State law bans the Fresno Democrat from lobbying his former colleagues for one year following his tenure in the state Assembly. Yet, the state’s ban on influence-peddling hasn’t stopped the Pharmaceutical Research and Manufacturers of America from hiring Perea as a senior director of state advocacy. Perea, according to published reports, began talking job prospects with the industry group in September.

Beginning on January 4, Perea will direct political operations in California, Arizona and Nevada for the group known around the Capitol by the acronym PhRMA. The group represents the country’s biggest pharmaceutical and biotechnology companies, including Allergan, Amgen, AstraZeneca, Bayer, Bristol-Myers Squibb, Celgene, Eli Lilly and Company, GlaxoSmithKline, Johnson & Johnson, Merck & Co., Novartis Pharmaceuticals Corporation and Pfizer.

“They innovate, they discover cures, they represent a lot of California employers,” Perea said in an interview with the Los Angeles Times. “The debate in health care, especially after the Affordable Care Act, is going to be very robust over the next decade or two and I look forward to being a part of that.”

PhRMA’s Robust Lobbying Operation

Since Perea’s first term in the state Assembly in 2010, the Pharmaceutical Research and Manufacturers of America has spent big money to lobby the governor, state lawmakers and other state government officials.

A CalWatchdog.com analysis of state lobbying disclosure forms found that Perea’s new employer has spent more than $2.59 million in state lobbying over the past five years. That half-million dollars per year in annual lobbying fees doesn’t include money spent by PhRMA’s member organizations.

Just one PhRMA member, the multinational pharmaceutical giant Pfizer, spent more than $3.18 million in lobbying over the same period, according to CalWatchdog.com’s review of disclosure reports.

Perea’s Campaign Contributions from PhRMA

The pharmaceutical industry’s robust lobbying operation in Sacramento has frequently crossed paths with Perea. Over the course of his career, Perea has accepted $157,144 in campaign contributions from the industry, according to FollowtheMoney.org’s analysis of campaign contributions. That ranks him 119th of every politician in the country and, according to FollowtheMoney.org, means he’s accepted more pharma money than Senate President Pro Tem Kevin de León, Speaker of the Assembly Toni Atkins and former Senate President Pro Tem Darrell Steinberg.

During the 2011-2012 legislative session, the pharmaceutical industry contributed more than $74,000 to Perea’s campaign accounts, making it the second largest industrywide contributor to Perea’s campaign, according to an independent analysis by the transparency group MapLight.

Perea’s multiple campaign committees also appear frequently on campaign finance disclosure reports and political action committee summaries filed by pharmaceutical companies. Earlier this year, his campaign committee for a 2018 Insurance Commissioner campaign accepted $2,000 from Amgen. In 2014, Pfizer gave Perea $3,500 and counted his re-election among its important wins.

“We continue to face significant legislative and regulatory challenges and each election cycle is critical to our industry,” Sally Susman, chair of Pfizer PAC, wrote in its 2014 Pfizer PAC annual report, a 102-page report detailing the company’s effort to build “positive public will.”

Perea’s history of luxury gifts, trips

Although Perea has refused to disclose his new salary, it’s likely to be more than the $97,197 annual salary and $33,000 in annual tax-free per diem payments he received as a member of the state Legislature.

Over the course of his career, Perea supplemented his income with tens of thousands of dollars in luxury goods, entertainment and travel, according to his economic disclosure reports.

In 2011, Perea accepted $9,397 worth of lodging, meals and transportation for a junket to Italy sponsored by the California Foundation on the Environment and the Economy, “a San Francisco-based nonprofit made up of oil companies, utilities and environmental groups.” Two years later, Perea again accompanied the group on its junket to Eastern Europe – a trip valued at $9,984.

Perea’s biggest haul came last year, when he accepted $16,090 from the group, including a $10,221 trip to Chile. He also traveled to: Maui on a $2,148 trip paid for by the Independent Voter Project, Israel on a $11,550 trip paid for by the American Israel Public Affairs Committee, and Central America on a $1,500 trip paid for by the government of El Salvador.

3rd lawmaker resignation since 2013

Perea will become the third California lawmaker in two years to quit in the middle of a term in order to take a job with a Capitol interest group. In 2013, Democrat State Senator Michael Rubio abruptly quit his position to take a job with Chevron’s government affairs unit. That same year, Republican State Senator Bill Emmerson quit mid-term for a high-paying job with the California Hospital Association.

Perea’s resignation will trigger a 2016 special election that is expected to cost Fresno taxpayers several hundred thousand dollars. The March 2014 special election to fill Emmerson’s seat cost Riverside County taxpayers $415,000, according to the Press-Enterprise.

Two candidates had already announced their intentions to run for the 31st Assembly District: Democrat Joaquin Arambula and Republican Fresno City Councilman Clint Olivier.

