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 22, 2024
Subject: Q3 Legislative Update
The month of September saw the conclusion of legislative activity with the Governor taking action on the last of the 1,206 bills that were sent to his desk. In total, the Governor signed 1,017 bills and vetoed 189, marking a slightly higher than average veto rate over his tenure. The most common reason cited for vetoes was the state’s budget deficit and the concern that measures would exacerbate the state’s delicate fiscal footing. Other veto messages include warnings of controversial policy, legality, local control, or implementation. The vast majority of bills will go into effect January 1, 2025, while some have a delayed effective date to allow state or local agencies to prepare. Lawmakers will return briefly on December 2 for Organizational Session to welcome newly elected members and kick off the 2025-26 session.
2024 State Legislative Wrap-up
The 2024 legislative session came to a dramatic close just after midnight on Saturday, August 31, as both chambers were engulfed in a flurry of last-minute proposals, political maneuvering, and power plays among leadership in both houses and the Governor’s administration. The adjournment marked the end of the two-year 2023-24 Regular Legislative Session, which saw nearly 5,000 bills introduced over the course of the two years.
While last-minute policy introductions are a common feature of California's legislative process, this session was notable for the unusually high number of bills and amendments introduced in the final 72 hours. These last-ditch efforts aimed to make sweeping changes in key areas such as energy policy, industrial land use regulations, and gas pricing, among others.
Adding to the usual end-of-session frenzy, Governor Newsom called a special session just hours before the regular session's end to address new mandates on oil refineries aimed at reducing gas prices. This unexpected move effectively pushes the Legislature into overtime, as the Administration is now asking lawmakers to grapple with the complex and politically sensitive issue of energy affordability just as the campaign season kicks into high gear ahead of the November 5 election.
The conclusion of the 2024 legislative session also signals the start of the Interim Recess and the ramp-up to the November 2024 General Election. At least 23 State Assembly seats and 12 State Senate seats are set to change hands due to incumbents being termed out of office or otherwise choosing not to seek re- election, representing over 25% of each house. When the Legislature
reconvenes in January 2025 for the start of the 2025-26 session, a wave of freshman legislators will bring new priorities, leadership styles, and political dynamics to Sacramento.
Below is a detailed overview of priority measures and key events from the 2024 legislative session, organized by issue area:
Bonds
Pivoting away from impacting the state budget, ten different legislators introduced bills that proposed to place general obligation bonds on the ballot. AB 247 by Assemblymember Al Muratsuchi (D-Torrance) and SB 867 by Senator Ben Allen (D-Santa Monica) were the only two measures to make it out of the fray and are now Propositions 2 and 4, respectively, on the November General Election ballot. Prop 2 dedicates $10 billion for public school and community college facilities and Prop 4 issues $10 billion for various climate and environmental protection projects.
The deficit strained the Legislature’s capacity to authorize multiple bonds, so state lawmakers were forced to prioritize which bonds were to advance and also how much should be financed by each proposed bond. By approving bonds for school facilities and environmental protection projects, initiatives that would have funded higher education facilities, flood control, fentanyl prevention, and housing were put on hold. While housing is a top priority for the state, many were disappointed that a housing bond was not approved for the ballot.
The two bonds that will be on the November ballot, Propositions 2 and 4, would still have a significant impact on the state’s budget. The Legislative Analyst’s Office estimates the cost to pay off Prop 2 would be $500 million per year for 35 years, and $400 million per year for 40 years for Prop 2 totaling $33.5 billion over the life of both bonds. Currently, the state is paying about $6 billion per year on debt service for existing bonds, so the drawdown on resources is substantial when weighing which bonds to approve each year.
Behavioral Health and Homelessness
Flexible Local Homeless Funding and “Local Accountability”
The Governor and the Administration continued their plight for local accountability related to the spending of state budget homelessness dollars that are directly allocated to local governments throughout the 2024 Legislative session. While the 2024 budget deficit presented an issue for the continuance of local homelessness dollars, ultimately, the funding was restored due to the persistence of local governments and their existing programs. However, the use of funds was the subject of scrutiny.
In 2023, the Joint Legislative Audit Committee initiated an audit of the State’s homelessness funding, including an evaluation of the efforts undertaken by the State to address the growing crisis. With over 180,000 Californians experiencing homelessness in 2023, the State Legislature has committed billions of dollars in funding to prevent and end homelessness. In 2018, the Homeless Emergency Aid Program (HEAP) allocated $500 million in block grants, providing direct assistance to localities in addressing homelessness across California.
Despite notable progress in recent years, local governments, which are primarily responsible for implementing homelessness programs and collecting data, bore the brunt of effectively evaluating program effectiveness and implementing regional plans to evaluate their effectiveness. As the homelessness crisis has worsened, the State has allocated $24 billion over the past five fiscal years for homelessness and housing programs, according to the Legislative Analyst’s Office.
