When oil giant Chevron said over the summer that it would be moving its corporate headquarters to Houston from San Ramon, the headlines were dire. “Chevron Dumps California for Texas After 145 Years,” read one. Another called the move a “Snub to California.” A third noted that the departure came “as Regulations Mount in Golden State.”

The gloomy headlines illustrate how the press and corporate leaders often oversimplify big-company departures from California, leading citizens and state officials to under-examine the factors that lessen the impact of corporate departures and overstate their importance. The same type of doomsaying has played out with other big companies whose headquarters are leaving or have left the state, including Tesla, Oracle and SpaceX.

In Chevron’s case, discussions of the exit tended to miss or downplay a few key points. Despite talk tying the move to regulations and climate-change litigation in California, CEO Mike Wirth said repeatedly that the relocation was about moving to “the energy capital of the world,” not policy differences with state officials. Also, Chevron already had three times as many workers in Texas as in California at the time it decided to move. And few observers bothered to note the major operations Chevron would retain in the state, including refineries and oil fields.

With other exits, pundits often don’t examine the true effects on state tax revenue. Or take into account the fact that some companies leave key people in California or eventually return. And expansions by companies or startups that pop up here don’t get as much attention, either, the governor and some economists say.

“This is a long narrative in California — about businesses moving out,” said Ted Egan, chief economist for San Francisco. “At the same time, you need to talk about businesses starting up.”

Understanding the nuances of corporate exits is important because the departures can influence state policy and affect confidence among consumers and businesses. For example, the prospect of tech companies fleeing the state was raised this year by opponents of a California bill, eventually vetoed by the governor, that would have made tech companies test for critical harms from large artificial intelligence systems. Similarly, when Democratic Assemblymember Alex Lee of San Jose proposed a wealth tax last year, the California Chamber of Commerce said in a letter to him that the tax would likely contribute to “California’s business and resident exodus.” It did not pass. The Chamber used identical language in 2022 when successfully opposing various tax increases to fund a single-payer state health care program.

Despite complaints about high taxes, expensive housing and burdensome regulations — grousing that has been going on for decades — the state remains the national leader both for tech startups and for its share of big companies.

“I agree California is a more onerous place to do business,” said David Neumark, a UC Irvine economics professor who has studied relocations. “But it’s not like we’re some basket case.”

When leaving looks like staying

Some companies that recently made high-profile headquarters exits from the state have also either added more California employees or kept the lion’s share of workers here. Any remaining employees in California will continue to pay the state’s personal income tax.

Take Oracle, for example. The tech company announced in 2020 that it was moving its headquarters to Austin from Redwood City, leading to headlines like “Oracle Moves Headquarters to Texas, Joining Valley Exodus” and worries over “California’s higher operational costs and hefty taxes,” not to mention “steeper cost of living,” according to a couple of articles about the news. And yet Oracle as of this past spring still had almost triple the office workers in California than it has in Texas, 6,900 vs. 2,500, Bloomberg reported. A company spokesperson did not return a request for comment. But Redwood City’s data showed the company was still its biggest employer as of 2023. Though Oracle eliminated about 3,000 jobs in Redwood City over the past decade, it retains about 3,757 workers there, or more than 7% of the city’s workforce.

Oracle continues to pay taxes in California, though because tax records are confidential, it’s hard to know exactly how much. That includes not just sales taxes but corporate income taxes too; moving a headquarters does not necessarily mean a company escapes those.

“Corporations’ tax has very little to do with where their headquarters or employees are located,” said Brian Uhler, deputy legislative analyst with the state. “For a multinational business, they earn profit in California and outside California. California attributes profits to the state based on what share of a company’s national sales occur here.”

The state taxes corporations based on their sales, property and investments. So if a company earns revenue from sales or transactions in California, the company will pay taxes here regardless of where its headquarters is based. Companies also have to pay employment taxes for their workers based here. And certain types of companies, such as banks and other financial institutions, pay higher or additional taxes.

