The cost of the 119-mile segment was originally estimated at $6 billion. But the main consulting firm on the project, WSP (formerly Parsons Brinckerhoff), told the California High-Speed Rail Authority’s board at a recent meeting that it was now projected at $10.6 billion – a 77 percent increase.

The fact that the overrun was so high on the part of the statewide project with the least-challenging geography appeared to startle some rail authority board members and some Democratic state lawmakers.

On Tuesday, Assemblyman Jim Patterson, R-Fresno – a longtime bullet train skeptic – was joined by Sen. Jim Beall, D-San Jose, in a letter asking for a formal state audit of the $67 billion project. Beall is chairman of the Senate transportation committee.

The letter was sent to Assemblyman Al Muratsuchi, the Torrance Democrat who chairs the Joint Legislative Audit Committee. It has the authority to direct state Auditor Elaine Howle to audit the bullet-train project without the blessing of the governor, who in 2016 vetoed a bill that would have increased oversight of the project and the rail authority. Previous calls for an audit have been blocked by Democratic lawmakers.

While the bullet train has been regularly scrutinized by the nonpartisan Legislative Analyst’s Office, its reports tend to note problems without offering harsh criticisms or sweeping judgments.

State audit could influence vote on June bullet-train ballot measure

By contrast, Howle takes no prisoners if she believes she has evidence of incompetent management, deceit or secrecy. In the past two years, her scathing criticism of the University of California over admissions policies that more than tripled out-of-state students at UC campuses and over UC President Janet Napolitano’s aides’ interference with her office’s attempts to gather information led to admission policy changes and to a state law barring such interference by state agencies.

If the state auditor was directed to review the bullet train project in coming weeks and completes her report faster than usual, it could affect a bullet train-related measure on the June primary ballot.

Last July, then-Assembly Republican leader Chad Mayes of Yucca Valley agreed to help Democrats round up enough GOP votes to extend the state’s cap-and-trade program until 2030 in return for the Legislature ordering the placement of a Mayes-drafted constitutional amendment before state voters in the primary.

If it won approval, the amendment would mandate that in 2024, the Legislature must have an up-or-down vote on whether to continue allowing the state government to use cap-and-trade revenue on the bullet train – with a two-thirds threshold for approval in both the Assembly and Senate.

Cap-and-trade auction funds are the only firm source of revenue the rail authority will have after spending the remaining $10 billion in funds left from a $3.3 billion grant from the Obama administration and the original $9.95 billion in state bond funds that voters approved for the project in 2008.

Cutting off the bullet train’s access to cap-and-trade dollars could kill the project without it ever having carried a passenger – leaving a massive white elephant in the Central Valley. Even before the overrun was reported, authority officials said in 2016 that they didn’t have enough money to build their planned segment linking San Jose with Bakersfield. Officials told a U.S. House subcommittee hearing that the project’s eastern terminus would be an almond orchard about 30 miles northwest of Bakersfield.

The influential California Association of Realtors is launching a signature drive for a November 2018 ballot measure that would greatly expand the ability of Californians who are at least 55 years old and disabled people to maintain their low-tax assessments even if they move to other counties or purchase more expensive new homes.

Prop. 13 requires counties to tax properties at 1 percent of their value (plus bonds and other special assessments), which is established at the time of sale. The owners maintain that assessment even if values increase, as they typically do in California. The proposition limits tax hikes to no more than 2 percent a year. Prop. 13 passed overwhelmingly because many people – especially seniors – were being taxed out of their homes as assessments soared during a real-estate boom.

Under current rules, people 55 and older may keep their low assessments if they move within the same county or within one of 11 counties that accept these transfers. They may do so only once in a lifetime. It enables retired people, for instance, to downsize from a big family house to a condominium without paying a stiff tax penalty.

For example, if one purchased a home in 2008 for $350,000 and that home is now worth $750,000, they may continue paying taxes at the lower assessed value even after they sell the home and purchase a smaller one. The valuation goes with them. But the newly purchased property must have a market value the same or lower than the house that has been sold.

The Realtors’ proposal would, for seniors and the disabled, tie the assessed value of any newly purchased home to the assessed value of the old home. They would be free to take that assessment with them to any of the state’s 58 counties. They could carry it with them as many times as they choose. The reduced assessments would apply even for people who purchase home with market values above the ones that they sold.

