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Prepared by Precision Advocacy
State budget concerns are mounting as Governor Gavin Newsom is requesting an additional $2.8 billion loan just a few days after the Department of Finance granted a $3.44 billion loan for Medi-Cal to cover bills through the end of the fiscal year. On Monday, the Assembly Budget Subcommittee on Health discussed the shortfall, highlighting increased expenses in both the current year and budget year.
In January, the Department of Health Care Services (DHCS) estimated higher Medi-Cal costs totaling about $2.6 billion:
- $540 million General Fund due to growth in Medi-Cal pharmacy expenditures.
- $1.1 billion increase in costs from smaller than previously assumed impacts related to redeterminations. In other words, more people have retained Medi-Cal benefits than was anticipated.
- $2.7 billion increase in costs for Medi-Cal for undocumented immigrants.
- $1 billion reduction in General Fund costs related to the Managed Care Organization (MCO) tax.
- $453.7 million reduction in General Fund costs related to Proposition 35.
- $478.7 million reduction in General Fund costs related to approval of an amendment to the MCO tax related to consideration of Medicare revenue back to January 2024 instead of April 2024.
Anticipated cost increases for 2025-26 include:
- Approximately $3.6 billion due to changes in the use of available MCO tax revenues. Of this amount, $2.7 billion is related to implementation of Proposition 35 and another $478.7 million relates to a one-time adjustment in 2024-25 to reflect the full year of additional MCO revenues from consideration of Medicare revenue back to January 2024 instead of April 2024.
- $215.2 million due to the projected growth in Medi-Cal pharmacy expenditures.
- $268.5 million increase in other base costs, reflecting the net impact of growth in average managed care rates, changes in projected enrollment, growth in Medicare premium and Part D costs, and projected fee-for-service utilization other than pharmacy.
Although Chair Dawn Addis (D-Morro Bay) emphasized that the primary concern for the legislature should be the threat of lost federal funding, growing criticism is coming from the legislative Republican caucuses in Sacramento regarding the roughly 1.6 million immigrants without legal status who are enrolled in Medi-Cal. Costs to cover this undocumented population is about $8.5 billion General Fund annually.
Further exacerbating the Medi-Cal funding shortfall, there has been 40% growth in the senior population enrolled over the last 4 years. Covering seniors costs Medi-Cal about $15,000 annually compared to $8,000 on average for other enrollees.
Outside of Medi-Cal, conversations are beginning regarding the expiration in 2030 of Proposition 30 and Proposition 55 - which taxed and then extended the tax on high-income earners. The state’s cap-and-trade program providing auction revenues also expires in 2030. Drops in stock prices are creating fears around a recession, which would add to California’s structural deficit. Continued conversations will be taking place in the coming months as additional information emerges.
Senate Insurance Committee Hearing on Wildfires and Homeowners Insurance
The Senate Insurance Committee held an informational hearing titled, “Understanding California’s Insurance Market: Key Factors and Future Outlook in the Aftermath of Recent Wildfires” last week. The hearing was intended to provide background and context on California’s complex insurance challenges for the legislative year ahead. Chaired by Senator Susan Rubio (D-West Covina), it was attended by Senators Roger Niello (R-Rancho Cordova), Aisha Wahab (D-Fremont), and Anna Caballero (D-Fresno) and featured four panels.
The first panel, “Assessment of the Current Situation” included Michael Martinez, Chief Deputy Commissioner, California Department of Insurance (CDI) and Michael Peterson, Ph.D., Deputy Commissioner for Climate and Sustainability, CDI focused on Insurance Commissioner Lara’s Sustainable Insurance Strategy (SIS).
Mr. Martinez stressed the global nature of the insurance crisis and its connections to climate change. Dr. Peterson summarized implementation of Insurance Commissioner Lara’s SIS including comprehensive rate review reform to move filings through the system more quickly, the introduction of new risk management tools including catastrophe models and reinsurance costs, and insurer commitments to write more policies in wildfire distressed areas.
Consumer Perspectives. Barbara Birenbaum, a Los Angeles resident who lost her home in the recent fire, gave her personal experience of the insurance claim process. She dealt with several adjusters, had a largely positive experience, but is still waiting for the majority of the funds to be released.
