Gov. Brown’s Budget and Legacy Priorities

Governor Brown released his 2018-19 Budget last week and the OC Register was kind enough to publish my first impressions in their commentary section.  Here is a link:

The good and bad of Jerry Brown’s budget

I also sent out an immediate reaction:

Governor Brown admits that the “last 5 budgets have significantly increased spending” and this budget proposal is no different. Coming in at just under $300 billion dollars of total spending, debt and poverty remain at all-time highs. Even worse, our balance sheet is massively short and unfunded liabilities are in the hundreds of billions of dollars. Our underfunded pension systems will get minimum payments of $6.2 billion to CalPERS and $3.1 billion for CalSTRS. These costs are directly related to policies Jerry Brown embraced 40 years ago during his first time as governor. While he’s sensitive to a possible economic slowdown and should be lauded for increasing our rainy day funds, he has been a spendthrift in Sacramento. We have to acknowledge that the $9.3 billion in pension payments won’t go to pay for more teachers or cut college tuition or build roads right now. And yet, we’re hoisting these liabilities on future generations at a higher cost unless we do more to address them now. I was wondering how seriously Governor Brown would be in his last budget about addressing our liabilities. It looks like he’s kicking the can down the road to the next governor. Oh well.

The primary focus for Governor Brown has not been that California has the worst balance sheet of all 50 states. Just look at the city of Oakland’s balance sheet, and you’ll see that being deep in a fiscal hole is not one of Jerry’s worries.

Brown’s focus has been climate change and converting California to an electric car state, relying on solar and wind to provide the energy. It’s covered in a lengthy and thorough manner by CALmatters here:

California’s climate fight gets harder soon, and the big culprit is cars

The irony is that electricity needs to be carried by power lines. These power lines have caused many of the wildfires in California. And, wildfires create more greenhouse gases than our state’s cars, by a long shot. So, where is the effort to address the cause of the biggest greenhouse gas source? It’s nonexistent. See: MOORLACH UPDATE — Fire Safety Concerns.

Worse, being totally dependent on electricity for travel, communication, preserving food supplies, and dealing with occasional inclement weather, this state will shut down in a matter of days without it. This is also a scary proposition in a world where terrorism is the new norm. I’m just sayin’.

There’s the legacy. He’s funded the required Rainy Day Fund. He’s exposing residents to a different danger in the potential loss of power.  And he’s flown around the world to preach climate change. But, our balance sheet sucks and our wildfire zones went up in smoke this year and are now suffering from the damages that rain can cause.  Sometimes I just want to weep.

Is there a niche for sensible politics in California & America?

California-budget-crisis-bear-flagGiven the current state of American politics, and those of our state of California, our founding fathers might well consider not just turning over in their graves but boring deeper towards the earth’s core. Yet amidst the almost unceasing signs of discord and hyperbolic confrontation, there exists a more sensible approach which could help rescue our wobbling Republic.

Centrism has long been the subject of well-meaning advocacy but has lacked a class or geographic focus. It most defines the politics of the suburban middle. Much of the urban core — where Clinton and other Democrats often win as many as 80 to 90 percent of the vote — is now about as deep blue as the Soviet Union was red. For its part, the countryside has emerged so much as the bastion of Trumpism that MSNBC’s Joy Reid labels rural voters, “the core threat to our democracy.”

A niche for sensible politics?

Most Americans do not live in either the urban core or rural periphery; more than half live in suburban areas which nearly split their ballots in 2016 , with perhaps a slight edge for President Trump. Many suburban areas — not only in California or New York but in places like Fort Bend County, outside Houston — went for Clinton. Democrats won big recently in the Virginia suburbs, and did better in those in Alabama; both resulted in stinging defeats for Trump and the GOP.

To consolidate these gains, Democrats need to resist the tendency, most epitomized by the likes of Gov. Jerry Brown, to detest not only suburbs, but the entire notion of expanded property ownership, privacy and personal autonomy. Suburbanites may not like Trump’s nativism and grossness, but they do have an interest in preserving their way of life.

A more reasoned, problem solving approach seems the best course as well for Republicans. The most popular governors in the nation, for example, are not progressive firebrands like Brown or Washington’s Jay Inslee, both under 50 percent approval. Nor are right-wing firebrands so popular; Kansas’ Sam Brownback wins plaudits from less than a quarter of his electorate. They are measured politicians like Maryland’s Larry Hogan and Massachusetts’ Charlie Baker, Republicans from deep blue states with roughly two-thirds approval.