Assemblyman Henry T. Perea, a Central Valley Democrat, announced Tuesday his resignation from the California State Assembly, effective December 31.

“This is a bittersweet moment for me as I announce my departure from the state Legislature to pursue other career opportunities,” Perea said in a statement. “I am currently exploring these options and I expect to make a decision soon.”

3rd lawmaker resignation since 2013

Perea will become the third California lawmaker in two years to quit in the middle of their term for a job with a Capitol interest group. In 2013, Democrat State Senator Michael Rubio abruptly quit his position to take a job with Chevron’s government affairs unit. That same year, Republican State Senator Bill Emmerson quit mid-term for a high-paying job with the California Hospital Association.

The resignation will trigger a 2016 special election that is expected to cost Fresno taxpayers several hundred thousand dollars. The March 2014 special election to fill Emmerson’s seat cost Riverside County taxpayers $415,000, according to the Press-Enterprise.

During his five years in office, Perea endeared himself to the Capitol’s biggest special interest groups, unions and corporations and developed a reputation as one of the State Assembly’s primary dealmakers.

“I maximized every day to deliver on the most pressing issues facing our state,” Perea said in a statement.

In 2013, Perea authored legislation that brought about “sweeping changes to the way most of the state’s residents pay for power.” Assembly Bill 327  granted the California Public Utilities Commission substantial power to rewrite California’s energy policy. Some of Perea’s fellow Democrats strongly criticized the legislation for raising energy rates on poor and working families.

“It’s called robbing the hood,” state Senator Rod Wright, D-Inglewood, said of AB327 when it reached the Senate floor. “This is a bad bill. You’re going to raise people’s rates.”

Perea collected luxury gifts, trips

As a state lawmaker, Perea earned $97,197 in annual salary plus $33,000 in annual tax-free per diem payments. He also maximized his opportunities to accept tens of thousands of dollars in luxury goods, entertainment and travel, according to his economic disclosure reports.

In 2011, Perea accepted $9,397 worth of lodging, meals and transportation for a junket to Italy sponsored by the California Foundation on the Environment and the Economy, “a San Francisco-based nonprofit made up of oil companies, utilities and environmental groups.”

Two years later, Perea again accompanied the group on its junket to Eastern Europe – a trip valued at $9,984.

Perea’s biggest haul came last year – when he accepted $16,090 from the group, including a $10,221 trip to Chile. He also traveled to: Maui on a $2,148 trip paid for by the Independent Voter Project, Israel on a $11,550 trip paid for by the American Israel Public Affairs Committee, and Central America on a $1,500 trip paid for by the government of El Salvador.

In addition to his international junkets, Perea attended the running of the 140th Kentucky Derby, just days before redeeming $368 worth of free passes to Disneyland.

Two candidates had already announced their intentions to run for the 31st Assembly District: Democrat Joaquin Arambula and Republican Fresno City Councilman Clint Olivier.

But not as much attention has been paid to the criticism a strong majority of the Assembly made of the governor on what he and others have described as California’s biggest issue: how it deals with its profound shortage in water. This criticism was reflected in 47 of the 80 Assembly members signing a letter asking for a special session to consider emergency drought legislation.

The Associated Press, which broke the story, reported that the bipartisan group believed a …

… special session is needed to address the unprecedented water crisis, which could worsen as California faces the prospect of an El Nino weather pattern that could bring severe flooding.

 

“We have seen from widespread reports that as much as half of the $687 million set aside to help drought-stricken communities remains unspent in state accounts – and will remain there until 2016,” says the letter. “In addition, we are seeing the same slow and lethargic project pace with the funds raised as a result of last year’s Proposition 1 ballot measure.”

 

The AP reported in June that more than $320 million that was supposed to be rushed to drought-stricken California communities was sitting unspent in government bank accounts, more than a year after lawmakers voted to use the money to provide water, protect wells from contamination and upgrade outdated water systems.

 

A special session addressing the drought should also include “thoughtful and careful review of environmental policies that — even if well-meaning — may be doing more harm than good,” the letter says.

Young Central Valley politicians taking on the governor

The Central Valley produced many of the 47 signatories to the letter. Assemblyman Devon Mathis, a 32-year-old Republican who represents Tulare and Inyo counties and parts of Kern County, was the leading organizer.

The leader of the opposition to Brown’s and state Senate President Kevin de Leon’s push for a long-term 50 percent reduction in gasoline use — the rejected central plank of the energy legislation — was Assemblyman Henry Perea, a 38-year-old Fresno Democrat.

This suggests that regional politics may be returning to prominence in Sacramento after a long period in which nearly all elected state Democrats went along with an agenda dominated by politicians aligned with environmentalists and union interests based in Los Angeles and the Bay Area. Republicans got nowhere with appeals for regional solidarity on some issues.

