San Francisco Passes Retail Worker Bill Of Rights

Ahead of the Thanksgiving holiday, San Francisco passed a law designed to prevent employers from scheduling workers with little notice.

The law, also known as the Worker Bill of Rights, was passed by the San Francisco’s City Council and combines two pieces of legislation containing five provisions designed to make it easier for hourly workers at many of the city’s restaurants and stores.

KTIC explains the law will require employers to post schedules two or more weeks in advance and restrict these businesses from hiring new employees before giving additional hours to existing part-time employees. Additionally, the law will require employers to pay employees for any hours where they are put on call, even if the shift is ultimately canceled.

A writer for Vox argued that the absence of such laws can make life very tough for workers who have to schedule their work around other life commitments like children and other jobs. Uncertain hours also mean unpredictable income.

However, some experts see such a law as having profoundly negative outcomes for businesses and employees alike.

“Anyone who has ever run a lemonade stand knows this won’t work,” Michael Saltsman, a research director at Employment Policies Institute, told The Daily Caller News Foundation.

Saltsman predicts that the law will cause employers to give their employees less hours. Before a business may “staff up” or hire more part time workers to accommodate busy days or shifts, they will be less likely to do so knowing they may be penalized if they had to change the schedule at the last second because they got less or more customers then what they expected.

The law will also likely lead to worse service because fewer people than needed will be working a given shift.

“The net result is there is going to be fewer opportunities created,” Saltsman added.

The Friday after Thanksgiving is a particularly busy time for retail employees.

This article was originally posted on the Daily Caller News Foundation

More Taxes and Tuition Buy Time for the Pension Bubble

“The ‘recovery’ is largely an illusion created by the effects of zero percent interest rates, quantitative easing, and deficit spending. The asset bubbles that have been created as a result of these policies have primarily benefited the owners of stocks, bonds, and real estate (the rich), while simultaneously deterring the savings and capital investment that is needed to actually create good paying jobs and increased purchasing power.”

-  Peter Schiff, EuroPacific Weekly, November 6, 2014

The question everyone should be asking, especially the managers of public employee pension funds, is how much longer our economy can run on zero percent (adj. for inflation) interest rates, quantitative easing and deficit spending.

When asked how we unwind all of this debt and deficits in a manner that doesn’t trigger a collapse of collateral and potentially catastrophic deflation, i.e., how do we create the preconditions for sustainable economic growth, respected economics blogger Charles Hugh Smith emailed back this answer:

“Those who foisted the debt off as safe have to absorb the losses, as did those who were conned. As it stands now, the hapless taxpayers are having to make the perps and their marks whole—that is wrong, morally and financially. The US has about $90 trillion in net worth. If $10 T were wiped off the books, it would be bad for the banks and those who trusted them, but it would not sink the country.”

Which brings us to the topic of this post.

As reported on November 16th in the Sacramento Bee:

This year, UC will pay about $1.3 billion to the pension fund, about 5 percent of its overall operating budget. UC officials want the state’s general fund to pick up nearly a third of the payment, which would cover the university’s portion of pension contributions for faculty and other employees who are paid from state funds. ‘Frankly, if the state were to pay that, we would not be proposing a tuition increase,’ said Nathan Brostrom, UC’s chief financial officer. ‘That is money that could go to other resources.’”

Like nearly every public employee pension fund in the U.S., the University of California’s pension system is underfunded. According to the Sacramento Bee, the system is 79 percent funded, which equates to a $7.2 billion unfunded liability.

What is going to happen to the UC System’s pension fund when these asset bubbles deflate?

The precariously low funded ratio challenging America’s public employee pension systems is itself based on the dangerous assumption that we are not experiencing unsustainable asset inflation. A healthy correction would lower asset values, making the basic necessities of life – housing and energy – affordable again. But a healthy correction in asset values would render pension systems insolvent because the value of their investments – already on the brink of inadequacy – would decline further.

In the public debate over this issue, there is another assumption at work, pernicious and misleading. That assumption is that faculty on the various UC campuses are making common cause with the students by insisting that state taxpayers pick up the tab for these pensions. But there is no common cause. Beneficiaries of public sector pensions are shareholders. From funds that control nearly $4 trillion in investments, this privileged class of state and local government workers collect pensions that – at least in California – average four times (or more) what someone with similar compensation (and similar withholding) can expect to receive from Social Security. And unlike ordinary shareholders, when the shares held by their pension funds decline, they are empowered to force taxpayers to cover their losses.

