Insights on LA - American Rescue Plan, Inflation, Housing, New Collar Jobs, etc.
Quote of the Week
“Americans often fail to recognize government’s role in society, even if they have experienced it in their own lives. That is because so much of what government does today is largely invisible.”
Suzanne Mettler, a professor of government at Cornell, is the author of “The Submerged State: How Invisible Government Policies Undermine American Democracy.”
Big Picture
In 2021 the 88 cities in Los Angeles County got to spend their first half allotment of President Biden's $1.9 trillion American Rescue Plan. $350 billion is going to fund state and local governments and $4.5 billion of that is going to all of LA's jurisdictions.
In May of this year, everyone will receive their second half of funding. A number of business and civic leaders are trying to figure out where all these one time dollars have gone and will go, especially knowing that California's state and local governments did not fall apart financially during the pandemic and the state's bank account continues to overflow with our taxpayer dollars.
Let's look back at 2021
LA County allocated $975 million of their $1.9 billion total in 2021 toward the following:
$567.9 million: Investments will increase housing for people experiencing homelessness, create more affordable housing, resource the Board’s “Care First, Jails Last” vision, reduce the digital divide, and build wealth in communities that have historically been left out of generational wealth gains.
$239.68 million: This second pillar, “Building a Bridge to an Equitable Recovery,” recognizes the need to deploy supportive services through an equity lens to jumpstart recovery for those who have suffered the most.
$167.42: The third pillar, “Fiscal Stability and Social Safety Net,” recognizes the need to ensure LA County’s infrastructure of last resort – the “safety net”.
What to pay attention to: LA touts itself as the small business capital of the world and only $70 million went for small businesses, entrepreneurs, and nonprofits hit hard by the pandemic.
The City of LA was appropriated $1.28 billion in total, and thanks to the LA City Controller there are a number of graphs, diagrams and interactive charts illustrating the magnitude of the City’s unexpected revenue shortfall, and breaks down how ARP funds have been used to pay for local public services and initiatives. As one can see the bulk of the money went toward homelessness and preserving city services.
Yet, as referenced in a recent March 7 Insights on LA, only $50 million went to fund economic and workforce development related initiatives, like relief to struggling for-profit small businesses. And secondly, I was told that the city is using all the ARP money to make up for shortfalls in their last two budgets. From what I read even with all of this money the City's budget is a mess as more and more Angelenos rely on the public sector to live in LA. (Context: Mayor Garcetti's first proposed budget as Mayor was $8.1B.)
The big question is are all the May 2022 dollars for the County and City already committed. They do have until 2026 to spend it on city infrastructure, public services and pilot programs and it would be nice to see more transparency.
Moving Forward
LA County just released a newly proposed $38.5 billion budget that seeks to reset the county's finances through a social equity lens after the pandemic era exposed many gaps in public health and criminal justice. More specifically:
$12.985 billion for health-related services
$9.597 billion for public assistance
$9.461 billion for public protection
$5.737 for general services and other costs
$737 million for recreation and culture
And the Mayor of LA recently proposed a $11.8 billion budget, which he said aims to make LA cleaner and safer, with an 8.5% increase to the LA Police Department’s budget.
Yet, as anyone can see, the Mayor keeps putting less and less resources into one of the city's most significant departments - Economic & Workforce Development Department - that plays a role in supporting businesses, creating jobs and providing skills development. See the chart below. This is not helpful to LA's economic recovery plans.
For now, government revenues continue to return to well run states and cities, and the Treasury Department issued guidance encouraging cities and counties to treat rescue funding as a flexible resource that could be deployed for purposes faintly related to Covid-19.
If there are dollars not committed, or better ways to invest in initiatives in which the public sector can play a better role in fostering economic and jobs growth, I would recommend thinking about things in this context:
LA's economy, its workers and small business and nonprofit communities were devastated by the pandemic and the public sector needs to do more to get them back on their feet or we will continue to see Angelenos voting with their feet - As reported in a recent LA Times article, 159,621 Angelenos left the LA region between July 1, 2020 to July 1, 2021.
They are leaving in search of better housing and job opportunities and an improved quality of life. The public sector should be held to a higher standard in changing this dynamic.
For example, data shows that City Hall only green lit 150,000 homes in the past eight years, when Angelenos need 3X that amount. City Hall touted their role in creating 200,000 jobs, pre-COVD, but overlooked the fact that too many of those jobs helped produce a median income level of $28,000 and a historically low labor force participation rate of 63.8 percent.
For those in office and those who seek office let's focus a little more on these numbers:
Getting People Back to Work (lower unemployment rate)
Getting More Angeles Back into the Workforce (increase labor force participation rate)
Getting Angelenos the Skills Needed to Secure a Good Paying Job ($ into apprenticeships)
More Programs and Services to Support Self-Employed Workers (increase labor force)
Rents Are Rising Everywhere. Not So Much in LA
See how much prices are up in counties throughout the US since 2019.
LA County: The rent increase has grown very little - +6.7% since 2019 and the average rent is $2,043.
Surrounding Counties have seen increases more double that and a rent on par with LA.
San Diego: 16.6%
Riverside: 21.9%
Santa Bernadino: 23.4%
Ventura: 18.9%
Growth has skyrocketed in the south eastern and western parts of the US. CA's next door neighbor Arizona and its largest county Maricopa showed an increase of 28.2%, with somewhat cheaper rent around $1,600 a month.
"New Collar Jobs"
More Americans are making the leap from blue-collar jobs and hourly work to “new collar” roles that often involve tech skills and come with better pay and schedules. (WSJ)
Data:
As many as 32 million Americans lack a four-year college degree but have the skills or experience to parlay into higher-income jobs.
