Welcome to the May 19-23 edition of the Main Street Minute from your small-business-advocacy team in Sacramento.

State Budget Revise

The big news of last week was the May Revision of the proposed State Budget for the 2025-2026 Fiscal Year unveiled by Gov. Gavin Newsom last Wednesday, May 14.

By now, readers of the Main Street Minute, through their regular media, are fully aware of the highlights. Your NFIB lobbying team in the State Capitol went immediately to Page 61 of the revision to find what mattered to small business.

From that page, we transmit the following three bullet items:

— Unemployment Insurance Trust Fund Loan Interest—An increase of $8.5 million one-time General Fund in 2025-26 to align with updated estimates for the annual interest payment on the state’s Unemployment Insurance loan balance. This adjustment will bring the total estimated interest payment for 2025-26 to $642.8 million General Fund when combined with the estimated payment included in the Governor’s Budget.

— Workforce Innovation and Opportunity Act-May Revision Update—An increase of $20.4 million one-time in 2024-25 and an increase of $119.6 million one-time in 2025-26 to align with anticipated federal Workforce Innovation and Opportunity Act funding that will be available to support various workforce development programs.

— Department of Industrial Relations (DIR) Apprenticeship Training Grant Expansion—An increase of $18.2 million one-time from the Apprenticeship Training Contribution Fund for DIR to support apprenticeship training in construction and related trades. This funding is in addition to the $3 million included in the Governor’s Budget for this purpose.

Hold on!

Tim Taylor, NFIB California’s policy director, reminds everyone, “Paying the interest on the UI credit card is obligatory, and it comes out of the pocket of small businesses. Do Californians take a victory lap every time they pay the minimum on their monthly credit card bills? The state is kicking the UI can down the road and forcing small businesses to shoulder the monetary burden.”

California still owes the federal government nearly $20 billion on the principal of the loan. The above, as Taylor points out, only addresses the interest. The Newsom administration is aware of the problem, and in conversations with State Director John Kabateck said legislative hurdles make it difficult to address.

Meanwhile, a couple of weeks ago, New York came to an agreement to pay off its UI loan, leaving California the last state still in arrears out of the 22 states that borrowed from Uncle Sam at the start of the pandemic to keep unemployment checks going to people who needed the help.

Did it have to come to this? 

“Unlike dozens of other states, California and New York devoted almost none of the tens of billions of dollars in flexible federal funds they received during the pandemic toward repaying their loans,” writes Matt Weidinger, senior fellow at the American Enterprise Institute. “They instead spent that money, for example devoting $12 billion to ‘Golden State stimulus checks’ and $2 billion to New York’s unprecedented unemployment benefits program for illegal immigrants.”

Some Good News?

Although the UI trust fund problem will be with us for a while, the state budget could be used to address two big regulatory problems, which if they come about, will be of help to small businesses.

“We know the governor’s people are also concerned about the UI Trust Fund and would have to step delicately through a legislative minefield to address it, but if what we’re hearing about wrapping some huge regulatory reforms (Assembly Bill 609, Senate Bill 607) into the state budget, we’ll consider that a bit of a consolation prize,” said NFIB California State Director John Kabateck.

So, what on earth do regulatory, or any other non-monetary, issues have to do with the state budget?

Explains CalMatters’ Dan Walters, “The [budget] process became much more complicated after voters passed Proposition 13 …  overnight the budget became a much larger and infinitely more complicated document. That complication soon spawned another element of the annual process: ‘trailer bills’ to implement the budget’s financial decrees by changing laws governing how the newly allocated money should be spent.

“Over the ensuing 40-plus years, the number of trailer bills blossomed. Eventually, they ceased being just adjuncts to the budget and became vehicles for major changes in policy having little or nothing to do with the budget.”

Calendar

— May 26: Memorial Day. Legislature not in session.

— June 6: Last Day for Senate and Assembly to pass bills introduced in their chambers.

— June 15: Budget bill must be passed by midnight.

— July 4: Independence Day. Legislature not in session.

— July 18-August 17 Summer recess.

— September 12, 2025-January 5, 2026: Interim recess of the 2025-2026 session of the California State Legislature.

— October 15: Last day for governor sign or veto bills passed before September 12.

National

— The House Ways and Means Committee advanced a tax reconciliation package that permanently increases the 20% small business deduction to 23%. NFIB strongly supported the measure, which now heads to the House floor. The small business deduction was generously expanded in a huge win for small businesses. However, it is pivotal that the small business community remain engaged, as there are still opportunities for changes in a long process ahead. Letter of support.

— The U.S. House Ways and Means Committee’s budget reconciliation proposal also includes pro-small business health care measures, including a two-year small business tax credit for businesses that choose to set up a CHOICE/ICHRA account.

— The NFIB Research Center released the April SBET survey, which showed that the Small Business Optimism Index declined by 1.6 points in April to 95.8 and the Uncertainty Index decreased four points from March to 92, remaining far above the historical average of 68.

— NFIB released Episode 61 of the “Small Business Rundown” podcast, featuring SBLC VP and Executive Director Beth Milito discussing why credit card chargebacks happen and how to prevent them.

Next Main Street Minute, May 26. All Main Streets Minutes can be found on the NFIB website here. Pull down the California tab in the upper-right-hand corner.