The problems with West Covina’s public contracts were so bad, the controller’s office says, that they constitute criminal behavior in violation of the state’s public contracting laws.

However, the statute of limitations for public contracting violations is limited to one year — making it nearly impossible to prosecute violations.

“It makes no sense that the statute of limitations for violating state and local contracting laws is one year from when the money is spent,” Controller Yee said in a statement to CalWatchdog.com. “I urge the legislature to consider a statutory change if we expect to ferret out fraud and prevent willful abuses of state law and taxpayer dollars.”

West Covina: 72 of 79 control components inadequate

The audit of West Covina covered just two fiscal years, from 2011-13, during which time the city routinely misstated its revenues and expenditures. The controller’s audit division reviewed the internal accounting components based on the guidelines established by the General Accounting Office’s Internal Control Management and Evaluation tool. Ninety-two percent, or 72 of 79 components were deemed inadequate.

The City of West Covina struggled with basic accounting procedures. In fiscal year 2011-12, the city understated its property tax revenue by $14 million, sales tax revenue by $4 million and expenditures by $16 million. The following year, expenditures were off by $9.78 million and property tax revenue understated by $4.2 million.

In addition to misstating the city’s financials, the council and top management charged the city for lavish meals, hotel bills and other expenses with no government purpose. From July 1, 2011, to June 30, 2013, city officials charged more than $32,000 in “questionable” expenses to city credit cards. According to the state controller’s audit, former city councilmembers and city managers charged thousands of dollars for hotel stays in Santa Barbara and weekend getaways in Indian Wells.

Problems occurred under former City Manager Andrew Pasmant

Among the State Controller’s other findings:

• West Covina settled a breach of contract lawsuit for $900,000 after a real estate deal fell through due to the city’s failure to comply with applicable laws and regulations. The city also paid $145,000 in legal fees to the West Covina Improvement Association, which challenged the deal’s legality.
• After winning a discrimination and hostile work environment lawsuit, West Covina waived its right to recover more than a million dollars in costs and legal fees. The State Controller’s review concluded the city failed in its responsibility to protect taxpayer dollars.
• Invoices for $457,015 in legal fees did not detail the work performed or show payment authorization.

In another instance of questionable city spending, the state controller’s audit revealed, “On November 17, 2011, the former City Manager charged to the City issued card $5,300 for a business-magazine advertisement for a private company for which the contact person was the former Community Development Director.” Andrew Pasmant, according to city records, was the city manager at the date in question.

The West Covina city council should have anticipated Pasmant’s penchant for problems. When the city hired him in 2001, it knew about Pasmant’s past problems in the City of South Gate, which needed “a court order to get him out of his office,” according to the Los Angeles Times.

Sweetheart Contract for Athens Services

The former city manager can share the blame with the former members of the city council.

In 2012, the council approved a sweetheart deal for Athens Services to collect the city’s trash and recycling. Athens Services received a contract extension until November 2037 in exchange for a one-time payment of $2 million and annual contributions of $50,000 to the City’s SWAT program, $20,000 to the Summer Concert series, and $30,000 to the Fourth of July celebration.
That agreement with Athens Service  was approved by then-Mayor Mike Touhey and then-Councilmen Steve Herfert and Rob Sotelo. Councilman Fredrick Sykes, who cast the lone dissenting vote, criticized the contract.

“The evergreen clause has been in the driver’s seat in this city forever,” Sykes said of the Athens contract, according to the San Gabriel Valley Tribune. “The City Council doesn’t control the how and the when and the cost. We have no say.”

To its credit, the City of West Covina has embraced much of the audit’s findings and cooperated with the state controller’s office. The current city council was largely elected on a reform slate and took over control after the problems found in the audit.

“The City of West Covina acknowledges that the open bidding requirements established by the municipal code were not always complied with,” the city stated in response to the audit. The city also says that it has adopted “a new and more comprehensive purchasing policy since the time periods evaluated.”

A complete copy of the audit is available at the State Controller’s website.

By Katy Grimes

The Obama administration has a lot riding on California’s implementation of Obamacare, also known as the Patient Protection and Affordable Care Act. How the state implements the new insurance exchanges, and whether or not it is done successfully, will be an important test of nationalized health care.

But a state-run health exchange puts the burden onto the state and the expense ultimately on the taxpayers. The state loses the authority and flexibility needed to best meet the needs of its people… Which is why more than 30 states have told the Obama government that they will not create state-run health exchanges, leaving the Obama administration to build and operate online health insurance markets for more than 30 states. This is an unexpected problem, unanticipated by the federal government when Obamacare was passed in 2010.

