Central Valley Angered by Newsom’s Bullet-Train Plans

High speed rail constructionGov. Gavin Newsom’s announcement in his State of the State speech in February that he didn’t believe California had the resources to complete its $77 billion statewide bullet-train project produced a backlash that Newsom didn’t seem to expect. Within hours after the speech, his aides said the media was inaccurately reporting that Newsom’s only commitment was to build a $12.2 billion, 119-mile high-speed link between Merced and Bakersfield in the Central Valley and nothing more. They said he remained a supporter of the full project.

But nearly two months later, the initial reaction to Newsom’s speech remains the enduring takeaway for most Capitol watchers: He’s off the bullet train bandwagon. Building unions and green lawmakers who believe in the statewide project’s potential to help in the fight against climate change remain among the most upset.

Yet easily the most intense reaction is in the area where Newsom still wants the project to proceed: the Central Valley.

Coverage from The Bakersfield Californian, the Los Angeles Times and small newspapers in the region reflect anger over how the valley has been treated. Valuable farmland and family homes have been acquired with eminent domain for a project that no longer will link the area with the rest of the state – despite promises from Govs. Arnold Schwarzenegger and Jerry Brown.

‘My mouth was just open with shock’

“I don’t want to talk political because I don’t do it very well,” Fairmead resident Vickie Ortiz told the Times. “But you know, you had a governor that was pushing-pushing-pushing for the high-speed train, and we started getting used to the idea that we can’t stop a train but maybe we can use it to help the community. But then you get another governor and he says: ‘No, I don’t want to do that any more.’ My mouth was just open with shock.”

In the Antelope Valley Press, retiree Bill Deaver, a former official in the Federal Railroad Administration, blasted the “politics and ignorance” of project critics who he blamed for Newsom’s decision.

“Politicians used [high-speed rail] to score political points rather than supporting something that will be able to handle huge increases in traffic projected in coming years. That sort of behavior is one of the biggest barriers to progress.”

Newsom’s decision didn’t surprise some in the Central Valley who never believed a statewide bullet train would get built. “People lost their homes and businesses. And for what?” Visalia farmer Randy Van Eyk told the Times.

Some see commitment to help region

But other remarks the governor made about the Central Valley have resonated more positively – and created an expectation that he will do more than past governors to help the region.

“The people of the Central Valley endure the worst air pollution in America as well as some of the longest commutes. And they have suffered too many years of neglect from policymakers here in Sacramento. They deserve better,” Newsom said in the same speech in which he outlined his views on the bullet-train project’s future.

Bakersfield Californian columnist Robert Price said if Newsom was serious, he should help Kern County diversify its economy away from “two industries under assault in the Central Valley: agriculture and, especially, oil and gas.”

Anna Smith, another columnist for the Californian, also said Newsom should promote economic diversification. But she also called on him to address the Central Valley’s social ills, including “high rates of illiteracy and obesity, lack of access to quality education and health care (especially in rural communities), water contamination and extreme poverty.”

This article was originally published by CalWatchdog.com

Gavin Newsom wants California to be its own nation-state in the Trump era

Gavin newsomJust five weeks into the job, Gov. Gavin Newsom has crystallized his vision of what California will look like in the Trump era: It won’t just be the hub of the resistance against the president; it will be its own nation-state.

But before Newsom can create a country-within-a-country, he had to defuse two multibillion-dollar grenades that his predecessor, Gov. Jerry Brown, left in his in-box: high-speed rail and the delta tunnels project. In proposing Tuesday to scale back both of Brown’s unpopular legacy projects, Newsom hopes he can preserve enough political capital to get his own legacy projects on the fast track.

If he can do that, he can lead California down its own path for as long as Trump is president. California must go it alone, because Trump’s portrait of America is “fundamentally at odds with California values,” the governor said Tuesday in his first State of the State speech. …

Click here to read the full article from the San Francisco Chronicle

Are Big Tax Increases Coming to California?

TaxesGavin Newsom’s election as governor and the expanded Democratic Party majorities in the Legislature have raised hopes in some quarters and fears in others that big tax increases may be on the horizon.