Breaking with the bad

These political leaders suggest a new possibility to circumvent the red-blue, coast-heartland divides tearing the country apart. It could also lead to an end to the spasmodic political upheavals which either favor core cities, as was the case with President Obama, or now President Trump’s base in the more dispersed heartland.

One idea has been to promote an independent candidacy of Ohio GOP Gov. John Kasich and Colorado’s John Hickenlooper, who have worked on health care reform together. Both men are thoughtful, come from swing states and enjoy high popularity ratings. Sadly, Kasich, to date, has backed away from such a campaign, although perhaps the combination of a future Trump meltdown and a more pronounced Democratic shift to the left, could make him reconsider.

Veteran political observer Lou Cannon suggest that a more centrist, common-sense politics has a market. Independents are a growing trend, now accounting for 40 percent of the electorate, that is particularly marked among millennials. Both major parties, deservedly in my mind, are near record lows in terms of popularity among voters. Skeptics counter that polarization is growing and that many independents remain largely adherents of one party or the other, even if they detest their leaders.

How about California?

California is widely seen as a one-party state, dominated largely by rabid progressives. Yet “decline to state” voters are growing and now larger than Republicans. Surprisingly, the Democratic preference has also dropped over the past 25 years from 49 to 45 percent.

Right now the best hope for independents lies in the candidacy of environmentalist Michael Shellenberger, co-founder of the Oakland-based Breakthrough Institute. Unlike many of his green allies, Shellenberger has the courage to denounce climate policies that create higher housing and energy prices, in the process stunting upward mobility.

Shellenberger points out that the current Brown policies have not done so well in reducing emissions, as recently documented in the green magazine Grist. The main reason for last year’s emissions drop turned out to be surge in hydropower, from last year’s wet weather. Shellenberger traces the state’s less than stellar performance as well to the shutdown of nuclear power, arguably the most effective way to reduce carbon. More important still, he sees a state under the control of a corrupt political machine, first crafted by John Burton in the 1960s, dominated by “public employees and green energy companies.”

Unlike our self-styled progressive leaders, Shellenberger favors policies that address climate without undermining the middle and working classes. He defends “the California dream” and accuses the front-runner, former San Francisco Mayor (surprise!) Gavin Newsom of “talking more about Trump” than assessing the state’s real needs.

Best of all Shellenberger epitomizes the notion that politicians should address real problems, rather than posturing for the adoration of the media, celebrities and billionaires with clearly too much money and time on their hands. “Does it matter if a policy is liberal or conservative,” he asks. “Who cares? What matters is what works.”

Originally published in the Orange County Register.

Cross posted at New Geography.

Editor of NewGeography.com and Presidential fellow in urban futures at Chapman University

Brown’s final budget plan proposes $132 billion in spending

Democratic Gov. Jerry Brown proposed a $131.7 billion state spending plan Wednesday, launching his final year of budget negotiations as he prepares to leave office.

Brown’s proposal is up 5 percent from last year but includes little new spending on new programs. Once again warning that he believes a recession looms, Brown dedicated $5 billion toward the state’s Rainy Day fund, more than is constitutionally required. He also proposed a new online community college program.

“It’s not exciting, it’s not funding good and nice things, but it’s getting ready and that is the work of a budget,” Brown said.

Notably, Brown’s plan makes no changes related to federal tax changes out of Washington, which are expected to hit taxpayers in high-tax states like California the hardest. That’s because Brown had to finalize his plan in December, before the federal changes were finalized. He said he expects to make revisions to his plan during ongoing negotiations with the Legislature. A final plan must be passed by lawmakers in June.

The spending plan also includes nearly $59 million in special funds and bonds, which are dedicated for specific purposes. …

Click here to read the full article from  KPPC

Gov. Jerry Brown’s LAST budget

Jerry Brown Budget 2017Governor Jerry Brown and his Finance Department are putting finishing touches on his final budget to be presented soon. This is a second time that Brown has wrapped up two terms as Governor of California offering a final budget. While much has changed in California government, politics and demography since that “first” last budget in 1982 was completed, a look back may offer some hints on where Brown will go with his second final budget.

Brown’s budget will reflect California’s current circumstances of a big economy with surpluses into the near future. The Legislative Analyst’s Office projected in November $19.3 billion in reserves for the 2018-19 budget if the legislature doesn’t create new budget commitments. Brown will do his best to keep those commitments in check.