Amy Bach, Executive Director of United Policyholders, lauded CDI’s efforts around the SIS. She credited the reforms with stabilizing the market and indicated she had had hopeful conversations with insurance companies who did plan to stay in the state and increase their underwriting after the Los Angeles fires.
Carmen Balber, Executive Director, Consumer Watchdog was more critical of the SIS and the financial position of the insurance market in general. Data from homes is important, she said, but consumers need to be able to act on it. She highlighted a general lack of transparency on the use of catastrophe modeling. She looked at other states that have allowed reinsurance costs to be incorporated in rate making, citing a 30-50% rate increase for other states that allow pass-throughs of reinsurance costs. She cited State Farm Insurance as an example, saying the company buys reinsurance from its parent company, a potential conflict of interest.
Ms. Balber advocated strongly for a public wildfire catastrophe model, mandated discounts for home mitigation efforts and the creation of community wildfire hardening standards. Senator Wahab asked about the public wildfire model, Ms. Balber clarified that insurance companies are reluctant to make all elements of the catastrophe model transparent because they don’t want to give away the “secret sauce” that differentiates them in the marketplace. She characterized the process as a “black box”.
Insurance Company Perspective. David Lorenc, Chief of Staff to California FAIR Plan President Victoria Roach, spoke about the FAIR plan’s work on depopulation of the plan but noted that in January 2025, they had the highest number of new policies ever. They recognize that they are becoming the only resort for many Californians. They are focused on customer service and support after the fires.
Denneile Ritter, Vice President, Western Region, of the American Property Casualty Insurance Association, discussed her members’ efforts to get claim money to customers quickly. She noted that the company is paying fees to the FAIR plan despite not receiving premiums from its customers. Her organization supports Commissioner Lara’s SIS and spoke in favor of catastrophe models and reinsurance costs aspects of the reforms.
Seren Taylor, Vice President of the Personal Insurance Federation of California referenced the specific challenges facing the insurance market of climate change and inflationary driven rebuilding costs. He noted that every state, except for California until now, allows for the use of catastrophe models and reinsurance costs to be incorporated in rates. He also noted that in those states, insurance companies are not required to underwrite more policies in disaster prone areas. He emphasized the need for policymakers to have realistic expectations. From the LA fires, 37,000 claims have been filed and at least 28,000 policyholders have already received more than $12 billion in payments.
Shari McHugh of McHugh, Koepke, Padron, representing the Pacific Association of Domestic Insurance Companies, and Anisha Basi, President of the Pacific Association of Domestic Insurance Companies both spoke in favor of the SIS and emphasized the industry’s efforts to serve its customers. They also spoke with some optimism that CDI is increasing staffing to deal with the backlog of ratemaking filings.
Outlook for the Insurance Market. The final panel “Outlook of California’s Insurance Market Participants” included Nancy Watkins, Principal and Consulting Actuary from Milliman, a frequent contributor to discussions around troubled insurance markets and natural disasters. She talked about “a new better normal” for the insurance market. Her presentation focused on data to manage and communicate risk around wildfires that would help residents prioritize mitigation efforts that matter and have a real impact on driving down risk. She emphasized the need for continuous learning and improvement from the data. Specifically, she talked about a Wildlife Urban Interface (WUI) data commons, “mitigation makeovers”, and increasing the availability of insurance for consumers as a result.
Michael Wara, Senior Director for Policy, Sustainability Accelerator, from the Doerr School of Sustainability, spoke about a healthy insurance market, emphasizing the importance of accurate pricing of risk. A healthy insurance market provides insurance that is both available and affordable, he said. His research has shown a dramatic increase in pricing for the highest risk insurance, with FAIR plan insurance rates so high, he didn’t include them in his charts. He applauded CDI’s efforts to solve for insurance availability.
He gave the example of the recent fire in Altadena and talked about the need to manage and reduce risk through home hardening efforts. He highlighted that zone zero designations will not apply to older homes until 2029, and there is no funding to harden these homes. He emphasized the community nature of fire risk particularly in built out residential areas with homes ripe for ignition. While new construction is much less fire prone, much needs to be done around California’s older stock of homes.
