Welcome to 2023 — a year that will likely prove decisive in California’s attempts to address some of its most pervasive challenges, ranging from housing and homelessness to climate change.

Wednesday, state lawmakers are set to return to Sacramento (though some may be driving instead of flying Southwest as they usually would) to resume the two legislative sessions that ceremonially started in December: a regular session focused on the typical business of debating and passing bills, and a special session focused on Gov. Gavin Newsom’s proposal to levy a penalty on oil companies he accuses of price-gouging Californians at the gas pump.

On Sunday, many of the 997 bills Newsom signed into law last year — out of the nearly 1,200 state lawmakers sent to his desk — went into effect.

Now let’s dive into some of the key issues CalMatters is keeping an eye on in 2023:

• Tough budget decisions: Newsom by Jan. 10 will unveil his budget proposal for the upcoming fiscal year — one that will have to account for a projected $24 billion deficit, testing the state’s commitment to expanding social safety net programs. And California’s public pension plans, both of which posted negative returns on investments last year, are expected to face similar or worse conditions this year — increasing pressure on local governments and taxpayers.
• An industry reckoning: Even as Newsom doubles down on his campaign against the oil industry, people close to him say he remains a pro-business centrist who’s fiscally conservative and socially liberal, Politico reports. Meanwhile, a first-in-the-nation law setting statewide standards for wages and working conditions for the fast food industry — set to take effect Sunday — was temporarily blocked Friday after a judge approved industry groups’ request to put it on hold until local elections officials determine later this month whether enough signatures were collected for a 2024 referendum, which would block the law until voters weigh in.
• The implementation of ambitious and controversial programs:
  • Mental health: By Oct. 1, seven of California’s 58 counties are set to launch CARE Court, Newsom’s contentious plan to make it easier to compel severely mentally ill people into housing and treatment. But its potential limitations are already becoming clear: No CARE Court participant can be forced into treatment or forcibly medicated, unless they’re under the constraints defined by the decades-old Lanterman-Petris-Short Act governing conservatorships, a California Health and Human Services Agency spokesperson told the Los Angeles Times.
  • Health care: As California embarks on a multi-year plan to dramatically overhaul Medi-Cal, its health care insurance program for the poor, it’s backtracked on a controversial plan to offer Medi-Cal contracts to just three companies (plus Kaiser, under a separate deal) instead of nine. Blue Shield and Community Health Group will also now receive Medi-Cal contracts in 2024, the state Department of Health Care Services announced Friday, noting that all plans “will be held to new standards of care and greater accountability.”
  • Housing: As California contends with the country’s highest homelessness rate, the state this year will get its first glimpse of the impacts of two new laws that aim to speed up affordable housing development in former commercial areas. Lawmakers will also consider a bill to make it easier for religious organizations and nonprofit colleges to build 100% affordable housing on their property. Meanwhile, some local governments are facing a Jan. 31 deadline to submit blueprints requiring the state to plan for 2.5 million homes by 2030 — but, although the state is enforcing this more seriously than it has in the past, it’s all fun and games until the actual homes get built, as CalMatters’ Manuela Tobias put it.
• Immigration and the border: Although the U.S. Supreme Court last week temporarily blocked the expiration of Title 42 — a federal pandemic policy allowing U.S. officials to turn away migrants seeking asylum — state and local officials are increasingly concerned about California’s financial inability to support an influx of immigrants once Title 42 ends, CalMatters’ Wendy Fry reports.
• Population and public perception: Even as the U.S. population grew, California’s population fell to about 39.03 million as of July 1, 2022, a 0.3% decrease from the year before, new U.S. Census Bureau estimates show. That doesn’t bode well for a state that just lost a seat in the U.S. House of Representatives for the first time in history. Making matters worse, Texas and Florida — with whose Republican governors Newsom frequently spars — gained more residents than any other state, while California lost more than any state but New York.