Category Archives: Economy

Governor Newsom proposes huge cuts to address $54 billion budget gap brought on by the COVID-19 recession

Governor Newsom Submits May Revision Budget Proposal to Legislature

Press Release,

SACRAMENTO – In the face of a global health crisis that has triggered a global financial crisis, Governor Gavin Newsom today submitted his 2020-21 May Revision budget proposal to the Legislature – a balanced plan to close a budget gap of more than $54 billion brought on swiftly by the COVID-19 recession.

“COVID-19 has caused California and economies across the country to confront a steep and unprecedented economic crisis – facing massive job losses and revenue shortfalls,” said Governor Newsom. “Our budget today reflects that emergency. We are proposing a budget to fund our most essential priorities – public health, public safety and public education – and to support workers and small businesses as we restart our economy. But difficult decisions lie ahead. With shared sacrifice and the resilient spirit that makes California great, I am confident we will emerge stronger from this crisis in the years ahead.”

The May Revision proposes to cancel new initiatives proposed in the Governor’s Budget, cancel and reduce spending included in the 2019 Budget Act, draw down reserves, borrow from special funds, temporarily increase revenues and make government more efficient. Due to the size of the challenge, there is no responsible way to avoid reductions. The budget will show that the most painful cuts will only be triggered if the federal government does not pass an aid package that helps states and local governments.

The proposal responds to the dramatic economic and revenue changes since January, when prudent fiscal management was reflected in a multi-year balanced budget plan with a $5.6 billion surplus and record reserve levels. The rapid onset of the COVID-19 recession in California has resulted in more than 4 million unemployment claims being filed since mid-March, the unemployment rate is now projected to be 18 percent for the year, and there is a $41 billion drop in revenues compared to January’s forecast. With a higher demand for social safety net services increasing state costs, the $54.3 billion deficit is more than three times the size of the record $16 billion set aside in the state’s Rainy Day Fund.

This recession-induced swing of nearly $60 billion in just four months underscores the necessity of additional federal funds to protect public health and safety, public education and other core government functions, as well as to support a safe and swift economic recovery. If additional federal funds are not forthcoming, the May Revision spells out spending cuts necessary to meet the constitutional requirement for a balanced state budget.

While difficult decisions are required to close this sudden deficit as the state navigates to recovery, the May Revision is guided by principles of prudent fiscal management to protect public health, public safety, and public education; provide assistance to Californians who have been hurt the most by the pandemic; and invest in a safe and quick economic recovery.

Protecting Public Health, Public Safety, and Public Education

The May Revision proposes $44.9 billion in General Fund support for schools and community colleges and $6 billion in additional federal funds to supplement state funding. To address the decline in the constitutionally-required funding for schools and community colleges resulting from the COVID-19 recession, the May Revision proposes to reallocate $2.3 billion in funds previously dedicated to paying down schools’ unfunded liability to CalSTRS and CalPERS to instead pay the school employers’ retirement contributions. It also proposes a new obligation of 1.5 percent of state appropriation limit revenues starting in 2021-22 to avoid a permanent decline in school funding that grows to $4.6 billion in additional funding for schools and community colleges by 2023-24.

The May Revision prioritizes $4.4 billion in federal funding to address learning loss and equity issues exacerbated by the COVID-19 school closures this spring. These funds will be used by districts to run summer programs and other programs that address equity gaps that were widened during the school closures. These funds will also be used to make necessary modifications so that schools are prepared to reopen in the fall and help support parents’ ability to work. The May Revision also preserves the number of state-funded child care slots and expands access to child care for first responders.

The May Revision preserves community college free tuition waivers and maintains Cal Grants for college students, including the grants for students with dependent children established last year. Many workers return to higher education and job training after losing a job; continuing this initiative will prioritize affordability and access to these programs.

Supporting Californians Facing the Greatest Hardships

With the COVID-19 recession hitting harder on families living paycheck to paycheck, the May Revision prioritizes funding for direct payments to families, children, seniors and persons with disabilities. It maintains the newly expanded Earned Income Tax Credit, which targets one billion dollars in financial relief to working families whose annual incomes are below $30,000 – and including a $1,000 credit for those families with children under the age of six. It maintains grant levels for families and individuals supported by the CalWORKs and SSI/SSP programs. It prioritizes funding to maintain current eligibility for critical health care services in both Medi-Cal and the expanded subsidies offered through the Covered California marketplace for Californians with incomes between 400 percent and 600 percent of the federal poverty level. It estimates unemployment insurance benefits in 2020-21 will be $43.8 billion – 650 percent higher than the $5.8 billion estimated in the Governor’s Budget.

