M E M O R A N D U M
To: City of Santa Clara
From: Townsend Public Affairs
Casey Elliott, Vice President
Date: October 24, 2023
Subject: Q3 Legislative Update
The month of September saw the Legislature complete their work for the first year of the 2023-24 Legislative Session. The Legislature conducted all final policy and fiscal committee hearings, as well as floor votes, and sent hundreds of bills to the Governor for his consideration. The Legislature will remain on Interim Recess until they reconvene for the second year of the two-year session on January 3, 2024.
Overview of the 2023 Legislative Year
September 14
th marked the final night of the 2023 Legislative Session, marking the end of the first year of the two- year 2023-24 legislative session. The 2023 legislative year was shaped by a number of dynamics, including a record number of freshman legislators, leadership changes in both houses, and the highest number of bill introductions in over a decade. In the final week of the Session alone, the Legislature had more than 700 bills that were still active and pending consideration. This set the stage for a frenetic pace of activity, with the Legislature determined to act on a number of consequential policy issues, including behavioral health reform, public safety reforms, conservatorship expansion, and proposed constitutional amendments that would enhance and protect local revenue sources.
The Legislature decided the fate of a number of bills important to local governments in its final days of session. Of the 3,038 bills introduced this year, the Legislature passed close to 1,100 measures. As of September 18
th, the Governor has signed 476, vetoed 3, and still has 847 bills to consider before the October 14th deadline to act on measures. During Governor Newsom’s first four years in office, he vetoed between 7.9% and 16.5% of the bills sent to his desk each year for action. Governor Newsom’s vetoes typically trend with concerns about a lack of state resources to effectively support the implementation of measures. It is anticipated that his vetoing of measures from the 2023 Legislative Session will follow a similar pattern.
The end of the 2023 Legislative Session also marked the beginning of Interim Recess. The Legislature will resume the second half of the 2023- 24 Legislative Session on January 3, 2024.
In the coming months, lawmakers are expected to return to their districts to meet with constituents and local stakeholders, hold staff retreats to determine policy priorities for the next year, and participate in informational hearings in preparation for major policy reforms anticipated next year.
Looking forward, there are over 400 measures that did not meet specified deadlines for passage in 2023 and were held as “2 -Year Bills.” Th ese measures will be eligible for consideration in
January 2024 and may be re- integrated into the legislative process along with other measures introduced at the beginning of the new session.
Below is an overview of priority measures and events acted upon during the 2023 Legislative Session.
Behavioral Health Reform
This year, Governor Newsom and Legislative Leaders made overhauling the State’s existing behavioral healthcare infrastructure a top priority. The Behavioral Health Reform Package, comprised of the Mental Health Services Act (MHSA) policy reforms contained within SB 326
(Eggman) and the $6.38 billion bond proposal to support residential care facility construction contained within
AB 531 (Irwin), passed the Legislature in the final days of Session and will appear on the March Primary ballot.
SB 326 includes amendments to the MHSA originally passed by the voters nearly 20 years ago.
The changes proposed in SB 326 would have a considerable and long-term impact on how funds are allocated to support the provision of behavioral health services in communities, by prioritizing spending on housing solutions and expanding the pool of individuals eligible for services to include substance use disorders as qualifying criteria.
AB 531, if approved by the voters at the March 5, 2024, statewide primary election, authorizes the issuance of $6.38 billion in general obligation bonds to finance loans or grants for the acquisition of capital assets for the conversion, rehabilitation, or new construction of permanent supportive housing and behavioral health infrastructure. The bill specifies $1.5 billion of the total to be awarded specifically to cities, counties, and tribes for programs across the continuum of behavioral health treatment resources. The measure also includes language to streamline the development of behavioral health infrastructure via a by-right process.
In addition to the behavioral health reform package headed for the ballot, the Legislature considered reforms introduced by Senator Eggman to expand the definition of “gravely disabled” under the state’s conservatorship process and improve data collection requirements to better track the use and need of the state’s behavioral health supportive resources.
Ultimately, SB 43
(Eggman), which expands the definition of “gravely disabled,” for purposes of involuntarily detaining to include a severe substance use disorder or mental health disorder and is unable to additionally provide for personal safety or necessary medical care, passed the Legislature after undergoing numerous iterations of amendments and is pending action from the Governor.