In 2009, for example, a proposal by Rep. Devin Nunes, R-Visalia, to help divert some federally controlled water to farmers in the poverty-wracked Central Valley won the support of 37 House Democrats. But only one was from California — Rep. Dennis Cardoza of Merced.

Nunes’ measure suffered a decisive defeat in the House Rules Committee, partly because Rep. Doris Matsui, D-Sacramento, wouldn’t support it. Matsui grew up in Dinuba, a poor town in Nunes’ district some 30 miles from Fresno.

Environmentalists who advocated for cleaning up air quality by shutting down old, obsolescent power plants are going to find that renewable power did not, in the long-run, bring about conservation-inducing tiered power rates. Moreover, this consolidation of pricing tiers will bring about the demise of rooftop solar power, which was economic only because the top two tiers for electricity were higher priced than the solar power.

Current pricing model

On April 21, the California Public Utilities Commission announced it was rolling out a new plan that would overhaul electric utility rates.

As shown in the adjacent chart, today, electric utilities charge for power based on four increasing rates.  The lowest rates is 15 cents per kilowatt-hour; and the highest more than double at 31 cents. The CPUC would reduce the price tiers to two and flatten the price difference between the tiers from 106 percent today to 20 percent by 2019.

The result would be that those with higher rates today will have their monthly electricity bill reduced and those at the bottom two price tiers will see their electricity bills increase.

AB327 phases out Top tiers of power rates by 2020

This is the result of California Assembly Bill 327 sponsored by Assemblyman Henry Perea, D-Fresno, which was signed into law by Gov. Brown on Oct. 7, 2013.  However, AB327 still provides for discounts for low-income electricity customers whose electricity bills do not exceed 30 to 35 percent of their income under the California Alternate Rates for Electricity program.

AB327 specifically states that the original reason for the four to five price tiers was to pay off the $42 billion bill accumulated due to the California Energy Crisis of 2001. That bill was loaded into Department of Water Resources power purchases to pump water through the State Water Project (see page 4 here). Conservation was never the primary purpose of the higher price tiers, which were expanded after 2001 so that wealthier customers would mainly pay off the huge debt incurred in 2001 to mothball older, dirtier power plants.

Progressive Pricing Coming to End

Evan Gillespie of the Sierra Club says of the new rate structure:  “It jacks up bills for low-income customers, lets energy hogs off the hook and will slow the transition to clean energy.”

Bottom line for customers in PG&E, Edison, and SDG&E service areas:

• Use very little electricity? Pay more than you did last year.
• Use a lot more electricity? Pay less than you did last year.
• Use an average amount? Pay about the same as last year.

But the era of Progressive pricing of electricity, where coastal ratepayers used 50 percent more power but paid 100 percent higher rates, will be coming to an end in 2020.

Current Electricity Price Structure for Regulated Public Utilities:

Perhaps the last chance to head off a California gasoline price hike that could exceed 50 cents per gallon by 2020 just was defeated on the state Senate floor.

Sen. Andy Vidak, R-Hanford, offered amendments to a bill, AB2492, that had nothing to do with the bill’s focus on drug sentencing. The amendments duplicated those in Vidak’s bill, SB1079, which would head off a gas price hike that could begin next year.

“I rise today to offer amendments that will stop a hike in gasoline and diesel prices that could range anywhere from 16 to 76 cents a gallon every time Californians fill up Jan. 1, 2015,” Vidak said on the Senate floor Aug. 21. “Gasoline is not a luxury for most Californians, it’s a necessity.

“Communities that I represent already suffer extreme poverty and some of the highest unemployment in the state as well as the country. Our food banks are already overwhelmed with families waiting in food lines. And they’re not able to make it right now. This is an unfair, hidden, regressive tax that will hurt many vulnerable Californians, and it must be stopped.”

The amendments were promptly voted down by the Senate’s Democratic majority, 23-10, without discussion.

Exemption

SB1079 would exempt the transportation fuel industry from having to comply with the state’s cap-and-trade program, which the industry is scheduled to do beginning Jan. 1, 2015. That program was started to advance compliance with AB32, the California Global Warming Solutions Act of 2006, which was signed into law by then-Gov. Arnold Schwarzenegger. The program requires the state’s largest energy users to reduce their carbon emissions or purchase carbon allowances through the cap-and-trade market mechanism.

“The State Air Resources Board’s regulatory analysis for the market-based compliance mechanism anticipates carbon allowance costs ranging from $15 to $75, inclusive, per ton between 2015 and 2020,” the bill states.

“Many areas of the state continue to struggle from disproportionately high unemployment rates, and the state’s hard-working low-income and middle-income families will likely suffer most from this additional cost burden.”

The bill exempts from the cap-and-trade program any industries not enrolled in it by Dec. 31, 2014.