The faculty that populate the campuses of the University of California, and by extension, every public employee who collects a pension at taxpayer – and tuition payer – expense, have interests that coincide with the one percent of the one percent, and the biggest banks, and the hedge funds, and the Wall Street firms they love to demonize. They benefit from the asset bubble that is destroying the economic aspirations of the rest of America. When financial policymakers encouraged cheap interest rates so ordinary people could borrow more than they could ever hope to pay back, just so they could own a home, shareholders – including the biggest shareholder class in the U.S., pension funds – profited from the debt-fueled economic growth. When asset bubbles rendered a middle class lifestyle unattainable to most Americans, the public sector exempted themselves through automatic cost-of-living increases and enhanced pension benefits.

The solution to the University of California’s money crunch is to suspend cost-of-living increases, increase payroll withholding for pension benefits, and lower pension benefit formulas. Only then will the people who teach California’s youth truly be making common cause with their students.

As it is, the roadblocks to sustainable economic growth are those who benefit from debt fueled asset bubbles – super rich shareholders and their fully co-opted partners, government workers.

Ed Ring is the executive director of the California Policy Center.

California: The Land of Double Taxation for Small Businesses

Just think: You run a business. Your partner embezzles from you and you are reeling – you feel like you’ve been punched in the gut. Next, California’s state government shows up and slaps you around. When you object, Sacramento offers no apology, no comfort. You’re on your own.

Farfetched? Read on to see what happened to a California Limited Liability Company (LLC) that tried to play by the rules.

First, an LLC is a form of business that permits the owner to avoid double taxation. In California, such companies must pay an annual minimum franchise tax of $800, which is the highest of any state (in 40 other states the fee is $100 or less) and may be subject to additional fees based on revenue.

An article by Mike Dazé in Bloomberg BNA – Corporate Close-Up: The Burden of California’s Taxes and Fees on Limited Liability Companies – points out that the State Board of Equalization “illustrates the challenges businesses face when trying to reduce their liability for taxes and fees in California. A company filing two-short period returns in tax year 2010 unsuccessfully protested the imposition of the minimum tax and LLC fee in each short period.”

In short, they objected to double taxation.

The company, Bay Area Gun Vault, LLC, converted from a two-member entity into a single-member LLC after one of the two members was caught embezzling money and was removed. So the company filed two short-period returns for 2010, one as a two-member LLC and the second as a single-member LLC.

In the first return, the company timely paid the annual tax of $800 and an extra LLC fee on profit. In the return for the second period, the company did not pay the LLC annual fee, but did pay the tax.

Despite two tax returns, the company clarified that the income was for the same business with the same tax ID number and assets and was operating in the same location. So the company should owe only $800 in tax and an LLC fee of $6,000.

But the removal of the embezzler caused a “technical termination” of the original LLC because 50 percent or more of the interests changed hands. Hence, the resulting single-member LLC was a “new entity for tax purposes” and owed the minimum tax and LLC fee during the same year.

Mr. Dazé wrote, “The logic of the company’s argument is appealing: LLC taxes and fees should not be imposed twice in the same year on the same business.”

The Board claims there is no statutory support for that position.

Well, if the Board is correct, why did legislators let an unfair law stand? Do Sacramento lawmakers use no foresight in determining whether technical provisions in business-oriented laws might cause future injury?

Actually, I know the answer to my own questions. Here is why the legislature doesn’t care how its actions harm the business community:

  • First, the Franchise Tax Board (California’s version of the Internal Revenue Service) has projected revenue from LLC taxes and fees to be $753 million in fiscal year 2014-2015. Sacramento wants to collect every single penny of that revenue.
  • Next, California’s legislature is packed with people who will use taxpayer funds to support the latest half-baked ideas. But they routinely turn a deaf ear to requests from the business community for fair taxation and regulatory policies.
  • Finally, most Sacramento politicians are clueless about what it takes to run a business.

To amplify on that last point – only “18 percent of the Democrats who control both houses of California’s full-time legislature worked in business, farming or medicine before being elected,” wrote former California Assemblyman Chuck DeVore. “The remainder drew paychecks from government, worked as community organizers, or were attorneys.”

In business-friendly Texas, “Democrats are more than twice as likely as their California counterparts to claim private-sector experience outside the field of law,” continued DeVore, and “75 percent of the Republicans earn a living in business, farming, or medicine….” All of that can be found in his book, The Texas Model: Prosperity in the Lone Star State and Lessons for America.

The analysis was for a couple of years ago, but the makeup of both legislatures remains virtually the same.

California is replete with demands for “environmental justice,” “social justice,” “income justice,” “sexual justice,” “workplace justice” – oh, the list goes on and on. What California needs more of is “entrepreneurial Justice,” “business justice” and “tax justice.”

Gov. Jerry Brown and legislative leaders should reverse tax-confiscatory policies and refund overpayments to that LLC and others in similar positons. If not, California will perpetuate its mean-spiritedness towards corporations – even the one-person kind.

The Irvine-based Principal of Spectrum Location Solutions helps companies plan and select ideal sites for new facilities across the U.S. and internationally.

