March 8, 2019 – News & Notes

For Clients & Friends of The Gualco Group, Inc.

IN THIS ISSUE – “I Had A Healthy Re-Set”




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 / @gualcogrou




New CalEPA Czar Flies “Podship Earth” to an Influential Post

What better way to decompress from a stressful federal government job than by trekking 2,600 miles on foot from Mexico to Canada?

That’s what Jared Blumenfeld, the new head of the California Environmental Protection Agency, did three years ago, setting out on the arduous and beloved Pacific Crest Trail that traces California’s searing deserts, rugged mountains and sparkling coastline. Turns out the dust on his boots afforded him just the perspective he needed to take on the job Gov. Gavin Newsom gave him in January.

“I had a healthy reset,” Blumenfeld said recently about his four months on the trail. “What you realize is the complexity of the environmental issues. We have so many people talking about environmental issues, but we say it in a way that most people don’t understand.” People want to be part of the solution to environmental problems, he said.  “What I got from a distance was (the importance of) bringing these messages home in a way that’s digestible and actionable.”

Blumenfeld’s work perspective also shifted, from his job as the regional administrator for the federal EPA during the Obama administration to its mirror agency in Sacramento.

Blumenfeld, who has law degrees from the University of London and UC Berkeley, left his federal job in May 2016, a few months before his appointment was set to expire.

The agency he now manages oversees a half-dozen departments that regulate matters including air and water quality, which are among the state’s most contentious issues. Those issues have put California on a collision course with the Trump administration, which is undoing dozens of federal environmental protections, including some that originated in the Golden State.

Perhaps the most consequential battle is over Obama-era rules tightening future car emissions and gas-mileage standards to reduce greenhouse gases and other pollutants; the regulations were crafted by California but adopted nationwide. The federal government announced it would roll back those rules and revoke California’s right, first granted by Washington decades ago, to set its own air-pollution standards. Such a move would significantly affect the state’s ambitious climate policies.

Blumenfeld, 49, said the state needs the federal government as a partner on these issues, but when it came to hammering out a compromise on the auto standards, it was a one-way conversation. The feds announced last week that they had broken off negotiations with the state.

“They did not negotiate,” he said. “It was a little spurious to say they ended negotiations. They never began. The rule that was passed by the Obama administration has been rewritten based on very spurious and kind of junky science by the Trump administration.” (Federal officials produced research that they said showed the regulations as set would make cars less safe and be difficult for automakers to meet.)

In a wide-ranging conversation, Blumenfeld also said:

  • The state will vigorously defend its right to waive some federal emissions regulations and set its own, stricter standards. He expects the fight to be resolved incourt. “We do have law and precedent on our side,” Blumenfeld said. “But we do live in bizarre political times, and that does have an influence on how the highest court may look at this issue.”
  • He brought together the state agencies he oversees and provided marching orders to step up enforcement of California’s environmental laws and impose fines when called for. “The regulated community is frustrated that in some cases the enforcement is happening in some parts of the state, but it isn’t in happening in others,” he said. “Consistency, clarity and prioritizing enforcement are important.” He had criticized California for lax enforcement of water laws in anopinion piece published in the San Francisco Chronicle last year.
  • Blumenfeld worked for Newsom in San Francisco as environmental director for the city. Then-mayor Newsom took him and other key aides to Hunters Point, a highly polluted former Navy shipyard, and into the community to talk to residents affected by residual problems. Newsom told the aides, “I don’t want you sitting in your offices. I want you to get out and help people.” The nexus of environmental damage and public health will be a focus of the new governor, Blumenfeld said.

The enviro-czar didn’t just spend his time hiking while on hiatus from government service. He founded a green-tech consulting company and started a podcast, Podship Earth. The native of Cambridge, England, who retains a trace of his British accent, said it’s now time to get back to work.

“Previous governors came up with great laws and targets, and the Legislature does the same,” he said. “Our job is to implement those. Let’s not just jump to the next shiny-cool environmental thing that we could do. Our first order of business is to look at what we’re doing and make sure we’re doing it according to the plans that are already there.

“We have politicians in every level of government who care deeply about the environment,” Blumenfeld said. “California offers hope and inspiration on how to solve problems, from an innovation perspective but also politically. It’s exciting to be in California right now.”


