Weideman Group COVID-19 Update
May 15, 2020

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The spread of COVID-19 across California and the country is impacting everyone’s personal and professional lives. To ensure you are receiving the most up to date and pertinent information, Weideman Group is closely monitoring actions being taken by the state (Governor, Legislature, regulatory agencies) and the federal government. We will be sharing the most significant COVID-19 information with you on a periodic basis. Here is a summary of important information from this past week. 

Governor’s Budget Revise Takes Center Stage

Governor Gavin Newsom released his updated state budget proposal for fiscal year 2020-2021 (referred to as the May Revise). California began 2020 with a strong economy, historic reserves, a structurally balanced budget, and a projected surplus of $5.6 billion. However, the Department of Finance (DOF) now predicts revenue declines of $41.2 billion due to job losses and business closures. This is combined with an expected $7.1 billion in caseload increases for health and human services programs and other expenditures of approximately $6 billion – the majority in response to COVID. DOF now estimates that the overall budget deficit is approximately $54.3 billion, of which $13.4 billion occurs in the current budget year (2019-2020) and $40.9 billion in the 2020-21 budget year (which begins July 1, 2020). For reference, this overall deficit is nearly 37% of the General Fund spending authorized in last year’s budget.

Consistent with the state’s constitutional obligation to enact a balanced budget and the prohibition against issuing long-term bonds to finance deficits, the May Revise 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 and temporarily increase revenues. It also reflects savings from the Administration’s direction to agencies and departments to increase efficiency and streamline existing efforts. Finally, the May Revise reflects reductions needed to address the remaining budget gap in the event the federal government does not provide states and local governments additional necessary funding to support public health, safety and education, and a safe, swift economic recovery. While under the May Revise the budget would be balanced next year, a significant structural out-year deficit would remain, increasing to over $16 billion by 2023-24.

Here are some highlights from the Governor’s May Revise:

  • Cancels $6.1 billion in program expansions and spending increases, including one-time expenditures included in the 2019 Budget
  • Utilizes $16.2 billion from the Rainy Day Fund over three years
  • Borrows $4.1 billion from special funds
  • Reallocates $2.3 billion previously going towards unfunded pensions that will now be redirected to schools
  • Preserves existing funding for the Department of Public Health and a number of safety net programs such as:

      – Child care slots (and expands slots for first responders)

     - Earned Income Tax Credit

     - Eligibility for Medi-Cal subsidies offered through Covered California

  • $716 million General Fund set-aside for additional COVID-19 response in the budget year
  • CARES Act funding to local governments to support COVID-19 efforts such as homelessness, public safety, and public health 
  • Temporarily suspends net operating losses and temporarily limits to $5 million the amount of credits a taxpayer can use in any given tax year. 

Governor Newsom stated that President Trump “with a stroke of his pen” can negate $14 billion in cuts that he has labeled as “trigger cuts” by signing the HEROES Act. Newsom and his administration have drafted specific “control section” language in the Budget Act to hold off some of the proposed cuts if the federal HEROES Act funding comes through. As of now, these cuts are scheduled to take place on July 1.

The Assembly Budget Committee and Senate Budget and Fiscal Review Committee have released their respective Governor’s Budget overview documents. 

California Statistics

California moves further into Stage 2 reopening. Compliance with the stay at home order has given the Governor and public health authorities the confidence to continue slowly reopening the state, but they urge compliance with physical distancing to minimize the surge in positive COVID-19 cases. THESE are the most recent facts released by the Department of Public Health.