During his campaign for governor last year, Newsom pledged support for a variety of expensive public services, including universal health insurance coverage and universal pre-kindergarten care and education.

His initial budget offered only token appropriations for those and other items on his wish list, but were he to seriously pursue them, they would require tens of billions of dollars in new taxes each year.

Newsom has proposed a new tax on water to pay for cleaning up municipal water supplies in impoverished communities. Several other targeted taxes have also been introduced in the Legislature.

Meanwhile, an initiative has qualified for the 2020 ballot to undo some of Proposition 13’s property tax limits. The measure would create a “split roll,” removing the 2 percent annual cap on increases in assessed valuation for non-residential, non-agricultural commercial property, such as office building and shopping centers.

If passed, it would raise property taxes by perhaps $10 billion a year – a lot of money, certainly, but far short of what the most ambitious service expansions would need. However, the initial polling on the split-roll measure doesn’t bode well for its passage, and the commercial real estate industry has pledged to spend $100 million to defeat it.

The more likely avenue for big tax increases would be some version of tax reform, which Newsom has endorsed in principle.

However, it must contend with the simple fact that we Californians are, in the aggregate, already carrying one of the nation’s highest tax burdens and quite possibly the highest.

The Tax Foundation, a Washington-based organization that charts taxation trends, has California at No. 6 in state and local tax burden as a percentage of personal income, the most accepted method of comparison. It pegs Californians’ burden at 11 percent of personal income.

However, that’s based on 2012 data, so it is seven years out of date, and it does not include all forms of taxation.

A more up-to-date estimate is that California’s state and local governments collect about $325 billion a year in taxes, and that works out to 12.5 percent of personal income, estimated by the state as $2.6 trillion this year, thus putting us very near the top of the states.

So, assuming that Newsom and his fellow Democrats in the Legislature want a bigger tax bite to finance their expansionist ambitions, what form would it take?

Income taxes? They already supply 71 percent of the state’s general fund revenues, half of them are paid by the top 1 percent of taxpayers and California already has the nation’s highest marginal tax rate, 13.3 percent on incomes over $1 million.

Sales taxes? We’re at or near the top in those rates as well, 10 percent in many communities.

Property taxes? That would require not just a split roll for commercial property, but voter permission to virtually repeal Proposition 13’s protections for homes, which polling indicates would be close to impossible.

The real world effect of a big tax increase, moreover, would be magnified by new federal tax laws that sharply limit deductions for state and local taxes, raising the likelihood of a political backlash.

So are we going to see a big tax increase? However much Newsom, et al, might want it, the political lift would be daunting.

This article was originally published by CalMatters.org

Your One-Party Government at Work

legislatureHere’s what one-party government looks like in California: the voters make decisions at the ballot box and the majority party elected officials shrug and move forward to overturn those decisions not fearing a rebuke when up for re-election.

We’ve seen such moves twice in the last week initially on the death penalty then on rent control.

First, Gov. Gavin Newsom declared a moratorium on the death penalty despite voters defeating a measure to abolish the death penalty and, in fact, supporting a measure to speed up of the death penalty process.

Newsom figures in blue state California there will be no threat from Republicans when he runs for re-election.

No sooner had Newsom signed his executive order, a dozen legislators filed a proposed constitutional amendment to abolish the death penalty all together. Do any of them fear voters would take away their seats and give it to a Republican?

Doubtful that this one issue would flip a seat from blue to red. Perhaps there are one or two (sort-of) competitive districts that a single vote on the death penalty could have an impact but Democratic majorities are large enough and leadership has enough votes to give those one or two representatives in those districts a pass if the majority wants to push the amendment onto the ballot.

Repealing the Costa-Hawkins bill that restricts cities’ ability to create or expand rent control was defeated handily last November when it appeared on the ballot as Proposition 10. Less than six months later Democratic legislators to encourage and promote rent control and renter protections have introduced a slew of bills. Most notably among them is Assemblyman Richard Bloom’s AB 36 that would alter Costa-Hawkins and expand rent control opportunities for local governments.