Despite budget constraints and proposed cuts, local governments were successful in advocating for the restoration of a number of budget programs, including:
• Homeless Housing, Assistance, and Prevention (HHAP): HHAP provides local jurisdictions with flexible funding to support regional coordination and to expand or develop local capacity for addressing immediate homelessness challenges. Local leaders underscored the need for ongoing support through HHAP, arguing that regional collaboration is key to long-term solutions. Their advocacy ensured HHAP funding remained a priority in the state’s budget, allowing jurisdictions to continue addressing the homelessness crisis at the ground level. This funding was restored in line with previous allocations to the tune of $1 billion, annually, with new requirements for local governments who receive direct allocations to create memorandums of understanding with neighboring jurisdictions regarding the disbursement and use of funds.
• Encampment Resolution Funding (ERF): ERF offers competitive grants to help local jurisdictions provide services and supports that improve the health and safety of people living in encampments. It focuses on creating meaningful pathways to stable housing.
Local governments successfully argued for the program’s inclusion in the budget, highlighting the urgent need for resources to address the humanitarian challenges of encampments, while also reducing their public health and safety risks. These funds were continued within the state’s budget process, and complement the goals of the Governor’s executive order and Grants Pass decision to remove encampments.
Energy
Income-Tiered Rate Policies and Regulations
The 2024 Legislative Session began with a focus on energy reform, including several proposals to repeal provisions of AB 205
(2022). AB 205 had directed the California Public Utilities Commission (CPUC) to develop income-graduated fixed charge for energy bills for customers of Investor-Owned Utilities (IOUs). Under this measure, the CPUC was tasked with working alongside IOUs to establish income-based rates, which were initially proposed to range from $24 per month for low-income earners to $128 per month for households earning $180,000 or more annually.
The implementation of AB 205's provisions faced criticism from a range of stakeholders.
Environmental groups argued that the proposed joint IOU plan did not sufficiently charge high - income earners their fair share. The solar industry, which relies on high electricity rates to justify the cost of rooftop solar installations, advocated for a shift toward time-differentiated rates to encourage flexible demand. Meanwhile, local agencies called for fixed rates to remain low, with substantial rebates offered to those who electrify by certain deadlines.
These concerns led to multiple legislative proposals aimed at repealing AB 205 or introducing oversight measures to prevent future cost shifts. Among these were AB 1999 (Irwin), which sought
to repeal the income-based rate escalator, and AB 1912 (Pacheco), which would have mandated a third-party actuarial review of all legislative proposals affecting energy ratepayers. These reviews would have needed to be completed and considered before any final vote.
Despite the momentum, both legislative proposals were set aside by leadership amid ongoing internal negotiations involving the Legislature, the Administration, and the CPUC. Concerns over high costs for ratepayers, passthrough provisions, and the potential need for IOUs to access sensitive tax information to determine income levels ultimately led the CPUC to reject the original income-escalated charge proposal. Instead, a new structure was adopted, charging residential customers a flat rate of $24.15 per month, with a reduced rate of $6 to $12 for those enrolled in low-income programs. This new rate was implemented by the CPUC in July.
Last Minute Rate Reduction and Clean Energy Bill Proposals
As previously mentioned, the final days of the 2024 Legislative Session featured the introduction of numerous late-breaking amendments that inserted new policy proposals into existing bill vehicles. Among these were six measures focused on addressing California’s clean energy challenges, specifically meeting mandates for clean, carbon -free energy and reducing some of the nation’s highest electric bills.
The primary proposal targeting California’s escalating electric bills, AB 3121 (Petrie Norris),
sought to provide each household with a modest, one-time credit ranging from $30 to $70. The estimated $500 million in savings would have been drawn from cuts to utility programs benefiting low-income residents and schools. Advocates for these programs argued that the proposed cuts would disproportionately harm low-income Californians and children while offering only a minimal reduction in ratepayers’ utility bills. This measure ultimately failed to pass before the end-of - session deadline.
Another significant proposal, AB 3264 (Petrie Norris), mandates that the Public Utilities Commission study ways to reduce the costs associated with expanding transmission capacity and report on energy efficiency programs funded through consumers’ utility bills. This bill successfully passed through the legislature under the tight deadline and was signed into law by the Governor.
Other proposals within the late-breaking package that passed the legislative process included SB
1420 (Caballero), which aimed to streamline hydrogen facility permitting, and SB 1142 (Menjivar), which sought to prevent power shutoffs for ratepayers with active payment plans. Two additional bills did not survive the legislative process, including SB 1003 (Dodd), which would have increased oversight of utility wildfire costs. In a statement to the press following the session's close, Senate Pro Tem Mike McGuire expressed his commitment to reintroducing more energy - related proposals next year to build upon the efforts of this package.
Housing and Land Use
RHNA Reform
As is typical of the Legislature in recent years, the 2024 Legislative Session was keenly focused on housing production and compliance with state housing laws. This included an analysis of the regional housing needs allocation (RHNA) process and improvements that could be implemented prior to the start of Cycle 7. In April, the California Department of Housing and Community Development (HCD) released its entitled
California’s Housing Future 2040: The Next Regional
Housing Needs Allocation (RHNA), outl ining dozens of suggested reforms to improve the RHNA methodology, regional determination, and compliance process.
