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IN THIS ISSUE – A $214-Billion “Commitment to Prudence”
STATE BUDGET
- Legislature Passes 2019-20 Budget…But “There Are Deals Still Out There”
- Retail Politics During Budget Season: Logic Takes a Vacation
- Carbon Tax Fund for Clean Water Questioned
CRITICAL ISSUES
- Chamber of Commerce Stops All “Job Killer” Legislation
- Exports Drop for 3rd Month
- PG&E Bankruptcy Short Circuits Green Grid
- Ocean Desal Projects “Vital, Local, Reliable”
NATIONAL PERSPECTIVES
- First Time in a Century – 49 States Dominated by One Party
- Congress & Media Probe Silicon Valley Tech Giants Controlling News
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.
Stay current daily! For our focused updates via Twitter: @jrgualco / @robertjgore / @gualcogroup
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FOR THE WEEK ENDING JUNE 14, 2019
Legislature Passes 2019-20 Budget…But “There Are Deals Still Out There”
California lawmakers passed a $214.8 billion budget deal Thursday, with new spending on schools, homelessness and health care for undocumented immigrants.
The budget relies on a surplus to add billions to the state’s reserves funds, which will bring the state’s total so-called rainy day fund to $19 billion. It puts hundreds of millions of dollars into other reserves, too, including ones for schools and social services.
Lawmakers are still hashing out final details of some aspects of the budget through so-called trailer bills, which can be passed after the main budget bill. But the bill passed Thursday will provide the major framework for state spending in the next fiscal year, which starts July 1.
“The budget deal will maintain the state’s ongoing commitment to fiscal prudence,” said Sen. Holly Mitchell, a Los Angeles Democrat who leads the committee that oversees the final budget deal. “This budget is bold and responsible.”
Republicans criticized some of the spending tucked into the budget for individual projects, including dog parks and playgrounds.
“This budget has more pork in it than any other budget that I’ve seen in my time in the Legislature,” said Assemblyman Jay Obernolte, R-Hesperia, noting that many of those expenditures were added over the weekend. “Those earmarks have no business being in the budget at that late date.”
Now that lawmakers have passed it, Gov. Gavin Newsom has 12 days to sign or veto the bill. He can also nix parts of the budget through line-item vetoes.
Here’s a look at some of aspects of the budget bill passed Thursday:
EDUCATION: MORE MONEY FOR PUBLIC SCHOOLS
The budget has about $101 billion for k-12 education, spending largely based on a formula in state law that dictates how much California must spend on public schools.
It has hundreds of millions of dollars to ease pension pressure on schools and it allocates more money for special education programs.
Schools will also receive $125 million for new preschool slots.
HEALTH CARE: NEW SPENDING ON IMMIGRANTS AND MIDDLE-INCOME PEOPLE
The budget includes $98 million to let undocumented young adults under age 26 enroll in Medi-Cal, the state’s health insurance program for low-income people, starting in 2020. Undocumented children up to age 19 are already eligible for Medi-Cal benefits.
Lawmakers and Newsom have also agreed to fine people who don’t buy health insurance through a penalty known as the individual mandate. Revenue from the mandate will fund insurance premium subsidies for middle income people. The budget agreement passed Thursday includes an additional $450 million over three years to fund insurance subsidies after some lawmakers argued mandate revenue alone wouldn’t make health insurance affordable.
HOUSING: MORE MONEY TO SPUR CONSTRUCTION AND HELP HOMELESS PEOPLE
Lawmakers also approved $250 million to help cities and counties plan for new housing, and half a billion dollars each for developer loans to build affordable housing and expanding the state’s Low-Income Housing Tax Credit program.
The bill also includes $650 million for local governments to help homeless people, as well as other spending intended to help that population.
DRINKING WATER: MORE FUNDING, BUT NO NEW TAX
The budget also appropriates $130 million to clean up drinking water in some parts of the state.The money comes from a fund intended to reduce greenhouse gases, but the Newsom administration argues that a lack of clean drinking water causes carbon emissions because it requires transporting bottled water to those communities.