Another tech company that continues to contribute tax revenue to the state: Hewlett-Packard Enterprise, which announced it was relocating its headquarters to Texas in 2020. Even so, company spokesperson Adam Bauer said last month that the company has about 3,700 employees in Texas and about 3,600 in California. And on the company’s website, there were recently more job openings in California (45) than in Texas (34), including a few sales positions, a Northwest account executive and a “supplier relationship owner” for Nvidia, which is based in California.

“Corporations’ tax has very little to do with where their headquarters or employees are located.”
— Brian Uhler, deputy legislative analyst, state of california

A third company that “left” California without really leaving is Tesla, which has actually grown in the state since its departure. The electric car maker moved its headquarters from Silicon Valley to Austin in 2021. CEO Elon Musk told shareholders that the company’s factory in Fremont was “jammed” and that housing costs in the state were high, making it tough for workers to live near the facility. Musk had also clashed with local health officials about COVID-related shutdowns. The New York Times framed the relocation as a “Blow to California.”But three years later it doesn’t seem like a particularly severe blow. In 2022, the year after the move, the company “grew to 47,000 employees” in California, it said in a blog post, and ”our production footprint continued to increase.” Then, the next year, Tesla announced it would put its engineering and AI headquarters in Palo Alto, reportedly expecting to locate 1,400 employees in Hewlett-Packard’s former headquarters there.

California’s Tesla experience makes it hard not to wonder how impactful two other recently announced Musk-related relocations will be. In July, the billionaire said he was moving the headquarters of social media company X and rocket builder SpaceX to Texas from California. Musk cited a law recently signed by Gov. Gavin Newsom that bans the state’s school districts from requiring parents to be notified of a change in their child’s gender identification. Musk has a transgender daughter and has been publicly critical of transgender people’s rights to choose preferred pronouns. He called the law “the final straw” on top of “many others that preceded it, attacking both families and companies.”

It’s not clear how many California X and SpaceX employees will actually end up in Texas. A source told the Washington Post that the 120 employees at X headquarters in San Francisco will move to Musk-linked offices in San Jose and Palo Alto, but since then the company has reportedly said in legal filings that it will move X’s headquarters to Bastrop, Texas. LAist quoted experts saying that moving SpaceX to Starbase, Texas, will be complicated and time-consuming since the company’s headquarters in Hawthorne is a huge aerospace facility. X and SpaceX did not respond to requests for additional information.

Similarly, Chevron spokesperson Randy Stuart said the company has not yet decided which of its positions in San Ramon will relocate to Texas. The relocation is not effective until Jan. 1 and the company expects it will take five years to migrate most corporate functions to Texas. Some 2,000 Chevron employees work in California versus 7,000 in Texas but that includes people outside of headquarters working on Chevron’s operations in this state, including crude oil fields, technical facilities and two refineries, which range from the San Joaquin Valley to Richmond to El Segundo.

Growth can be hard to notice

While big departures like Musk’s get a lot of attention, expansions and new businesses within California tend not to.

In a recent Instagram post, Gov. Gavin Newsom tried to combat what he labeled “misinformation” about California’s economy by touting in-state expansions by well-known companies such as Visa, Ford Motor, Nintendo and Disneyland. He added that “the world’s leading AI companies are expanding right here in California.”

The governor may have a point about those expansions. There weren’t very many headlines — if any — about Visa recently opening a big new office in San Francisco; Ford’s plans to roll out a new electric-vehicle development center in Long Beach early next year; Nintendo’s intention to open a store in San Francisco next year; and Disneyland’s multibillion-dollar expansion over the next decade that promises jobs and community benefits for the city of Anaheim.

Statewide, about 291,000 new business entities have registered in California this year, according to the secretary of state’s office, compared with 215,000 a decade ago. And that number does not include sole proprietorships, which do not register with the state.

Egan, San Francisco’s chief economist, noted that new AI companies are taking office space in San Francisco, helping the city’s slow recovery from the pandemic-induced boom in remote work. PitchBook, which keeps track of capital markets, recently ranked San Francisco the top city in the world for startups. New York and Beijing were second and third. And a report from PitchBook and the National Venture Capital Association showed that the Bay Area and Los Angeles combined had a total of 746 venture capital deals in the fourth quarter of 2023, compared with 402 deals in New York, the runner-up.