The May Revision also targets $3.8 billion in federal funds to protect public health and safety. It also proposes $1.3 billion to counties for public health, behavioral health, and other health and human services programs, and also proposes $450 million to cities to support homeless individuals.

State Government Savings and Efficiency

In addition to baseline reductions in state programs, savings in employee compensation are also necessary in the absence of federal funds. Negotiations will commence or continue with the state’s collective bargaining units to achieve reduced pay of approximately 10 percent. The May Revision includes a provision to impose reductions if the state cannot reach an agreement. In addition, nearly all state operations will be reduced over the next two years, and nonessential contracts, purchases and travel have already been suspended.

The COVID-19 pandemic has required an unprecedented shift to telework for state government that has allowed state managers, led by the Government Operations Agency, to rethink their business processes. This transformation will result in expanded long-term telework strategies, reconfigured office space, reduced leased space, and flexible work schedules for employees when possible. The Administration also continues working with state departments in delivering more government services online – including expansion of the Department of Motor Vehicles’ virtual office visits pilot to other departments and agencies with more face-to-face interactions with Californians.

Supporting Job Creation, Economic Recovery, and Opportunity

Given the critical role of small business in California’s economy, the May Revision proposes an augmentation of $50 million for a total increase of $100 million to the small business loan guarantee program to fill gaps in available federal assistance. This increase will be leveraged to access existing private lending capacity and philanthropy to provide necessary capital to restart California small businesses. To support innovation and the creation of new businesses, the May Revision retains January proposals to support new business creation by exempting first-year businesses from the $800 minimum franchise tax.

During this time of unprecedented unemployment, the Administration will work in partnership with the Legislature to help get people back to work and support the creation of good-paying jobs. It will develop proposals and actions to support a robust and equitable recovery both in the near term and the long term. To this end, the Administration is considering options to support job creation including: assistance to help spur the recovery of small businesses and the jobs they create, support for increased housing affordability and availability, and investments in human and physical infrastructure. Any investments and actions will focus on equity, shared prosperity and long-term growth.

The Governor has convened a Task Force on Business and Jobs Recovery – a diverse group of leaders from business, labor, and the non-profit sector – to develop actionable recommendations and advise the state on how the state’s economic recovery can be expedited. The Administration is committed to additional actions, informed by the Task Force and other stakeholders, to support a safe, swift, equitable and environmentally-sound economic recovery. The Administration is also committed to working with colleges and universities to build on their experience with distance learning and develop a statewide educational program that will allow more students to access training and education through distance learning.

More details on the May Revision are available online at www.ebudget.ca.gov.

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Reopenings risk more virus outbreaks in the U.S. and around the world

Reopenings bring new cases in S. Korea, virus fears in Italy

A street that is normally swarming with vacationers as the tourism season kicks off stands empty in Cyprus’ popular seaside resort village of Ayia Napa, Saturday, May 9, 2020. With coronavirus restrictions gradually lifting, Cyprus authorities are mulling ways to get holidaymakers back to the tourism-reliant island nation that officials say is conservatively estimated to lose at least 60% of its annual tourist arrivals. (AP Photo/Petros Karadjias)
Associated Press, by Nicole Winfield, Vanessa Gera, Amy Forliti, 5/1020

ROME (AP) — South Korea’s capital closed down more than 2,100 bars and other nightspots Saturday because of a new cluster of coronavirus infections, Germany scrambled to contain fresh outbreaks at slaughterhouses, and Italian authorities worried that people were getting too friendly at cocktail hour during the country’s first weekend of eased restrictions.

The new flareups — and fears of a second wave of contagion — underscored the dilemma authorities face as they try to reopen their economies.

Around the world, the U.S. and other hard-hit countries are wrestling with how to ease curbs on business and public activity without causing the virus to come surging back.

In New York, the deadliest hot spot in the U.S., Gov. Andrew Cuomo said three children died from a possible complication of the coronavirus involving swollen blood vessels and heart problems. At least 73 children statewide have been diagnosed with symptoms similar to Kawasaki disease — a rare inflammatory condition — and toxic shock syndrome. But there is no proof the mysterious syndrome is caused by the virus.

Two members of the White House coronavirus task force — the heads of the Centers for Disease Control and Prevention, and the Food and Drug Administration — placed themselves in quarantine after contact with someone who tested positive for COVID-19, a stark reminder that not even one of the nation’s most secure buildings is immune from the virus.

Elsewhere, Belarus, which has not locked down despite sharply rising infections, saw tens of thousands turn out to mark Victory Day, the anniversary of Nazi Germany’s defeat in 1945. Authoritarian President Alexander Lukashenko has dismissed concerns about the virus as a “psychosis.”

