Capital News & Notes
For Clients & Friends of The Gualco Group, Inc.
IN THIS ISSUE – “…getting close to the end…I’m OK with that….”
GOV. BROWN’S LONG GOOD-BY
- Brown Tells NY Times: “The Ranch Is Calling”
- One for the History Books – His 16th State of the State Address
- State Payroll Up $1B in His Last Year
BALLOT PROPOSITIONS
- Ballot Proposition Season Comes to a Mall Near You
- Fuel Tax Hike Repeal Gains Momentum
CALIFORNIA TRENDING
- Oil Demand May Peak By 2030
- SoCal Median Home Price Hits All-Time High
- Internet Pervasive
Capital News & Notes (CN&N) harvests California legislative and regulatory insights from dozens of media and official sources for the past week, tailored to your business and advocacy interests. Please feel free to forward.
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FOR THE WEEK ENDING JAN. 26, 2018, READ ALL ABOUT IT!!
Brown Tells NY Times: “The Ranch Is Calling”
SACRAMENTO — When Jerry Brown became the 34th governor of California in 1975, he was a young and impetuous bachelor who slept on a box spring and took pleasure in defying political convention. He was the vanguard of the left, the face and spirit of a new generation of a state that — politically and culturally — was proudly distinct from the rest of the nation. He has been such a fixture ever since that it seems impossible to imagine California without him.
Now, as Mr. Brown enters the final 12 months of his second tour as governor, and as he prepares to deliver his final State of the State speech here on Thursday, he has become the face of the old order — admired for his long stewardship, but also seen as a roadblock for some younger Democrats who have impatiently awaited change.
This is a decidedly more liberal class of Democrats, on issues ranging from single-payer health care to the impeachment of President Trump, and many of them have long said the time has come for Mr. Brown’s generation to step aside.
“He is a middle-of-the-road sort of guy and if I’m being perfectly honest, he is not completely in touch with the way the majority of folks in California feel,” said Kimberly Ellis, a Democratic leader from the Bay Area who lost a fight last year to lead the state Democratic Party. “In many ways, with respect to single-payer and other issues, he and others play the safe role — the conservative role.”
After more than 45 years, Mr. Brown, 79, is entering what he says are his final months in public life. He has been governor (twice), attorney general, mayor of Oakland, secretary of state, state Democratic Party chairman, and a candidate for president (three times). Mr. Brown is barred by term limits from running yet again.
Sitting in the sun-washed first-floor salon of the Governor’s Mansion, he talked of finally leaving politics and of retiring to his isolated 2,514-acre family ranch, Rancho Venada, an hour’s drive north of here. His years of running for office, Mr. Brown said, are over.
“I think it’s getting close to the end,” Mr. Brown said, as his dog, Colusa, slept in the next chair. “I think I’m going to be O.K. with that.”
After two turns as governor, marked by many ups but also quite a few downs, a poll by the Public Policy Institute of California released in December found that 53 percent of Californians approved of how he was handling his job, compared with 28 percent who did not. That compared with a low approval rating of 34 percent in February 2011, right after he took office, to a high of 62 percent a year ago.
And though he is by most measures exiting on a high note, he has yet to deliver on some of his biggest agenda items, including high-speed rail and repairing the state’s water systems. He also predicted in the interview that California would soon enter a recession, an unusual assertion by a sitting governor.
There will, no doubt, be some Democrats who will be glad to see Mr. Brown move on; while he is celebrated in some quarters as a centering force for California and the state Democratic Party, Mr. Brown is a moderate in a state that is moving left. His departure clears the way for candidates waiting in the wings who have not shied away from expressing their eagerness for new faces to take it in that direction.
“We’re going to see a new generation of Democratic leadership being ushered into new political positions,” said Kevin de Leon, 51, the California Senate leader challenging Senator Dianne Feinstein, 84, who is seeking a sixth term.
Senator Kamala Harris, 53, who replaced Senator Barbara Boxer, 77, when she retired, has emerged nationally as what Mr. Brown once was — a potential presidential candidate representing the nation’s most populous state and embodying the hopes of its liberal wing.