The administration had initially pushed for a new tax to fund clean drinking water, but that plan was abandoned in the compromise.
(See also next story.)
STILL TO COME
Over the next week, lawmakers will continue to vote on bills that would finalize the details of the budget, including legislation to enact a new fee on telephone bills to upgrade the state’s 911 system and to expand paid the state’s paid family leave program.
Lawmakers are also still negotiating how to fund an $800 million expansion of a state tax credit for low-income families. Newsom wants to pay for it by ending certain business tax deductions.
Assemblyman Phil Ting, a San Francisco Democrat who leads the legislative Budget Committee with Mitchell, said the Legislature will pass roughly 17 trailer bills next week. He said negotiations among the Senate, Assembly and governor still underway, including on how to fund some housing proposals.
“There are a couple items still out there,” Ting said. “Deals take time.”
https://www.sacbee.com/news/politics-government/capitol-alert/article231498278.html?#storylink=cpy
Retail Politics at Budget Time: Logic Takes a Vacation
Commentary from CalMatters
Many factors go into making political deals – ideology, self-interest, expediency and emotion to mention just a few.
Logic rarely enters the equation, and if it does, it usually dwells at the bottom in importance.
Two cases in point are to be found in the final deal on a $213 billion state budget that was hammered out last weekend, just a few days before the June 15 deadline, by Gov. Gavin Newsom and legislative leaders.
The first is an agreement to use money from the state’s “cap-and-trade” program of auctioning off carbon emission allowances to improve local water systems, mostly in impoverished communities. Up to a million Californians now have substandard water supplies so the goal is certainly a worthy one.
Newsom and his predecessor, Jerry Brown, wanted a tax on water to generate money for the much-needed repairs, but legislators were worried about a backlash were they to impose such a tax while the state is running up multi-billion-dollar budget surpluses.
The expedient solution was to tap the cap-and-trade fund, which is supposed to be used for projects that reduce greenhouse gases, but that has evolved – surprise, surprise – into an all-purpose political slush fund.
The rationale offered by Newsom budget adviser Vivek Viswanathan was, to put it mildly, creative.
“In these communities where there isn’t access to safe drinking water, you’re often bringing in bottled water, you’re trucking in water that’s safe to drink and all of these have emissions impacts,” Viswanathan said. “We believe these investments not only help those communities by giving them safe drinking water but also fulfill the goals of the cap-and-trade program.”
That very strained, and completely illogical, rationalization for political expediency further undermines the original intent of the system and further converts it into just another hidden tax on consumers. Cap-and-trade, for instance, raises gasoline prices by an estimated dime a gallon.
Example No. 2 is the decision to expand state-subsidized medical insurance, including – for the first time anywhere – to some undocumented immigrant adults.
To finance the expansion, Newsom and legislators agreed to reinstate the “individual mandate” that was part of the original Obamacare legislation but was erased by Congress and President Donald Trump two years ago.
Those who didn’t purchase health insurance in some fashion were to be fined. Newsom proposed, successfully, to reinstate the fines in California of $695 a year or 2% of income, whichever is greater.
“Without the mandate, everybody’s premiums go up,” Newsom said in proposing it, adding that Obamacare “has been vandalized” by the mandate’s removal and “We’re here to get it back on firmer footing.”
Here’s the catch: Newsom, et al, characterize the charges for non-compliance as fees, rather than taxes, thus evading the two-thirds legislative votes needed for taxes.
However, when the federal individual mandate was before the Supreme Court, it ruled 5-4 that it is a tax. As Chief Justice John Roberts put it, “The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax. Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.”
Logically, how can fines for failing to buy insurance be considered taxes by the U.S. Supreme Court – the only way they could be considered legal – but as fees by California’s state government?
By expediently stretching definitions to their breaking point, these two budget actions, no matter how well-intended their purposes, contribute to popular cynicism about manipulative politicians.
Carbon Tax Fund for Clean Water Questioned
State lawmakers decided to address water contamination by taking $130 million yearly out of the Greenhouse Gas Reduction Fund as part of budget talks. The fund is where companies buy credits to offset the pollution they emit, otherwise known as California’s cap and trade program.
