California Lawmakers Split On How To Spend $2.1b Meta Payout

SACRAMENTO, California — California just won a tentative $2.1 billion payout from tech giant Meta’s settlement in a child safety lawsuit — the largest share any U.S. state or territory is receiving from a pot of up to $18 billion.

Now the challenge is figuring out how to spend it.

Meta reached the settlement with dozens of state attorneys general amid a high-profile trial in California, alleging the social media company intentionally hooked kids on its platforms while misleading users about their potential harms. Part of the funds are contingent upon other tech companies meeting certain kids’ safety commitments that Meta also agreed to.

Conversations with 16 California state lawmakers who are positioned to have a say in how the money is spent, plus the candidates vying to become governor, revealed nearly a dozen competing ideas for how to cash in.

Some politicians want to put the money into enforcing social media laws. Some think that the settlement cash should backfill behavioral health services or suicide prevention programs as Republican-backed federal health care cuts take a hit on California’s budget. Others hope to fund research exploring social media’s impacts on children, finance community nonprofits that mentor young kids or offer schools grants to implement student smartphone bans.

But with only so much money to go around — and strings attached to more than a third of it — state leaders likely won’t be able to fund all of their ideas.

“Many of those proposals cost money,” said Jesse Gabriel, a powerful Democratic lawmaker who chairs the Assembly Budget Committee. “We’re going to need to think very thoughtfully and carefully consider how we can best deploy those resources to support young people.”

As the candidate heavily favored to win the governor’s race in November, Democrat Xavier Becerra, will likely have the most control over how the money is spent. He’s keeping his options open.

Becerra spokesperson Jonathan Underland told POLITICO the settlement “is pretty clear that these dollars are for keeping kids safe online.” He didn’t offer specifics beyond that, instead saying that the former U.S. health secretary “will work with the Legislature, local governments and experts to make sure the next generation reaps the benefits.”

Republican gubernatorial candidate Steve Hilton had a far different vision for the settlement, which he called “a complete waste of time and money.”

“We have the highest taxes in the country and the highest cost of living,” Hilton said. “If there’s money available, then it should be used to reduce the burden on working people and small businesses.”

Becerra’s view seems in line with how other blue-state leaders are approaching the settlement.

In New Jersey, Gov. Mikie Sherrill’s office told POLITICO that they’re still discussing how to spend the Garden State’s maximum payout of $752 million, though they indicated the Democrat is seeking “the biggest possible impact for our kids and their mental health.”

And in New York, officials expect an up to $1.15 billion payout from the settlement will start arriving at the end of the year — weeks before Gov. Kathy Hochul is expected to propose their budget.

The Democratic governor, who is seeking a second full term this year, has been supportive of efforts to limit the impact of social media on minors, backing measures like prohibiting algorithmic feeds for young peoples’ accounts. Hochul’s team has also identified broad areas for use like after school and mental health services.

Brooklyn Democratic state Sen. Andrew Gounardes, a leading proponent for regulating social media platforms in the Legislature, wants the cash to go toward youth mental health services, like expanding beds in care facilities.

“I would love to see investments in things like playgrounds and parks and broken basketball and tennis courts,” Gounardes told POLITICO. “One of the reasons why we’ve made this case that children have been trapped in their phones is that they’re not experiencing life in the real world.”

Seeking ‘karmic’ uses for cash

California’s share of the settlement, like other states’, comes with restrictions. Roughly $660 million is contingent on social media competitors Snap, TikTok and YouTube agreeing to Meta’s settlement terms, meaning a third of the state’s total award might never materialize. Another $200 million of the total payout sits beyond lawmakers’ reach because, under a provision unique to California, it’s earmarked for enforcing consumer protection and privacy laws, including $100 million to be spent at “the sole discretion” of Attorney General Rob Bonta.

For the remaining cash, settlement terms dictate states should prioritize initiatives “related to the prevention or remediation of mental health or other harms to young Californians associated with social media use.” But that’s a broad mandate, leaving lawmakers plenty of room to deliberate how they spend the money.

Five assemblymembers who proposed a ban this year on “addictive” social media features for teens under 16 — Democrats Josh Lowenthal, Buffy Wicks and Rebecca Bauer-Kahan, plus Republicans Joe Patterson and Josh Hoover — said the money should be used to police Facebook, Instagram and other companies’ compliance with kids’ safety rules.

Their proposal, contained in AB 1709, would establish an “eSafety Commission” tasked with helping the attorney general enforce restrictions on personalized feeds, infinite scrolling and other engagement-maximizing features. Gov. Gavin Newsom appears likely to sign the bill this month, but it doesn’t earmark money for the proposed seven-member body.

Wicks said that funding enforcement efforts would tackle a perennial challenge: ensuring tech giants are actually following California’s social media regulations. Independent reports have found compliance is spotty, partly because the attorney general’s office is consistently overworked but often the only prosecutor empowered to prosecute violations.

“The attorney general does such a great job, and he needs more resources,” Wicks added.

Moreover, Patterson said, funding enforcement is “more important now” because child safety features mandated in the settlement only apply to Meta. “You’ve got to get everybody on a level playing field. I don’t think it’s fair that it only applies to Meta,” he added.

But California’s two health committee chairs, Assemblymember Mia Bonta and state Sen. Akilah Weber Pierson, feel a pressing need is mental health services. Both pointed out that federal budget cuts approved last year under H.R. 1 disproportionately impacted health care, and they saw the settlement as a prime opportunity to backfill programs focused on youth well-being.

Bonta said that hiring new school behavioral health specialists to treat youth mental health issues tied to chronic social media use, like anxiety, depression and eating disorders, would be a “very karmic use” of the settlement funds.

A handful of her Democratic colleagues agreed mental health resources should be prioritized, but they looked to other programs.

Assembly Budget Committee member Pilar Schiavo suggested funding the state’s 988 suicide crisis hotline or funneling cash to Medi-Cal programs targeted at low-income families.

Assemblymember Avelino Valencia, who chairs a select committee on boys’ and men’s mental health, felt that funding youth mentorship programs like Big Brothers, Big Sisters would help give kids more reasons to log off social media and focus on real-world connections.

“There’s a lack of structure for young people — young men in particular — hence why they’re gravitating toward pornography online, gaming online, [and] toward gambling, because it’s that immediate gratification,” Valencia said. “We’re never going to be able to beat that, but at least providing an option to help mitigate the impact is something I’m passionate about.”

Nick Reisman, Dustin Racioppi, Rachel Bluth and Marisa Guerra Echeverria contributed to this report.

A version of this story first appeared in California Decoded, POLITICO’s morning newsletter for Pros about how the Golden State is shaping tech policy within its borders and beyond. Like this content? POLITICO Pro subscribers receive it daily. Learn more at www.politicopro.com.