But this isn’t a problem for Democratically controlled California government, which will do just about anything for a federal grant.

Politics and health care

Don’t discount the politics involved. The California Democratic Party is clearly hoping that this latest government expansion works. Then again, Democrats think the DMV works.

However, if people don’t enroll, the state stands to lose billions in federal dollars.  Many warn that if this happens, all insurance premiums will rise in California.

The state expects to enroll more than 2 million additional residents in Medi-Cal, the state’s version of Medicaid, and sign up another 2.5 million for subsidized private insurance.

Medi-Cal pays for health care services for individuals receiving welfare.

Marketing and PR on the backs of taxpayers

And California, on the brink of insolvency, plans to spend nearly $90 million in 2013 on marketing and “raising public awareness” about the exchange. The state hired eight public relations firms to come up with the marketing plan using traditional advertising, grass-roots efforts at churches, schools and cultural events, and will even enlist the help of Hollywood in movie theaters and popular television shows.

Implementing this extensive, expensive marketing plan will take a great deal of coordination. But never fear, the state is here, and the state knows how to market to itself.

“In addition, as required, the plan’s elements for outreach include consideration of core principles and opportunities for seamless coordination with public coverage programs and the Project Sponsors: The California Health Benefit Exchange, the California Department of Health Care Services (DHCS) and the Managed Risk Medical Insurance Board (MRMIB) as well as the programs they administer: Medi-Cal, Healthy Families, Access for Infants and Mothers program, Pre-Existing Condition Insurance Plan, Major Risk Medical Insurance Program and other state health insurance programs. The California Office of Patient Advocate will also be providing outreach, education and consumer assistance,” the marketing team plan says.

Expanding subsidized health care – who pays?

The overall goal is to provide health insurance to a “projected” 5 million “uninsured residents” – half of which will qualify for low-income subsidies.

Who is uninsured in California? According to the California Healthcare Exchange, 47 percent are Latinos, 33 percent are whites, 21 percent are African Americans, 12 percent are Asian, and 3 percent are “other.”  And of these uninsured or “eligible,” 2.6 million qualify for subsidies, and 2.7 million don’t qualify for subsidies but will now have “guaranteed coverage.”

If this still doesn’t look like a giant government expansion, I have some lovely swamp land to sell you. It is clearly not based on need. If the government really cared about insuring uninsured Americans, a gap insurance policy would have been created to insure the legitimate 10 million estimated uninsured Americans.

Instead, the Obama administration saw an opportunity to grossly expand government, and jumped on it. While other states ran from creating the exchanges, California’s liberal politicians jumped in as well.

We are already falling off the fiscal cliff, while the state’s Democrats are forming committees to decide how to spend the new tax revenue. California’s real debt is $617 billion – the highest in the entire country.

The real national unemployment rate would be closer to 11 percent if it weren’t for all of the people who have stopped looking for work and completely dropped out of the labor force. And the really real unemployment rate is a separate government number called the “U-6,” rarely reported by the media, which provides an accurate look at how many people are really unemployed.

According to the U-6, California has a 20.3 percent real unemployment rate.

Twenty-three million Americans are struggling to look for any work, nearly one in six are living in poverty, and 47 million people are dependent on food stamps to feed themselves and their families.

California’s real debt is 10 times what Brown and the state Democrats report. Facing insolvency and continually expanding state government, Californians are probably facing a more than just downgrade of medical benefits.

While other states are refusing to expand Medicare or implement the Obamacare health exchanges, California has sold out to the federal government program, and more importantly, the money.  It’s just about the money.

By Wayne Lusvardi

President Barack Obama’s “stimulus” flying saucer landed in California in February 2009. This isn’t something from Steven Spielberg’s “E.T.: The Extra-Terrestrial.” It’s the actual description from Paul Krugman, the Nobel Prize-winning economist and New York Times columnist.

Krugman is quoted in the new book, “Debacle: Obama’s War Against Jobs and Growth,” by John Lott and Grover Norquist. Lott is a well-known economist at the American Enterprise Institute. Norquist is the president of Americans for Tax Reform, a taxpayer advocacy group.

Krugman:

“If we discovered that space aliens were planning to attack and we needed a massive buildup to counter the space alien threat, and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months.  And then if we discovered, oops, we made a mistake, there aren’t any aliens, we’d be better off.”

Thirty-eight months later, there is, as predicted, a growing state budget deficit and looming inflation from California’s new green laws. But there is no significant economic recovery, either.  In fact, California may be headed for a double-dip recession in 2013 and 2014. What happened?