“The fact that it’s 2019 and we are on the verge of securing every human’s right to water is both long overdue and is a historic moment,” Nelson said.
All this pollution impacts places like the Central Valley town of Lanare where an arsenic treatment plant sits dormant.
“What’s left is a symbolic reminder of what could provide the community with safe drinking water,” said Veronica Garibay with the Leadership Counsel in Fresno, which advocates for communities dealing with water contamination.
“The fund will help make sure what happened in Lanare doesn’t happen again,” Garibay said.
Lawmakers decided not to go with Gov. Gavin Newsom’s plan to add a 95-cent tax on residential water bills, which has been pitched several times in recent history.
Garibay says community members being present in Sacramento helped show legislators how real the issue remains.
“Those ganas — that resiliency — that’s what’s led to meeting with our representatives on an ongoing and regular basis to make sure this was the number one priority,” Garibay said.
Not all environmental groups are sold on the idea. “You’re making sure that people who are already suffering from lack of clean water are likely going to be suffering from more air pollution than necessary,” said Kathryn Phillips with Sierra Club California.
But Riverside Assemblymember Eduardo Garcia disagrees. “I don’t believe that we’re pitting air and water against each other. There are tremendous amounts of resources that are coming to address those issues collectively.”
http://www.capradio.org/135536
Chamber of Commerce Succeeds in Stopping All “Job Killer” Legislation
Going into this year’s legislative session, it appeared that the California Chamber of Commerce’s long string of wins on bills it labels “job killers” might end.
Over the previous two decades, the chamber and its allies in the business community had killed or neutralized about 90 percent of the bills on the annual list. In 2018, just one targeted bill reached then-Gov. Jerry Brown’s desk and he vetoed it.
The list is a fairly reliable annual guide to the big conflicts pitting business and employer groups against unions, environmentalists, personal injury attorneys and consumer advocates. They typically involve business tax increases, additional civil liability, higher employee compensation and/or more governmental regulation with multi-billion-dollar financial stakes.
This year seemed to be a new opportunity for those four Democrat-friendly groups to advance their agendas. Democrats scored big wins in 2018 elections, jumping from two-thirds supermajorities in both houses to superduper majorities of about 75 percent and the Legislature was clearly tilting further to the left as this year’s session began.
Moreover, Brown had retired after four terms as governor and an outwardly more liberal Gavin Newsom had become governor.
Thus far, though, the chamber is doing fairly well, with all but five of the 31 bills on this year’s list failing to make the session’s first cut – moving out of their original houses by May 31.
As usual, most died without a formal committee or floor vote as their authors parked them, having decided that they lacked enough support, or were quietly killed in the appropriations committees that act as legislative traffic cops.
Although five of the 31 bills are still alive, two of them are virtually identical. Assembly Bill 1080 and Senate Bill 54 would mandate a sharp reduction in the use of plastic packaging by 2030 to reduce environmental degradation. The chamber calls it “an unrealistic compliance time frame.”
AB 1080 is being carried by Assemblywoman Lorena Gonzalez, a San Diego Democrat who clearly relishes having her bills on the list and has scored several notable wins in the past. She was the author of the one bill that Brown vetoed last year, a measure to ban binding arbitration agreements in employment.
Gonzalez has introduced the arbitration ban again this year as Assembly Bill 51. Once again it’s on the job killer list and it’s also one of the five survivors.
In fact, Gonzalez is carrying three of the five. Her third is Assembly Bill 1066, which would allow striking workers to obtain unemployment insurance benefits if the dispute lasts more than four weeks. She raised the threshold from two to four weeks once the bill reached the Senate, evidently hoping to make it more palatable to moderate, pro-business Democrats.
The fifth and in some ways most controversial of the five survivors is Senate Bill 1, carried personally by Senate President Pro Tem Toni Atkins, also a San Diego Democrat. It would empower a variety of state agencies to adopt, without many of the usual procedures, environmental and labor rules that mimic federal regulations before they were weakened by the Trump administration – and allow attorneys to enforce them with lawsuits.