“This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect,” the bill states.

“The facts constituting the necessity are: To allow sufficient lead time to make necessary adjustments to the program before it takes effect January 1, 2015, it is necessary for this act to take effect immediately.”

Stuck

Despite the bill’s call for urgency, SB1079 is bottled up – Vidak calls it “stuck” – having been sent to the Senate Rules Committee.

“Liberal elites don’t seem to care about poor people who have to wait in food lines to feed their family,” said Vidak in a press release response to the rejection of his amendments. “Even a small increase in gas prices will be devastating to so many people in our Valley.”

Vidak goes on to charge that “the California Air Resources Board and the Brown administration secretly created the unauthorized gas tax without public knowledge or legislative approval. California already has the highest gas prices in the nation. According to GasBuddy.com, the average cost for gasoline in California is $4.12 per gallon and the national average is $3.68.”

A similar bill, AB69, by Assemblyman Henry Perea, D-Fresno, provides a three-year exemption for the transportation fuel industry until 2018. It has been assigned to the Assembly Rules Committee.

High gas prices

No one knows exactly how high gas prices might increase as a result of bringing transportation fuels into the cap-and-trade mandate. It will depend on how high the price of a carbon allowance goes. Currently at $11.34 per ton, it’s expected to grow by 5 percent plus inflation per year as the carbon allowance noose tightens.

By 2020, gas prices will likely increase in the range of 13-20 cents per gallon, but could exceed 50 cents per gallon, according to a letter to Perea from the Legislative Analyst’s Office. The estimate is based on gas prices increasing 8-9 cents per gallon for every $10 per ton of carbon allowance cost.

“The actual price increase will depend on a wide variety of economic, technological, and regulatory factors that are difficult to predict,” the LAO letter acknowledges. “We note that if transportation fuels were not part of the cap-and-trade program, alternative policies to meet the AB 32 emissions targets might be adopted that also have the effect of increasing gasoline prices.”

Price study

The estimate of a 13-20 cent per gallon gas price rise is based on a June 2014 study conducted for the California Air Resources Board by the Market Simulation Group. It’s based on a 2020 allowance price of $20 per ton. But the study also states that allowance prices could go as high as $79 per ton, shooting gas prices up more than 50 cents per gallon.

“This study’s scope is narrower than the others we reviewed, but our summary places very heavy weight on it due to its timing and methodological credibility,” the LAO letter states.

The other cost studies that the LAO looked at are not far off from the Market Simulation Group report.

A 2012 study by the Boston Consulting Group estimated that gas prices could increase 15-77 cents per gallon in 2020 (in 2013 dollars). The amount could be 17-87 cents per gallon in projected 2020 dollars, according to the LAO.

A 2010 study for the Union of Concerned Scientists estimated gas prices increasing 37 cents per gallon in a “conservative case” and 88 cents per gallon in an “extreme case.”

An 88-cent gas price hike would likely push California gas prices over $5 per gallon. And that concerns Perea, who defended his three-year moratorium bill in a press release.

“The cap-and-trade system should not be used to raise billions of dollars in new state funds at the expense of consumers who are struggling to get back on their feet after the recession,” he said. “In some areas of the state, like the Central Valley, constituents need to drive long distances and they will be disproportionately impacted by rising gas prices.”

‘Much larger’

Perea believes gas prices will increase about 15 cents per gallon, but cautioned that “a much larger jump is possible. Delaying fuels from coming under the cap would allow California consumers to prepare for the potential impacts of higher gas prices.”

The pain at the pump will be felt not only by residents, but by businesses, warned John Kabateck, executive director of the National Federation of Independent Business/CA.

“California’s small businesses and consumers‎ face significant economic harm from fuel price increases coming Jan. 1, but state officials have done nothing to inform them this is coming,” Kabateck said. “A reasonable delay to this policy will give the state time to fully analyze the impacts of bringing fuels under the cap and small businesses and families time to budget for this financial hit.”

Transportation businesses will likely be hardest hit by the gas price hike.

“Moving fuels under the cap-and-trade program could stifle the economic recovery in the state and give out-of-state businesses a competitive advantage,” said Mike Kelton, CEO of Inland Star Distribution in Fresno.

“While we must work to reduce the consumption and dependency on gasoline and diesel to reduce our greenhouse gas emissions, ­another new gas tax is the wrong way to go about it. The bipartisan support to delay the new hidden gas tax shows the importance to review the impacts of the policy created by regulators at the Air Resources Board.”

$2 billion hit

The probability that SB1079 and AB69 will not be voted on in this legislative session has drawn scorn from Sacramento Bee columnist Dan Walters. He estimates that a 15-cent gas price hike would translate into a $2 billion hit to Californian motorists, with many paying more than $100 extra annually to fill up.

