Balanced Budget? David Crane, President of Govern for California, recently wrote about California’s “balanced budget”. He gave WECA permission to republish his observations.
Last Monday, Governor Newsom issued a press release previewing a "balanced" budget for 2025-26, so imagine our surprise when his proposed budget released today disclosed that balance was achieved by transferring $7.1 billion from the Rainy Day Fund. In your household do you consider your budget balanced if you dip into savings to cover a deficit? We don’t. In fact, when the Monday press release extolled that "state revenues are up by $16.5 billion," we expected the proposed budget would not only not draw from the Rainy Day Fund, but also would pay back $4.9 billion taken from the Rainy Day Fund last year. It’s misleading to characterize such a budget as "balanced", and worrisome that Newsom keeps taking money from the Rainy Day Fund when the economy and stock market are vibrant and reserves might be needed more than ever. We’re still reading through the document and will have more to say, but this is not a good start.
Crane followed up with additional analysis:
Governor Newsom’s proposed budget includes a paragraph entitled “GOVERNMENT EFFICIENCY AND COST SAVING MEASURES”, but the measures mentioned there are a tiny fraction of the inefficiencies and costs added under Newsom. E.g., in the year Newsom took over from Jerry Brown, the Executive Branch hosted 211,000 jobs on whom the state spent $19.5 billion in salaries.
Since then, Newsom has expanded staffing and salaries in favor of public sector unions that are also his political supporters, with the result that the proposed budget shows staffing up 21% and salary spending up 44% to $28.1 billion per year.
Schedule 6 of the budget, which includes State employees outside the Executive branch, shows a sharp drop in efficiency. E.g., employees per 1,000 population is up 17% and General Fund expenditures per Capita are up 65%. Have public services per Capita improved at all — much less 65% — since Newsom took office?
Another contributor to declining efficiency is rising spending on benefits for retired employees, another Newsom supporter. E.g., spending on Other Post-Employment Benefits (OPEB) is up 74% and takes more than $4 billion per year from the General Fund. California's OPEB benefits are multiples of those provided by other states. On top of that is pension spending of $14 billion, up 46%. The same issues handicap efficiency in schools, colleges, universities, cities, counties and other agencies funded and governed by the state.
As with his untruthful claim of a balanced budget, Newsom’s claim about an efficient budget is misleading.
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More Pain for Employers The Legislative Analyst’s Office (LAO) released “Fixing Unemployment Insurance,” finding that the “anticipated annual shortfalls” between revenue and benefits paid out “will add to the state’s looming $20 billion outstanding federal UI loan” and “expects the loan to grow by billions of dollars before federal surcharge UI taxes are high enough for the state and employers to begin making progress toward repaying the loan.” The LAO recommends the legislature “increase the taxable wage base” on which employers are required to pay UI taxes, from a maximum of $7,000 to $46,800, which would “place California among the ten states with taxable wages bases above $40,000 and all other Western states,” but notes “this step alone would not be sufficient to address the state’s solvency problems.”
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Litigation Filed to Enjoin SB 399 Prohibiting Mandatory Meetings During Union Organizing On January 1, 2025, Senate (SB) Bill 399, went into effect in California, which joined other states, including Illinois, Connecticut, Hawaii, New York, and Oregon, in enacting statutes that prohibit “captive audience” meetings, similarly limiting employers’ ability to conduct mandatory meetings on religious or political matters, including a labor organization. Several business groups have filed a federal lawsuit challenging the constitutionality of SB 399 and seeking declaratory and injunctive relief. The lawsuit, filed in the Eastern District of California, argues that the law infringes on employers’ rights to free speech and equal protection under the First and Fourteenth Amendments of the U.S. Constitution. The plaintiffs contend that SB 399 discriminates against employers’ viewpoints on political matters and restricts the content of their communications with employees. They argue that the law stifles employer speech and is preempted by the National Labor Relations Act (NLRA), which protects employer free speech under Section 8(c). Story
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Falls and Construction Lead in Workplace Fatalities
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Senator Hawley Circulating Framework for Labor Reform Senator Josh Hawley (R-MO) is circulating a framework for potential labor law reform legislation. The framework calls for:
- notice posting requirements on employees’ collective bargaining rights;
- safety provisions for warehouse workers, including a prohibition against work speed quotas;
- banning captive audience meetings;
- ambush elections within 20 business days;
- a 10-day time period for the employer and union to begin negotiating following a representation election; and
- civil penalties, increased damages, and employees’ right to seek remedies in court if the employer violates the NLRA.
Hawley and the Teamsters are sharing the framework with Senate offices, looking for additional support. Hawley’s comment to the press regarding the framework was that he “look[s] forward to advancing meaningful legislation for working people this Congress.” While it’s difficult to weigh in on the consequences of the proposal without seeing actual legislative text, these concepts could trigger First and Seventh Amendment concerns.