One would think that the voice of the people on a measure debated and voted upon so recently would carry weight with legislators. But, apparently not when one party is so dominate that there is little consequence to face at the ballot box when they run for re-election.

The governor and legislators hope their actions will give the voters a second chance at considering these matters. No doubt, there are cases when particular issues came back to voters and the voters collectively expressed second thoughts, but that usually occurs over a longer period of time.

In the case of rent control, legislators are looking for answers to the state’s housing crisis, which is understandable. But in pure political terms, challenging a decisive vote of the people so soon can more comfortably be attempted when one-party rule dominates the state politics. That is the point here.

With the Republican brand damaged in this state, Democratic elected officials feel unrestrained in challenging the voters’ judgment.

ditor and co-publisher of Fox and Hounds Daily

This article was originally published by Fox and Hounds Daily

Bill Blocking ‘Rent Gouging’ Draws Attention in Capitol

housingLess than six months after voters overwhelmingly rejected a ballot measure that would have gutted a 1995 state law banning new types of rent control on all single-family homes and all rent control on apartments or condos built after the law passed, state lawmakers hoping to help Californians deal with the extreme cost of housing have introduced four new bills.

By far the most buzz is going to Assembly Bill 1842 by Assemblyman David Chiu, D-San Francisco, that is being framed as much different than Proposition 10, which lost by 18 percentage points in November. Chiu says his bill would prevent “rent gouging.”

Instead of the hard caps on rent increases seen in many local rent control ordinances adopted by California cities before 1995, Chiu’s measure would ban landlords from increasing rents each year by more than an as-yet-undetermined percentage more than inflation.

Oregon recently became the first state in the nation to adopt an “anti-gouging” rent law. The measure limits annual rent increases to inflation plus 7 percent for existing tenants in buildings that are at least 15 years old. Rents can go up by more than that when apartments are vacated, but the law contains additional protections meant to prevent landlords from seeking to evict tenants with solid records of timely rent payments solely so they can raise the rent.

UC Berkeley researchers concluded that if a similar law passed in California, 4.9 million homes, condos and apartments would be covered.

Some landlord and business groups didn’t oppose the bill as it moved through the Oregon Legislature – seeing it as preferable to the harder, smaller caps that some state lawmakers and activist groups preferred and that polls suggest are popular.

But stronger and more consistent opposition to Chiu’s bill looms in California. “We need to encourage new housing, not create policies that stifle its creation,” Tom Bannon, CEO of the California Apartment Association, told the Bay Area News Group. He said any state law capping rent increases would be counterproductive and ineffective at remedying the housing crisis.

Gov. Gavin Newsom has not taken a public stand on Chiu’s bill. Last month, however, he told lawmakers at his State of the State address, “Get me a good package on rent stability this year and I will sign it.”

Assemblyman Richard Bloom, D-Santa Monica, has also once again introduced a bill including more traditional rent control provisions. Assembly Bill 36 would allow local governments to mandate rent control on apartments and single-family homes as soon as they were 10 years old. Landlords with only a few units would not be covered.

Assemblyman Rob Bonta, D-Oakland, has also once again introduced a bill meant to make it significantly more difficult to evict tenants. Assembly Bill 1481 would set a statewide “Just Cause for Evictions” standard. Most cities already have such policies.

The least controversial measure affecting renters was proposed by Assemblywoman Buffy Wicks, D-Oakland. Assembly Bill 724 would set up a state housing information clearinghouse that would list all available units, their monthly rents, how long units were vacant and how many tenants are evicted. Landlords would be required to submit this information on a timely basis.

Wicks thinks this would lead to more informed decisions on housing by the Legislature and the Newsom administration.

This article was originally published by CalWatchdog.com

Gov. Newsom has a $500 million plan for homelessness

Tent of homeless person on 6th Street Bridge with Los Angeles skyline in the background. California, USA. (Photo By: Education Images/UIG via Getty Images)

Sacramento Mayor Darrell Steinberg and a dozen other California mayors asked Gov. Gavin Newsom on Wednesday to allocate more state money for homelessness than what the governor has proposed.