It’s a major component of California’s “resistance” to President Donald Trump and is needed, its advocates say, to protect the state from the Republican president. But, business critics say, it would give too much authority to unelected bureaucrats and create “the potential for costly litigation” – making it a classic example of the “job killer” genre.
https://calmatters.org/articles/commentary/most-job-killer-bills-already-dead/
California’s merchandise export trade continued to slide lower for the third straight month, according to Beacon Economics’ analysis of the latest U.S. trade statistics from the U.S. Census Bureau.
Exports by California businesses totaled $13.86 billion for the month, a nominal 7.5% decline from the $14.98 billion recorded in April 2018. Exports of manufactured goods, totaling $8.96 billion, were 7.2% down from the $9.66 billion reported in the same month last year. Shipments abroad of non-manufactured goods (chiefly agricultural products and raw materials) fell by 10.9% to $1.71 billion from $1.92 billion. The value of re-exported goods meanwhile slipped by 6.2% to $3.19 billion from $3.40 billion.
“To be fair, comparing this April’s export trade with April 2018 is loading the dice since last April was largely avant le deluge,” said Jock O’Connell, Beacon Economics’ International Trade Advisor. “It was in April of last year when America’s major trading partners began retaliating against the tariffs the Trump administration had imposed earlier on imported steel and aluminum. Things have gone downhill ever since.”
But higher tariffs applied to a steadily expanding list of goods were not the sole reason for the state’s lagging export trade. A stronger dollar, lower prices on some export commodities, a slowdown in economic growth abroad, and even worsening traffic congestion at U.S.-Mexico border crossings, contributed to the decline.
The April drop in the dollar value of California’s export trade was manifested at California’s major international trade gateways. The number of loaded export containers shipped from the state’s three major container ports (the Ports of Los Angeles, Long Beach, and Oakland) dropped by 6.7% from one year earlier, while airborne export tonnage from LAX was down by 9.3%.
The strengthening U.S. dollar continued to discourage foreigners from buying California goods. The Bloomberg Dollar Index shows the greenback’s value relative to a basket of other major currencies was up nearly 8% in April from the same time one year earlier. California accounted for 10.3% of the nation’s overall merchandise export trade in April, down from 10.9% one year ago. Through the first four months of 2019, the state’s $57.49 billion in merchandise exports was lagging last year’s $59.26 billion total by 3.0%.
https://beaconecon.com/publications/california-trade-report/
PG&E Bankruptcy Short Circuits Green Grid
California’s crusade to turn its electricity grid green is running into an increasingly serious obstacle: PG&E Corp.’s bankruptcy.
The utility last week won a key court ruling when a bankruptcy judge said federal regulators can’t stop PG&E from unraveling billions of dollars worth of pricey contracts to buy electricity from solar and wind farms and other renewable energy sources.
Although PG&E said it hasn’t decided whether to walk away from those deals, it fought for the legal right to do so. Green-energy advocates say PG&E’s efforts are casting a cloud over their entire industry and will make it harder to borrow money for future projects, whether it’s PG&E or some other utility buying the power.
That, in turn, would imperil California’s plans — mandated by the Legislature — to phase out fossil fuels in electricity generation in the coming years.
“Our state is talking about getting to 100 percent clean energy,” said Jan Smutny-Jones of the Independent Energy Producers Association, an advocacy group based in Sacramento. “Who in the world is going to be investing in new battery technologies and other things that people say are needed? We have to have a stable environment.”
A fight with state leaders — already irate with PG&E over its safety record and other issues — could be in the offing. The California Public Utilities Commission’s general counsel, Arocles Aguilar, told lawmakers in March that her agency has the authority to prevent PG&E from walking away from its green-energy contracts.
Asked about last week’s court ruling, Gov. Gavin Newsom spokesman Nathan Click said: “Our office is closely monitoring and will not allow bankruptcy to interfere with the state’s renewable energy goals.”