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Higher OSHA Penalties Kick-in This Week The Department of Labor last week announced its annual inflation adjustments to OSHA civil penalties for 2025, taking effect for violations issued on or after Jan. 15, 2025. Below are the maximum penalty amounts:
· State plan workplace safety agencies are required to increase their maximum penalties in alignment with OSHA’s penalty increases to maintain at least as effective penalty levels.
· Other DOL civil penalties are similarly increasing. More information can be found in the final rule.
READ MORE
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SOMAH Decision Workshop, February 11, 2025, 1:00 p.m. - 3:00 p.m. PT The SOMAH Program will host a workshop in compliance with the California Public Utilities Commission’s (CPUC) Final Decision D.24-11-006. This workshop will provide an opportunity to explore upcoming program changes and engage in discussions on key topics, including:
· New incentive levels for paired storage systems
· Potential impacts on tenant benefits, budgets, and SOMAH goals
· Updated safety rules for storage installations
· Alignment with SGIP rules and incentives
· Opportunities for prior SOMAH applicants to enhance existing systems with storage
· Strategies to achieve SOMAH’s 300 MW target
Register
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Former EEOC Commissioner and Acting WHD Administrator Announced as Pick for Deputy Secretary of Labor On January 14, 2025, President-elect Trump named former U.S. Equal Employment Opportunity Commission (EEOC) Commissioner Keith Sonderling as his pick for deputy secretary of the U.S. Department of Labor (DOL). This is a significant appointment as it places an experienced labor and employment attorney, who has served in both the EEOC and DOL, as second-in-command under the previously announced Secretary of Labor pick Lori Chavez-DeRemer. Sonderling began his career as a management-side labor and employment attorney in his native state of Florida. After spending nearly 10 years in the private sector, he joined the DOL in the first Trump administration. There he held several roles, most notably serving as the acting and deputy administrator of the Wage and Hour Division (WHD). In 2020, Sonderling was tapped to become one of five commissioners at the EEOC. He was strongly supported by the business community and confirmed by the U.S. Senate with bipartisan support. He finished his tenure at the EEOC in August of 2024. Story
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Lawsuits Dangle Compensation Lure to California Wildfire Victims While the cause of the Southern California wildfires is still under investigation, several lawsuits have been filed claiming utility equipment is responsible for one of the largest blazes. Attorneys working with ClassAction.org are now looking to file a class action lawsuit on behalf of people who were injured by or suffered losses due to the wildfires, including the Palisades, Eaton, Kenneth, Hurst, Lidia and Sunset fires. Those who were forced to evacuate, who were injured, whose homes were damaged, whose businesses were impacted, or had a sleepless night because they worried about fires may be able to take action. Looters gotta loot!
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Higher Electricity Costs Expected Electricity bills in California — already among the nation’s highest — could soon skyrocket. In addition to killing two dozen people and destroying at least 12,000 structures, the devastating wildfires in Los Angeles have also damaged the region’s electrical system, writes Politico. “Ultimately, ratepayers will foot the bill,” said Travis Miller, a utilities analyst at Morningstar. And that is just one of the expected costs to residents. “Customers face a triple whammy here, with potentially higher insurance costs, higher utility bills and the recovery from property damage they suffered,” Miller said. The total damage from the fires is expected to rise north of $250 billion—making it one of the nation’s costliest disasters.
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Cal/OSHA’s Workplace Violence Plan Since July 2024, California employers have been working under the requirements of SB 553 for workplace violence (WPV) prevention. After several years of planning to enact a new Cal/OSHA regulation, the Division of Occupational Safety and Health will take the next steps in the new year to combine the law with its own vision. That work officially begins on January 24th, 2025, with an advisory committee meeting via video conference. SB 553 requires DOSH to forward a rulemaking proposal to the Standards Board by the end of 2025. The Board must adopt a regulation by the end of 2026.
What Does the 2024 Election Mean for Contractors? With the holidays behind us and the inauguration ahead, some business owners and managers wonder what the election means for the next few years. I have highlighted several key things WECA Government Relations will be focused on:
Cabinet Appointments Some were surprised when President-elect Trump (hereafter referred to as DJT) announced that the girlfriend (ex-girlfriend?) of Don Jr., Kimberley Guilfoyle, would become Ambassador to Greece. Having a dad in the White House comes in handy when it’s time to change your dance card, as Don Jr. seems to have moved on—much like Gavin Newsom did when he divorced Guilfoyle in 2006. More troubling is DJT’s announcement that former one-term Oregon Representative Lori Chavéz-DeRemer would be Secretary of Labor. Chavéz-DeRemer served as mayor of Happy Valley, Oregon, from 2011 to 2019. She is the first Republican woman to represent Oregon in the House. Voters in Oregon’s 5th district had second thoughts and replaced Chavéz-DeRemer with Democrat Janelle Bynum in November. The race was considered one of the most competitive in the US House and drew more than $26 million in outside spending. The race was called for Bynum on Friday, November 8th. So, why the concern? Chavéz-DeRemer was often the lone Republican supporter of various pro-union bills in Congress, including the PRO Act (card check) and comes to the Trump camp with strong union support, and healthy skepticism from business groups, and Republicans.