“There has been a generation of really incredible leaders that have come out of California and proven themselves to be national and global leaders,” Ms. Harris said.
Mr. Brown said he was ready for his exit, but demurred when asked if he was confident he was leaving California in good hands. “Well, that’s a loaded question,” he said. “What if I say I am not confident? That’s one damn headline. So I have to say I’m confident.”
Still, the state under Mr. Brown is prosperous: Its economy is booming and Mr. Brown’s latest budget projects a $6.1 billion surplus in the next fiscal year, compared with the more than $26 billion deficit he faced when he proposed his first budget. Since the election of President Trump, California has emerged as a rare bright spot for the Democratic Party, a workshop for the party’s ideas on the environment, immigration, housing and criminal justice.
California has been spared the partisan battling that has afflicted Congress and statehouses in many parts of the country. That reflects both the overwhelmingly Democratic control of government, but also Mr. Brown’s knowledge of how Sacramento works. He is the son of a legendary governor, Pat Brown, who served from 1959 to 1967.
“Give him credit: he inherited a $26 billion deficit, and when he leaves office he’ll have an $11 or $12 billion rainy day fund,” said Gray Davis, a former governor and also a Democrat. “He took a state that everyone was cracking jokes about to one where analysts are truly impressed with the financial progress that has been made.”
That said, the future of Mr. Brown’s two most ambitious initiatives — building a high-speed train line from San Francisco to Los Angeles and repairing the state’s water network — is far from assured. As several critics noted, Mr. Brown has not extended his considerable political clout to take on some of the tougher challenges California faces — among them, a volatile tax system that, because of its reliance on high-earner taxes, has fueled repeated booms and busts, and a public pension system facing ruinous shortfalls. California continues to be saddled with one of the most severe affordable housing and homelessness crises in the nation.
Mr. Brown predicted California would fall into a recession within the next two or three years. He and other Democrats are worried about the toll the Republican tax overhaul could take on the state’s economy and housing market. And it is hardly clear that the Democrats fighting to succeed him will champion the kind of fiscal restraint that was a hallmark of Mr. Brown’s tenure.
Pete Wilson, a former Republican governor who defeated Mr. Brown in a race for the United States Senate in 1992, said Mr. Brown had held the line on spending “to a degree.” But he said spending and taxes had still risen and he faulted Mr. Brown for failing to take on public employee pensions.
“I’ve heard a number of people say that Jerry’s the most conservative Democrat in Sacramento,” Mr. Wilson said. “That may be, but that’s not setting the bar too high. Jerry has cultivated an image of himself as a skinflint, which has caused most conservatives to smart and laugh.”
Asked if there was anything that he regretted not accomplishing, Mr. Brown responded: “Not particularly.”
“I’m sure there are a lot of things — I’ve done a lot of things,” Mr. Brown said. “You can’t do everything. You don’t create perfection.”
In the course of a 70-minute interview at the mansion, Mr. Brown was relaxed, discursive, self-reflective and at times quarrelsome as he spoke about his past and his future. (“You’re asking me predictions — let me get my crystal ball here,” he said when asked if the congressional tax law would hurt California. He went on to expound at length about why it would, in his view, do exactly that.)
Mr. Brown said national Democrats needed to recruit new and stronger leaders to steer the party back into control.
“The Republicans have been more effective,” he said. “They were able to stigmatize the Affordable Care Act and the Obama administration in an incredible way. Republicans are very effective propagandists.”
Mr. Brown argued that the Republicans were ripe for attack.
“We have a lot of needs,” he said. “We know the population is aging. We know the cost of Medicaid and Medicare are going up. You are increasing the social divisions in America which will make America less governable and therefore less secure.”
In his remaining months, Mr. Brown said he would be turning his attention to finishing up his California business.
“I think he realizes that he is running out of time,” said Mr. Davis, who was Mr. Brown’s chief of staff when Mr. Brown held the office in the 1970s. “If he wants to follow in his father’s footsteps, he has to accomplish big things. But certainly, high-speed rail, fixing the state’s water system and righting the state finances are three big things.”
