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IN THIS ISSUE – “Compromise and Collaboration”…in the Capitol!
- Inside Look at Legislators Legislating…Or Not…
- Dealing with Wildfires: $26 Billion
- Final 2019-20 California Financial Plan
- New State Budget Benefits Public Employee Unions
- State’s Healthcare Insurer Announces Record Low Premium Hike
IT’S THE WATER
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 JULY 12, 2019
Inside Look at Legislators Legislating…Or Not…
An inside look at legislating, or what Mark Twain famously called “making sausage.” Revealing the nuanced world of what happens in plain view in legislative committee rooms. Courtesy of CalMatters…you have to read this to the plot twist at the very end….
The #MeToo era notwithstanding, an Assembly committee killed legislation this week that would have allowed authorities to crack down on psychologists who engage in sexual misconduct with their clients.
On behalf of the California Board of Psychology, Sen. Richard Pan is carrying legislation to update definitions of sexual misconduct. It stalled Tuesday.
Currently, these acts don’t warrant license revocation: sexting, phone sex, trading nude photos, or giving sex toys as gifts.
Pan, a Sacramento Democrat, told the Assembly Business & Professions Committee:
“You could actually lick the nipple of a male patient, and that would not meet that [current] definition.”
In nine cases over five years, the board sought to revoke shrinks’ licenses. In one case, a woman client became suicidal after her therapist coaxed her into sexual acts. But the nine psychologists were given probation.
Beverly Hills psychologist Stephen Phillips, head of the Board of Psychology, testified:
“We are leaving sexual predators in a position where they still have a license to practice psychology and see patients.”
The Senate approved Pan’s bill 38-0. But Assembly Business & Professions Committee Chairman Evan Low said Pan should take a “more holistic” approach and include more professions.
Low, a Democrat from Campbell: “We of course in Assembly B&P will not tolerate any kind of sex misconduct. … Unfortunately, at this time, it is too narrow in scope, so we do not offer amendments.”
Pan’s bill died without a vote.
A connection? Three of Low’s bills stalled in the Senate Business & Professions Committee last week. Pan sits on that committee.
The Legislature yesterday passed a $26-billion, bipartisan proposal to deal with the state’s ongoing wildfire threats, which Gov. Gavin Newsom announced he would sign today.
Newsom worked with lawmakers behind the scenes to pass a comprehensive plan ahead of a month-long summer recess.
Under the plan, utility companies would need to pay $5 billion in order to access a fund of up to $21 billion, with PG&E contributing the greatest share of the burden.
If San Diego Gas & Electric and Edison agree to participate, costs for the $21 billion going into the fund would be evenly shared between California’s largest investor-owned utility companies and ratepayers. A new panel called the California Catastrophe Council would run the fund.
A $2.50 surcharge added onto customers’ bills after the 2001 energy crisis was set to expire in 2020. The plan lawmakers approved Thursday morning extends the fee for another 15 years, giving them cover to claim they aren’t raising rates.
In a statement, Newsom praised lawmakers for moving the bill onto his desk.
“I want to thank the Legislature for taking thoughtful and decisive action to move our state toward a safer, affordable and reliable energy future, provide certainty for wildfire victims and continue California’s progress toward meeting our clean energy goals,” Newsom wrote. “The rise in catastrophic wildfires fueled by climate change is a direct threat to Californians. Strengthening our state’s wildfire prevention, preparedness and mitigation efforts will continue to be a top priority for my administration and our work with the Legislature.”
Republicans from rural, fire-prone districts joined Democrats in supporting the measure.
Assemblyman James Gallagher, R-Yuba City, blamed PG&E for putting lawamkers in a difficult position after the company declared bankruptcy in January. While he said he was torn, he ultimately decided to back the plan.
“Many rooting for this bill to fail want to see the government take over PG&E,” Gallagher said on the Assembly floor on Thursday. “If there’s anything worse than big business, it’s big government.”
But not everyone was on board with the wildfire plan.
Assemblyman Marc Levine, D-Greenbrae, opposed the bill, expressing worries it may shift the burdens of future wildfire liability costs away from utilities.
