When Governor Edmund G. “Jerry” Brown enters his sixteenth year as governor of California this January, he will likely ask his magic mirror which is the bluest state of them all. The mirror will reply “California. It’s so obvious, why do you even ask, you silly governor?”
Democrats in Sacramento hold more than two-thirds of the seats in both houses of the legislature, and no Republican has won a statewide office since 2006. Although Jerry Brown governed in split terms (1974-1982 and 2010-2018), the legislature was majority Democrat long before Brown took office. Since then, Republicans have held a majority of the Assembly for only two years, and they never controlled the Senate. That’s one-party dominance.
To prove their power, Democrats recently adopted a $5 billion gas tax increase, declared California a “sanctuary state” in defiance of the Republican president, and extended the unique cap-and-trade law, which requires California business to pay billions more in taxes. They did it, they acknowledged, in order to display California’s leadership, as a lesson to other states in how to control the global climate.
And they did all this after making permanent the formerly “temporary” highest personal income tax rate in the nation.
The mirror does not lie; California is the bluest state of them all. Jerry Brown should be proud.
Why, then, in this bluest of states does the little guy suffer so much? The Democrats’ narrative is, and has always been, that they are the champions for the underprivileged. Yet California has the highest poverty rate, the highest homeless rate, the worst schools for underprivileged kids, the worst conditions for working-class commuters, and the least opportunity for the working class of any state in the nation. What gives?
According to the United States Census, when the actual cost of living here is taken into account, California has the highest poverty in the nation—20.6% in 2016. California leads the nation in homelessness with 118,142, according to HUD’s 2016 Annual Homelessness Assessment Report. Although New York is a close second at 86,352, the next three in line are far behind those two—Florida (33,559), Washington (20,827) and Massachusetts (19,608). With all this poverty, it should be no surprise that California has the highest number of people on welfare, but according to the San Diego Union Tribune, some may be surprised to learn that 34% of the nation’s welfare recipients live in California, while only 12% of the U.S. population lives here.
Not only are there more poor people in California, but life is harder on the poor and working class here than in other states. Several have pointed out that energy costs in California are much higher than in any other state, and the burden of these high costs falls disproportionately on the poor and working class. Energy for transportation is more expensive than other states not only because of environmental policies handed down by Sacramento but also because of heavy taxation on gasoline. After adopting a $5 billion gas tax increase this year, Sacramento renewed cap-and-trade, which will impose its heavy taxes on business and will be passed on to consumers of a variety of products, including gasoline. These increasing costs have not yet been fully felt at the pump, but when they are, they will be regressive—disproportionally impactful on the poor and working class. This is because this demographic is compelled to commute longer distances by reason of policies that have made housing in California among the most expensive in the nation. Since the wealthy may choose where they live, they may commute less, costing them less at the pump.
There are other ways that high-energy costs brought on by California’s blue state policies hurt the poor. For example, the poor tend to use energy less efficiently than the wealthy, and they use a larger percentage of their incomes for energy, often causing what is called “energy poverty,” where a family must choose between heating their home and eating a nourishing meal.
In a groundbreaking 2015 study, Jonathan Lesser of the Manhattan Institute demonstrated that California is exacerbating this problem through poor choices in its energy, environmental and housing policies.
First, as others have pointed out, energy prices in California are the highest in the nation and continue to rise due to single-focus policies that can be reversed if Sacramento chooses to change them. Second, this rise in energy cost has a disproportionate impact on certain counties such as California’s inland and Central Valley regions because summer electricity consumption is highest there. The impact of this energy tax is regressive, Lesser says, because household incomes in those regions are the lowest; in other words, the poor people live in the most unpleasant places, where air conditioning is needed the most. The more pleasant places, along California’s coast, are reserved for the wealthy through housing policies that keep prices sky high. Sacramento could change those policies if they wished, but very few new homes, relatively speaking, have been built in the most desired areas since Jerry Brown first became governor. Third, according to Lesser, as a consequence of these policies, “[i]n 2012, nearly 1 million California households faced ‘energy poverty’,” and this figure will most certainly go up unless something is done to change the upward trend in energy pricing crossing with the upward trend in energy use by the poor. Lesser provides specific suggestions for policy changes, but none were implemented by Sacramento.
Public education is another area that the poor and working class depend upon more than other segments of the population. In California, you are stuck with the school in your zip code, but for people of means, there is always private school. A recent report ranked California tenth worst in the nation overall in public school performance. When we focus on the schools most likely to be charged with educating California’s poor and working class, however, we quickly learn that the achievement gap remains a living misery for our state’s poor. The recently released Assessment of Student Performance and Progress provides only two performance scores of substance, English and language arts (which means knowing how to read) and math. Scores are divided into four categories, two that meet or exceed acceptable standards and two that do not. In the inner cities where public schools are operated by the Oakland, Los Angeles and Santa Ana Unified School Districts, the following percentage of students met or exceeded the standard for language arts, respectively: 31.86%, 38.55% and 27.80%. In that same order, students meeting or exceeding the standard for math were 25.50%, 29.86% and 22.41%. So our bluest state does not care enough to teach even 60% of our poorest kids how to read or 70% to do math.
So do Republicans have the right to be smug? No way. Republicans have let down the poor just as much as Democrats in Sacramento because they have done nothing to save them. It is not too late for the GOP, however. It is time to step up and become champions of the poor and working class.
Where has the GOP been? Instead of stepping up as champions for the poor, who have been miserable under blue state policies for a very long time, Republicans spend all their time fighting among themselves about any issue they disagree about. A key requirement for admission to the GOP seems to be that one must have a talent for being distracted by issues that divide the party at the expense of issues that could unite it. In this case, the misery of the poor and working class has essentially been ignored by Republicans even though free market policies are ideally suited as the best solution to the oppressive policies that have been in place for so long. Not only would this issue unite the party, but it would provide the GOP an opportunity to do something good in the process.
Here is my solution for Republicans: forget about the rich. They can take care of themselves. And stop fighting. If you have a serious disagreement, table the issue, and campaign on something you agree on. Unfurl a banner that says, “I AM THE CHAMPION OF THE POOR AND WORKING CLASS.” Then get to work to prove it because no one will believe you at first. The poor and working class need a champion; Democrats so far have not been able to reverse course. Come on, GOP, find your heart.
Robert Loewen is chairman of the board of the California Policy Center.
 E.g. http://www.ocregister.com/2017/07/13/energy-costs-making-california-unaffordable-for-too-many/ ; http://www.nationalreview.com/article/421869/californias-energy-policies-poor-are-hit-hardest-robert-bryce ; http://capitolweekly.net/california-poverty-high-costs/ ;
 Arthur C. Brooks, The Conservative Heart, How to Build a Fairer, Happier, and More Prosperous America. According to Brooks, conservatives are natural champions of the poor when they advocate free market principles; he does not believe that conservatives need to become “center-left” in order to advocate for the poor and working class.
In the space of just a few months, state officials have suddenly turned their attention to a problem in the public-educational shadows: insider dealing among California school district officials and outside vendors.
In a January opinion, state Attorney General Kamala Harris concluded that school officials had become too cozy with companies that stand to benefit from passage of high-ticket school bonds.
“A school or community college district violates California constitutional and statutory prohibitions against using public funds to advocate passage of a bond measure by contracting with a person or entity for services related to a bond election campaign if the pre-election services may be fairly characterized as campaign activity,” Harris wrote.
In July, California Treasurer John Chiang warned districts about the same problem. And in August, Gov. Jerry Brown signed into law AB 2116, creating financial oversight committees for the spending of bond revenue.
Despite the scrutiny, companies looking to do business with the Capistrano Unified School District are major contributors to the district’s massive $889 million bond, Measure M on the November ballot.
Contributors include construction, engineering and architecture firms. Documents first published by Dawn Urbanek, a South County activist, show Tilden-Coil Constructors gave $25,000; $15,000 came from WLC Architects; computer giant Dell gave $4,000 to the effort.
Some of the contributors have already worked for the district. WLC Architects designed the Capistrano Valley High School Performing Arts Center. School officials approved five payments to WCL Architects (total: $43,781.03) during a September 14 meeting.
At the center of the controversy: CUSD’s top administrator, Superintendent Kirsten Vital.
Vital ran into similar trouble at her job in the Alameda Unified School District. Her highest-profile collision in Alameda involved an Oakland-based political consulting firm with multiple ties to the district. That firm worked for Vital to promote the district’s Measure H Bond in 2008. The next year, the school board appointed the firm’s two partners to a Master Plan Advisory Group that year. That same year, Vital paid the firm $14,000 for “design and programming of AUSD website redesign.” In the same year, Vital created a webmaster position and hired AUSD Board Trustee Mike McMahon’s daughter Rebecca McMahon to fill the position. Her salary, depending on tenure, ranged from $41,000 to $51,000 per year.