As the nonpartisan Legislative Analyst’s Office explains, if the new and prior homes have the same market values (based on sales and purchase prices), the new tax valuation would be the same as the old one. A fairly complex formula would determine the tax rate for purchases that were either higher or lower than the sales price of the prior home.

The initiative addresses a problem faced by many empty-nesters. They are living in large homes where they raised their families and would like to downsize – but to do so would mean a huge tax hit given that their new tax rate would be tied to the purchase price of the new property. In the preponderance of situations, the new purchase price for even a smaller house would be far higher than the price that the seniors paid for the homes where they currently live.

The Orange County Register reports that, if passed, the initiative could spur an additional 40,000 home sales a year. Supporters say that could ease up tight housing markets, but foes argue that the Realtors have an interest in spurring more home sales. County governments – backed by LAO projections – say that it eventually will cost them as much as much as $1 billion a year.

“By further reducing the increase in property taxes that typically accompanies home purchases by older homeowners, the measure would reduce property tax revenues for local governments,” according to that LAO analysis. “Additional property taxes created by an increase in home sales would partially offset those losses, but on net property taxes would decrease.”

The Howard Jarvis Taxpayers Association, which defends the legacy of Prop. 13, disputes the idea of large tax losses, given that younger couples would move in to the homes that older people sell, and they would pay property taxes based on the new market value. In other words, an older couple will sell a house and keep their lower tax rate.

“We believe upward portability makes a lot of sense especially as property values across California continue to rebound,” said HJTA president Jon Coupal in a statement. The statement says he believes the measure would “help California alleviate its current housing crisis by removing a financial barrier that keeps many older homeowners from selling their homes, and many millennials from entering the housing market.”

The Realtors’ association had submitted three different potential measures, including one that would expand portability for people of all ages. But the final measure applies only to seniors and disabled persons. As the saying goes, the best defense is a good offense. Supporters of Prop. 13 have learned that the best way to protect it might be by trying to expand it.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

When Gov. Jerry Brown’s aggressive proposal to jump-start housing construction by sharply streamlining the approvals process for urban housing projects that met certain conditions

Coverage of the “by-right” proposal had emphasized that both unions and environmentalists didn’t want the California Environmental Quality Act to be weakened – even if the Golden State had the nation’s highest effective poverty rate because of sky-high home prices and among the nation’s highest rents. That’s because CEQA lawsuits enable the groups to win concessions from developers and government agencies or to block projects they don’t like. In an op-ed in the Sacramento Bee, Shamus Roller, executive director of Housing California, lamented the proposal’s failure and complained about “the political gamesmanship of powerful interests.”

But now there’s push-back against this tidy assumption about what’s driving the housing crisis, and from an unlikely source: Legislative Analyst Mac Taylor. In “Do Communities Adequately Plan for Local Housing?” – a report prepared by LAO staff but carrying Taylor’s byline – the first central conclusion is that the process under which the state Department of Housing and Community Development works with cities and counties on their general plans to ensure adequate housing isn’t working. It cites little follow-through from many local governments on past promises and notes that many development plans are badly outdated and unusable. It offers suggestions on how the process might be improved to speed construction of housing stock.

Local officials do bidding of local housing opponents

But then Taylor offered his theory about why state housing policies have failed to address the housing crisis: because foot-dragging local officials are doing the bidding of their constituents.

When it comes to rule changes to speed up construction, “many local communities have fervently opposed, obstructed, or even disregarded such changes in the past. … Any major changes in how communities plan for housing will require their active participation and a shift in how local residents view new housing,” Taylor wrote. “There is little indication, however, that such a shift is forthcoming. Convincing Californians that a large increase in home building – one that often would change the character of communities – could substantially better the lives of future residents and future generations necessitates difficult conversations led by elected officials and other community leaders interested in those goals. Unless Californians are convinced of the benefits of more home building – targeted at meeting housing demand at every income level – the ability of the state to alter local planning decisions is limited.”

The governor is trying again, however, to change the status quo. In January, his office unveiled a legislative package meant to streamline the approvals of building permits and to give incentives to local governments to reduce permit costs.

