Left and Lefter in California

california-flagThe California Democratic Party’s refusal to endorse the re-election of Senator Dianne Feinstein represents a breaking point both for the state’s progressives and, arguably, the future of the party nationwide. Feinstein symbolizes, if anyone does, the old Democratic establishment that, while far from conservative, nevertheless appealed to many mainstream businesses and affluent suburban voters. The rejection of Feinstein reveals the eclipse of the moderate, mainstream Democratic Party, and the rise of Green and identity-oriented politics, appealing to the coastal gentry. It offers little to traditional middle-class Democrats and even less to those further afield, in places like the industrial Midwest or the South. In these parts of the country, bread-and-butter issues that concern families remain more persuasive than gestural politics.

To its many admirers back east, California has emerged as the role model for a brave new Democratic future. The high-tech, culturally progressive Golden State seems to be an ideal incubator of whatever politics will follow the Trump era.

Certainly, California is an ideal place to observe this shift, as radicalism faces no restraints here. The Republican Party has little to no influence in politics and culture and not much even among business leaders. For the Democrats, this vacuum allows for a kind of internecine struggle resembling that of the Bolsheviks after the death of Lenin. And just as happened then, a new Stalinism of sorts seems to be emerging—in this case, to the consternation not only of conservatives but also of traditional liberals and moderates of the Feinstein stamp.

Yet as California Democrats exult in what they see as a glowing future, they are turning away from the models that once drove their party’s (and the state’s) success — a commitment to growth, upward mobility, and dispersed property ownership. California’s current prosperity is largely due to the legacy of Governor Pat Brown, who, a half-century ago, built arguably the world’s best transportation, water, and power systems, and created an incubator for middle-class prosperity. Ironically, the politician most responsible for undermining this achievement has been Pat’s son, Governor Jerry Brown. Long skeptical of his father’s growth-oriented, pro-suburban policies, Brown the Younger put strong constraints on growth, especially when these efforts concerned the fight against global warming — a quasi-religious crusade. Battling climate change has awakened Brown’s inner authoritarian; he has lauded the “coercive power of the state” and embraced “brainwashing” on climate issues.

Brown’s stridency on climate, however, does not extend to all leftist issues. Like Feinstein, Brown has some appreciation of the importance of infrastructure, such as the need to increase water supplies, and he exercises at least a modicum of caution on fiscal matters like the state’s gargantuan pension debt. He is not a strict identitarian, having vetoed an attempt to enact Title IX standards of evidence for campus sexual-assault cases, a measure embraced by the state’s vocal feminist leaders.

As Brown prepares to depart, and Feinstein struggles to retain office, a new dominant coalition — led by tech oligarchs, identity politicians, and Greens — is rising to usurp control of the party. This new coalition of the privileged and aggrieved marks a departure both from Pat Brown’s social democracy and his son’s more elitist but still measured politics.

State senator Kevin de León, the emergent leader of this new configuration and cat’s paw of billionaire Tom Steyer, the San Francisco hedge-fund billionaire epitomizes the new approach. Having made much of his fortune in oil sands and coal, Steyer is now the Democratic Party’s prime bankroller, and his largesse extends to the drive to impeach President Trump. He has made common cause with hard-Left politicians like de León, and even embraced unionism—as long as labor follows his extreme position on climate change.

Steyer and other oligarchs are working to eliminate the last vestiges of the old Democratic Party. Climate activists have been targeting, with some success, the so-called Mod Squad — centrist Democrat legislators from the state’s less-prosperous interior and working-class suburbs. This shrinking group, occasionally financed by energy, homebuilding, and other pillars of the old economy, sometimes holds the balance of power in Sacramento, and has managed to slow some of the most draconian climate measures.

De León’s enthusiastic embrace of climate-change dogma may seem odd for a politician whose impoverished district suffers from Los Angeles’s continued de-industrialization, hastened by strict environmental regulation and high energy costs. Instead of backing policies that would create more high-wage jobs, de León’s priorities are largely redistributive. This jibes with his support among public employees and from the militant California Nurses Association. He endorsed the union-backed single-payer health-care plan, a measure that assembly speaker Anthony Rendon tabled as impossibly expensive (it would more than double the state budget). Immigration is another key de León issue. He is a fervent supporter of illegal immigrants, in a state that houses one in fourof the nation’s total, bragging about his own relatives’ use of false IDs.

Lieutenant Governor Gavin Newsom, the former San Francisco mayor and frontrunner in the governor’s race, also embraces these policies. After briefly trying to appeal to mainstream business, Newsom has fallen into line with Bay Area-dominated progressives and the big public unions on virtually every issue, including single-payer. His likely election suggests a continuation of California’s current drift, but without Brown’s occasional restraint and intelligence.

The Golden State’s progressive tilt would not be possible without demographic change. The state’s majority-minority makeup has made the capture of middle-class and moderate voters less important. As middle-class families leave California, the electorate is increasingly dominated by racial minorities — with whites, 70 percent of the population in 1970, now less numerous than Hispanics and destined to be roughly one-third of the population by 2030. California’s demography is more and more dominated by the poor and near-poor (roughly one-third of the population), the young and unattached, and a residual population of older whites, many luxuriating on generous state pensions or inflated property values.

What makes all this work is the growing power of the tech oligarchs and their more glamorous cousins in the Hollywood glitterati. The tech boom of the last decade has obscured the decline of California’s basic industries, such as energy and manufacturing. California’s above-average job performance since 2010 is almost entirely a combination of high-income employment growth in the Bay Area and the swelling ranks of low-wage service workers who serve them. The oligarchs, including tech investor Sam Altman, LinkedIn co-founder Reid Hoffman, and philanthropist Laurene Powell Jobs, widow of the late Apple founder, have lined up behind de León. Tech will likely bankroll the pliable and well-heeled Newsom, who already gets cash from Airbnb, Twitter, and Salesforce.com.