PRO Act/Card Check As mentioned above, Chavéz-DeRemer didn’t just support the PRO Act, but cosponsored it. Additionally, Missouri Senator Josh Hawley recently offered that he wants to see a business-friendly PRO Act. He didn’t explain what that meant, but Hawley said that he no longer supported right to work—which bars unions and employers from requiring workers to pay dues as a condition of employment. This was a significant change for Hawley, who backed the policy when he was running for office in 2016. And it’s part of a broader attempt by the Republican incumbent to appeal to union members in the run-up to the Nov. 5 election. “If those people don’t pay dues but get the benefit of the contract, that’s not fair,” Hawley said.
Tariffs DJT has announced across the board tariffs on “day one.” As Construction Dive observed, “For commercial builders and their clients, that could spell major price hikes. While much about the plan remains uncertain, industry leaders are already bracing for its potential impact. The scale of the tariffs—and how rigorously they are enforced—will determine how deeply construction is affected. Broad enforcement could disrupt construction by increasing the costs of materials from specific countries, potentially delaying or deferring projects altogether. Products imported from China, including lower-cost commodity items such as certain metals, coatings, plumbing components and HVAC parts, could see significant price increases.”
“Heading into 2025 it’s unclear if prices will remain so well-behaved,” said Anirban Basu, chief economist of the ABC, in a statement. “The next administration’s trade policy increases uncertainty regarding construction materials costs. Beyond the implications of potential tariffs, input prices may rise in the short term if purchases rush to import materials prior to the implementation of those policies,” he added. “Construction is more reliant than most industries on imported materials, parts and components,” said Ken Simonson, the top economist for AGC. “Because the industry is so diverse and obtains materials mainly through intermediaries rather than importing directly, it’s impossible to estimate the share of construction purchases that go for imports. Also, it varies by location as to whether contractors are using domestically sourced or imported materials such as lumber, steel or cement,” he added. Simonson recalled when then-President Trump enacted 25% tariffs on steel and 10% on aluminum, which was followed by domestic producers raising prices and contractors experiencing supply chain problems. It’s not clear yet which items will be subject to tariffs and the effects, but another danger is the knock-on effects as other countries threaten to enact their own tariffs in retaliation, he added. “Both the tariff-induced price increases and the responses are likely to be damaging to construction firms and to the demand for construction,” Simonson said.
Deportations In Texas, California, New Jersey and the District of Columbia, immigrants make up more than half of construction trade workers, according to Riordan Frost, a senior research analyst at the Harvard Joint Center for Housing Studies. Undocumented workers make up an estimated 13% of the construction industry—more than twice that of the overall workforce, according to a recent estimate from Pew Research Center. Trump, a former real-estate developer himself, has said he would support the construction industry by easing regulations and allowing more building on federal land. But many economists and builders say the loss of the immigrant workforce would drive up the cost of wages for some positions and leave others unfilled. What should California contractors do? A Google search returns many suggestions, but all business owners should consult with California-based attorneys with immigration knowledge and subs should consider a conversation with your GCs about site access and their rights and responsibilities.
PLAs President George W. Bush issued two executive orders related to a prohibition on federal funding for construction contracts that included a requirement for contractors to sign a Project Labor Agreement with trade unions. The first executive order—Presidential Executive Order 13202, signed on February 17, 2001—received national news coverage and Congressional attention. Long-time merit shop supporter Kevin Dayton wrote about these EO’s in 2017.
On February 6, 2009, President Obama issued Executive Order 13502, Use of Project Labor Agreements for Federal Construction Projects (“EO 13502”). The Executive Order encouraged federal agencies to use union-only project labor agreements (“PLAs”) on construction projects, the cost of which exceeds $25 million.
In his first term, President Trump, unlike his Republican predecessor, took no action to repeal 13502. Instead, agency heads took not-widespread action to require PLAs on their projects. This changed in February 2022 when President Joe Biden issued EO 14063, which required federal agencies to “use project labor agreements in large-scale construction projects to promote economy and efficiency in the administration and completion of Federal construction projects.” The rule defines a large-scale construction project as a “federal construction project within the United States for which the total estimated cost of the construction contract to the Federal Government is $35 million or more.”
