for lifting restrictions on public life in California, which he said could not happen until there is widespread testing that would allow the state to isolate people exposed to the virus and trace people with whom they have come in contact.

"We want to make sure that people can get the testing and treatment they need without fear," Wright said. "This is a public health emergency and will require some public health investment to get out of."

The legislative caucuses representing Latino and Asian Pacific Islander members have written to the governor urging him to treat health care for all undocumented adults as a priority in the coronavirus response. Advocates note seniors are most at risk of severe health problems from the virus.

But requests for new spending or taxes are drawing opposition from business groups, which say they are looking for signals that Newsom is mindful of their challenges during what they expect will be a slow and fragile recovery.

"If they expand spending now, that would be singularly the most irresponsible thing they could do," said Rob Lapsley, president of the California Business Roundtable."Who pays for it? It's business."

Lapsley's group and other businesses organizations are asking the governor for breaks such as freezing the workers' compensation rate and suspending the ability to sue over certain labor code violations. Doing that, they say, would give them a more solid financial footing and allow them to start hiring people back sooner.

John Kabatek, state director of the National Federation of Independent Business in California, said Newsom should pause enforcement of several major laws that took effect this year, including AB5, which makes it harder for companies to label workers as independent contractors, and the Consumer Privacy Act, which gave customers additional control over their personal information online.

"To impose laws right now that have new costs, new regulations, is asking a lot of already fragile businesses," Kabatek said.

A minimum wage hike scheduled for 2021, to $14 an hour for large employers and $13 an hour for small businesses, could be the biggest fight of all.

A 2016 law that put California on track to eventually reach a $15 hourly minimum included an off-ramp in case of an economic downturn. If the state finance director determines by July 28 that employment and sales tax revenue are down or that raising the minimum wage would push the state into a budget deficit, the governor can suspend the increase for a year. He would have to make a final decision by Sept. 1.

"We'll make a determination in real time," Newsom said this month. "We've got a team of some of the best minds that I could find on economic recovery."

The California Restaurant Association sent a letter to the governor last month asking for a delay. President and CEO Jot Condie said in an interview that the conditions Newsom has suggested restaurants will have to adopt to return would mean fewer customers. With profit margins already thin, he said, some restaurant owners may decide not to reopen at all without the certainty that labor costs, their biggest expense, won't rise again within a few months.

"Every penny counts at this point," he said. "This is really about the survival of an industry."

Pausing the minimum wage, however, would mean crossing California's labor unions, which are among the biggest sources of money and volunteers for Democratic campaigns in the state.

Tia Orr, director of government affairs for SEIU California, said the off-ramp is not an option. The union, which represents about 700,000 workers, was at the forefront of the minimum wage fight and helped bring a reluctant then-Gov. Jerry Brown to the negotiating table by pursuing a ballot measure to raise the hourly rate. It was pulled after he signed the 2016 law.

Orr said the coronavirus recovery plan must invest in those at bottom of the economic ladder. Many of the essential employees still going to work during the crisis, like child care providers and janitors, are among the lowest paid.

"The most important thing we can do for families right now is to get more money in their pockets, so they can get back on their feet," Orr said.

Guadalupe Sanchez, 53, prepares and cooks food at a McDonald's in San Leandro. She earns $14.50 an hour, 50 cents more than the city's minimum wage, but hours have been cut by as much as half in recent weeks. She was able to spare only $100 from her last paycheck for her parents in Mexico, a third of what she usually sends them, and she worries about making her $600 rent next month for the Hayward home she shares with four people.

Sanchez, an activist with the , said workers like her are counting on the minimum wage increase.

"Bills don't wait. We have to pay the rent. We have to eat," she said in Spanish. "I don't think we can survive like this."

Alexei Koseff is a San Francisco Chronicle staff writer. Email: Twitter: @akoseff