“Given the heavy financial impact of placing fuel under the cap-and-trade program, it should face legislative scrutiny and direct up-or-down votes, rather than being imposed by an unelected board,” wrote Walters in his column, “Legislature ducking debate on big fuel price hike.”

“Were AB69 to die without even a hearing, it would be another example of how the Legislature has cravenly ceded its policymaking duties to others, whether they be initiative sponsors, judges or bureaucrats.”

That certainly is true in California, where the last month of the legislative session, which we’re now in, always sees a frenzy of bill passing — meaning few legislators have read the most important bills.

Two items:

1. What to do with a water bond to fight the drought? Currently, Proposition 43 is on the ballot, with $11.1 billion in new spending, most pork. Gov. Jerry Brown instead has proposed a $6 billion bond, with less pork and $2 billion for reservoirs. Both include a lot of environmentalist spending.

As we have seen recently, bonds are what I long have called “delayed tax increases.” All the water, parks and stem-cell research bonds passed in the previous decade ran up the payback costs, loading up extra spending in the general-fund budget. That’s the real reason Proposition 30, $6 billion in tax increases, was put on the ballot by Brown and passed by voters in 2012.

There’s no consideration for a pay-as-you-go system that would build dams and reservoirs from current funds, cutting waste in other areas to pay for it.

2. On the positive side, AB69, by Assemblyman Henry Perea, D-Fresno, would delay the cap-and-trade provisions imposed by AB32 that would raise gasoline costs by more than 50 cents a gallon. Sensibly, Perea is worried about the impact on his poor constituents, many with long commutes, being gouged even more at the pump.

The bill likely will go nowhere because the state’s powerful environmentalists, centered in Hollywood and Silicon Valley, won’t allow changes to AB32. If you’re a digital billionaire, what do you care if the gas price for your Bentley rises 50 cents a gallon?

This axiom is playing out right now in Australia, where the government has repealed a carbon tax adopted in 2012 when another regime was in power. Here’s some analysis from the liberal Vox site:

The repeal is a big blow for climate policy. Economists have long argued that carbon pricing is one of the most effective ways to tackle global warming. The premise is simple: People should pay for the damage they cause by emitting carbon. And making fossil fuels more expensive will spur companies to seek out cleaner alternatives.

But the major weakness of a price on carbon has always been politics. So many daily activities depend on fossil fuels — from driving to home heating to industry — and the pinch from any tax is likely to be more noticeable than, say, that from more complex regulations. …

And so Tony Abbott and the Liberal Party made repeal of the carbon tax a major issue in the run-up to the 2013 elections. Abbott argued that the tax was costing the Australian economy some $9 billion per year and had little climate benefit so long as other countries weren’t also enacting their own carbon taxes.

Hilarious that Vox labels concern about how much something costs a “politics” problem.  But still.

Same populism in Melbourne and Fresno

Now of course AB 32 isn’t the same thing as a carbon tax, but both California’s and Australia’s initiatives build on the idea that families and businesses should pay more for energy that isn’t renewable. Subtext: Fossil fuels are evil.

But when believing in this truth began to have a price-tag — and especially when it seemed pointless, because most of the world wasn’t into symbolic masochism — Aussie voters bailed.

And in California, so did 16 Assembly Democrats.

Assembly Bill 69 by Assemblyman Henry Perea, D-Fresno, would delay for three years [an AB 32] rule requiring the energy industry to purchase permits for transportation fuels. Lawmakers and critics have been warning for months about a resulting price bump. …

In a show of broad discontent, 16 Democrats last week sent a letter to the Air Resources Board urging the air quality regulator to delay implementing the new rule. …

Perea said he still supports AB 32’s overarching goal of reducing emissions but does not believe consumers have been adequately prepared.

That’s from the Sac Bee earlier this month.

Notice the parallel between Perea’s double-talk and Vox’s? The liberal website likens concern about higher costs of energy to playing “politics” with the issue. Perea suggests the public won’t mind paying more for energy — so long as it’s “prepared” for the pain.

Somehow, I don’t think the Fresno pol actually believes that.

With gas prices soaring again, consumers are rebelling. And even liberal Democrats in California are seeking to help their constituents.

Assemblyman Henry Perea, D-Fresno, spearheaded the writing of a June 16 letter signed by 16 Democratic assembly members to California Air Resources Board Chairwoman Mary Nichols. Separately, 26 Republican legislators have advanced a similar protest. The concern of the legislators is high future gasoline prices from the cap-and-trade emissions program on their constituents.

Cap and trade and its quarterly auctions of emissions allowances were instituted by CARB two years ago under the authority of AB32, the Global Warming Solutions Act of 2006. It limits air emissions by large industries and private electric utilities unless they “trade” pollution allowances above the allowed emissions “cap.”

Most of the new letter signatories represent low-income areas in Los Angeles, the Central Valley and the Inland Empire.