In addition, for the first time since 2014, California as of June has the highest number of Fortune 500 companies, 57, while Texas and New York have 52 each. Newcomers to Fortune magazine’s annual ranking of the world’s biggest companies based on their revenue included California-based companies DoorDash, Workday, Prologis and Clorox.

“I agree California is a more onerous place to do business. But it’s not like we’re some basket case.”
— David Neumark, economics professor at UC Irvine

Sarah Bohn, labor economist at the Public Policy Institute of California, said the headquarters moves “warrant attention, at a minimum. These moves make headlines, and that’s an important force for how people are feeling about doing business in California.”

Bohn said she is currently doing research to quantify the effects of corporate departures, but that it’s important to remember that there are always businesses moving out of, starting up in, or dying in the state.

Neumark, the UC Irvine professor, is working with Bohn on that research. He also co-authored a couple of research papers that examined the issue in 2004 and 2007, so he knows the concern about businesses leaving the state is not new. Neumark saw the same worries back then, during the Arnold Schwarzenegger era. There was a lot of talk about companies moving out of California and some “crazy political stuff,” he said. That included the actor-turned-governor showing up at a Las Vegas business with a van marked “Arnold’s Moving Co.” to symbolically help that company move back to California.

Neumark and his fellow researchers found in 2007 that California did not lose a significant number of workers due to business relocations, only about 11,000 jobs a year out of more than 18 million jobs from 1992 to 2004. In the same period, total employment in the state rose by around 106,000 jobs per year, driven by the creation and expansion of new businesses, according to data presented in the paper. The researchers found no evidence of a mass business exodus, saying that the net losses in the number of businesses that left and jobs lost as a result were negligible: 0.05% of businesses in California moved to other states during each of the two worst years, 1993 and 1994; and 0.1% of jobs were lost to relocation during each of the two worst years, 1997 and 1998. He mentioned that a substantial portion of California’s economy is service-oriented, “and restaurants and hospitals don’t move to other states.”

Complaints from departing corporations

There is no denying that some business executives are fed up with the state.

After Chevron’s exit last month, the president of moderate business group Bay Area Council, Jim Wunderman, said in a written statement: “It’s an embarrassment for California that we’ve lost so many global companies because of misguided policies that make it incredibly difficult to do business here.”

In an interview with CalMatters, Wunderman said it’s time for a “reckoning.” He said lawmakers and officials need to rethink policies that make it hard to build housing, or drive up the cost of energy. “I understand we’re going through an energy transition. Do we have to do it in a way that we exacerbate economic problems in the state?”

He pointed to a bill, recently signed into law by the governor, that aims to curtail traffic and air pollution from warehouses. “We’re constantly regulating things to make it more difficult for businesses. (The warehouse bill) particularly affects the Inland Empire, whose economy is built around that industry.” By possibly reducing the number of job opportunities at warehouses, Winderman said the new law could hurt the very people it’s trying to protect.

California’s flat corporate income tax rate of 8.84% of a company’s net income is the sixth highest in the country, according to the right-leaning think tank Tax Foundation. Conservative legislators also criticized a recent decision by the governor and Legislature to suspend certain business tax deductions and limit tax credits for three years to close the budget deficit, saying such suspensions have become too common.

On the other hand, the state’s corporate tax rate has actually declined over the past few decades, with state lawmakers slashing it from 9.6% to 9.3% in 1987, then to its current rate in 1997. The California Budget & Policy Center, a left-leaning think tank, said in a 2022 analysis of state data that corporate tax breaks have lessened the tax burden on California businesses over the years.

“We’re constantly regulating things to make it more difficult for businesses.”
— Jim Wunderman, president of Bay Area Council

Ahmad Thomas, CEO of Silicon Valley Leadership Group, which advocates for big tech companies, said, “The challenge we have is the cost of doing business and operating in California continues to increase. How do we mitigate that?”

Thomas said California’s “competitive advantage continues to be chipped away at year after year by competition” that is global. He mentioned that there needs to be “more innovative solutions… around our cost structure connected to our tax policy,” as well as more affordable housing.