Feds Move to Accelerate Water Management Flow

The Trump Administration has ordered federal biologists to speed up critical decisions about whether to send more water from Northern California to farmers in the Central Valley, a move that critics say threatens the integrity of the science and cuts the public out of the process.

The decisions will control irrigation for millions of acres of farmland in the country’s biggest agricultural economy, drinking water for two-thirds of Californians from Silicon Valley to San Diego, and the fate of endangered salmon and other fish.

Federal biologists will set these rules after completing an intricate scientific analysis, and they are the final word on how much and when water can be pumped out of the Sacramento-San Joaquin River Delta.

“It’s a very aggressive schedule,” said a former federal biologist familiar with the matter who did not want to be identified. “And I think it runs the risk of forcing them to make dangerous shortcuts in the scientific analysis that the decisions demand.”

According to internal emails obtained under the Freedom of Information Act, federal scientists raised two major concerns: that their agency lacks the staff to undertake the analysis and that the Trump Administration is skewing the rules to boost the water supply for Central Valley farms.

Some see the fingerprints of acting interior secretary David Bernhardt, who once helped lead the charge to increase pumping and weaken environmental standards in the Delta. He was then a lawyer for the Fresno-based Westlands Water District, the largest agricultural water agency in the country.

Bernhardt is already under scrutiny after a recent New York Times story reported that, shortly after joining the Interior Department in 2017, he directly advocated on Westlands’ behalf to get more water for farmers at the expense of endangered fish, even though federal rules precluded him from lobbying.

Last week, the Campaign Legal Center, a non-profit ethics organization in Washington, D.C., filed a complaint demanding that the Interior Department’s inspector general open an investigation into whether Bernhard is using his public office to benefit his former client.

Bernhardt now oversees two of the three agencies under orders from the White House to expedite the new rules shaping California’s water future: the U.S. Fish and Wildlife Service and the U.S. Bureau of Reclamation.

At stake is the future of fish teetering on the edge of existence, a salmon fishing industry in crisis, and the ample supply of water flowing through millions of California faucets and fields.

During President Trump’s 2016 campaign, he promised Central Valley farmers he would send them more water. As a step toward keeping that promise, Trump signed an October 2018 memo ordering the rapid scientific review.

“That’s definitely on our mind,” says Erin Curtis, spokeswoman for the U.S. Bureau of Reclamation. “The president has outlined in his memo that we need to take a new look at how we’re operating these projects in a way that we can maximize water deliveries.”

As a first step, the Bureau, which operates dams and water pumps, released an 871-page proposal in early February for how it would like the rules to operate.

The plan, called a “biological assessment,” would provide billions of gallons more water for agricultural and urban water districts, an increase of 10 to 15 percent depending on the year. That would leave less in the Delta for endangered fish.

Environmental groups are alarmed at the proposal.

“I think this is a proposal for extinction,” says Doug Obegi, an attorney at the Natural Resources Defense Council in San Francisco. “What we decide to do in the Delta really will determine if we drive our native species extinct and threaten thousands of fishing jobs.”

According to federal law, two federal wildlife agencies, the National Oceanic and Atmospheric Administration and the U.S. Fish and Wildlife Service, must now review the Bureau of Reclamation’s plan.

If it doesn’t do enough to protect threatened fish, the agencies have the obligation and legal authority to write rules that do. These biological opinions will replace the current ones, although they could be challenged in court.

Under President Trump’s decree, federal biologists must write those opinions in 135 days, the minimal amount of time guaranteed under the Endangered Species Act.

Given the complexity of the issues, the agencies have previously needed more time than that to complete their analysis, from 60 to 80 percent more time.

They must look at how water flows across hundreds of miles through different rivers, dams and levees, and then forecast how it would affect the life cycle of half a dozen threatened species. These include endangered Chinook salmon and threatened steelhead and green sturgeon, as well as endangered killer whales in the Pacific Ocean, which depend on salmon for food.

“How often does the interior secretary write a memo forcing that an opinion happens in 135 days?” says Cay Goude, former assistant field supervisor for the U.S. Fish and Wildlife Service office in Sacramento. “It’s never happened to my knowledge.”

Even before Trump tightened the timeline, one of the agencies, NOAA Fisheries, warned that it did not have the resources to do the analysis.

In July 2018, Maria Rea, the assistant regional administrator in the California Central Valley Office of NOAA, described the agency’s dilemma in an email to her internal staff. She said it took 30 part-time staff and 10 full-time staff to complete the previous biological opinion in 2009, which took 246 days.