This article was originally published at Fox and Hounds Daily

CalPERS Numbers Attract Fresh Scrutiny

The California Public Employees’ Retirement System looks to see 2015 as another controversial year, especially around four budding controversies.

First, attention has focused in recent weeks around the way CalPERS pays its board members and executives. An investigation by the Sacramento Bee revealed that, for 15 years, CalPERS has reimbursed the “government pay and benefits of five board members who are on full- or part-time leave from their jobs to conduct fund business.”

While some board members receive little or even no money for their service, others received hundreds of thousands of dollars. Priya Mathur — recently stripped of her administrative posts, but not fired after repeatedly violating state ethics laws — was paid just shy of $300,000 during the last fiscal year. During the same period, John Chiang, an ex-officio board member in his capacity as the state controller, received nothing. He also will receive nothing when he remains on the board in January when he becomes the state treasurer, another ex-official CalPERS board membership.

Bonuses

Second, CalPERS executives received a substantial increase in lavish bonuses. The San Francisco Chronicle reported a 14 percent increase in bonus payments over the fiscal year before last, with $8.7 million going to investment staff and nearly $300,000 to the fund’s non-investment executives.

“The rewards are based on three-year performance verses a benchmark, as well as the earnings of each asset class and individual portfolios,” according to CalPERS spokesman Brad Pacheco. In an effort to deflect criticism for the windfalls, the Chronicle noted, CalPERS maintained it “must grant bonuses to help compete with the pay that employees could make if they went to work on Wall Street.”

According to Pacheco, “spending money on in-house investment management saves about $100 million a year that otherwise would be paid to Wall Street in fees.”

Secret deals

Third, in an area fraught with Wall Street competition of a different sort, CalPERS has proven itself willing to play political hardball to ensure financially stressed cities pay it first, and investor-creditors later. In an exclusive, Reuters cast a spotlight on how that process has played out secretly in the case of San Bernardino.

Speaking on condition of anonymity, a “senior city source” revealed details of CalPERS’ deal with the city that a judicial gag order had sought to keep under wraps. Although it hasn’t published a completed budget, San Bernardino has set aside over $10 million for an unnamed creditor — which the source identified as CalPERS.

The city’s decision “to strike a deal with CalPERS first, and begin paying arrears before a bankruptcy exit plan could be formulated, shows the reluctance of California cities to take on the pension giant,” concluded Reuters.

Demographic destiny

Fourth, CalPERS has faced a new round of investor skepticism over its approach to funding. The Moody’s ratings agency warned this week that cities like San Bernardino will face increasing pressure from CalPERS obligations, “even after the relief provided by the bankruptcy adjustments” authorized by the courts. “The ratings agency calculated that San Bernardino’s adjusted net pension liability for the 12 months to the end of June 2014 was $731 million — nearly 10 times its outstanding debt,” according to the Chief Investment Officer website.

CalPERS’ unfavorable demographics were likely responsible for the projected future increases in required contributions. At PublicCEO.com, Ed Mendel reported that “in a few years CalPERS retirees are expected to outnumber active workers, a national trend among public pension funds that makes them more vulnerable to big employer rate increases.”

CalPERS has managed in recent years to boost its funding level to some 77 percent. But now, Mendel observed, “some think getting to 100 percent funding may become difficult if not impossible. Employer contribution rates would have to be raised to an impractical level, crowding out funding for other programs, and investments would have to yield unlikely returns.”

According to prevailing interpretations of the California Constitution, taxpayers are on the hook for any fund shortfalls.

This article was originally published on CalWatchdog.com

UC Pension Crisis Creates Teachable Moment

Californians have abysmally low levels of civic engagement as evidenced by the recent election where voter turnout set an historic low.  And the widespread disengagement of California’s younger voters is even worse.

True, in 2008 California’s youth turned out in large numbers to elect Barack Obama as president.  And in 2012 they turned out again because, in addition to Obama being up for reelection, Proposition 30 was on the ballot.  Proposition 30, which gave California the highest income tax rate and highest state sales tax rate in America was, ironically, entitled Temporary Taxes to Fund Education.

During the Proposition 30 campaign, Governor Brown traveled to several university campuses to push the massive tax hike promising that passage would prevent tuition hikes. California’s college students, being as gullible as they are idealistic, believed the promise hook, line and sinker.  So much for critical thinking.

But perhaps California’s younger voters are finally getting wise to all the broken promises of tax-and-spend politicians and that might explain, in part, why they stayed home in this last election.  And sure enough, their increasing cynicism is proving to be well founded.

Despite the massive tax hikes ostensibly to keep higher education affordable, the University of California Board of Regents just announced a sizable increase in tuition.  And UC students are none too happy.