This marriage of the poor and the new rich appears to be the dominant theme emerging in California. The oligarchs, as Greg Ferenstein has reported, don’t even pretend to believe in upward mobility for the masses. Instead, they favor policies — such as forced densification — that will house their largely young, childless workers, including the nation’s largest population of H1-B visa-holders. Measures such as State Senator Mark Wiener’s SB 827 would largely strip cities of their ability to control development anywhere near transit stops. Civil rights groups, mainstream environmental organizations, neighborhood associations, and cities themselves have come out in opposition, and even Los Angeles mayor Eric Garcetti, a dedicated densifier, fears a backlash in the city’s remaining single-family neighborhoods. Yet the oligarchs and their YIMBY (“yes in my backyard”) allies, whom they generously fund, have backed the bill.

At its core, the oligarchs’ vision for California represents a kind of high-tech feudalism. Tech companies are starting to dominate sectors like electric and autonomous cars, even seeking monopolies in dense urban areas. They support limiting ownership and consumer choice, even as the bulk of automobiles remain gas-powered. In the longer term, the oligarchs have little interest in creating blue-collar jobs and would prefer to replace employment with algorithms. Deprived of work and unable to pay for housing, the working class and an ever-shrinking middle class would be bought off with income-maintenance payments — twenty-first-century alms for the poor.

Opponents of this new gentry agenda should appeal to the remnants of the middle class and the unsubsidized portions of the working class. Feinstein could win reelection by rallying such voters; her name recognition and ample campaign war chest could help her fend off de León this year. But even if she wins, it will likely be a last hurrah for the old Democrats. Tech oligarchs and activist CEOs have committed themselves to extreme environmentalism, identity politics, and open-borders immigration policy. California’s bevy of clueless celebrities, now celebrated by Time as “suddenly serious” for following the identitarian party line, have also climbed aboard.  As anyone knows who has suffered through awards shows or listened to interviews with stars, the entertainment industry—much like tech — has become homogeneous in its views.

The key issues for the glitterati are not income inequality, upward mobility, or the preservation of middle-class neighborhoods but the feverish pastimes of the already rich: gender and racial issues, climate change, guns, and anything that offends the governesses and schoolmarms of intersectionality. To the ranks of these over-exposed but influential voices, you can also add California’s media and most of its intelligentsia, who seem to get their talking points from progressive sources and work assiduously to limit the influence of moderate (much less conservative) views. With Silicon Valley increasingly able to control content and ever more willing to curb debate, the policy agenda of the state’s new elite may well become reality — a nightmarish one for millions of ordinary Californians.

California’s middle class is in decline, despite the state’s immense wealth

Middle classCalifornia’s lush coastline, balmy climate and post World War II economic promise made it an easy sell as America’s middle class paradise in the 1950s.

“The California Dream of two or three generations ago was, `I’m going to move from a place that’s cold and flat to a place where there’s lots of opportunity,’” said Joel Kotkin, a presidential fellow in Urban Futures at  Chapman University in Orange. “`I’ll get a job in an aerospace factory, in an oil company. I’ll buy a house with a pool. I’ll die and go to heaven. And I’ll do it all in good weather.’”

Today the weather remains. But access to the California dream is being choked off.

Stratospheric housing costs, the exit of key companies and the failure to replace the jobs that left with them have downsized the state’s middle class.

Since 1970, California’s share of the middle class fell from 60 percent to just over half the population. That trend almost mirrors patterns across the country. The number of middle-income Americans slipped from 61 percent in 1971 to 50 percent in 2015, according to the Pew Research Center.

In California, some have risen to the upper class and others have slid down. And some have left the state.

“The key group leaving is basically in their 30s, 40s and 50s tending to be making about $100,000 to $200,000 a year,” Kotkin said, citing Internal Revenue Service data.

Between 2007 and 2016, California lost 1 million more domestic residents than have come into the state, according to the IRS. Many are moving to Texas, Arizona, Nevada and Oregon.

“California opened their doors and basically kicked us out,” Kelly Rudiger said. “We couldn’t afford to live there with almost half of our income paying for our housing, our property taxes, our utilities so my husband and I both being full-time employees, we could keep up but we could never get ahead.”

Rudiger and her husband, Tony, moved their two children to Texas last year.

“We sold an 1,800 square-foot home in San Diego and now live in a 4,000 square-foot home and are still paying less on our mortgage,” Rudiger said.

She said her middle class income goes a lot further in Texas than in California.

The Public Policy Institute of California classifies middle income earners  as those making between $49,716 and $174,006 based on 2017 calculations.

Kotkin said California families used to pay three times their income for a home in 1970. Sometime over the next decade, it changed and now that figure has jumped to as high as 10 times.

“Who has got that kind of money?” asked Kotkin. “Where I live, all the older people keep complaining, `My kids keep visiting me just waiting for me to drop dead so they can have the house.’ ”

Peter Brownell, research director at San Diego’s Center on Policy Initiatives, said the inability of California’s middle class to afford homes, exposes a vulnerability in the state’s economy.

“Even though as a whole, our economy is successful in terms of what it’s producing and the amount of wealth it’s producing, we’re not seeing that translate into incomes that will support families here in San Diego and across California,” he said.

And he believes that is not economically sustainable.

“When people have stable, middle-class incomes, it means they have money in their pocket to consume all kinds of goods, whether that’s purchasing housing, buying new clothes, buying cars, buying refrigerators,” Brownell said. “Our economy is driven by consumer spending.”

