The Hedge | Brutal Honesty Over Hype Since 2008

California’s Private Attorneys General Act — the most feared employer liability statute in the state — was partially reformed in 2024 through SB 92 and AB 2288. These reforms were widely covered in business media as a major employer victory. The actual changes were more modest. Understanding what specifically changed, and what remains, is essential for any California employer managing PAGA exposure.

What SB 92 and AB 2288 Changed

The 2024 reforms made three significant modifications to PAGA’s structure. First, they created a “cure” mechanism for certain technical violations — allowing employers to fix specific wage statement errors and other technical violations within 65 days of notice without incurring full per-pay-period penalties. Second, they capped penalties for certain categories at lower levels when the employer had established and implemented reasonable policies to prevent violations. Third, they gave courts more explicit authority to reduce aggregate penalties when the full statutory amount would be disproportionate to the actual harm.

What Didn’t Change

The fundamental PAGA structure is intact. Private attorneys still have standing to file representative actions on behalf of aggrieved employees. The 75/25 split between the state and employees remains. The per-violation penalty structure remains — though with new caps in some categories. The statute of limitations remains. The most aggressive PAGA claims — those involving systematic wage theft, pervasive overtime violations, or large employee populations — are largely unaffected by the 2024 reforms. The cure mechanism helps employers who made inadvertent technical errors; it does not protect employers with systemic violations.

The Practical Impact

For California employers, the 2024 PAGA reforms reduce the most extreme penalty scenarios for technical violations but don’t change the fundamental compliance calculus. The lesson remains unchanged from the May analysis: build accurate wage statement systems, implement proper timekeeping, pay overtime correctly, and provide required meal and rest breaks — because the compliance cost is far lower than the litigation cost. The cure mechanism gives you a second chance on technical errors. Use it if you qualify.

The Hedge has been cutting through financial and business noise since 2008. Brutal honesty over hype — always.

The Hedge — Brutal Honesty Over Hype Since 2008

The Pitch

Assemblyman Carl DeMaio’s Cost of Living Reduction Act (AB 23): when California prices exceed the national average by more than 10%, state agencies must automatically reduce taxes, fees, and mandates until prices come down. He’s also promising $2,500 per middle-class family annually in cost-of-living rebates, funded out of the Greenhouse Gas Reduction Fund. DeMaio’s diagnosis of Sacramento’s failure is largely correct. The prescription is where it falls apart.

What He Gets Right

The benchmarking concept is intellectually interesting — automatic accountability that doesn’t depend on any individual politician’s will. His examples are real: average ER visit in California runs $3,238 versus $682 in Maryland. Average ambulance ride $2,407 versus $662 in North Carolina. The differential is primarily regulatory.

The $2,500 Per Family Math

California has approximately 13 million households. At $2,500 each, that is $32.5 billion per year. The Greenhouse Gas Reduction Fund historically disburses $3 to 5 billion annually. Emptying it doesn’t get you to $32.5 billion. It gets you to 10 cents on the dollar. DeMaio has not explained this gap. This is a campaign number, not a policy number. When a politician promises $32.5 billion out of a $4 billion fund, you either don’t understand the math or you’re hoping voters won’t check.

The Gas Tax Suspension Problem

Suspending state gas taxes “until politicians fix it” has no defined endpoint. It’s either a permanent tax elimination (explain the budget math) or a temporary measure with no exit condition. Meanwhile the roads don’t get maintained.

The Bottom Line

DeMaio mixes legitimate structural reforms with numbers that don’t survive basic arithmetic. When a politician tells you a $32.5 billion annual promise will be funded by a $4 billion fund, that is not a rounding error. That is the whole ballgame.

Rating: The best critique of the status quo in the race. The math is theater.