Democratic lawmakers, meanwhile, continue to focus on affordable housing projects to ease the crisis. State Sen. Toni Atkins, D-San Diego, has proposed Senate Bill 2 which would add fees of $75 to $225 to property transfers, with the exception of home sales, with some of the proceeds going to pay for housing for poor families and migrant workers.

The LAO warned that the stock market fluctuations and other “volatile and unpredictable” economic factors make it difficult to project the state’s finances too far out. Regardless, the LAO estimates that the state would be fine through 2020-21. 

The projections would change with any new obligations, both at the state and federal levels.

Gov. Jerry Brown has been quick to veto new spending or tax cuts that aren’t paid for, like the ill-fated effort to remove sales tax on tampons and other feminine hygiene products, but the impending negotiations on transportation issues may call for new spending. The LAO also pointed to the possibility that a new president and Republican-controlled Congress may change federal policies that affect that state’s budget.

“Any such state or federal policy changes could have a significant impact on the state’s ‘bottom line,'” wrote the LAO. 

It was easy for many people to understand the emotional nature of the issue during mid-1980s. Crime rates had soared by 276 percent over a 20-year period. They had begun to fall again in the late 1980s, but political angst often trails the data. Justice Bird rejected the death penalty in all 64 such cases that came before her and so became a lightning rod for those upset over crime. Crime rates crept up again in the early 1990s, but have been falling precipitously since.

Now, there’s been a recent spike in crime, and a debate over the role some recent incarceration policies have played in that uptick. For instance, some blame Proposition 47, the 2014 voter initiative that reduced some felonies to misdemeanors, and the governor’s realignment policy, which houses some prison inmates in county jails. Others say the data doesn’t back up those claims, and that crime rates ebb and flow for various reasons.

Whatever the case, crime rates remain relatively low – and the crime issue doesn’t come close to generating the emotions it did during the Rose Bird controversy. Nevertheless, voters on Nov. 8 are being asked to revisit the death-penalty issue in two competing initiatives. It’s a crowded ballot, with 17 initiatives overall, which explains in part why these measures have not garnered much attention. But they offer Californians two starkly different choices.

In Proposition 62, voters are being asked whether to repeal the death penalty for those found guilty of murder and replace it with life in prison without the possibility of parole. In Proposition 66, voters are asked whether to streamline the appeals process to make it easier for the state to execute convicted murderers. When initiatives are contradictory, the one that receives the highest votes prevails. An interesting showdown is in the works.

Ironically, Prop. 62 would put an end to executions that rarely happen anyway. The last execution in California took place a decade ago – all executions have been delayed because of legal challenges to the use of lethal injections. The nonpartisan Legislative Analyst’s Office puts the numbers in perspective: “As of April 2016, of the 930 individuals who received a death sentence since 1978, 15 have been executed, 103 have died prior to being executed, 64 have had their sentences reduced by the courts, and 748 are in state prison with death sentences.”

Those realities actually bolster the case made by the supporters of both initiatives. Backers of Prop. 62 argue that the state’s death penalty is a failed system because so few people are actually executed. The cost per execution, they argue, is $384 million as they languish on costly death rows. Instead of endless delays, they propose doing away with the penalty – something supporters say will provide “real closure” for families of victims. Instead of fighting in courts, convicted murderers will have a permanent sentence and will never be allowed to go free.

Backers of Prop. 66 say the solution to the lack of executions is to speed up the appeals process. “There are nearly 2,000 murders in California annually,” according to supporters’ official ballot argument. “Only about 15 death penalty sentences are imposed. But when these horrible crimes occur, and a jury unanimously recommends death, the appeals should be heard within five years, and the killer executed.” Both initiatives require these inmates to work.

Opponents of Prop. 66 raise concerns that speeding up the appeals process will cause innocents to potentially be executed, whereas supporters argue that their initiative will allow plenty of time to assure that innocent people aren’t executed. This proposition attempts to speed up the process by requiring “that habeas corpus petitions first be heard in the trial courts,” according to the LAO analysis. It also “places time limits on legal challenges to death sentences” and “changes the process for appointing attorneys to represent condemned inmates.”