Kotkin said California’s middle class started to dwindle when the Cold War ended in the 1990s, devastating the state’s aerospace industry. California has lost 280,000 aerospace jobs over the last 30 years, according to the book “Blue Sky Metropolis: The Aerospace Century in Southern California.”

Kotkin said real estate and construction jobs also went away. More recently, jobs in the business sector have taken a hit.

“Toyota, Occidental Petroleum, Nissan, companies that employed a large number of middle class people, are going,” Kotkin said. “These were companies that had a lot of good paying jobs — $80,000, $100,000, $120,000 —  enough to support a middle class lifestyle.”

And he said many companies that remain are not expanding because of California’s land, energy, housing and regulatory costs.

The Center on Policy Initiative’s Brownell said the companies that are expanding are contributing to the state’s income inequality.

“Here in California, we’ve had great success in creating highly skilled, high paying jobs in the tech industry in Silicon Valley and in San Diego the biotech industry,” Brownell said. “A lot of those really successful and well-paying industries have built into them a structural demand for low-wage work as well, the nannies, the restaurant workers and the drycleaners.”

Brownell said it is important to note that even people earning more than workers in low-wage jobs are struggling to survive.

Sharon Mintz runs a floral arrangement business in San Diego. She said she offers free meals to her employees and has increased their pay from $15 to $20 an hour over the past few years but still cannot hold on to them.

“It works and then the rent goes up,” Mintz said. “And then we offer a little bit more and then groceries go up. It feels like we’re always trying to catch up.”

Brownell said a middle class revival lies in the hands of government, strong unions and companies.

He said policymakers need to encourage the creation of quality jobs in the state. Unions set standards for wage and working conditions. And Brownell said companies with healthy profits should pay their employees more.

“The more prosperous a company becomes, the more of an obligation it has to share its success across the company,” Brownell said.

Without any fixes, Kotkin said California is headed away from the enchantment of the 1950s toward a more primitive time.

“Today, we have a society which over time is becoming more and more feudal with the very rich, very successful — some of the richest people in the history of the world — at the very top, and then a diminishing middle class,” Kotkin said. “And what’s more frightening is you have young people, some of them with college educations working at Uber, working at Starbucks, essentially barely making it.”

The California Dream series is a statewide media collaboration of CALmatters, KPBS, KPCC, KQED and Capital Public Radio with support from the Corporation for Public Broadcasting and the James Irvine Foundation.

This article was originally published by CALmatters

Who’s Really to Blame for Orange County’s Housing Affordability Crisis?

house-constructionThis past week, three separate media outlets sought my comment on Orange County’s housing affordability crisis and high-cost of living. The inquiries came on the heels of a host of news stories chronicling sky-high rents, the dismantling of homeless encampments in Anaheim, and the adequacy of wages paid by the county’s largest employers.

These were the questions news folks wanted answered: What is business doing to get more homes built? What is business doing to eliminate poverty? What is business doing to end homelessness?

Let’s get real.

Do we face a growing housing affordability and cost-of-living crisis here in Orange County and throughout California? You bet. Hardworking residents are struggling to make ends meet, and housing costs stand at the center of their paycheck-to-paycheck existence. Orange County Business Council has been arguing this for years and objective data backs it up.

A recent USC Gasden Family Forecast shows the average rent for a two-bedroom apartment in Orange County at a whopping $1,813 a month. For the typical renter, that’s a number that swipes more than half of their monthly take-home pay.

But the problem isn’t a lack of quality jobs or even skimpy paychecks. The problem is a lot of workers in a strong economy chasing too few available homes or apartments. That drives up housing costs and takes more of their paycheck.

Indeed, OCBC’s own Housing Scorecard reports that Orange County needs 65,000 more homes today to meet the housing needs of the people who already live and work here. But get this: Orange County has added only one new home for every 5.26 residents since 2010. And it’s not just Orange County that’s falling down on the job. Anaheim reportedly approved only 8 percent of its low-income housing needs, for example.

The crisis statewide is even more pronounced. A recent report found that more than 500 counties and cities failed to meet their mandated housing goals. So it’s no wonder that California has a housing shortage exceeding 3.5 million homes. That’s what you get when your population has increased every year since 1950, but you’ve failed every year since 1989 to build enough homes to meet the need.

So who’s to blame?

Homebuilders — in an industry that has fueled California’s economy for more than half a century — are as eager as ever to build the American Dream in the Golden State. But here’s the problem: lawmakers, regulators, local governments and anti-development activists — who already own their own home — won’t let them.

Overly restrictive land-use regulations, abuses of California’s environmental laws, local ballot box initiatives that neuter good planning, and city councils that won’t say “yes” are fueling the bottleneck in new-home delivery. Sure, some recent, minor actions were taken by the state legislature to streamline approvals, but ultimately local political leadership controls land use and housing decisions.

The systemic flaws that eat away at the paychecks of Orange County residents and threaten California’s economic prosperity are not caused by business but by the folks you elect to serve you in public office. The role of business is to offer goods and services, and thus create jobs, not to act as a substitute for local government or its elected officials who benefit from the significant tax revenue generated by business.

So here are the questions that need to be asked: What are your elected leaders doing to see that a good supply of affordable housing is built? What are your elected leaders doing to assure the end of homelessness in your community? What are your elected leaders doing to help grow good middle class jobs?

If you don’t like the answers, vote them out.

resident and CEO of the Orange County Business Council

Originally published in the Orange County Register.