Senator Caballero raised the issue of residents who don’t live in high fire zones having to pay the FAIR plan assessment, advocating for not continuing to build homes in wildfire areas.
Dr. Wara talked about the older neighborhoods that burned in LA. He said building new construction around older communities can act as a “moat” to keep new ignitions to a minimum. Ms. Watkins talked about smarter development and creating more fire breaks around a community. She emphasized the interdependent nature of planning and building for wildfires.
Chair Rubio closed the hearing noting the complexities of the insurance market and promised that the next hearing would be longer in time to allow for more in-depth discussions on each of the topics.
Insurance Commissioner Lara Conditionally Approves State Farm’s Emergency Rate Hike
Following Thursday’s Insurance Committee hearing, California Insurance Commissioner Ricardo Lara said he will grant State Farm’s request to raise home insurance premiums by 22% on average if the company agrees to certain conditions.
Lara is asking the company to demonstrate with data why the rate increase is needed at a hearing on April 8. If the condition is met, the emergency rate would increase premiums for homeowners by 22%, 15% for tenants, and 38% for rental owners.
State Farm submitted its request in a letter to Commissioner Lara on March 11, 2025, emphasizing the need to protect the public’s interests after months of informal discussions with the Department of Insurance staff. As of March 11, the firm noted that it has received more than 12,000 total fire and auto claims related to the January 2025 fires and has paid over $2.2 billion to its customers.
Total insurance industry losses for wildfires are coalescing around the $40 billion mark, although some have suggested the total loss could be as high as $50 billion, while economic losses are expected to exceed $250 billion.
As part of his discussions with the company, Commissioner Lara has urged State Farm to suspend non-renewals and seek a $500 million capital infusion from its parent company to restore financial stability.
Commissioner Lara commented, “State Farm claims it is committed to its California customers and aims to restore financial stability. I expect both State Farm and its parent company to meet their responsibilities and not shift the burden entirely onto their customers. The facts will be revealed in an open, transparent hearing.”
Senate Budget Sub 4 Hearing on Homeless Funding
The Senate Budget Committee on State Administration and General Government held a hearing last week focused on funding for homeless services including the Homeless Housing, Assistance, and Prevention (HHAP) and Encampment Resolution Fund (ERF).
Chaired by Senator Christopher Cabaldon (D-Napa) and attended by Senators Lola Smallwood-Cuevas (D-Los Angeles) and Roger Niello (R-Rancho Cordova), the hearings showcased some of the new interactive “accountability” dashboards that are intended to provide policy makers and those implementing the programs with performance indicators and insights.
Marc Dones, Policy Director at the University of California at San Francisco’s Benioff Homelessness and Housing Initiative spoke broadly about the homeless population in California and the general uncertainty of federal funding under the current Administration. California’s homeless population increased by 3% compared with a national increase of 18% with over 170,000 people experiencing homelessness daily. The median age of those experiencing homelessness is 47, with 78% unsheltered, and 40% with behavioral health needs.
Homeless Housing, Assistance, and Prevention (HHAP). Meghan Marshall, Executive Officer of the California Interagency Council on Homelessness (Cal ICH) discussed her agency’s use and analysis of various data sources including:
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Homeless Management Information System (HMIS): HMIS is a collection of databases used by federally funded homeless service providers to collect information about unhoused individuals, to keep a record of interactions, and to track the provision of services.
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Point-in-Time (PIT) Counts: The PIT Count is literally a count of the nation’s unhoused population conducted over the course of a few nights each year, usually in January. The result is an annual rough gauge of the number of unhoused individuals, both sheltered and unsheltered on any given night.
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Reporting by Grantees: State programs to address homelessness generally require grantees to report on how much they have spent, what the money was spent for, what services they provided, and what outcomes they achieved as a result. Reporting the latter two data points can often be done through HMIS.
Ms. Marshall discussed the new homelessness data dashboards which include the above data inputs and are intended to give actionable insights for policymakers and practitioners. All of the departments have received some training on the dashboards, but they will not have full and complete data until later this spring. Accountability.ca.gov, announced by Governor Newsom last month, integrates data from the above sources as well as information about local jurisdiction’s progress on meeting housing planning requirements and production goals.