The letter highlighted something not well known: “AB32 does not mandate that CARB create a program that generates revenue for the state and it was not intended to be a funding mechanism for massive, new state efforts at GHG [Greenhouse Gas] reduction.”

Yet in the new state budget for fiscal year 2014-15, which began on July 1, Gov. Jerry Brown and the Legislature grabbed $250 million of cap-and-trade funds for the controversial high-speed rail program. That’s 25 percent of an expected $1 billion in cap-and-trade revenues.

The California Chamber of Commerce earlier this year filed a lawsuit contending the Legislature did not authorize CARB to raise revenue beyond the costs of administrating the cap-and-trade program. The outcome of that case is pending.

Gas price spike

Assemblyman Perea’s concern is that gasoline prices will rise by $0.15 per gallon next year from cap and trade and will increase each year thereafter.  Gas prices are expected to rise dramatically as the cap-and-trade program expands to include large fuel suppliers next year.  The Wall Street Journal cited a Boston Consulting Group study in 2012, predicting gasoline prices would go up between $0.49 to $1.83 per gallon by 2020 due to cap and trade.

An effort called “Fed Up at the Pump” has just been organized by the California Independent Oil Marketers Association to criticize this “hidden” tax on gas.

The largest number of long distance automobile commuters in the United States are from San Bernardino County to Los Angeles County at an average of 68 miles.  The higher costs would roughly add from $799 to $2,986 per year to gasoline expenses for an average commuter (assuming 20 miles per gallon fuel efficiency).  At the higher figure, that would be equivalent to a car payment each month for many lower-income workers.

Political crackup?

The Democrats are echoing the attitude of Jim Kellogg, himself a Democrat and former member of the California Fish and Game Council. He warned in 2010:

“I don’t doubt that there will be more green jobs in California, perhaps even thousands of them; however, we don’t want to put at risk the millions of well-paying, blue-collar jobs that put bread on the table right now. We need to make sure we do our homework, ask the tough questions and make adjustments as necessary to implement AB32  in a way that reduces greenhouse gases without hurting millions of families in this state.”

The Perea caucus letter signifies a continuing split in the majority Democratic Party between Hispanic politicians representing largely working-class areas — and the Bay Area Democrats who represent ultra-wealthy, Silicon Valley billionaires interested in greater environmental restrictions.

In 2013, Democrats started losing seats in the Legislature to Republicans in the Central Valley electoral districts with heavily Democratic and Hispanic constituencies over the different issue of “Fish versus Farmers.” Further unreasonable implementations of AB32 could further hurt working-class Hispanic voters, leading them to continue moving toward the Republican Party.

Jay McKeeman of the California Independent Oil Marketers Association summed up the looming higher gasoline prices:

“I think we all just kind of realized that there was no quarter given by CARB. At this late date, we don’t see out of the administration that there’s going to be an adjustment for this, so we’ve got to take it to the streets.”

Indeed, Neel Kashkari, the Republican challenger in the November gubernatorial race, has attacked what he calls Brown’s “hidden” gas tax. Kashkari’s bid remains a longshot. But if gas prices keep rising the next four months, he could turn the issue into one that makes the race too close for Brown’s comfort.

The 16 Democratic Assembly members signing the Perea letter:

Henry Perea, D-Fresno, 31^st District

Cheryl R. Brown, D-Inland Empire, 47^th District

Freddie Rodriguez, D-Pomona, 52^nd District

Rudy Salas, D-Bakersfield, 32^nd District

Susan Bonilla, D-Central Valley, 14^th District

Adam C. Gray, D-Merced-Central Valley, 21^st District

Isadore Hall III, D-Compton, 64^th District

Tom Daly, D-Anaheim, 69^th District

Jose Medina, D-Riverside, 61^st District

Christina Medina, D-Bell Gardens, 58^th District

Roger Hernandez, D-El Monte, 48^th District

Matthew Dababneh, D-Encino, 45^th District

Reginald B. Jones-Sawyer, Sr., D-Los Angeles 59^th District

Sebastian Ridley-Thomas, D-Los Angeles, 54^th District

Joan Buchanan, D-Contra Costa County, 16^th District

Jim Frazier, D-San Francisco Bay, 11^th District

By Dave Roberts

Assembly Democrats, many of whom see themselves as champions of the downtrodden, instead became reverse Robin Hoods recently, robbing from the poor and middle class to give to the rich. Nearly every Democrat along with two Republicans approved AB 8 on June 27, which extends until 2024 a variety of vehicle fees that were due to expire next year.

Some of those fees, which are the same whether they are imposed on a $500 clunker or a $387,000 Lamborghini, subsidize the purchase of electric vehicles -– the kind of cars that tend to be purchased by the wealthy. The typical recipient of the state’s clean vehicle rebate earns more than $150,000 per year, according to the legislative analysis for AB 8.