At the same time, Vital faced a series of pay cuts in Alameda. She earned $273,908 in 2012; dropped to $262,823 in 2013, and to $214,031 in 2014. In three years her pay dropped 22%.
Interestingly, Joseph M. Farley, her predecessor at CUSD, rode a more dramatic financial downhill. Documents provided by Transparent California show Farley earning $287,073 in 2013. In 2014, he made just $203,773, a one-year drop of 29%.
Vital’s original CUSD 2014-2018 contract gave her an annual salary of $305,000 – a huge bump over her Alameda salary (and Farley’s in CUSD). She also received a $15,000 relocation assistance stipend. That four-year deal was amended after just two years, in 2016. The new contract, extended through 2020, gave her an annual salary of $319,244 and another bonus, this one a $14,244 “discretionary payment.”
Conor McGarry is a graduate of California State University–Dominguez Hills, and a Journalism Fellow at California Policy Center.
For Immediate Release
August 18, 2016
California Policy Center
Contact: Will Swaim
SACRAMENTO — It’s rare that a think-tank study produces real reform, but it happened today when Gov. Jerry Brown signed into law a bill designed to stop school officials before they recklessly spend again.
Assembly Bill 2116 began one year ago with a July 2015 California Policy Center study.
“For the Kids: California voters must become wary of borrowing billions from wealthy investors for educational construction,” by CPC researcher Kevin Dayton, tracked passage over 14 years of more than 900 California school bonds worth $146.1 billion.
Inspired by that CPC study, Rep. James Gallagher (R-Sacramento Valley) drafted a bill to limit the ability of school districts to take on debt through new bonds – even authorizing county auditors to stop spending if bond “funds are not being spent appropriately.”
“I am pleased that the governor saw the need to increase oversight of school bonds,” Gallagher said in a press release. “Borrowing for bonds has exploded in the last decade, and it is more important than ever that school construction bond funds be fiscally sound and their financing mechanisms transparent.”
In addition to waste and abuse in the management of those school bonds, Dayton found another problem: the surge in school bond debt has produced a massive “wealth shift” upward – from taxpayers of relatively modest means to “wealthy investors who buy state and local government bonds as a relatively safe investment that generates tax-exempt income through interest payments.”
Gallagher’s bill implements California Policy Center recommendations to kill one of the most pernicious municipal finance practices. The new law limits the ability of bond advisers to exaggerate property values when calculating the taxpayer burden.
“We dedicated tremendous resources to producing this study, and we were naturally pleased to see Rep. Gallagher act on it with such energy,” said Ed Ring, CPC’s president. “We’re especially delighted that the state’s school kids have been placed ahead of the interests of consultants, government unions, politicians and Wall Street banking interests.”
“It’s great to see intellectual research and analysis turn into practical improvements in law,” said Dayton.
ABOUT ANALYST KEVIN DAYTON
Kevin Dayton is a policy analyst for the California Policy Center, an influential writer, and the author of frequent postings about generally unreported California state and local policy issues on the California Policy Center’s Prosperity Forum and Union Watch, as well as on his own website LaborIssuesSolutions.com. Dayton is a 1992 graduate of Yale University. Follow him on Twitter at @DaytonPubPolicy.
ABOUT THE CALIFORNIA POLICY CENTER
The California Policy Center is a non-partisan public policy think tank providing information that elevates the public dialogue on vital issues facing Californians, with the goal of helping to foster constructive progress towards more equitable and sustainable management of California’s public institutions. Learn more at CaliforniaPolicyCenter.org.
Most countries around the world think that it’s a good thing to have cheap energy. But in California, we have plenty of cheap energy available, just not the political will to access it.
California depends on natural gas-driven turbines and hydroelectric generators to provide just 38 percent of its oil needs. The state imports 12 percent of its oil from Alaska, and another 50 percent from foreign nations, relying heavily on Canada.
So why are California’s utilities warning of potential rolling blackouts again?
It’s political. And it’s corrupt.
Highest Electricity Rates = Less Power in CA
California’s natural gas shale formation is one of the largest in the world. And, California has been a pioneer in renewable energy, albeit still unreliable and unproven. Yet warnings are already coming that Californians may have rolling blackouts this summer. While California sits on one of the largest known deposits of recoverable oil and gas, production is falling steadily, as the state ignores its vast onshore and offshore deposits, which are fully accessible through conventional and hydraulic fracturing technologies.
This is one reason California electricity costs more than twice the national median – thanks to a government-created shortage.
Another reason is that the California Public Utilities Commission, the state’s energy “regulator,” has an historic dubious relationship with Wall Street, making promises to keep the profits higher of the state’s publicly held utilities, than utility profits elsewhere. Those profits come out of ratepayers’ pockets. “You’re ego is writing checks you’re body can’t cash,” the famous quote from the movie Top Gun says.
$5 Billion Cover-Up at San Onofre
Another of the problem areas is the California Public Utilities Commission $5 billion cover up and scandal over the 2012 closure of the San Onofre Nuclear Generating Station, due to the failure of the steam generators. San Diego attorneys Mike Aguirre and Mia Severson exposed the attempt to make the public pay big for utility and regulatory executives’ mistakes at the failed San Onofre nuclear power plant.
Southern California Edison executives purchased new steam generators from Mitsubishi, but were warned that they were bigger and run hotter, and could fail. SCE executives purchased and installed the generators anyway, knowing of a flaw in the generator design, according to records. Built to last 40 years, the generators at San Onofre failed after 2 years. And, the generators’ cost had not yet been included in rates. So SCE was faced with broken generators they could not charge ratepayers for.
then-PUC President Michael Peevey, and executives of Southern California Edison colluded in secret to saddle ratepayers with $3.3 billion of the $5 billion shutdown cost. The $5 billion recovery settlement was negotiated in secret in Poland, away from prying eyes and open records laws in California.
The state is awash in ultra cheap natural gas, yet in California, our corrupt government finds a way to create an energy shortage, and charge rate payers the highest rates in the country.
“State officials warn that Southern California could face as many as 14 days of scheduled blackouts this summer because of depleted reserves of natural gas caused by the massive leak in Aliso Canyon,” the Los Angeles Times warned in April. The LA Times neglected to mention that California ratepayers do have options, but its politicians have no will. The state sits on one of the largest known deposits of recoverable oil and gas — the Monterey Shale, a 1,700 square mile oil-bearing shale formation primarily in the San Joaquin Valley, which contains an estimated 15 billion barrels of oil. The Times article quoted Bill Powers, of Powers Engineering in San Diego, who said the utility’s pipeline system has not exceeded its capacity of 3.8 billion cubic feet per day during summer in the last 10 years, thus the concern of blackouts is without merit. “It is crying wolf for state agencies to be implying blackouts from a lack of gas, especially from a lack of gas in the summer time,” Powers said.
The Monterey Shale formation is estimated to be several times bigger than the Bakken Shale formation, currently delivering a record economic boom to North Dakota. But even as the fourth-largest oil producing state in the country, oil and gas production has been steadily declining here. Instead, California lawmakers turned their attention to wind and solar, and other types of alternative energy. The state has been only focused on implementing the Renewable Portfolio Standard, passed in 2011, which requires the state to be using 33 percent renewable energy by 2020.
A University of Southern California study, “Powering California: The Monterey Shale & California’s Economic Future,” looked at the development of the vast energy resource beneath the San Joaquin Valley known as the Monterey Shale. It found that hydraulic fracturing could create 512,000 to 2.8 million new jobs, personal income growth of $40.6 billion to $222.3 billion, additional local and state government revenues from $4.5 billion to $24.6 billion, and an increase in state GDP by 2.6 percent to 14.3 percent on a per-person basis.
It’s Not Easy Being Green
California politicians have gloated over being the first state to enact such aggressive green energy and greenhouse gas busting policy, but have yet to produce any proof that these oppressive and business-killing laws have had any “green” results.
All while they ignore that natural gas is clean, less expensive to extract, natural and abundant. It wasn’t that long ago that natural gas used to be the left’s preferred alternative to all other “dirty fuels.” But as the oil and gas industry found better, more affordable ways to access natural gas, it fell out of favor with emotional, whimsical environmentalists.
The last California Governor blamed for rolling energy blackouts was recalled by voters… hold that thought.
Katy Grimes is senior correspondent for The Flash Report, and a contributor to the Canada Free Press and Legal Insurrection. She is a senior media fellow with the Energy & Environmental Legal Institute, and she serves as president of the Sacramento Taxpayers Association.
According to my father, in the 1950s and ’60s, California had the best transportation agency in the entire world. But all that changed with the election of a new, anti-growth, small-is-beautiful governor by the name of Jerry Brown.
Now, fast forward 40 years. Governor Brown, version 2.0, proposes a budget that assumes a big increase in transportation taxes and fees. The California Legislature shouldn’t just say no, it should say hell no.