Local HHAP recipients Tanya Torno, Director of the Riverside County Continuum of Care; Todd Gloria, Mayor of the City of San Diego (appearing remotely); Chevon Kothari, Deputy County Executive for Social Services for the County of Sacramento; and Moriah McGill, Deputy Director of the Northern Circle Indian Housing Authority testified in support of additional funding and gave examples of the types of projects that are being funded at the local level including things like safe parking sites. Panelists spoke of the importance of the flexibility of the funding and the need for sustained long term funding to address homelessness.
Meghan Kirkeby, the Deputy Director of Housing Policy Development at the California Department of Housing & Community Development spoke about HHAP and its implementation. She highlighted some of the accountability measures being taken under the program. For HHAP 6 disbursement of funds, for applicants to receive the first 50% of HHAP 6 funds, they must:
- Fully obligate HHAP Rounds 1–3 funds.
- Expend all HHAP Round 1 funds.
- Expend at least 50% and obligate 75% of the initial disbursement (first half) from HHAP Round 4.
- Be in good standing on all reporting requirements (including HMIS reporting) for prior rounds.
For the second disbursement of HHAP 6 funds, grantees must have obligated not less than 75% and expended not less than 50% of the initial Round 6 allocation no later than June 30, 2027. City and county grantees must also have a compliant housing element. Additionally, grantees are required to submit a mid-award update on the Round 6 Regionally Coordinated Action Plan to HCD by January 31, 2027, and include updates on expenditure and obligation activities, progress on the system performance and improvement plan, and adequately improving on at least half of the current System Performance Measures. If progress is deemed insufficient, HCD can prescribe a Corrective Action Plan before disbursing funds.
Ms. Kirkeby said HHAP is intended as a regional plan to address homelessness and emphasized that working with locals is a two-way street. Locals need flexibility, but the state needs to be clear about their policy expectations. Senator Cabaldon talked about the challenge of providing flexibility while also making sure recipients are using best practices as they implement the funding.
Senator Cabaldon pointed out the numerous accountability measures already being implemented under the HHAP program and asked about the disconnect with the Governor’s Budget which does not propose a seventh round of HHAP. An administration representative said that they recognized the interest in HHAP round seven while acknowledging the current fiscal challenges that the state faces. In response, Senator Cabaldon expressed his concern about the sustainability of the funding and the clear need for it on the ground. He said it was “deeply unfair” to call for accountability for everyone but themselves and called on the state to also review and be accountable for their own programs.
Encampment Resolution Fund (ERF). Molly Rattigan, Deputy City Manager from the City of Napa, talked about her city’s experience with the ERF Program and the elimination of two local encampments. The city took out a three year lease for 54 units at what had formerly been a Motel 6. The city then moved encampment residents out of the encampments and into the center in a phased process that is still underway. ERF funding supports meals, security, and other services for residents, including storage of resident’s belongings. While the former encampment residents stay at the center, staff work to connect them with permanent housing.
Ms. Rattigan reported that, while work to clear the encampment from Kennedy Park continues, the ERF funded operations have succeeded in removing the two encampments from a Caltrans site, though regular monitoring and sweeps are required to prevent new unhoused individuals from taking up residence in the same locations.
Ms. Kirkeby went on to cover the ERF program and proposed budget trailer language that would modify the ERF obligation and expenditure timelines. Under the proposed budget trailer bill language, ERF grantees still have the same number of years to obligate and expend their ERF awards, but the clock does not start running against them until the date of their ERF award. In effect, this extends ERF grantees’ obligation and expenditure deadlines.
The committee voted 3-0 in favor of the following:
- Provide funding to implement AB 799 (Rivas, Luz, Chapter 263, Statutes of 2024), which requires state agencies and departments administering homelessness-related programs to provide Cal-ICH updated information on new or existing funding opportunities on a quarterly basis; and instructs Cal-ICH staff to develop and maintain a funding guide and a calendar of new or existing funding opportunities. Additionally, AB 799 also mandates new Cal-ICH initiatives to improve how the state gathers, tracks, and presents data about our programs to address homelessness.
- Adjusting the HHAP Program reporting timing for rounds 1 and 2 to the same frequency as they must do for subsequent rounds. Specifically, this means reporting annually on their system performance metrics and providing fiscal obligation and expenditure reports monthly.