But can the state force PG&E to keep its energy contracts? Probably not, says one expert.
The Public Utilities Commission probably would fare no better than federal regulators who tried to block PG&E from unwinding its power deals, said Jared Ellias, a bankruptcy expert at the UC Hastings College of Law in San Francisco. “The PUC can’t block PG&E from tearing up those contracts,” Ellias said.
Already, California utilities get 34 percent of their power from renewables, making the state a leader in turning the grid green. But California wants to go much further in the fight against climate change. The Legislature last year enacted SB 100, which says utilities must be 50 percent green by 2026 and 60 percent by 2030.
The crisis arose when PG&E filed for bankruptcy in January under the weight of an estimated $30 billion in liabilities from the wine country fires of 2017 and last November’s Camp Fire, the deadliest in California history.
Generally speaking, a company that goes bankrupt has the right to cancel existing contracts, if the judge believes cancellation is a reasonable business decision.
Traditionally, utilities don’t build their own renewable plants but buy the power on contract from others. California’s ambitious clean-energy targets have prompted solar and wind companies from all over the country to build facilities in the state.
PG&E entered bankruptcy with more than $40 billion worth of contracts on the books, and has been hinting that it might want to dump some of them.
In particular, the price of solar electricity has plummeted in recent years, and PG&E’s lawyers complained in court papers that the utility is now paying “above-market rates” for much of its electricity. At the same time, the utility said it has plenty of power in its portfolio and could easily live without some of the contracts.
Wall Street analysts from Credit Suisse, Standard & Poor’s and others have estimated that PG&E could save more than $2 billion by shedding some of the deals made years ago. The savings could be used “to satisfy wildfire-related claims and recover wildfire prevention costs while minimizing consumer energy rate increases,” Moody’s Investors Service said in an April report.
Green-energy advocates insist the savings wouldn’t actually free up cash for wildfire victims. That’s because the solar and wind companies that lose their contracts would become creditors of PG&E, just like fire victims, lenders and others. “It dilutes the amount of money available to the wildfire victims,” Smutny-Jones said.
Shannon Eddy, director of a trade group called the Large Scale Solar Association, added: “We are in uncharted territory here …. This is not the time to be (canceling) any of these contracts.”
PG&E’s hints have given the green-energy industry the jitters. Fitch Ratings downgraded the credit rating of Topaz Solar Farm in San Luis Obispo County — a subsidiary of financier Warren Buffet’s Berkshire Hathaway conglomerate and one of the largest solar projects in the world — to junk-bond status. That makes it much harder to finance new facilities.
The Topaz farm sells all of its power, enough to light up more than 400,000 homes, to PG&E. It made its deal with PG&E in 2008, when solar power was about five times more expensive than it is now, according to Moody’s.
Another renewable developer that does business with PG&E, Clearway Energy Inc. of Princeton, N.J., reduced its quarterly shareholder dividend in February, saying the bankruptcy “has heightened the risk” to Clearway.
Just as PG&E was about to file for bankruptcy, the feds stepped in. At the urging of two renewable companies that sell to PG&E — NextEra Energy of Florida and Exelon Corp. of Chicago — the Federal Energy Regulatory Commission declared that it had “concurrent jurisdiction” with the Bankruptcy Court over PG&E’s contracts.
PG&E fought back, filing papers in Bankruptcy Court demanding the right to sever any contracts. Last week Bankruptcy Judge Dennis Montali sided with the utility, bluntly telling the feds to mind their own business. The agency was trying “to exercise power it wholly lacks,” the judge wrote.
The utility released a statement saying it’s “pleased with the court’s decision” but adding that it hasn’t decided what to do about its renewable contracts. It also said it shares California’s commitment to battling climate change.
“We appreciate the concerns from stakeholders across the state concerning the impact that (the) Chapter 11 filing could have on the state’s clean energy progress,” PG&E added.
https://www.sacbee.com/news/politics-government/capitol-alert/article231413083.html?#storylink=cpy
Ocean Desal Projects “Vital, Local, Reliable”
Some 30 miles north of San Diego, along the Pacific Coast, sits the Claude “Bud” Lewis Carlsbad Desalination Plant, the largest effort to turn salt water into fresh water in North America.
