California facing a ‘fiscal cliff?’ + Kiley defends defiant restaurant owner

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Good morning and welcome to the A.M. Alert!

FIRST UP — Friday is the big day. The day when Gov. Gavin Newsom unveils his “May Revision” budget. The Sacramento Bee Capitol Bureau will be all over that news, bringing you stories on what you need to know about the revised 2022-23 budget.

What can we expect?

For starters, Newsom will likely include an update on his proposal to send a rebate to California drivers to address high gas prices. Then there’s the governor’s controversial “CARE Court” proposal. And Newsom has signaled that he wants to have a fight over abortion rights, in the aftermath of the U.S. Supreme Court’s likely decision to overturn Roe v. Wade.

Stay tuned to The Sacramento Bee for the latest budget news!

IS CALIFORNIA FACING A ‘FISCAL CLIFF?’

California may be flush right now, but is it on borrowed time?

That’s the finding of a new paper published by the Volcker Alliance, a nonprofit founded by former Federal Reserve Board Chair Paul Volcker.

The paper found that California is facing a so-called “fiscal cliff” beginning in 2026, when federal COVID-19 relief cash runs out.

“While the federal COVID-19 aid provides a historic opportunity to make much-needed and long-overdue investments in our citizens and communities, equally important is the ability of states and local governments to ensure ongoing spending is accounted and paid for. California should take note of our findings to ensure long-term programs have sustainable funding in place before relief funds run dry and they find themselves on the edge of a fiscal cliff,” said William Glasgall of the Volcker Alliance, in a statement.

Last year, Congress sent $350 billion to state and local governments as part of the American Rescue Plan Act. California’s share was $27 billion, which must be obligated by the end of 2024 and spent by 2027. As of July 31 last year, California has obligated nearly all of it ($26.7 billion), according to the report.

But rather than spending that money on projects like water and sewer systems, broadband, infrastructure or repayment of federal loans to state unemployment trust funds, as recommended by the Volcker Alliance, California has committed much of it to recurring expenditures which will likely outlive the funding behind them.

“States that use (federal relief dollars) for one-time projects are less likely to incur a fiscal cliff than states that devote the dollars to maintaining or expanding services or to creating recurring programs,” the report says.

Volcker, who died in 2019, served as Chair of the Federal Reserve under both Presidents Jimmy Carter and Ronald Reagan. He also chaired the Economic Recovery and Advisory Board under President Barack Obama.

KILEY PENS LETTER TO NEWSOM ON BEHALF OF ROSEVILLE RESTAURANT

Following a Sacramento Bee report that Gov. Gavin Newsom’s Department of Alcoholic Beverage Control wants to shut down a Roseville restaurant for 30 days as a penalty for defying the state’s COVID-19 health orders, Republican Assemblyman and frequent Newsom nemesis Kevin Kiley has written to the governor, demanding that he call off the effort.

“I urge you to immediately terminate the selective and politically motivated prosecution of the House of Oliver, a small business in Placer County that I represent,” Kiley wrote in his letter, which he shared on Twitter.

Owner Matthew Oliver sparred with Newsom and the Department of ABC throughout the COVID-19 lockdown, including continuing to host indoor service despite a state order against it, calling it “Newsom hour.”

“This prosecution by the California Department of Alcoholic Beverage Control is happening despite the Placer County District Attorney finding insufficient evidence. In fact, there has never been any evidence presented that any harm was caused,” Kiley writes.

Kiley cites Sac Bee reporting that Placer County recorded fewer COVID-19-related deaths than the state average.

“It is imperative that ABC end its selective and politically motivated attack on this small business in my community. I look forward to your timely response,” he concludes.

QUOTE OF THE DAY

“We need bullhorn protesters, we need courageous scholars, we need engaged voters, we need compassionate discourse, we need honest journalism… and, we need more inspiring elected officials. We each have a role to play in making the world a better place. Change takes all of us.”

- Assemblyman Isaac Bryan, D-Los Angeles, via Twitter.

Best of the Bee:

  • Sacramento County Sheriff Scott Jones is reigniting his feud with Black Lives Matter in his run for Congress, via Theresa Clift and David Lightman.

  • Regular gasoline for $6 a gallon everywhere in California, all the time? It’s getting close, experts say, via David Lightman.

  • A case involving a former Sacramento police officer accused of abusing and threatening his girlfriend has brought renewed attention to the Sacramento County District Attorney’s Office at a time its elected leader is running for attorney general, via Patrick Riley.

  • What do a socialist, a billionaire and a podiatrist have in common? They are all running to be a United States Senator for California in 2023, via Gillian Brassil.

  • California’s efforts to become an abortion care sanctuary is personal for some leaders — one of whom shared her story as part of a statewide push to strengthen access to reproductive healthcare, via Lindsey Holden.

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