Andrew Krulewitz charges his electric Hyundai Ioniq 6 in Oakland on Feb. 27, 2024. Photo by Camille Cohen for CalMatters

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I’m CalMatters Capitol reporter Alexei Koseff, subbing for Lynn.

As a new legislative session gets underway in Sacramento next week, officials are sending mixed signals about the state of the state budget and just how ambitious California can afford to be in the coming year.

A mere week ago, the Legislature’s nonpartisan fiscal adviser released its annual outlook, projecting a small deficit that could soon grow into much larger deficits and warning that the state has no capacity for new spending commitments. Legislative leaders endorsed that message, urging restraint and a focus on protecting existing services.

But Gov. Gavin Newsom still has big, expensive ideas — especially as California gears up for another Trump administration in which the state may play captain of the resistance.

He announced on Monday that if President-elect Donald Trump follows through on plans to eliminate a federal tax credit for electric vehicles, Newsom will propose reviving an expired state rebate program. The governor previously floated creating a backup disaster relief fund in case Trump denies emergency aid to California and, unrelated to the president, doubling the state’s film and television production tax credit.

That’s potentially billions of dollars in additional spending — before we even get Newsom’s full budget pitch in January.

Funding for the electric vehicles rebate, at least, would come from California’s cap-and-trade program for large greenhouse gas emitters, a different pot of money than the general tax revenue stream that fiscal officials say is currently tapped out.

But any new programs, at a time when California is facing looming deficits, would likely have to be offset by cuts elsewhere to keep the state’s nearly $300 billion budget balanced.

While Newsom’s Department of Finance says he’s got a plan to keep everything in check — which he must share publicly by Jan. 10 — his solutions could come into conflict with the Legislature. Lawmakers, who must send Newsom a budget by June 15, will have their own priorities on which state programs to protect and, taking the governor’s lead, perhaps their own ideas for new spending.

Given that we’re months away from serious negotiations, let alone a budget deal, key players are still keeping their cards close to the vest.

Senate President Pro Tem Mike McGuire, a Healdsburg Democrat, told CalMatters in an interview Tuesday that his caucus “will review the multiple proposals that are being advanced” by Newsom, but he refused to say whether he is even open to creating new programs or expanding existing ones next year. Instead, he reiterated the careful and somewhat cryptic stance that he took last week.

McGuire: “We need to be incredibly strategic on any new potential spending, and we need to err on the side of caution as we move forward into the budget negotiations.”

Focus on Inland Empire: Each Wednesday, CalMatters Inland Empire reporter Deborah Brennan surveys the big stories from that part of California. Read her latest newsletter and sign up here to receive it.

Other Stories You Should Know

CA election results near finality

A voter watches an election worker process their ballot at the Mid-City Gymnasium in San Diego on Nov. 5, 2024. Photo by Adriana Heldiz, CalMatters

With fewer than 160,000 ballots left to process statewide out of more than 16 million cast, California’s long election is finally drawing to a close, three weeks after Election Day. As the results of the last remaining undecided contests become clearer, the Democratic and Republican parties have both seen promising outcomes this cycle.

Democrat Derek Tran declared victory on Monday evening in a closely-watched House race in Orange County, after an update extended his lead over Rep. Michelle Steel, the Republican incumbent, to 613 votes. (Steel has not yet conceded, but appears to be eyeing a rematch in 2026.)

It would be the second GOP seat in Congress that California Democrats flipped this year. George Whitesides already defeated Rep. Mike Garcia in the northern Los Angeles suburbs. A potential third flip awaits in the Central Valley, where Democrat Adam Gray overtook GOP Rep. John Duarte by 182 votes on Tuesday.

Meanwhile, state Sen. Josh Newman, a Fullerton Democrat, conceded Monday evening to Republican Assemblymember Steven Choi. Along with what appears to be two pickups of open Assembly seats previously held by Democrats, California Republicans had their best legislative election in a decade.

Notably, all three of those flips were by Asian or Latino candidates, which is poised to give the GOP a majority non-white caucus in Sacramento for the first time ever, writes CalMatters Digital Democracy reporter Ryan Sabalow.

Could a growing appeal in diverse California communities traditionally aligned with Democrats be the party’s path back to power at the state Capitol, where Republicans remain a superminority? Experts offer their theories in Ryan’s story.

Election results: Follow all the final California results, including on the ballot propositions and toss-up U.S. House races. And keep up with CalMatters coverage by signing up for 2024 election emails.

Wage theft in construction?

New housing construction in a neighborhood in Elk Grove on July 8, 2022. Photo by Rahul Lal, CalMatters

Attorney General Rob Bonta is getting tough on wage theft on behalf of allies in organized labor.

At a press conference in Los Angeles on Tuesday, Bonta announced a felony complaint against US Framing West, a Kentucky-based wood framing company, and two of its employees, alleging 31 counts of grand theft, payroll tax evasion, prevailing wage theft and filing false documents.

Bonta: “For some reason, US Framing West seems to think it can operate outside the prevailing wage laws of California. I’m here with a simple message: They cannot. No company can.”

As CalMatters Inland Empire reporter Deborah Brennan explains, US Framing West secured several jobs on large construction projects in California between 2018 and 2022, subcontracting out the labor to unlicensed operators who allegedly underpaid workers by tens of thousands of dollars. Bonta also accused the company of failing to pay more than $2.5 million in state payroll taxes over that period.

Notably, the case came to the attorney general’s office through complaints from construction unions. Lorena Gonzalez, president of the California Labor Federation, appeared alongside Bonta at Tuesday’s press conference, where she called for jail time for wage theft violations.

Tending to that relationship is smart politics for Bonta, who is expected to soon enter the 2026 race for governor. In an already crowded and largely undefined field, winning the backing of organized labor could offer a significant boost.

And lastly: Navy lab experiments

Sailors and workers at Hunters Point Naval Shipyard in July 1947. Photo by Duke Downey, San Francisco Chronicle via Getty Images

Between the 1940s and 1960s, more than 1,000 service members and others were exposed to potentially hazardous levels of radiation at the U.S. Navy lab at Hunters Point Shipyards, reports the San Francisco Public Press. In partnership with The Guardian, the first in a six-part investigative series published Tuesday. Read it here.

California Voices

California voters improved accountability on healthcare spending by passing Proposition 34, writes Julie Gill Shuffield, executive director of Patients Come First California.

CalMatters events: If you missed our most recent ones this month, you can replay them on video: On workforce training, and on mental health parity.

Other things worth your time:

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