A series of bill proposals emerged during the session that aligned with the suggested reforms in the report. This included:
• AB 3093 (Ward), which creates two new income categories - Acutely Low Income (ALI) and Extremely Low Income (ELI) - in the Regional Housing Needs Determination, Regional Housing Needs Allocation, and Housing Element Law. Creating the ELI and ALI categories will require regions and local governments to develop targeted programs and strategies in their housing elements that cater to the needs of Californians at the lowest end of the income spectrum, including homeless individuals and those at risk of homelessness. This bill drew strong support from, and was signed into law by, the Governor.
• SB 7 (Blakespear) makes a number of technical changes to the regional housing needs determination process conducted by HCD and the regional housing needs allocation process conducted by HCD or Councils of Governments. This measure passed the Legislature and was signed by the Governor.
Other proposals geared toward reforming the RHNA process included AB 2485 (Carrillo), which would require HCD to convene and engage specified stakeholders to consider improvements to the process of determining the housing needs for each region. The bill would also require HCD to publish specified data and information on its website regarding the decision-making process used to determine regional housing needs. While this bill drew a wide array of support from local stakeholders, it was ultimately held in the second house appropriations committee.
Builder’s Remedy
In addition to RHNA reforms, the Legislature this year turned its attention to refining the Builder’s Remedy, a provision within the 1982 Housing Accountability Act (HAA) that prevents local governments from denying housing developments that include 20% lower -income units, even if the project does not conform to local zoning laws —provided the jurisdiction has not adopted a compliant housing element. Although several developers have attempted to invoke the Builder’s Remedy in recent years, they have largely been unsuccessful.
During the session, lawmakers introduced several proposals aimed at clarifying and refining the Builder’s Remedy, focusing on legal interpretation, timing, and specific parameters for development projects. These proposals include:
• AB 1886
(Alvarez): Clarifies that the Builder’s Remedy is triggered by a determination of noncompliance from HCD. It also specifies that development standards apply only if the city is in compliance, and projects remain eligible if the application was submitted w hile the city was non-compliant.
• AB 1893 (Wicks): Establishes guidelines regarding density, underlying zoning, and objective standards that a development must meet to qualify for the Builder’s Remedy. It also reduces the required amount of affordable housing for a project to be eligible.
• AB 2023 (Quirk-Silva): Introduces a rebuttable presumption of invalidity for housing elements deemed noncompliant by HCD, raising the burden of proof for jurisdictions seeking to challenge or dismiss HCD’s noncompliance determination.
Despite facing opposition from local agencies, all three bills successfully passed the Legislature and were signed into law by the Governor.
Industrial Land Use Standards
In a familiar legislative maneuver, AB 98
—previously stalled earlier this year —was revived to
establish design standards, electrification requirements, and minimum setback distances for logistics facilities located near sensitive receptors such as homes, schools, and hospitals in the closing days of the legislative session. The bill also mandates that local governments update their circulation elements to incorporate truck routes, signage, parking, and idling restrictions, with enforcement led by the Attorney General.
Weeks before the end of the legislative session, rumors emerged that stakeholders had returned to negotiations to reach a new agreement on warehouse development and zoning standards.
When the language was finalized, the Laborers’ International Union of North America and the California Chamber of Commerce took the lead in advocating for the revised bill. Although CalChamber officially maintained a "neutral" stance, it encouraged its members to support the compromise despite having opposed the prior version of the warehouse bill, AB 1000, from last year. Local government organizations were largely excluded from the drafting process and ultimately launched an opposition campaign due to the increased financial and legal burdens imposed on cities and counties. Similarly, environmental justice groups opposed the bill, citing concerns over provisions that would allow warehouse and distribution center development to continue near sensitive areas.
After moving through policy and fiscal committees in the final 72 hours of the session, the bill encountered delays caused by political maneuvering between Senate and Assembly leadership, who were negotiating which bills to prioritize in the final days. Just 30 minutes before the midnight deadline, AB 98 passed the Assembly floor and was transmitted to the Governor, who signed the bill. The narrow vote margins and impassioned speeches on both legislative floors underscored the contentious nature of the bill and the rushed legislative process. It is expected that further amendments will be required to address unresolved issues in the next legislative session.
Revenue and Taxation
Impact Fees
Housing affordability remained a central legislative theme in 2024, with impact fees and exactions targeted as contributors to high development costs. A critical decision from the U.S. Supreme Court this year mandated that local governments establish a clear "essential nexus" between development projects and the fees they impose, ensuring that fees are "roughly proportional" to the actual impact of the development. This ruling has the potential to significantly affect local government revenue streams.
In addition, the Legislature advanced several measures aimed at limiting or deferring impact fees, including:
SB 937
(Wiener), which defers certain development fees until a certificate of occupancy is issued.
It also locks in impact fees before a building permit is granted and prohibits indexing fees for inflation or charging interest on deferred fees. While local governments opposed the measure, it passed and may see further refinement in future sessions.