SB 363
(Eggman), which would have required various agencies to develop a real-time, internet- based database to collect, aggregate, and display information about beds in specified facilities to identify the availability of inpatient and residential mental health needs and usage, was ultimately held in the Assembly Appropriations Committee.
California Environmental Quality Act (CEQA) Reform
During the Legislative Session, a series of bills pertaining to the California Environmental Quality Act (CEQA) generated significant controversy. CEQA requires state and local government agencies to inform decision-makers and the public about the potential environmental impacts of proposed changes to the physical environment and to reduce those environmental impacts to the extent feasible.
In the final weeks before the constitutional budget deadline, Governor Newsom pushed forward a comprehensive CEQA reform package for large infrastructure projects in an attempt to position the state to receive billions of federal funding for solar and wind facilities, reservoirs, bridges, railways, and similar energy, water, and transportation projects. The new laws take aim at environmental policies that shape how state agencies approve large projects. For instance, numerous large-scale water storage and conveyance projects have been stalled for years as they undergo environmental reviews and engineering planning. At the center of the Governor’s CEQA reform package is SB 149, which sets a 270-day limit for concluding CEQA lawsuits that challenge water, energy, transportation, and semiconductor projects.
In addition to statewide CEQA reforms for large- scale projects, the Legislature passed several bills that reform CEQA practices for smaller -scale developments, including housing projects.
These include AB 1633 (Ting), which strengthens the state’s Housing Accountability Act (HAA) to prohibit local agencies from delaying a housing development under CEQA concerns if all legal requirements have been met. The me asure was introduced in response to an incident that occurred within the Assembly Member’s district, wherein the San Francisco Board of Supervisors overturned the Planning Commission’s approval of a 500- unit project located at 469 Stevenson Street, a site near transit identified as a priority for development under the region’s climate plan.
Housing supporters claim the city acted in bad faith under the guise of needing further environmental study, providing no clear direction on how to bring the plans into compliance. This measure is pending action from the Governor.
Further, the Legislature aimed at addressing recent CEQA court decisions around noise pollution.
Earlier this year, a state appellate court blocked a proposed housing development for 1,100 UC Berkeley students, partly on the grounds that CEQA requires the university to study and mitigate the potential “noise impacts from loud student parties.” This decision constituted a major expansion of CEQA law and was ultimately applied to a second housing development in Los Angeles, which included the construction of a private developer’s housing project with 100 5- bedroom units near the University of Southern California. The court sided with neighborhood groups who argued that the student tenants they expect to occupy the project would likely party on the rooftop decks, creating “significant noise impacts” and thus required careful study under the state’s signature environmental law.
In response to these cases, Assembly Member and Housing Chair Buffy Wicks introduced AB 1307, which provides that the effects of noise generated by occupants and guests on human beings is not a significant effect on the environment, thus invalidating the recent court decisions.
The Governor signed AB 1307 into law on September 7. Due to the inclusion of an urgency clause, the measure became effective immediately upon signature.
Energy and Utilities
This session the Legislature was focused on ensuring that the state, and its infrastructure, is prepared for the growing number of alternative fuel vehicles that will be purchased by Californians.
Among the bills that were approved by the Legislature included AB 1614 (Gabriel) that will require the California Energy Commission and the Air Resources Board to study the feasibility of transitioning gasoline stations to provide alternative fuels, as well as identifying barriers to doing so, and financial incentives that could help reduce those barriers. Additionally, SB 493 (Min) was
approved by the Legislature and would have required the California Energy Commission to assess the energy resources needed to meet state goals to transition medium - and heavy-duty vehicles to zero- emission vehicles. The Governor ultimately vetoed this measure given the potential costs that it would have imposed on the California Energy Commission. The Governor also pointed to similar work that is currently being undertaken at the Public Utilities Commission.
The Legislature also approved AB 1594 (Garcia) which would required that any state regulations requiring the procurement of medium- and heavy-duty zero-emission vehicles to authorize public utilities to purchase replacements for utility -specialized vehicles to maintain reliable service and respond to major foreseeable events. This bill is an example of the Legislature recognizing that there will be challenges as the state transitions to a greater number of alternative fuel vehicles, as the infrastructure, and in some instances technology, is not prepared for the State’s aggressive timeline.
Fentanyl Overdose Prevention
With a growing number of fentanyl -related fatalities in California, opioid overdose prevention emerged as a prominent focal point within the legislative agenda during this year’s Session. Given the prevailing statistical trends and the pervasive nature of this crisis across both the state and the nation, Legislators introduced a plethora of legislative initiatives aimed at mitigating the impacts of the epidemic.