Newsom’s proposed budget includes $500 million for homelessness — the same amount that was included in the state’s 2018-19 budget. The mayors did not say how much more money they’re requesting.

“We deliberately did not put a number in there because it’s a different relationship with this governor. He’s made housing a priority,” said Steinberg, who chairs the Big City Mayors group that met with Newsom at the Capitol. “He’s already said, and it’s backed up by his budget, that housing and homelessness is a priority. Of course we want to bump the number up … but we’re going to do it with him.”

Newsom did not commit to an additional amount of money, Steinberg said. …

Click here to read the full article from the Sacramento Bee

How Much Should We Pay Our Public Sector Workers?

Pension moneyPublic employee compensation issues are never far from the headlines in California, but both 2019 and 2020 appear likely to continue the recent trend of increasingly contentious negotiations and the accompanying highly charged public debate.

At the local level, in recent months we have already seen teacher strike authorization votes in the major urban school districts of Oakland, Los Angeles, and Sacramento, among other localities.

At the state level, the election of Gov. Gavin Newsom raises the question of whether the Governor’s Office will continue former Gov. Brown’s precedent of requiring state level bargaining units to accept new paycheck deductions to help pay for the cost of retiree medical care.

Newsom has already signaled that he will uphold the “California rule,” which prohibits any reduction of existing public employees’ pensions even if it causes the insolvency, and or ultimate bankruptcy of the public agency in question.

Five bargaining units representing about 46,000 state workers have contacts expiring in July 2019, and the contract for SEIU Local 1000, the state’s largest union representing about 95,000 employees, expires in January 2020, according to a Sacramento Bee report.

What is not often discussed during this periodic collective bargaining process at both the local and state levels of government in California is whether the state’s system for setting public employee compensation is working or not, and perhaps more importantly, whether this whole system is sustainable given the state’s rapidly escalating public debt levels?

The unfortunate reality is that the state’s whole collective bargaining system, and accompanying laws, was setup decades ago, dating back to Gov. Brown’s first stint as Governor, and has changed little since then.

As recent events have begun to suggest more clearly, this system appears increasingly disconnected from several key principles of good government and effective public sector financial management.

Perhaps most importantly, the compensation of our public sector workers should be linked to what is financially affordable and sustainable for a given public agency.

As reported by Senator John Moorlach, the California Policy Center and others, the mounting debt and looming financial insolvency for the vast majority of public agencies in California suggests that many public agencies in California are struggling to pay their contractual debt obligations, of which the vast majority is related to public employee compensation.

Furthermore, the recent strike-ending deals cut in Oakland and Los Angeles only served to exacerbate the financial weaknesses of the school districts and push existing problems further into the future, particularly with regard to public employee compensation practices.

Another key issue that is almost completely forgotten from the get-go, is how much should we pay public sector employees to begin with?

In the private sector, employee compensation is determined by competition and market forces.  But in the public sector most positions are compensated based on decades of previous negotiations which yields a pay scale, and total compensation package, that is often far in excess of what would be paid for comparable positions in the private sector.

The public sector unions have perfected their rebuttals to these issues, and I have heard an analyzed all of them, but the simple fact remains:  why should California taxpayers compensate public sector workers in excess of the market rate for a given position?

The reality is that it is common for public employees to be compensated far in excess of what they would receive in the private sector for comparable work.  The California Policy Center and others have found this excess compensation to be as high as 100% or more when total compensation is included, particularly benefits.

Nobody disputes the value that our public sector workers provide, but when 20% of the state lives in poverty and many more Californians are living paycheck to paycheck, this is really an issue of fundamental fairness and equity to the average California taxpayer.

One last principle that is rarely discussed in the public sector is the concept of linking compensation to performance.

In the private sector, this principle is of the utmost consideration because every employee has to be paid based on the value that they provide to the company.  Moreover, the linking of pay to performance often provides a great way to incentivize employees to do a better job, thus benefiting both the employee and the company.

In California public sector collective bargaining, public sector employees are routinely awarded a whole host of bonuses, premiums, retroactive pay increases, and raises without any connection to their actual performance or value provided to the government or people of California.