The San Francisco Chronicle raises concerns about the attorney appointment process in the initiative: “Condemned inmates often must wait years for representation. The measure attempts to compel attorneys to take up capital appeals by excluding them from certain other defense work. This raises two serious concerns: One is the prospect that attorneys less steeped in the fine points of capital appeals — and it is a specialized part of the law — will be representing inmates with lives on the line. The other is the possibility of attorneys enlisted against their free will in these appeals.”

Contra Costa County District Attorney Mark Peterson, writing in the San Jose Mercury News, argued that “Defense attorneys refuse to represent death row inmates in order to thwart the process, so it takes an average of five years before a condemned inmate is even assigned an attorney.”

Proposition 62 is more straightforward than Proposition 66. The former ends the death penalty – even for those currently on death row – and replaces it with “life without parole.” The latter includes a series of complex reforms designed to “mend” the current system. For voters, however, the choice will come down less to the specific details and more to their overall outlook. If they want to end the death penalty, they’ll vote yes on 62. If they want to speed up its use, they’ll back 66.

A recent public-opinion poll from Sacramento State’s Institute for Social Research showed Proposition 62 losing 45-37 and Proposition 66 winning 51 to 20. So while the level of contentiousness over the death penalty is far different now than it was in 1986, it seems that public attitudes about it haven’t changed much in 30 years.

Steven Greenhut is Western region director for the R Street Institute. He is based in Sacramento. Write to him at sgreenhut@rstreet.org.

The issue actually is quite simple, even though the political machinations are complex. There are two main types of bonds to finance long-term infrastructure projects. The most common are general-obligation ones, which are repaid through revenues in the state’s general fund. In other words, the money to repay investors comes directly from taxpayers. The California Constitution requires a vote of the people before the state government can take on such debt.

By contrast, revenue bonds are repaid by users of the project. For instance, they typically are used on bridge projects, where users repay the debt by paying tolls, or on water projects, where water ratepayers repay the debt. The state does not require a public vote for these projects. Proposition 53 would require such a vote if the bond amount tops $2 billion. It “applies to any projects that are financed, owned, operated, or managed by the state, or by a joint agency formed between the state” and another agency, according to its official summary.

Opponents believe it could harm the ability of the state – and local joint-powers agencies – to build necessary projects. “Prop. 53 could threaten a wide range of local water projects including storage, desalination, recycling and other vital projects to protect our water supply and access to clean, safe drinking water,” argued the Association of California Water Agencies, in the official ballot argument against the measure. They fear that, say, Northern California voters would not vote to fund a project designed to benefit Southern California water users.

The Banks Pumping Plant looking toward the Bay Delta, where tunnels are planned that could protect fish. Photo courtesy of www.hcn.org

But the nonpartisan Legislative Analyst’s Office, in its analysis of the measure, explains that “[r]elatively few state projects are likely to be large enough to meet the measure’s $2 billion requirement for voter approval.” Indeed, the only two current projects that could trigger its vote requirement are the $17-billion-plus plan to build twin tunnels underneath the Sacramento-San Joaquin Delta to divert water toward Southern California and the governor’s $68-billion high-speed rail project, which could possibly employ the use of revenue bonds, although its current funding is uncertain.

Critics of the measure note it is funded largely by Dino Cortopassi, a retired Stockton-area farmer and opponent of both projects. Supporters say the measure is about controlling the state’s wall of debt, not about stopping any particular project. Cortopassi, for instance, in 2014 sponsored a series of newspaper advertisements across the state (titled, “Liar, Liar, Pants on Fire!”) accusing state officials of using “deceptive” accounting to hide the size of the state’s debt and unfunded liabilities. The measure is designed to stop state agencies from using this particular form of debt to circumvent a public vote and fund mega-projects.

Even though revenue bonds are funded by user fees, they still often rely on taxpayer dollars, Prop. 53 supporters note. For instance, the revenue bonds that would fund the twin tunnels project would be funded “mostly by rate hikes and property tax increases on water customers,” according to a San Jose Mercury News report. In other words, the “revenue” stream is from higher property taxes and rate hikes on customers. Since those bills are ultimately paid for, in part, by taxpayers, supporters think taxpayers should have a vote. Furthermore, some projects funded by revenue bonds have sought taxpayer help and enjoy some taxpayer subsidies.

The initiative’s opponents say municipalities are not on the hook for these bonds. But supporters argue that, while governments may not legally be required to make good on them if a project fails, they might have little choice but to help pay off the debt, given the impact a failure would have on their community’s overall credit rating.