We thought by now that the space aliens from “Planet O” would have won California’s war over global warming, its water wars and its war against Proposition 13.  For as former White House Chief of Staff Rahm Emanuel said, “You never want to see a crisis go to waste.”  So the Mortgage Meltdown of 2008 was used as an excuse to run around Prop 13, home rule, and eventually California’s Constitution.  Government avoided having to adjust wages, home prices and public pensions from inflated levels during the Mortgage Bubble.  Now it has announced it is running a $16 billion deficit. California’s budget flying saucer just doesn’t want to come back down to planet earth.

The federal stimulus program ended in July 2011.  But 2012 is an election year.  So Obama and California Attorney General Kamela Harris have shaken down commercial banks for another $18 billion bailout in the guise of a foreclosure fraud settlement.  To do this, California must circumvent its State Constitutional ban on giving a “gift of public funds” to homeowners. But who cares about the rule of law? Obama will do anything to get elected. Obama’s economic stimulus movie might as well have been written, produced and directed on a stage set in Hollywood.  But it died at the box office.

California’s decline due to stimulus

Lott and Norquist have written a well-documented book on why Obama should not be re-elected, due to his poor track record on jobs and economic growth.  Though they don’t provide any specifics on California in their new book, the chapters of their book could easily be applied to California:

Chapter 1: The Financial Crisis — California is ground zero of the foreclosure crisis as shown by the $25 billion foreclosure settlement funds coming to California.

Chapter 2: The Worst Recovery on Record — California is lagging behind every other state in economic recovery.

Chapter 3: The Stimulus Made Things Worse — the stimulus postponed the reduction of government wages, home prices and public pensions resulting from the Mortgage Bubble that would have brought about a rapid recovery.

Chapter 4: Would the Economy Have Been in Worse Shape without the Stimulus? — The foreclosure fraud settlement will prolong California’s recession and circumvent the constitutional prohibition against giving homeowners a gift of public funds.  The federal Department of Energy’s $535 million loan guarantee to California-based solar panel manufacturer Solyndra ended up with the company taking the money and jumping on a flying saucer as soon as the loan was approved.

Chapter 5: Regulatory Thuggery — Due to a federal EPA crackdown on fracking permits — oil drilling by hydraulic fracturing of rocks — California’s oil well permits dropped from 71 in 2009 to 7 in 2011, a 90 percent drop.

Obama’s war against jobs and growth

When Obama was elected in 2008, it gave Democrats a supermajority.  Obama signed Sen. Dianne Feinstein’s H.R. 146 — San Joaquin River Restoration Act — as part of the Omnibus Lands Act of 2009.  This bill transferred contracted water from San Joaquin Valley farmers to commercial fishing, recreation, lodging and real estate development interests in a water grab.

The amount of data and documentation Lott and Norquist have amassed won’t convince their opponents if all the reader reviews at Amazon.com are any example.  No matter how convincing this book is, the text is bound to make opponents only more prone to denial and strengthen their opposition. Social psychologists call this “cognitive dissonance” — information at odds with one’s core beliefs that threaten one’ livelihood or social status typically results in one’s beliefs only getting stronger.

But reality still intrudes. As Lott and Norquist show, another four years of Obama would drive the economic train off a cliff — with California riding in the first car.

By Steven Greenhut

Gov. Jerry Brown’s “Moonbeam” shtick has long passed its expiration date, taking about as long to go from “cute” to “annoying” as it did for Arnold Schwarzenegger’s “Terminator” references.

On Monday, in announcing that the state’s budget deficit ballooned from $9.2 billion to $15.7 billion in a mere four months (later revised to about $17 billion by the legislative analyst), the governor let loose with this Brown-ism: “The capitalist system is not coincident with your expectations of exactitude.” In other words, the market system “doesn’t play out like we may want it to.”

That entertaining wordplay might have gotten a chuckle or two in the past, but the governor — not the capitalistic system — is largely responsible for the budget mess he detailed that day. The state continues to face enormous shortfalls precisely because this governor betrayed the promises he made to Californians.

An Inefficient and Meddling Government

Brown promised us an honest budget. But, according to economists who looked at a budget deficit that has grown by 70 percent since January, there was nothing in the economy that caused the tidal wave of red ink. The problem: Gov. Brown’s budget was dishonest. Just like Schwarzenegger and Gray Davis before him, Brown didn’t have the courage or political skill to bring state spending in line with revenue, so he relied on overly aggressive economic forecasts to paper over the enduring mess.