More than a tenth of Americans in low-paying roles in warehouses, manufacturing, hospitality and other hourly positions made such a switch during the past two years.
Many of the new jobs are in software and information technology, as well as tech-related roles in logistics, finance and healthcare.
The workers who made the “new collar” switch skews about 67% male and 77% between age 25 and 44.
Sixty-seven percent live in cities and 70% describe themselves as optimistic about their career prospects.
Trend:
Companies have struggled to hire all the talent they need, so many have dropped pre-qualifications like prior work experience or a four-year college degree.
Thousands of businesses are in the thick of a digital revolution that is requiring them to fill new roles and adapt existing ones to integrate more data and automation.
Key takeaway: The key is spending the time and dollars on training, and spotting the potential in applicants who lack traditional criteria.
Why this is important:
More than half of college graduates over 25 don't work in their field of study adding to concerns that degrees may not be worth their hefty price. (Bloomberg)
About a quarter earned less than $30,000 a year, while approximately one in seven earned less than $15,000, an Intelligent.com survey found. Business, engineering and computer science majors, however, took home about triple that.
Student loan debt, meanwhile, on average increased 4.5% between 2020 and 2021, according to the Education Data Initiative.
Poverty paychecks. Of the 1,000 college grads surveyed, nearly half live paycheck to paycheck. Many reported putting off major goals like buying a home or a car because they couldn't afford it.
Inflation - Where's It Hitting the Most
The U.S. is a leader in inflation rates, with consumer prices rising 8.5% from December 2019 to December 2021 in the U.S. versus 5.5% in Canada and 4.7% in the Eurozone.
The overall cost of gas, food and other everyday items is increasing at its fastest rate in more than 40 years.
What's next: No one know with confidence whether price increases will speed up or slow down in the coming months.
Context: The accelerating price rate "inflation" hit 8.5 percent in March over the previous year, according to a federal report released last week.
History: That was the fastest increase since 1981.
Moving forward:
It gets worse if there is a continuation of disruptive events.
It gets better if the Fed figures out the right level of monetary intervention.
Big ?: Will high inflation for staple goods lead consumers to cut back on everything else.
Is CA's Private Attorneys General Act Legitimate
CA Senate Bill 796 was signed into law in 2013 by Governor Gray Davis to create the Private Attorneys General Act.
This allows aggrieved employees to file a representative action on behalf of themselves, all other aggrieved employees, and the state of CA for alleged Labor Code violations.
Intention: The law was originally intended to protect employees from wage theft and unsafe work environments by allowing them to file claims on their own and the state’s behalf and to relieve the state’s administration from the burden in investigating such claims.
Weakness: In its 18 years thousands of cases have been filed and many settled, but the state Chamber of Commerce and other business groups contend that while it has been a lucrative source of fees for the state and private lawyers, workers have seen few economic benefits.
Unique to CA: To date CA is the only state with such a law and nearly two decades later, PAGA, is the subject of a potential ballot measure and new skirmishes in the Legislature while the U.S Supreme Court weighs whether it should be erased because it conflicts with federal law.
CA legislature: Two bills would expand PAGA. One, Senate Bill 1044, would allow employees to refuse to work if they consider it unsafe to do so. The other, Senate Bill 1162, would require employers to file detailed reports on their workers’ salaries, broken down by ethnicity, gender and other criteria.
CA Ballot: Business groups have filed an initiative ballot measure to repeal PAGA.
U.S. Supreme Court: It recently heard oral arguments on a lawsuit that could kill PAGA because it allows suits even when employees have signed arbitration agreements. In that suit business interests have argued that PAGA violates the 1925 Federal Arbitration Act, which sanctions arbitration as an alternative to lawsuits in business disputes.
Outcome: Is PAGA a legitimate tool. If PAGA is overturned, the immediate effect would be on California, but if PAGA survives, it could spark efforts to enact similar laws in other blue states where labor unions have strong political power.
Let's Push for By Right For Commercial Zones in CA
California Assembly Bill 2011 (Buffy Wicks) is making its way through the CA State Legislature.
The bill calls for the up zoning of commercial corridors (similar to AB 215 and SB 6 from 2020) and streamlining project approvals and CEQA (similar to SB 35, 2017).
The Bill would specifically:
Allow housing to be built by right in infill areas currently zoned for office, retail, and parking uses.
100% affordable housing will be allowed anywhere in these areas that is not adjacent to industrial land or on environmentally sensitive land.
Mixed-income housing will be focused along commercial corridors that are wide enough to accommodate density and new transit. At least 15 percent of the units would be required to be affordable to lower income households. For sale projects could, alternatively, provide 30 percent of their unit for moderate-income households.
Include new homeownership opportunities for middle-income Californians, while promoting climate-friendly affordable development on sites close to jobs and transit.
One recent analysis found the potential for two million units in just Santa Clara County and Los Angeles County. Learn more.
The LA Coalition, along with other statewide business and civic groups are fully supportive and anyone can send letters of support for the bill here.
Leadership in the Community
EquiBlue invests in middle-market office, mixed-use redevelopment and repositioning opportunities located within under-resourced communities of color in high-growth corridors of Los Angeles, the San Francisco Bay Area, Seattle and Vancouver.
They deliver and lease a portion of high-end, fully amenitized, pre-built office space to leading tech and media companies, including many of Hudson Pacific’s largest tenants, who share a commitment to DEI and increasingly want to meet current and future employees where they live. Additional leasing focuses on thriving community businesses and startup companies led by women and people of color.
They also has a “community carry share” whereby Hudson Pacific gives back 25% of its “carried interest” profits to local Community Development Financial Institutions (CDFIs) and community partners to establish small business loan and grant programs for local businesses owned by women and people of color.