AB 1820 (Schiavo), which creates a framework for developers to receive preliminary and final estimates of project-related fees and exactions within specific timeframes.
Both bills passed the Legislature and were signed into law by the Governor.
Labor and Employee Relations
At the outset of the legislative session, several bills were introduced by progressive lawmakers, with backing from major labor organizations . The labor groups, alongside numerous employee advocacy organizations, have recently prioritized addressing the reported labor shortages in the public sector. According to a recent study by the UC Berkeley Labor Center, vacancy rates in county job positions within three of California's most populous counties are now 1.5 to 2 times higher than they were prior to the COVID-19 pandemic.
In response to these vacancy rates and workforce gaps, several pieces of legislation were introduced, seeking to increase transparency in public sector bargaining unit vacancies and to promote the hiring of internal labor over consultants. These measures also included substantial data reporting requirements for existing consultants and contractors in the public sector, aiming to support arguments in favor of using internal labor groups for essential tasks.
The principal bills—AB 2557 (Ortega) and AB 2651
(McKinnor)—faced significant opposition from
local governments and business interests during the legislative process. Despite this resistance, both bills successfully advanced through policy committees, largely along party lines, due to robust support from labor advocates among committee members. However, AB 2557 (Ortega), which would have required extensive reporting and auditing on public sector contracting, failed to pass the Senate Appropriations Committee before the legislative deadline and was shelved for the year. In contrast, AB 2561 (McKinnor), mandating that local public agencies with more than a 20% vacancy rate in any bargaining unit publicly present updates on vacancies, recruitment, and retention efforts at least once per fiscal year, passed the Legislature in the final days of the session and was signed into law by the Governor.
Public Safety
This year, Governor Newsom and legislative leadership in both houses prioritized addressing retail theft, resulting in a comprehensive public safety package. After several Retail Theft Select Committee hearings, a series of bills emerged and were signed by the Governor on August 16 as part of an early action public safety initiative. These measures aim to enhance public safety statewide without amending Proposition 47 (2014). The key bills include:
• AB 1779
(Irwin): restores cross -jurisdictional prosecutions for thefts committed in more than one county.
• AB 1802 (Jones-Sawyer): makes permanent the crime of organized retail theft and the operation of the CHP property crimes task force.
• AB 1960 (Soria): provides enhanced penalties for individuals who take or destroy property while committing a felony (smash and grab).
• AB 1972 (Alanis): expands the CHP property crimes task forces to combat increased levels of cargo theft.
• AB 2943 (Zbur, Speaker Rivas): creates the new crime of unlawful deprivation of a retail business opportunity and makes changes to law on arrest authority, aggregation, and probation terms for theft-related offenses.
• AB 3209 (Berman, Speaker Rivas): authorizes courts to impose a Retail Crime Restraining Order on repeat offenders.
• SB 905 (Wiener): creates a new alternate felony-misdemeanor for any person who forcibly enters a vehicle with the intent to commit a theft
• SB 982 (Wahab): eliminates the sunset date for the crime of retail theft and the existence of a CHP taskforce to analyze organized retail theft activities • SB 1416 (Newman): creates new sentencing enhancements for selling property acquired through shoplifting
Despite these legislative advancements, concerns remain among some public safety advocates that avoiding amendments to Proposition 47 may not sufficiently deter retail theft or enhance community safety. These concerns led to the launch of a ballot initiative, backed by District Attorneys, aiming to introduce stricter penalties for theft and drug-related crimes. Proposition 36 (Drug and Theft Crime Penalties and Treatment-Mandated Felonies Initiative), now qualified for the November ballot, proposes key changes to existing laws, including harsher penalties for serial theft offenders, increased felony charges for organized retail theft involving three or more people, and extended sentences for drug-related offenses involving substances like fentanyl, heroin, and methamphetamine.
Initially, Governor Newsom introduced “poison pill” amendments to his retail theft package, which would have nullified the newly signed bills if Proposition 36 passed. However, following significant backlash, the nullification provisions were removed prior to final approval of the bills.
At the November General Election, voters will decide on Proposition 36, which proposes rolling back aspects of Proposition 47 by restoring harsher penalties for serial theft offenders and drug traffickers, among other reforms. The initiative also introduces a "treatment-mandated felony" option for individuals charged with drug possession, allowing for charges to be dismissed upon completion of a rehabilitation program. Additionally, it would require courts to warn drug dealers that they could face murder charges if their actions result in a death.
Because the Governor’s Retail Theft Package avoids amending Proposition 47 and Proposition 36 explicitly seeks to amend the 2014 initiative, both measures could be enacted without conflict, taking effect in January 2025. This dual approach could strengthen public safety by increasing accountability for offenders and providing additional enforcement tools, all while avoiding the pitfalls of past policies that contributed to prison overcrowding. After a decade of debate on Proposition 47’s impact, California voters will have the opportunity to shape the state's approach to addressing retail theft and public safety moving forward.