Where to start? First, let’s take judicial notice of the fact that California is already a high tax state with the highest income tax rate and the highest state sales tax in America. But more relevant for the issue at hand, we also have the highest fuel costs in the nation. This is because of both the 4th highest excise tax on fuel and the fact that refineries are burdened with additional costs to comply with California’s environmental regulations.
The high cost to drive in California might be understandable if we were getting value for our tax dollars. But we aren’t. A big problem is that Caltrans is dysfunctional, plain and simple. It has never fully recovered from the days when the agency was effectively destroyed by Gianturco. A report by the California State Auditor just a couple of months ago concluded that a primary responsibility of Caltrans – maintenance of our highways – is not being executed in a manner that is even close to being efficient or competent. Senator John Moorlach, the only CPA currently serving in the California legislature, reacted saying that “This audit reinforces the fact that our bad roads are not a result of a lack of funding. They’re a result of a lack of competence at Caltrans.” Moreover, a report by the Legislative Analyst concluded that Caltrans is overstaffed by 3,500 employees costing California taxpayers over a half billion dollars a year. All this compels the obvious question: Why, for goodness sake, do we want to give these people even more money?
Another unneeded and costly practice consists of project labor agreements for transportation construction projects. These pro-union policies shut out otherwise competent companies from bidding on projects resulting in California taxpayers shelling out as high as 25% more than they should for building highways and bridges.
Finally, California’s environmental requirements are legendary for their inefficiency while also doing little for the environment. Exhibit A in this foolishness is Governor Brown’s incomprehensible pursuit of the ill-fated high speed rail project. Not only has the project failed to live up to any of the promises made to voters, it is currently being kept alive only by virtue of the state’s diversion of “cap and trade” funds which are supposed to be expended on projects that reduce greenhouse gas emissions. But in the Kafkaesque world of California transportation policies, the LAO has concluded that the construction of the HSR project actually produces a net increase in emissions, at least for the foreseeable future.
No one disputes the dire need for improvements in California’s transportation infrastructure. But imposing draconian taxes and higher registration fees that serve only to punish the middle class while wasting billions on projects that don’t help getting Californians get to work or school cannot and should not be tolerated. Legislators who present themselves to voters as fiscally responsible need to understand that a vote for higher transportation taxes will engender a very angry response from their constituents.
About the Author: 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.
See the complete California Policy Center report For the Kids: California Voters Must Become Wary of Borrowing Billions More from Wealthy Investors for Educational Construction (complete, printable PDF Version, 4 MB, 361 pages)
Links to all sections of this study readable online:
Executive Summary: “For the Kids” – Comprehensive Review of California School Bonds (1 of 9)
You are here: More Borrowing for California Educational Construction in 2016 (2 of 9)
Quantifying and Explaining California’s Educational Construction Debt (3 of 9)
How California School and College Districts Acquire and Manage Debt (4 of 9)
Capital Appreciation Bonds: Disturbing Repayment Terms (5 of 9)
Tricks of the Trade: Questionable Behavior with Bonds (6 of 9)
The System Is Skewed to Pass Bond Measures (7 of 9)
More Trouble with Bond Finance for Educational Construction (8 of 9)
Improving Oversight, Accountability, and Fiscal Responsibility (9 of 9)
Guide to all Tables and Appendices – Comprehensive Reference for Researchers
Why This Report Matters: More Borrowing in 2016
Californians will be asked in 2016 to continue taking on debt for construction of educational facilities, but one elected official is leery. Governor Jerry Brown wants to change the funding system for school construction. He is concerned about debt that Californians have accumulated from years of allowing the state and local educational districts to relentlessly borrow.
That money borrowed through bond sales will have to be paid back — with interest — to the investors who bought them. Voters have limited understanding of bonds and how bonds provide funds for construction, and elections focus on what voters will get rather than how they will pay for it. To the detriment of future generations, few Californians realize the huge amount educational districts have been authorized to borrow and the huge amount of debt accumulated.
Interest Groups Want Voters to Consider Another State Bond Measure
When the California Policy Center published this report, the California Attorney General had approved circulation of petitions through September 21, 2015 for a proposed statewide ballot initiative entitled the “Kindergarten Through Community College Public Education Facilities Bond Act of 2016.” Professional signature gatherers set up tables at grocery stores and other public locations trying to cajole citizens into signing petitions to “help the kids” by putting the measure on the ballot.
If this proposal qualifies for the ballot and voters approve it, the State of California will have the authority to borrow $9 billion through selling bonds to investors. According to the petition, this $9 billion will ensure that “K-14 facilities are constructed and maintained in safe, secure and peaceful conditions.” As reported in the Sacramento Bee, school construction interests and residential housing developers want this bond measure, or one like it, on the ballot in 2016.
Proponents point out, accurately, that most of the money that voters authorized the state to borrow in 1998, 2002, 2004, and 2006 has been distributed as matching grants to local educational districts. As of April 15, 2015, $195.4 million remains3 from $35.4 billion approved to borrow as a result of three statewide ballot propositions in the 2000s.
The petition for the Kindergarten Through Community College Public Education Facilities Bond Act of 2016 lists four “findings” explaining what the state could do if it borrowed $9 billion:
1. Career technical education facilities to provide job training for many Californians and veterans who face challenges in completing their education and re-entering the workforce.
The history of recent bond measures on the state and local level shows that voters are inclined to support more government spending when veterans are cited as beneficiaries. Poll results confirm this. A “State of California School Bond Measure Feasibility Survey” of likely voters conducted January 30 to February 9, 2014 for California’s Coalition for Adequate School Housing (C.A.S.H.) indicated that “more than six-in-ten are highly concerned about unemployment among veterans.”
2. Upgrade aging facilities to meet current health and safety standards, including retrofitting for earthquake safety and the removal of lead paint, asbestos and other hazardous materials.
Again, the “State of California School Bond Measure Feasibility Survey” concluded that “more than two-thirds agree that many California public schools need significant health and safety improvements,” specifically the statement that “many schools and community colleges throughout California are old, outdated and need upgrades to meet current health and safety standards, including retrofitting for earthquake safety and the removal of lead paint, asbestos and other hazardous materials.”
3. Studies show that 13,000 jobs are created for each $1 billion of state infrastructure investment. These jobs include building and construction trades jobs throughout the state.
Influential construction interests are part of the coalition supporting this statewide bond measure. This statement acknowledges their pivotal role in the campaign to pass it.
4. Academic goals cannot be achieved without 21st Century school facilities designed to provide improved school technology and teaching facilities.
Once again, the “State of California School Bond Measure Feasibility Survey” concludes that “in particular, voters believe that funds must be directed towards upgrading vocational/career education programs, repairing classrooms and science labs and upgrading technology.”
These are deliberately chosen arguments to justify borrowing another $9 billion for community college and K-12 school district construction projects. In fact, these were the same arguments used in newspaper opinion pieces and position papers in 2014 to support Assembly Bill 2235, which if signed into law would have asked state voters in the November 2014 election to authorize borrowing $4.3 billion for school construction through bond sales.
Regardless of whether the four arguments listed above for a statewide bond measure are factually valid, they have been tested through polling and other voter research and shown to be effective in winning voter support. Surely a 2016 campaign for a state bond measure will use them.
How do these arguments stand in the larger context of bond indebtedness for the State of California and its community college districts and K-12 school districts? This report provides some of that context and introduces information never before available to the public.
Governor Brown Worries About Debt and Seeks Change in School Construction Finance
Governor Jerry Brown has used his executive power to thwart legislative efforts to place a statewide bond measure for educational construction on the 2016 ballot. Assembly Bill 2235 never received an opposition vote as it passed the Assembly and moved through Senate committees with support from numerous interest groups. Voters didn’t get to consider it in the November 2014 election only because Governor Brown didn’t want it on the ballot. As reported by a Capitol Public Radio reporter, the bill author issued a statement explaining its abandonment: “The governor has made it clear that he does not want a school bond on the same ballot as the water bond and rainy day fund. We do not expect the legislature to send the bill on him.”
