AB 2222 Would Likely Save California Taxpayers At Least $47 Million

California’s Finance Board has already indicated that AB 2222, the Community NEWS Act, would be paid for through the tightening of a state tax loophole. New research shows the bill could actually save California local governments and taxpayers another $47.6 million a year in borrowing costs.

A landmark study in 2020 by finance academics Pengjie Gao, Chang Lee, and Dermot Murphy found that lenders charge local governments higher interest rates on municipal bonds when newspaper coverage disappears. This year, Murphy, of the University of Illinois Chicago, joined Rebuild Local News’ research director Matt Baker to put a price tag on this – which turns out to be $1.1 billion extra nationally and $47.6 million in California.

The reason is this: Investors viewed areas without journalism to be at greater risk of being inefficient, wasteful or corrupt. So they raise the interest rates on lending to the governments in those areas. Those higher interest rates get passed on to taxpayers in those areas either through higher taxes or reduced services.

In California, 18 counties defined as news deserts issued an estimated more than $5 billion in bonds. Over the course of 10 years, the resulting premium in those counties would add roughly $47.6 million in costs.

The state projects that AB 2222, which provides refundable tax credits to newsrooms that hire or retain local reporters, would be funded by closing the loophole in the California tax code (putting further limits on how much a corporate CEO could deduct above $1 million in compensation). Specifically, the Franchise Tax Board estimates that local news employment credit would cost $19 million the first year, $43 million the second year and $42 million the second year – but the loophole-closing would bring in $29 million in the first year, $58 million in the second year and $65 million in the third year.

If Governor Gavin Newsom signs the legislation, that surplus would go to California’s general fund. The savings to municipal governments after they got rid of their news deserts would be savings on top of that.

Of course, borrowing costs are not the only way that local news coverage benefits local communities. Research has shown that robust local news coverage is also associated with increased civic engagement, higher-quality candidates for local government positions, reduced rates of financial misconduct and environmental violations from local firms, and lower taxes. Therefore, the $47.6 million per year in savings for local governments in California should be seen as a lower-bound estimate on the benefits associated with robust local news coverage.

To be clear, AB 2222 does not target money at news deserts but it provides significant support throughout the local news system and provides a structure where investors or philanthropists that invest in news deserts can have their support be partly matched by the state.

The bill is now before Gov. Newsom. A large coalition of more than 180 national and California media is urging him to sign it, along with most state press associations. Supporters include:

National

• Rebuild Local News
• SAG‑AFTRA
• National Newspaper Association
• National Association of Broadcasters
• Communication Workers of America
• National Newspaper Publishers Association | Black Press of America
• National Association of Hispanic Publications
• Public Media Company
• Institute for Nonprofit News
• Local Independent Online News Publishers
• News/Media Alliance
• The NewsGuild-CWA
• Society of Professional Journalists
• Report for America
• American Journalism Project
• America’s Newspapers
• Bonneville International (TV, Radio)
• PEN America
• National Trust for Local News
• Solutions Journalism Network
• Association of Alternative Newsmedia
• South Carolina Press Association
• Nevada Press Association
• Pennsylvania NewsMedia Association
• Spanish Broadcasting System, inc.
• Kentucky Press Association
• Wisconsin NewsMedia Association
• Kansas Press Association
• Washington Newspaper Publishers Association
• Nebraska Press Association
• Utah Press Association
• Montana Newspaper Association
• Hoosier State Press Association
• Iowa Newspaper Association
• Public Knowledge
• Freedom of the Press Foundation
• Military Veterans in Journalism
• Trusting News
• MindSite News
• The Media and Democracy Project
• Media Action Center
• Public Media Venture Group
• Times Media Group

California

• California Black Media
• Latino Media Collaborative
• American Community Media
• California Independent News Alliance
• California News Publishers Association
• California Broadcasters Association
• Media Guild of the West of The NewsGuild-CWA
• CalMatters
• La Opinion
• Journalism Chairs of the Cal State University System
• San Francisco Chronicle
• Pacific Media Workers Guild of The NewsGuild‑CWA
• Black Voice News (Riverside)
• KQED
• The Sacramento Observer
• LAist
• Lookout Santa Cruz
• Coastside News Group (Half Moon Bay Review and Pacifica Tribune)
• CCNMA Latino Journalists of California
• Embarcadero Media Foundation
• Cityside (Berkeleyside, Richmondside, Oaklandside)
• The LA Local
• NABET-CWA Local 51
• KVCR Public Media
• KPBS
• PBS KVIE / Abridged
• SPJ, Greater LA Pro Chapter
• Robert C. Maynard Institute for Journalism Education
• The Center for Investigative Reporting (San Francisco)
• El Popular Bakersfield
• Northern California Public Media
• The Riverside Record
• BenitoLink
• Los Angeles Public Press
• Coastal View News (Carpenteria)
• Santa Clara Weekly
• EdSource
• Los Angeles Press Club
• Santa Barbara Independent
• La Nueva Voz (Pomona)
• Coachella Valley Independent
• Ventura County Sun
• Point Reyes Light
• Lake County News
• Ojai Valley News
• Needles Desert-Star
• Mariposa Gazette
• Alameda Post
• Boyle Heights Beat
• Long Beach Post
• Slavic Sacramento
• India Currents (Silicon Valley)
• J. The Jewish News of Northern California
• Nowruz Media (Bay Area)
• Tahoe Tribune
• Sierra Sun (North Lake Tahoe)
• Oakland Voices
• Silicon Valley Voice
• Capital & Main
• Palo Verde Valley Times
• Punjabi Radio (San Jose)
• Imperial Valley Press (El Centro)
• Napa Valley Register
• Healdsburg Tribune
• KRML Radio (Carmel)
• Pacific Sun (Marin)
• Institute for Media and Public Trust (Fresno)
• LA Reporting Collective
• KBIF 900
• Fullerton Observer
• Good Times Weekly (Santa Cruz)
• Tri-City Voice (Fremont, Newark and Union City)
• White Ash Broadcasting, Inc (Valley Public Radio)
• Bay Area Reporter
• The Ark (Belvedere)
• Weeklys Media Group
• Media Alliance
• The Mendocino Voice
• Golden State
• Asian American Journalists Association of Los Angeles
• Mineral King Publishing
• Impulso Newspaper (LA)
• Marquee Broadcasting West – Redwood News
• UsK-News
• Kiosko News (LA)
• Nevada City Community Broadcasters Group
• San Jose Spotlight
• Broke-Ass Stuart (Bay Area)
• Central Valley Journalism Collaborative
• Shafter-Wasco Publishing
• Shasta Scout
• El Nuevo Sol (Northridge)
• San Francisco Public Press
• Bay City News
• Santa Barbara News-Press
• Pasadena Outlook
• Glendale News Press
• Burbank Leader
• KWMR
• Mission Local (San Francisco)
• News for Chinese (San Jose)
• US News Express (Los Angeles County)
• HHTV
• Tehran Magazine (Los Angeles)
• Radio Korea (Los Angeles)
• Little Saigon TV (Los Angeles, San Jose)
• Nguoi Viet Daily News (Westminster)
• Indian Voices/Indigenous Network (San Diego)
• ChicoSol
• Hispanic LA
• Pacifika By Design (Sacramento)
• KXO AM, KXO-FM and KXORADIO.COM (Imperial County)
• Russian California / RusCali (RusCali.com)
• El Informador del Valle (Indio)

Editor’s Note: This piece draws on research and analysis from Dermot Murphy, associate professor of finance at University of Illinois Chicago, and Matt Baker, our director of research. Their work informed the data, insights, and conclusions presented here.