Purchasers of Nissan Leafs receive a $7,500 federal tax credit and a $2,500 rebate from California taxpayers. More than 6,700 rebates had been dispensed as of Dec. 31, 2012. Nearly 450 rebates were also handed out to buyers of the Tesla Model S, which costs $70,000 for the base model and can exceed $100,000 with upgrades. As an added bonus, electric vehicle owners don’t have to pay the smog abatement fee that funds their rebate.

Subsidizing infrastructure for $200k cars

In addition, AB 8 authorizes spending $220 million from vehicle registration fees to fund the development of up to 100 hydrogen fueling stations. You’ll need to shell out nearly $200,000 to buy a hydrogen-powered car.

Sticking poor and middle class Californians with the tab in order to give hundreds of millions of dollars to benefit rich Californians was one of the concerns raised by Assemblyman Tim Donnelly, R-Twin Peaks, before the floor vote:

“This bill is going to cost taxpayers $2.3 billion over the next eight years. What are we doing creating a hydrogen highway that a handful of Californians are going to use, but we’re taxing every single driver? Every single Californian that is on their way to work right now is going to have to pay for something they may never use, may never be able to afford to use it. And we don’t have enough money in California to subsidize hydrogen vehicles for everybody. Maybe I shouldn’t give you any ideas.

“This is a terrible idea. It is a regressive tax. It is a tax that is going to hit the hardest working, most vulnerable, lowest income people where it hurts the most. The cost of fuel is continually going up. And every time we pile more taxes on those who drive an automobile, we are taxing progress. We are taxing the people who say, ‘Hey, I’m not just going to sit around and collect a check. I want to go to work.’ And we are creating an obstacle to them bettering themselves by their own efforts.”

Several Democrats defended the extension of the vehicle fees, arguing that the money is necessary to reduce air pollution.

“Californians suffer from the worst air pollution in the nation with over 90 percent of residents living in counties with unhealthy air,” said the bill’s author, Henry Perea, D-Fresno. “While great progress has been made in improving air quality, California has two of the most polluted regions in the nation: the South Coast air basin and the San Joaquin Valley. AB 8 seeks to expand California’s clean air and clean vehicle incentive programs in order to meet clean air, public health, climate and economic development goals.”

“Let’s not burden our constituents again and again and again”

Don Wagner, R-Irvine, acknowledged “that there are some good things to like in this bill.” But he argued that the cost is too high.

“What we are doing here is raising $250-$275 million each year on your constituents,” said Wagner. “And there’s no good reason for that. You can’t keep going back to the tax well over and over and over again. At some point we’re going to have the cleanest air in the world because we will have driven everybody out of the state. This is not the way to go. Let’s not burden our constituents again and again and again.”

A Senate version of the bill, SB 11, has been referred to the Senate Committee on Natural Resources and Water. SB 1455, which was nearly identical to AB 8, passed the Assembly last year but failed to gain the necessary two-thirds support in the Senate.

By Dave Roberts

Leakage. It sounds like something dribbling from a broken beer stein. It’s also become a buzzword in the implementation of the California Global Warming Solutions Act of 2006, also known as AB 32.

The California Air Resources Board defines leakage in bureaucratese as “a reduction in emissions of greenhouse gases within the state that is offset by an increase in emissions of greenhouse gases outside the state.” In other words, some California businesses will be shutting down, downsizing or moving out of state in response to the legislation’s exorbitant costs and onerous regulations.

Leakage might be more accurately called “floodage.” California will have 262,000 fewer jobs in 2020 than if AB 32 had not been enacted, predicts a study by Andrew Chang & Company. The state could lose as many as 51,000 jobs due to refinery closures alone, warns a study by The Boston Consulting Group.

As a result, “AB 32 requires ARB to design measures to minimize leakage to the extent feasible,” according to CARB. So, at the same time that state government is bashing businesses with a bureaucratic sledgehammer, it’s offering carrots to entice them to stick around a while, if only to receive more cudgeling in the future.

Bureaucratic sledgehammer

The first sledgehammer blow will be felt on Nov. 14 with the first cap-and-trade auction for allowances, which permits businesses to emit greenhouse gases. About 350 businesses emitting at least 25,000 metric tons of carbon dioxide equivalent are targeted. They include oil producers, refiners and electricity generators.

The carrots are the 90 percent of allowances that initially will be dispensed for free. One allowance is equivalent to one metric ton of CO2. Over time, businesses will be squeezed as the cap on emissions is lowered and the number of free allowances is reduced, thereby driving up the cost of complying.