The Underrecognized, Undervalued, Underpaid, Unfunded Pension Liabilities

SACRAMENTO, CA - JULY 21: A sign stands in front of California Public Employees' Retirement System building July 21, 2009 in Sacramento, California. CalPERS, the state's public employees retirement fund, reported a loss of 23.4%, its largest annual loss. (Photo by Max Whittaker/Getty Images)

“It’s the economy, stupid.”
–  Campaign slogan, Clinton campaign, 1992

To paraphrase America’s 42nd president, when it comes to public sector pensions – their financial health and the policies that govern them – it’s the unfunded liability, stupid.

The misunderstood, obfuscated, unaccountable, underrecognized, undervalued, underpaid, unfunded pension liabilities.

According to CalPERS own data, California’s cities that are part of the CalPERS system will make “normal” contributions this year totaling $1.3 billion. Their “unfunded” contributions will be 41% greater, $1.8 billion. As for counties that participate in CalPERS, this year their “normal” contributions will total $586 million, and their “unfunded” contributions will be 36% greater at $607 million.

That’s nothing, however. Again using CalPERS own estimates, in just six years the unfunded contribution for cities will more than double, from $1.8 billion today, to $3.9 billion in 2024. The unfunded contribution for counties will nearly triple, from $607 million today to $1.5 billion in 2024 (download spreadsheet summary for all CalPERS cities and counties).

Put another way, by 2024, “normal contribution” payments by cities and counties to CalPERS are estimated to total $2.8 billion, and the “unfunded contribution” payments are estimated to total almost exactly twice as much, $5.5 billion.

So what?

For starters, every pension reform that has ever made it through the state legislature, including the Public Employee Pension Reform Act of 2013(PEPRA), does NOT require public employees to share in the cost to pay the unfunded liability. The implications are profound. As public agency press releases crow over the phasing in of a “50% employee share” of the costs of pensions, not mentioned is the fact that this 50% only applies to 1/3 of what’s being paid. Public employees are only required to share, via payroll withholding, in the “normal cost” of the pension.

Now if the “normal cost” were ever estimated at anywhere near the actual cost to fund a pension, this wouldn’t matter. But CalPERS, according to their own most recent financial report, is only 68% funded. That is, they have investments totaling $326 billion, and liabilities totaling $477 billion. This gap, $151 billion, is how much more CalPERS needs to have invested in order for their pension system to be fully funded.

A pension system’s “liability” refers to the present value of every future pension payment that every current participant – active or retired – has earned so far. In a 100% funded system, if every active employee retired tomorrowand no more payments ever went into the system, if the invested assets were equal to that liability, those assets plus the estimated future earnings on those invested assets would be enough to pay 100% of the estimated pension payments in the future, until every individual beneficiary died.

A pension system’s “normal payment” refers to the amount of money that has to be paid into a fully funded system each year to fund the present value of additional pension benefits earned by active employees in that year. When the normal payment isn’t enough, the unfunded liability grows.

And wow, has it grown.

CalPERS is $151 billion in the hole. All of California’s state and local pension systems combined, CalPERS, CalSTRS, and the many city and county independent systems, are estimated to be $326 billion in the hole. And that’s extrapolated from estimates recognized by the pension funds themselves. Scenarios that employ more conservative earnings assumptions calculate total unfunded liabilities that are easily double that amount.

With respect to CalPERS, how did this unfunded liability get so big?

An earlier CPC analysis released earlier this year attempts to answer this. Theories include the following: (1) Letting the agencies decide which type of asset smoothing they’d like to employ, (2) permitting the agencies to make minimal payments on the unfunded liability so the liability would actually increase despite the payments, (3) making overly optimistic actuarial assumptions, (4) not taking action sooner so the unfunded payment wouldn’t end up being more than twice as much as the normal payment.

One final alarming point.

CalPERS recently announced that for any future increases to the unfunded liability, the unfunded payment will have to be calculated based on a 20 year, straight-line amortization. This is a positive development, since the more aggressively participants pay down the unfunded liability, the less likely it is that these pension systems will experience a financial collapse if there is a sustained downturn in investment performance. But it begs the question – why, if only increases to the unfunded liability have to be paid down more aggressively, is the unfunded payment nonetheless predicted to double within the next six years?

CalPERS information officer Tara Gallegos, when presented with this question, offered the following answers:

(1) The discount rate (equal to the projected rate-of-return on invested assets) is being lowered from 7.5% to 7.0% per year. But this lowering is being phased in over five years, so it will not impact the 2018 unfunded contribution. Whenever the return-on-investment assumption is lowered, the amount of the unfunded liability goes up. By 2024, the full impact of the lowered discount rate will have been applied, significantly increasing the required unfunded contribution.

(2) Investment returns were lower than the projected rate of return for the years ending 6/30/2015 (2.4%) and 6/30/2016 (0.6%). Lower than projected actual returns also increases the unfunded liability, and hence the amount of the unfunded payment, but this too is being phased-in over five years. Therefore it will not impact the unfunded payment in 2018, but will be fully impacting the unfunded payment by 2024.

(3) The unfunded payment automatically increases by 3% per year to reflect the payroll growth assumption of 3% per year. This alone accounts, over six years, for 20% of the increase to the unfunded payment. The reason for this is because most current unfunded payments are calculated by cities and counties using the so-called “percent of payroll” method, where payments are structured to increase each year. CalPERS is going to require new unfunded payments to not only be on a 20 year payback schedule, but to use a “level payment” structure which prevents negative amortization in the early years of the term. Unfortunately, up to now, cities and counties were permitted to backload their payments on the unfunded liability, and hence each year have built in increases to their unfunded payments.

The real reason the unfunded liability has gotten so big is because nobody wanted to make conservative estimates. Everybody wanted the normal payments to be as small as possible. The public sector unions wanted to minimize how much their members would have to contribute via withholding. CalPERS and the politicians – both heavily influenced by the public sector unions – wanted to sell generous new pension enhancements to voters, and to do that they needed to make the costs appear minimal.