Mr. Brown said he would use the rest of his year to advance the water tunnels and the high-speed train, both of which have faced rising opposition as Republicans gained control in Washington. State officials announced last week that the cost of building just one section of the train — 111 miles of track through the Central Valley — was now projected to cost $10.6 billion, up from an original estimate of $6 billion.
“It’s challenging because no great infrastructure is ever built without federal help,” Mr. Brown said. “Certainly I would hope we get help in the post-Trump era. We can keep going. But at some point we need the help of the federal government.”
Given that strategy, the project’s future may rest with the next governor. There are two Democrats leading the field to succeed Mr. Brown: Antonio R. Villaraigosa, the former mayor of Los Angeles, and Gavin Newsom, the lieutenant governor. Mr. Villaraigosa supports the project; Mr. Newsom, after initially supporting it, has expressed reservations about its cost and financing.
Mr. Brown predicted his successor would face demands for “virtually limitless spending” from lawmakers that would be almost impossible to meet. “They will have a very short honeymoon of spending,” he said.
California has been a touchstone for the Brown family since the governor’s great-grandfather arrived on a wagon train more than 150 years ago. There are no members of the Brown dynasty waiting to step in, to run for office or to pick up Mr. Brown’s role as the state’s ambassador, advocate and historian.
Mr. Brown seems at peace with that.
“I will do some,” he said. “But I am not going to commit myself to a torrid travel schedule. Not when I have the ranch calling.”
Governor’s 16th State of the State Address: “The Bolder Path”
California has prospered over the past eight years despite critics’ warnings of doom and financial collapse, Gov. Jerry Brown said Thursday, arguing in his final State of the State speech that the embattled high-speed rail and delta tunnels will ultimately emerge as successful projects that greatly benefit the public.
In a wide-ranging speech, the termed-out 79-year-old governor passionately argued for the unpopular undertakings, saying any big project has setbacks.
“Difficulties challenge us, but they can’t discourage or stop us,” Brown said in his 16th State of the State speech. “Yes, there are critics, there are lawsuits — lots of them — and there are countless obstacles. But California was built on dreams and perseverance and the bolder path is still our way forward.”
Brown told lawmakers at the Capitol that governments have to do what individuals can’t, such as building big infrastructure projects. He reminded lawmakers that often, in these big projects, like the building of the new eastern span of the Bay Bridge — costs escalate — but that this should not deter the state from being bold and moving ahead. Those projects, he said, ultimately serve a public need.
Among those projects, he said, is the state’s responsibility to fix and maintain its vast network of freeways and bridges. The state’s transportation system is essential, he said, vowing to fight a Republican-led effort to repeal the gas tax. Last year, Brown signed a bill to increase gas taxes and vehicle registration fees to pay for road maintenance. Opponents of the law are currently collecting signatures for a ballot measure to overturn it.
He emphasized the need for the state to lead by example on climate change and environmental protection: “We can’t fight nature. We have to learn to get along with her,” he declared, twice.
Clean energy and greenhouse gas-reducing initiatives, such as the state’s goal of putting 5 million zero-emission vehicles on the road by 2030, are essential to protecting the environment, he said.
He noted that eight of the state’s most destructive fires have happened in the past five years, with the Thomas Fire in Ventura and Santa Barbara counties becoming the largest in recorded history. Devastating mudslides that followed were among the most deadly in state history.
He announced he is convening a task force to review how the state manages its forests to reduce the increasing threat of fires — and protect the trees that help reduce carbon, a cause of climate change.
“We should never forget our dependency on the natural environment and the fundamental challenges it presents to the way we live,” Brown said.
Brown, who served two terms as governor from 1975-83 and began another two terms in 2010, will cap his 50-year political career in December.
Like with his previous 15 State of the State speeches, Brown highlighted education and criminal justice reform. He touted his Local Control Funding Formula, which gives more money to school districts with low-income, foster and English learner students.