He wants industry and policymakers to work together to drive down the cost of living here, while trying to minimize additional taxes to businesses.

Still, business leaders get something in exchange for grappling with those challenges: access to capital, a skilled workforce, world-class universities and more.

“Full stop, I believe there is no better place to locate, grow and scale a company than in California,” Thomas said.

And not all state policies and laws drive business away. They help create them.

Bohn of the Public Policy Institute of California said the state continues to have policy levers, such as tax credits, that it can use to target businesses it wants to keep in the state.

“Full stop, I believe there is no better place to locate, grow and scale a company than in California.”
— Ahmad Thomas, CEO of Silicon Valley Leadership Group

Case in point: Newsom boasted last year during a press conference with Musk about Tesla’s partial homecoming that California legislation and policies on clean vehicles helped spur the company’s rise to electric-vehicle dominance. It is the most valuable automaker in the world and responsible for the bulk of Musk’s wealth, which reportedly will soon stretch beyond $1 trillion. Tesla’s success wouldn’t have happened without California, where the company has received at least $3.2 billion in direct and indirect subsidies from the state, with the bulk of those being tax credits for zero-emissions vehicles, according to estimates from Newsom’s office reported by the San Francisco Chronicle.

At the press conference, Musk stood stiffly by as Newsom bragged about the state’s pivotal role. But then the billionaire also made an admission that might startle those who think California businesses are beset by red tape and entitled workers: Tesla’s Fremont factory is the most productive automotive plant in North America.

“It will probably be about 600,000 or more cars this year,” Musk said. “California is a tremendous manufacturer as well as a place of engineering innovation.”

That’s a point, Newsom added, “which is, again, often so lost.”

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CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

Charles (Chuck) Albert DeWitt, 79, passed away at 3 p.m. on September 16 at St. Joseph’s Hospital, surrounded by his family and friends, and will be sorely missed. He is survived by his brother Joseph Mark DeWitt, his son, Donovan Lake Dewitt, his daughter Shannon Elaine DeWitt, his stepdaughter, Antonia Lyn Crane, his stepson, Steven A. Crane, as well as many other extended family members.

Chuck’s early life was spent in Davis, but he settled in Humboldt County where he worked as a rural carrier for nearly forty years. When he retired, he dedicated his time to saving and restoring the first shipwrecked peace boat, “The Golden Rule” with the help of Leroy Zerlang and the Veterans for Peace. The Golden Rule and her crew members have been sailing around the United States for the past 12 years sending a direct message of protest against nuclear bomb testing as well as sharing anti-war education and strategies for peace.

Chuck will always be known for his legacy of activism, his generous service, his friendship, his laughter and his sense of adventure. He will also be remembered as a beloved father, brother, and friend to many in Humboldt County and beyond. A celebration of Chuck’s life will be forthcoming.

See photo below. Press release from the Cal Poly Humboldt University Police Department:

The University Police Department (UPD) is seeking the public’s assistance in identifying an individual who is alleged to be involved in assaults at approximately 12:30 p.m., Monday, Oct. 7 at the University Quad at Cal Poly Humboldt.

The incidents, reported by students and a community member, are under investigation. UPD is working to identify the individual, who was last seen wearing a purple hooded sweatshirt, yellow coat, and black pants, and throwing paint from a ladle, according to witnesses.

UPD takes this incident very seriously and is committed to ensuring the safety of the campus and local community.

This investigation is ongoing and anyone with information is encouraged to contact UPD at (707) 826-5555 or submit a tip through the Rave Guardian mobile app. Rave Guardian is available on the Apple Store and the Google Play Store. For more information see this link. Tips can remain anonymous. Your assistance could be crucial in helping us identify the individual responsible.

UPD would like to thank the community in advance for any assistance in this matter.

Reality, for a few residents in Arcata’s six mobile home parks, is roofs that fail to keep the water out, floors that fail to keep the feet dry, and plumbing that fails to make water go anywhere. Some mobile homes lack infrastructure that would make them accessible to people with mobility issues, or to the elderly.