Meanwhile, the Governor is taking a leading role in calling for change in how state and local governments fund California school construction. He submitted a state budget proposal to the California legislature in January 2015 with an introduction stating that funding commitments “must be honestly confronted so that they are properly accounted for and funded.” It warned that “budget challenges over the past decade have also resulted in a greater reliance on debt financing, rather than pay-as-you-go spending…From 1974 to 1999, California voters authorized $38.4 billion of general obligation bonds. Since 2000, voters authorized more than $103.2 billion of general obligation bonds”
|Table 1: All General Obligation Bonds to Be Paid Off Through
California’s General Fund
|Amount Authorized to Borrow||$135.2 billion|
|Amount Borrowed||$105.7 billion|
|Amount Authorized But Not Borrowed||$29.5 billion|
|Amount Owed in Principal (June 1, 2015)||$72.4 billion|
|Amount of Debt Service Owed (June 1, 2015)||$131.8 billion|
|Amount of Debt Service to Be Paid 2015-2016||$6 billion|
|Sources: “Schedule of Debt Service Requirements for General Fund Non-Self Liquidating Bonds (Fixed Rate),” California State Treasurer, June 1, 2015, accessed June 28, 2015, www.treasurer.ca.gov/bonds/debt/201506/general-fixed.pdf and “Authorized and Outstanding General Obligation Bonds,” California State Treasurer, June 1, 2015, accessed June 28, 2015, www.treasurer.ca.gov/bonds/debt/201506/authorized.pdf|
Concern About Debt Growing from State Matching Grants for Local Educational Districts
One funding commitment Governor Brown “confronted” in his proposed fiscal year 2015-16 budget was the State of California’s debt accumulated from funding construction of facilities for local school districts. California voters approved bond measures in 2002, 2004, and 2006 authorizing the state to borrow $35.4 billion via bond sales for school and college construction, and only $195 million remains to be borrowed. According to internal California State Treasurer documents, debt service on those three state bond measures is $56.7 billion.
According to the Governor’s 2015-16 Budget Summary, “the Administration has noted the following significant shortcomings” related to school bond finance over the past two years:
The current program does not compel districts to consider facilities funding within the context of other educational costs and priorities. For example, districts can generate and retain state facility program eligibility based on outdated or inconsistent enrollment projections. This often results in financial incentives for districts to build new schools to accommodate what is actually modest and absorbable enrollment growth. These incentives are exacerbated by the fact that general obligation bond debt is funded outside of Proposition 98. These bonds cost the General Fund approximately $2.4 billion in debt service annually.
This statement is surprising and controversial recognition that some school districts spend money on new school construction that perhaps isn’t needed. The proposed budget summary also notes that large school districts have in-house professional facilities departments that can take advantage of the first-come, first-serve application system to get funding from the State Allocation Board for local school construction.
Another surprising admission in the Governor’s budget proposal is acknowledgement that voters approve four out of five proposed local bond measures, thus providing a relatively easy flow of money for school construction: “The current program was developed before the passage of Proposition 39 (which reduced the local bond vote threshold from a two-thirds supermajority to 55 percent) in 2000, which has since allowed local school bonds to pass upwards of 80 percent of the time.”
The budget summary also reported that the California Department of Finance had met with parties interested in educational construction and developed a set of recommendations, including three related to bond finance:
1. Increase Tools for Local Control: Expand Local Funding Capacity
While school districts can pass local bonds with 55% percent approval, assessed valuation caps for specific bond measures and total caps on local bonded indebtedness have not been adjusted since 2000. In order to provide greater access to local financing, these caps should be increased at minimum by the rate of inflation since 2000.
Based on the Consumer Price Index of the U.S. Bureau of Labor Statistics, the inflation rate from November 2000 (when voters approved Proposition 39) to May 2015 was 36.6%. Therefore, under this proposal the California legislature would increase tax and debt limits at least 36.6% above existing amounts. However, the flaw in this proposal is that it does not account for increases in property value or total assessed property valuation in California since 2000. (See Section 5 of this report for background on tax and debt limits.)
2. Expand Allowable Uses of Routine Restricted Maintenance Funding
Current law requires schools to deposit a percentage of their general fund expenditures into a restricted account for use in maintaining their facilities. Rather than requiring that these funds be used solely for routine maintenance, districts should have the ability to pool these funds over multiple years for modernization and new construction projects. Expanding the use of these funds will provide school districts with yet another funding stream to maintain, modernize, and construct new facilities.
This proposal injects a bit of “pay-as-you-go” from district general funds into educational facilities construction — a departure from the bond debt financing that has driven school construction since the enactment of Senate Bill 50, the Leroy F. Greene School Facilities Act of 1998.
3. Target State Funding for Districts Most in Need
State funding for a new program should be targeted in a way that: (1) limits eligibility to districts with such low per-student assessed value they cannot issue bonds at the local level in amounts that allow them to meet student needs, (2) prioritizes funding for health and safety and severe overcrowding projects, and (3) establishes a sliding scale to determine the state share of project costs based on local capacity to finance projects.
This recommendation is based on the perception that the current first-come, first-served funding system allows certain school and college districts to win a disproportionate amount of state matching grants at the expense of other districts that may have a more legitimate need but lack the resources and wherewithal to take advantage of opportunities.
Finally, the list of recommendations concludes with a message:
…it is the intent of the Administration to advance the dialogue on the future of school facilities funding. School districts and developers should have a clear understanding of which limited circumstances will qualify for state assistance. Over the course of the coming months, the Administration is prepared to engage with the Legislature and education stakeholders to shape a future state program that is focused on districts with the greatest need, while providing substantial new flexibility for local districts to raise the necessary resources for school facilities needs.
These proposals are not new ideas. A 2003 report from the Public Policy Institute of California analyzed school bond measures and identified disparities among districts based on wealth and region. In response to these findings, the report suggested raising state debt limits for bond measures to reduce the impact of changes in assessed property valuation. It also recommended adoption of a plan that would give deserving school and college districts access to state construction funds without having to match these grants with local funding.
State Legislative Initiatives
The stage is set for change in California school construction financing. Subsequent to the release of the proposed budget from the Governor, state legislators introduced bills such as Senate Bill 114 and Assembly Bill 148. These bills would make some mild changes to the state’s school construction program, while at the same time placing a statewide bond measure on the November 2016 ballot to borrow money (for a yet unidentified amount) via bond sales for school construction.
The author of Senate Bill 114 explained the purpose of the bill:
Funding for the School Facilities Program is virtually gone and there is a backlog in applications for state assistance…while the state’s growing debt service is of concern, it is unclear whether local districts have the capacity to generate sufficient revenue at the local level to meet their specific facility needs. The “winding down” of the current program, and the Governor’s call for change, present an opportunity to rethink the administrative and programmatic structure of the State Facilities Program…
Supporting one or both of these bills are the California School Boards Association, the California Faculty Association, the California Association of School Business Officials, the American Federation of State, County, and Municipal Employees union (AFSCME); the Los Angeles Unified School District, and the Riverside County Superintendent of Schools. Further debate will reveal if these groups are willing to withhold potential objections to some of the Department of Finance proposed changes to educational construction finance in exchange for having another statewide bond measure on the 2016 Presidential general election ballot.
No formal opposition to these bills has yet emerged, but at this time the bills are just a frame, to be expanded with more detailed proposals.
“Request for Title and Summary for Proposed Initiative: Kindergarten Through Community College Public Education Facilities Bond Act of 2016,” Office of the California Attorney General, January 12, 2015, accessed June 28, 2015, https://oag.ca.gov/system/files/initiatives/pdfs/15-0005%20(Education%20Bond%20Act).pdf
“California School Builders, Others to Gather Signatures for November 2016 Bond Measure,” Sacramento Bee, January 12, 2015, accessed June 28, 2015, www.sacbee.com/news/politics-government/capitol-alert/article6143364.html
“AB 148 School Facilities: K–14 School Investment Bond Act of 2016 – California State Assembly Education Committee Analysis,” California Legislative Information, April 28, 2015, accessed June 28, 2015, https://leginfo.legislature.ca.gov/faces/billAnalysisClient.xhtml?bill_id=201520160AB148#
“State of California School Bond Measure Feasibility Survey,” California’s Coalition for Adequate School Housing, Date, accessed June 28, 2015, https://www.cashnet.org/meetings/2014_Annual_Conference/documents/38_LegislativeUpdate_Bond_Feasibility.pdf
“Text – AB 2235 Education Facilities: Kindergarten-University Public Education Facilities Bond Act of 2014,” California Legislative Information, accessed June 28, 2015, https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201320140AB2235
“No School Bond, Lawmaker Suspension Measures On November Ballot,” Capitol Public Radio, August 19, 2014, accessed June 28, 2015, www.capradio.org/articles/2014/08/19/no-school-bond,-lawmaker-suspension-measures-on-november-ballot/
“2015-16 Governor’s Budget Summary,” Department of Finance – California Budget, January 9, 2015, accessed June 28, 2015, www.ebudget.ca.gov/2015-16/pdf/BudgetSummary/FullBudgetSummary.pdf
“2015 California’s Five-Year Infrastructure Plan,” Department of Finance – California Budget, January 9, 2015, accessed June 28, 2015, www.ebudget.ca.gov/2015-Infrastructure-Plan.pdf
“Governor’s Budget Summary 2015-16: K Thru 12 Education,” Department of Finance – California Budget, January 9, 2015, accessed June 28, 2015, www.ebudget.ca.gov/2015-16/pdf/BudgetSummary/Kthru12Education.pdf
“SB 50 – Chaptered. Leroy F. Greene School Facilities Act of 1998: Class Size Reduction – Kindergarten University Public Education Facilities Bond Act of 1998,” Official California Legislative Information, August 27, 1998, accessed June 28, 2015, www.leginfo.ca.gov/pub/97-98/bill/sen/sb_0001-0050/sb_50_bill_19980827_chaptered.html
“Fiscal Effects of Voter Approval Requirements on Local Governments,” Public Policy Institute of California, January 27, 2003, accessed June 28, 2015, www.ppic.org/content/pubs/report/R_103KRR.pdf
“Text – SB 114 Education Facilities: Kindergarten Through Grade 12 Public Education Facilities Bond Act of 2016,” California Legislative Information, June 3, 2015, accessed June 28, 2015, leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201520160SB114&search_keywords=
“Text – AB 148 School Facilities: K–14 School Investment Bond Act of 2016,” California Legislative Information, May 6, 2015, accessed June 28, 2015, leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201520160SB114&search_keywords=
“Senate Education Committee Legislative Analysis – AB 148 School Facilities: K–14 School Investment Bond Act of 2016,” California Legislative Information, March 25, 2015, accessed June 28, 2015, http://leginfo.legislature.ca.gov/faces/billAnalysisClient.xhtml?bill_id=201520160SB114#
A union-led initiative wants to eliminate Prop. 13 benefits for businesses.
