California Grapples With Post-Pandemic Economic Recovery

Small businesses, undocumented laborers, gig-economy workers — everyone wants a place at the table to discuss how California’s economy recovers once the novel coronavirus has been eradicated.

Unionized hospitality workers wait in line in a basement garage to apply for unemployment benefits at the Hospitality Training Academy last month in Los Angeles. (AP Photo/Marcio Jose Sanchez)

(CN) — Business owners, worker advocates and budget experts told California lawmakers at a state budget hearing Monday that officials should increase support for small businesses — including by potentially relaxing some regulations — and struggling workers in plans for economic recovery after the coronavirus emergency.

The hearing took place as San Francisco Bay Area counties extended stay-at-home orders through the month of May and California Governor Gavin Newsom announced 45 new deaths from Covid-19 and 1,300 new positive cases.

Assemblymember Phil Ting, chair of the California Assembly Budget Committee, framed Monday’s hearing as a chance for experts to weigh in on lawmakers’ arduous task of crafting a budget that benefits as many residents and businesses as possible.

“There’s no sector of the state that’s left really untouched by this pandemic,” Ting said. “The biggest challenge is that we cannot deficit-spend. We have to pass a balanced budget on June 15. That will limit the help people are asking for.”

University of California, Los Angeles, economist Jerry Nickelsburg told committee members the pandemic will erase 2.2 million jobs in the state and increase its unemployment rate to nearly 17%. 

“Economic recovery will be more rapid because of how demand has been restricted,” said Nickelsburg, who also directs the UCLA Anderson Forecast. “But it will take until the end of 2022 to return to 2019 employment levels.”

Nickelsburg said three sectors of the Golden State economy will be particularly hard hit: transportation and warehousing, leisure and hospitality, and agriculture. 

David Ahlem, president and CEO of Hilmar Cheese Company in the Central Valley, told the committee the economic crisis has stifled farmers’ operations, erased demand from food service companies and driven the value of his cheese products down 40%.

“Agriculture and food production is a backbone of the California economy,” Ahlem said. “The more we can support farmers, incentivize ways to eat out, shop and go to the movies, the quicker we get back on our feet.”

Ahlem asked lawmakers to ensure businesses can give workers personal protective equipment, or PPE once the economy kicks back into gear. 

Assemblymember Jim Wood, D-Santa Rosa, told Newsom administration officials the state needs to step in with a plan to provide PPE to businesses so they can operate safely when they open again.

“We’re the fifth largest economy in the world. Could we not figure out a plan to produce our own PPE?” said Wood. “These masks will be a way of life for months to come if not longer.”

California Department of Finance official Vivek Viswanathan told the committee the state is pressing for more federal relief funds to lessen the burden on employers and state governments who purchase PPE for workers.

Marko Mijic with the state’s Health and Human Services Agency said a state website launched Monday to track PPE stockpiles, shipments and orders statewide.

“We’re only looking at opening up businesses based on public health guidance,” Mijic told lawmakers.

Assemblymembers Adam Gray, D-Merced, and Vince Fong, D-Bakersfield, said a bipartisan task force should study various relief measures for small businesses, including by listing taxes, state fees and regulations to be waived during the pandemic-fueled economic downturn.

Republican Assemblymember Jay Obernolte of Big Bear Lake suggested relaxing enforcement of Assembly Bill 5, which requires some gig-economy companies to offer employee status and benefits to workers.

Viswanathan told Obernolte the state continues to enforce the law.

“AB 5 is the law on the books in California,” said Viswanathan. “We don’t feel a blanket removal or a pause on regulations is appropriate here given the complexity of the situation.”

Finance department official Chris Cook told Obernolte the governor’s office may look into it as part of its May budget revision process.

Saru Jayaraman, director of One Fair Wage and the University of California, Berkeley’s Food Labor Research Center, cautioned the committee against crafting a pro-small business budget that leaves out wage increases and health care for workers.

“Small businesses won’t survive without workers who have the wherewithal to spend,” Jayaraman said. “If workers are not guaranteed protections, such as sick pay, they will not be able to consume.” 

At least 1.1 million restaurant workers — many of them immigrants — have lost employment so far, Jayaraman said, adding that the state could support efforts to sell shuttered restaurants to workers or help businesses convert into worker-owned cooperatives.

“These are high-skilled workers with low wages,” Jayaraman said. “Not all workers will get their jobs back, but support for them starting their own business does exist.”

Earlier this month, Newsom provided California’s undocumented immigrants who were left out of Congress’ $2.2 trillion stimulus with one-time stimulus payments from a $125 million state relief fund.

Newsom said undocumented workers paid nearly $3 billion in taxes in California in 2019 and represent 10% of the state’s workforce.

California Budget and Policy Center executive director Chris Hoene told the committee while the payments are vital, undocumented residents need more support. The state can enroll undocumented residents in health care and unemployment insurance programs for starters, Hoene said.

San Francisco Chamber of Commerce CEO Rodney Fong told the committee to consider the pandemic’s impact on working parents who struggle to balance their children’s distance-learning efforts with work-from-home demands.

“The focus on safely reopening public schools and ensuring public health will help our small businesses get back online,” said Fong. 

Legislative Analyst Gabe Petek said the state will likely feel the effects of the current crisis for more than one budget cycle. 

“Increased spending in one area means reduced spending in another,” Petek said of spending on social safety net programs. “The state’s options are limited as compared to the federal government, which can run large deficits to stimulate the economy.”

With California dipping into its $21 billion surplus fund to meet demands of the Covid-19 crisis, Newsom faces a May 15 deadline to propose a state budget framework. His administration calculates the state could spend at least $7 billion from its reserves to pay for efforts to protect the public from the coronavirus outbreak.

The Legislature reconvenes in May to take on the task of passing a balanced budget. 

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