NOAA is working to reassign staff, currently on other projects, to at least achieve similar staffing levels, according to agency staff who spoke on the condition they not be identified. The federal government shutdown in January slowed that process.

According to the emails obtained by KQED, federal wildlife scientists also are concerned that the Bureau of Reclamation is pushing to give more water to agriculture at the expense of threatened species.

In an email to fellow NOAA Fisheries staff last summer, Water Operations and Delta Consultations Branch Chief Garwin Yip outlined his misgivings about cases where there is scientific debate about what the fish need.

“Absence of definitive science should not be the reason to propose actions more aggressive towards water supply,” Yip wrote.

Both Yip and Rea declined to comment about their emails.

While the Bureau of Reclamation has updated its proposal since then, it’s unclear whether those concerns have been addressed. Some say the agency has cherry-picked the science in favor of boosting water for farmers.

“It’s not science, basically,” says Jon Rosenfield, senior scientist with San Francisco Baykeeper, an environmental group in San Francisco. “It’s an extraordinarily selective read and deliberate misinterpretation of the information that we have.”

Rosenfield points to several of the protections the Bureau of Reclamation is proposing to eliminate, such as rules that guarantee water flows through crucial parts of the estuary when fish are most at risk because they are closer to the pumps.

The agency says “dynamic rules,” which rely on new technology that monitors where the fish are in the Delta, can do a better job than fixed rules.

“We feel that what we’ve proposed both helps protect listed species as well as provides more water supply flexibility,” says Russ Callejo, assistant regional director for the Mid-Pacific Region of the Bureau of Reclamation in Sacramento. “We think it does both.”

Environmental groups are skeptical of that claim, saying the Bureau is proposing to dial back water pumping only after the fish are significantly harmed. The wildlife agencies will have to evaluate that during their biological reviews.

This is where some see the influence of Bernhardt, who told The New York Times that he directed a senior official to weaken protections for fish and divert water to farms as part of a broader administration policy to help rural America.

The internal emails also show the new environmental rules will receive less outside scientific review than ever before, which eliminates public involvement.

Peer review, in which independent scientists assess other researchers’ work, is a core practice of science, and previous biological opinions have received that scrutiny.

When the current rules were written in 2008, the draft biological opinion from NOAA Fisheries underwent an independent review by a panel of scientists. The review included a meeting where the public could attend and comment.

This time, wildlife agencies say the Trump Administration’s deadline won’t allow for that.

NOAA Fisheries, which is writing the environmental rules for salmon and other fish, plans to have some independent scientific review, according to agency staff. The draft biological opinion will be sent out to individual scientists, but without public involvement or comment.

The U.S. Fish and Wildlife Service, which is writing the environmental rules for delta smelt, says the agency is planning some form of peer review as well.

“We intend to incorporate peer review into the development of our biological opinion,” said Shane Hunt, spokesman for the federal agency’s Bay-Delta Fish & Wildlife Office. “We are still ironing out the details.”

Meanwhile, as the public is frozen out, water districts will be given unprecedented access.

For the first time, public water agencies, keen to boost their supply, are invited to be heavily involved in the development of the environmental rules in the biological opinions, which are legally mandated to protect fish.

In 2016 President Obama signed the WIIN Act, giving water contractors the power to “have routine and continuing opportunities to discuss and submit information” to federal agencies developing the biological opinions. The act, pushed by Senator Dianne Feinstein and Central Valley Republicans, was an effort at compromise after years of water battles in California.

Before the Bureau of Reclamation even finished its proposed plan, water agencies had the chance to submit their take on endangered species protections.

“We have adhered to the WIIN Act,” says the Bureau’s Callejo. “We have involved the public water agencies.”

Westlands Water District did not respond to questions about its involvement.

Water agencies will also receive drafts of the biological opinions from wildlife agencies. Under the law, their comments must be “afforded due consideration” by wildlife biologists. If the comments aren’t adopted, those biologists must explain why.

There are no plans to release the drafts to the public.


Hispanic Birthrate Plummets

Yoselin Wences grew up with a constant refrain from her parents, immigrants from Mexico who became a landscaper and a cook.

“The mind-set was, ‘Don’t be like us,’” she said. “‘Don’t get married early. Don’t have children early. Don’t be one of those teen moms. We made these sacrifices so that you can get educated and start a career.’”