Fire Insurance
At the conclusion of the 2023 Legislative Session, the Governor and the Insurance Commissioner took significant action through an executive order and regulatory proceedings to enact changes aimed at stabilizing California’s insurance market and retaining insurance companies in the state.
This initiative focused on four key objectives: (1) Expanding insurance coverage in high-risk areas, (2) Modernizing the FAIR Plan to reintegrate members into the standard insurance market, (3) Updating rate review and filing timelines, and (4) Allowing the use of advanced catastrophic modeling tools.
The latest draft regulations, last revised at the beginning of the year, specify the requirements for insurance companies wishing to use forward-looking catastrophe models for setting rates. Under these draft regulations, insurers must either offer policies in high-risk areas that represent at least 85% of their statewide market share or increase the number of plans in these areas by 5%.
Additionally, insurers are required to consider wildfire mitigation efforts implemented by policyholders.
A policy qualifies as being in a high-risk area if it is located in a county or ZIP code designated as distressed, undermarketed, and high-risk. A county is classified as "distressed" if more than 20% of its residential properties with fewer than five units are rated as “high” or “very high” risk by CAL FIRE. These designations will be reviewed and updated annually. The designated counties currently include Alpine, Amador, Butte, Calaveras, Del Norte, El Dorado, Humboldt, Lake, Lassen, Marin, Mariposa, Mendocino, Modoc, Mono, Monterey, Napa, Nevada, Placer, Plumas, San Luis Obispo, Santa Cruz, Shasta, Sierra, Siskiyou, Tehama, Trinity, Tuolumne, and Ventura.
Following the release of these draft regulations, the Insurance Commissioner announced additional amendments to the FAIR Plan, California’s insurance program designed to provide coverage to residents and businesses in both urban and rural areas who cannot secure insurance through the standard market. These changes, part of an agreement between the Department of Insurance and the California FAIR Plan, include provisions for recouping losses by imposing surcharges on residential and commercial insurance polic ies across the state in “extreme worst- case scenarios.”
Under the current framework, the FAIR Plan is responsible for paying claims once its reserves, reinsurance, and catastrophe bonds are depleted. The new agreement stipulates that, should these funds be exhausted, insurers will be required to cover up to $2 billion in FAIR Plan claims— $1 billion for residential and $1 billion for commercial policies. Insurers can then, with the insurance commissioner’s approval, temporarily surcharge their policyholders for up to half of the amount assessed. It is important to note that homeowners will not be surcharged for commercial losses; only commercial policyholders will bear those costs. Additionally, insurers may surcharge policyholders for 100% of claims exceeding these amounts, pending the insurance commissioner’s approval.
This restructuring of the FAIR Plan is a component of Commissioner Lara’s broader Sustainable Insurance Strategy, a series of executive actions designed to stabilize California’s insurance market. These actions come in response to the growing reluctance of insurers to issue new policies or renew existing ones, particularly in areas with high wildfire risks, due to the surge in wildfire-related claims.
As insurers have withdrawn from high-risk areas, the number of residential FAIR Plan policies has more than doubled since 2019, reaching approximately 408,000 as of June. Similarly, the number of commercial policies under the FAIR Plan has increased to 11,026.
The FAIR Plan will implement a Plan of Operation that includes the following:
• Expanded Coverage: Introducing a new “high-value” commercial coverage option with limits up to $20 million per building, alongside past increases for residential policies. • Financial Stability: Establishing a sound financial formula to protect policyholders in extreme loss scenarios.
• Improved Transparency: Requiring enhanced public reporting on FAIR Plan activities and customer service metrics.
In alignment with the Administration's and Legislature's objectives, this regulatory process has advanced without intervening legislation during the 2024 Session. Various legislative proposals, including those seeking to increase oversight of insurance modeling tools and mandate consideration of home hardening practices for rate reductions, did not pass due to concerns that they might disrupt market conditions and the ongoing regulatory process. This includes Senator Becker’s SB 1060 , which would have required insurers using risk models for underwriting to account for wildfire risk reductions achieved through hazardous fuel reduction, home hardening, and defensible space. The bill would have also authorized the Department of Insurance to examine underwriting models for compliance and issue necessary orders.
The Department of Insurance plans to adopt these regulations by the end of 2024. Issues concerning coverage affordability and availability will likely be addressed through legislation in the coming year.
Transportation
As with many other areas, funding dominated the conversation on transportation in 2024. In 2023, through SB 125
, the Legislature appropriated $2 billion from the General Fund, with a promise of an additional $2 billion in 2024, to the Transit and Intercity Rail Capital Program. These funds were allocated based on a population-based formula for regional transportation planning agencies, offering flexibility to support both transit operations and capital improvements. SB 125 also established the $1.1 billion Zero-Emission Transit Capital Program, which allocated funds for zero-emission transit equipment and operations through both population-based and revenue- based formulas.
However, the state's fiscal challenges in 2024 significantly impacted transportation funding.