— Timothy McCandless | The Hedge | timothymccandless.wordpress.com

The Hedge — Brutal Honesty Over Hype Since 2008

The Pitch

Steve Hilton’s “Cali-ffordability” agenda: eliminate state income taxes on the first $100,000 earned, deliver $3/gallon gasoline, cut electricity bills by 50% through deregulation, cap developer impact fees, restrict CEQA lawsuit standing, and run an anti-fraud crusade called “Cal Doge.” He leads Republican polling and has Trump’s endorsement.

What He Gets Right

Developer fee caps and CEQA lawsuit reform are legitimate policy levers with bipartisan support in principle. The income tax proposal identifies the right problem: California’s tax structure punishes the working and middle class who can’t afford to leave.

The $3 Gas Problem

California gas is expensive because of a thin, California-specific refinery market, state-mandated fuel blend requirements, cap-and-trade costs, the Low Carbon Fuel Standard, and the highest per-gallon state excise tax in the nation. Eliminating every state gas tax component gets you perhaps $0.90/gallon toward that $2+ gap. The rest requires either federal action, massive refinery investment, or overturning California’s own air quality regulations. Hilton has not explained the mechanism.

The 50% electricity cut has the same problem at larger scale. Wildfire liability, grid hardening, and transmission infrastructure are physical costs already baked into the grid. You can’t deregulate your way out of them.

The Funding Gap

“Fraud elimination” and general spending cuts have never come close to closing an income tax revenue gap of this size anywhere. The numbers require either massive service cuts or deficit spending.

The Bottom Line

Hilton is running in a state that hasn’t elected a Republican governor since Schwarzenegger left office in 2011. His platform is designed to sound maximally different. Whether the math holds up is a separate question — and on the specifics, it doesn’t.

Rating: The best Republican salesman in the field. The promises outrun the physics.

— Timothy McCandless | The Hedge | timothymccandless.wordpress.com

The Hedge | Brutal Honesty Over Hype Since 2008

California’s Davis-Stirling Common Interest Development Act governs every homeowners association in the state — from two-unit condominiums to master-planned communities with thousands of homes. It is one of the most comprehensive bodies of HOA law in the country, and most homeowners in HOA-governed communities have never read it. That knowledge gap costs them money, rights, and legal standing every year.

What Davis-Stirling Covers

The Davis-Stirling Act, codified at California Civil Code Sections 4000-6150, governs: the formation and governance of common interest developments; the powers and limitations of HOA boards; assessment collection and enforcement procedures; member inspection rights for association records; dispute resolution requirements; and the specific procedures associations must follow before taking adverse action against members. It is not optional. An HOA operating in California operates under Davis-Stirling whether it wants to or not, and provisions of the CC&Rs that conflict with Davis-Stirling are void.

The Most Important Provisions for Homeowners

Assessment collection: before an HOA can record a lien on your property for unpaid assessments, it must follow specific pre-lien notice procedures including a 30-day written notice and an opportunity to request a payment plan. Skipping these procedures makes the lien defective. Inspection rights: members have the right to inspect association financial records, minutes, and governing documents under Davis-Stirling — the HOA cannot simply refuse. IDR and ADR: before filing a civil lawsuit against a homeowner for CC&R violations, the HOA must offer internal dispute resolution (IDR) and, if unsuccessful, alternative dispute resolution (ADR). Failure to comply with these requirements is a defense to the lawsuit.

Why This Matters to The Hedge’s Audience

A substantial portion of California residential real estate — particularly condominiums, townhomes, and planned unit developments — is subject to HOA governance. For entrepreneurs who own their workspace or investment properties in HOA communities, and for the growing number of California business owners who operate from HOA-governed residences, understanding Davis-Stirling is practical financial knowledge. The June series will cover the key provisions in actionable detail.

The Hedge has been cutting through financial and business noise since 2008. Brutal honesty over hype — always.

The Hedge — Brutal Honesty Over Hype Since 2008

The Pitch

Riverside County Sheriff Chad Bianco: deregulation, cutting “excessive fraud,” and the argument that Democratic single-party rule caused the mess and he’s the non-Democrat who’ll clean it up.