But much can happen in the next few months to affect the budget Brown plans to present. Decisions out of Washington, D.C. on health care and the federal tax law changes, and also a possible repeal of California’s gas tax may upset any near-term picture on the budget.

One key difference from 36 years ago was that California was still living in the shadow of the tax revolt of 1978. Another key difference, while no longer running for governor, Brown would be on the 1982 ballot as a candidate for United States Senator. Recently, California legislators and voters have loosened their grip on the purse strings in recent legislative terms and elections. This time around Brown is not seeking another office and political considerations will not cloud budget decisions.

Ironically, just like the end of Brown’s current term, the year prior to his final budget the gas tax was increased in California. In 1981, the gas tax was raised two cents from 7-cents to 9-cents, a 28% increase. In 2017, the gas tax rose 12-cents from 29.7-cents to 41.7-cents, a 40% increase.

Brown was still famously speaking about the “era of limits” when he signed the $25.3 billion 1982 budget on June 30. The budget he offered in 1982 came at a time a recession hit. Brown’s 1982 budget was barely 1-percent larger than the previous budget.

Brown had an eye on his senate race and didn’t want to offer ammunition to political opponents. Reserves in certain accounts were tapped and gimmicks employed to make the budget appear balanced. It wasn’t. By the close of 1982 the budget was nearly $1 billion out of balance and the Senate Finance Committee held several hearings to come up with a fix.

The budget solution would not come under the Brown Administration. As tax historian David Doerr stated in his book, The California Tax Machine, “For the third time in four administrations, an outgoing governor used one-time revenues to balance the budget, leaving a dismal mess for the incoming governor (the exception was Ronald Reagan, who left Jerry Brown with a surplus.)”

The trend of inheriting a deficit was certainly felt by Brown when he took office for his third term in 2011. He does not want to leave a deficit again. His personal history from his first tour in the governor’s office and the experience of his recent gubernatorial journey will have him focused on the budget bottom line to maintain the surplus that the LAO projects.

Legislators should put their spending plans back in their pockets.

This article was originally published by Fox and Hounds Daily

To Avoid Trump Tax Reform, California Dems Want to Convert State Taxes to Charitable Contributions

Tax formCalifornia’s Democrat-controlled state government wants to re-classify state taxes as charitable contributions to avoid the new $10,000 cap on state and local tax (SALT) deductions in President Donald Trump’s new tax reform.

For decades, California Democrats have demanded higher and more progressive tax rates as a social justice cure to address income inequality. But they are appalled that President Trump’s Tax Cuts and Jobs Act progressively hurts the state’s highest income earners by capping SALT deductibility.

Gov. Jerry Brown called limiting SALT deductibility to about an upper middle-class income level as “evil in the extreme,” and hissed at Trump’s Republican allies for “acting like a bunch of Mafia thugs.” California Senate President Pro Tem Kevin de León (D-Los Angeles) snarled, “Republicans in Washington have once again zeroed in on California to punish us and make our state the single biggest loser in their reckless tax scheme.”

California is the most populous state, but only has the fourth-highest percentage of residents that claim SALT deduction, at 34.5 percent. The Golden State’s “per-filer” average SALT deduction is a middle-class $12,682. But due to rich coastal and multi-property owners, California has the highest “per claimant” SALT deduction of any state, at $36,802. For California’s rich, tax reform means an effective increase in state taxes.

De León is promising to introduce legislation next week that would allow California’s highest income earners to continue deducting 100 percent of state and local taxes over the $10,000 limit by renaming them charitable contributions.

Final negotiations between the U.S. Senate and House versions of tax reform maintained deductions for actual charitable contributions to support popular programs to support poverty relief, non-profit schools, and the arts.

But IRS Publication 526, which defines what qualifies for federal charitable contribution deductions, specifically allows deductions for “federal, state, and local governments, if your contribution is solely for public purposes (for example, a gift to reduce the public debt or maintain a public park).

It is not clear that California’s gambit would pass the test — but Democrats may try.

This article was originally published by Breitbart.com/California

California pension funds likely to face new pressure to divest from fossil-fuel companies

Calpers headquarters is seen in Sacramento, California, October 21, 2009. REUTERS/Max Whittaker

New York Gov. Andrew Cuomo’s call for his state’s biggest government pension fund to stop new investments in fossil-fuel companies and phase out existing investments is likely to lead to renewed calls for the Golden State’s two massive pension funds – the California Public Employees’ Retirement System and the California State Teachers’ Retirement System – to do the same.