Facing a multibillion-dollar General Fund deficit, the Governor's January budget proposal reduced the promised SB 125 funding for 2024-25 from $2 billion to $1 billion. By April, the Department of Finance went further, freezing the $2 billion allocated in the current year. Nevertheless, the Legislature employed creative budgetary tactics, shifting the funding source from the General Fund to cap-and-trade revenues, enabling them to preserve $1 billion in this year’s budget for the SB 125 program, with the remaining $1 billion deferred to future years. In July, the Department of Finance unfroze last year’s funding, allowing regional agencies to finally access the SB 125 resources.
Despite these efforts, budget experts are predicting another deficit in next year's budget, raising concerns that next year's promised transit set-asides may be delayed or cut. While transportation funding was largely preserved this year, the outlook remains uncertain for the future.
On the policy front, the Legislature passed several significant transportation-related measures , including:
• SB 960
(Wiener) mandates that Caltrans include "complete streets" elements in its asset management plan, system highway management plan, and the performance report for the State Highway Operation and Protection Program (SHOPP). The bill also requires Caltrans to adopt a transit priority policy, develop guidelines, and set specific four -year targets for incorporating complete streets facilities into SHOPP.
This measure was signed into law by the Governor.
Assembly Convenes in Special Session to Address High Gas Prices
On September 18 and 19, the newly formed Assembly Petroleum and Gasoline Supply Committee convened its first two hearings geared toward stabilizing California’s oil and gas market. The first hearing provided an overview of the current market and the state’s fuel decarbonization strategy and transition plan away from traditional fuels. Academics, energy companies, environmental organizations, and state agencies came together in this informational hearing to assess California’s petroleum platform and production cycle. The overall tenor of the hearing highlighted the political sensitivity of this issue as oil companies claimed they would need to produce more to meet the Governor’s mandate, but the state is transitioning away from more oil and gas production.
The second hearing weighed the merits of Governor Newsom’s plan to mandate refineries’ backstock additional oil supplies. Beginning with input from state, labor, petroleum, and energy stakeholders, the Committee reviewed the challenges for California’s fuel market. Specifically, how fuels are transported to and across the state, what might impact future supplies (and in turn – costs), and how the market could rebound. Pivoting to solutions, the panel and Committee members discussed how to stabilize California’s fuel market. With the Governor’s proposal at the forefront of the discussion, experts assessed tradeoffs to policies that would allow for more supply in the state, such as importing, where extra supply would be stored, and how gas prices might still continue to fluctuate.
The Committee met again the following week and approved ABX2-1 (Hart & Aguiar- Curry) that
charts a path to allow the California Energy Commission (CEC) to impose inventory requirements on oil and gas refineries to prevent price spikes. The committee was joined by advocates from the CEC, labor organizations, and the oil and gas industry providing testimony before voting to advance the bill to the Assembly Floor. At the center of debate was the impact the proposal could have on the price of gas at the pump and how drivers can be protected from price spikes while the state maintains its climate resilience goals.
In the same hearing, the committee approved ABX2-9
(Petrie-Norris) to require the California Air
Resources Board to analyze the use of 15% ethanol blended gasoline, and also requires the CEC to explore ways to expand the size of the California fuels market to increase in-state supply and stabilize costs to consumers.
Joint Informational Hearing Held on Proposition 36
On September 10, the Senate and Assembly Public Safety Committees hosted a Joint Informational Hearing on Proposition 36, the November ballot initiative related to drug and theft crimes. The hearing was split into portions for an overall analysis of the measure followed by separate panels of proponents and opponents of the initiative.
The Legislative Analyst’s Office (LAO) kicked off the hearing with an assessment of the Proposition’s fiscal impact on the state and background of California’s criminal justice system, which will also be included in the voter information guide. The LAO iterated during the hearing that if passed, Proposition 36 could increase state criminal justice costs to taxpayers within a range of the low tens of millions to hundreds of millions annually, in addition to increased local costs. Advocates for district attorneys, law enforcement, local governments, criminal justice reform, and reentry programs took center stage fielding questions from legislators and opining on the broader implications of Proposition 36. Legislative leadership and the Governor have already come out opposing Prop 36 satisfied with the package of public safety bills signed into law earlier this summer.
While no action was taken during the hearing, it was a critical consolidation of both sides of the issue with opportunities for lawmakers and the public to express their outlook on the proposition.
Themes discussed throughout the hearing included increases in fentanyl crimes, a decline in public safety staffing resources, and how Proposition 36 will complement the 13-bill package the Legislature passed to curb theft and drug crime occurrences.
Polling was released later in the month showing that 71% of polled voters support the measure six weeks before the election. Despite concerns from members of the Legislature and the Governor questioning its necessity, this new data suggests that the majority of voters see the outcome of Prop 36 as critical.
There has been some anecdotal criticism of the retail theft bills recently signed into law, suggesting that these laws could conflict with Proposition 36. Both Prop 36 and AB 2943 (Zbur) address the aggregation of stolen goods' value to determine a grand theft conviction. While a policy conflict may exist, there is no legal conflict; Proposition 36 will take precedence if passed.