Each day 100 million gallons of seawater are pushed through semi-permeable membranes to create 50 million gallons of water that is piped to municipal users. Carlsbad, which became fully operational in 2015, creates about 10 percent of the fresh water the 3.1 million people in the region use, at about twice the cost of the other main source of water.
Expensive, yes, but vital for the fact that it is local and reliable. “Drought is a recurring condition here in California,” said Jeremy Crutchfield, water resources manager at the San Diego County Water Authority. “We just came out of a five-year drought in 2017. The plant has reduced our reliance on imported supplies, which is challenging at times here in California. So it’s a component for reliability.”
A second plant, similar to Carlsbad, is being built in Huntington, California with the same 50-million-gallon-a-day capability. Currently there are 11 desalination plants in California, and 10 more are proposed.
https://e360.yale.edu/features/as-water-scarcity-increases-desalination-plants-are-on-the-rise
First Time in a Century – 49 States Dominated by One Party
It is the first time in more than a century that all but one state legislature is dominated by a single party. Most legislative sessions have ended or are scheduled to end in a matter of days in capitals across the nation, and Republican-held states have rushed forward with conservative agendas as those controlled by Democrats have pushed through liberal ones.
Any hope that single-party control in the states might ease the tone of political discourse has not borne out. Lopsided party dominance has not brought resignation; instead of minority parties conceding that they lack the numbers to effectively fight back, the mood has grown more tense and vitriolic.
This year was always poised to be contentious in statehouses. Across the nation, nearly 1,700 new lawmakers won seats in last fall’s elections. The vast majority of the newcomers were Democrats, who won control of six new legislative chambers, meaning that they now dominate both chambers in 18 states. But Republicans continue to control the majority of state legislatures, with 29. (Two states, Nebraska and Alaska, do not easily fit the model, although both are also dominated by Republicans.)
“The whole nation is speaking about how divisive we are,” Thomas Jackson, a Democrat in the Alabama House of Representatives, told colleagues during a contentious meeting last month.
In Oregon, where Democrats control state government, Republicans boycotted sessions for several days over disagreements about taxes and gun control. In Tennessee, where Republicans are in charge, Democrats staged a walkout during a heated and chaotic budget debate, and Republicans ordered the police to go find them.
In New York, the State Legislature passed several laws that had been blocked in previous years by Republicans, who lost control of the Senate earlier this year after a decade in power. Those measures included a law extending the period of time for victims of childhood sexual abuse to file lawsuits, and several others restricting the use of firearms, including bans on bump stocks and teachers carrying guns in schools.
And in Colorado, where Democrats dominate in the capital, Republicans were so upset about the stream of new laws being passed that they demanded each bill be read aloud to slow the pace. Democrats responded by having five computers simultaneously “read” bills. The computers were able to whip through hundreds of pages in minutes, but the result was gibberish.
Analysts said that issues addressed by state legislatures this year, which included gun control, health care, education and police procedures, might have more immediate, lasting effect than anything approved in Washington, D.C., where government is divided.
The roots of the polarization in state legislatures can be traced to elections in 2010, when Republicans made decisive gains in statehouses and pressed for policies that included restricting labor unions and abortion access, while expanding gun rights, according to Sarah F. Anzia, a political scientist at the University of California, Berkeley.
Around the same time, Dr. Anzia said, national organizations representing interest groups ranging from teachers to gun owners became more active in state capitals, because they found it far easier to make headway in places like Sacramento and Charleston, W.Va., than in Washington because of gridlock in Congress.
The number of states with either supermajorities of Democrats that also have Democratic governors (California, Nevada and Oregon, among others) or Republicans with Republican governors (Alabama, Ohio and Tennessee, among others) has grown, too, meaning that many lawmakers rarely feel the need to compromise.