That was in contrast to Russia, which skipped the usual grand military parade in Moscow’s Red Square. This year’s observance had been expected to be especially large because it is the 75th anniversary, but instead, President Vladimir Putin laid flowers at the tomb of the unknown soldier and a show of military might was limited to a flyover of 75 warplanes and helicopters.

Worldwide, 4 million people have been confirmed infected by the virus, and more than 279,000 have died, including over 78,000 in the U.S., according to a tally kept by Johns Hopkins University. Spain, France, Italy and Britain have reported around 26,000 to 32,000 deaths each.

Germany and South Korea have both carried out extensive testing and contact tracing and have been hailed for avoiding the mass deaths that overwhelmed other countries. But even there, authorities have struggled to find the balance between saving lives and salvaging jobs.

Seoul shut down nightclubs, hostess bars and discos after dozens of infections were linked to people who went out last weekend as the country relaxed social distancing. Many of the infections were connected to a 29-year-old man who visited three nightclubs before testing positive.

Mayor Park Won-soon said health workers were trying to contact some 1,940 people who had been at the three clubs and other places nearby. The mayor said gains made against the virus are now threatened “because of a few careless people.”

Germany faced outbreaks at three slaughterhouses in what was seen as a test of its strategy for dealing with any resurgence as restrictions ease. At one slaughterhouse, in Coesfeld, 180 workers tested positive.

Businesses in the U.S. continue to struggle as more employers reluctantly conclude that their laid-off employees might not return to work anytime soon. Health officials are watching for a second wave of infections, roughly two weeks after states began gradually reopening with Georgia largely leading the way.

Some malls have opened up in Georgia and Texas, while Nevada restaurants, hair salons and other businesses were able to have limited reopenings Saturday or once again allow customers inside after nearly two months of restrictions.

The reopening of the Great Smoky Mountains National Park along the Tennessee-North Carolina border was a bit too tempting a draw as scores of nature lovers crowded parking lots and trails and even trekked into closed areas, park spokeswoman Dana Soehn said. Many did not wear masks.

In Los Angeles, hikes to the iconic hillside Hollywood sign and hitting the golf links were allowed as the California county hit hardest reopened some sites to recreation-starved stay-at-homers.

Mayor Eric Garcetti urged “good judgment” and said the city would rely on education and encouragement rather than heavy-handed enforcement: “Not our vision to make this like a junior high school dance with people standing too close to each other,” he said.

In New York, a Cuomo spokesman said the governor was extending stay-at-home restrictions to June 7, but another top aide later clarified that that was not so; the May 15 expiration date for the restrictions remains in place “until further notice,” Melissa DeRosa said in an evening statement.

The federal government said it was delivering supplies of remdesivir, the first drug shown to speed recovery for COVID-19 patients, to six more states, after seven others were sent cases of the medicine earlier this week.

Italy saw people return to the streets and revel in fine weather.

Milan Mayor Giuseppe Sala warned that “a handful of crazy people” were putting his city’s recovery at risk and threatened to shut down the trendy Navigli district after crowds of young people were seen out at the traditional aperitivo hour ignoring social-distancing rules.

The Campo dei Fiori flower and vegetable market was also bustling in Rome. But confusion created frustrations for the city’s shopkeepers.

Carlo Alberto, owner of TabaCafe, an Argentine empanada bar that was selling cocktails to a few customers, said that since reopening this week, police had threatened to fine him over crowds outside.

“Am I supposed to send them home? They need a guard here to do that,” he said. “The laws aren’t clear, the decree isn’t clear. You don’t know what you can do.”

Elsewhere, Pakistan allowed shops, factories, construction sites and other businesses to reopen, even as more than 1,600 new cases and 24 deaths were reported. Prime Minister Imran Khan said the government was rolling back curbs because it can’t support millions who depend on daily wages. But controls could be reimposed if people fail to practice social distancing.

In Spain certain regions can scale back lockdowns starting Monday, with limited seating at bars, restaurants and other public places. But Madrid and Barcelona, the country’s largest cities, will remain shut down.

“The pandemic is evolving favorably, but there is a risk of another outbreak that could generate a serious catastrophe,” Spanish health official Fernando Simón said. “Personal responsibility is vital.”


Gera reported from Warsaw, Poland, and Forliti reported from Minneapolis. Associated Press journalists around the world contributed to this report.