Newsom Administration

Governor Newsom continues to take action and provide updates on the state’s efforts in response to COVID-19. Here is a recap of recent actions:

  • Pharmacist Testing - On Tuesday, Governor Newsom announced that the California Department of Consumer Affairs and the State Board of Pharmacy have waived certain requirements, and pharmacists are now authorized to collect specimens and order COVID-19 testing for patients. This will help to maximize testing capacity in the state, and was a major policy priority and big win for Weideman Group client California Society of Health-System Pharmacists. 
  • Additional Stage 2 Guidelines - Governor Newsom announced that his Administration has posted additional guidelines for sectors in the retail space (e.g. shopping malls), offices where telework is not an option, and limited dine-in at restaurants. All industry guidance can be found here.
  •  Medi-Nurse Hotline - Governor Newsom announced the launch of “Medi-Nurse.” This phone line is available for Medi-Cal patients without a health plan and uninsured Californians. The line – 1-877-409-9052 – is available 24/7 for COVID-19 concerns or for general medical issues. Those who have health insurance may visit covid19.ca.gov and use the telehealth zip code finder to access their health insurance plan’s telehealth and nurse help lines.
  • Wildfire Preparedness -  Governor Newsom highlighted the investments being made in preparation of the upcoming wildfire season. Wildfires remain a top issue for the Governor and Legislature, which is why we saw the wildfire spending intact and in some areas increased in the May Revise. For example, the May Revise includes funding for additional CalFire firefighters and allocations to acquire technology and equipment to prevent and fight the wildfires. 
  • Testing Milestone - Governor Newsom announced that thanks to the diligent work by the Testing Task Force, co-chaired by Blue Shield President and Weideman Group client Paul Markovich, California has performed more than 1 million tests and is averaging nearly 35,000 tests a day. California’s next goal is to perform 60,000 tests a day. The Governor also provided the following updates:

    – OptumServe will increase testing sites to 86, mostly focusing on rural “testing deserts.”

    – California is exploring roaming testing options to further service in rural areas.

  • Western States Pact Urge Federal Support - Governors (including Newsom) and legislative leaders from five western states (the Western States Pact) co-signed a letter to congressional leaders urging a $1 trillion federal allocation to support states and local governments. 

 Regulatory Agencies and Department Actions

California regulatory agencies continue to work through the pandemic. Numerous departments are providing updates on their efforts to address issues brought on by the pandemic and the Superintendent of Public Instruction provides insight into the new school year.  Here are some highlights:

  • Reopening Schools - Superintendent of Public Instruction Tony Thurmond announced that the California Department of Education will allow local school districts to determine when schools may physically reopen and when it is safe for students to return.
  • DMV Expands Virtual Field Office Services - In an effort to avoid the need for in-person visits to their field offices, the Department of Motor Vehicles has expanded its online services and digital tools. 
  • ABC Emergency Powers - With an increase of “rogue bars” defying closure orders, the Department of Alcoholic Beverage Control is seeking emergency power to shut down establishments breaking closure orders. The pending rules can be found here
  • Emergency Tribal Grants - The Tribal Nations Grant Fund Panel approved emergency grant applications for tribes to use towards COVID-19 response. More information on the Tribal Nations Grant Fund can be found here.

California Legislature

Important Dates:

  • June 15 – Budget Must Be Passed
  • June 19 – Assembly House of Origin Deadline
  • June 19 – July 13 -  Assembly Summer Recess
  • June 26 – Senate House of Origin Deadline
  • July 2 – July 13 -  Senate Summer Recess
  • August 31 – Last Day of Session

The California Legislature is in full swing and holding daily policy committee hearings. With strict social distancing guidelines in place, both houses of the California legislature have resumed policy committee hearings. Committees are allowing a very limited number of individuals in a hearing room and requiring the use of face masks. For witnesses on bills, committees have allowed very limited in-person testimony, making available remote witness testimony via video or phone and providing a phone line for public testimony. These new guidelines are likely to last throughout the remainder of the legislative session. 

Assembly holds an oversight hearing focused on state COVID-19 related contracts. The Assembly Committee on Accountability and Administrative Review and the Assembly Governmental Organization Committee held a joint oversight hearing on the state contracting process associated with COVID-19 response, specifically those related to PPE and other equipment. The committees heard from Mark Ghilarducci, Director of the Governor’s Office of Emergency Services and Fiona Ma, California State Treasurer. Members asked the witnesses to provide a run through of the vetting processes for contracts.