“Clever legislators and lobbyists have expanded the definition of revenue bonds to apply to many projects that are tough sells,” wrote the Sacramento Bee’s Dan Morain. “No voter wants to spend on prisons, for example. So lawmakers rewrote the law to finance prison construction with revenue bonds.”

Prop. 53 supporters see that as evidence that voters need to close a loophole used by legislators to fund projects without public support. Requiring a vote is not the same thing as stopping a project; supporters simply need to do a good job packaging the project in a way that appeals to voters, who tend to vote in favor of the vast majority of bond-funded projects that come before them anyway, they say.

Opponents point to this element of the LAO report: “(T)here is some uncertainty regarding which projects would be affected. This is because the measure does not define a ‘project.’ As a result, the courts and the state would have to make decisions about what they consider to be a single project.” There’s some question, the LAO continued, about whether a single building would be a project or whether the definition of “project” covers multiple buildings that are part of a complex. These uncertainties could create litigation problems, although supporters say the fear is overblown.

Primarily, supporters see Prop. 53 as a means to rein in runaway levels of debt that plague state government and to put into place a means to at least consult with voters the next time an administration proposes a massive statewide infrastructure project. Opponents fear the measure could hold up important regional projects, as a joint agency has to lobby the entire state to win approval for something that’s fairly local.

There is a third possibility: The bar is so high for triggering a vote that the measure may be much ado about very little. As the LAO explained, “(I)t is unlikely that very many projects would be large enough to be affected by the measure.” On a ballot filled with hot-button issues, such as marijuana legalization and eliminating the death penalty, this one might cause voters to shrug.

Steven Greenhut is Western region director for the R Street Institute. He is based in Sacramento. Write to him at sgreenhut@rstreet.org.

But two months before the election, one of the highest-visibility measures also is fairly narrow in scope. Proposition 56 would raise California’s relatively low tobacco tax (relative to other states) by $2 a cigarette pack – and increase taxes by an equivalent amount on all other tobacco products (cigars, chewing tobacco, etc.). It also would significantly increase taxes on electronic cigarettes and vaping products. It has high visibility right now because of a series of advertisements opponents are running on radio stations across the state.

Supporters pitch the measure as a means primarily to boost public health. “An increase in the tobacco tax is an appropriate way to decrease tobacco use and mitigate the costs of health care treatment and improve existing programs providing for quality health care and access to health care services for families and children. It will save lives and save state and local government money in the future,” according to the initiative’s findings.

Gov. Jerry Brown recently signed into law a package of anti-tobacco bills that, among other things, raise the smoking age to 21. Studies of addiction show that teens who begin smoking are more likely to continue this dangerous habit throughout their lives. Backers of this initiative argue that raising the prices of cigarettes is another main way to dissuade people from smoking. And they point to the costs to the health system imposed by smokers.

But the measure’s opponents are focused increasingly on the spending aspects of the proposal. According to the official ballot argument against the measure, “Prop. 56 allocates just 13 percent of new tobacco tax money to treat smokers or stop kids from starting. If we are going to tax smokers another $1.4 billion per year, more should be dedicated to treating them and keeping kids from starting. Instead, most of the $1.4 billion in new taxes goes to health insurance companies and other wealthy special interests, instead of where it is needed.”

An analysis by the non-partisan Legislative Analyst’s Office confirms that only a small percentage of the estimated $1.4 billion in new revenues are earmarked to such programs. The main priority of the new funds, based on the LAO analysis, is to “replace revenues lost due to lower consumption resulting from the excise tax increase.” That reinforces the odd conundrum faced by California and other states. They use tax and regulatory policies to promote public health by reducing smoking, but then struggle to find funds to pay for ongoing programs as the number of smokers – and therefore the number of tobacco-taxpayers – keeps falling.

The initiative then earmarks some funds to law enforcement, to University of California physician training, to the state auditor and to administration. But 82 percent of the remaining funds go to “increasing the level of payment” for health care related to Medi-Cal, the state’s health-care program for low-income people. Prop. 56 opponents therefore argue it’s designed mainly to benefit health-insurance companies and other interest groups – and includes few limits on how they spend the money they receive.