Turns out that the driving force behind these hikes is the growing unfunded liability of UC’s pension fund and other items of questionable compensation.  Allysia Finley with the Wall Street Journal explains:  “UCs this year needed to spend an additional $73 million on pensions, $30 million on faculty bonuses, $24 million on health benefits and $16 million on collectively bargained pay increases. The regents project that they will require $250 million more next year to finance increased compensation and benefit costs.”

Moreover, Finley reveals the extraordinary level of waste in the UC system:  “Ms. Napolitano [President of the University of California] says that the UCs have cut their budgets to the bone, yet her own office includes nearly 2,000 employees—a quarter of whom make six-figure salaries. An associate vice president of federal government relations earns $273,375 a year, plus $55,857 in retirement and health benefits, according to the state controller’s office.  Thirty professors at UC Santa Cruz rake in more than $200,000 in pay, and most faculty can retire at 60 and receive a pension equal to 75% of their final salary. More than 2,100 retirees in the university retirement system collected six-figure pensions in 2011.”

At the moment, the outrage expressed by students in their protests – one of which resulted in a shattered glass door outside a meeting of the UC Regents – seems a bit unfocused.  They’re angry but, aside from the mere fact that their education costs are rising, many are not clear about the causes.

In a weird way, UC’s pension crisis might be the ultimate teachable moment for college students who typically have little grasp of anything related to public finance.

So, students, here’s the scoop:  There’s no such thing as a free lunch.  Public employee compensation is expensive; especially pension costs that you will be paying long after those of us who are older are long gone. Government waste, fraud and abuse in California is a real problem.  Those who pay taxes – a lot of taxes – have choices where to live and move their businesses – and that may not be in California.  Debt means future costs.  You might like the idea of High Speed Rail but you might want to study both the costs and viability of any megaproject before you hop on board.

And finally, don’t buy into any promise by any politician about what they are going to do for you without first figuring out what they are going to do to you.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

This article was originally published on HJTA.org

Gov. Brown Appoints Leondra Kruger to State Supreme Court

Governor Jerry Brown has nominated a U.S. Department of Justice official for a spot on the California Supreme Court.

On Monday, Brown nominated Leondra R. Kruger, a Yale Law School graduate, to fill a vacancy created by the retirement of Associate Justice Joyce L. Kennard, who left the court in April. If confirmed by the Commission on Judicial Appointments, Kruger would be Brown’s third appointee to the state’s highest court in as many years.

“Leondra Kruger is a distinguished lawyer and uncommon student of the law,” Brown said in a press release announcing the appointment. “She has won the respect of eminent jurists, scholars and practitioners alike.”

Born and raised in the Los Angeles area, Kruger has spent the past eight years working in various positions at the U.S. Department of Justice. Since 2013, Kruger has served as a Deputy Assistant Attorney General at the department’s Office of Legal Counsel, where she has earned high praise from the federal government’s top lawyer.

“Leondra is an extraordinarily talented attorney who has been a leader within the Justice Department’s Office of Legal Counsel and Office of the Solicitor General,” U.S. Attorney General Eric H. Holder Jr. said in a written statement on Kruger’s nomination. “Her remarkable judgment, tireless work ethic, and dedication to the highest ideals of public service have marked her as one of the foremost leaders of her profession.”

Brown remaking state Supreme Court

When Brown took office for his second stint as governor, all but one of the seven state Supreme Court justices were appointed by Republican governors. With Kruger’s confirmation, Democrats now would hold three seats on the court. One more Brown appointment over the his last term in office would give Democrats a four-member majority.

Earlier this year, Brown nominated Mariano-Florentino Cuellar, a 41-year-old Stanford law professor, to fill the vacancy created by Justice Marvin Baxter. In 2011, Brown tapped UC Berkeley law professor Goodwin Liu, who had been denied a seat on the 9th U.S. Circuit Court of Appeals.

Supreme Court Appointments

If successfully confirmed, Kruger would be Brown’s 10th appointment to the state Supreme Court — more than any other governor in California’s history, according to CalWonk’s Phillip Ung. Kruger would be the only African American currently on the California Supreme Court.

“I am deeply honored by Governor Brown’s nomination,” Kruger said in a press release. “I look forward to returning home to California and, if confirmed, serving the people of California on our state’s highest court.”

Democratic lawmakers were quick to embrace Kruger’s nomination to the position, which pays $225,342 per year.

“This is another outstanding appointment Governor Brown has made to the California Supreme Court,” Assembly Speaker Toni Atkins, D-San Diego, said in a prepared statement. “I look forward to Ms. Kruger’s voice on the court as all three branches of our government work to ensure justice for all Californians.”

Kruger’s conflict with religious groups

The choice of Kruger is likely to draw the ire of religious groups that have battled with her over First Amendment rights. While at the Solicitor General’s office, Kruger represented the Obama administration in 12 cases before the U.S. Supreme Court, including Hosanna-Tabor Evangelical Lutheran Church and School vs. EEOC.