The Common Fund – New York’s pension fund for state and local public sector employees – has $200 billion in holdings. Cuomo, a Democrat who is expected to run for president in 2020, said it was time to craft a “de-carbonization roadmap” for the fund, which “remains heavily invested in the energy economy of the past.”

New York City Comptroller Scott Stinger agreed with Cuomo and called for changes in the investment policies of the city’s five pension funds, with holdings of about $190 billion.

The announcements were hailed on social media as a reflection of the mission statement of the 2015 Paris Accord outlining international efforts to address global warming.

It’s possible Brown could use his State of the State speech later this month to reveal his call for CalPERS and CalSTRS climate-change divestment. The pension giants have already been forced to end investments in coal companies because of a 2015 law signed by the governor, selling off shares worth less than $250 million, a tiny fraction of their overall portfolios.

But selling off stakes in energy companies would be a much more impactful event. Giant firms like ExxonMobil are among the most common holdings of pension funds around the world.

Some unions worry divestment will hurt CalPERS finances

And while the California Democratic Party has been largely unified behind Brown’s and the state Legislature’s efforts dating back to 2006 to have California lead the fight against global warming, such unanimity is unlikely should Brown follow Cuomo’s lead because some public employee unions are worried about divestment damaging the finances of CalPERS and CalSTRS.

As of July, CalPERS had $323 billion in assets and said it was 68 percent funded – meaning it had about $150 billion in unfunded liabilities. As of March, CalSTRS had $202 billion in assets and said it was 64 percent funded, leaving unfunded liabilities of about $100 billion.

CalPERS’ steady increase in rates it charges local agencies to provide pensions and the heavy costs facing school districts because of the Legislature’s 2014 CalSTRS’ bailout have taken a heavy toll on government budgets.

Corona Police Lt. Jim Auck, treasurer of the Corona Police Officers Association, has testified to the CalPERS board on several occasions, imploring members to focus on making money with investments, not making political statements.

According to a July account in the Sacramento Bee, Auck said public safety is hurt when police departments must spend ever-more money on pensions.

“The CalPERS board has a fiduciary responsibility to the membership to deliver the best returns possible,” Auck testified. “Whatever is delivering the return they need, that’s where they need to put our money.”

The International Union of Operating Engineers, which represents 12,000 state maintenance workers, has taken the same position, according to the Bee.

In New York, Gov. Cuomo also is not assured of success. The sole trustee of the Common Fund is State Comptroller Thomas P. DiNapoli. While he agreed to work with Cuomo in establishing a committee to consider possible changes in its investment strategies, his statement pointedly emphasized that there were no present plans to change the fund’s approach to energy stocks.

While DiNapoli cited his support for reducing global warming and the Paris Accord, his statement concluded with a sentence emphasizing his priorities: “I will continue to manage the pension fund in the long-term best interests of our members, retirees and the state’s taxpayers.”

How to Reduce the California State Budget by $40 Billion

BudgetAs of a few days ago, high-wage earners have a new reason to leave California: their state income taxes are no longer deductible on their federal income tax returns.

Can California’s union-controlled state legislature adapt? Can they lower the top marginal tax rates to keep wealthy people from leaving California?

The short answer is, no, they cannot. They cannot conceive of the possibility that California’s current economic success is not because of their confiscatory policies, but in spite of them.

Earlier this year California’s union controlled legislature approved a gas tax increase that will increase state tax revenue by about $5.0 billion per year. Next in their sights is changing property taxes to a “split roll” system, whereby all commercial properties will no longer be protected from steep tax rate increases. Also under consideration is extending sales taxes to services, along with taxes on watermarijuana, and, who knows, maybe even robots.

These new taxes have attracted a lot of attention, but in reality California’s state government derives most of its tax revenue, 58%, from personal income tax. In recent years personal income taxes have contributed as much as 65% of the California state government’s total tax revenue. California’s top marginal income tax rate of 13.3% is by far the highest in the U.S. Oregon has the 2nd highest rate, at a much lower 9.9%. The impact of this can be seen on the chart depicted below, which is taken from the State Controller’s most recent annual financial report for the fiscal year ended June 30, 2016. As can be seen, state income taxes accounted for 58% of all tax revenue in the most recent fiscal year for which we have data. Nothing else even came close.