A new state-funded grant could go a long way towards repairing some of those homes. 

The Manufactured Housing Opportunity & Revitalization (MORE) program, funded by the California Department of Housing and Community Development, will grant money to mobile home owners whose homes need repairs. This is the program’s first year, and Arcata received a $3 million award.

To be eligible, people must live in one of the six licensed mobile home parks in Arcata and make less than 80% of the Humboldt County median income.

Applicants whose homes have been cited for HCD code violations are at the top of the list for getting that grant money, followed by applicants whose mobile homes are not up to code but have not been cited yet, and then those with accessibility issues. 

Arcata wants people in that second category to ask a contractor to check the damage out and estimate how much it would cost to repair. Arcata is also taking bids from contractors to do the repairs. The program will run until funds run out. 

Some of the most common problems with Arcata’s mobile homes are leaky roofs; water-damaged, spongy floors; and plumbing problems. At the Lazy J Ranch, an age-restricted mobile home park for people 55 and older, some homes need ramps or grab bars.

“So we just got a lot of calls, and they’re like, ‘Hey, it’s raining and my roof is leaking, and now I have mold problems,’ or ‘I’m having all kinds of plumbing issues or electric issues,’” Jennifer Dart, Arcata’s Community Development Deputy Director, told the Outpost.

“I think being able to put people in safe and affordable living conditions is going to be huge for the people that can participate in the program. And we want to be able to assist as many people as possible…We’re really excited about the program, and hope to help as many people here in Arcata as possible.”

Instructions on how to apply can be found at this link.

Press release from the Humboldt County Sheriff’s Office:

On Oct. 7 at about 6:30 p.m., Humboldt County Sheriff’s deputies responded to a report of a disturbance in the 1100 block of Lloyd St. in the Pine Hill area. The caller reported a male — later identified as Jeffrey Buckalew, age 62 of Fortuna — yelling and banging on their door before leaving the property.

While searching the area for Buckalew, deputies received another report that someone was yelling in a nearby private pasture, about half a mile from the initial incident location. Suspecting that this was the same person, deputies responded to the caller’s residence in the 500 block of Sea Ave. in the Pine Hill area.

Buckalew was found hiding in the pasture’s brush and responded to deputy callouts with threats to use a firearm on them. For safety purposes, deputies drew their department-issued handguns and less-than-lethal weapons, as well as brought a specialized K-9 on scene. Deputies continued to tell Buckalew to cooperate and negotiated with him for over an hour, but he refused to comply with commands and continued threatening the use of his firearm. 

After about 90 minutes of negotiating, Buckalew crawled out of the brush with his hands up and no firearm was seen. Shortly after, he fled back into the brush; however, deputies were able to safely apprehend him. Buckalew was taken into custody for disorderly conduct while under the influence (PC 647(f)) and obstructing/resisting an executive officer (PC 69).

This case is still under investigation.

Anyone with information about this case or related criminal activity is encouraged to call the Humboldt County Sheriff’s Office at (707) 445-7251 or the Sheriff’s Office Crime Tip line at (707) 268-2539.

So the ballots are out, and it’s time to consider many important issues. One issue is in regards to the state of our county roads. I am sure it takes no convincing to recognize the need to repair our roads. They are in horrible condition, and in fact state data show that on average each car owner is spending $900 per year per car on repairs related to bad roads. Shocks, tires and rims, alignments and more from hitting potholes and rough patches. The question is how to raise funds for road repair.

Measure O is on the ballot to raise funds for road repair and a small amount for transit. There are those that have said it should have been a special tax earmarked for roads, but that would have taken 67% of voters to pass. That would have been an unlikely outcome. Polling suggest that a majority will support the measure, but not 67%. So we decided to do it as a General Obligation tax that only needs 50% plus one to pass. Yes, that means that the funds go into the general fund and there is no guarantee that these funds will go to roads. While that is true, the ballot language was crafted carefully to be sure that roads will be the primary use of the funds, with a little to transit. Read the ballot language carefully and you will see that it says 911 emergency response will be improved by fixing roads!