Brown mentioned the “struggle for funds” when it comes to higher education — a nod to the University of California regents, who postponed a vote on tuition increases Wednesday.
The governor is proposing an online community college so working adults can receive low-cost training to raise their wages.
Brown also urged lawmakers to look at the state’s criminal justice system — with its growing prison budget and massive penal code provisions. New laws have been added — oftentimes in response to a specific heinous crime — without considering how each law interacts with the ones on the books, Brown said.
“My plea is relatively straightforward: Take time to understand how our system of crime and punishment has evolved, how other states and countries have devised their prison systems and what changes we now make,” Brown said.
While his State of the State speeches typically are short, with last year’s address lasting 16 minutes, Brown held the rostrum for 30 minutes on Thursday. He lingered in the Assembly to pose for selfies with lawmakers and signed their commemorative programs where he typically was whisked away after previous speeches.
“I thought he gave a great 16th and final speech,” said Assemblyman Phil Ting, D-San Francisco. “He doubled down on the environment, focusing on clean air, clean water and enshrining those victories.”
Brown said as the climate changes and more rain instead of snow changes how the state captures and stores water, California will need to modernize its “broken water system.” To that end, he said he remains convinced the delta tunnels project is the answer.
“That is the reason I have persisted,” Brown said.
The delta tunnels project and high-speed rail have been beset by problems. The high-speed rail is billions over budget, behind schedule and suffering from a revolving door of leadership. Brown is considering scaling back the controversial delta tunnels plan that would move water around the state, from two tunnels under the Sacramento-San Joaquin River Delta to one.
While Brown was making the case for the projects to lawmakers and the public, his most crucial audience may be the next governor. Two hopefuls — Lt. Gov. Gavin Newsom and state Treasurer John Chiang — sat beside him while he spoke.
Newsom said Brown is “wise” to scale down the tunnels project as he tries to move the project forward.
“There are few things more attached to his legacy than this issue,” Newsom said. “I’m hopeful the governor can pull it off.”
Newsom, who has been critical of the bullet train’s financing and lack of transparency, said Brown rightfully made the case for the project.
“This is a very challenging projet to complete and (if elected) I am up for that task,” Newsom said. “I want to see it done.”
http://www.sfgate.com/bayarea/article/Jerry-Brown-celebrates-California-s-strengths-12525428.php
As-prepared remarks, from which he varied:
https://www.gov.ca.gov/home.php
State Payroll $1 Billion Higher In 1 Year
California’s state payroll – excluding its universities – grew by more than $1 billion last year, twice the rate of growth as the previous year, according to new figures from the State Controller’s Office.
The 6 percent growth rate was not unexpected. More than half of the state’s workforce voted on labor agreements early last year that included substantial pay raises. Money for the raises was included in the 2017-18 state budget.
The largest contract, for Service Employees Union Local 1000, included one-time bonuses of $2,500 for more than 95,000 state workers. That’s worth more than $235 million in total compensation for employees the union represents.
The California Department of Corrections and Rehabilitation saw payroll increase by $452 million, or 9 percent. The Department of Forestry and Fire Protection logged an $87 million, or 13 percent, increase in payroll as the state experienced a horrible wildfire season.
The Sacramento Bee’s state worker pay database has been updated with more than 250,000 civil service and California State University salaries for 2017. To search all state employee salaries, visit sacbee.com/statepay.
The number of state employees outside of universities earning more than $300,000 increased from 456 in 2016 to 709 in 2017, a rise of 56 percent. Those employees, however, still make up only a sliver of the state’s workforce.
Most of the highest-paid state workers outside of universities are doctors and dentists in the state prison system. The union for those doctors negotiated a pay hike of up to 24 percentover the next four years early last year. Prison health officials cited the difficulty of filling vacancies as a justification for the contract.
The highest-paid state worker outside of universities remains Ted Eliopoulos, chief investment officer of CalPERS. He earned about $867,000 last year, up from $768,000 in 2016.