California’s Prop. 13, wildly popular on both sides of the political aisle, is under siege by unions. Using the Orwellian name “Make It Fair,” a coalition led by the California Teachers Association, California Federation of Teachers, SEIU and their friends has decided that they can milk businesses to the tune of $9 billion a year via a new ballot initiative.
As Dan Walters explains, “Proposition 13 limits property taxes on all forms of property to 1 percent of value, plus what’s needed to retire bonds and other debts, and limits increases in value to no more than 2 percent a year, except when properties change hands. Newly constructed homes and commercial buildings are placed on the tax roll at their initial values, but are protected by the limits thereafter.”
While it is true that there are a few loopholes which probably should be addressed on the commercial side of Prop. 13, the promoters of the so-called split roll initiative are using that as an excuse to essentially gut the tax protections for businesses. It is tantamount to owning a smooth-running automobile with an oil leak and being told you should ditch the car. To that end, Jon Coupal and Robert Lapsley joined together in 2014 to sponsor a reform bill that would have eliminated the loopholes. They explain,
AB 2371 was authored by the chair of the Assembly Revenue and Taxation Committee, Raul Bocanegra, and San Francisco-area Assemblyman Tom Ammiano and supported by a broad coalition of business and taxpayer organizations. Most importantly, we also had the support of the California Tax Reform Association (who is pursuing the split roll initiative) as it passed overwhelmingly off the Assembly floor.
But then a strange thing happened on the way to the Senate. The California Tax Reform Association suddenly flip-flopped and withdrew its support in the Senate, saying that AB 2371 was not real reform after all. Why? Because they realized that taking care of a potential problem would actually create a bigger problem for their political agenda to pass a split roll initiative next year. The California Tax Reform Association and other groups want to preserve the ‘loophole’ issue as one of their key messages in the 2016 campaign.
The unions would have us think that the state of California doesn’t receive its fair share of taxes. Of course nothing could be further from the truth, and most of us who pay them as residents and property owners in Taxifornia know it. As San Diego tax fighter Richard Rider informs us:
CA now has by far the nation’s highest state income tax rate. We are 21% higher than 2nd place Hawaii, 34% higher than Oregon, and a heck of a lot higher than all the rest – including 7 states with zero state income tax – and 2 more that tax only dividends and interest income.
CA is so bad, we also have the 2nd highest state income tax bracket. AND the 3rd. Plus the 5th and 8th.
CA has the highest state sales tax rate in the nation. 7.5% (does not include local sales taxes). Two new 2015 bills seek a combined $10 billion++ CA state and local sales tax increase. At least one will likely pass.
CA has the nation’s 2nd highest gas tax at 63.8 cents/gallon (Jan., 2015). Add in the new 10-15 cent CA “cap and trade” cost and CA is easily #1. National average is 48.3 cents. Yet CA has the 6th worst highways.
CA in 2014 ranked 17th highest in per capita property taxes (including commercial) – the only major tax where we are not in the worst ten states. But the median CA property tax per owner-occupied home was the 10th highest in the nation in 2009 (latest year available).
That the teachers unions are promoting another tax raise at this time is especially galling. Due at least in part to the union-orchestrated Prop. 30 in 2012, Governor Jerry Brown has just announced a revised budget which will see billions headed for schools over the next few years, including $3.1 billion for the current year and $2.7 billion for next year. K-12 education funding will increase $3,000 per pupil – a 45 percent boost – over 2011-12 levels.
But is it possible that the unions will be affected by their own proposition? As Mike Antonucci points out, it isn’t clear if they will be exempt from the provisions in the initiative. CTA’s building in Burlingame is assessed at $22 million and its 2014 tax liability was $265,000 or about the same 1.2 percent rate my wife and I pay for our home in Los Angeles. CTA’s and other unions’ tax bills could increase considerably if the prop flies. So it would hardly be a surprise if they tried to carve out an exemption for themselves. (Please keep in mind that that at the same time CTA is trying to stick it to tax-weary Californians, it brings in about $185 million a year in forced dues and pays not a penny in state and federal income tax.)
However, even if CTA and other public employee unions are not exempted, they may figure that they will still make out because that extra $9 billion will enable the state to hire busloads of new employees, all of whom will be forced to pay the unions if they want to work. In short, it will be an investment with a great ROI.
If successful, what are the ramifications of this initiative for California? The Orange County Register points to a March 2012 study from the Pepperdine University School of Public Policy’s Davenport Institute. It found that “adopting such a ‘split-roll’ property tax would result in a loss of nearly 400,000 jobs and $72 billion in economic activity in the first five years.”
Grim news for Californians. However, Texans are grinning ear-to-ear, baking cookies and ordering evermore welcome mats.
Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.
These days, the teachers unions have landed on the wrong side of judges, teachers, the general public and just about everyone else whose lives they touch.
Seems like the teachers unions are getting it from all sides these days. In a Wall Street Journal piece, the writers note that the percentage of elementary and secondary teachers who are union members is down about 20 percent since 1988. But as private and charter schools proliferate and the right-to-work movement grows, the last 26 years will look like the good old days.
Big Apple Kerfuffle
In response to the death of Eric Garner while in New York Police Department custody, United Federation of Teachers command central decided to join forces with Al Sharpton in blaming the police. However, New York City teachers responded by giving UFT president Michael Mulgrew a one-finger salute, and on the first day of school last week teachers all over the city wore pro-cop T-shirts. This independent streak was way over the top for Boss Mulgrew, whose union emailed a brief warning, “…as public employees, one must remain objective at all times.”
Teachers union members remain objective?!! WHAT!!! This followed UFT’s sponsorship of an Al Sharpton rally in support of Mike Brown, who died while in police custody in Ferguson, MO.
Now, how teachers should respond to non-education-related community events is a discussion for another day; the issue here is the union’s hypocrisy. But then again, Mulgrew has always shot from the hip … and as often as not, the bullet has wound up piercing his shoe. Most recently, despite teacher misgivings with Common Core, the union president decided that the standards were worthy. And at the American Federation of Teachers convention last month, in classic thug style, he closed with these pearls,
If someone takes something from me, I’m going to grab it right back out of their cold, twisted, sick hands and say it is mine! You do not take what is mine! And I’m going to punch you in the face and push you in the dirt because this is the teachers! These are our tools and you sick people need to deal with us and the children that we teach. Thank you very much!
If they ever decide to recast Goodfellas, Mulgrew is a shoo-in for the Joe Pesci role. (Extreme profanity alert.)
After Michigan went right-to-work in 2012, the Michigan Education Association decided to play hardball. Most teachers didn’t know that the only period they could resign from the union was when most of them weren’t paying attention to school or union matters – in August. Some teachers sent in their resignation notice before the union-mandated allotted time and thought they’d legitimately opted out and stopped paying dues. However, they were soon faced with threats that unless they paid up, the union would do its best to damage their credit ratings. But the Mackinac Center Legal Foundation took the teachers’ side and brought suit against the union. Then, just last Tuesday administrative law judge Julia Stern recommended that the “… Employment Relations Commission order the Michigan Education Association to no longer limit school employees to leaving the union solely in August of each year. She said the law that took effect last year incorporated a federal law interpreted to give public employees the ability to leave their union anytime.”
Furious with the decision, the union went into spin-mode to divert attention from it, triumphantly pointing to the fact that only 5,000 teachers (out of 110,000 total) had resigned during the August window. But as Mike Antonucci notes, the bigger picture is not so rosy. “In 2008-09, the union had 129,000 active members. The latest loss brings that number down to 106,000 – a drop of almost 18 percent.” Also, as more contracts expire, more teachers will have the opportunity to disengage from the union. Additionally, as teachers see that the world of their non-unionized colleagues does not come to an end without Big Daddy, many will realize that the $1,000+ dues they pay on a yearly basis could be much better spent elsewhere.