According to the California Department of Public Health, between 2019 and 2021, California’s opioid-related deaths spiked by 121%. A majority of these deaths were linked to fentanyl, an extremely potent synthetic opioid. Legislation that passed both house floors move d to establish special task forces to fight opioid overdoses, provide fentanyl test strips in California Community Colleges and CSUs, and weigh existing sentencing enhancements for penalties associated with trafficking and furnishing substances. Measures that were unsuccessful this year included provisions for incarceration enhancement that ultimately sought to add to the state’s penal code.
Measures that made it to the Governor’s Desk include AB 33 (Bains), which e stablishes the Fentanyl Misuse and Overdose Prevention Task Force to undertake specified duties relating to fentanyl abuse, SB 234 (Portantino), which requires stadiums, concert venues, and amusement parks to maintain doses of an opioid antagonist on premises and ensure at least two employees are aware of the location, and AB 701 (Villapudua), which applies the existing weight enhancements that increase the penalty and fine for trafficking substances containing heroin and cocaine to fentanyl.
Measures that were unsuccessful this year include fentanyl and opioid legislation with sentencing enhancements provisions. They were intentionally held in the Assembly Public Safety Committee, as a majority of Committee members voiced concerns about adding to the state’s penal code and the unintended impacts on minority communities and the state’s legal system. Legislation that was ultimately held included AB 367
(Maienschein), which adds sentencing enhancements for
those who seriously injure or kill through fentanyl poisoning, AB 955 (Petrie-Norris) which increases penalties for dealers who sell fentanyl over social media, and AB 1058 (Patterson) which increases penalties for those possessing a large amount of fentanyl.
In May 2023, the Assembly Health and Public Safety Comm ittees met with the newly -formed Assembly Select Committee on Fentanyl, Opioid Addiction, and Prevention for an informational hearing that lasted over five hours, hearing testimony from experts, officials, and families affected by fentanyl. Lawmakers committed to studying proposed measures to address fentanyl public safety reforms over the interim recess and hold additional fentanyl -specific committee hearings to continue legislative conversations.
Firearm Reform
This year, the Legislatures introduced a multitude of firearm control reform bills in response to the incidents of gun violence and mass shootings that have occurred within both the state and the nation. In August 2023, a joint resolution (SJR 7
) was introduced in the California Legislature by
Senator Aisha Wahab and Assemblymember Reggie Jones -Sawyer. SJR 7 is Governor Newsom’s proposal for a “Right to Safety”, which proposes an amendment to the United States Constitution to ensure the people’s elected representatives can determine what gun safety laws are appropriate for their communities and to enshrine fundamental, broadly supported gun safety measures into law.
Specifically, SJR 7 requests Congress to call for a constitutional convention to propose a constitutional amendment affirming that federal, state, and local governments may adopt firearms regulations consistent with the Second Amendment, or impose national firearm regulations related to background checks, assault weapons, age limits, and waiting periods. For the proposed constitutional amendment to be considered by Congress, legislatures in two- thirds of the states must vote in favor of a constitutional convention. If this is accomplished, and a convention is called, it is unlikely that the Constitutional Amendment will pass the three- fourths vote required, as Republicans currently control more than half of state legislatures, some of which have recently reduced gun restrictions.
Another major firearm reform bill introduced this year was SB 2 by Senator Anthony Portantino.
SB 2 restructures and recasts provisions of law related to carrying concealed firearms and concealed carry licenses (CCWs) in response to a recent United States Supreme Court decision invalidating a concealed carry law in New York similar to California’s. Specifically, SB 2 aims to balance compliance with the Supreme Court’s decision in New York State Rifle & Pistol Assn. vs.
Bruen with stringent limitations on who can obtain a concealed- carry permit in California. SB 2 was signed by the Governor on September 26 and faces potential legal challenges that could reach the U.S. Supreme Court.
Housing and Land Use
This year’s Session ended with the passage of several notable land use reform measures. Two pieces of notable legislation were introduced by Senator Wiener, including SB 4 which requires a housing development project to be a “use by right” on land owned by an independent institution of higher education or a religious institution, and SB 423, which extends the sunset on SB 35 (Wiener, Chapter 366, Statutes of 2017) to January 1, 2036, makes various changes to labor requirements, and removes the categorical exemption of coastal parcels for streamlining, subject to certain conditions.