Under the current system, companies must prove they manage their equipment properly. Assembly Bill 1054 shifts the burden of proof, requiring others to show the utilities acted recklessly.
Others have expressed concerns that the plan doesn’t offer immediate compensation to wildfire victims. Rather, it sets a deadline for PG&E to exit bankruptcy and pay victims by June 2020.
Up from the Ashes — an advocacy group representing wildfire victims — supported the proposal and said it’d offer a more concrete timetable for victims to get reimbursed for the losses they had incurred.
“With fire season fast approaching, and so many victims still struggling, putting AB 1054’s protections into practive quickly is going to make a tremendous difference,” said Patrick McCallum, co-president of the organization and victim of the 2017 Tubbs Fire victim. “It’s our best hope going forward.”
Assemblyman Jim Wood, D-Santa Rosa, supported the bill, though he and a few of his colleagues from both parties sent Newsom a letter last month asking for more money to prevent fires from breaking out in the first place. Woods had a bill that called for $1 billion to fireproof homes, but that funding was later stripped from his proposal in amendments.
Assemblyman Chad Mayes, R-Yucca Valley, co-authored the proposal. Moments before the vote was taken, he acknowledged its flaws but explained why his colleagues needed to support it.
“This bill is not perfect, but is the best we all could come up with,” Mayes said. “It’s a work of compromise and collaboration. It was Republicans and Democrats working together.”
Supporters like Senate leader Toni Atkins say immediate action is necessary, especially amid threats from credit ratings agencies to downgrade some utilities in the state to junk bond status.
“Doing nothing is not an option. Not only for those communities that would find themselves devastated by wildfires, but for all Californians,” Atkins said in a statement. “Without action, we would face a number of untenable scenarios including rate increases, disruptions with power delivery and major uncertainty for victims of the 2017 and 2018 fires.”
You’ve read the January version, seen the drama in the legislative hearings, watched the news summaries and now the e-book:
The state budget package that Democratic legislators and Gov. Gavin Newsom just enacted is sprinkled with billions of dollars in extra goodies for their most important political constituency, labor unions.
Take, for example, Senate Bill 90, the budget’s omnibus education measure. It would allocate $3.1 billion to reduce mandatory payments that local school districts would otherwise have to make to the State Teachers Retirement System (STRS) and the California Public Employees Retirement System (CalPERS).
CalPERS has been ramping up mandatory contributions from school districts and local governments to deal with tens of billions of dollars in unfunded pension liabilities. Former Gov. Jerry Brown and the Legislature rescued STRS from its similar situation by requiring that the state, teachers and school districts contribute more.
By reducing those payments, the appropriations would put that much additional money on the table for school salary negotiations. It bails out districts, such as Los Angeles Unified, Oakland Unified and Sacramento Unified, that have dug deep financial holes by overspending and underwrites salary negotiations in other districts.
Another budget trailer bill, Senate Bill 75, provides $36 million to help pay non-teaching school employees during summer vacations – in effect, extra pay for the unionized workers.
SB 75 also allocates $10 million to create records on childcare workers, with the stated goal of making it easier for the Service Employees International Union or some other labor organization to organize them in the future.
The state is pouring hundreds of millions of dollars into expanding what’s called “early childhood education” and unions see the child care industry as ripe for unionization.
It’s similar to what happened a couple of decades ago when workers who care for the elderly and disabled under the federal-state In-Home Supportive Services (IHSS) program were designated as employees who could be unionized.
Speaking of which, still another budget trailer bill, Senate Bill 80, would impose financial penalties on counties that don’t reach a contract agreement with IHSS worker unions, thus giving them leverage in negotiations.
The biggest labor bill of the year, however, is not attached to the budget. Assembly Bill 5 would lock into law a ruling by the state Supreme Court that several million workers who have been treated as contractors must become payroll employees with the attendant benefits and, of course, the potential to be unionized.
Unions sought the ruling, saying that workers misclassified as contractors were being exploited, citing drivers for on-call transportation services such as Uber and Lyft as examples.
The measure has touched off furious efforts by affected employers, and sometimes their contract workers, for exemptions but the author of AB 5, Assemblywoman Lorena Gonzalez, has agreed to only a few.