So, what will President Trump do in 2025? Will he repeal 14063? That may not suffice inasmuch as the Biden administration took additional steps to enforce the EO by issuing new regulations that won’t be automatically repealed by a new EO.
Apprenticeship, Workforce Development The National Apprenticeship Act of 1937 (also known as the Fitzgerald Act), established the Department of Labor's role to safeguard the welfare of apprentices, ensure equality of access to apprenticeship programs, and provide integrated employment and training information to sponsors. Many believed the Act was outdated and on February 5, the House of Representatives passed H.R. 447, the National Apprenticeship Act of 2021, reauthorizing the 1937 program. The bill died in the Senate. The 118th Congress tried again in 2023 with H.R. 2851 and S. 2122, but neither advanced. Will Chavéz-DeRemer and President Trump make renewal a priority?
WIOA Reauthorization The Workforce Innovation and Opportunity Act (WIOA) expired in 2020, leaving workforce development agencies in a state of limbo. Federal funding for workforce programs has declined by 45% over the past two decades, and in the absence of updates, workforce systems are struggling to meet the economic and employment challenges of today. Despite bipartisan support, differences between House and Senate proposals and tight legislative timelines have delayed reauthorization since WIOA expired in 2020. A bipartisan compromise bill will be in play but faces hurdles for passage. Impact of New Congressional Leadership in 2025: Rep. Tim Walberg (R-MI) will replace Rep. Virginia Foxx (R-NC) as chair of the House Education and Workforce Committee. This leadership shift, coupled with competing legislative priorities, could further complicate reauthorization efforts. Politico reported that a bipartisan deal to reshape WIOA was a casualty of the conservative-led revolt over a temporary funding package that fell apart late last year. “Language reauthorizing the Workforce Innovation and Opportunity Act, known as the A Stronger Workforce for America Act, was excluded from the slimmed down bundle brokered by House Republicans, according to the bill’s text. The legislation had been included in a vastly more expansive $100 billion package that was loaded with policy items that went beyond continuing to fund the government until next March. Those add-ons drew opprobrium from conservatives online, Elon Musk, and ultimately President-elect Donald Trump. Trump appeared to bless the newer package unveiled Thursday, which includes an extension of the debt limit he demanded, though it remains to be seen whether it can ultimately pass Congress.”
Why is WIOA reauthorization important to California contractors? California law that regulates how the state spends WIOA grants for pre-apprenticeship training in the building and construction trades fund programs and services must “follow the Multi-Craft Core Curriculum implemented by the State Department of Education for its pilot project with California Partnership Academies.” Who controls the Multi-Craft Core Curriculum? The State Building and Construction Trades Council!
2026 Election And because the 2024 election is just over, WECA Government Relations is already looking ahead to 2026 (as we assume so is everyone else who enjoys politics). Obviously. The party in the White House historically loses ground in mid-term elections, but will this trend continue? If it does, it could make the next two years of President Trump’s second term more difficult. It will also be the election for Governor of California with Gavin Newsom termed out. Senate Candidate Katie Porter is preparing to run and many on the left believe that soon to be ex-vice president Kamala Harris would be an excellent Governor candidate; many Republicans agree and would enjoy her being nominated. Lt. Gov. Eleni Kounalakis has suggested her background as a housing developer as uniquely preparing her to help California build its way out of an affordability crisis. Superintendent of Public Instruction Tony Thurmond, who grew up relying on public assistance, said he would fight for working people. Former Controller Betty Yee asked voters to consider her nearly 40 years in public service taking on big interests and solving problems. Former state Senate leader Toni Atkins said she was the candidate most ready to hit the ground running on day one, because of her record of accomplishment on all these issues in the Legislature. Former Los Angeles Mayor Antonio Villaraigosa, who tried tacking to the center in an unsuccessful gubernatorial bid against Newsom in 2018, is also thinking about the race. At least two top Democrats are reportedly still considering whether to enter the race later: Attorney General Rob Bonta and U.S. Health and Human Services Secretary Xavier Becerra.
Also, in the mix: Stephen Cloobeck, who made his fortune selling timeshares. He sold the firm in 2016. This is Cloobeck’s first run for public office, but not his first foray into politics. Cloobeck is a longtime donor and fundraiser for Democrats and philanthropic causes. He backed Gov. Gavin Newsom and former Los Angeles Mayor Antonio Villaraigosa in the 2018 California governor’s race, along with former federal prosecutor Nathan Hochman’s successful bid for Los Angeles County district attorney in the 2024 election.
Among Republicans thinking about the race: Chad Bianco, Riverside County Sheriff; Lanhee Chen, Stanford University professor and public policy expert; Brian Dahle, former state senator, and Steve Hilton, conservative commentator.
It will be a busy year!