Senate Bill 423 extends a decades-long state housing law set which is to expire in 2026. Current state housing laws grant developers the authority to bypass a substantial portion of bureaucratic procedures, frequently attributed to hindering the progression of multifamily construction projects.
This exemption, however, applies exclusively to municipalities that have not yet met the state’s housing targets. Initially, SB 423 faced controversy and backlash from labor unions. While SB 423 requires housing developers to provide wages at union standards and limited healthcare benefits, concerns have been raised by the Trades Council and numerous local and state labor organizations regarding doubts over the sufficiency of these provisions in adequately protecting the welfare of construction workers. To address those concerns, amendments were added to SB 423 that strengthened labor regulations on certain projects.
Labor Relations
Given that labor constitutes one of the most powerful lobbying groups in California, it came as no surprise that the Legislature considered and passed a number of transformative measures relating to labor and employment.
One of the more high-profile pieces of legislation was a last-minute compromise deal on fast food workers that enacts a $20 minimum wage for covered workers in exchange for the withdrawal of a pending referendum on landmark legislation enacted last year (AB 257 ) to establish a powerful
Fast Food Council.
AB 1228 (Holden) represents a compromise between Governor Newsom, labor unions, and some fast-food industry participants, and would apply to fast food restaurants (and their employees) that are part of a national food chain of more than sixty establishments. The measure also preempts any local government from establishing higher minimum wages by prohibiting any ordinance or regulation applicable to fast food restaurant employees. On September 29 Governor Newsom signed AB 1228 into law.
This measure is complementary to a similar measure designed to reform minimum wage standards for healthcare workers, which passed in a similar compromising fashion. SB 525 (Durazo) would enact a series of minimum wage requirements that vary by type of healthcare employer. In exchange, local healthcare worker minimum wage ordinances would be overridden, similar to the language included in AB 1228. In addition, media reports indicate that as part of this compromise, labor groups have agreed to a moratorium on legislation and/or ballot measures aimed at dialysis clinics. The Governor signed AB 1228 into law on September 28, and is currently pending action on SB 525.
Other notable labor bills include AB 1484 (Zbur), which amends the Meyers-Milias-Brown Act to require the inclusion of temporary employees in the same bargaining unit as permanent employees. AB 1484 is currently pending final action from the Governor.
Yet another major labor reform measure acted upon this year was SB 799 (Portantino), which provides that an employee would be eligible to receive unemployment after the first two weeks of a trade dispute. This measure was introduced in light of the significant labor activity and strikes occurring in Hollywood and elsewhere throughout the state. A similar measure was last proposed in 2019 but failed on the floor by two votes. Interestingly, when the proposal was last attempted the state’s unemployment fund had a $3 billion surplus. Currently, the state has an $18 billion deficit. If SB 799 is signed, all employers (even those without striking workers) may pay higher taxes until the deficit is paid down. The Governor
vetoed SB 799 on September 30, citing that
although he has, “Deep appreciation and respect for workers who fight for their rights and come together in collective action […] Any expansion of eligibility for UI benefits could increase California's outstanding federal UI debt projected to be nearly $20 billion by the end of the year and could jeopardize California's Benefit Cost Ratio add- on waiver application, significantly increasing taxes on employers. Furthermore, the state is responsible for the interest payments on the federal UI loan and to date has paid $362.7 million in interest with another $302 million due this month”.
Revenue and Taxation
Late into the final night of the Session, ACA 1 (Aguiar-Curry) and ACA 13 (Ward) passed the second house floor, both of which constitute major reforms to protect and enhance local revenue- generating tools. Because these measures propose amendments to the California Constitution, they will face consideration from the voters at the November 2024 General Election.
ACA 1 allows voters to decide whether a 55% threshold for approving special taxes or incurring bonded indebtedness to fund the construction, reconstruction, rehabilitation, or replacement of public infrastructure or affordable housing projects is an appropriate standard. 2023 marked the fifth year Assembly Member Aguiar-Curry attempted to move the measure forward. The legislation took numerous iterations of amendments, including language that limits the n umber of propositions authorized by the measure a local government can place on the ballot until all funds from a proposition have been committed, along with other transparency requirements.
ACA 13 requires an initiative constitutional amendment to compl y with any increased voter approval threshold that it seeks to impose on future ballot measures.