In addition, as most public managers would tell you, it is almost impossible to fire underperforming or poorly performing employees, and they commonly get moved around without the bureaucracy rather than fired just because it is so difficult, almost unheard of.

From a public management perspective, the impact that this disconnect between compensation and performance permeates the whole system of California government—providing significant disincentives to work hard, produce results, and serve the state and its people in the most beneficial manner possible.

As a former financial analyst for public sector collective bargaining, I am not holding my breath for any of these practices to change soon, but at the same time, I acknowledge that change could be on the horizon at some point.

The reality is that public agencies, while more insulated from market factors, must still operate in the same market economy and within some of the same fiduciary, legal and financial parameters that private businesses do.

If a private company, makes poor financial decisions it goes out of business or is reformed and restored to financial viability.

The public sector, on the other hand, does not have the same financial bottom line as private sector businesses and can continue to deteriorate, both financially and in terms of compromised performance, over a significantly longer time horizon.

Public sector agencies, particularly local government agencies, can run out of money and go bankrupt—ultimately leaving many debts unpaid, particularly public employee debt obligations.

Just take a look at Orange County in the 1990s, and the California cities of Vallejo, Stockton, and San Bernardino in the 2000s.

No U.S. state has went bankrupt yet, but some analysts believe the State of Illinois could be close, and there is also the case of the U.S. territory Puerto Rico’s debt crisis.

As the recent unrest in the state’s education system suggests, the road to financial ruin takes time, and is not pretty.

In the end, the people who are the most hurt are the least vulnerable, our teachers and kids in this case–it is just a shame that more of our elected officials and union leaders do not realize this and heed this fact of life before it is too late.

David Kersten is an independent political consultant who lives in the Bay Area. Kersten is also an adjunct professor of public budgeting at the University of San Francisco.

This article was originally published by Fox and Hounds Daily

California Gov. Newsom offers rare praise for Trump

Gavin Newsom budgetPresident Trump and California Gov. Gavin Newsom have been at odds long before the latter took office in Sacramento earlier this year – lambasting each other in speeches and on social media over issues ranging from immigration to high speed rail projects.

So it probably came as a shock to many when Newsom on Monday offered rare praise of a Trump administration policy that provides tax breaks to spur investment in low-income areas.

During a speech at Stanford University, Newsom said the Opportunity Zones program will not only help boost California’s already enormous economy, but would also help provide funds to deal with state’s housing crisis and would promote energy investment to help the state reach its climate change goals. …

Click here to read the full article from Fox News

Gavin Newsom’s threat to localities is extortion by any other name

Shortly after his inauguration, Gov. Gavin Newsom announced that he would withhold funds designated for transportation from local governments that didn’t comply with his vision for affordable housing. His move could be characterized as either the height of hypocrisy or extortion. Take your pick.

Let’s start with the hypocrisy. Our new governor has complained bitterly about how the federal government — i.e., the evil Trump administration — threatens to withhold funds from California. He has criticized the withholding of high-speed rail funds from the feds because of California’s failure to meet benchmarks imposed as a condition for the receipt of those funds and he complained about the withholding of law enforcement dollars because of the refusal of California to cooperate with ICE.

In his ongoing war with the federal government, Newsom has bragged about how many times he has sued the federal government, alleging that Trump is engaging in heavy-handed pressure against progressive states like California. It is apparently lost on the governor how hollow his protests appear when he threatens local governments in the same manner.

As for the extortive threat itself, it is little wonder that Newsom has received copious amounts of blowback from other elected officials across the political spectrum. Sen. Jim Beall, D-San Jose, chair of the Senate Transportation Committee, called the move “very unwise.” Likewise, the chairman of the Assembly Transportation Committee, Jim Frazier, D-Discovery Bay, challenged the idea that new conditions should be placed on road maintenance funds. “It is not fair, or in good faith, to deny them the benefits of [gas tax money] after they have paid for it, based on local government decisions they have no control over.”

To read the entire column, please click here.