What He Gets Right

California’s regulatory environment is genuinely hostile to housing construction and business formation. CEQA has been used to block solar farms, transit projects, and housing developments by parties that have nothing to do with environmental protection. The “excessive fraud” argument has legitimate foundation — California’s EDD paid out an estimated $20+ billion in fraudulent unemployment claims during COVID. Medi-Cal fraud is a documented, recurring problem.

What He Doesn’t Have

“Deregulate” is not a plan — it’s a direction. Which regulations? How? A governor’s executive authority to override CEQA is limited. Substantive reform requires legislative action, and California’s legislature is heavily Democratic. “Rein in excessive fraud” is a campaign line, not a budget — even recapturing every identified dollar wouldn’t dent the structural cost drivers of housing, energy, and water.

There’s also a significant credibility problem. Bianco is in a court battle over his office’s unprecedented seizure of 650,000 Riverside County ballots from last November’s statewide special election. Voters evaluating a law-and-order candidate have standing to ask whether he applies that same discipline to himself.

The Bottom Line

The cost of living is driven by structural supply constraints that don’t care which party is in Sacramento.

Rating: Correct diagnosis. No prescription.

— Timothy McCandless | The Hedge | timothymccandless.wordpress.com

The Hedge | Brutal Honesty Over Hype Since 2008

May’s series covered the foundational structural problems with California as a business formation state — the $800 franchise tax, the absent Series LLC, the RULLCA unanimous consent trap, the 38% cost of living premium, and the talent absorption problem that makes early-stage hiring genuinely difficult. None of those structural problems have changed. But June brings some context worth adding.

What’s Actually Shifting

California’s Legislature has been more active on business formation issues than in prior years. SB 54, the venture capital diversity data reporting requirement, reflects the state’s ongoing interest in regulating the venture capital industry — adding compliance burden to an asset class that was previously largely unregulated at the state level. AB 1228, which created a new minimum wage floor for fast food workers at $20/hour, illustrates the continuing upward trajectory of California’s labor cost floor. Neither development changes the fundamental analysis from May. Both reinforce it.

The Migration Data Continues to Point One Direction

California’s domestic outmigration continues. The IRS migration data — the most reliable measure because it tracks actual tax filers moving between states — shows California losing higher-income households to Texas, Florida, Nevada, and Arizona at rates that have been consistent since 2020. The companies that have announced relocations or expansions in other states since January 2026 include names across industries that have genuine California roots. The pattern is not slowing.

The Honest June Framework

This month continues the May analysis with specific deep dives: the PAGA reform that passed in 2024 and what it actually changed, the AB5 contractor classification landscape three years after enactment, the specific cost comparison between California and Nevada for service businesses, and a new series on HOA compliance law that affects property owners across the state. The Hedge covers it all — with the same commitment to numbers over narrative that has defined this publication since 2008.

The Hedge has been cutting through financial and business noise since 2008. Brutal honesty over hype — always.

The Hedge — Brutal Honesty Over Hype Since 2008

The Pitch

San Jose Mayor Matt Mahan — the youngest major candidate at 43, the most moderate Democrat, and arguably the most specific on policy mechanics. His platform: suspend the gas tax, cap developer fees, set strict permit timelines, pause new-home taxes for two years, and tie government pay to actual outcomes.

What He Gets Right

California’s gas prices run roughly $2/gallon above the national average. State excise taxes, cap-and-trade costs, and the Low Carbon Fuel Standard are legitimate contributors to that premium. A temporary suspension would provide real, immediate relief to working families who commute.

Impact fees — charges developers pay cities — add $60,000–$100,000 to the cost of a new unit in some California cities. Capping them is not ideological. It’s arithmetic. Mahan’s permit timeline mandate addresses the time-is-money problem. Forcing cities to decide within a defined window is a lever that could actually move prices.