As a result, taxpayers are now paying 100% of an “unfunded contribution” that is already a bigger payment than the normal contribution, and within a few years is destined, best case, to be twice as much as the normal contribution.

Camouflaged by its conceptual intricacy, the cleverly obfuscated, deliberately underrecognized, creatively undervalued, chronically underpaid, belatedly rising unfunded pension liabilities payments are poised to gobble up every extra dime of California’s tax revenue. And that’s not all…

Sitting on the blistering thin skin of a debt bubble, a housing bubble, and a stock market bubble, amid rising global economic uncertainty, just one bursting jiggle will cause pension fund assets to plummet as unfunded liabilities soar.

And when that happens, cities and counties have to pay these new unfunded balances down on honest, 20 year straight-line terms. They’ll be selling the parks and libraries, starving the seniors, releasing the criminals, firing cops and firefighters, and enacting emergency, confiscatory new taxes.

Whatever it takes to feed additional billions into the maw of the pension systems.

Budget surplus? Dream on.

*   *   *

Edward Ring co-founded the California Policy Center in 2010 and served as its president through 2016. He is a prolific writer on the topics of political reform and sustainable economic development.


How to Restore Financial Sustainability to Public Pensions, February 14, 2018

How to Assess Impact of a Market Correction on Pension Payments, February 7, 2018

California Government Pension Contributions Required to Double by 2024 – Best Case, January 31, 2018

Did CalPERS Use Accounting “Gimmicks” to Enable Financially Unsustainable Pensions?, January 24, 2018

How Much More Will Cities and Counties Pay CalPERS?, January 10, 2018

If You Think the Bull Market Rescued Pensions, Think Again, December 7, 2017

Did CalPERS Fail to Disclose Costs of Historic Bump in Pension Benefits?, October 26, 2017

Coping With the Pension Albatross, October 13, 2017

How Fraudulently Low “Normal Contributions” Wreak Havoc on Civic Finances, September 29, 2017

Pension Reform – The San Jose Model, September 6, 2017

Pension Reform – The San Diego Model, August 23, 2017

Trump Sues California Over Three Laws Designed To Frustrate Immigration Enforcement

Jeff SessionsThe Trump administration sued California in a federal district court late Tuesday over its “sanctuary city” designation, arguing federal immigration law preempts three of the state’s laws.

The Department of Justice noted in a statement one of the three laws prohibits private employees from “voluntarily cooperating with immigration officials” and requires employers to give employees advance notice of a potential worksite enforcement inspection.

California Attorney General Xavier Becerra, named a defendant in the suit, said after the law became effective Jan. 1 that he would “prosecute those who violate [Assembly Bill 450] by voluntarily cooperating with Immigration and Custom Enforcement (ICE) efforts.” He later told employers that under the new law they can’t voluntarily grant ICE agents “physical access to nonpublic areas of the worksite or to employee records” without triggering legal penalties.

The second California law challenged bars state and local law enforcement officials from informing federal immigration agents of the release date of criminal aliens and prohibits state employees from transferring criminal aliens to federal custody, except in narrow circumstances. This one, Senate Bill 54, also became effective on Jan. 1.

The third bill, Assembly Bill 103 adopted June 27 of last year, authorized the California AG to inspect immigration detention facilities in the state to examine the “due process provided” immigration detainees, and “the circumstances around their apprehension and transfer to the facility.” This law also requires detention facilities to provide state officials access to confidential federal records.

The DOJ argues in its complaint the three laws — AB 450, SB 54, and AB 103 — conflict with federal immigration law and are thus invalid under the Supremacy Clause. With the complaint, the DOJ filed a motion for a preliminary injunction, seeking to pause enforcement of the California statutes until the lawsuit is played out in court. …

Click here to read the full article from The Federalist

CA Democrats Reject Feinstein; Signal State’s Leftward March Will Continue

Dianne FeinsteinWhat a difference a few decades make: in 1990, Dianne Feinstein was apparently too far left for California voters, losing a gubernatorial race to Republican Pete Wilson. Nearly 30 years later, she’s not left enough — at least for the state Democratic Party, which has refused to endorse her for a fifth term in the U.S. Senate. She received only 37 percent of delegates’ votes at the late February annual party convention — far short of the 60 percent needed for an endorsement. Supporters of State Senator Kevin de León, who nearly won the endorsement, serenaded Feinstein with the chant “Your time is up! Your time is up!” at the end of her speech.

Feinstein is often characterized as a centrist Democrat, though she has been reliably left of center. According to the American Conservative Union’s most recent congressional rankings, she scored an 8, on a scale where 100 represents a perfect conservative voting record. Her lifetime rating is 9.15. On the other side, left-leaning Americans for Democratic Action gives Feinstein an 85 rating, on a similar 100 scale. She scored 75 in 2015, 90 in 2014, 100 in 2013 (when she made the list of ADA Senate “heroes”), and a 95 in 2012.

With such a reliably left-wing voting record, why did Feinstein lose the support of the California Democratic Party? Maybe it’s because the party — though not necessarily its voters — is listing so far to port that it’s falling into the deep end. De León’s popularity at the convention was driven by several factors. He’s taken a harder line against the Trump administration than Feinstein, and he’s promoted himself as a young leader with more energy to fight the battles that the party is picking in 2018. De León is a steamrolling union organizer, while Feinstein is a comfortable-in-her-wealth multimillionaire. Insiders believe that de León could be an insurgent candidate who would stir up Trump’s Washington more than Feinstein has.