Guidance for Upcoming “Homekey Plus” Program Released
On September 19, alongside the passage of a major housing bill package, the Department of Healthcare Services (DHCS) and the Department of Housing and Community Development (HCD) unveiled preliminary guidance
for the upcoming Notice of Funding Availability (NOFA) for the new "Homekey+" Program. This program, backed by over $2 billion from Proposition 1, aims to finance permanent supportive housing for individuals experiencing homelessness or at risk of homelessness.
The Homekey+ Program will fund a variety of permanent housing solutions, including the conversion of non-residential or commercially zoned structures, buildings with existing residential uses, new multifamily rental housing construction, scattered-site housing, and shared housing models. Notably, 50% of the units must be designated for veterans. Eligible projects are also required to offer comprehensive supportive services, such as case management and behavioral health counseling.
The request for applications will be released in November 2024, with the application portal opening in early 2025. Funding awards are expected to be announced in May 2025.
Legislative Calendar
The Legislature has adjourned the 2023-24 Regular Legislative Session. The Governor has called for a Special Session to consider legislation related gas and energy prices, which may bring the Legislature back to Sacramento for additional work prior to the sine die adjournment of session on November 30.
Below are the upcoming relevant dates for the Legislature:
November 30
th – Legislature adjourns sine die at midnight
December 2nd – 2025-26 Regular Legislative Session convenes for Organizational Session
Congress Averts Government Shutdown Establishing new December Funding Deadline
On September 25, Congress passed a stopgap bill to fund the government through December
20. The legislation largely keeps the federal government running at existing funding levels until the winter recess while incorporating limited boosts to critical programs. Among the increases is a $231 million boost in funding for the Secret Service. Excluded from the bill was the SAVE Act, which would require voters to show proof of US citizenship to register, and a requested extra $10 billion for the Federal Emergency Management Agency’s disaster relief fund. House Appropriations Committee Chair Tom Cole said that the extra $10 billion will ultimately be added to the final spending deal in December.
The November elections will impact how the FY2025 negotiations proceed during the lame duck session. If one party wins control of the White House, Senate, and House, they might have incentive to pass medium-term bills only—long enough to clear the decks for the new President, but short enough to allow them to use their unified power next year.
Additionally, Republican leadership is changing. Senate Minority Leader Mitch McConnell is stepping down as the Republican Senate leader after the election and Speaker Mike Johnson may not be the Republican party leader if they lose the House majority. Both of these changes will impact the dynamics between parties and previous agreements on spending levels.
The Building Chips in America Act Signed by President Biden
On September 23, the House passed the Building Chips in America Act of 2023 (S.2228) to accelerate the environmental regulatory process and avoid unnecessary delays for domestic semiconductor chip manufacturing projects. First passed by the Senate in Decem ber 2023, the Act expands upon the original CHIPS and Science Act passed in 2022. It gives executive agencies more authority to implement the CHIPS and Science Act, boosting American microchip manufacturing, and strengthening domestic supply chains. Specifically, it addresses certain Commerce Department initiatives authorized by the FY2021 defense authorization, which allowed the Commerce, Defense, and State departments to provide financial assistance to bolster domestic semiconductor manufacturing. The legislation was then presented to President Biden, who signed the measure, despite receiving pressure from some environmental groups to veto the legislation.
Senate Banking Subcommittee Holds Hearing on 2025 Tax Legislation
Senate Committee On Banking, Housing, And Urban Affairs Subcommittee On Economic Policy held a hearing entitled, “The Macroeconomic Impacts of Potential Tax Reform in 2025.” The witnesses were: Kitty Richards, Senior Fellow, Groundwork Collaborative; and Ai-jen Poo, President, National Domestic Workers Alliance; Executive Director, Caring Across Generations.
Congress is in the early phases of discussing tax policy ahead of next year’s expiration of the 2017 Tax Cuts and Jobs Act.
White House Announces Rule to Lower Mental Healthcare Costs
FEDERAL LEGISLATIVE UPDATES
On September 9, the White House announced a federal rule that will place new requirements on health plans to improve and strengthen access to mental healthcare for private health insurance users. The rule will require health providers to make their mental-health and substance-use care plans more affordable so that they are covered at the same level as physical health benefits. The plans will have to evaluate their provider networks, how much they pay out-of-network providers, and how often they require and deny prior authorizations. Most provisions will go into effect starting on January 1, 2025, and the remaining in January 2026. The Departments of Labor, Treasury and Health and Human Services will oversee the rule’s enforcement.
The proposal seeks to build on the 2008 Mental Health Parity and Addiction Equity Act (MHPAEA), which required insurance companies to provide the same access to mental and physical treatment. When the bill passed, it did not require some nonfederal governmental health plans, like those offered to state and local government employees, to comply with its requirements. The final rule will also close a loophole that exempted federally provided health insurance plans from complying with the MHPAEA. The Biden administration estimates that the new rule will impact more than 200 additional health plans and improve mental health care for 120,000 consumers.