- Approving trailer bill language modifying the ERF obligation and expenditure timelines, so that the clock for obligating and expending awards does not start running against them until the date of their ERF award. Currently, it begins when the legislature appropriates the funding.
We will continue to monitor budget and legislative discussions around the HHAP and ERF programs.
February Revenues
The Department of Finance (DOF) and State Controller released reports on February’s revenues as compared to the 2025-26 governor’s budget proposal.
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Tax Revenues
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DOF February
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DOF Fiscal YTD
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Controller Fiscal YTD
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Personal Income
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$1.024 billion above estimates
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$3.12 billion above estimates
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$3.064 million above estimates
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Corporation
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$296 million above estimates
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$111 million above estimates
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$15.74 million above estimates
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Sales and Use
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$167 million below estimates
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$263 million below estimates
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$362.2 million below estimates
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Total Revenues
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$2.33 billion above estimates
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$4.58 billion above estimates
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$4.29 billion above estimates
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Upcoming Hearings
Agendas are typically posted on the committee websites in the Assembly and Senate a few days prior to the hearings. To view hearings after they take place, you may access them in the Assembly or Senate media archives where they are generally available within a few hours of committee adjournment.
Monday, March 24, 2025, 2:30 p.m.
Assembly Budget Subcommittee No. 6 on Public Safety
Location: State Capitol, Room 447
Item No. Description
0690 Office of Emergency Services
2720 Department of California Highway Patrol
0286 Office of Youth and Community Restoration
Tuesday, March 25, 2025, 1:30 p.m.
Assembly Budget Subcommittee No. 5 on State Administration
Location: 1:30 p.m. - State Capitol, Room 447
Item No. Description
0515 Business, Consumer Services, and Housing Agency
2240 Department of Housing and Community Development
1700 Civil Rights Department
8885 Commission on State Mandates
0968 Tax Credit Allocation Committee
Tuesday, March 25, 2025, 3:00 p.m.
Assembly Military and Veterans Affairs
Location: State Capitol, Room 127
Informational Hearing: Changing Landscape in Veterans Benefits
Wednesday, March 26, 2025, 9:30 a.m.
Assembly Budget Subcommittee No. 4 on Climate Crisis, Resources, Energy, and Transportation
Location: State Capitol, Room 447
Item No. Description
0521 California State Transportation Agency
2600 California Transportation Commission
2660 Department of Transportation
2665 High-Speed Rail Authority
2667 High-Speed Rail Authority Office of the Inspector General
2720 Department of California Highway Patrol
2740 Department of Motor Vehicles
Wednesday, March 26, 2025,1:30 p.m.
Assembly Budget Subcommittee No. 2 on Human Services
Location: 1:30 p.m. - State Capitol, Room 444
Informational Hearing
0530 California Health and Human Services Agency
4100 State Council on Developmental Disabilities
4300 Department of Developmental Services
5160 Department of Rehabilitation
- Master Plan for Developmental Services Report
- Program Updates and Priority Issues of Interest
- Governor's Budget Proposals
Wednesday, March 26, 2025, 1:30 p.m.
Assembly Utilities and Energy
Location: State Capitol, Room 437
Informational Hearing: Strategies to Reducing California's Transmission Costs.
Wednesday, March 26, 2025, 2:30 p.m.
Assembly Joint Hearing Human Services and Agriculture
Location: State Capitol, Room 126
Joint Oversight Hearing: Food Insecurity: How Can California Increase Access to Food Assistance Programs
Thursday, March 27, 2025, 8:00 a.m.
Senate Budget and Fiscal Review Subcommittee No. 4 on State Administration and General Government
Location: State Capitol, Room 113 (Upon Call of the Chair (Please note time change))
0509 Governor's Office of Business and Economic Development
0650 Governor's Office of Land Use and Climate Innovation
0680 Governor's Office of Service and Community Engagement
1700 Civil Rights Department
Thursday, March 27, 2025, 9:00 a.m.