Gozalez, a Democrat from San Diego and a former union official, moved the bill through the Assembly easily, but its fate in the state Senate is uncertain. That said, she has a powerful lever because if the Legislature doesn’t act, the Supreme Court ruling’s three-factor test for who’s an employee and who’s not remains in effect.
While a Legislature dominated by Democrats makes its bias for union organization quite obvious, there is one notable exception.
Assembly Bill 969, also carried by Gonzalez, would allow the Legislature’s own workers to become union members. It didn’t even receive an initial hearing in the Assembly’s labor committee.
It’s a stark example, not the first, of the Legislature’s penchant for imposing obligations on others while exempting itself.
Covered California announced that it expects an average premium increase of 0.8 percent for 2020 in the state’s individual marketplace, the lowest such rate change since the health insurance exchange started business in 2013.
Peter V. Lee, the executive director of Covered California, attributed the low rate change to bills passed by the California Legislature and signed into law by Gov. Gavin Newsom over the past six months.
The legislation includes a so-called individual mandate that will impose a state tax penalty on any California resident who does not maintain health insurance coverage and offers state subsidies that will help an estimated 922,000 residents pay for insurance.
“The bold moves by Gov. Newsom and the Legislature will save Californians hundreds of millions of dollars in premiums and provide new financial assistance to middle-income Californians, which will help people get covered and stay covered,” Lee stated in a prepared news release. “California is building on the success of the Affordable Care Act and bringing quality care and coverage within reach for more people.”
He also noted that the legislative changes so improved insurer confidence that Anthem Blue Cross decided to return to offering coverage in much of the state.
The federal law, enacted in 2010, was a congressional attempt to bring affordable health care coverage to all Americans. Besides giving states the ability to create health marketplaces where insurers could compete to win consumers, the measure also protected patients from losing insurance because of pre-existing conditions and established minimum coverage provisions that all policies must offer.
However, the law has been challenged almost from the time it was passed, and Tuesday, California Attorney General Xavier Becerra will lead a coalition of 20 Democratic-controlled states in seeking to overturn a Texas judge’s ruling that the Patient Protection and Affordable Care Act is unconstitutional.
Judges in the U.S. Court of Appeals for the 5th Circuit are hearing arguments today from Becerra and the attorney general for Texas who is representing 18 Republican-led states that want the legislation overturned. U.S. Attorney General William Barr has said he will not defend the measure.
The Republican-controlled Congress gutted key components of the Affordable Care Act — doing away with the federal individual mandate, for instance, that gave a credit to taxpayers who bought insurance and penalized those who didn’t. And, the Trump administration has refused to reimburse insurers for the discounts that the law requires them to offer.
Those actions led to uncertainty in the marketplace and double-digit rate increases in the last two years. Covered California responded by allowing insurers to impose surcharges on the popular silver-tier policies to recoup the cost, and that staved off a mass exit of insurers.
Still, Anthem Blue Cross exited from offering insurance in many counties out of concerns about profitability. Now, Covered California announced Tuesday, Anthem plans to expand back into many areas of the state, meaning that virtually all Californians will have a choice of two insurers and 87 percent will have a choice of three.
“The fact that we have a major national plan re-entering major markets and that we’re ensuring virtually everyone across California has a choice in coverage is proof that, when you have a competitive market, it can work for both consumers and health plans,” Lee said.
Covered California officials estimate that the number of state residents getting insurance will increase by an estimated 229,000 people. The Golden State’s individual health marketplace now numbers roughly 2.2 million people, according to estimates from Covered California, and 1.39 million of those individuals buy their policies through the Sacramento-based health exchange.
The California subsidies will benefit roughly 235,000 state residents who do not qualify for premium assistance from the federal government because their income exceeds limits and 663,000 Californians who currently receive federal subsidies and will now also get a state one.
About 23,000 Californians whose annual income is just 138 percent of the federal poverty level — $17,237 for and individual and $35,534 for a family of four — will be able to get premiums of $1 per member per month.
“The winners of making coverage more affordable an once again requiring consumers to be insured are all 2.2 million people in the state’s individual market and Californians who benefit from having more of their friends, family and neighbors insured,” Lee said.
