The Brief

The California State University system will seek a state loan of $144 million that it’ll have a year to repay at no interest, even though current projections show the system will have to add to its deficit to repay the debt.

Cal State’s chief financial officer says the loan will be used to offer one-year bonuses to faculty and staff. While salaries vary widely across the system, the extra $144 million is roughly a 3% increase in the total pay for Cal State’s workers, including executives. State law says the loan needs to be repaid by next July.

Despite months of hesitation, the system today took the first step to request the loan and will likely get the money in 60 days or less, said Cal State’s interim chief financial officer, Patrick Lenz, in an interview. The process involves approval from state lawmakers, who are likely to support the move.

State lawmakers made the loan available to Cal State after they cut state funding to the system by $144 million this year. Cal State has 22 campuses and enrolls 460,000 students.

The system’s largest union, the California Faculty Association of 29,000 workers, is cheering this decision but says more work is needed to bring back lecturers whose contracts were cancelled as many campuses contend with shrinking budgets. The union’s collective bargaining agreement is expiring but negotiators from the union and Cal State leadership haven’t met since April.

“We will take this as a win, but we have so much work to do, and I do hope that this provides an opening for the management to come to the table with us and negotiate fairly,” said Elaine Bernal, a lecturer at the Department of Chemistry and Biochemistry at Cal State Long Beach and senior member of the faculty association.

“The one-time investment, great, but we really got to focus on long-term investment,” she said.
The Legislature intends to increase state spending for Cal State in 2026-27 by just $101 million — far lower than previous promises from Gov. Gavin Newsom of about $250 million — so the system will effectively be $43 million short once it repays the loan, Lenz said. The decision to take the loan came “after careful deliberation, conversations with the chancellor, conversations with our Board of Trustees,” Lenz said.

Money is chronically tight at CSU. Since 2023 the system has battled ongoing deficits that have led to hundreds of degree and course cuts, fewer lecturers and hiring freezes. Back then, the system said it was spending $1.5 billion less than it should to adequately educate its students.

Over the past two years that figure has grown by several hundred million dollars as costs rise for campus utilities, insurance, health benefits and more. The deficits exist even as the system in 2024 began increasing tuition annually; the added costs outweigh the new revenue from charging students more. However, most students don’t pay tuition because of state and system financial aid.

Despite those fiscal pressures and likely new expenses to replace the Trump administration’s cuts to federal education grants, Lenz said system leaders want to spend the money on workers.

Unions wanted loan

The zero-interest loan has been the source of intrigue and scrutiny since July as unions representing Cal State workers have been pressuring the system to agree to borrow the money so campuses can offer pay increases for workers. Unions and some lawmakers argued that the the system was fully funded because the state budget gave CSU the option to borrow the loan, which should trigger collective bargaining contract language that stipulated that ongoing raises would kick in if the system received an increase in state funding.

But Cal State officials say that even if they take the loan, it’s not new or ongoing funding — it’s money they’d have to repay after a year — so the system isn’t obligated to increase wages like those contracts dictate.

Lenz reiterated that point during an interview, even after indicating the system will take out the loan.

“Clearly, anything that is one time is not ongoing,” he said of the loan. So any raise “would be only for the 12 months of the budget year.” But maybe the state will send more cash to the system than what lawmakers and Newsom signaled in the annual budget deal they solidified in June, Lenz said. He also suggested that CSU could negotiate more time to repay the loan.

“There's a long way to go in this process, and there's a lot of unknowns,” he said.

The loan is “an unusual financial strategy”, said Robert Kelchen, a professor of higher education budgets and finance at the University of Tennessee, Knoxville. Asked if this could be a model for other states, Kelchen said it might be for “other blue states that are heavily unionized” and are trying to secure labor peace with labor groups.

“That's really what this feels like,” he said.

How CSU got here

That the loan even exists is itself an example of curious budgeting tactics by lawmakers and Newsom. Last year they passed a state budget that gave Cal State a moderate increase in state funding with a warning of huge cuts of $375 million this July — equal to about 8% of what the state spends supporting the CSU.

After a half-year of fierce advocacy from Cal State officials, students and workers, the final 2025-26 budget approved in June applied just a 3% cut to CSU, with a promise that the cut — $144 million — would be restored in the 2026-27 budget year that begins next July. To help Cal State manage its finances this fiscal year, the state said the system could borrow $144 million this year and repay it by the end of June 2026.