CalPERS saw an 11.2 percent return on its investments in fiscal year 2017. That came as stock markets soared, with the S&P 500 increasing by 15.2 percent over the same period.
The state’s payroll fell during the recession a decade ago before stabilizing around 2012. It has risen since then.
Adjusted for inflation, California’s state payroll excluding universities was about 5 percent higher in 2017 than during 2008. The state’s population has grown
http://www.sacbee.com/news/politics-government/the-state-worker/article195655949.html#storylink=cpy
Ballot Proposition Season Comes to a Mall Near You
The folding table full of clipboards and flapping sheets of paper — a staple of ballot measure campaigns and thus a hallmark of California politics — is back in front of neighborhood grocery stores and shopping malls.
The race is on to collect voter signatures on any initiative angling for a spot on the Nov. 6 statewide ballot.
State elections officials have suggested there are about 90 days left to gather and submit those signatures on initiatives to write state law, borrow money or amend the California Constitution. After that, the odds become long for tallies to be finalized in time for the formal certification of fall ballot propositions.
Interviews with political strategists and those who circulate initiative petitions suggest that as many as a dozen measures could end up on the final list. Two years ago, there were 17 propositions — the most since Bill Clinton was president.
At this point, only one proposition is official: a $4-billion bond for affordable housing and veterans assistance written by the Legislature. But two more on the subject of housing look likely — one that would expand the power of local governments to impose rent control and another to allow more of the state’s older homeowners to transfer their existing property tax burden to a new residence.
Two ballot measures to radically restructure California’s system of governance, both of which failed to get on the ballot in the past, look more likely this time. One is championed by John Cox, a Republican candidate for governor. It would reshape the Legislature by requiring the selection of some 12,000 neighborhood representatives who then would choose 120 of their peers to serve in Sacramento. Far more disruptive would be the initiative by Silicon Valley investor Tim Draper to split the Golden State into three smaller states. Draper failed to qualify a six-state version of his California carve-up in 2014. Like that effort, this version could be challenged as violating the U.S. Constitution.
Debates over the cost of kidney dialysis and the rights of consumers to keep their information private are both addressed in likely ballot propositions. So, too, is a proposal to require drivers and technicians at private California ambulance companies to be on call during their meal and rest breaks. And this month, a group of powerful national paint companies quietly put $6 million into a campaign for a ballot measure under which taxpayers would pay for lead paint cleanups. That proposal is still a few days away from hitting the streets, but the industry’s cash gives it a good shot at gathering the almost 366,000 valid signatures needed to get it on this fall’s ballot.
Two proposals would ask California voters to rework or throw out existing law. Crime victim advocates seek to expand the definition of a “violent felony” and thus exclude more prisoners from the expanded parole rules championed in 2016 by Gov. Jerry Brown. Critics of last year’s $52-billion state transportation plan, meanwhile, are pushing a constitutional amendment that would force an up-or-down vote on the increased gas taxes in 2020.
Only one other proposal seems likely at this point: an $8.9-billion bond for water supply and watershed protection.
Whether any of the measures can actually win on election day isn’t clear. But on the journey of 1,000 political miles, the first step is getting your signature outside that local store. And soon.
http://www.latimes.com/politics/la-pol-ca-road-map-ballot-initiatives-signatures-20180121-story.html
Fuel Tax Hike Repeal Gains Momentum
The effort to overturn the fuel tax and vehicle fee increases in California’s new transportation funding law appears to be gaining momentum.
The author of one proposed ballot measure is now backing a rival initiative that could be headed for the November election.
The first measure was authored by Orange County Assemblyman and Republican gubernatorial candidate Travis Allen. It would have repealed the transportation funding law – SB 1 – word for word.
But it’s been held up in a legal battle over how voters would see it described on the ballot. Democratic Attorney General Xavier Becerra assigned it what Allen calls an unfair title and summary.
So Allen is now endorsing a different initiative backed by his GOP rival in the governor’s race, San Diego businessman John Cox – who gleefully jabbed Allen in a recent debate on KPCC.