Since the Golden State became the Cerulean State, public-employee pensions have become a fiscal time bomb, taxation continues to increase, businesses have fled a hostile commercial and regulatory environment, the middle class is finding refuge elsewhere, the poverty rate is the nation’s highest, and the state’s quality of life has been ranked the worst in the nation. The state’s homeless problem is a national embarrassment, its housing crisis goes unaddressed, and its public school system is failing students and parents.

If the state Democratic Party’s shunning of Feinstein is any indication of how voters will mark their state and local ballots this year and in coming elections, these problems will only grow worse. California could become a 2020s version of a 1980s Rust Belt state, where economies, prospects, and populations recede at alarming rates. If the Democratic Party’s leftward swing indeed resonates with voters, California is in more trouble than anyone has previously thought.

Kerry Jackson is the Pacific Research Institute’s fellow in California studies.

This article was originally published by City Journal online

Once again, California sees the unintended consequences of bad legislation

property taxLast July, we wrote a column regarding the foolishness of Senate Bill 2, a new $75 tax on real estate recordings, ostensibly for the purpose of funding housing programs. We pointed out that imposing a tax on real estate transactions to pay for programs to make housing more affordable is like treating someone with a low blood count with leeches.

While the fundamental irrationality of SB2 is water under the bridge, a host of implementation problems have now arisen that need corrective action, and quickly.

For example, SB2’s language makes it difficult for California’s 58 County Recorders to determine if they should charge the additional $75 for tax liens and lien releases presented by government agencies.

These tax liens can originate from small local business activities like selling Avon, from failure to pay your annual income taxes, from a missed tax payment on your jet ski, for child-support collection and more. You don’t even need to own a house to have one of these liens recorded against you, and worse yet, you may not even know that the lien exists until it shows up on your credit report.

State agencies and the IRS have refused to pay the $75, arguing that these documents are exempt from the new tax. The attorney general agrees (see AG 18-101), but California’s Office of Legislative Counsel issued an opinion that contradicts the attorney general — making it even more confusing for taxpayers and county recorders.

At this point, most recorders interpret the statute as mandatory, because the legislative counsel has told them this was the original intent of the bill. Therefore, they are mailing back lien releases as unrecorded to state agencies and to the IRS for lack of the $75. For property owners, this is a real problem because their debt has been paid but their credit is not cleared because the lien hasn’t been released.

Some taxpayers are so eager to clear their credit that they are intercepting the lien releases at their county recorder’s office and offering to pay the $75, legal or not. The Department of Child Support Services intends to record all lien releases itself instead of giving them to the redeemed payer to record more quickly on their own, but it is still being held up. Some child-support payers might be offering to take the release to the recorder themselves and paying the $75 to have their credit cleared. As the situation continues, however, others might be discouraged from paying up their child support arrears or tax debts in the first place. The extra hurdle is not helping the government, the taxpayer, or the children.

It is also true that the state of California cannot tax the federal government. Although this has been settled law for hundreds of years, many county recorders are attempting to collect the tax from the IRS. And although this is legal doctrine, it makes common sense as well. Would there be any sense or justice if the states had the power to tax the federal government out of existence?

Because the language of SB2 is so confusing, and it relies on many assumptions that the county recorder has no ability to independently verify, payment of the tax on most documents relies on self-certification. Most people do not have law degrees, so many people are paying the tax when they are not legally required to pay it, and others are receiving exemptions when they are not entitled to them.

SB2 gives a long but non-exclusive list of “real estate instruments” to which the fee applies. This includes a “release” and a “mechanic’s lien,” but not just a “lien” nor a “tax lien,” and certainly not a “child support lien.” SB2 also uses the words “transaction,” “in connection with” and “relating to real property,” none of which are defined in statute. Is enforcing a government debt a “transaction”? Are IRS tax liens and releases “relating to real property”? Tax liens use specific real property to enforce a debt, but they are not like a mechanic’s lien where the contractor performed work on that specific property.

There are many other types of liens where intent could vary as to whether to charge the $75: liens for postponement of property taxes for senior citizens, government liens recorded in error, government liens released due to discretionary re-prioritizing, and, less sympathetically, liens for graffiti nuisance abatements or violations of various safety codes. It is unclear whether the legislature intended to extend the tax to these recordings, although they were aware that this was a potential issue and chose not to address it.

Clean-up legislation is needed promptly. SB2, as substantive legislation, was bad enough. Its implementation is almost worse.

Jon Coupal is the president of the Howard Jarvis Taxpayers Association and Kammi Foote is the clerk-recorder of Inyo County.

This article was originally published by the Orange County Register

California Wants to Ban the Internal Combustion Engine

Engine CarCalifornia’s relentless crusade against emissions effectively camouflages its voracious need for revenues.

AB32, the original landmark bill was signed into law in 2006 when California contributed one percent to the world’s greenhouse gases. While the cap and trade program has been a cost effective method of reducing CA’s greenhouse gas emissions, the program does next to nothing to reducing global emissions. A decade later, in 2016, the California Energy Commission said we still contributed a minuscule one percent to the world’s greenhouse gases, but it has successfully extracted more than $7 billion dollars of revenue from our citizens to fund a multitude of governmental pet projects.

California’s elected officials must be in La La Land when they state that California’s economy is thriving in large part because of its emphasis on enacting sweeping environmental legislation. California’s economy, like the rest of the nation, has been booming ever since the recession, but California is ranking up where the state is not proud of. The California go-it-alone crusade to reduce emissions regressively impacts consumers.  Today the California energy portfolio, the environment, and climate change are always discussed together. Here’s what’s really up – energy costs, poverty, homelessness, welfare and unfunded pension liabilities.