Covered California estimated that this year’s legislative changes resulted in premium decreases of 2-5 percent. The insurers’ proposed rates are subject to regulatory approval..
The California Senate sent legislation to Gov Gavin Newsom’s desk that will spend $130 million a year over the next decade to improve drinking water for about a million people.
About one million of California’s nearly 40 million residents don’t have access to clean drinking water because of pollution from humans or natural causes, a fact state lawmakers have called an embarrassment for a state with the fifth-largest economy in the world. The problem is statewide, but it is concentrated in the Central Valley — the capital of the state’s $20 billion agriculture industry.
Senators approved the measure 38-1.
Newsom had proposed a tax on most residential water bills to address the problem. But state lawmakers were wary of approving a new tax in a year when they had an estimated $21.5 billion surplus.
Instead, on Monday the state Senate approved a bill that would authorize spending up to $130 million each year on the state’s distressed water districts, with most of it coming from a fund aimed at fighting climate change.
California voters have approved billions of dollars in infrastructure projects for water districts over the years. But the problem, advocates say, is smaller water districts can’t afford to maintain them. The proposal would authorize spending through 2030 to help these districts with their operating costs, including consolidating smaller districts to help improve their management and finances.
But instead of coming from the state’s general fund and its bountiful surplus, lawmakers agreed to take the money from the state’s cap and trade program. The program requires the state’s biggest polluters, like oil refineries and farms, to buy credits to let them pollute. It has generated more than $9.5 billion since its inception, and state officials are supposed to use that money to reduce greenhouse gas emissions to improve the environment and public health.
That’s why some lawmakers are alarmed at the idea of raiding the program to pay for things outside of the program’s original purpose.
“We’re pitting clean water against clean air. We know Californians can and must have both of them,” said state Sen. Bob Wieckowski, a Democrat from Fremont who was the only lawmaker to vote against the bill on Monday.
State Sen. Bill Monning, a Democrat from Carmel, said climate change has hurt California’s water quality by reducing surface water flows, accelerating the decline of groundwater basins and “increasing concentrations of environmental contamination.”
“I see ourselves with this bill as first responders, as emergency first responders to communities for whom many of us this is a theoretical challenge because we enjoy and take for granted clean, safe drinking water when we turn on the tap,” Monning said. “Too often when we talk about climate change we refer to a future risk. Members, climate change is upon us.”
Water is easy to take for granted. It falls from the sky, and, though it’s vital, we sometimes treat it as if it’s worthless. How often have you seen sprinklers running in the rain?
Yet the prospect of shortages in the years ahead could make water a precious commodity. That represents an opportunity for investors.
A small group of traditional mutual funds and exchange-traded funds already invest in it, mainly in companies that contribute to the delivery, testing and cleaning of potable water. Those companies stand to grow as governments around the globe strive to stem the expected water shortfalls.
“Water scarcity is a global phenomenon,” said Andreas M. Fruschki, portfolio manager of the AllianzGI Global Water Fund. “And it’s most pronounced in regions with the highest population growth,” like the Indian subcontinent and the Middle East.
Population growth, climate change and pollution are disrupting the world’s freshwater supplies. The United Nations Environment Program has predicted that half the globe’s population could face severe water stress by 2030. Annual expenditures of $200 billion, up from a historical average of about $40 billion to $45 billion, are needed now to keep spigots running, the U.N. said in a 2016 report.
Even developed countries face rising costs to deliver water, because water is heavy and hard to move long distances. “Rain in New York doesn’t help Southern California,” Mr. Fruschki said. On top of this, much of the water infrastructure in the developing world is antiquated and overdue to be replaced, he said. That’s leading to water-main breaks across the United States and the loss of two trillion gallons a year of drinking water, according to the American Society of Civil Engineers’ 2017 Infrastructure Report Card.
The 35 companies held by the AllianzGI fund provide products or services to help overcome water scarcity and remedy infrastructure shortcomings, Mr. Fruschki said. The fund’s largest holding, American Water Works, is a utility that operates in 16 states, including New York and New Jersey. Another top holding, Xylem, supplies a spate of water technologies as diverse as pumps and smart meters.