“If you are a Republican in one state, you are probably going to be pushing the same agenda as a Republican in another state, and the same is true for Democrats,” said Dr. Anzia. “That hasn’t always been true, and the result is that now more than ever, state legislatures are key players in these partisan battles over politics.”
In Minnesota, the only state left with a divided legislature, promises of bipartisanship sometimes devolved into stalemate.
During a budget standoff last month, Tim Walz, the Democratic governor who campaigned last year on a pledge to work across the aisle, angrily denounced Republicans for blocking gun control efforts and supporting deep tax cuts, saying those policies “fit better in Mississippi and Alabama than they do in Minnesota.”
Ultimately, Democrats could win neither new gun laws nor new tax increases, and Republicans also failed to win approval for the bulk of their agenda.
Still, once the session ended last month, Governor Walz said that “Minnesota is showing the rest of the nation that Republicans and Democrats can still find compromise and work together to get things done,” citing spending increases for public education and efforts to fight opioid addiction.
Alabama and Illinois — one overwhelmingly red, the other blue — were more representative of this year’s tone, providing perhaps the best examples of political parties moving to enact utterly different agendas.
Congress & Media Probe Silicon Valley Tech Giants Controlling News
In the first of what promises to be many hearings by Congress into Big Tech’s dominant role in the information society, the head of a media industry group says that “a small cadre of tech giants exercise an extreme level of control over news.”
David Chavern, president and CEO of the News Media Alliance, a group representing about 2,000 news organizations in the U.S., told a House Judiciary subcommittee that despite efforts by media groups to invest in their own online platforms, apps and other formats, the rise of digital news distribution has introduced “new, potentially existential threats to the news industry.”
Chavern spoke in support of bipartisan legislation that would allow online publishers to work together to bargain with tech platforms, such as Google, potentially to share revenue. The Journalism Competition and Preservation Act is sponsored by antitrust subcommittee Chairman David Cicilline, D-R.I., and Judiciary Committee ranking member Doug Collins, R-Ga.
Cicilline said concentration in the digital advertising market “has pushed local journalism to the verge of extinction.”
A study by Chavern’s group estimates that $4.7 billion is earned annually by Google thanks to search advertising revenue through links to news content.
That study, though, has faced criticism since its release on Monday. In a statement, Google said:
“These back of the envelope calculations are inaccurate as a number of experts are pointing out. The overwhelming number of news queries do not show ads. The study ignores the value Google provides. Every month Google News and Google Search drive over 10 billion clicks to publishers’ websites, which drive subscriptions and significant ad revenue. We’ve worked very hard to be a collaborative and supportive technology and advertising partner to news publishers worldwide.”
But Judiciary Committee Chairman Jerry Nadler, D-N.Y., said what he called a journalism crisis is also a “democracy crisis.”
“Today, the vast majority of Americans consume the news online, and two online platforms have immense control over how Americans access their news sources,” Nadler said. “A single algorithm change by one of these private corporations can entirely distort what information the public shares and consumes and what revenue the publisher receives.”
Among those testifying on behalf of the legislation was News Corp General Counsel David Pitofsky, who dismissed criticism by the tech companies that the newspaper business model is obsolete.
“Many in Silicon Valley dismiss the press as old media, failing to evolve in the face of online competition, but this is wrong,” he said. “We’re not losing business to an innovator who has found a better or more efficient way to report and investigate the news. We’re losing business because the dominant platforms deploy our news content to target our audiences, to then turn around and sell that audience to the same advertisers were trying to serve.”
Diana Moss, president of the American Antitrust Institute, told NPR’s Morning Edition on Tuesday that the Judiciary subcommittee’s hearing was part of efforts to “take on some of the bigger issues that arise in the tech sector.”
She said government needs to enforce antitrust laws, saying, “We have not seen vigorous antitrust enforcement in the U.S. for many decades now, and my organization has advocated strongly for that for 20 years.”
But she said breaking up the tech companies, as some politicians are calling for, is “putting the cart before the horse” and would be “a heavy lift” for antitrust laws.
https://www.scpr.org/news/2019/06/11/89868/news-publishers-say-tech-industry-poses-potentiall/