In Hosanna, Kruger argued that federal discrimination laws should be applied to religious organizations. Courts have long recognized a ministerial exception, which exempts religious institutions from anti-discrimination laws in hiring practices. Several justices openly scoffed at Kruger’s arguments to overturn the precedent.

“That’s extraordinary. That’s extraordinary,” Justice Antonin Scalia said in one exchange with Kruger during oral arguments. “We’re talking here about the Free Exercise Clause and about the Establishment Clause, and you say they have no special application.”

A unanimous Supreme Court ultimately upheld the school’s First Amendment right to exercise its religious beliefs.

“The interest of society in the enforcement of employment discrimination statutes is undoubtedly important,” Chief Justice John G. Roberts Jr. wrote in the court’s opinion. “But so too is the interest of religious groups in choosing who will preach their beliefs, teach their faith, and carry out their mission.”

Kruger quickly rose through Justice Department ranks

Kruger, who clerked for Supreme Court Justice John Paul Stevens from 2003 to 2004, worked as an associate at Wilmer, Cutler, Pickering, Hale and Dorr LLP from 2004 to 2006. While teaching at the University of Chicago Law School in 2007, Kruger was tapped to join the Bush administration’s Justice Department, where she quickly rose through the ranks.

“Get used to this name, Leondra Kruger,” the Wall Street Journal’s legal blog advised in 2010. “Say it again: Leondra Kruger. It’s a name in the world of law that you’re likely going to be hearing for years to come.”

At that time, Kruger was promoted to principal deputy solicitor general, a position that is considered the “political deputy” under the solicitor general. A prominent legal blog considered the appointment under Acting U.S. Solicitor General Neal Katyal “a surprise.” But, Katyal was impressed by Kruger’s legal expertise.

“Leondra Kruger is perhaps the most outstanding lawyer in America right now under the age of 40,” Katyal said of Kruger’s appointment to the California Supreme Court. “She is known for meticulous preparation before her arguments in the United States Supreme Court, her absolute dedication to candor and her unwavering commitment to fairness.”

In 2011, Kruger was honored by the National Law Journal as one of its “Minority 40 Under 40.” She was admitted to the State Bar of California in 2002, according to bar records, but is currently inactive.

Kruger must be confirmed by the Commission on Judicial Appointments, which consists of Chief Justice Tani Cantil-Sakauye, Attorney General Kamala D. Harris and senior presiding justice of the state Court of Appeal Joan Dempsey Klein.

If Kruger is confirmed, she would face a statewide confirmation vote in the 2016 general election.

This article was originally published on CalWatchdog.com

CA GOP Eyes Special State Senate Election

Aside from preventing Democrats from again nabbing two-thirds supermajorities in the California Legislature, the Nov. 4 national GOP electoral wave did little to change the political dynamic here. With two years to go before the 2016 elections, Golden State Republicans have gained an opportunity — though not a lot of time — to focus on the keys to a stronger performance.

Between now and then, the California GOP may be able to use focus groups and internal polls to test certain themes, issues and talking points. Nevertheless, elections have a special value in helping parties refine their message and build momentum.

And until 2016, the most important election in the state for Republicans may well be the special election to replace Mark DeSaulnier, D-Concord, in the state Senate. Gov. Jerry Brown will set a date for the election soon after DeSaulnier officially resigns from his current office.

Musical chairs

On Election Day, Nov. 4, DeSaulnier prevailed in his effort to replace retiring Rep. George Miller in the 11th Congressional District. After his victory, DeSaulnier took pains to point out that “civic illiteracy and complacency” had nonetheless gotten him down — in other words, low turnout.

Although depressed voting numbers didn’t hurt DeSaulnier, he understood as well as any California Democrat that Republicans in the state often benefit from the phenomenon. Sure enough, in the race to replace him, Republicans may be competitive for that reason as well as others.

That’s why Mark Meuser — a Republican attorney from Walnut Creek and no stranger to DeSaulnier — has jumped into the race, announcing recently he hopes to prevail in the special election for the soon-to-be-vacant 7th state Senate District seat, which encompasses most of Contra Costa and Alameda counties.

As the Antioch Herald reported, Meuser’s campaign will likely focus around economic themes — not just jobs in the abstract, but the dynamism of small business and innovation. “The spirit of entrepreneurs in California is as strong today as it was during the gold rush,” Meuser announced on his campaign site. “It needs an advocate in Sacramento, and Meuser wants to be that advocate. Ensuring that our communities stay strong — and grow stronger — requires a long-term vision for future generations, and Meuser has that vision.”