California Tax Revenue By Source – 2015 and 2016

Taxes graphic

When around 60% (or more) of all state tax collections depend on how much money individual residents make each year, revenue can be volatile. A recent analysis by the Franchise Tax Board, as reported in the Sacramento Bee, showed that the top 1% of California taxpayers by income paid 45% of the total income taxes collected. This means that in the last fiscal year, the top 1% paid 26% of ALL taxes collected in the State of California. If you extend that comparison to the top fifth – those Californians who earned on average over $237K in 2013, it can be seen they paid nearly 90% of the total income taxes collected, or 51% of ALL taxes from all sources.

California Income Tax Burden by Income Group – 2013 vs 1994

Income tax burden

When you have the top fifth of your wage earners paying more than half of ALL taxes collected in your state, you definitely don’t want those folks moving to other states. California has really great weather, but there are a lot of reasons to leave: An inhospitable business climate, a global economy with burgeoning new opportunities in many low tax regions, and an increasingly virtual work environment which means you don’t have to live within 50 miles of the California coast in order to attract venture capital or find business partners.

Just for the sake of argument, here are ways to cut expenses in the state budget, in order to keep California’s state government solvent without punishing the wealthy, or, worse, losing them to other states and nations.

HOW TO REDUCE THE CALIFORNIA STATE BUDGET BY $40+ BILLION

(1) Reduce Costs for Prisons – $2.0 billion or more:  California now spends over $75,000 per year per prisoner, a cost that has doubled since 2005. In Alabama, it costs less than $15,000 per year per prisoner. If California contracted with the State of Alabama to have them house its 130,000 prisoners, that would save California taxpayers $7.8 billion per year. If doing business with Alabama is unpalatable, how about right across the border in Nevada? The State of Nevada spends under $18,000 per year to house their prisoners – sending California’s prisoners across the Sierras to Nevada could save taxpayers $7.4 billion. Obviously relocating California’s prisoners to other states is an extreme solution. But there are many other less extreme, bipartisan solutions to lower prison costs, including alternatives to incarceration.

(2) Cut Ratio of Administrators to Faculty in Public Universities – $2.0 billion or more: In 2000 California’s UC System employed around 4,000 administrators and 7,000 faculty. Only 15 years later, in 2015, the UC System employed 10,500 administrators and 9,000 faculty. Just assuming for a moment that the administrative overhead in the UC System wasn’t already bloated in 2000, the UC System could reduce their administrative headcount by over 5,000 administrators, and save at least $500 million per year. Do the same thing in California’s much larger Cal State and Community College systems, and you can probably achieve total savings of around $2.0 billion per year

(3) Outsource CalTrans Work and Eliminate Redundant Positions – $2.5 billion or more: CalTrans is set to consume $12.8 billion of the State 2017-18 budget. As recommended by State Senator John Moorlach after an audit of the agency, just eliminating 3,500 redundant positions would save $500 million. But competitive outsourcing of roadwork contracts could save much more. CalTrans only outsources 10% of its roadwork, whereas, for example, Arizona outsources 80% of their roadwork. It is common to take competitive bids from private contractors to do public road maintenance and upgrades – CalTrans is the exception. A very expensive exception.

(4) Fund all CalTrans Work With Proceeds from Bullet Train Financing – another $10 billion per year for ten years: Ok, this isn’t entirely fair. Bonds are deferred taxes. But just imagine if instead of paying for a train that will never make any meaningful contribution whatsoever to relieving the congestion on California’s roads and freeways, all that money was used to improve the roads? Redirecting Bullet Train funds – which are destined to total well in excess of $100 billion – into CalTrans projects would save taxpayers nearly 100% of CalTrans budget for a decade or more.

(5) Slash State Agency Headcount and Pay/Benefits by 20% – $6.5 billion: In 2015 the average pay and benefits for the 154,000 full time employees of state agencies was $116,887. Eliminating 20% of these jobs would save taxpayers $3.6 billion per year. Reducing pay and benefits for the 123,000 remaining state employees by 20% would save another $2.9 billion – their average pay package would “only” be $93,500 per year after this reduction. Is this feasible? Recent history proves that it is. In 2009, cash-strapped California state agencies implemented “Furlough Fridays,” which functionally achieved both objectives described here – there was a 20% reduction in work being performed, and state workers collected 20% less in pay. And guess what? The state government continued to function.

