from MARK SMITH
Happy Saturday. I’ve been on both coasts this week, I seem to be bringing government shutdowns with me lately when I travel to DC. Glad to be back in CA after that cold weather too. Here are a couple things going on for your weekly recap.
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Job openings plummet in warning sign for Trump's economy: The research firm Challenger, Gray and Christmas reported that companies announced plans to cut more than 108,000 positions last month, more than double the layoffs tallied in January 2025. The payroll processing firm ADP said private sector firms added just 22,000 jobs in January — a sign of tepid payroll growth. And jobless claims spiked last week.“On the margin, firms are able to do more with less,” said RSM US Chief Economist Joe Brusuelas. “That’s fine when you’re talking to an economist or capital markets professional; that’s hell if you’re talking to a politician or the public.” That could spell trouble for Trump, whose approval ratings on the economy have already been battered by affordability, inflation and labor market anxieties that have hurt the GOP in recent elections and forced the president to refocus on cost-of-living issues.
People are panicking about California’s ‘gas mileage tax.’ We’re nowhere close: California legislators sparked worry and confusion on social media this week over a “gas mileage tax” — but the bill now before the state Senate would only require a report.Assembly Bill 1421 seeks to identify a possible solution to declining gas tax revenues as more drivers switch to electric vehicles, but any actual effect on residents is far from materializing. The bill passed on the Assembly floor Jan. 29; if approved by the Senate and signed into law, it would require the California Transportation Commission to submit a report examining the particulars of road user charges and mileage fees — and any equity concerns for low-income drivers — by Jan. 1, 2027.
How failing talks could spark a legal fight over Colorado River water: With the leaders of seven states deadlocked over the Colorado River’s deepening crisis, negotiations increasingly seem likely to fail — which could lead the federal government to impose unilateral cuts and spark lawsuits that would bring a complex court battle. Interior Secretary Doug Burgum has urged negotiators for the states to reach a deal by Feb. 14, but substantial disagreements remain. “All seven states know that if we’re unable to achieve an agreement, it would likely fall to the courts, and that would be a lengthy and uncertain process,” Colorado Gov. Jared Polis said in an interview. “I’m confident that Colorado would prevail based on the merits,” Polis said, but a court fight is “something that I don’t think any state desires.” The Colorado River provides water for about 35 million people and 5 million acres of farmland, from the Rocky Mountains to northern Mexico. The water was originally divided among the states in 1922 under an agreement called the Colorado River Compact.
Budget Mess: California legislators are facing a fifth straight budget where spending would outstrip its revenues, amid warnings of multibillion-dollar deficits stretching well into the future unless they either reduce outlaws or increase income.
Legislative analyst Gabe Petek, in his overview of Gov. Gavin Newsom’s proposed $349 billion 2026-27 budget, says the deficits totaled $125 billion over the last four years and “have persisted even as the state’s economy and revenues have grown, underscoring that the problem is structural rather than cyclical. Taken together, these trends raise serious concerns about the state’s fiscal sustainability.” The proposed budget projects $227 billion in general fund revenues and $248 billion in general fund spending. Newsom has promised that when the budget — his last as governor — is revised in May, it will close not only its deficit but address the ongoing deficits. Petek and Newsom’s Department of Finance project them in the range of $20 billion to $35 billion a year. How Newsom would do that while opposing major tax increases is still to be revealed. Meanwhile initial hearings in both legislative houses featured speculation from members on how the budget could be balanced, including sharp spending cuts and tax increases.
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MARK SMITH
Smith Policy Group
1001 K Street, 6th Floor
Sacramento, CA 95814
(916) 335-5072
mark@smithpolicygroup.com
smithpolicygroup.com