Meuser is best known as the Republican who ran for that same seat in 2012, losing to DeSaulnier. Then, Meuser won 38.5 percent of the vote, with DeSaulnier getting 61.5 percent. This time around, expectations have changed — in part because more than one Democrat also is angling for the seat, and there will be no incumbent.

Healthy competition

As the Contra Costa Times reported, two well known and influential Bay Area Democrats are expected to throw their hats in the ring: re-elected Assemblywoman Susan Bonilla, D-Concord, and term-limited Assemblywoman Joan Buchanan, D-Alamo. With the state Capitol teeming with Democrats drawn from the well-to-do power corridor between Sacramento and San Francisco, there are more ambitious politicians than there are elective offices for them to fill.

Bonilla and Buchanan are both credible candidates sure to appeal to voting Democrats. It is less clear, however, whether either has the ability to turn out Democrats in large enough numbers to deal another loss to Meuser — particularly if they have to campaign against one another, and not just Meuser. According to California law, if no candidate gets 50 percent-plus-one of the vote, a runoff election then is held.

As the Antioch Herald also reported, both Democrats will be influenced in their decision-making by California’s particular rules restricting length of terms in office. Whether serving in the Assembly or state Senate, legislators are capped at a total of 12 years in both houses, according to Proposition 28, which voters approved in 2012. But it only applies to those elected to office after its passage.

Yet “because Bonilla was elected before June 5, 2012, she is restricted by the previous term limits, approved in 1990, which limited legislators to three terms in the State Assembly and two terms in the State Senate. Since the election will be past the half-way point in DeSaulnier’s term, if elected, she will serve less than two years, allowing her two more full terms for a total of close to 10 years. The same would apply to Assemblywoman Joan Buchanan.”

Looking forward

The 7th is not the only state Senate District soon to be up for grabs as a result of a special election. Similar circumstances have also created upcoming vacancies in the 21st District and the 37th District, where Republican state Sens. Steve Knight and Mimi Walters, respectively, were elected to the U.S. Congress. No date for an election has been set. But these are seats in heavily Republican districts, so the makeup of the Senate won’t change.

And on Dec. 9, an election will be held to replace Democratic state Sen. Rod Wright in Senate District 35. He resigned after being convicted in a corruption scandal. If necessary, a Feb. 10, 2015 runoff will be held. According to Ballotpedia, “Louis L. Dominguez (D), Isadore Hall, III (D), Hector Serrano (D) and James Spencer (R) will face off.” As Wright got 76.5 percent of the vote to 23.5 percent for Republican Charlotte A. Svolos in the 2012 election, one of the Democrats is almost assured of victory, meaning this race also won’t change the party makeup of the Senate.

Given the familiar faces and competing ambitions at work in the presumptive 7th District race, however, Republicans may likely be tempted to use Meuser’s and the other two campaigns to road-test strategies that could pay dividends in 2016. If races can be targeted where Democrats compete, turnout is low, and seasoned Republican candidates can deliver a well-tailored message, the California GOP could see a better return on its investments. However, with 2016 being a presidential election year, turnout likely will be high, which would benefit Democrats.

Ultimately, the success of such an approach could hinge on whether the Nov. 4 elections did not quite capture the full extent of voter frustration with Democrats; and on how President Obama’s recent amnesty plays out among all groups of voters.

This article was originally published by CalWatchdog.com

Report: EPA Regulations To Raise Power Costs 37 Percent By 2020

Electricity prices are already increasing at record levels and Environmental Protection Agency rules will only force power prices up even higher as the agency finalizes a slew of regulations aimed at the power sector.

A report by Energy Ventures Analysis found that the EPA underestimates how much its power plant regulatory regime will raise electricity and natural gas prices by imposing new regulations on power plants, most recently being the agency’s rules to cut carbon dioxide emissions from new and existing power plants.

These new rules to tackle global warming, combined with other rules to reduce more traditional air pollutants, will dramatically increase Americans’ utility bills by 2020, according to EVA’s report which was sponsored by the coal company Peabody Energy.

“Annual power and gas costs for residential, commercial and industrial customers in America would be $284 billion higher ($173 billion in real terms) in 2020 compared to 2012—a 60% (37%) increase,” the EVA report found.

The EPA’s so-called Clean Power Plan to reduce emissions from existing power plants aims to reduce carbon dioxide emissions from the power sector 30 percent below 2005 levels by 2030. The EPA says its plan will result in “approximately 46 to 49 GW of additional coal-fired generation” being “removed from operation by 2020.”

On top of this the “decrease in coal-fired power will also cause natural gas prices to rise up to 11.5 percent as an additional 1.2 trillion cubic feet of natural gas is used to make up for the lack of coal power in 2020,” EPA said. “Average retail electricity prices are projected to increase in the contiguous U.S. by 5.9% to 6.5% in 2020.”

