Capitol Update
By Pat Moran, Aaron Read & Associates
Session Begins: The California Legislature returned on December 3, 2024, for the start of the two-year legislative session. Joining the Legislature for the first time are 29 newly elected Senators and Assemblymembers who were sworn-in at a ceremony at the State Capitol. When you couple the 29 new members that were sworn-in with the 30 new members from two years ago, half of the legislative members have two-years of experience or less as we enter this new session.
After members were sworn-in, they got down to business and each respective house elected their leaders for the 2025-26 session. To no one’s surprise, Assembly Member Robert Rivas was reelected as Assembly Speaker and Senator Mike McGuire was reelected Pro Tem of the Senate.
There may be some additional changes to their leadership teams and committees as members have termed out and been replaced by the newly elected. Once the changes are announced, we will let you know.
Special Session: The Senate and Assembly also convened a special session called by the Governor, with a focus on bolstering California legal resources to protect civil rights, reproductive freedom, climate action, and immigrant families. Both the Assembly and Senate gaveled in the special session — then quickly adjourned until January 6, 2025 — without taking any action.
Budget staff introduce initial bills including the Senate version that includes $25 million for deportation legal services and $10 million for cities and counties, on top of the $25 million sought by the Governor for the state Department of Justice.
New bills: The newly sworn in members did not waste any time introducing new legislation. Approximately 100 bills have been introduced in the first two days of session with many more to follow. While the Legislature has adjourned until January 6, 2025, members will still be able to introduce legislation through the month of December.
We expect to once again see a significant number of bills introduced that SCRHA will have to fight this year.
Bill limit: Legislators will have to pick their bills more carefully. After decades of complaints that too many bills are introduced each year, legislative leaders proposed, and the rank and file approved, a limit of 35 bills each for the two-year session. That’s down from 50 in the Assembly and 40 in the Senate. If past is prologue, we will still see a significant number of bills introduced as there will be exceptions to the rule.
Budget: The Governor is constitutionally required to present his budget to the Legislature by January 10th of each year. You may recall, last year state leaders closed a roughly $47 billion General Fund shortfall across the three-year “budget window” (fiscal years 2022-23 through 2024-25) using a broad array of budget tools.
The solutions in the 2024-25 budget package included:
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$16 billion in spending reductions.
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$13.6 billion from a combination of additional revenue (which is mostly temporary) and internal borrowing from state special funds.
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$6 billion in fund shifts, which transfer certain costs from the General Fund to other state funds.
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Nearly $6 billion in withdrawals from two reserves: the Budget Stabilization Account (also known as the rainy-day fund) and the Safety Net Reserve.
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$3.1 billion in funding delays and pauses. This includes delaying, for two years, an expansion of food assistance to undocumented Californians as well as postponing, for six months, a wage increases for people who provide services to Californians with intellectual and developmental disabilities.
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$2.1 billion in deferrals, which postpone certain payments to later years. This includes shifting one month of state employee payroll costs from June 2025 (the last month of the 2024-25 fiscal year) to July 2025 (the first month of the 2025-26 fiscal year).
As a result of these budget actions, the Legislative Analyst’s Office (LAO) in its annual fiscal outlook, estimated that California will face a $2 billion deficit next year, a gap that could be resolved with some minor solutions. However, they did warn that there is little to no room for new programs.
Both the Assembly Speaker Robert Rivas and Senate Pro Tem Mike McGuire also endorsed a cautious approach.
“We need to show restraint with this year’s budget, because California must be prepared for any challenges, including ones from Washington,” Rivas said in a statement. “It’s not a moment for expanding programs, but for protecting and preserving services that truly benefit all Californians.”
Federal Funds: While a small $2 billion deficit is welcome news (as opposed to what some had expected), the deficit could certainly grow depending on actions taken in Washington D.C. when the new administration takes over. A significant share of federal funding for California flows through the state budget.
The enacted state budget for 2024-25 includes $153 billion in federal funds. This is more than one-third (33.9%) of the total state budget. Any significant reductions would negatively impact the state’s budget.
The Legislature will begin budget-related hearings sometime after the Governor presents his budget to the Legislature on or before January 10th.