Measure Z was a General Obligation tax as well, and we have made sure that the funds raised did go to improving Public Safety, as promised. Not one dollar went to existing General Fund expenses. We fulfilled our promise to the voters. We hired more deputies and supported local fire departments and have a Measure Z committee to keep all spending accountable. Measure O will also have an accountability committee made up of road experts, labor contractors and members of the public to keep all spending on track. We fulfilled our promise to voters on Measure Z and we will assure these funds from Measure O go to roads and some for transit.

Currently, the limited funds we have for roads goes mostly to emergency repairs, and we have little left to leverage federal and state funding. With Measure O we will generate $24 million dollars per year, and that will allow us to leverage significant federal and state funding. Twenty percent of our funds will leverage 80% federal funding. That means that we could leverage up to $100 million dollars per year with federal and state assistance. That means potholes can be fixed, roadsides mowed to reduce fire starts and visibility increased for cars, bikes and pedestrians. It means taking care of roads before they fall apart and require complete, expensive rebuilds.

Yes, taxes add up, and inflation has hit everyone hard, but this is a small price to pay for greatly improved road conditions. And as mentioned above, we are all already spending the money on expensive car repairs. Let’s move those funds up front and be proactive in repairing roads before they tear our cars apart. An ounce of prevention is worth a pound of cure. Please consider supporting Measure O as the sensible approach to taking care of our roads. This one cent sales tax is only on taxable items. It does not apply to food, rent, medicines and medical care, and many other items. Thank you for your support.

Steve Madrone
Humboldt County 5th District Supervisor

Among the blitz of election ads flooding TV, social media and street corners, you won’t see any opposition to a ballot measure proposing to lock in billions of dollars to pay doctors more for treating low-income patients.

But opponents of Proposition 35 have a warning even if they don’t have the money to pay for ads: The measure could backfire and cause the state to lose billions in federal funding.

Prop. 35 would take an existing tax on health insurance plans and use the money to increase payment to doctors and other providers who see Medi-Cal patients. Its supporters have raised $50 million, drawing from groups representing hospitals, doctors and insurers.

Medi-Cal, the subsidized insurance plan serving some 14-million Californians, has ballooned in size over the past decade with increased eligibility and benefits. But those changes haven’t come with a commensurate increase in payment to doctors.

As a result, health care providers and advocates say too few doctors accept Medi-Cal, leaving patients with nowhere to turn.

According to the Public Policy Institute of California, the measure is leading and likely to pass.

But opponents, represented by a small coalition of community health advocates, seniors and activists for good governance say the details of the proposition put the state at risk of losing billions in federal funding.

That’s because the federal government under both the Biden and Trump administrations has warned California that its tax on health plans to fund Medi-Cal services takes unfair advantage of a loophole in federal regulations. The federal Centers for Medicare and Medicaid Services intends to close that loophole, regulators wrote in a letter to California officials late last year.

“This is the fatal flaw of this initiative,” said Kiran Savage-Sangwan, executive director of the California Pan-Ethnic Health Coalition, which is leading the opposition. “We can all have opinions on how to spend the money, but we have to raise the funds first.”

The problem, opponents say, lies in how California taxes health plans and how Prop. 35 limits changes in the future.

Right now, the Managed Care Organization Tax, also known as the MCO Tax, generates revenue for Medi-Cal by taxing health insurers that serve both Medi-Cal and commercially insured patients. The federal government gives California a dollar-for-dollar match to whatever funds are raised by the tax. For Prop. 35 that’s an estimated $7 billion to $8 billion annually through 2027.

However, California has historically placed the majority of the tax burden on Medi-Cal insurers and not commercial insurers. In its letter to state officials, federal regulators said Medi-Cal plans represent 50% of all insured people but bear “99% of the total tax burden.” That is at odds with the spirit of the law, which is meant to redistribute revenue from commercial insurers to Medi-Cal plans, regulators wrote.

Prop. 35 would cap the tax on commercial insurers at a minimal rate. Any attempts to modify the tax would have to go back to the ballot box or be approved by three-fourths of the Legislature. Opponents say that means federal rule changes requiring the commercial tax to be more equal to the Medi-Cal tax will force the state to reduce taxes on the Medi-Cal plans.