The loan option was extended to multiple state agencies, including the University of California.

System budget leaders, including Lenz, in July expressed wariness over taking out the loan because if the state’s budget picture remains shaky — it’s already projecting billions of dollars in deficits — then lawmakers may decide to apply further cuts to the CSU. That means the system would be in a deeper deficit and be on the hook for a loan they couldn’t repay.

The fiscal malaise could have been worse. In 2022, Newsom promised the CSU and University of California five years of increasing budget support totaling more than $1 billion for each system in new, ongoing funding. But because of state budget constraints, that so-called “compact” has only been partially funded.

And new funding pain points are likely on the horizon. Congressional Republicans and President Donald Trump approved spending plans that Newsom says will kick millions of low-income Californians off public health insurance. If the state plans to pay for that care, budgets for other agencies, especially those that can raise tuition, may need to decrease.

This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.

The Trump administration is seeking to challenge state laws regulating the artificial intelligence industry, according to an executive order the president signed Thursday.

The order directs the Justice Department to set up an "AI Litigation Task Force" to sue states over their AI-related laws and also directs the the Federal Trade Commission and the Federal Communications Commission to work with the DOJ to follow the White House's AI action plan to circumvent "onerous" state and local regulations.

The order also directs Commerce Secretary Howard Lutnick to study whether the department can withhold federal rural broadband funding from states with unfavorable AI laws.

"We have to be unified," said President Donald Trump. "China is unified because they have one vote, that's President Xi. He says do it, and that's the end of that."

Trump's AI advisor, venture capitalist David Sacks, said the administration will not push back on all state laws.

"Kid safety, we're going to protect," Sacks said. "We're not pushing back on that, but we're going to push back on the most onerous examples of state regulations"

The executive order is almost certain to be challenged in court and tech policy researchers say the Trump administration cannot restrict state regulation in this way without Congress passing a law. The order also directs Sacks to work with Congress to help draft legislation.

Trump's executive order drew criticism from some of his supporters, including organizations that are part of a bipartisan effort to pass laws protecting children from AI harms.

"This is a huge lost opportunity by the Trump administration to lead the Republican Party into a broadly consultative process," said Michael Toscano, director of the Family First Technology Initiative at the Institute for Family Studies, a conservative think tank. "It doesn't make sense for a populist movement to cut out the people on the most critical issue of our day. But nonetheless, that is what they are vigorously trying to do."

"Even if everything is overturned in the executive order, the chilling effect on states' willingness to protect their residents is going to be huge because they're all now going to fear getting attacked directly by the Trump administration," said Adam Billen, vice president of Encode, a nonprofit focused on child safety and threats posed by AI. "That is the point of all of this — it is to create massive legal uncertainty and gray areas and give the companies the chance to do whatever they want."

Sacks can recommend some state laws, such as around child safety, to not be challenged if Congress does come up with a national policy for AI.

While Congress has stalled on passing AI regulation, dozens of states have passed laws related to AI, which include banning creating nonconsensual nude images using AI technology, mandating government agencies and businesses to disclose AI usage, requiring checks for algorithmic discrimination and protecting whistleblowers.

The Trump administration has pushed for less regulation of the AI industry, citing competitive pressure with China. But Trump has also recently allowed chipmaker Nvidia to sell its second-most advanced AI chips to China. Depending on the quantity, said Michael Sobolik, a senior fellow at Hudson Institute who studies U.S.-China competition, the export could end up "diluting what is our most significant advantage in the AI race."

Trump and some of his allies have attempted multiple times this year to halt state-level AI regulation. Earlier this month, GOP lawmakers tried and failed to insert AI preemption into the annual defense spending bill. An earlier version of the executive order signed Thursday leaked last month, sparked a round of opposition from across the political spectrum. In July, the Senate dropped an AI moratorium from the reconciliation bill it was debating.

While Democrats broadly support more AI regulation, the issue has divided Republicans. A faction of the party, including the president, welcome the support of tech billionaires, though others continue to view them with distrust.

Sen. Ted Cruz of Texas, an industry ally, introduced the failed AI moratorium during the reconciliation bill debate and stood next to Trump at a signing ceremony for the order on Thursday. After the effort to slip a similar measure in the defense spending bill failed last week, Sen. Josh Hawley of Missouri posted on X, "This is a terrible provision and should remain OUT."