Assembly and Senate provide a preview of what is to come in their respective budget plans. The Assembly Budget Committee released a schedule of subcommittee hearings  for May, leading up to a full vote on the budget on June 15. The memo accompanying the schedule states that the Assembly anticipates needing to adopt a budget that will include sizable reductions to services, and will be considering all other options, including increased revenue. The Senate Democrats produced a Budget Approach & Economic Recovery slide deck that includes two proposals – creating a program enabling agreements between renters, landlords, and the state to resolve unpaid rents over a limited time period, and separately creating a $25 billion Economic Recovery Fund through prepaid future tax vouchers from 2024 through 2033. 

Budget timeline. Beginning Monday of next week, the Assembly and Senate Budget Subcommittees will start an accelerated deliberation process leading up to the full Budget Committees releasing their respective spending plans. Once each house’s spending plans are finalized, the differences will be reconciled against the Governor’s proposal and a final balanced budget will be voted on and sent to the Governor by June 15th. We expect there will be remaining budgetary activity after June 15th to pass a Budget Bill Jr and additional budget trailer bills that will likely last through the end of August. 

 Special Elections

Assemblymember Melendez wins the Special Election in Senate District 28.  Republican Assemblymember Melissa Melendez is officially a Senator-Elect after defeating her Democratic opponent during a special election. The vacancy was created after Republican Senator Jeff Stone stepped down last year to accept an appointment as the Western Regional Director in the U.S. Department of Labor. 

Republicans gain a congressional seat in California for the first time in 20 years. Republican Mike Garcia is officially a Congressman-Elect after defeating Democratic Assemblymember Christy Smith in a special election. Garcia will serve out the remainder this term and will be up for reelection during the November General Election where he will face off with Assemblymember Christy Smith once again.

Federal Government

Congressional Democrats release the HEROES Act. House Speaker Nancy Pelosi released an ambitious $3 trillion coronavirus relief bill aimed at providing relief to governments and individuals as they continue to feel the effects of this pandemic. This new stimulus package has an uphill battle given that the Senate is controlled by the Republicans and they, along with President Trump, have said they will not support the bill as currently written. Highlights from the bill include:

  • $1 trillion in relief for state and local governments
  • A second round of direct payment of $1,200 to individuals, up to $6,000 per household
  • $200 billion for hazard pay for essential workers
  • $75 billion for coronavirus testing
  • Extends the addition of $600 per week in unemployment insurance through January
  • $175 billion in rent, mortgage, and utility assistance
  • Affordable Care Act subsidies for people who lost their employee-sponsored health care
  • Additional funds for SNAP, including a 15% maximum benefit increase
  • Small business relief, such as $10 billion in emergency disaster assistance grants
  • Election safety and vote by mail provisions to make voting by mail easier
  • Relief for the US Postal Service

Local Action

With stay-at-home requirements beginning to ease, some local governments begin the process of reopening. Here are some highlights:

  • Regional Variance - 12 California counties have been granted the ability to move further into Stage 2 by the California Department of Public Health after they self-certified that they meet the state’s guidelines for further opening. 
  • Support Local Recovery - A coalition of cities, firefighters, public safety representatives, labor and small business is calling on the state to provide $7 billion in direct and flexible funding to cities to support critical local services, as well as a portion of the state’s CARES Act funding to help cities address COVID-19 related expenditures.
  • Los Angeles Extends Stay-At-Home - Los Angeles County has extended its stay-at-home orders through July as the hard hit county continues to fight the pandemic.
  • Los Angeles County Requires Masks Outside - Los Angeles County further extended its mask requirement and is now requiring residents to wear face coverings at all times when outside of their house. 

Resources

  • California Coronavirus Response website can be found here
  • California Department of Public Health guidance documents can be found here
  • California COVID-19 risk screening and testing can be found here
  • California Local Public Health Authority information can be found here
  • Center for Disease Control and Prevention COVID-19 updates can be found here
  • Looking for ways to help your community? Visit this site here