“The end result of that is when the federal government makes good on their promise to change the rules on this tax, the revenue we raise from this tax will be dramatically reduced and we would leave billions of dollars on the table,” Savage-Sangwan said.

Proponents of the measure said this argument is false but did not provide details. They say Prop. 35 will make the Medi-Cal program more stable and higher rates will encourage more providers to see low-income patients.

California’s Medi-Cal reimbursement rates fall in the bottom third compared to all other states, according to the Kaiser Family Foundation, and rates for specific services like obstetrics are among the lowest in the country.

“Prop. 35 is a critically needed investment to protect and expand access to care for Medi-Cal patients and all Californians,” said Molly Weedn, spokesperson for the Yes on Prop. 35 campaign, in a statement. “The principal purpose behind Prop. 35 is to provide stability and predictability… to address the significant shortfall of providers who can see Medi-Cal patients.”

The California Association of Health Plans said that it did not ask for the commercial tax cap in the proposition and that it has historically supported this tax structure to pay for Medi-Cal. A higher tax on commercial plans could increase premiums.

Where is Gov. Newsom on Prop. 35?

The largest donors to the yes campaign are the California Hospital Association, Global Medical Response, and the California Medical Association, which collectively donated $38 million. Opponents have raised no money, according to state campaign finance records.

Gov. Gavin Newsom has not taken a formal stance on the measure, although he said at a press conference in July that he’s concerned about how it would lock in tax revenue for a single purpose. The state budget he signed that month shifted most of the tax revenue from the tax on health insurers into the general fund to pay for the Medi-Cal program.

If voters approve Prop. 35, the state would face a $2.6 billion deficit in the current budget, which relies on the tax to fill in gaps. That deficit would increase to $11.9 billion over the next three budget cycles, according to an analysis from the Department of Finance.

“This initiative hamstrings our ability to have the kind of flexibility that’s required at the moment we’re living in. I haven’t come out publicly against it. But I’m implying a point of view. Perhaps you can read between those many, many lines,” Newsom said at the press conference.

Newsom’s office did not respond to multiple requests on whether he would formally oppose the measure.

Savage-Sangwan said the opposition has not solicited any money for their campaign.

“We are using the very small megaphone that we do have to just get the facts out,” she said.

Trade-offs in 2024 health care ballot measure

The political split over Prop. 35 is unusual. The measure’s opponents are often on the same side as its supporters when it comes to health policy issues in the Capitol. But community health advocates say they’re speaking up because the future ramifications of the initiative are too risky.

“We want to make clear that the goals of the prop are goals we agree with. We recognize our providers in Medi-Cal are paid far too little and that disproportionately impacts people of color, children of color especially,” said Mayra Alvarez, president of The Children’s Partnership, another opposing group.

Some lawmakers agree. During multiple budget hearings, Sen. Caroline Menjivar, a Democrat from Van Nuys, came to oppose the proposition in part because the industry organizations that negotiated who would get money from the tax left out “community providers” and those “who don’t have high-paid lobbyists.”

“By listening to those with boots on the ground, the legislature developed a plan to equitably address many Medi-Cal concerns over the next few years,” Menjivar said in a statement from the opposition campaign.

The tax is expected to generate more than $30 billion over the next four years. The budget Newsom signed puts most of the money in the state’s general spending account, but set aside roughly $2 billion to increase rates for services including community health workers, private duty nursing, adult and children’s day centers and children at risk of automatic Medi-Cal disenrollment. If Prop. 35 passes, different groups will get rate increases.

Weedn with the Yes on Prop. 35 campaign said the initiative won’t automatically cause cuts if it passes. It would be up to the Legislature to decide how to pay for the programs opponents are worried about, she said, and that the initiative provides about $2 billion of flexible dollars annually for legislative priorities.

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Supported by the California Health Care Foundation (CHCF), which works to ensure that people have access to the care they need, when they need it, at a price they can afford. Visit www.chcf.org to learn more.

CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.