An update from the Smith Policy Group – lobbyists for the United Chamber Advocacy Network
Happy 2025!
We hope you had a good holiday and the New Year is off to a good start. Speaking of starts, the 2025-26 Legislative Session kicked off again on January 6. While it’s early in the year we are already seeing policy trends develop. Leadership in both houses have indicated a focus on affordability and the cost of living in California. On that front we will likely see bills that address housing scarcity, energy policies, wages, employment and benefits. In the face of the LA wildfires, we expect that there will be significant legislative efforts related to California’s insurance market, including continued efforts to stabilize residential insurance policies. In the days following the Presidential election Governor Newsom called for a special session to “Trump proof” California. This special session sets aside $50 million in state funding to litigate Trump Administration policies and actions, such as those related to the environment, reproductive health, immigration, water policy and more. Also, nothing prepares the Governor for a 2028 presidential run better than sparing with the Federal government over the next 4 years.
In early December, the non-partisan Legislative Analyst’s Office (LAO) released a comprehensive proposal to fix California’s unemployment insurance fund’s many problems, including the $20 billion tab California owes to the federal government. The LAO notes that the payroll taxes - paid by employers - are routinely falling short of covering the existing benefit costs and that the program is likely to see deficits of $2 billion per year over the next five years. In a recent press conference, Governor Newsom addressed the fund’s shortfall saying he is hopeful that the state can make some progress in reducing the debt in a way that doesn’t fall on the backs of employers. Since he’s already elected to stick employers with repaying the current $20B debt obligation racked up with COVID fraud we aren’t holding our breath.
Finally, Governor Newsom released his 2025-26 Budget Proposal on January 10, with the State Department of Finance projecting no deficits and a modest surplus of $363 million. The Governor proposes several new programs, including a state reorganization plan to create the California Housing and Homelessness Agency, meant to streamline housing development efforts and the state’s response to the homelessness crisis. Perhaps the Governor is feeling the pressure of his unmet campaign promise to build 3.5million housing units in California during his tenure (hint – we aren’t anywhere close).
It will be several more months before the political wrangling over the state budget and thousands of proposed bills truly ramps up. In the meantime, the Legislative bill introduction deadline is February 21st,and we will have a much better sense of the policy agenda once we pass that check point. Stay tuned for further updates on policy, legislation and regulations affecting California’s employers in future writings throughout the year.