EPA Announces Grants to Advance Recycling Infrastructure and Prevent Food Waste
On September 16, the EPA announced $117 million to advance recycling infrastructure and boost food waste prevention education. The funds will be distributed via the Solid Waste Infrastructure for Recycling (SWIFR) grant program and the Recycling Education and Outreach (REO) grant program. Applications must be submitted to grants.gov by December 20.
SWIFR’s funding opportunity will allocate approximately $58 million total in awards ranging from $500,000 to $5 million. This includes projects that will improve collection, transport, systems, and processes related to post-use materials that can be recovered, reused, recycled, repaired, refurbished, or composted. Funding for the REO grant program, focused on food waste prevention and composting, will provide approximately $39 million.
Both programs advance the Justice40 Initiative, which aims to deliver at least 40% of the overall benefits of certain federal climate, clean energy, affordable and sustainable housing, clean water, and other investments to communities that are marginalized by underinvestment and overburdened by pollution. Applicants must demonstrate they will subaward a portion of the total award to implement education and outreach activities locally, which will benefit local communities.
Read more about eligible applicants and activities for the SWIFR and REO grant programs.
Department of the Treasury Proposes Rules to Expand Clean Energy in Communities
The Department of the Treasury and the Internal Revenue Service issued a Notice of Proposed
Rulemaking for the Clean Electricity Low-Income Communities Bonus Credit Program, otherwise known as 48E(h). The program promotes cost- saving clean energy investments in low -income communities, on tribal lands, within affordable housing, or directly benefitting low -income households.
48E(h) builds on its predecessor, the 48(e) program. The transition from 48(e) to 48E(h) opens the program to additional clean energy technologies beyond wind and solar such as hydropower and geothermal. 48E(h) also provides an additional 10 or 20% tax credit for eligible clean energy projects under 5 megawatts that do not involve combustion or gasification on top of the 30% 48(e) Clean Electricity Investment Tax Credit. Each year, 1.8 gigawatts of capacity will be allocated for these projects, continuing until greenhouse gas reduction targets are met or until 2032.
The rule aims to benefit both low -income communities and clean energy providers. 48E(h) is indicative of a growing trend in American policy and rulemaking towards the standardization and implementation of clean energy solutions. Savings continue to be made available to local governments who are willing to invest in new clean energy technologies, and 48E(h) hopes to bring these savings into low-income communities.
Treasury encourages the public to submit written comments in response to the proposed rules.
Comments will be accepted for 60 days following publication in the Federal Register. Treasury will consider public comments before issuing final rules. 48E(h) has a January 1, 2025 implementation deadline.
White House Releases Gun Violence Prevention Progress Report
President Biden created the White House Office of Gun Violence Prevention in 2023 via the Bipartisan Safer Communities Act (BSCA) and over the past year the Biden-Harris Administration has compiled the newly released report on initiatives to reduce gun violence. Their mission is to expand upon key executive and legislative actions that reduce gun violence and promote public safety.
The Department of Justice reported that from January to June, gun homicides dropped 17 percent compared to the same timeframe last year. In addition, data from the Gun Violence Archive indicates that the number of mass shootings to date in 2024 has decreased by 20 percent compared to the same period last year.
A few initiatives of the White House Office of Gun Violence Prevention include:
• Making Clear the Gun Show Loophole Does Not Exist: The Department of Justice estimates that over 20,000 unlicensed sellers are engaged in the business of firearm dealing through online advertisements, gun shows, and other means. These unlicensed sellers should be licensed and therefore conduct background checks. • Implementing State Red Flag Laws : BSCA includes $750 million for states to implement crisis interventions such as red flag laws. However, by March 2024, only six states had accessed BSCA’s crisis intervention funding for the purpose of implementing red flag laws. • Enhancing Gun Background Checks for Individuals Under Age 21: The Federal Bureau of Investigation conducted over 300,000 enhanced background checks of individuals under 21, denying over 3,500 of those transactions. Of that total, the enhanced checks alone are responsible for a quarter of all denials. Nearly 900 firearms transfers to individuals under age 21 have been denied because of BSCA.
To read the full progress report, please visit here
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DHS and TSA Team Up to Enforce REAL ID Rules
On September 11, the Department of Homeland Security and the Transportation Security Administration unveiled a proposal that would allow agencies to spend two years phasing in full enforcement of the REAL ID requirements that are scheduled take effect in M ay 2025. The proposed rule is scheduled to be published in the Federal Register on September 12, and DHS is accepting public feedback for 30 days.
The rule builds on the 2005 Real ID law that aimed to reduce the use of fraudulent IDs by setting nationwide card standards and minimum documentation requirements. Once fully enforced, REAL ID-compliant cards will be required for commercial air travel and access to many government facilities.
Federal agencies would craft their own phased enforcement plans, such as a “three strikes” system that warns individuals about the need to have a REAL ID without immediately turning them away. Both DHS and TSA are proposing flexible enforcement after the M ay 2025 deadline to mitigate anticipated backlogs at state agencies that issue IDs.