A First Look at the Governor’s Housing Budget

house-constructionDuring his campaign for Chief Executive of California, then-candidate and now Governor Newsom promised three and a half million new housing units would be built in the state by 2025. He promised a majority of those units would be affordable to lower-income households, as well. He also promised he would make it profoundly easier to get those housing units approved for construction. Governor Newsom knows it’s now time to deliver on those promises.

With the release in January of his Fiscal Year 2019-2020 Budget, the Governor is signaling he’s going to at least try. He’s still sticking to the three-and-one-half- million-unit goal (though many are disputing that possibility), he still wants to help lower-income families, although he proposes increasing assistance to moderate-income households, as well. And, his budget appears to reflect interest in helping local governments approve housing faster.

But, the Governor’s housing proposals for the next fiscal year fall short of meeting the state’s needs. An analysis of the proposed budget – summarized here with a little help from the Legislative Analyst’s Office (LAO) – shows how despite aiming at the real problem with housing production in California it punts the ball and intentionally or not misleads with the data and definitions it presents.

For example, Governor Newsom during the campaign and afterward accurately pinpointed the main source of why California so woefully under-produces housing: he rightly concluded that all power to okay a housing development – vast and prodigious – rests with local government. Yet, in an apparent attempt to be persuasive, the Governor goes after localities with kid gloves – litigation and a modest funding award. He knows better. Lawsuits take precious time and cost a lot of money. And, they simply enrich lawyers. Moreover, $3 million in planning grants to the state’s major cities and $7 million more if they build new housing is both wasteful and mere pittance when it comes to rewarding them.

In addition to its timidity, the Governor’s budget is misleading in its portrayal of increasing state benefits to higher-income persons. Example #1 is the suggestion that a revised state low-income housing tax credit will now “target households with relatively higher incomes” – allowing beneficiary incomes to rise to laughably higher levels – to 80 percent of median – then pretends that a mere $200 million boost in the state program will lead to the ability to “target households with relatively higher incomes”. In truth, the state credit program rarely operates without the much richer federal credit which, for competitive reasons, rarely assists households with incomes above 60 percent of median.

Example #2 comes from the Governor’s proposal to add $500 million in authority to the existing CalHFA program which lends money to developers for building housing affordable to lower and moderate-income families (50 percent of area median to 120 percent) – a very good thing. But, the program will not assist middle-income families (up to 150 percent of median), as the Governor claims.

A bold budget, which reflects the high priority that the Governor has made housing – and which will give him a good head start in building those three and a half million units in six years – starts with rich, meaningful incentives to local governments. “Plan and zone for your housing need for the year and get a sizeable cash reward” should be the message from the state to local governments everywhere. Instead of the locals getting $10 million – much of which goes to re-inventing the wheel – a true housing budget would allocate ten times that amount or more to them for, say, a variety of infrastructure – not just road repair. Indeed, $100 million to $200 million apiece to fund their priorities ought to get the attention of most localities.

The Governor shouldn’t be shy about defending the limits of how far state funding should go, either. He doesn’t have to worry about the households earning more than the so-called moderate-income tranche (120 percent of median income). He just needs to uphold his pledge to truly streamline the local project-approval process. If the Governor sticks to his guns and does that, he can be assured that the market-rate developers will take care of the rest.

This first look at his budget for Fiscal Year 2019-2020 examines only what the Governor has proposed. Subsequent analyses will be made and published in this space before it is due in its final form, June 30, 2019. But, his current spending plan makes a genuine effort to treat California’s housing crisis after it appropriately highlights the substantial need – particularly among lower-income households and, to a lesser extent, the dislocation of a million or so middle-income families that pay more than 30 percent of their income for housing (the average is 26 percent).

In so many words, it’s clear the Governor genuinely wants more housing for California and he remains steadfast in maintaining getting it as a high public-policy priority. But, there are ample reasons to be doubtful. First, his budget could be a more dramatic set of proposals. That it’s not should signal his Department of Finance (DOF) won’t let him – DOF never liked housing much.

Second, at this point it looks like lawmakers don’t like the impact the proposals may have on local governments – they want him to back down somewhat. And, early indications are that it’s the Governor who will blink first.

onsultant specializing in housing issues.

This article was originally published by Fox and Hounds Daily