The Energy Information Administration estimates that 50 gigawatts of coal-fired power are slated to shutdown by 2020, mainly because of an EPA rule targeting mercury emissions. This means that the Clean Power Plan could nearly double the amount of coal-fired capacity being retired by 2020.

Retiring coal-fired generators and using more natural gas-fired power and green energy comes at a cost, however, as new energy infrastructure must be built to accommodate the shift and gas prices rise as demand increases.

“The cost of electricity and natural gas will be impacted in large part due to an almost 135% increase in the wholesale price of natural gas (100% in real dollars), from $2.82/mmbtu in 2012 to approximately $6.60/mmbtu ($5.63) in 2020,” EVa reports. “These increases are due to baseline market and policy impacts between 2012 and 2020 as well as significantly increased pressure on gas prices resulting from recent EPA regulations on the power sector and the proposed [Clean Power Plan].”

U.S. industry would be hit the hardest, seeing their electricity and gas costs soar 64 percent by 2020 over 2012 costs. EVA notes that skyrocketing “operational costs in the industrial sector are of particular concern for energy intensive industries in the U.S. such as aluminum, steel and chemicals manufacturing, which require low energy prices to compete.”

“Industrial power consumers would be expected to pass energy cost increases on to their customers, affecting the costs of goods purchased by American consumers over and above increased monthly utility bills,” EVA reports.

“The EPA’s collection of regulations will force American families, businesses and manufacturers to shoulder the burden it stands to create,” said Chad Kolton, spokesman for the Partnership for a Better Energy Future — which opposes the EPA’s Clean Power Plan.

“Today’s report from EVA is consistent with what industry has been saying for months — the EPA’s regulatory agenda will do significant damage to the American economy,” Kolton said.

Environmental groups, however, have said the Clean Power Plan — and pretty much all major EPA rules in the last six years — are necessary to protecting public health and the environment. Activists have spent a large amount of energy, in particular, protecting the Clean Power Plan which they see as the centerpiece of President Obama’s climate agenda.

The Natural Resources Defense Council recently published a report saying the Clean Power Plan will actually save Americans money while fighting global warming. NRDC argues, in contrast to EVA, that EPA’s plan overestimates the compliance costs of cutting carbon dioxide emissions.

“It’s clear that EPA has ample room to significantly strengthen the Clean Power Plan, making deeper cuts to dangerous carbon pollution from power plants at a reasonable cost,” said Starla Yeh, the report’s co-author and NRDC policy analyst.

“It can do so relying more on energy efficiency and clean energy—such as wind and solar energy—which can help slash America’s biggest source of heat-trapping pollution.,” Yeh said.

NRDC’s report argues that EPA overestimated the cost of increasing energy efficiency in the power sector by double what current projections are and overestimated the cost of green energy use by 50 percent.

Taking these factors into account, NRDC argues the Clean Power Plan will save Americans between $6.4 billion and $9.4 billion from energy efficiency by 2030 — well above EPA projected savings of up to $8.8 billion by that year.

“In 2030, energy efficiency savings could total 140 terawatt-hours more than what EPA projected,”NRDC reports. “Renewable generation could be 171 terawatt-hours higher than EPA’s projections.  Collectively, that’s equivalent to the electricity used by 29 million homes in one year—roughly the population of the New York and Chicago metropolitan areas together.”

This article was originally published by the Daily Caller News Foundation.

CA Budget Worse Despite $2 Billion New Revenue

California’s budget picture is sort of like that old Sandy Dennis high-school movie, “Up the Down Staircase.”

Going up: Legislative Analyst Mac Taylor just reported tax receipts jumped $2 billion over projections in the fiscal 2014-15 budget the Legislature passed, and Gov. Jerry Brown signed, last June. And the state’s credit rating was bumped up to A+ by Standard & Poor’s after voters on Nov. 4 passed Proposition 2, which strengthened the state’s rainy-day fund. The last time the bond rating was increased to A+ was in 2006.

Going down: Despite the added revenue, the state has reached a limit on what it can spend, according to a new study by insurance-asset manager Conning and Company, “Municipal Credit Research: State of the States.”

Moreover, for October Conning ranked California 36th among the states on its percentage of Expenditure Burden, defined as a percentage of the burden on general fund revenues for debt, future pensions and Medicaid expenditures. That’s four ranks lower than for April.

And as CalWatchdog.com calculated, California also has the largest Expenditure Burden in terms of absolute dollars, as shown in the following table. (Expenditure Burden is the far-right column.)

States with Highest Expenditure Burden (Fourth Quarter 2014)

 

State Expenditure Burden, percent of general fund Total General Fund Budget 2014-15  (in $billion) Expenditure Burden in Absolute Dollars (in $billion)
Nevada 43.2% $6.6 $2.851
Ohio 36.4% $30.677 $11.17
Illinois 30.3% $65.9 $19.97
California 25.4% $107.987 $27.43
Kentucky 24.7% $5.776 $1.43

Pension burdens

Gov. Brown’s June budget report correctly projected the state’s “Wall of Debt” will be cut from $34.7 to $13.8 billion by the end of fiscal 2014-15 next June 30.  But this picture of the debt omits future unmet pension burdens and Medicaid spending.