(6) Reform Pensions – $2.1 billion: When you talk about pensions, it is understating the problem to restrict the discussion to state agencies. Local cities, counties and school district pensions combine with state agencies to produce an unfunded liability that – depending on who you ask – ranges between $200 and $700 billion. Moreover, pension reform might be subsumed under the preceding Option #5. Nonetheless, here are the numbers for state agencies: Taxpayers contribute, on average, $21,900 towards each state workers pension, representing 26% of their pay. Just lowering that to a contributory 401K equivalent to 10% of pay would save at least $2.1 billion per year. In reality, because these pensions are so underfunded, getting control of pension benefits would actually save much more than this estimate.

(7) Face Reality and End the “Sanctuary State” – around $20 billion: According to the United Nations, there are now over 250 million displaced refugees in the world. Right behind them are another 1.2 billion individuals living in extreme poverty. America, with only $330 million residents, is not nearly capable of absorbing even a fraction of these multitudes, much less California with not quite 40 million residents. Yet California has thrown open the doors and foots the bill, betting that the tech boom and asset bubble will last forever. A study by the Federation for American Immigration Reform estimated the cost of undocumented immigrants to California taxpayers at over $25 billion per year – $14.4 billion for education, $4.0 billion for health care, $4.4 billion for justice and law enforcement, $0.8 billion for public assistance, and $1.6 billion for general government services. This scrupulously footnoted study, published in Sept. 2017, got virtually no coverage in the media. What did receive extensive media coverage was a study promoted by the Institute on Taxation and Economic Policy that estimated the total state and local taxes paid by California’s illegal immigrants to equal nearly $3.0 billion per year. Net cost and potential savings: $22 billion. At the least, California should stop being a magnet state for undocumented immigrants, and instead should help craft then adhere to a realistic national policy.

The most powerful special interest in California, government unions, wants nothing to change. They are hostile towards corporations and individual wealth. They have strong incentives to want inefficient, expensive prisons, universities, and infrastructure projects. They have strong incentives to expand all government services to accommodate destitute immigrants. Why? Because the more government workers are hired and the more taxpayers’ money is wasted, the more dues paying government union members they acquire.

Joining these government unions are California’s powerful Latino Legislative Caucus and their allies in the identity politics industry, who recognize a huge political opportunity by spewing separatist demagoguery, nurturing a bleak, tribal paranoia in the collective minds of recently arrived immigrants. Also joining these government unions are left-wing oligarchs and the monopolistic businesses they control, who see in an expanded government and a hostile business climate a chance to prosper through legislated scarcity and mandated product choices. And, of course, the asset bubbles produced by contrived shortages add precarious value to the pension funds and increase property taxes.

So these solutions, while eminently practical, may never see the light of day. But California’s voters should understand that around $40 billion could be cut from the state budget if California’s government was ran in the interests of the people, instead of in the interests of government unions and their elitist allies. If $40 billion were cut from California’s state budget, not only could the new gas tax be repealed, but the top marginal tax rate could be dropped to under 10%. And as any student of the Laffer Curve knows, that might actually keep California’s wealthy from leaving; it might even cause income tax revenue to go UP, as fewer high income individuals feel the need to shelter or defer their taxable earnings.

The Laffer Curve
Depending on where you are on the curve, lowering taxes can raise tax revenue.

Laffer curve

*   *   *

Edward Ring is a contributing editor for the California Policy Center.

 

California looks to Trump administration for help on marijuana banking

Buds are removed from a container at the "Oregon's Finest" medical marijuana dispensary in Portland, Oregon April 8, 2014. Over 20 Oregon cities and counties are moving to temporarily ban medical marijuana dispensaries ahead of a May deadline, reflecting a divide between liberal Portland and more conservative rural areas wary about allowing medical weed. Portland, Oregon's largest city, already has a number of medical marijuana clinics and has not moved to ban them. Picture taken April 8, 2014. REUTERS/Steve Dipaola (UNITED STATES - Tags: DRUGS SOCIETY POLITICS HEALTH) - RTR3KMHE

With the legal sale of recreational marijuana a week away, local governments across California have adopted policies on where and when permitted legal sellers can operate, following the ground rules set up by Proposition 64 – the November 2016 state ballot measure legalizing pot for recreational use beginning Jan. 1, 2018.

But despite more than 13 months of lead time, state officials still haven’t figured out how to deal with a crucial problem: the fact that federally regulated banks can’t accept deposits or have any financial relationship with marijuana vendors or growers, given that pot sales and consumption remain illegal under federal law.

Cash-only medical marijuana dispensaries authorized by a 1996 ballot measure have long been plagued by armed robberies. With recreational pot sales expected to be a multibillion-dollar industry, pot-related crime could skyrocket.