Many Republican governors are also opposed to the move. Earlier in the day, Utah Gov. Spencer Cox posted on X that he preferred an alternative executive order that did not include barring state laws. "States must help protect children and families while America accelerates its leadership in AI," he wrote.

"An executive order doesn't/can't preempt state legislative action," posted Florida Gov. Ron DeSantis on X Monday in response to Trump's Truth Social post announcing the upcoming order, "Congress could, theoretically, preempt states through legislation." DeSantis has recently proposed a series of AI-related measures.

John Bergmayer, the legal director of the nonprofit advocacy group Public Knowledge, agreed. "They're trying to find a way to bypass Congress with these various theories in the executive order. Legally, I don't think they work very well."

In a post on X on Tuesday, Sacks suggested that the federal government can override state AI laws because it has the power to regulate interstate commerce.

Bergmayer disagreed, "States are, in fact, allowed to regulate interstate commerce. They do it all the time. And the Supreme Court just recently said it was fine."

Bergmayer cited a 2023 Supreme Court decision where the court supported California's power to regulate its pork industry even though the regulations affected farmers in other states.

NPR's Bobby Allyn contributed reporting.

Hundreds of people gathered at a cemetery in Boyle Heights Thursday to honor more than 2,300 Angelenos whose bodies have not been claimed by loved ones.

Officials say it was the highest number of people laid to rest during the annual Ceremony of the Unclaimed Dead over the past 45 years.

The remains were those of adults and children, some of whom had experienced homelessness, and who were immigrants far from home. Several of the people had struggled with physical and mental illnesses.

All of them died in 2022, about two years into the COVID-19 pandemic. The bodies were cremated and placed in a communal grave ahead of the ceremony, which has been a county tradition since 1896.

Los Angeles County Supervisor Janice Hahn said the unclaimed Angelenos may be strangers to those observing the ceremony, but they were our neighbors, too.

“They may have walked the same streets we did, waited at the same bus stops, enjoyed the same warm sunny days, even ones in mid-December like today,” Hahn said during the ceremony. “Like all of us, they hoped, they hurt, they dreamed — and too many endured more suffering and loneliness than anyone should.”

Inside the ceremony

Local faith leaders presided over the roughly hour-long event, sharing prayers and blessings to reflect the cultural and religious diversity of the region.

They included a Native American sage ceremony, as well as Buddhist, Islamic, Jewish and Christian prayers in five languages.

About 250 community members came to pay their respects, including Naha Armady of East Hollywood, who told LAist the experience was moving and emotional, especially after losing a family member and a pet earlier this year.

“It felt like it was totally meant to be for me to be able to come and hold space for these souls,” Armady said. “It's just an opportunity to have time and space and kind of honor the dead, and also maybe get a little bit of closure.”

Members of the community, along with county officials and faith leaders, placed white roses and bouquets of flowers they brought from home on the communal grave. One man sprinkled a few drops of whiskey over the petals from a black coffee cup.

Local faith leaders presided over the roughly hour-long event, including Jerry Arvayo, who performed a Native American sage ceremony.

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Makenna Sievertson

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LAist

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Paying respects 

Officials say the ceremony is designed to make sure every person in L.A. County, regardless of their means, is remembered with respect, dignity and compassion.

Justin Szlasa, a commissioner for the regional Los Angeles Homeless Services Authority, told LAist the ceremony is an opportunity to honor fellow Angelenos who may have been overlooked or lonely in life.

“These are people who are not connected to the community in a way that I wish they would be,” Szlasa said. “And I think it's really wrapped up in the work that we do related to trying to solve the homelessness problem here in Los Angeles.”

A video of this year’s Ceremony of the Unclaimed Dead is available here.

L.A. Mayor Karen Bass has asked the City Council to increase the Los Angeles Police Department’s budget by $4.4 million to hire 410 more officers before July.

In a letter to council members yesterday, Bass wrote that the city needs to have enough officers to keep Angelenos safe in coming years, including during major events like the 2026 FIFA World Cup and the 2028 Olympic Games.

LAPD Chief Jim McDonnell made a similar argument at a Budget and Finance Commission meeting Tuesday, where he said that despite the city’s budget problems, he worries about whether L.A. will be prepared for the Olympics in 2028 under currently approved staffing.