Furthermore, the initiative bypasses educational-funding requirements under Proposition 98, the 1988 initiative that now requires approximately 43 percent of state general-fund revenues to be directed to the public-school system. As the LAO explained, “Proposition 56 amends the state Constitution to exempt the measure’s revenues and spending from the state’s constitutional spending limit. (This constitutional exemption is similar to ones already in place for prior, voter-approved increases in tobacco taxes.) This measure also exempts revenues from minimum funding requirements for education required under Proposition 98.”

It’s not unusual for a major tax hike measure to ignite controversies over how the new revenues will be spent. But there’s a serious question about whether this initiative will meet its health-improvement goals given the way the tax hammers a common product used by people to quit smoking.

In a research paper co-authored with my R Street Institute colleague Cameron Smith, we note the measure boosts excise taxes on vaping by 320 percent. The key, stated goal of the tobacco tax increase is to dissuade people from buying cigarettes. By the same logic then, the massive boost in taxes on e-cigarettes seems designed to dissuade people from using them.

Yet as Public Health England explained: “The comprehensive review of the evidence finds that almost all of the 2.6 million adults using e-cigarettes in Great Britain are current or ex-smokers, most of whom are using the devices to help them quit smoking or to prevent them going back to cigarettes.” That government health agency urges public-health officials to promote vaping as a way to improve public health. Some U.S. studies come to similar conclusions.

Proposition 56 backers argue that vaping hasn’t been proven safe and the devices haven’t been around long enough to know long-term health effects. They also fear teens will begin vaping and then move on to combustible cigarettes, which everyone agrees are dangerous. And they point to a recent University of Southern California study suggesting teens who vape are six times more likely to begin smoking cigarettes than teens who don’t vape.

In reality, the study seems mainly to reflect “the difference between teens inclined to experiment and teens not so inclined,” according to a public-health expert we quoted. Furthermore, the e-cigarette industry doesn’t claim vaping is safe – they say it is a safer alternative to cigarette smoking. Research suggests they are about 95 percent safer.

California has the second-lowest smoking rate in the nation at around 12 percent. Only Utah has a lower percentage of smokers. So Proposition 56 doesn’t effect a broad swath of the public – but it is a contentious measure given questions about where the tax dollars will go and about its heavy-handed treatment toward vaping. Compared to many of the other initiatives on the ballot, this one might seem simple, but it’s about far more than whether the state government should boost taxes on a pack of cigarettes by two dollars.

Steven Greenhut is Western region director for the R Street Institute. He is based in Sacramento. Write to him at sgreenhut@rstreet.org.

But Lt. Gov. Gavin Newsom and many other high-profile Democrats who sought the law continue to defend it. They hail it both for freeing up room in the Golden State’s long-overcrowded prisons and for moving away from a punitive criminal-justice status quo exemplified by both the state Legislature’s and state voters’ adoption of “three strikes and you’re out” measures in 1992 mandating that three-time convicts be locked up at least 25 years.

Now, however, Prop. 47 is coming under new criticism that can’t be blunted or turned away by talk of social justice. It has to do with a problem endemic to California’s direct democracy: Ballot measures are sold to voters with promises that often don’t come true.

In 2014, the measure’s advocates told Californians that savings from releasing state inmates would free up  “hundreds of millions of dollars annually, which would be spent on truancy prevention, mental health and substance abuse treatment, and victim services,” using language from a report by the nonpartisan Legislative Analyst’s Office. The claim was cited prominently in the official ballot argument for Prop. 47 and repeatedly in debates and interviews over the initiative.

Prop. 47’s savings a fraction of what was predicted

The California Department of Finance, however, says that never happened. Instead, in its official calculations for the 2016-17 budget, it predicted savings of just $29.3 million. Aware that the number would be a huge letdown to social service advocates, the governor and the Legislature arbitrarily inflated the amount to be granted to their programs in spring 2017 to $67.4 million.

But even with the boost, that’s a third of the low end of “hundreds of millions of dollars” that voters were told would go to help the needy.

The LAO doesn’t agree, issuing a report specifically challenging the $29.3 million figure. The document says the estimate is “about $100 million” low.

But in a recent Sacramento Bee story, the Brown administration said the LAO’s estimate depended upon a false assumption: that without Prop. 47, the state would have to pay to house more than 5,000 inmates in “contract beds” at expensive non-state facilities in California, Mississippi and Arizona.