  • California taxes and cost of living are higher than most other states.
  • California’s energy costs are as much as 50 percent higher than the national average.
  • Nearly 20 percent of California’s 38 million residents live below the poverty line.
  • California has more than 33 percent of the nation’s welfare recipients.
  • California is home to 12 percent of the nation’s population, but startlingly 22 percent of the nation’s homeless population.
  • Roughly 1.5 million households pay more than 50 percent of their income toward rent.
  • Unfunded pension liabilities.

Now compounding these problems is a bill currently under consideration in the Legislature, Assembly Bill 1745, that would outlaw the sale and registration of new light-duty vehicles powered by internal combustion engines beginning in 2040. The unintended consequence for those existing internal combustion engines after 2040 would be that people would drive their internal combustion engines for 50 years, like they did in Cuba, and adversely affect air pollution, and not take advantage of technology improvements. The sheer scope of the proposed mandate is staggering. According to the state’s Department of Motor Vehicles, of the 35 million registered vehicles in CA there are over 26 million passenger vehicles registered in California. Of these, only about three percent are personal electric vehicles.  Limiting the types of new cars Californians could buy would disproportionately punish working families already struggling to make ends meet.

It appears that governments, worldwide, in pursuit of the current EV crusade, may be overlooking the fact that an essential ingredient that lithium-ion batteries are dependent on is cobalt which is already in limited supply worldwide to manufacture IPhones, IPads, and car batteries. Without the element’s energy density, batteries without cobalt tend to perform worse.  Currently about a quarter of global production of cobalt winds up in smartphones. In the expected event that cobalt supply does not meet the EV needs in the decades ahead, the impact on the local and international economies could be devastating. Environmentally, it’s also harder to recycle lithium-ion batteries with cobalt than lead-acid batteries used in gasoline powered vehicles.

Finally, AB1745 fails the cost-benefit test. California accounts for less than one percent of global greenhouse gas emissions, so even if every gasoline-powered car in our state were taken off the road tomorrow there would be zero impact on climate change.

Our elected leaders need to address the very real challenges facing California, rather than touting misguided new policies like AB 1745 that will only make our problems worse.

ounder of PTS Staffing Solutions, a technical staffing agency headquartered in Irvine

This article was originally published by Fox and Hounds Daily

After $1 Billion in Govt. Subsidies ‘Green’ Tesla Fined $139K for Air Pollution

teslaTesla’s factory was fined $139,000 for emitting the same type of toxic NOx into the atmosphere that their electric-vehicles are supposed to eliminate.

Tesla has been fined $139,500 by Bay Area Air Quality Management District (BAAQMD) for emitting nitrogen oxides (NOx) air pollution inside its factory. Although Tesla told the San Francisco Chronicle that the sanction was due to a malfunctioning furnace, the company was fined $1,000 for the same issue in 2013.

Nitrogen oxides known as NOx, are poisonous gases often emitted by fossil-fuel burning cars, trucks, tractors and boats or industrial processes like power generation. NOx human health impacts include breathing problems, headaches, chronically reduced lung function, eye irritation, loss of appetite, and corroded teeth.

To supposedly reduce nitrogen oxides (NOx) emissions, California-based Tesla receives government subsidies of $2,500 Zero Emission Vehicle (ZEV) tax credit for every all-electric Model S, Model X and Model 3 purchased in the state. Combined with federal ZEV subsidies of $7,500 per vehicle, Tesla has received about $1 billion in ZEV credits.

Tesla has tried to blame the issue on the NUMMI, a joint venture between General Motors and Toyota Motor Corp. The joint-venture sold their Fremont plant and equipment to Tesla for $42 million in 2010.

A Tesla spokesman emailed reporters claiming the company inherited the problems from GM: “The majority of these violations were resolved by Tesla four years ago when we proactively brought the issue to the attention of the District.” But despite a complete rehabilitation, Tesla was fined $1,000 for the same NOx issue in 2013.

But the BAAQMD release claims the $139,500 fine and settlement covers a series of violations from 2013 through 2016. Tesla also agreed to install about $93,000 worth of solar panels at the Silicon Valley Boys and Girls Club in San Jose.

“Although Tesla develops electric vehicles and related technologies that California needs to address global climate change, the company still must comply with all their permit conditions,” said Jack Broadbent, executive officer of the Air District. “Air quality improves when industries abide by their emissions limits and the public does their part to reduce reliance on fossil fuels.”

Tesla has long been under fire by conservatives for mining government subsidies for the rich that can afford the $90,000 price tag for a new Model S sedan or Model X SUV.

But progressives are increasingly complaining that its vehicle’s so-called embodied carbon, which is a measure of the energy needed to build its vehicles, is too high.

Salon argued last year that Tesla’s still has significant carbon emissions with its “extraction and processing of raw materials, and shipping parts and vehicles across oceans in filthy bunker-fuel burning cargo ships. Every time you roll off the dealer’s lot in a new set of wheels — electrified or not — your personal carbon footprint grows immensely.”

It is estimated that the manufacture of a U.S. standard midsize sedan generates 17 metric tons of carbon dioxide, about the equivalent of 3-years of electricity consumed per household. But the U.S. Union of Concerned Scientists estimates that it takes about 15 percent more embodied carbon to produce an electric vehicle, due to the materials and fabrication processes used to make very large battery packs.

This article was originally published by Breitbart.com/California

A Post-Janus Agenda for California’s Public Sector Unions

School education“If you do not prevail in this case, the unions will have less political influence; yes or no?” Kennedy asked. “Yes, they will have less political influence,” Frederick answered.
–  an excerpt from the Janus vs. AFSCME trial, quoted in the Washington Post, February 26, 2018

This past week the U.S. Supreme Court heard arguments in the Janus vs. AFSCME case. Mark Janus, a public employee in Illinois, is challenging the right of unions to charge “fair share” fees, because he disagrees with the political agenda which he claims his fees help pay for.