Solano County leads Bay Area with highest unemployment at 5% – How to get help

Bureau of Labor statistics comparing March to February

San Francisco sees biggest increase: 31%

KQED News, by Nina Sparling, May 9, 2020
Restaurant and retail workers have been hard hit during the pandemic. (Getty Images)

Gary Darst lost his job at Pläj in late March. The Scandinavian restaurant in Hayes Valley in San Francisco depends on nearby institutions like the opera, symphony and SFJAZZ Center for much of its business. When those venues went dark in early March, Darst started to worry.

“The thing about the restaurant industry is that you’ve always got a job,” he said. “It’s relatively safe. At least it used to be.”

First, the restaurant furloughed Darst for a few weeks in mid-March. Not long after, all 20 employees were laid off. Darst filed for unemployment insurance immediately — one of hundreds of thousands of Bay Area workers to do so.

But county-level unemployment data show the pandemic is impacting each Bay Area county in a unique way. Those with the lowest unemployment rates have also seen the highest increase in unemployment insurance claim filings — and vice versa.

San Francisco, for instance, has a high percentage of professional and white-collar workers, many of whom continue to work from home and receive a paycheck. The unemployment rate in the county was 3% at the end of March, on the lower end for the Bay Area, according to a KQED and Associated Press analysis of Bureau of Labor Statistics data.

“It could be driven by the fact that you have white-collar jobs that have kept their jobs, kept their pay, and other workers who haven’t,” Sylvia Allegretto an economist at the Institute for Research on Labor and Employment at UC Berkeley said.

Many Bay Area workers have lost their jobs, but the region as a whole is faring much better than the national average. The unemployment rate for the Bay Area as a whole was 3.5% in March compared to 4.5% nationally at the same time. New data from the Bureau of Labor Statistics puts the April national unemployment rate at 14.7%, the highest since 1948.

While that number is alarming, Allegretto emphasizes the context behind the numbers. “We came together as a nation collectively to shut down the economy as we start to try to deal with a pandemic,” she said. “If I didn’t see high rates of unemployment I’d wonder why are all these people working.”

San Francisco saw a 31% increase in how many unemployment claims were filed in March compared to February. That could reflect the large numbers of restaurants and bars in San Francisco, which were among the first businesses to shutter after the Bay Area-wide shelter-in-place order on March 16, Allegretto says.

“It can hold both ways,” Allegretto said.

Meanwhile, the eastern Bay Area counties show the opposite trend: higher rates of unemployment, but lower increases in unemployment insurance claim filings from February to March.

Solano and Sonoma counties have the highest percentage of workers in construction and retail, industries that have been heavily impacted by COVID-19.

The Bureau of Labor Statistics numbers are not seasonally adjusted, meaning they don’t account for expected increases around the busy holiday season for retail workers or seasonal fluctuations in construction.

Allegretto warns that it’s early yet to draw definitive conclusions. The April report reflects unemployment insurance filings through the end of March, just when the economy started to wind down. The full implications of COVID-19 on the workforce have only grown more acute.

April saw furloughs at Bay Area oil refineries. Tech companies like Uber and Airbnb announced layoffs in early May. City and county budgets are suffering, too. California cities project losses of $6.7 billion in the two years, and Bay Area cities know layoffs might be in the future.

Darst, the restaurant manager, first started working in restaurants at age 14. But he isn’t counting on being able to return to work in the industry any time soon.

“It’s a disaster,” he said. “It’s really bad.”

Below are various KQED resource guides that can help those who have lost their jobs and income due to the pandemic:

How to File for Unemployment in California During the Coronavirus Pandemic

Californians who are missing work because of the novel coronavirus can access benefits, including unemployment. Benefits are not only for people who have been laid off, they also apply to caregivers, those who are quarantined and workers whose hours have been reduced.

Emergency Funds for Freelancers, Creatives Losing Income During Coronavirus

Some self-employed people will not qualify for unemployment insurance, particularly artists who rely on informal, direct cash payments or practice without a business license. With those challenges in mind, KQED compiled a list of mutual aid funds that distribute emergency grants to artists, creative professionals and freelancers facing financial hardships.

Here’s What’s Available to Help Small Businesses Survive the Coronavirus

From restaurants and bookstores to dry cleaners and hair salons, small businesses are a big deal in the U.S., employing nearly half of the nation’s workforce. Most of these institutions, which were already operating on razor-thin margins, have been hit particularly hard by the coronavirus pandemic. And without major assistance, many simply won’t be able to weather their economic losses. This guide lists some of the lifelines Bay Area businesses can try to take advantage of.

A Guide to Bay Area Eviction Moratoriums During the Coronavirus Crisis

Some of who’ve lost their jobs might be worried about paying their rent. This guide has some answers to common questions about renters and tenants protections in the Bay Area.