Additionally, ACA 13 guarantees in the state constitution the ability of local governments to submit advisory questions to voters. The most recent amendments specify that the measure’s voter threshold requirement would “apply to statewide initiative measures that appear on the ballot on or after January 1, 2024.
ACA 13 was introduced in response to the Taxpayer Protection and Government Accountability Act, wh ich seeks to raise vote threshold requirements for the passage of state and local tax measures and imposes a stringent burden of proof standard that local governing bodies must meet when modifying or increasing all taxes and fees by justifying their use, need, and duration.
The measure has qualified for the November 2024 ballot and is sponsored by the California Business Round Table and its affiliates. If enacted by voters, it would make it extremely difficult for local governments to maintain existing tax revenues and modify them in the future.
After the bill was approved by the Assembly on the final night of the session, Assembly Member Ward and Assembly Leadership announced
that they would be holding ACA 13 at the Assembly
Desk until November 1st (2023) and would then process the measure. While this may seem like a minor processing item, the practical effect is that ACA 13 will not be processed in time to be placed on the March 2024 primary election ballot but will instead be placed on the November 2024 general election ballot.
ACA 13 contains language that states its provisions apply to initiatives that appear on the same ballot, so if ACA 13 passes on the November 2024 ballot, its provisions would apply to initiatives on that same ballot, such as the Taxpayer Protection and Government Accountability Act . It is possible that the Legislature will continue to negotiate with the California Business Round Table to reach a compromise in advance of next year’s November General Election. If that compromise requires legislative action, the Legislature will have until June 2024 to approve a new measure.
Transportation
Like many other issue areas, one of the biggest challenges of the year for transportation was funding. The FY 2021 -22 Budget Act included $3.65 billion from the General Fund for transit capital projects, and also included a legislative “goal” to appropriate $2 billion for transit in FY 2023. Despite the Legislature’s stated intention, Governor Newsom only included $1 billion in his proposed 2023-24 budget as the specter of a budget shortfall loomed large. However, through significant Legislative pressure and in the face of a statewide transit fiscal crisis, the final negotiated budget included $2 billion for transit operating or capital and $410 million for a newly created Zero-Emission Transit Capital Program.
The funding did not come for free, as several additional reporting requirements and accountability measures were included in SB 125
, the transportation budget trailer bill. Specifically, SB 125 requires CalSTA to establish a “Transit Transformation Task Force” to solicit and develop a structured, coordinated process for engagement of all parties to develop policy recommendations to grow transit ridership and improve the transit experience for all users. The task force is to include a detailed analysis of specific issues and recommendations, including reforming the Transportation Development Act.
To further assist in addressing the transit operations deficit in the Bay Area, Senator Wiener introduced SB 532
which would have increased the toll rate for vehicles for crossing the state- owned toll bridges in the San Francisco Bay area by $1.50 and redirected the additional revenue to transit operators. This bill passed out of the Assembly Appropriations Committee but was pulled from the Assembly Appropriations Committee agenda by the author as he struggled to secure the support he needed to move the measure forward.
After years of failure, proponents of speed enforcement cameras finally passed AB 645
(Friedman) authorizing an automated camera speed enforcement pilot program in the Cities of Los Angeles, Long Beach, San Francisco, Oakland, Glendale and San Jose. The cameras, whose use must be authorized in a public meeting, may be used for up to five years and can only be placed in school zones, safety corridors, and streets with a high number of incidents of speed contests or exhibitions of speed. Revenues beyond the administration of the pilot can only be spent on traffic calming measures within the respective jurisdictions. AB 645 is currently pending final action by the Governor.
Finally, Assembly Member Reyes was able to successfully send AB 126 to the Governor’s Desk, extending various fees originally established in 2004 and 2007 which fund several Clean Transportation Programs that were set to expire at the end of 2023. Specifically, AB 126 extended revenue streams such as smog abatement fees, vehicle registration fees, and certain specialized license plate fees to fund programs like the Carl Moyer Program, the Air Quality Improvement Program, and the Enhanced Fleet Modernization Program. It looked like this bill would not make it out of the Legislature before end of session, having stalled during budget talks in June, but was revived in the last week of session and pushed through on the last day before fall recess began.
This measure is currently pending final action by the Governor.
Water
Water policy continues to be a major legislative focus of the California Legislature every year regardless of statewide drought conditions. The adopted FY 2023-2024 Budget maintained $8.1 billion in allocated funding from previous Budgets for drought resilience and response programs to help communities and fish and wildlife avoid immediate impacts from extreme drought, while advancing projects and programs that will improve the State’s resilience to future droughts and floods.