Brown has no interest in cutting government, even though the state’s still-huge budget is filled with waste, inefficiency and redundancy. The state government meddles in just about every aspect of our lives. California’s cost to provide services is far higher than for most other states, thanks largely to the enormous overhead exacted from a public sector that enjoys the most lush pension and health care benefits in the nation. We’re supposed to believe the government is cut to the bone?

The Legislature has refused to pursue pension reform, which would not only trim needed dollars from the deficit, but would keep the state’s localities from hitting the financial wall. But legislators don’t have time for it, busy as they are with such pressing matters as banning foie gras. If Brown spent a tenth of the time pushing his pension reform plan as he does pushing for tax hikes, he might actually get somewhere.

Brown has tried to play on his cheapskate image, honed in the 1970s, by cutting a few pennies from, say, the Commission on the Status of Women, but he has not looked at serious reforms, alternatives to the government’s costly — but shoddy — delivery of services. He recently joked that there’s plenty of money “sloshing around” in California, and that the rich are doing just fine. But such words are only a reminder of what a bore the man has become.

Turning Away Businesses

A growing economy could surely bring in new revenue, but the state’s leaders are too busy punishing the private sector to understand that message.

Like other leaders of his party, he doesn’t take seriously the evidence — such as California’s lowest ranking among states to do business, per Chief Executive magazine’s latest survey, or the USC survey showing dramatically slowing population growth — that the rich, moderately rich and entrepreneurial middle class are high-tailing it to other states. Yes, people are still coming to California — but taxpayers are being replaced largely with tax consumers.

The California government’s war of attrition against the most productive members of its society might explain another reason that the deficit keeps getting worse. “California is suffering [a] tax drought even as most other states enjoy a revenue rebound,” the Wall Street Journal opined. “State tax collections were up nationally by 8.9 percent last year, according to the Census Bureau, and this year revenues are up by double digits in many states.” California defied that trend.

I argued recently for Bloomberg that there’s a case for staying in California, in that we ought to dig in and fight for our home rather than pull up roots and try to find a better place. But it’s hard to imagine any new business choosing to move or expand here, despite localized growth (San Jose) and the state’s appeal for those who already have made their fortune. We have tools to revive our state (i.e., the initiative process), but someone save us from the crowd that governs us these days.

Brown’s Faulty Leadership

Brown, who helped create the state’s current mess during his first go-round as governor (1975-83) thanks to the vast expansions of power he granted to public-sector unions and his small-is-beautiful approach to infrastructure, positioned himself as the man best able to wrestle with the state’s problems. Instead of confronting tough problems, he’s looking for the easy route — cobbled-together budgets and tax increases as he protects the coddled public sector from competition and reform.

Brown also is committed to spending our way out of the mess, as he promotes other dishonest schemes, such as a bloated high-speed rail project based on phantasmagorical funding schemes and “green jobs” programs based on equal parts subsidy and fantasy. The carbon-emission cap-and-trade system embraced by Schwarzenegger and Brown alike is killing business and won’t provide any cleaner air, designed as it is merely to prod other states and the feds into following suit. That’s California exceptionalism these days – following its own ideologically driven path right over the cliff.

“You’ve got to try many paths because a lot of them don’t work,” Brown said at a March economics conference. “I’m open, I’m curious, and I like to try new things.”

But Brown really is open to only one idea – new taxes. He’s using threats of Draconian cuts to coerce the public into giving the state government and the unions that dominate it even more of their hard-earned money. Voters should understand that if they give him what he wants, we’ll never get real reform, and Brown and his allies soon will be back, asking for even more money. That’s even less entertaining than the governor’s boring rhetoric.

Former community organizer and civil rights activist, Sen. Kevin de León, D-Los Angeles, co-authored SB 1234, which would require businesses with five or more employees to enroll them in a new “Personal Pension” defined benefit program. Or the private employer would have to offer an alternative employer-sponsored plan.

Public pensions have now turned out to be the biggest ponzi scheme in history. Experts have estimated that unfunded pension liabilities in the U.S. are worth trillions of dollars.

Democratic Solutions Strangle Business

Despite that 401(k) plans and IRA plans are available to everyone, Democrats are trying to convince the masses that somehow they are being robbed if they do not have an pension plan. According to the Wall Street Journal, in 2011, nearly 60 percent of American households nearing retirement age had 401(k)-type accounts. Anyone can start a retirement plan through any investment firm. There is no reason for the government to be involved in private sector pensions, unless more corruption and mismanagement is the goal.