Senate Budget and Fiscal Review Subcommittee No. 3 on Health And Human Services
Location: 1021 O Street, Room 1200
Item Description
0530 California Health and Human Services Agency
0977 California Health Facilities Financing Authority
4120 Emergency Medical Services Authority
4260 Department of Health Care Services
- Medi-Cal Eligibility
- Medi-Cal Benefits
- California Advancing and Innovating Medi-Cal
- Medi-Cal Home and Community Based Services
- Medi-Cal Other Administration, Fiscal Intermediary
- Family Health Programs
Thursday, March 27, 2025, 9:00 a.m.
Senate Budget and Fiscal Review Subcommittee No. 5 on Corrections, Public Safety, Judiciary, Labor and Transportation
Location: State Capitol, Room 112
Item Description
0521 California State Transportation Agency
2660 Department of Transportation
2665 High-Speed Rail Authority
2667 High-Speed Rail Authority Office of the Inspector General
2740 Department of Motor Vehicles
Governor’s Press Releases
Below is a list of the governor’s press releases beginning March 12.
March 19: Governor Newsom proclaims Developmental Disabilities Awareness Month
March 19: California seizes over 650,000 fentanyl pills so far in 2025
March 19: While other states chase Hollywood, California locks in record-breaking film slate
March 19: Governor Newsom cuts red tape to accelerate Fresno clean energy project
March 18: Governor Newsom proclaims Women’s Military History Week
March 18: Millions of Californians to get average of $137 in credits on their April utility bills thanks to state’s climate program
March 18: Governor Newsom continues supporting Los Angeles business, fire recovery workers with funding, educational workplace safety outreach
March 18: California strengthens its position as the global AI leader with new working report issued by experts and academics
March 17: Governor Newsom honors fallen San Bernardino County Sheriff’s Deputy
California y Sonora firman una nueva alianza para impulsar acciones transfronterizas sobre el aire y la energía limpia
March 17: California and Sonora sign new partnership advancing cross-border action for cleaner air and clean energy
March 17: Governor Newsom announces judicial appointments 3.17.25
- Doris Ng, of Alameda County, has been appointed to serve as a Judge in the Alameda County Superior Court
- Jonathan Wolff, of Contra Costa County, has been appointed to serve as a Judge in the Alameda County Superior Court
- William Shin, of Los Angeles County, has been appointed to serve as a Judge in the Los Angeles County Superior Court
- Kimberly Dotson, of Los Angeles County, has been appointed to serve as a Judge in the Los Angeles County Superior Court
- Faye Chen Barnouw, of Los Angeles County, has been appointed to serve as a Judge in the Los Angeles County Superior Court
- Chamandeep Johal, of Merced County, has been appointed to serve as a Judge in the Merced County Superior Court
- Jennifer McCartney, of Orange County, has been appointed to serve as a Judge in the Orange County Superior Court
- Cecilia Joo, of Riverside County, has been appointed to serve as a Judge in the San Bernardino County Superior Court
- Dina Amani, of Riverside County, has been appointed to serve as a Judge in the San Bernardino County Superior Court
- Julia Cervantes, of San Francisco, has been appointed to serve as a Judge in the San Francisco County Superior Court
March 17: Governor Newsom proclaims United States Navy Week 2025
March 14: Governor Newsom announces appointments 3.14.25
- Janessa Goldbeck, of San Diego, has been appointed to the California Veterans Board
- Courtney Welch, of Emeryville, has been appointed to the California Housing Partnership Corporation
- Indira Cameron-Banks, of Los Angeles, has been appointed to the Civil Rights Council
- Ricardo Sanchez, of Hollister, has been appointed to the California State Board of Pharmacy
March 14: ICYMI: LA’s rebuilding and recovery efforts continue with support from Governor Newsom and LA Rises
March 13: Governor Newsom announces appointments 3.13.25
- Andrew King, of Sacramento, has been appointed Deputy Director of Data Operations Strategy at the Office of Data and Innovation
- Lavelle Parker, of Rancho Cucamonga, has been appointed Warden of California Institution for Women
- Yolanda Franco-Clausen, of Hayward, has been appointed to the California Sex Offender Management Board
- Sarah Metz, of Alameda, has been appointed to the California Sex Offender Management Board
March 13: California deploys cutting-edge technologies for LA fires recovery with expanded NASA Jet Propulsion Laboratory partnership
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