Two separate proposals have emerged after what state officials say are months of discussions.

One under consideration by Gov. Jerry Brown’s administration seems a long shot given that it relies on the cooperation of the Trump administration – specifically Attorney General Jeff Sessions, who has opposed individual states’ efforts to legalize marijuana for recreational use.

The Los Angeles Times recently reported that the state had met with 65 banks and credit unions, as well as with federal regulators, about having one bank in California established as a clearinghouse for all marijuana-related accounts of various banks throughout the state. The “central correspondent” bank would process all transactions involving pot dollars.

Seeking assist from federal government after suing it 24 times

Brown administration officials appeared hopeful that this concept would go over well with federal regulators because, at least in theory, it would make it easier to keep close track of marijuana industry finances, and to spot suspicious payments or transfers of funds.

The problem for California is that this proposal is built on the presumption that the federal government wants to help the state – which has already sued the Trump administration 24 times. While federal regulators have met with state officials on the pot-banking issue, the final decision on whether to cooperate is up to Sessions. At a Nov. 29 press conference, he said his office was taking a hard look at rolling back Obama administration rules that let states allow recreational marijuana after basic public safety and health standards were met.

“It’s my view that the use of marijuana is detrimental, and we should not give encouragement in any way to it, and it represents a federal violation, which is in the law and is subject to being enforced,” Sessions said, according to the McClatchy News Service. “We are working our way through to a rational policy, but I don’t want to suggest in any way that this department believes that marijuana is harmless and people should not avoid it.”

Chiang: Consider setting up a state bank for pot transactions

The second proposal – touted by state Treasurer John Chiang at a Nov. 7 news conference – is to have the state study the feasibility of opening its own bank to deal with marijuana financial transactions. That was based on the recommendations of Chiang’s cannabis bank working group.

The group’s 32-page report also suggested California work with other states in setting up a network of such institutions. But the report noted the many obstacles to establishing such a bank, including the likelihood that it ultimately would still be subject to federal regulation and thus to Sessions’ objections.

Chiang told reporters at his November news conference that “a definitive, bulletproof solution will remain elusive” without changes in federal banking laws.

But the 2018 gubernatorial candidate said that “is not an excuse for inaction.”

This article was originally published by CalWatchdog.com

As problems mount, California Democrats cling to their favorite boondoggle

High speed rail constructionWhen the father of the current governor of California was governor, he was a driving force behind the highway building boom that gilded the already Golden State. Aggressive road construction and free-flowing water were Edmund G. “Pat” Brown Sr.’s lasting legacies. By contrast, Governor Edmund G. “Jerry” Brown, Jr. is looking at a legacy tarnished by a bullet train that will cost far more than projected, won’t thin out today’s jammed highways, and will never run on time.

Politicians like flashy new projects: a European-style bullet-rail line is more glamorous than maintaining battered transportation arteries and adding desperately needed highway capacity. But California’s 800-mile, high-speed rail plan is well on the way to becoming a legendary boondoggle. News that $35 million allocated for utilities costs had been transferred on an “emergency” basis to pay train contractors are one reason why Republican state assembly member Jim Patterson called for an emergency audit. “What are your plans to complete the project?” demanded Patterson last month of the California High-Speed Rail Authority. “Describe to us how you’re managing costs. Please explain to us why and how you are transferring hundreds of millions of dollars just to keep the construction going?”

Democrat Al Muratsuchi, chairman of the legislature’s Audit Committee, rejected the request on procedural grounds. His reasoning: because the legislature wasn’t in session, committee members and the public would be denied “the opportunity to have a say in the decision.” The rejection, combined with the train’s mounting troubles, makes it look like there is something to hide.

Muratsuchi has reportedly told Patterson that he can submit the request again in January, when the legislature is in session—in other words, when lawmakers will have an official opportunity to say no, or, if the request is granted, to spin whatever inconvenient news the audit turns up. Muratsuchi might think that Patterson is looking for a “gotcha” revelation to make headlines, but concern about the cost and progress of the rail line is well founded—from budget estimates and cost-containment policies to contingency planning if funding dries up. “We owe it to the people to demonstrate that the High-Speed Rail Authority isn’t going to skip town and leave us with a partially built track,” Patterson said. “Californians deserve to know what Plan B is—it’s time for a reality check.”