But the Sacramento Bee reported that the “UC Berkeley Center for Labor Research and Education figures about 62 percent of working Californians – more than 7 million people – have no retirement savings through their employer. If all of them put 3 percent of their wages into a retirement fund, the pot of money would grow to $6.6 billion in the first year, say university researchers.” But nowhere in the story did the Bee mention that anyone can open an account, and start funding a retirement plan, with or without an employer sponsor.

The Democrats’ solution to the half-a-trillion dollar public pension debt, is to make a new law ordering private business to participate in another pension scheme? Is this so that the private sector can end up bankrupt as well? This is nothing more than a tawdry tactic to get private sector money to support the state’s bankrupt, broken public pension system.

The bill is co-authored with Senate Pres Pro Tem Darrell Steinberg. It appears that big union contributors may be getting some payback with another government expansion program. Both Steinberg and de Leon receive very large union political campaign contributions, according to Maplight.org.

Who Gets To Administer The New Program?

Language in the bill states, “The bill would require the Employment Development Department to modify the California Employee’s Withholding Allowance Certificate to create an option for employees to elect to opt out of an employer-sponsored retirement or pension plan. The bill would require the Employment Development Department to assess a penalty on any eligible employer that fails to offer its eligible employees a retirement or pension plan option...”

The new system’s investments would be professionally managed by CalPERS, “or another contracted organization.”

The bill allows for the hiring of additional state employees to administer the new pension program, and calls for the Employment Development Department to enforce business participation. California is about to get pension police. Can you imagine EDD employees with a badge and gun?

“The Employment Development Department shall assess an eligible employer that fails to offer all of its eligible employees an employer-sponsored retirement plan or the personal pension pursuant to Section 10010 a penalty of one thousand dollars ($1,000) for every eligible employee not offered the retirement option,” the bill states. And the collected penalties will be deposited in the state’s general fund.

Called “the Golden State Retirement Savings Investment,” the board, “which shall consist of the Treasurer, the Director of Finance, the Controller, an individual with retirement savings and investment expertise appointed by the Senate Committee on Rules, a small business representative and a public member each appointed by the Governor, and an employee representative appointed by the Speaker of the Assembly. The Treasurer shall serve as chair of the board.”

The very hungry fox will be guarding the henhouse.

FEB. 24, 2012

I hope that the rest of America is happy that even more of its tax money will be robbed to pay for California’s High-Speed-Train-To-Nowhere-Boondoggle. Reports McClatchy:

WASHINGTON — California’s high-speed rail plan will receive up to $624 million in additional federal funds, Transportation Department officials announced Thursday.

The new funding adds to the $715 million in federal funds previously awarded to California. It arrives courtesy of Ohio and Wisconsin, two states where recently elected Republican governors decided not to accept their own allotment of high-speed rail dollars.

“I am pleased that so many other states are enthusiastic about the additional support they are receiving to help bring America’s high-speed rail network to life,” Transportation Secretary Ray LaHood declared in a written statement.

LaHood’s redistribution of an additional $1.195 billion in high-speed rail funding provoked cheers among lawmakers who had been lobbying for a bigger slice, but regret among some Midwesterners who saw their own money slip away.

California is one of 12 states that will receive a piece of the redirected funds. Florida, the next biggest beneficiary will get $300 million.

California’s two Democratic senators, Dianne Feinstein and Barbara Boxer, had both urged LaHood last month to provide additional funding once it became clear Ohio and Wisconsin would forgo their potential share.

“No other state is as ready, as able, or as determined to develop a high-speed rail system in the near future,” Feinstein stated.

Boxer added that the new funding is “great news for California, which has made a strong commitment to high-speed rail and the jobs it creates.”

Of course, the federal taxpayers’ loot is but a fraction of the $90 billion cost — at least — of this demented choo-choo. Ohio and Wisconsin are smart in turning down the dough, because state taxpayers also have to kick in billions, and then pay billions more for maintenance and operation.

Yet, Gov. Arnold, DiFi, Babs Boxer, Debt Maestro Bill Lockyer, and Legislative leaders back the Train to Nowhere.

Meanwhile, in the Real World, the U.S. government just ran up a $150 billion deficit in November, the highest ever. That works out to $1.8 trillion for a year, meaning the deficit now is around 40% of federal spending.

And California’s budget deficit now has jumped even higther, to $28 billion.

Yet all along we have had high-speed trains that take you from L.A. to Sacramento or S.F. in about an hour. They even have wings. They’re called airplanes.

Dec. 10, 2010