Solano County on re-opening: guide and links to 8 new documents on County website

By Roger Straw, May 8, 2020

Late on Thursday evening, Solano County Public Health added 8 new links to COVID-19 information on the County website.

The detail is welcome, although late to be posted.  The detail is also somewhat confusing and open to interpretation.

I will detail here the new material.  I will leave the analysis and critique to others, or maybe to a later posting here.

Inventory of changes on County website as of 8am Friday May 8 (changes most likely posted sometime between 6 and 9pm on 5/7)

  1. The County’s main Coronavirus page at top, “NEW Solano County Public Health amends the shelter at home order, enabling low-risk businesses to reopen starting Friday, May 8, 2020 with specific social distancing practices. Click here for more information about the roadmap.”
    1. The link “amends the shelter at home order” goes to a 14-page PDF, “ORDER OF THE COUNTY PUBLIC HEALTH OFFICER No. 2020-07”.  The ORDER includes sections on Effective Date, Intent and Purpose, Guiding Principles for Resuming Activities, Prohibited Activities, Level of Risk (Low, Medium and High), Social Distancing, High-Risk Populations, General COVID-19 Business Precautions, and Enforcement.  It also includes Exhibit A – Previously Designated Essential Activities, Exhibit B – Low Risk Activity, Appendix A – Low Risk Activity – Golf Courses, Appendix B – Solano County Social Distancing Protocol (Updated May 5, 2020). Two additional pages are empty: Exhibit C – Medium Risk Activities and Exhibit D – High Risk Activities, both of which state, “Currently not permitted to be opened until the County Public Health Officer promulgates the necessary guidelines. Once issued, such guidelines will be inserted here.”
    2. The link “roadmap” goes to a web page, “Solano County COVID-19 Roadmap to Recovery”.   This page summarizes the May 8 re-opening of low-risk activities, stating that “low risk businesses can open starting May 8th, subject to specific social distancing practices.”  The summary at top begins with the following links:
      1. Another link to the Public Health Order (see above).
      2. A link to a similarly named but more detailed Roadmap to Recovery.  This is a 9-page PDF, revised May 7, 2020, that details Low Risk, Medium Risk and High Risk activities with color-coded guides to re-opening.  This document “outlines the criteria for reopening and the phases for lifting the stay at home order to guide critical decisions in support of the public’s health and well-being in the weeks and months ahead.”
      3. A link to a “press release about the amendment and roadmap.” The May 7, 2020 press release begins, “County Public Health Officer amends shelter-at-home order — low-risk businesses to reopen starting Friday subject to specific social distancing practices”.
        1. The press release announces “Starting May 8, 2020, low-risk businesses in Solano County may reopen providing they have implemented and maintain social distancing best practices for reducing the spread of COVID-19.” Acknowledging that enforcement will be near impossible, the document quotes Dr. Matyas, “Changes to lifting this order place a lot of responsibility on business owners, their staff and residents to make good decisions.”
        2. The press release states that “The FOX 40 News report and comments by Fairfield Councilwomen Moy are incorrect.”  That report (posted here on the Benicia Independent and subsequently removed), asserted that all Solano restaurants would be reopened by Friday, May 15.
        3. The press release announces the Supervisor meeting on May 12 when strategies for reopening medium-risk businesses will be considered, and links to “Details, including how to view and participate…included on the County’s website.” That link goes to a general page about Board of Supervisor meetings but with two new links:
          1. A bright red header box: “Solano County public meeting protocol in response to Coronavirus (COVID-19): CLICK HERE”. That page outlines how to access the live-streamed meeting, and how to submit public comments by email or phone.
          2. A link to Board Rules and Procedures, which goes to a 7 page PDF, the 2009 standing rules for Solano BOS meetings.

So yes, complicated.  I only hope this outline of the County’s new postings will help guide you to an understanding of the slow and careful openings that were passed by our Board of Supervisors on Tuesday May 5.  You, like me, might think it is still too soon to be opening these “low-risk” businesses.  And you, like me, might stay away from those businesses that do open.

Let’s all hope the County does NOT open “medium-risk” businesses when it considers the matter next Tuesday, May 12.  Consider attending or sending in your comment.  From the County press release: “The strategy for minimizing risk and the timeline for reopening of medium-risk businesses are still being reviewed and will be discussed further with the Solano County Board of Supervisors at their meeting on Tuesday, May 12, 2020, starting at 9 a.m.  Details, including how to view and participate, are included on the County’s website at www.SolanoCounty.com/BOS.”