She followed that advice, and now, at 22, Ms. Wences, a junior at North Carolina State University, will soon become the first member of her family to graduate from college. When asked about children, Ms. Wences replied that for her, they were years away.

“Probably around 34 or 35,” she said. “That age range seems ideal to me.”

As fertility rates across the United States continue to decline — 2017 had the country’s lowest rate since the government started keeping records — some of the largest drops have been among Hispanics. The birthrate for Hispanic women fell by 31 percent from 2007 to 2017, a steep decline that demographers say has been driven in part by generational differences between Hispanic immigrants and their American-born daughters and granddaughters.

It is a story of becoming more like other Americans. Nearly two-thirds of Hispanics in the United States today are born in this country, a fact that is often lost in the noisy political battles over immigration. Young American-born Hispanic women are less likely to be poor and more likely to be educated than their immigrant mothers and grandmothers, according to the Pew Research Center, and many are delaying childbearing to finish school and start careers, just like other American-born women.

“Hispanics are in essence catching up to their peers,” said Lina Guzman, a demographer at Child Trends, a nonprofit research group.

The Hispanic decline is helping to drive a major shift in the country’s fertility patterns. Child Trends found that 2016 was the first year in which American women ages 25 to 29 did not have the highest birthrate. Instead, the rate was highest among women in their early 30s.

In the last year, as demographers have tried to better understand what is driving the country’s overall declining fertility rate, they have looked more closely at the data broken down by race and ethnic group.

The fertility rate for Hispanics — defined by demographers as people who report they are of Hispanic origin on birth certificates — dropped to 67.6 from 97.4 births per 1,000 women. By contrast, the rate for non-Hispanic whites fell by 6 percent to 57.2, and by about 12 percent for blacks to 63.1, according to Child Trends.

The implications of the Hispanic decline are broad. With the white population shrinking, Hispanics account for the majority of the population gains in the United States. And while their fertility rates are still the highest for any major racial and ethnic group, the steep drops in recent years are having an effect.

The United States population grew by just 0.6 percent last year, the smallest increase in 80 years, according to Ken Johnson, a demographer at the University of New Hampshire. He noted that, at current rates, young Hispanic women will have an average of two children, down from three just a decade ago.

The largest decline in Hispanic fertility rates has been among women of Mexican heritage, Dr. Guzman said. That is significant for the nation’s fertility patterns because of the sheer size of the Mexican origin population, which accounts for nearly two-thirds of all Hispanics and around 11 percent of the American population, according to the Pew Research Center.

Ms. Wences’ parents, who came to the United States permanently in the mid-1990s, met on a tobacco farm and settled in a rural patch of Wake County, which contains Raleigh and its suburbs. Soon after, when her father was 21 and her mother was 23, Ms. Wences was born.

There weren’t many Hispanic families in the area at the time. Ms. Wences recalled spending more time with children who were not Hispanic and discovering differences. Their parents were much older than her parents. They worked at desks, not outside.

Some women said their lives were so busy — many worked full time while also going to school — that they did not have time for friends, never mind boyfriends. Many lived at home in distant suburbs, instead of on campuses in the city, making socializing difficult.

“At the moment, I am not thinking about dating anybody,” said Bianca Soria-Avila, 28, who is in her last year at Wake Tech in Raleigh and lives with her Mexican immigrant parents in Wendell. She works full time as an insurance agent. “I don’t have friends. I don’t want to talk on the phone or to go out. I need to graduate,” she said.

Having children later might be common for young Americans, but it is unusual for Ms. Soria-Avila’s older Mexican-American relatives, who often react with raised eyebrows when they ask her age at family gatherings.

“They laugh and say ‘When I was your age, I already had four kids,’” she said. “I tell them if I had kids now, I wouldn’t be able to do what I want to do.”

For now, Ms. Wences said she was focused on finishing her bachelor’s degree in psychology. Her associate diploma hangs on her father’s living room wall.


“IPO-alooza” to Transform SF & State Income Tax Revenue

Big wealth doesn’t come in monthly paychecks. It comes when a start-up goes public, transforming hypothetical money into extremely real money. This year — with Uber, Lyft, Slack, Postmates, Pinterest and Airbnb all hoping to enter the public markets — there’s going to be a lot of it in the Bay Area.