Several City Council members have already been pushing back against the proposal, arguing that the budget for those positions was negotiated and signed by Bass in June.

“The council and the mayor signed a budget that included 240 new hires,” Councilmember Katy Yaroslavsky said at the Budget and Finance Commission meeting on Tuesday. “The department chose to hire that full 240 in the first six months of this year.”

“Our job is to keep the city safe. We also have a responsibility to keep it solvent,” Yaroslavsky told LAist in an emailed statement. “I want to grow the police department, but I have yet to see a proposal that identifies an ongoing funding source to pay for more officers.”

LAPD Officers line up in preparation to form a skirmish line in front of protesters near the federal detention facility in downtown L.A. on June 7, 2025.

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Jordan Rynning

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LAist

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LAPD hiring goals twice as high as current budget

Mayor Bass initially proposed a budget back in April recommending funding to support 480 new LAPD officers.

The final budget was a compromise reached by the City Council that approved hiring 240 new recruits in the midst of a budget crisis and attempts to reduce layoffs across the city. According to a press release on June 7, the day after she signed the final budget, Bass announced a plan to find additional funding within 90 days to bring the total LAPD hires to 480.

The funding never materialized and no additional positions have yet been approved.

LAPD has already hit its hiring cap of 240 new officers, according to a letter from the city personnel department.

The city’s most recent financial status report filed on Dec. 5 by City Administrative Officer Matt Szabo says if LAPD continues hiring at its current pace, the department would add 410 new sworn officers and exceed the plan previously budgeted.

The report shows that costs of the additional 410 officers would be expected to exceed $4.4 million through June, then about $23.7 million in the next fiscal year.

Chief McDonnell spoke to council members at the Budget and Finance Committee about the pace of hiring, and said that the department did what it was “told to do.”

“Our understanding was . . . that we would be able to hire an additional 240 if we hired 240 in the first six months,” McDonnell said, “we did that.”

The department cannot continue hiring without the additional positions requested by Bass.

Show me the money

At Tuesday’s Budget and Finance meeting, Councilmember Tim McOsker asked Szabo whether any funds had ever been identified to fill those positions.

“There has not been a formal report issued to this body identifying funds for additional hiring above what is in the budget,” Szabo replied.

“Is there any proposal — any sort of competent, grown up, adult proposal — for how we pay for this?” McOsker, who also chairs the Personnel and Hiring Committee, asked in a follow up question to Szabo.

“Not that I'm aware of,” Szabo replied. He said his office would be happy to identify reductions to fund additional hiring, but had not been instructed to do so.

That means the proposed hires would need to come from the city’s reserve funds, which Szabo’s office cautioned against.

“The impact of this overspending in 2025-26 and 2026-27 cannot be overlooked,” his office’s financial status report states, “as it represents a departure from the approved plan with likely repercussions to the City’s Reserve Fund.”

The reserve fund currently sits at 5.06 percent of the total general fund budget, according to the report, but overspending — primarily driven by LAPD and liability payments — could bring the reserve fund below emergency levels of 5 percent.

“We should never, as a practice, assume the use of the reserve fund for hiring police officers,” Szabo told the Budget and Finance Committee. “The reserve fund is there for unexpected circumstances.”

In an emailed statement provided to LAist, McOsker said he agrees with the mayor that public safety is the highest priority.

“I agreed with the Mayor six months ago when she originally proposed this saying she would work with Council Leadership to find the money to fund more officers.” McOsker said, “But six months later, this remains a proposal with no funding identification.”

Bass told Larry Mantle on AirTalk that the city is looking at “every account possible” to find money for more officers, and that not approving more hiring will also have a financial cost.

“ Either we hire new officers or we continue to spend millions and millions of dollars in overtime,” she said.

Listen to the interview

Hermon just got its first sit-down restaurant.

If you've never heard of the Northeast Los Angeles neighborhood tucked between Highland Park and El Sereno, you're not alone. Unless you live there or regularly navigate the Arroyo Seco, Hermon tends to fly under the radar.

While its hip neighbors have seen wave after wave of restaurant openings, this 3,500-resident community has remained untouched. Until now.