Hardly a surprise, but immediately following Judge Rolf Treu’s final decision in the Vergara case, which affirmed his original one, the California Teachers Association, the California Federation of Teachers and Governor Jerry Brown (under pressure from his biggest political backers – the unions) filed an appeal. In a dual release, the unions trotted out the usual off-subject malarkey in an attempt to convince people of the evil intent of the suit.
All along it’s been clear to us that this lawsuit is baseless, meritless, and masterminded by self-interested individuals with corporate education reform agendas that are veiled by a proclamation of student interest.
The Vergara ruling makes clear that Judge Treu failed to engage the evidence presented in court by education experts and school superintendents who testified that teacher rights are not impediments to well-run schools and districts.
He also failed to take into account the impact of underfunding, poverty, growing inequality, and lack of decent jobs in the communities surrounding our schools….
… this ruling doesn’t address any of the real solutions to problems facing public education, solutions such as adequate funding, peer assistance and review programs for struggling teachers, and lower class sizes.
Blah, blah, blah.
While this kind of union spin has traditionally been successful, the general public at long last has become hip to it. In an Education Next poll released in August concerning the issue of tenure – a major part of the Vergara suit,
… Survey respondents favor ending tenure by a 2-to-1 ratio. By about the same ratio, the public also thinks that if tenure is awarded, it should be based in part on how well the teacher’s students perform in the classroom. Only 9% of the public agrees with current practice in most states, the policy of granting teachers tenure without taking student performance into account.
Fair Share Flim-Flam Fades
Every year around Labor Day, Gallup polls Americans on their attitudes toward labor unions. This year a question was added about right-to-work laws, and the responses were not good news for the forced-union crowd. As Mike Antonucci writes,
The poll finds 82% of Americans agreeing that ‘no American should be required to join any private organization, like a labor union, against his will,’ a position advanced by right-to-work proponents. Pro-union forces partly oppose right-to-work laws because of the ‘free-rider’ problem, with non-union workers benefitting as much as union workers when unions negotiate pay and benefit increases with employers. But by 64% to 32%, Americans disagree that workers should ‘have to join and pay dues to give the union financial support’ because ‘all workers share the gains won by the labor union.’
The teachers unions are starting to remind me of a man at sea flailing away for help, but the courts, the general public and even many of their own members are not not throwing out a life raft. Perhaps Mr. Mulgrew needs to start breaking some legs. Nothing else seems to be working.
Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers and the general public with reliable and balanced information about professional affiliations and positions on educational issues.
Once again it is time for taxpayers to get a good grip on their wallets because Sacramento politicians are looking to extend the “temporary” taxes imposed by Proposition 30, approved by voters less than two years ago.
There is nothing more permanent than a temporary tax. They are as immortal as a vampire and nearly as hard to kill. Take the “temporary” tax imposed in 1898 to pay for the Spanish-American War. It remained on the books until 2006 when Congress discovered that the Spanish-American War ended a century earlier.
More recently and more relevant to Californians, two decades ago the political establishment — both Republicans and Democrats — backed a 1¼% increase in the state sales tax, a half cent of which was supposed to be temporary. (The tax increase was justified, in part, on the argument that the higher taxes were less pernicious than deficit spending. But this tax package just institutionalized even greater spending and debt.) At the time, to quell opposition, Sacramento politicians went out of their way to draw public attention to the temporary nature of the half cent increase. But within a year of its expiring, it was reinstated and made permanent through a ballot measure whose passage backers claimed was absolutely essential to maintain local public safety services.
In 2012, Gov. Jerry Brown and his government employee union allies backing Proposition 30 promised the tax increases would be temporary, that the sales tax increase would expire in 2016 and the income tax increase on upper-middle income earners, and above, would expire in 2018. But the politicians, who have been lying in the weeds waiting until closer to the expiration date to spring an extension of the tax increases on unwary taxpayers, are already tipping their hand.
In January, state schools chief Tom Torlakson called for an extension of Proposition 30 beyond its full expiration in 2018. “We need to renew Prop. 30,” the Superintendent of Public Instruction told a meeting of PTA leaders.
Now state Sen. Mark Leno has spoken up, telling an education rally at San Francisco City Hall it’s time to start thinking about the need to extend the Proposition 30 tax increases. One of the reasons Leno opposes the governor’s effort to establish a prudent budget reserve is that such a “rainy day fund” would make it harder to justify a continuation of higher taxes on sales and incomes.
While it is common to question the veracity of politicians, in this case, it would be wise to accept these Sacramento leaders’ comments as genuine expressions of their greed for ever greater amounts of taxpayer dollars
Gov. Brown, to his credit, has urged majority Democrats in the Legislature to make due with current revenues and keep faith with the voters by letting the taxes expire on schedule. But even this responsible approach, a reflection of his minimalist approach in his first two terms, may not help taxpayers much as we approach 2018, the year, that even if he is reelected, Brown will end his final term.
Meanwhile, the Sacramento politicians are salivating over the prospect of new and extended taxes. “Shoot for the moon,” Sen. Leno told a reporter. “We might not get there, but that’s where we have to start.”
However, Leno and his colleagues are not shooting for the moon, they are shooting for taxpayers’ wallets.
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.
Even close observers of the California High-Speed Rail Authority have struggled to track developments for the state’s planned bullet train. The debacle began in November 2008, when 52.7% of California voters approved Proposition 1A and triggered serious planning for what could be the most expensive construction project in human history. With that kind of money at stake, unions were obviously inspired to be part of this boondoggle.
The California High-Speed Rail Authority has become justly notorious for backroom deals, secretive administrative actions, and lack of transparency. But most Californians are at least vaguely aware that the project has been mismanaged and misrepresented.
Proposition 1A – placed on the ballot by the California State Legislature – authorized the State of California to borrow $9.95 billion to begin design and construction of a $45 billion complete high-speed rail system linking San Francisco, Los Angeles, San Diego, and Sacramento. Including interest payments, the Proposition 1A commitment was estimated to be $19.4 billion to $23.2 billion for bonds to be paid back over 30 years. According to Proposition 1A, that money borrowed by the state was supposed to be supplemented with significant funding from the federal government, private investors, and municipal governments.
Proposition 1A also promised that the bullet train would be able to travel non-stop from San Francisco to Los Angeles in 2 hours, 40 minutes. Presumably many Californians who voted for it – including the 78.4% of San Francisco voters who approved it – imagined a fast train speeding between two world-class cities along the median of Interstate 5. They were wrong.
Here’s the current appalling status of California High-Speed Rail:
1. The California High-Speed Rail Authority has spent $587 million on consultants as of September 30, 2013. The California State Treasurer has sold at least $703 million worth of bonds (Buy America Bonds and perhaps others) for California High-Speed Rail as of May 13, 2013.
2. The estimated cost has been dramatically revised. Instead of being $45 billion for the entire system, it is now $68 billion just for the line between San Francisco and Los Angeles, and the high-speed rail will be “blended” with other commuter rail lines at the beginning and end of the route. One group has estimated that the entire system may exceed $200 billion if bond interest is included and the federal government does not provide additional grants.
3. The California State Treasurer cannot sell the Proposition 1A state bonds because a judge determined in November 2013 that the California High-Speed Rail Authority failed to comply with the law. While the California High-Speed Rail Authority has already obtained $2,942,000,000 from the federal government, possibly under false pretenses of a commitment to matching funds, the Republican majority in the U.S. House of Representatives is intent on stopping further grants until the Authority gets its act together. No private investors have emerged – corporations want to GET money from the Authority through contracts, not give it money to be squandered. Cities in the San Joaquin Valley where the line will be built first have no money to invest in it – Fresno is nearly bankrupt.
4. Governor Jerry Brown desperately included $250 million in his 2014-15 budget for California High-Speed Rail to be obtained from “Cap and Trade” allowances paid by emitters of greenhouse gases as part of the California Global Warming Solutions Act of 2006 (Assembly Bill 32 or AB 32). But the project is expected to increase greenhouse gas emissions during four years of initial construction. The Authority claims it will earn the Cap and Trade funds because offsets from its tree planting program (as well as other activities such as “cleaner school buses and water pumps in Central Valley communities”) will allow it to produce “zero net emissions.”
5. With the “blended” plan, there are serious challenges to achieving the 2 hour 40 minute travel time required in law. An analysis claiming that the time can be met includes the train going over the Tehachapi mountain range (north of Los Angeles) at 150+ miles per hour. There is idle talk about digging a long tunnel for the bullet train through the seismically-active San Gabriel Mountains from Palmdale to Los Angeles, but this is probably to lull citizens of Santa Clarita into believing the rail won’t go through their town.