Estimates of Uber’s value on the market have been as high as $120 billion. Airbnb was most recently valued at $31 billion, with Lyft and Pinterest around $15 billion and $12 billion. It’s anyone’s guess what prices these companies actually will command once they go public, but even conservative estimates predict hundreds of billions of dollars will flood into town in the next year, creating thousands of new millionaires. It’s hard to imagine more money in San Francisco, but the city’s residents now need to start trying.

Welcomed finally into the elite caste who can afford to live comfortably in the Bay Area, the fleet of new millionaires are already itching to claim what has been promised all these years.

They want cars. They want to open new restaurants. They want to throw bigger parties. And they want houses.

One recent night, in a packed room with a view of the Bay Bridge and an open bar, real estate investors gathered. Standing at the front presenting was Deniz Kahramaner, a real estate agent specializing in data analytics at Compass.

“Are we going to see a one-bedroom condo that’s worth less than $1 million in five years?” he asked the crowd. “Are we going to see single family homes selling for one to three million?”

No, he said, not anymore. The energy rose as he revealed more data about new millionaires and about just how few new units have been built for them. San Francisco single-family home sale prices could climb to an average of $5 million, he said, to gasps.

As the idea of the coming I.P.O.-palooza took on currency, sellers started pulling their houses off the market. The broader California housing market has softened, and home sales are down, but here’s one fix for that.

“Even if just half the I.P.O.s happen, there’s going to be ten thousand millionaires overnight,” said Herman Chan, a real estate agent with Sotheby’s. “People are like, ‘I’m not going to sell till next year, because there are going to be bajillionaires everywhere left and right.’”

One of those is his client Rick Rider, a 61-year-old C.E.O. who decided not to publicly list his Bay Area house until some of the I.P.O.s have happened.

“Our particular house is not a family home. It’s a Double Income No Kids sort of home,” Mr. Rider said. “So it would potentially play well for a lot of the people that would be benefiting from the I.P.O.s.”

The spending wars will likely stay close to work.

“The millennial tech workers are really looking for convenience,” said Christine Kim, the president of Climb Real Estate. “They seem to not want to own cars, and food deliveries are really easy now, and they want to be close to entertainment, so they’ll stay in the city.”

When Google in Mountain View and Facebook in Menlo Park went public, their workers were spread across the Bay Area, and so the impact on housing was diffuse. Now, many of the biggest start-ups are based in San Francisco, in part thanks to the city’s tax breaks. Brokers say San Francisco is where the workers want to stay

In 2018 there were 5,644 properties sold in San Francisco and only 2,208 of those were single family homes. Software employees represent more than 50 percent of those buying, according to Compass. One real estate firm estimates an average one-bedroom in the city now rents for $3,690 per month. (Another firm puts that average at $3,551.)

“Now you’ve got all these I.P.O.s at the same time, and we’ll potentially have thousands of young people, all now with money, looking to buy homes,” said Shane Ray, a real estate agent. “You’ll be able to feel it.”

Those in the market for a house are trying to buy them fast while the inventory shrinks but before the wave hits.

“I had this sense of existential dread that if we didn’t buy before all the I.P.O.s, we would forever be priced out,” said Tom McLeod, the founder of storage start-up Omni, who has been renting for nearly a decade. “We ended up pulling the trigger.”

Electric bikes, on the other hand, are a favorite mode of transportation for the San Francisco tech worker. Owners of the electric bike shop New Wheel say they are preparing for the I.P.O.s by ordering 30 percent more of the Stromer ST3 — the most popular configuration retails for around $7,500 — and 200 percent more of the Riese & Muller front-loader bikes, which sell for around $9,500.

Michael Biggica, the founder of Pixel Financial Planning, said 2019 is the year of “pent-up demand” and that the excitement of a windfall can be intoxicating.

In cities like Oakland and Berkeley and San Francisco, millennials obsess over Alexandria Ocasio-Cortez’s Twitter and attend Democratic Socialists of America meetings. But the socialist passion doesn’t seem to have impacted the city’s zeal for I.P.O. parties, which the party planning community says are going to surpass past booms.

Jay Siegan, a former live music club owner who now curates private entertainment and music, is gearing up. He has worked on events for many of the I.P.O. hopefuls, including Uber, Airbnb, Slack, Postmates and Lyft.