At about the same time that Patterson’s audit requested was denied, the High-Speed Rail Authority announced that its environmental reviews, which were supposed to be done by 2018, won’t be finished until 2020—just the latest delay in a project that has had too many to count. The Los Angeles Times reported in September that the 119-mile Central Valley segment alone is already $1.7 billion over budget and seven years behind schedule.

Policymakers sold the high-speed rail project to voters nearly a decade ago, in a ballot measure that promised a 220-mph super train that would blast passengers between Los Angeles and San Francisco in a tidy two hours and 40 minutes. Independent analysts say that the ride will likely take at least three hours and 50 minutes and as long as four hours and 40 minutes—or only an hour less than it currently takes to drive.

So it might not be very fast—but at least it will be cheap, right? Wrong again. Projected fares have risen along with the projected travel times. What was once estimated roughly as a $50 ticket between Los Angeles and San Francisco had inflated to $105 by 2009, according to the project’s business plan. The latest estimate: an $86 fare, which one can readily imagine going higher still by the time the train is operational.

Ridership estimates have steadily fallen. Voters were told that by 2030, the system would carry 65.5 million to 96.5 million riders a year—figures about three times higher than independent projections. At the lower numbers, not enough commuters will fill the seats to relieve the grinding congestion on the roads.

California has already spent more than $3 billion on a project with an estimated cost that has bounced around from the original $33 billion to $43 billion, then up to as much as $117 billion, before settling, at least for now, at about $68 billion. Some pressure is building to junk the project—to take a smaller loss now, that is, rather than a much larger one in the future. Letting the bullet train die would probably require a ballot initiative redirecting the project’s allocated but unspent funds to more useful projects—such as increased highway capacity. And that’s something that Californians could actually use.

Jerry Brown Blames Climate Change for California Fires

VENTURA, CA - DECEMBER 5: A home is destroyed by brush fire as Santa Ana winds help propel the flames to move quickly through the landscape on December 5, 2017 in Ventura, California. (Photo by Marcus Yam / Los Angeles Times via Getty Images)

California Governor Jerry Brown blamed climate change for the California fires that have devastated the state this fall during a visit to assess the damage in Ventura County on Saturday.

“This is the new normal,” he said, as quoted by the Orange County Register. “We’re facing a new reality where fires threaten peoples’ lives, their properties, their neighborhoods and cost billions and billions of dollars. We have to have the resources to combat the fires, and also have to invest in managing our vegetation and forests and all the ways we dwell in this very wonderful place — but a place that’s getting hotter.”

However, climate scientists are more skeptical, noting that climate change could be one of a variety of factors.

A comprehensive look at the question by Southern California Public Radio — hardly a conservative outlet — found that there was considerable debate about the factors that made this year’s fires particularly bad.

One factor was high winds, whose connection to climate change is “still up for debate.” Another factor was the state’s recent drought, which persisted in the part of Southern California where the Thomas fire — now in excess of 150,000 acres, with only 15% containment — struck. (Ironically, last winter’s heavy rains caused brush to grow rapidly, giving fires plenty of fuel to burn.)

An important factor in the fires of the past week was that people are building homes in areas that are naturally prone to wildfires, or where naturally dry conditions mean that the kinds of building materials and vegetation that people prefer to use in cities and suburbs are a fire hazard.

Brown has frequently cited climate change as the cause for natural disasters before, only to be corrected by scientists, who suggested he was guilty of “noble-cause corruption” — i.e. distorting science in service of a cause that many scientists support.

Last year, both Brown and then-President Barack Obama falsely linked wildfires across the western United States to climate change. And last month, Brown told a conference at the Vatican that the world needed “brain washing” on climate change.

Aside from the Thomas fire, firefighters have made significant progress in their struggle against some of the other fires burning across the region. The Skirball fire near the 405 Freeway, which brought traffic to a standstill in Los Angeles on Thursday, was at 75 percent containment as of Saturday afternoon, according to Southern California Public Radio. The Lilac fire, which killed several dozen horses on Thursday, was fully contained by Saturday evening, according to the Register.

“The Creek Fire was now 80% contained, and the Rye Fire was 65% contained” as of Saturday, the Los Angeles Times reported.

Officials say there have been no deaths associated with the Southern California fires.

Joel B. Pollak is Senior Editor-at-Large at Breitbart News. He was named one of the “most influential” people in news media in 2016. He is the co-author of How Trump Won: The Inside Story of a Revolution, is available from Regnery. Follow him on Twitter at @joelpollak.

This article was originally published by Breitbart.com/California