ASSEMBLY BUDGET SUBCOMMITTEE NO. 6
ON BUDGET PROCESS, OVERSIGHT,
AND PROGRAM EVALUATION
ASSEMBLYMEMBER PHIL TING, CHAIR
MONDAY, APRIL 27, 2020
10:00 AM – STATE CAPITOL, ROOM 4202
The Assembly Budget Subcommittee No. 6 on Budget Process, Oversight, and Program evaluation met this morning to discuss the economic impact of COVID-19 and what an economic recovery could look like. The committee received testimony from a broad list of experts who all participated remotely. The committee began with an economic forecast, moved onto the impact on businesses and workers, and concluded with information from the Legislative Analyst’s Office and CA Budget and Policy Center on what California has done and what can be done to best bounce back from the economic downturn. Assembly members then asked the panelists questions regarding the state’s response to the economic down turn with many of the questions not able to be answered until the May revise set to be released May 14th.
A recording of the hearing can be found on the Assembly Media Archive website.
Ting, Obernolte, Arambula, Wood, Brough, Cooper, Limon, Bloom, Fong, McCarty, Gray
- Jerry Nickelsburg, UCLA Anderson Forecast
- Rodney Fong, San Francisco Chamber of Commerce
- David Ahlem, Hilmar Cheese Company, Inc.
- Saru Jayaraman, One Fair Wage
- Gabe Petek, Legislative Analyst’s Office
- Chris Hoene, California Budget and Policy Center
- Vivek Viswanathan, Department of Finance
Professor Jerry Nickelsburg UCLA Anderson Forecast
Professor Nickelsburg provided an economic forecast. To preface the forecast, he began by saying that this is a different kind of recession than we have experienced. Unlike the recession of 2008, this recession is due to a reduction in demand is from a public health crisis and not from an over production of goods and all of the forecasts are based on less data than what was put out in 2009. The assumptions in the forecast are that by the early part of the summer we will be on the tail end of the outbreak and we will the begin opening up the economy. The assumptions are only assumptions and not predictions.
The forecast includes:
- 10% decline in GDP at least, maybe higher
- 16.5% unemployment peak by end of the year – services sector and lower-wage jobs are hit hardest
- Many businesses may go into bankruptcy and they see contraction through 4th quarter of 2020
- An expected 18 months to recover, through the end of 2021
- Retail will not fully recover; it was contracting even in the expanding recovery before the pandemic, especially brick and mortar retailers
- Leisure and hospitality industries will have struggles coming back
- Lots of technology jobs expected especially with remote work continuing
- This will likely be a more rapid recovery than the 2009 recession.
Rodney Fong, Director of SF Chamber of Commerce
The speaker stated that all businesses are fragile and were hit hard by the sudden response and shut down. What remains crucial is the need for schools to reopen soon so that working parents can send their kids to school and get back to work. Mr. Fong also anticipates a lot of remote working and emphasized the need for better and equitable Internet service around the state. Additionally, he stated that it is going to be critically important that there are clear guidelines and resources on how businesses can reopen and pivot to make their businesses successful. He concluded by highlighting the importance of contact tracing.
David Ahlem, Hilmar Cheese Company
Mr. Ahlem spoke to how the food and agriculture industry have responded to the pandemic and reiterated how they are essential services to Californians. They have been hit hard as the demand for food has dropped and prices have been reduced.
Mr. Ahlem went on to say that there are two keys to returning to normalcy. One is to restore confidence by supporting new and safe ways to interact and to support economic growth by not over burdening businesses trying to remain financially viable.
Saru Jayaraman, One Fair Wage
Ms. Jayaraman spoke about the millions of low-wage workers who have been laid off, including 1.1M restaurant workers. She stated that many have had trouble reaching federal and state benefits, especially undocumented workers. She also recognized that small businesses are hurting, particularly in the restaurant industry. Going forward there is a need to support the “high road to profitability”, which is a commit to livable wages; racial and gender equality. Additionally, Ms. Jayaraman advocated for:
- Wage subsidies and work-sharing programs
- Universal health care
- The Split Roll Ballot Measure
- Keeping schools open
- PPE and expanded paid leave
- A health and safety council at every business
- Hiring more public sector workers
Legislative Analyst, Gabriel Petek, LAO
Mr. Petek said the LAO is developing its fiscal estimates for the current and upcoming fiscal years and can state now that the state clearly has gone from a budget surplus to not covering its bills. This will expand beyond one budget cycle. He stated that the state could consider issuing bonds but that takes time and may not meet the immediate needs of the state, not to mention the additional long term cost associated with bonds. The state could also consider (1) internal borrowing, (2) spending down the reserve, (3) borrow from the federal government for its UI Program and make program changes. The state could choose to repay this with the general fund instead of placing the burden on employers if it chooses.
Chris Hoene, CA Budget and Policy Center
Mr. Hoene talked about the state’s options with a focus on workers and outlined key proposals that would aim to benefit those who are most in need, low-income workers, many of whom are essential workers. While the state is receiving federal dollars, there will likely be large gaps if funding is not increased. He closed by reiterating that with the state facing harsh fiscal realities the state needs to focus its resources on workers and their families.
Q and A:
Assemblymembers then asked the panelists many questions regarding the state’s response to the economic down turn. A majority of those questions will be answered when the May Revise is released on May 14th. Members had several questions pertaining to how small businesses have responded to COVID-19, the PPE supply chair, local government revenues, AB 5 enforcement, and a freezing of current regulations to ease the strain on businesses. Some Assemblymembers also stated that they would be in favor of a pausing of some non-COVID-19 related regulations in order to reduce litigation and regulation. An Assemblymember also advocated for a “blue new deal” for investing in the health care industry.