“Travis, welcome to the fight on getting rid of the gas tax!“ Cox said. “Glad to have you on board, finally!”
Cox has joined the campaign for the second ballot measure and, as Allen was quick to point out a moment later in the debate, chipped in some money in exchange for being named campaign chairman.
“I’d like to say thank you very much to John Cox for writing a $250,000 check to buy his way into the repeal the gas tax,” Allen quipped.
Political shots aside, the second initiative does have some momentum. The campaign says it’s gathered more than two-thirds of the 585,407 signatures needed to qualify.
The measure would require voter approval for any gas tax or vehicle fee increases.
“And then it applies that constitutional mandate retroactively to January 1st of 2017, effectively repealing this particular gas tax and requiring that any increase in those taxes go back to the voters,” says Jon Coupal with the Howard Jarvis Taxpayers Association, one of the initiative’s other backers.
But if the measure qualifies for the November ballot, it’s expected to face strong opposition – including from Gov. Jerry Brown, who said he thinks it can be beaten.
“If it does pass, it’ll be a decade at least before anyone thinks of providing the necessary money for roads and bridges,” Brown said as he presented his budget proposal earlier this month.
Backers of the second initiative have until mid-May to turn in their voter signatures, but they’ll likely do so earlier to ensure the signatures are verified in time for the measure to make the November ballot.
http://www.capradio.org/108731
Oil Demand May Peak By 2030
Peak oil demand may be just 12 years away.
That’s according to Bank of America Merrill Lynch analysts including Peter Helles, who predict that 40 percent of all car sales will be electric vehicles by 2030, reducing the need for oil as a fuel for transport.
“Electric vehicles will likely start to erode this last major bastion of oil demand growth in the early 2020s and cause global oil demand to peak by 2030,” the analysts wrote in an emailed report.
Despite strong global oil consumption helping to push crude prices higher, the rise of electric vehicles is seen as one of the biggest long-term threats to demand. Most oil companies see demand peaking around 2040, while Royal Dutch Shell Plc has said it expects to see demand peak in the early 2030s. Consultancy Wood Mackenzie said late last year that it expects oil demand growth to crawl, but not peak, by 2035, forcing major energy companies to shift from oil to natural gas and chemicals.
SoCal Median Home Price Hits All-Time High
The Southern California median home price in December finally surpassed bubble-era highs, a milestone that took more than a decade to achieve and is once again raising concerns that housing is too costly.
The six-county region’s median price surged 8.2% from a year earlier to $507,500, real estate data firm CoreLogic said Wednesday. That tops the bubble-era high of $505,000 in 2007, which was matched in September and November.
Adjusted for inflation, the region’s median is still nearly 13% below the 2007 peak, and there are other caveats as well. But the new nominal record is noteworthy as a historical marker and because more borrowers who were underwater probably are no longer.
“It goes to show you just how outrageous the last bubble was — for us to take 10 years to get back to that nominal level,” said Christopher Thornberg, founding partner of Beacon Economics.
In none of the six counties, though, did the median — the point at which half the homes sold for more and half for less — reach a new nominal high. The record for Los Angeles County was reached last summer when it hit $575,000 and has dipped $5,000 since then.
http://www.latimes.com/business/la-fi-home-prices-20180124-story.html#nws=mcnewsletter
Internet Pervasive
Since the internet became mainstream less than 20 years ago, faith in traditional institutions and consumption of traditional media has also been displaced by faith in newer, digital institutions and consumption of newer, digital media, according to the 15th annual Digital Future Report recently produced by the USC Annenberg Center for the Digital Future.
In the years since the USC Annenberg Center for the Digital Future published its first Digital Future Report in 2000, the internet has evolved from a secondary medium to an essential component of daily life.
Over the course of that time:
- Overall internet penetration has increased from 67 to 92 percent.
- Total hours per week online has steadily increased from 9.4 to 23.6.
- Internet usage at home has risen from 3.3 to 17.6 hours per week.
http://news.usc.edu/134580/internet-use-at-home-soars-to-more-than-17-hours-per-week/