Additional consideration and efforts were made to bolster the State’s spending on drought and flood prevention through work on proposed bonds that aim to address climate priorities. The Senate and Assembly both worked to advance conversations around potential climate bonds with the hope of negotiating a deal for the November 2024 ballot. Funding categories for a proposed climate bond are anticipated to include water recycling, flood protection, clean energy, wildfire mitigation, coastal resiliency, and protection of agricultural resources.
Headlining the year’s legislative agenda was a package of bills aimed at addressing the State’s outdated and complex water rights system. Assembly Member Rebecca Bauer-Kahan’s AB 460
and Assembly Member Wick’s AB 1337 both proposed to increase the State Water Resources Control Board’s authority to order diversion curtailments to all water rights holders, regardless of how old. These bills signaled a willingness of some individuals in the Legislature to change decades-old policies that afford different curtailment policies and procedures to pre- 1914 water rights holders. AB 460 and AB 1337 were both held for the year and will be the subject of negotiations when the Legislature returns in January 2024.
Other topics of consideration this year that were successful in reaching the Governor’s desk include additional perfluoroalkyl and polyfluoroalkyl substances (PFAS) source control measures, exemptions for Medium- and Heavy-Duty Zero-Emission Vehicle Fleet Purchasing for water and wastewater utilities, and a directive to eliminate non-functional turf irrigation with potable water.
“Taxpayer Protection and Government Accountability Act” Initiative Challenged in Court
On September 26
th, Governor Newsom, the Legislature, and John Burton filed an emergency petition with the California Supreme Court seeking to remove the “Taxpayer Protection and Government Accountability Act” initiative from the November 2024 Ballot.
The Act, sponsored by the California Business Roundtable (CBRT) and its affiliates, seeks to raise voter thresholds to pass state and local taxes and requires local governments to provide a high standard of proof justifying the use, duration, and need for taxes and fees. If passed by voters, the Act would apply to any tax and certain fees adopted after Jan. 1, 2022. Local governments would have one year to ask voters to reapprove those taxes. The Act also imposes new requirements for the ballot materials used to submit taxes to voters. Passage of the Act would result in the loss of billions of dollars annually in critical state and local funding, restricting the ability of local agencies and the State's ability to fund specific services and infrastructure.
The Legislature and Governor argue that the proposed ballot initiative unlawfully revises the state constitution and upends essential state and local government functions, such as the ability to “impose” rather than “propose” tax initiatives required to maintain basic government activi ties. A petition for a Writ of Mandate in this circumstance is used to question the validity of an initiative before it is considered by voters. Overall, it signals the desire from the Legislature and executive branch to take any actions necessary to stop the harmful measure from becoming law.
State Insurance Commissioner Initiates Regulatory Process for Wildfire Home Insurance
In the final days of the 2023 Legislative Session, it was rumored that the Governor and lawmakers representing fire-prone areas were working on a legislative deal that could let insurance rates go up in an attempt to get insurers to come back to California. Earlier this year, State Farm and Allstate announced they would no longer offer new policies due to climate change-fueled disasters and high building costs. Since 2017, the largest and deadliest wildfires to happen in state history have destroyed more than 50,000 homes, buildings, and other structures in California.
A state -run pool that serves as the insurer of last resort for many could face pressure as enrollments surge. The state pool — the California Fair Access to Insurance Requirements (FAIR) Plan — provides basic fire insurance coverage for properties in high- risk areas when traditional insurance companies will not. Enr ollments have jumped in recent years to 272,846 homes in 2022.
All in all, these circumstances led to a push from insurance regulators and lawmakers to act before the start of next year’s fire season. While the efforts did not result in a legislative proposal before the end of the Session, on September 21, Governor Newsom issued an Executive Order urging
Insurance Commissioner Ricardo Lara to take swift action to address issues with the insurance market and expand coverage options for consumers, while maintaining consumer protections and keeping plans affordable.
After the issuance of the Executive Order, Insurance Commissioner Lara announced a set of new rate-setting regulations. Under the terms of the agreement, insurance companies that want to operate in California will be required to increase their presence in disaster-prone areas to at least 85 percent of their market share elsewhere in the state when they file to update their rates. For instance, if an insurance company provides 10% of the homeowner policies across California, they would be required to provide 8.5% of the coverage in areas deemed “at-risk”. They will also have to bring on policyholders from the state’s FAIR Plan, thus skirting the insolvency of the fund.