Under Prop. 47, it is the Finance Department that makes the final call on how much money is judged to have been saved and is thus available for the social programs touted as benefiting from the ballot measure.

But this big picture doesn’t sit well with many lawmakers, starting with Assemblyman Reggie Jones-Sawyer, D-Los Angeles, and advocates for low-income residents.

State finding undercuts crime reformers’ credibility

The Brown administration’s position on Prop. 47’s savings has the potential to undercut the governor’s push for his own criminal-justice reform measure this November, Proposition 57, which would make it easier for “nonviolent” criminals in state prisons to gain parole.

The measure is already likely to be very controversial because the ballot language pushed by Jerry Brown and accepted by state Attorney General Kamala Harris classifies several categories of sexual attacks as nonviolent, as detailed on the website of the California District Attorneys Association. This includes the 2015 attack on an unconscious student by then-Stanford athlete Brock Turner, a case that has drawn national attention because of fury over the light sentence Turner was given.

Prop. 57’s path to adoption could be further complicated if its critics can point to Prop. 47’s unmet promises and say that in California, criminal justice reform advocates have a credibility problem. Disappointed social services advocates such as Aqeela Sherrills, an activist who lobbied for Prop. 47’s passage, are likely to help make the case.

“We pass an important ballot initiative, we change the law and we change the game to reallocate the resources,” Sherrills told the Bee. “Then they start playing with our money again. I don’t understand. I was like, ‘Man, no.’”

Under previous plans, the route linking the Los Angeles area to the Central Valley, Silicon Valley and San Francisco would either have bisected the heavily populated parts of the San Fernando Valley, cutting through Sylmar, Pacoima, Santa Clarita and San Fernando, or gone through a more rural part of the San Fernando Valley, affecting thousands of acres of equestrian lands and estates.

Now the rail authority proposes to instead mostly tunnel under valley communities. Two of its proposed new routes would see the bullet train go underground south of Pacoima and come out north of Santa Clarita. A third, more conventional route would still go above-ground through Lakeview Terrace, Shadow Hills and Sun Valley.

The change initially drew an ecstatic response from one local official. San Fernando Mayor Joel Fajardo called the revisions “absolutely phenomenal” in an interview with the Los Angeles Daily News just after learning of the changes.

But as more information came out, others were far more skeptical. At a San Fernando Valley Council of Governments meeting on Thursday, critics offered many objections. The new route would still have what were deemed unacceptable impacts on Shadow Hills and Sun Valley. A Santa Clarita official said that while the new plan was a big improvement, his city’s position remained that the bullet train should be underground the entire 40 miles-plus from Palmdale to Burbank, not just the approximately 22 to 24 miles from north of Santa Clarita to south of Pacoima. Environmentalists also said the new routes would likely harm two endangered species in the Angeles National Forest.

Underground tunneling: $1 billion a mile?

Rail authority officials provided no detailed information on another aspect of the proposed change: how it would affect the cost of the $64 billion project. Under previous routes, there would have been the need to have about 20 miles of the bullet train go underground. The new plan would only add a few more miles underground. But since it would require going under heavily populated areas — in addition to still having to go through mountains — that would likely add to the complexity of what the Los Angeles Times has described as “the most ambitious tunneling project in the nation’s history.”

By some accounts, underground systems cost about nine times as much as above-ground rail per mile. Details matter with individual projects — cost of land, difficulty of engineering, how many changes must be made to limit effects on the public, etc. A 2013 survey found underground railroad construction costs ranged from $357 million per mile in Sao Paulo, Brazil, to $960 million per mile in Singapore.

The Southern California tunnel seems likely to have a price tag on the high end. If it were to match the price in Singapore, that means at least $21 billion would have to be spent to go from north of Santa Clarita to south of Pacoima — about a third of the tab for the entire project. If the entire Palmdale-to-Burbank route were underground, that would mean at least $38 billion would be needed.

The rail authority is now preparing for construction of the first segment of the bullet train from the Central Valley to Silicon Valley. Plans for the first link to go from the Central Valley to San Fernando Valley were dropped by the state in February, mostly because the new plan is cheaper and would likely face less local criticism.