6. To the surprise and confusion of hipster high-speed rail supporters in San Francisco and Los Angeles, this bullet train will be a local, with stops at least in Merced, Fresno, Hanford or Visalia, Bakersfield, and Palmdale. In June 2013, the Authority awarded a $970 million contract (with provisions for an additional $55 million) to Tutor Perini/Zachry/Parsons (a joint venture) to design and build the first 29-miles of the high-speed rail between Madera and Fresno by February 2018. People are supposed to be able to ride the high-speed rail between Merced and Palmdale by 2022.
7. The California High-Speed Rail Authority erred by awarding the first design-build contract for a 29-mile stretch that includes 25 miles in one segment assigned for environmental review (Merced to Fresno) and four miles in another segment assigned for a different environmental review (Fresno to Bakersfield). While it received full environmental clearance for the 25-mile stretch, it has not received clearance for the 4-mile stretch. In December 2013, the federal Surface Transportation Board rejected a secretive request from the Authority for an exemption to environmental review. If it can’t get the federal exemption, the Authority’s design-build contract is in jeopardy.
8. Owners of 370 parcels that the California High-Speed Rail Authority needs for the first 29-mile stretch are apparently resisting or holding out on selling their property. At last report in mid-December, the Authority had allegedly closed escrow on five parcels. The Authority has now received authorization from the California Public Works Board to possess two parcels through eminent domain.
Based on these eight points alone, who would still be eager to proceed with this project besides Governor Jerry Brown, the corporations seeking contracts, and a scattering of citizens committed to various leftist causes related to urban planning and environmentalism? Unions.
In a backroom deal, without any public deliberation or vote, the board of the California High-Speed Rail Authority negotiated and executed a Project Labor Agreement (called a “Community Benefit Agreement”) with the State Building and Construction Trades Council of California. This agreement gives unions a monopoly on construction trade work and certain construction-related professional services.
In a January 16, 2013 email about the Project Labor Agreement to the former chairman of Fresno County Economic Opportunities Commission, the Small Business Advocate of the California High Speed Rail Authority stated the following:
The Community Benefits Agreemeent (CBA) is an internal administrative document that was not necessarily intended to be circulated for public comment, however, that doesn’t mean you cannot provide me your input. The document was added to Construction Package #1 and Addendum 8 and I’ve attached it herein for your convenience. It includes regulatory compliance and is being reviewed by the Federal Rail (sic) Administration.
There is no evidence available to show that the Federal Railroad Administration approved the Project Labor Agreement, as required by law. But the final version of the agreement was signed in August 2013. No board member or administrator of the California High-Speed Rail Authority has commented in a public meeting about the agreement that will give unions control of most of the claimed 100,000 job-years of employment over a five-year period.
When State Senator Andy Vidak, with Congressman David Valadao, held a press conference critical of California High-Speed Rail on January 17, 2014 at the site of the eventually-to-be-demolished Fresno Rescue Mission, there were protesters: construction union leaders, lobbyists, public relations officials, and activists. The Fresno Bee reported this about the press conference:
In a news release prior to the announcement, Vidak indicated that his goal is to kill the bullet train. He tempered his in-person remarks, however, as he faced a crowd that included both high-speed rail critics from his home area in Kings County and a couple dozen representatives of labor unions who support the project…Rail supporters, some clad in hard hats and safety vests, booed Vidak as they wielded their own signs proclaiming high-speed rail as “good for the local economy, good for air quality and good for jobs.”
The Fresno Business Journal reported this about the press conference:
Dillon Savory, an advocate representing several local unions, commented after the event that high-speed rail would not only provide needed jobs, but it would help improve the Valley’s air, which has been heavily polluted this winter. Also, the cost of roadwork in the area is about double the cost of high-speed rail, making road construction less cost effective, Savory said. Savory criticized the anti-high-speed rail forced for trying to pit rail against water. He said the greater issue is putting people back to work with decent paying jobs. He said many union workers are only finding temporary work for about two weeks at a time. That is not putting food on the table, he said.
In 2013, Savory was the manager for the successful union-backed campaign to defeat a ballot measure (Measure G) supported by the Mayor of Fresno that would have allowed the city to outsource garbage collection. The political professionals are getting involved.
When the groundbreaking ceremony occurs for California High-Speed Rail, perhaps in an abandoned Madera County cornfield seized through eminent domain by the Authority, expect thousands of construction union workers to be bused in to block and neutralize any protesters. Governor Brown cannot suffer any more embarrassment over this boondoggle and debacle.
California Streets and Highway Code Section 2704.09 (implemented by California voters in November 2008 as Proposition 1A, as authorized by Assembly Bill 3034 (Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century)
Top-40 Donors to Campaign to Convince California Voters to Borrow $10 Billion to Start Building High-Speed Rail
Election Results by County: Proposition 1A (2008)
May 7, 2008 Senate Appropriations Committee legislative analysis for Assembly Bill 3034 (source of estimated costs of bonds, including interest payments)
July 2012 – California’s High-Speed Rail Realities: Briefly Assessing the Project’s Construction Cost, Debt Prospects, and Funding (“The Realistic – No Additional Federal Funding scenario results in a total debt burden of $203 billion between 201 3 and 2058.”)
June 2013 – Contribution of the High-Speed Rail Program to Reducing California’s Greenhouse Gas Emission Levels (includes “plans to plant thousands of new trees across the Central Valley” and “cleaner school buses and water pumps in Central Valley communities”)
November 15, 2013 – Project Update Report to the California State Legislature (source of report that $587 million was spent on consultants)
Vidak Rails Against Bullet-Train Plan, Met by Bipartisan Crowd at Fresno Event – Fresno Bee – January 17, 2014
Vidak Calls for High-Speed Rail Revote – Fresno Business Journal – January 17, 2014
California High-Speed Rail Scam
Past Articles in www.UnionWatch.org on Unions and California High-Speed Rail
Unions Creep Closer to Monopolizing California High-Speed Rail Construction – December 6, 2012
Watch Union Official’s Rude Antics at California High-Speed Rail Conference – January 15, 2013
Unions Await Fantastic Return on High-Speed Rail Political Investments – January 22, 2013
Kevin Dayton is the President & CEO of Labor Issues Solutions, LLC, and is the author of frequent postings about generally unreported California state and local policy issues at www.laborissuessolutions.com. Follow him on Twitter at @DaytonPubPolicy.
CA announces a budget surplus — and legislators can’t wait to blow it.
It’s hardly surprising, but California’s we-never-met-a-big-budget-bill-we-didn’t-like Democratic lawmakers and State Superintendent of Public Instruction Tom Torlakson have joined hands to sponsor SB 837, new legislation that would provide free public preschool to every four-year-old child in California.
The Kindergarten Readiness Act of 2014, introduced by Darrell Steinberg (D-Sacramento) and co-sponsored by Torlakson and Early Edge California, will expand access to transitional kindergarten programs to all four year old children, no matter when their birthday. Currently, children with birthdays early in the year are excluded.
“It’s impossible to overstate how important these early years are to a child’s future success in school,” Torlakson said in a press release. “Transitional kindergarten—particularly a full-year, full-day program—can make all the difference, especially for families who may be struggling to give their young children these valuable learning opportunities.”
According to the proposal, 46,000 four-year-olds would be added each year for the first five years of the program, which will cost a total of $990 million by 2019-20.
California’s current transitional kindergarten program applies to 4-year-olds who turn 5 in October, November or December. That age group was affected by the 2010 bill, which requires children to turn 5 by Sept. 1, instead of Dec. 2, to attend kindergarten. The state began phasing in the program, one month a year, in 2012-13.
Needless to say, the California Teachers Association is on board with this (and any) bill that adds thousands of new dues-paying jobs to help replenish its sagging coffers. In fact, SB 837 would create 8,000 teaching positions for class sizes of 20 children or fewer. (CTA president Dean Vogel was not very happy with the earlier bill because unlike SB 837, it let individual districts decide whether or not to offer TK.)
Interestingly, the people of CA already weighed in on the subject back in 2006 when over 60 percent of the voters resoundingly clobbered Prop. 82 – a tax-the-rich scheme proposed by actor/activist Rob (Meathead) Reiner – which would have enabled four year-olds across the state to attend taxpayer supported preschool. But the Sages of Sacto have turned a blind eye to the will of the people since then.
What do we really know about Transitional Kindergarten (TK)?
TK, Pre-K and Head Start are different names for programs that accomplish little more than adding unionized teaching and educational support jobs to the state’s payroll. Oh, sure, the sales pitch sounds great. As Steinberg says, “Expanding transitional kindergarten can be accomplished with just a fraction of increased Proposition 98 funds while saving billions of dollars in the long run by reducing the extra costs of special education, grade retention and juvenile crime.”
