The State of California: Coronavirus And The Road Ahead

The major developments around the State of California included Governor Gavin Newsom allowing business and manufacturers to move into the next phase of reopening Friday, making deals to allow for the reopening of Orange County beaches, appealing relentlesses for public  patience with the pace of reopening the economy and continuing to practice physical distancing. Almost 500 more Californians died this week with statewide deaths totalling over 2,700, though the curve is flattening with the pace of new cases falling steadily, especially in the Bay Area. Finally, the state budget came into sharper focus this week, with news of a $54B deficit.

The Governor has been under tremendous pressure from counties around the state, especially more rural counties, regarding the pace of reopening the state. The Governor insists he’s not giving into political pressure, but this week he did decide to move a little more quickly into Phase II after what seemed to be behind-the-scenes pressure and lobbying. He said he’s driven by data, science and facts, and the flattening of the curve is allowing him to move into Phase II. Protesters around the state may be in the minority, but they have plenty of anger and frustration, and are making their voices heard. Almost half the counties, some two dozen, in California have written to the Governor asking him to allow them to reopen sooner citing their rural nature, or that they have their COVID-19 cases under control. These counties are hemorrhaging money with residents angry at the way things have gone. While the Governor is certainly feeling pressure, he doesn’t want to make the mistake of coming back too soon and seeing a surge or spike just when it seems like the state is on the downside of the pandemic.

Here in the Bay Area, the Governor has praised the work of county health officers who people think have done a very good job. He knows the Bay Area will tend to move more slowly, with many counties not feeling confident in moving towards Phase II so quickly. Even though the Bay Area caseload has been down, officials simply would rather take it slow, preferring not to have to go back. It would be even more difficult getting people to go back into strict shelter in place conditions once the horse is out of the Bay Area. The Bay Area counties don’t feel comfortable, don’t feel ready, and were in the vanguard in terms of sheltering in place three days before the state did and will come out of it behind much of the state. Officials have even hedged slightly on their May 18th estimate, saying that much of it still depends on the curve flattening to continue.

The Governor next must tackle the state’s budget crunch, brought on by the pandemic. As compared to prior governor’s, the percentage of the total budget is smaller, but in terms of gross dollars it’s the highest that anyone has ever had to figure out. The Governor has to submit a balanced budget next Thursday, while they are hoping for some amount of support from the federal government he will have to develop some combination of tax and fee hikes along with spending cuts to make up the difference. It remains to be seen what the appetite from voters will be for an increase in taxes, given the financial strain brought by the COVID-19 pandemic.