What Doesn’t Add Up

The gas tax is real infrastructure revenue. A temporary suspension doesn’t fund a replacement source — it defers the pressure. “Temporary” in California politics often isn’t. The bigger problem: Mahan is polling in the lower tier. His policy platform is among the most credible in the field, and he may not make the runoff.

The Bottom Line

If you want the candidate with the most coherent specific policy platform on costs, Mahan is that candidate on the Democratic side — and it’s not particularly close.

Rating: The best Democratic plan. May not matter.

— Timothy McCandless | The Hedge | timothymccandless.wordpress.com

The Hedge — Brutal Honesty Over Hype Since 2008

The Pitch

Katie Porter’s affordability platform: free universal childcare, speed housing permits by nearly two years, a down payment assistance bond for first-time buyers, eliminate state income taxes for households under $100,000, and two years of free college tuition.

The Fiscal Math Doesn’t Add Up

California’s personal income tax is the state’s largest single revenue source — roughly $130 billion annually. Eliminating the tax liability for under-$100K earners blows a hole in the budget that funds schools, roads, Medi-Cal, and every other program Porter wants to expand. Porter admits she “cribbed” this idea from Steve Hilton — the Republican in the race. Add free universal childcare, free college, increased housing production, and a down payment bond — Porter is promising to cut the state’s main revenue source and increase spending simultaneously, with no credible offset beyond wealth taxes on earners who are already leaving the state.

The Housing Plan

Her permitting speedup by nearly two years is actually the most credible item on the list. Time is money in construction — carrying costs accumulate monthly. But she hasn’t committed to overriding the local NIMBYism that actually blocks projects.

The Housing Deal She Gets to Live With

Porter campaigns on California’s housing crisis while living in a below-market UC Irvine faculty housing unit she purchased in 2011 for $523,000 — well below market rate in Orange County — through a program restricted to UC employees. She retained the subsidized housing for years after taking unpaid leave from her faculty position to serve in Congress. She didn’t break any rules. But voters are entitled to notice the gap.

The Bottom Line

You cannot cut the income tax for most earners, expand free services, and close the gap with a wealth tax on a population that’s actively voting with its feet.

Rating: The right instincts. The arithmetic is a mess.

— Timothy McCandless | The Hedge | timothymccandless.wordpress.com

The Hedge — Brutal Honesty Over Hype Since 2008

The Pitch

Tom Steyer — billionaire, former hedge fund manager, climate activist — wants to build one million homes you can afford in California, partly through surplus public land and prefabricated housing, and wants to return windfall oil company profits directly to residents.

The Problem

In 2018, Gavin Newsom campaigned on building 3.5 million new homes over his two terms. The state is now tracking to fall dramatically short of that goal — despite Newsom signing hundreds of housing bills. The reason Newsom’s promise failed isn’t that he didn’t try. It’s that California’s housing problem is structural, not gubernatorial. Local governments control zoning. CEQA can delay projects for years through litigation that has nothing to do with environmental protection. None of that changes because a new governor has a big number.

Steyer’s surplus public land proposal has been tried, piloted, and under-executed for two decades. The land exists. The political permission to build dense housing on it at scale — fast, without years of environmental review — does not exist in the current regulatory environment.

The Windfall Oil Profits Angle

If California imposes a windfall profits tax on refiners, the refiners have two options: absorb the cost (unlikely) or pass it forward in pump prices. California already has only a handful of refineries configured for California’s unique fuel blend. Any measure that makes refining California fuel less economically attractive reduces that already-thin supply. The likely outcome: higher gas prices with a rebate check that doesn’t fully compensate.

The Bottom Line

Steyer’s platform doesn’t explain why his million homes will materialize when Newsom’s 3.5 million didn’t.

Rating: Familiar fiction with better marketing.

— Timothy McCandless | The Hedge | timothymccandless.wordpress.com