The state is still struggling to identify how it will come up with funds to build a statewide project; private investors want revenue guarantees that are illegal under state law. Lawsuits also question the project’s legality. The state Legislative Analyst’s Office also recently weighed in with a report saying it was difficult to gauge bullet-train progress because the rail authority keeps making major changes in its plans.

According to the non-partisan Legislative Analyst’s Office, the “subjective” funding model could leave the state with a sizable burden depending on how investments perform, adding the system is too complicated for experts to adequately monitor.

But state officials say the revised model only updates what’s been in place since the ’90s, with each stakeholder giving higher contributions.

To be clear, the LAO agrees that the new funding model — implemented in 2014 when the CalSTRS pension fund was predicted to go broke in the mid-2040s —  put the fund on the right path.

However, according to a report released Tuesday, instead of a proportional and relatively simple funding model, contributions are recalculated every year based on an “alternate universe” funding model that could expose the state to extreme liability and may violate the spirit of “shared responsibility.”

What’s The Problem?

LAO argues that when tweaks were made to the CalSTRS pension fund in 2014, lawmakers did so with the intent that the system be proportionally funded by the state, teachers and school and community college districts depending on what they owed.

At the time, the unfunded liability (meaning the amount the fund was short if it were to pay all the benefits already earned by employees and retirees) was $74 billion — $47 billion by the districts, $20 billion by the state and $8 billion by the teachers (members of the fund). The aim was to be fully funded in approximately 30 years.

According to the LAO, it would have made sense — as was its impression — to embrace the concept of “shared responsibility,” where each of the three stakeholders pays a consistent share. But, the LAO argues that under the existing model the state’s contributions decrease when the pension’s investments perform better than the estimates, thereby deferring responsibility to the districts.

But state officials say this is the language that was out there for a while before being agreed upon and that it’s not much different than how it was before, just that everyone is paying higher contributions.

“We basically updated an existing mechanism that has been in place for quite some time,” said H.D. Palmer, deputy director for external affairs at the state’s Department of Finance. “We’re at somewhat of a loss to understand how LAO can project or conclude the losses that they have, given the fact that the law is being implemented as everyone involved in its crafting intended.”

Alternate Universe Calculation

Under this calculation, both the state and district contributions to the unfunded liability are recalculated every year based on salaries, under the assumption of what the CalSTRS situation would have been in present time had the state made different decisions in the past.

To explain further, there are two consequential decisions that it’s based on:

• In the late 1990s, the state increased pension benefits to CalSTRS’ teacher members.
• Contributions to the pension fund were decreased around 2000 because it was fully-funded for a brief period of time.

So, again, the funding model is based on what the present-day situation would have been had those two things never happened.

Ryan Miller, a principal fiscal and policy analyst at the LAO, told CalWatchdog that he was not aware of any other pensions using this kind of mechanism, although Palmer said that the CalSTRS pension is unique in that the teachers are not employees of the state (rather employees of the districts) and a unique model is warranted.

It’s Too Darn Complicated

To describe why the CalSTRS system is overly complicated, LAO used this anecdote: “In November 2014, CalSTRS’ consulting actuary introduced the details of the proposed funding policy to the CalSTRS board as follows: ‘This is probably the most difficult thing I’ve had to explain to a board in my entire career.’”

LAO argued that despite the inherent complexity of pensions in general, the “staggering complexity” of the alternate universe model makes it difficult for legislators, the governor, the CalSTRS board, teacher members and, of course, the public, to understand how it works.

“This weakens oversight of the funding plan, adds complexity to an already complex program, and will cause confusion about teacher pensions,” the LAO wrote.

Palmer agreed the model is complex, but said CalSTRS actuaries found the model to be sound, adding that required periodic reports will help with oversight.

Extra Liability

If the state’s contribution is theoretically lessened by high-performing investments, then when investments perform poorly it could have the reverse effect, leaving the state in a bind, according to the LAO.

“(I)f investment returns fall far short of assumptions over the long run, state contributions to CalSTRS could be billions of dollars higher by the 2040s,” wrote the LAO.

But Palmer noted there will be a performance report to analyze the first year, followed up by a five-year report, where lawmakers can reassess the funding model.

“It’s premature to project the kinds of fiscal impacts that are reflected in the LAO report,” said Palmer.