With hundreds of new laws going into effect next year, the saying that “there ought to be a law” is taken way too seriously by California politicians. Regrettably, there is one law lacking – a binding requirement that forces legislators to think about the unintended consequences of the bills they enact.
Here are a couple of examples.
It shouldn’t be surprising that the Legislature sent billions of dollars in new spending to Gov. Gavin Newsom’s desk this session. But it was a pleasant surprise that he vetoed some of the worst, stressing it was “important to remain disciplined when considering bills with significant fiscal implications” as the state faces “continuing economic risk and revenue uncertainty.”
That random act of sanity even earned him some praise in the media with reporters suggesting that the governor was exhibiting a more moderate streak in preparation for a possible presidential run. But two bills he did sign show that his supposed fiscal discipline was short-lived.
Assembly Bill 1228 raises the hourly minimum wage for fast food workers to $20 and Senate Bill 525 raises the minimum wage for healthcare workers to $25. Taxpayer advocates and other fiscal conservative warned that these two government mandates would significantly increase costs and that those costs would be passed onto the consumer like an indirect tax.
That’s exactly what is happening. Both McDonald’s and Chipotle recently announced that they will be raising prices in California in response to the state’s minimum wage increase. While McDonald’s didn’t specify how much prices would increase, Chipotle said it would be a “mid-to-high single-digit” percentage. You can bet that other fast-food restaurants will be doing the same soon.
As for the increase for health care workers mandated by SB 525, even the state’s own Department of Finance opposed it out of concern for “significant economic impacts” and the bill analysis stated that its fiscal impact was “unknown.” The Legislature passed it anyway and now we know that SB 525 will cost $4 billion in the 2024-25 fiscal year alone. About $2 billion of that is coming directly out of the General Fund while the rest will be paid out of federal Medicaid funds.
The L.A. Times called it “one of the most expensive laws California has seen in years and comes as the state faces a $14-billion budget deficit that could grow larger if revenue projections continue to fall short.” Meanwhile, Bloomberg reported that “California is poised to fall well short of its budget forecasts as the recent stock market slump erodes the state’s tax revenue.”
Did the governor actually know what he was doing when he signed these two costly bills? Maybe it’s wrong to assume that the higher price tags are simply “unintended consequences.” It is just as likely that he was aware of the impact to taxpayers and consumers but intended to reward political allies in labor organizations that can help further his political ambitions.
Senate Bill 616, also signed by the governor, greatly expanded mandated sick leave for employees of private-sector companies. The bill imposes new costs and leave requirements on employers of all sizes, by nearly doubling existing sick leave mandate, which is in addition to all other enacted leave mandates that already have small employers throughout the state struggling to implement and comply.
The unintended consequences of mandates such as SB 616 on California’s businesses, both large and small, is evident from countless media reports about the Great California Exodus as productive citizens and businesses move to other states. California’s unemployment rate is higher than the national average and our poverty rate, when the cost of living is taken into account, is the worst in the nation.