A quirk of this sector is that, though water is a commodity, it can’t be bought directly in the way many other commodities can be. “It’s not a tradable good like oil,” Mr. Fruschki said. Australia has a water market, called Waterfind. But in the United States, betting on the price of water requires buying land that has water rights associated with it. Harvard University’s endowment, for example, has bought up California vineyards and thus acquired control of their water rights.
Created in 2008, the AllianzGI fund returned an annual average of 9.83 percent over the 10 years that ended in June, compared with 5.37 percent for its average Morningstar peer. The fund is unusual in this niche in that it’s actively managed. The bulk of the water mutual funds and E.T.F.s available to retail investors track indexes and are not actively managed.
One way water investments differ from those in some other sectors is their greater exposure to regulatory and political risk. In the developed world, water supplies are often closely regulated, and in the United States, governments are both big customers and potential competitors.
That’s why a fund’s diversification, especially its country diversification, matters, Mr. Bloom said. Even if the United States were to tighten water regulation, other countries wouldn’t necessarily follow.
Matthew C. Sheldon, senior portfolio manager for water strategy at KBI Global Investors in Boston, said, “Different investors come to water from different angles. Some are looking to dilute their other natural-resource exposures. Others are looking for an infrastructure play. Some have a strong interest in environmental, social and governance investing. Some just want a diversifier.”
An internal analysis conducted by KBI found that adding a water E.T.F. to an already diverse portfolio both increased its overall return and reduced its risk.
But water wagers create ethical quandaries for some investors, said Monika J. Freyman, director for investor engagement, water, at Ceres, a Boston nonprofit. “Water’s needed for life itself,” she said. “So if you’re jacking up rates, you are going to run into social justice issues. Do you turn off a poor family’s water?”
Some investors shy from the sector because “a lot of people see publicly traded water utilities as water privatizers,” said Julie K. Gorte, senior vice president for sustainable investing at Impax Asset Management. Water, in this view, should be publicly owned and controlled to ensure that everyone has access to it. In reality, “municipalities often contract with water utilities” and regulate their service provision, Ms. Gorte said.
Robert Glennon, a water-law expert at the University of Arizona’s Rogers College of Law, said some of the distrust of private-sector control of water supplies may stem from misunderstandings of what customers pay for and where most fresh water goes. “Water may be a gift from God, but God doesn’t give us pipes, and pipes are expensive,” he said.
Household water accounts for only a small portion of water consumption — in the United States, about 7 percent, Professor Glennon said. The rest is used by farms and industry. And they have little incentive to use it prudently because nearly everyone in the United States pays little for water, he said.
“Our water supply is like a giant milkshake, and each diversion is a straw in the glass. People have a sense of our water supply as infinite, but in reality, it’s finite and exhaustible,” he said.
Economists, starting with Adam Smith, have long pondered the diamond-water paradox. Simply put, it’s the puzzle that fresh water is essential for life but cheap, while diamonds are a mere ornament but costly. The difference, of course, was water’s abundance.
Today, Mr. Smith might still be flummoxed by the price of diamonds, but investment possibilities of water he might attribute to his favorite market forces: supply and demand.
We have a nationwide preoccupation with heat. We’ve gotten far, far away from the actual origins of spiciness in food — to prevent and mask spoilage, impart flavor and even keep rats away. Now, you can’t throw a rock without hitting a hot-chicken place, or a YouTuber posting a video of themselves eating Carolina Reapers and other esophagus-destroying peppers. Spice has become sport.
But the children. What about the children? Well, the millennials and Gen Z-ers are at the forefront of this red-hot orgy, frankly, and it is in that spirit that I hereby present to you the authoritative, definitive and completely undisputed L.A. Times Spicy Snack Power Rankings. Like strains of antibiotic-resistant bacteria, their infiltration of our country cannot be stopped, so there’s little point in fighting it.
I have compiled every spicy snack known to mankind, save for the ones that I could not find, deem unworthy of inclusion, or both. What’s that you say? All these Flamin’ Hot and spicy snacks taste the same? UNTRUE. There are subtle differences, which I will happily illustrate below. I have ranked the snacks based on 1) flavor and 2) heat, the amount of saliva-coaxing capsaicin I detected in each one.
Get the goods: