June Sacramento Update

May is fiscal season in the Capitol when the Governor’s revised budget is released and Appropriations Committees hear bills that have an impact on the state’s general fund.  To that end, on May 14, Governor Newsom unveiled his “May Revise” which is an amended version of his January proposed budget. California’s budget is unhealthy, with the state facing a $12 billion deficit. In addition, revenues are expected to be $7.8 billion less than projected due to stock market instability and recent federal actions.  Governor Newsom estimates that the state could see a $16 billion loss due to the tariffs.  Given this reality, the budget is not proposing significant new spending and instead proposes $5 billion in spending reductions, $5.3 billion in revenue/borrowing, and $1.7 billion in fund shifts. Notably, Newsom is proposing to eliminate Medi-Cal coverage for undocumented adults.

Beyond the budget, the Senate and Assembly Appropriations Committees convened on May 23 to take up the suspense files in both houses, which is where bills are sent that have a certain fiscal impact on the state. AB 1365 (Garcia), which would have established the CalAccount program which would provide all Californians access to free, voluntary, zero-fee, zero-penalty, federally insured bank accounts, was held on the Suspense file and is dead for the year. CCBN advocated against this bill and its defeat is a win for community banks.

Conversely, AB 801 (Bonta) passed off the Suspense file with amendments narrowing the types of credit unions subject to the bill (those with assets above $75 million). AB 801 would establish the California Community Reinvestment Act, and would require a covered financial institution to have a continuing and affirmative obligation to meet the financial services needs of the communities, including low and moderate-income communities and communities of color, in which the covered financial institution conducts substantial business, as specified. The bill would also prohibit a covered financial institution with certain ratings from receiving state funds for deposit or being awarded a state contract to provide financial services.  CCBN helped defeat a Community Reinvestment Act bill several years ago and is advocating to be carved out of this legislation and make credit unions subject to the CRA. Without a carve-out, CCBN will oppose the bill.  It must now pass out of the Assembly and move to the Senate.  

So far this year, we have been integral in defeating three bills that would have had significant negative impacts on community banks and their customers.  In addition to the CalAccount bill, this included AB 1065 (interchange fees) and AB 909 (elder abuse induced transactions). We will continue to advocate to protect community banks and the legislative session continues.