In exchange, insurance companies will be allowed to use forward- looking catastrophe modeling when they set their rates, models that consumer advocates have objected to in prior negotiations on the grounds that they will lead to higher insurance c osts tied to increasing wildfire risk.
Companies may also be allowed to incorporate the costs they pay for reinsurance in California, to hedge against their own risk, in the rates they charge.
The proposed regulatory framework is still in its fledgling st age and will require a transparent rulemaking and public comment process. It is likely that legislators will introduce legislation addressing the issue during the 2024 legislative session that compliments the regulatory actions, such as requiring insurance companies to use a transparent and uniform catastrophe modeling tool in order to calculate risk.
Governor Newsom Signs Executive Order to Prepare California for the Progress of Artificial Intelligence
California is the epicenter of generative artificial intelligence (GenAI), which holds the potential to significantly impact daily life. On September 6
th, Governor Newsom issued an Executive Order to
outline California’s measured approach that focuses on shaping the future of ethical, transparent, and trustworthy AI, while remaining the world’s AI leader.
The Executive Order contains the following provisions:
• Risk-Analysis Report: Directs state agencies and departments to perform a joint risk analysis of potential threats to and vulnerabilities of Calif ornia’s critical energy infrastructure by using GenAI.
• Procurement Blueprint : To support a safe, ethical, and responsible innovation ecosystem inside state government, agencies will issue general guidelines for public sector procurement, uses, and required training for the application of GenAI – building on the White House’s Blueprint for an AI Bill of Rights and the National Institute for Science and Technology’s AI Risk Management Framework. State agencies and departments will consider procurement and enterprise use opportunities where GenAI can improve the efficiency, effectiveness, accessibility, and equity of government operations.
• Beneficial Uses of GenAI Report: Direct state agencies and departments to develop a report examining the most significant and beneficial uses of GenAI in the state. The report will also explain the potential harms and risks for communities, government, and state government workers.
• Deployment and Analysis Framework: Develop guidelines for agencies and departments to analyze the impact that adopting GenAI tools may have on vulnerable communities. The state will establish the infrastructure needed to conduct pilots of GenAI projects, including California Department of Technology approved environments or “sandboxes” to test such projects.
• State Employee Training: To support California’s state government workforce and prepare for the next generation of skills needed to thrive in the GenAI economy, agencies will provide training for state government workers to use state-approved GenAI to achieve equitable outcomes, and will establish criteria to evaluate the impact of GenAI to the state government workforce.
• GenAI Partnership and Symposium: Establish a formal partnership with the University of California, Berkeley, and Stanford University to consider and evaluate the impacts of GenAI on California and what efforts the state should undertake to advance its leadership in this industry. The state and the institutions will develop and host a joint summit in 2024 to engage in meaningful discussions about the impacts of GenAI on California and it s workforce.
• Legislative Engagement: Engage with Legislative partners and key stakeholders in a formal process to develop policy recommendations for the responsible use of AI, including any guidelines, criteria, reports, and/or training.
• Evaluate Impacts of AI on an Ongoing Basis: Periodically evaluate for potential impact of GenAI on regulatory issues under the respective agency, department, or board’s authority and recommend necessary updates as a result of this evolving technology.
Legislative Calendar
The Legislature concluded the first year of the 2023-24 Legislative Session on September 14 th
and will be on Interim Recess until January 3 rd. All bills not approved by the Legislature prior to adjournment are eligible for consideration when the Legislature reconvenes in January 2024.
Below are the upcoming relevant dates for the Legislature:
October 14th – Last day for the Governor to act on bills passed by the Legislature January 1st – New statutes take effect
January 3rd – Legislature reconvenes session
The Senate returned from recess and resumed session during the first week of September, while the House returned on September 12th. Within the last few weeks of September, the two chambers worked to reach an agreement on government funding before the current budget agreement
FEDERAL LEGISLATIVE UPDATES
lapsed on September 30th. To avoid a shutdown, Congress approved a stopgap funding measure through November 17th.
Congress Averts Government Shutdown, Passes Short-term Extension of Federal Funding
For most of September it appeared as though the House and Senate would not be able to overcome political disagreements in time to adopt a spending plan for the new f iscal year.