What if government unions were accountable to their members? What if the politics of these unions mirrored the politics of the members? Would Mark Janus still want out?

It’s already possible for public employees to “opt-out” of paying that portion of their dues that fund explicitly political activity, although in practice the unions typically make that opt-out process very difficult. But Mark Janus is arguing that all dues paid to public sector unions are political, because the consequences of collective bargaining in the public sector impact taxes, government debt, budgets and spending priorities. He is arguing that the agenda of public sector unions, including collective bargaining, is inherently political.

In reality, saying all public sector union activity is inherently political is itself an understatement. In California, public sector unions spend about $300 million per year on explicitly political activity – funding political campaigns, political action committees, and lobbyists. But they spend at least another $700 million every year not just on collective bargaining – which for government workers is inherently political – but on education campaigns that attempt to influence voters on countless political topics.

Equally important is the influence California’s public sector unions wield that doesn’t derive its power from how much money they can spend, but from the fact that elected officials come and go, but the union hierarchy is permanent. Public employees who want to advance in their careers do not cross these unions.

Government unions are so powerful that only a very aggressive outcome in the Janus ruling will suffice to significantly undermine their power in California. The court must rule that union membership must be renewed annually via a transparent opt-in process. Only then will these unions become accountable to their members.

If there is an aggressive ruling in the Janus case that truly forces public sector unions to become accountable, imagine how it may affect the political agenda of these unions. One may hope it would ignite a civil war within these unions. Even in California, for example, about 40% of public school teachers identify as conservatives. Among public safety employees, a majority identify as conservative. Yet these unions are the power behind a state legislature ran by the most liberal politicians in the history of the United States.

Just for a moment, consider what these unions could do, if their leadership was committed to making California a land of opportunity again:

(if they actually cared about ALL of California’s working families)

1 – Restore the balance in California’s colleges and universities so that the ratio of faculty to administrators is 2 to 1, instead the current ratio wherein administrators often outnumber teachers.

2 – End all discrimination and base college admissions purely on merit. Expand STEM curricula so it represents 50% of college majors instead of the current 20%.

3 – Enforce the Vergara reforms so it is easier to retain quality public school teachers and easier to fire the incompetent ones. Eliminate barriers to charter schools.

4 – Restructure the penal system to make it easier for prisoners to perform useful public services. For example. along with working the fire lines during fire season, they could work all year clearing dead trees out of California’s forests. Use high-tech monitoring devices to reduce costs. Reserve current prisons only for the truly incorrigible.

5 – Scrap the High-Speed Rail project and instead use the proceeds to add one lane to every major interstate highway in California.

6 – Use additional High-Speed Rail funds to complete plant upgrades so that 100% of California’s sewage is reused, even treated to potable quality.

7 – Pass legislation to streamline approval of the proposed desalination plant in Huntington Beach, and fast-track applications for additional desalination plants, especially in the Los Angeles basin.

8 – Spend the entire proceeds of the $7 billion water bond, passed overwhelmingly by Californians in 2014, on storage. Build the Los Banos Grandes, Sites and Temperance Flat reservoirs, adding over 5 million acre feet of storage to the California Water Project. Pass aggressive legislation and fund aggressive legal actions and counter-actions, to lower costs and enable completion of these projects in under five years.

9 – Permit slant drilling to access 12 trillion cubic feet of natural gas deposits from land-based rigs along the Southern California coast. Build an LNG terminal off the coast in Ventura County to export California’s natural gas to foreign markets. Permit development of the Monterey Shale formation to extract oil and gas.

10 – Permit construction of “generation 3+” nuclear power plants in geologically stable areas of California’s interior. Permit construction of new natural gas power plants.

11 – Repeal AB32 and SB375 and make it easy for developers to build homes on the suburban and exurban fringes, instead of just “in-fill” that destroys existing neighborhoods.

12 – Require California’s public employee pension funds to invest a minimum of 10% of their assets in infrastructure projects as noted above. They could issue fixed rate bonds or take equity positions in the revenue producing projects, or a combination of both. This would immediately unlock approximately $80 billion in construction financing to rebuild California’s infrastructure. At the same time, save the pension systems by striking down the “California Rule” that prevents meaningful pension reform.

These reforms would lower the cost of living in California, at the same time as they would create resource abundance and hundreds of thousands of high-paying jobs.

It is encouraging to think that the Janus ruling will reduce the political influence of public sector unions. But another possibility is equally tantalizing, that Janus will force unions to become accountable to their members. This, in turn, could be reflected in these unions fighting, for a change, to help all Californians.

To expect public sector unions to pursue the agenda outlined above is fanciful. But if California’s public sector unions were as committed to that pro-growth agenda as they are to their current agenda which is bankrupting California’s cities and counties at the same time as it obsesses over race, gender, and environmentalist extremism, they could probably get all of it done. And no other special interest could do this.

Only California’s public sector unions have enough power to successfully take on their current allies; the environmentalist lobby, the trial lawyers, and their puppet masters, the leftist oligarchy. No other special interest could take on these profiteers who have gotten filthy rich spouting leftist tripe, while they impoverished a generation of Californians.

Post Janus, it is time for a civil war within public sector unions. Using, hopefully, their option to not opt-in, it is time for public servants who care about ordinary Californians to make their voices heard.

Edward Ring is an analyst with the California Policy Center, which he co-founded in 2010. He is a prolific writer on the topics of political reform and sustainable economic development, and has been interviewed, published or quoted by the Wall Street Journal, Forbes, the Economist,  Die Zeit, the Los Angeles Times, Politico, and other media outlets.