Steinberg’s cheerleading notwithstanding, early childhood education has never proven to have lasting results. Obviously, due to its newness, there are no longitudinal studies specifically for TK. But we sure know about Head Start, which would seem to be TK by another name. The results of the third and final phase of the federal government’s Head Start study were released in December 2012, and they matched those of the second phase of the study published in 2010. They revealed that basically the federal program has been a $180 billion (and counting) boondoggle. Lesli Maxwell in Education Week explains,
In the first phase of the evaluation, a group of children who entered Head Start at age 4 saw benefits from spending one year in the program, including learning vocabulary, letter-word recognition, spelling, color identification, and letter-naming, compared with children of the same age in a control group who didn’t attend Head Start. For children who entered Head Start at age 3, the gains were even greater, demonstrated by their language and literacy skills, as well their skills in learning math, prewriting, and perceptual motor skills.
The second phase of the study showed that those gains had faded considerably by the end of 1st grade, with Head Start children showing an edge only in learning vocabulary over their peers in the control group who had not participated in Head Start.
And now, in this final phase of the study, “there was little evidence of systematic differences in children’s elementary school experiences through 3rd grade, between children provided access to Head Start and their counterparts in the control group,” the researchers wrote in an executive summary. (Emphasis added.)
After the second phase results came out, Reason Foundation’s Lisa Snell blogged,
The just-released large-scale random assignment study of Head Start confirms once again that the $7 billion a year federal preschool program provides meager benefits to children at huge costs to taxpayers.
In other words, it’s a very expensive and wasteful federal babysitting program. The Heritage Foundation’s Lindsey Burke elaborates:
… This federal evaluation, which effectively shows no lasting impact on children after first grade and no difference between those children who attended Head Start and those who did not, should call into question the merits of increasing funding for the program, which the Obama administration recently did as part of the so-called “stimulus” bill.
In a rare moment of candor, the mainstream media joined the naysayers, Time Magazine’s Joe Klein weighed in,
You take the million or so poorest 3- and 4-year-old children and give them a leg up on socialization and education by providing preschool for them; if it works, it saves money in the long run by producing fewer criminals and welfare recipients…it is now 45 years later. We spend more than $7 billion providing Head Start to nearly 1 million children each year. And finally there is indisputable evidence about the program’s effectiveness, provided by the Department of Health and Human Services: Head Start simply does not work.
So we may as well be flushing cash down the toilet. Perhaps that is what CA governor Jerry Brown was thinking when he announced his new budget last week. It seems that the quirky state leader has reservations about the financial outlay. Friday, he said that he has adjusted his initial budget proposals “to accommodate lawmakers on some of their priorities in recent years. But he made no mention in his presentation Thursday of a chief concern of legislative Democrats: transitional kindergarten.” When asked about the proposal, the governor said he would listen to proposals, but stressed that “wisdom and prudence is the order of the day.”
It’s outrageous that the taxpayers might have to fork over billions to satisfy the political agenda of the state legislature and their teacher union cronies. The Brookings Institution’s Grover J. Whitehurst sums it all up quite well, writing that childhood education,
… remains mired in philosophy, in broad theories of the nature of child development, and in practices that spring from appeals to authority and official pronouncements of professional guilds, rather than to research. Until the field of early education becomes evidence based, it will be doomed to cycles of fad and fancy. We need a science of early-childhood education, and we need it now.
Indeed, before spending another dime on any of this, we need fiscal discipline and solid research. Until then, we are at the mercy of what Stanford’s Caroline Hoxby refers to as the cardiac test. “We just know in our heart that this is right.”
Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers with reliable and balanced information about professional affiliations and positions on educational issues.
On October 13, 2013, California Governor Jerry Brown signed Senate Bill 7, which cuts off state funds designated for construction to any California city that exercises its right under the California Constitution to establish its own policies concerning government-mandated wage rates (so-called “prevailing wages”) on contracts. This was a major victory for the State Building and Construction Trades Council of California, the construction union umbrella lobbying organization that sponsored the bill.
There are 121 California cities that govern their own municipal affairs through a charter, a mini-constitution authorized in Article XI of the California Constitution. In its letter unsuccessfully requesting for a gubernatorial veto, the League of California Cities declared that “using political leverage to punish those exercising rights provided by the Constitution is unjust” and a veto was needed to “protect the integrity of our Constitution and the communities operating in lawful compliance with it.” (Coming from the professional association of California city officials, these statements cannot be easily brushed off by California Democrats and their union allies as irrelevant “Tea Party” rhetoric.)
In California, the “Progressive” movement is determined not to let the structural protections of constitutional government impede the quest for democratic socialism and societal justice. Passing Senate Bill 7 through the state legislature and getting it signed is the type of government activism that earns praise from the national news media, as it compares the State of California favorably against the “gridlock” in Washington, D.C.
Senate Bill 7 has a practical fiscal impact as well as a constitutional significance. Out of California’s 121 cities governed under a charter, 43 do not require construction companies to pay state-mandated prevailing wages on any city contracts, and 10 do not require construction companies to pay state-mandated prevailing wages on some kinds of city contracts. The cities of El Cajon, Bakersfield, and Newport Beach are the most recent cities to establish their own prevailing wage policies. Meanwhile, unions have successfully lobbied the city councils in San Diego and Mountain View in recent months to abandon their own wage rate policies and submit to state prevailing wage law.
A couple dozen “general law” cities have recently proposed charters to voters or plan to propose charters to voters. Evading the costly state prevailing wage mandate for construction contracts has been a primary motivation for these cities, and construction unions have been aggressive in lobbying and campaigning to undermine these local efforts. In 2012, voters in the cities of Auburn, Costa Mesa, Escondido, and Grover Beach rejected proposed charters.
It’s likely that a charter city or group of charter cities will file a lawsuit in 2014 to strike down Senate Bill 7, along with two similar laws implemented by Senate Bill 922 in 2011 and Senate Bill 829 in 2012. These two laws, also sponsored by the State Building and Construction Trades Council of California, cut off state construction funds to charter cities that adopt Fair and Open Competition policies prohibiting the cities from entering into contracts requiring construction companies to sign a Project Labor Agreement with unions.
Senate Bill 7 (2013) – to be California Labor Code Section 1782
Information on Charters from League of California Cities (includes list of 121 charter cities)
State Building and Construction Trades Council of California, AFL-CIO v. City of Vista et al. – California Supreme Court decision of July 2, 2012 upholding constitutional right of charter cities to establish their own policies concerning government-mandated wage rates for municipal construction contracts.
Are Charter Cities Taking Advantage of State-Mandated Construction Wage Rate (“Prevailing Wage”) Exemptions? (3rd edition – Summer 2012) – the most comprehensive report ever published on California prevailing wage and charter city policies and an inspiration for advocates of fiscal responsibility and local control. (A 4th edition is in the works.)
News and Opinion Leading Up to and Following Gov. Brown Signing Senate Bill 7
SB 7: Cities Stand to Lose Home Rule over Municipal Affairs – www.PublicCEO.com – September 9, 2013
Three Bad Bills that Gov. Jerry Brown Should Veto – editorial – Sacramento Bee – September 9, 2013
Legislative Sampler: 2 to Sign, 2 to Veto – editorial – Riverside Press-Enterprise – September 18, 2013
Has Labor Leader Overreached? – columnist Dan Morain – Sacramento Bee – October 9, 2013 (The answer is “no.”)
Prevailing Wage Bill Deserves a Veto – editorial – UT San Diego – October 4, 2013
Governor Should Veto Wage Bill – editorial – Modesto Bee – October 11, 2013
If Gov. Brown Doesn’t Like Intrusion, He Should Veto SB 7 – editorial – Sacramento Bee – October 12, 2013
Jerry Brown Signs Prevailing Wage Bill for Charter Cities – Sacramento Bee – October 13, 2013
Brown Signs Prevailing Wage Bill – Capitol Weekly – October 14, 2013
Brown Signs Prevailing Wage Bill for Cities – Central Valley Business Journal – October 14, 2013
Governor Signs Prevailing wage Bill for Charter Cities – Sacramento Business Journal – October 14, 2013
Prevailing Wage Law Could Raise Costs – UT San Diego – October 14, 2013
Unions Smile, Cities Frown at Prevailing Wage Law – Bakersfield Californian – October 14, 2013
Modesto Fears Harm from New Prevailing Wage Law – Modesto Bee – October 14, 2013
California Construction Unions Get Two Big Wins – columnist Dan Walters – Sacramento Bee – October 15, 2013
Charter Could Cost City Funding – Newport Beach/Costa Mesa Daily Pilot – October 16, 2013
Wage Law Costs Cities More Than Money – op-ed by El Cajon Acting Mayor Bill Wells – UT San Diego – October 25, 2013
Kevin Dayton is the President & CEO of Labor Issues Solutions, LLC, and is the author of frequent postings about generally unreported California state and local policy issues at www.laborissuessolutions.com. Follow him on Twitter at @DaytonPubPolicy.