However, at the last minute, Congress averted a shutdown by approving a stopgap funding measure on September 30th that will fund the federal government t hrough November 17th. The continuing resolution (CR) funds the government at existing Fiscal Year 2023 levels for the next seven weeks, buying Congress more time to negotiate new funding levels for Fiscal Year 2024.
If Congress is unable to pass funding legislation before November 14 th, the federal government
will experience a lapse in appropr iations. Not having a federal budget or CR in place results in what is commonly referred to as a government shutdown, which can have wide-ranging impacts due to the interruption of key federal services. The potential impacts of a government shutdown are contingent on many factors, making exact impacts difficult to predict.
The seven-week stopgap may have kept the lights on for now, but it does nothing to resolve the larger fights over full FY24 funding.
House Removes Speaker McCarthy From Leadership Position
In a stunning and historic move the U.S. House of Representatives voted, on October 3 rd, to
remove Kevin McCarthy from the office of Speaker of the House. The vote was 216 to 210 with all Democrats joining a faction of eight Republicans. The House will now need to elect a new Speaker, a process with an uncertain timeline and uncertain outcome.
In his efforts to prevent a government shutdown and passing a short -term funding bill, Speaker Kevin McCarthy needed to rely on the support of more Democrats than Republicans to get the CR out of the House. This angered several of his most ardent detractors on the Right who had previously indicated that they would try and oust McCarthy from the Speakership if he partnered with Democrats on the spending measure. The recent fight over government funding has laid bare the fact that Speaker McCarthy did not control a governing majority in the House.
At the time of that the vote was taken to remove McCarthy from Speaker, the Republicans that voted in favor of his removal did not have a replacement Speaker ready to assume the position.
Additionally, shortly after his removal, McCarthy indicated that he would not be seeking to return to his position of Speaker.
Without a Speaker, the House cannot move bills nor negotiate with the Senate to reach agreement on items, such as a spending plan. For legislative business to resume in the House a Speaker must first be elected. This injects a high level of uncertainty into negotiations around government funding, which could lead to a potential government shutdown on November 17th.
Laphonza Butler Appointed to Complete California Senate Term
Following the passing of Senator Dianne Feinstein, California Governor Gavin Newsom appointed Laphonza Butler to complete the senator’s term which expires on January 3, 2025. Senator Butler was sworn into office by Vice President Kamala Harris on October 3rd.
In taking her office, Senator Butler had to step down from her role as President of EMILY’s List, a political action committee with the aim of electing Democratic women to office. Before joining EMILY’s List, Senator Butler worked as a political consultant and Director of Public Policy and Campaigns for Airbnb. Additionally, she served for nearly 20 years as an organized labor leader within SEIU, serving as SEIU International Vice President and president of the SEIU California State Council.
By appointing Ms. Butler, Governor Newsom avoids picking a candidate already in the running for Senator Feinstein’s seat. Longtime Representative Barbara Lee, who is the highest -ranking Black woman appointed to Democratic leadership, is up against fellow Democratic Representatives Adam Schiff and Katie Porter, t wo of the House’s top fundraisers who have already amassed millions of dollars each for their bids. Senator Butler has not yet indicated if she too will run in the already competitive primary, however, Governor Newsom indicated that his appointee was free to do so, contrary to comments made a few weeks ago that he would be appointing a placeholder to the position.
US Department of Transportation Adopts New Categorical Exclusion for EV Charging Stations
In late September, the US Department of Transportation (DOT) accelerated the electric vehicle (EV) project delivery by adopting a Department of Energy Electric Vehicle Charging Station Categorical Exclusion under the National Environmental Policy Act (NEPA) that will speed up the installation of EV charging stations throughout the country. A categorical exclusion, or CE, is a class of actions that a Federal agency has determined does not individually or cumulatively have a significant effect on the human environment; neither an environmental assessment nor an environmental impact statement is normally required.
By allowing nearly all of the DOT's $7.5 billion in EV charging funding to be considered under categorical exclusions, the actions enable state and local governments to complete environmental review procedures more quickly for EV charging infrastructure projects. The Federal Highway Administration (FHWA), which oversees the Department of Transportation's EV programs, already has a number of CEs available. However, with the adoption of DOE's EV Charging CE, DOT now has a CE that is specifically focused on EV charging. This is an important tool for non- traditional grantees who are less familiar with FHWA's current CEs, which cover many EV projects but necessitate proficiency with the NEPA process.