“Leakage” was on just about everyone’s lips at the Sept. 20 CARB meeting, particularly from the scores of business owners, union workers and minority advocates who pleaded with the board to halt cap-and-trade. Many of them cited the Legislative Analyst Office’s finding in an Aug. 17 letter to Assemblyman Henry Perea, D-Fresno, that an allowance auction is not necessary to meet the AB 32 goal of reducing greenhouse gas emission levels to 1990 levels by 2020.

“A key advantage of 100 percent free allocation is that it would significantly offset more of the marginal cost increase resulting from compliance with the program as compared with the Air Resources Board approach and reduce the potential for leakage while preserving the environmental integrity of the program,” the LAO letter states.

On the other hand, a disadvantage of handing out free allowances is that it disguises the cost of complying with the emission reduction mandate.

“[W]hen allowances are introduced through a competitive auction, the market price of allowances indicates the marginal costs that firms bear to reduce GHG emissions,” the letter states. “Price discovery can be especially important when a program (such as cap-and-trade) is in its infancy.”

Another disadvantage of providing free allocations, as far as state officials are concerned, is that the auction is expected to raise anywhere from $660 million to $3 billion, creating a slush fund to dole out money to pet energy projects and favored constituencies.

Union, minority opposition

It’s been natural for business owners and trade associations to lead the opposition to AB 32; so it was noteworthy when 10 United Steel Workers who work for Phillips Petroleum spoke out while wearing “Save Our Jobs” t-shirts.

“The media talk about unions and companies fighting. We are not fighting on this issue; we are in accord,” said Lisa Bowman. “California has a strong tradition of demonstrating that a healthy environment and strong economy can work hand in hand.”

One of her coworkers said that they are concerned that the crackdown on California refineries means “that out-of-state refiners will have an unfair advantage. California refineries need the regulatory certainty that investing in updates is in their long-term interest. Make sure a level playing field is provided.”

Also noteworthy was the opposition from minority advocates, despite the fact that a chunk of the green slush fund is slated for “disadvantaged” communities.

“We will see a significant business flight and job loss, declining revenues and further erosion of the social safety net,” said Andrew Barrera, representing the Los Angeles Metropolitan Hispanic Chambers of Commerce. “Cap-and-trade will likely impair the profitability and sustainability of the small local businesses. In Los Angeles we are feeling the effects of AB 32. It will substantially increase energy costs. Los Angeles water and power rates have continued to go up. In the past few weeks the department has asked for another 11 percent increase. We cannot afford another emission allowance tax on top of that. Without free allowances we are likely to lose companies to other states. We are having trouble understanding why we would even consider this in today’s bad economy.”

Henry Casas, representing Soledad Enrichment Action, which educates and trains at-risk youth in the Los Angeles area, is concerned that increased business costs will result in fewer job internships, reduced financial assistance and training opportunities. “Unemployment and dropout rates in our communities are already alarmingly high,” he said. “This will make them worse.”

Said James Brady, representing 100 Black Men of America and noting that African-American unemployment is almost 19 percent, “Cap-and-trade auctions will drive energy costs up by billions of dollars, forcing many businesses to downsize or leave the state. We don’t need an auction to reduce greenhouse gas emissions.”

Nichols defends cap-and-trade

The cap-and-trade discussion lasted for more than four hours, but it essentially was over after five minutes. That’s about how long it took CARB Chairwoman Mary Nichols to defend AB 32, cap-and-trade and the allowance auction process.

“We are clearly on track to meet the goal to get to 1990 emissions by 2020, then getting to a reduction of about 80 percent over business as usual by 2050,” said Nichols. “While nothing about this program has been uncontroversial, there was an initiative in 2010 [Proposition 23]. Although the recession at that point was in its depths, the measure was rejected overwhelmingly by the voters. Everybody is against air pollution, but they just don’t happen to like the particular regulation that affects them. I think that’s where we are with respect to global warming.

“Cap-and-trade is the most novel and controversial piece of the program. Other than electric utilities, which are subject to a different regulatory scheme, there is no requirement that businesses participate in the auction. Companies subject to the rule will get allowances that cover about 90 percent of the greenhouse gases they are currently emitting for the first years of the program. As time goes on those who have cleaned up their emissions will get extra allowances that they can sell. Others will have to purchase or get offsets from others.

“I think that some form of an auction has been shown to be the most efficient and equitable way to create public information as to what the actual value of what a ton of carbon is. We have gone a long way to making these regulations as simple and palatable as possible. We will keep working to improve them.”

After the public had weighed in, the board members were relieved that they had not been given a harder time. “This hearing is quite a bit different than I expected; it’s far more peaceful,” said Board Member Ron Roberts. “I think we have made significant progress. I’m largely satisfied with where we are.”

Nichols said it’s still possible that the Nov. 14 auction could be postponed if significant problems arise. But at this point it looks like: Damn the leakage, CARB is moving full speed ahead with California’s quixotic effort to save the planet from global warming.