Just before the election, Controller John Chiang – on Nov. 4 himself elected as the new state treasurer – released figures on pension debt that confirmed a crisis long raised by pension critics. He warned:

“The unfunded actuarial accrued liability of the state’s pension systems — or the present value of benefits earned to date that are not covered by current plan assets — shows it has steadily risen from $6.33 billion in 2003 to $198.16 billion in 2013.”

That warning was confirmed by Paul Mansour, Conning’s head of muni research. He told Bloomberg, “California is still being held back by relatively high debt and pension levels…. We are more cautious on them than the [bond] rating agencies.”

Bloomberg also reported:

“California has $87 billion of bonds paid from the general fund, more than twice as much as a decade ago, according to data from the state. Voters also approved $7.5 billion for water infrastructure bonds this month [Propositon 2]. Its $2,465 of debt per resident is the third-highest burden among the 10 most-populous U.S. states, according to a report issued last month by Treasurer Bill Lockyer. New York ranks first, with $3,204 per person. The median among all states is $1,054.”

Forecast

There’s another reason why the new $2 billion in revenue the LAO forecast doesn’t much help long-term pension and medical-expenditure burdens. Proposition 98, passed in 1988, mandated about 40 percent of any revenue – including new revenue – must go to public schools.

As the LAO reported:

A $4 billion reserve would mark significant progress for the state, but maintaining such a reserve in 2015-16 would mean little or no new spending commitments outside of Proposition 98, the funding formula for schools and community colleges.”

So of that extra $2 billion, just $1.2 billion of it can be used for other spending, debt reduction or reserves — about 1 percent of an $108 billion general-fund budget.

Moreover, according to the LAO, despite the new revenue, the general-fund’s balance actually has declined due to adjustments, including “a $358 million downward adjustment relating to an allocation of state sales and use tax (SUT) to local governments to correct for past accounting issues. All told, these adjustments result in an entering fund balance of $2.2 billion, or $243 million lower than the budget’s assumptions.”

Bottom line: California’s budget problems are far from over. Every good-news story going up the stairs seems to be met by a bad-news story going down.

This article was originally posted at CalWatchdog.com

Biggest solar farm eclipsed

 

 

Solar_eclipse_1999_4_NR wikimediaSolar was supposed to be the key “renewable energy” powering California away from dirty old fossil fuels and into the Radiant Future. A 2011 law Gov. Jerry Brown signed mandated 33 percent renewable energy by 2020, now just a little over five years way. He actually said when signing the law, “I didn’t get my name, Gov. Moonbeam, for nothing. I earned it!”

It’s not turning out that way.

The latest:

“LOS ANGELES (AP) — The largest solar power plant of its type in the world – once promoted as a turning point in green energy – isn’t producing as much energy as planned.

One of the reasons is as basic as it gets: The sun isn’t shining as much as expected.

Sprawling across roughly 5 square miles of federal desert near the California-Nevada border, the Ivanpah Solar Electric Generating System opened in February, with operators saying it would produce enough electricity to power a city of 140,000 homes.

So far, however, the plant is producing about half of its expected annual output for 2014, according to calculations by the California Energy Commission.

It had been projected to produce its full capacity for 8 hours a day, on average.

The commission cited reasons for the low generation: “Factors such as clouds, jet contrails and weather have had a greater impact on the plant than the owners anticipated.”

That reminded me how the Soviet Union, during its 74 years of existence, every year suffered crop failures for which it blamed “bad weather.” Yet its farms in pre-socialist times, especially the rich earth of Ukraine, had been “the breadbasket of Europe.”

As Wayne Lusvardi has reported on our site, the failure of renewables to generate up to expectations has forced the state to rely on out-of-state fossil fuel power (natural gas and coal) and Warren Buffett’s hydropower.

Shocking costs

All of that, plus a dysfunctional distribution left over from the 2000 Electricity Crisis, means shockingly record high costs for ratepayers. The San Diego Reader reported:

California residential electricity rates are the highest in the nation — by far. A major reason is that the California Public Utilities Commission, the so-called regulator, schmoozes Wall Street, promising to keep the profits of the state’s publicly held utilities — Sempra Energy, Pacific Gas & Electric, and Southern California Edison — higher than utility profits elsewhere. Those profits come out of ratepayers’ pockets.

So Californians have the worst of both capitalism and socialism: crony capitalist (not free market) price structures and socialist generation mandates.

This post was originally published on CalWatchdog.com