“We see multiple parties per I.P.O. for the company that is, as well as firms that are associated to them,” Mr. Siegan said. Budgets for start-up parties, he said, can easily go above $10 million. “They’re wanting to bring in A-list celebrities to perform at the dinner tables for the executives. They want ballet performers.”

A popular new feature he’s noticing is clients hoping to curate their own theme concerts featuring fleets of bands. Mr. Siegan says he recently put on one for a 1980s loving tech executive, featuring the B-52s, Devo, The Bangles, Tears for Fears and Flock of Seagulls.

In a warehouse in Concord, Calif., the I.P.O. ice sculptor is getting ready to staff up for what he says will be a long year.

“It’s going to be a lot of 14-hour days,” said Robert Chislett, founder of Chisel-it, who has around 15 ice sculptors currently employed.

Together, they have chiseled a full-size ice car for a tech executive’s party in Atherton and a 10-foot ice Taj Mahal for another’s swimming pool in San Jose.

But, he says, executives usually want predictable things. An ice chair with the logo on the back, for photos. A lot of logos carved into ice rockets, to indicate that the company’s stock will be like a rocket. And ice cubes, for drinks, with the company logo on each one.

And of course, the tech backlash, mostly quiet as stocks have vested, is preparing for its own revival.

At Radio Habana Social Club in the Mission district, housing rights activists gathered one recent evening for a drink. By now, there is a well-known choreography: the cash comes flooding in to a few and the stock-less masses begin to gather. They will protest evictions, fight developers, organize against tax breaks and unfurl banners in front of tech buses.


Fixing Failed Tech Projects – Newsom’s Challenge

A $100 million government computer program doubled the time it takes to license California nurses.

A $290 million tax software upgrade unveiled last summer made it more difficult to file taxes online, prompting a major accounting firm to file by paper instead.

And, a $900 million accounting system the state has been working on for 14 years is now causing delays that threaten to impact the state’s credit rating.

Those are just a few examples of what has gone wrong when California state government has tried to improve its technology. They demonstrate the depth of Gov. Gavin Newsom’s challenge as he begins a new effort make the state’s cumbersome, outdated IT systems more responsive and effective for taxpayers.

He declared technology to be a priority his opening budget with a $36 million proposal to create an Office of Digital Innovation that he says would foster a more flexible, creative approach to government technology.

“If you like the status quo, you’re not going to like these reforms,” he said at a news conference earlier this year.

Before becoming governor, Newsom wrote a book titled, “Citizenville: How to Take the Town Square Digital and Reinvent Government.” He announced initiatives shortly after taking office that target some of the state’s most notorious tech failures, such as an attempt to overhaul DMV systems that has floundered since a first attempt in 1987.

We’re going to accept credit cards,” Newsom said during a budget address. “It’s a governor in 2019 in California saying that we’re going to accept credit cards in 2019 at the Department of Motor Vehicles. That is in the ‘you can’t make that up’ file.”

Some of his objectives with his new office resemble guidance from a task force created six years ago by former Gov. Jerry Brown and former Treasurer John Chiang. That task force, like at least one IT task force before it, suggested its recommendations could set the state on a better path.

“Previous task force reports and reviews … have addressed some of the same issues,” the report read. “Despite this, the task force is optimistic that with the current leadership and institutional commitment to reform, California’s current and future IT projects can and will be more successful by implementing the recommendations of this report.”


Audits and at least one legislative review since then show mixed results.

The state maintains an IT tracker that classifies current projects as green, yellow or red depending on their failure risks. Eight of 26 major projects under development are classified as yellow or red, indicating they are at risk of failing or requiring corrective action.

The task force found in 2013 that many of the delays started at the beginning of projects, with an approval process that was front-loaded with unnecessary analysis. It slowed down projects and set conditions for late operational changes.

“By the time this was awarded, what they had bid on didn’t even resemble what would be needed later on because things had changed or whatever,” said Rocío Alvarez, the Task Force’s chairwoman, who is now chief information officer for the Lawrence Berkeley National Laboratory.

The Department of Technology replaced the process with a new one in 2016. In January 2018, a state auditor’s report questioned whether the update was moving in the right direction.

The new process requires “even more robust planning and detailed analysis upfront … the process will likely take longer for agencies to complete and will require more resources,” the audit said.


Among the major projects that could test Newsom’s process is a payroll system that the state controller’s office first started trying to overhaul in 1999. The $250 million project was scrapped in 2013 after a disastrous trial run exposed major flaws with software designed by a contractor.