Opened Dec. 3, Hermon's sits on the main stretch of Monterey Road, the latest venture from Last Word Hospitality — the restaurant group behind Found Oyster, Barra Santos, Queen's Raw Bar & Grill and Rasarumah. Founded in 2014 by Holly Fox and Adam Weisblatt, the group partners with chefs and hospitality professionals, helping them become restaurant owners.

The neighborhood of Hermon was founded in 1903 by a Free Methodist Church group and named after the biblical Mount Hermon. Annexed into Los Angeles in 1912, Hermon has grown quietly as a primarily residential area. But it remains one of Northeast LA's last underserved neighborhoods, with limited amenities and stores. Anyone interested in dining out was restricted to takeout spots at the Fresco Community Market shopping center.

From banquet hall to bar seats

The 89-seat restaurant occupies a former banquet hall that belonged to the Free Methodist Church, with Art Deco bones in a decidedly Craftsman neighborhood. The all-booth dining room features a U-shaped bar, handmade California tilework, hickory floors and vintage artwork spanning centuries.

Fox spent five years pursuing the building, drawn to its corner location and architectural details. The landlord initially resisted, citing risk, but came around after detailed presentations and tours of Barra Santos and Queen's. The next stop was the Hermon Neighborhood Council. Fox's team pitched in the space itself, emphasizing architectural restoration. The clincher? The name.

"The first thing she said to me was, 'The smartest thing you've done is name it Hermon,'" Fox recalled of the council president's reaction. "'You saw a community and you said, "Let's build a reflection of who they are."'"

Inside Hermon’s: a softly lit, wood-lined dining room that nods to classic L.A. dining rooms while feeling firmly rooted in the Hermon community.

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Courtesy Hermon's

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Community goal

Gentrification concerns — common at Last Word's other openings — never surfaced. Instead, Fox said the community seemed eager to be recognized.

Nicole Mihalka, president of the Hermon Neighborhood Council, said the name itself was significant for the small community.

"Not a lot of people know what Hermon is, but now if there's this great restaurant that's a destination with Hermon in the name, they're going to have to find out," she said.

The opening fulfills a long-standing community goal. In 2018, when the Hermon Neighborhood Council asked residents what they wanted to see more of in the neighborhood, the answer was clear: walkable retail and amenities, including restaurants and cafes.

The story illustrates Last Word Hospitality's intentional approach to developing "in-between" neighborhoods rather than adding to already-saturated dining corridors.

Opening with a happy hour was non-negotiable for Fox — a signal from day one that Hermon's is built for locals. Running daily until 6 p.m., there are $10 martinis and food specials priced between $6-8 that include garlic bread, marinated olives and loaded potato fritters. Fox said happy hour sales already match the next two hours combined, proving the pricing strategy is working for neighborhood regulars.

The menu

Chef/partner DK Kolender, whose résumé includes Tartine and Dudley's Market, leads the kitchen with a New American bar and grill menu, offering polished crowd-pleasers with an edge.

Kolender is most excited about the two-sheet lasagna vongole ($36) — clams, cream, guanciale, parmesan and breadcrumbs layered between fresh pasta made daily. The dish evolved from a clam toast he made at Dudley's Market, after weeks of developing a verde lasagna that never quite landed.

A closer look at the Ode to Chez burger — char, melt and a little sauce drip for good measure.

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Jim Sullivan

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Courtesy Hermon's

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Hermon’s two-sheet lasagna vongole, layering clams, cream, guanciale, parmesan and breadcrumbs into a rich, flat-sheet presentation.

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Courtesy Hermon's

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The Ode to Chez cheeseburger ($24) — originally created for a Malibu project lost in the Palisades fires — features soubise fondue studded with green peppercorns, bordelaise onions, Dijon and a sesame milk bun developed with Kolender's former team at Tartine. Skip the $6 fries and opt instead for the loaded potato fritters ($16), topped with cream cheese, bacon and parmesan. It's the kind of indulgence that doesn't leave you weighed down.

Hermon’s loaded potato fritter: golden, layered potatoes crowned with a snowfall of grated cheese.

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Jim Sullivan

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Courtesy Hermon's

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Since the opening, Kolender says the response has been overwhelming.

"We've had people who live down the street here two, three times already," he said. "We know them by name."

For Fox, it's unprecedented.

"I have never opened a restaurant with this much support," she said. "It's an unbelievable feeling."