Newsom put forward an alternative process called an “innovation procurement sprint” that aims to get projects up and running more quickly. Controller Betty Yee recently said she is hopeful the alternative process could speed up the payroll project.

Several systemic issues impede the state’s ability to complete the big, expensive and complex tasks involved in technology overhauls, the task force and audits found. Two key issues are a lack of accountability for contractors and project leaders and a culture that can discourage reporting of problems.

“If a project exceeds (its) budget, it is often viewed unfavorably by the Legislature and agencies alike, creating a disincentive to course-correct it,” the task force report stated.


Right now, a $918 million project to replace hundreds of old accounting systems in the state with a new one is scheduled for full implementation in July, despite a January warning from the state auditor that lingering inefficiencies could threaten federal funding and impede annual financial reporting, which affects the state’s credit rating.

The full adoption of the Financial Information System for California, which the state calls Fi$Cal, has repeatedly been delayed since its 2005 launch. Its cost could be higher than higher than has been reported — the Technology Department’s IT tracker says the project’s poor budgeting and accounting have created an “inaccurate determination of the FISCal Project’s continuing cost.”

As of the fall, 43 of 64 entities implementing the new system were also using legacy systems, duplicating work and delaying monthly reports, according to the auditor.

Significantly, the State Controller’s Office does not use it as a standalone program to create the state’s annual financial reports. Instead, Yee’s office runs its old system and Fi$Cal. It has added staff for the extra work.


A major challenge for departments getting new IT projects up and running is changing how employees do their jobs.
“If you bring in new technologies and layer them on top of broken technologies, people are doing things badly, (and) they’re just going to do things badly faster,” said Alvarez, the task force chairwoman. “None of that (employee training) was part of the process from what we could tell when we looked at it.”

Struggles adapting to a new computer program contributed to the Department of Consumer Affairs’ implementation of a new computer program called BreEZe, whose cost grew to about $100 million from a $27 million estimate.

The Board of Registered Nursing, which the department oversees, blamed the program when the time it took to license new nurses jumped from six weeks to up to five months in recent years.

“Admittedly, the department failed miserably at change management,” former Consumer Affairs Director Awet Kidane told a Senate budget subcommittee in 2015.

In 2017, the department shifted from plans to use BreEZe at all 37 of the boards, bureaus and other entities it oversees to tailoring specific IT solutions for each one.


Struggles adapting business processes have contributed to delays implementing UCPath, a University of California system project to unify and upgrade payroll systems across its 10 campuses, five medical centers and the office of the president.

“It has been far more complex and complicated than we had ever envisioned,” UC Chief Financial Officer Nathan Brostrom told The Bee in 2015.

The project’s cost has reached at least $504 million, surpassing an initial estimate of $170 million. The system awarded a contract to develop the system to Oracle in 2011 but took over the project itself in 2013 after becoming dissatisfied with the corporation.

Last week, UC President Janet Napolitano approved delaying the program’s implementation at UC Davis, marking at least the fifth delay for the program. A new launch date has not been determined.


While California’s problems with technology have been well-publicized, they are not unusual.

“These problems are by no means unique to California or the public sector,” the task force reported. “Large-scale commercial companies frequently experience failed IT projects and even the most respected systems integrators and developers have regular project failures.”

The task force cited analyses suggesting up to 60 percent of large-scale projects fail. According to another analysis cited in the report, projects over $10 million have just a 2 percent chance of staying on schedule and on budget.

Alvarez said Newsom was interested in the task force’s findings when she brought it up to him in casual conversation shortly after it had come out.

“It doesn’t surprise me he’s interested in this, because when we spoke he seemed very aware of it,” she said.

She said she discussed the task force’s findings with former Treasurer Chiang but never with Brown.

“I do think that this governor understands the importance of technology a little better,” she said.


Algorithms Compound A Public Health Threat

Once relegated to tabloids and web forums, health misinformation and conspiracies have found a new megaphone in the curation engines that power massive platforms like Amazon, Facebook, and Google. Search, trending, and recommendation algorithms can be gamed to make fringe ideas appear mainstream. This is compounded by an asymmetry of passion that leads truther communities to create prolific amounts of content, resulting in a greater amount available for algorithms to serve up … and, it seems, resulting in real-world consequences.

By | 2019-03-11T10:02:04-07:00 March 11th, 2019|Air Quality|