It’s Senate Bill 539, by U.S. Senate candidate Kevin de León, a state senator from Los Angeles. The measure would limit the impact on affluent residents of the new $10,000 federal limit on deducting state and local taxes from federal tax returns by sharply increasing an existing tax credit for contributions to a college scholarship program already run by the state.

If SB539 is signed by Brown, families making more than $100,000 – especially homeowners – could potentially save billions of dollars with the new, much higher 75 percent credit. In 2015 – the most recent year for which statistics are available – 6.1 million California tax filers used the state and local tax deduction, with an average of $18,438, according to the Tax Policy Center.

This explains the bipartisan appeal of the measure, which passed the Assembly and Senate with a total of two negative votes – one Republican (state Sen. Jim Nielsen of Fresno) and one Democrat (Assemblyman Jim Frazier of Contra Costa County).

It’s not clear whether Brown will sign the measure. While he called the Republican tax overhaul approved last December “evil in the extreme” at the time it was being considered by Congress, he’s been reported to be skeptical that any state tax avoidance effort would be accepted by the Internal Revenue Service.

That’s the impression the IRS has sought to create since the state and local tax deduction was limited. And last month, the IRS proposed a 15 percent cap on deductibility of certain gifts, including to state programs like the one that would benefit from SB539.

IRS rule could reduce deductions for private tuition

The proposed IRS rule is so broad, however, that Gannett News Service reported on Aug. 24 that it could affect laws allowing for state and local tax credits for charitable contributions in 34 states. In several Republican-dominated states, these credits are available for private school tuition.

This generated a sharp reaction from EdChoice, an Indianapolis-based national nonprofit organization that’s devoted to encouraging alternatives to traditional public schools.

“The IRS chose to adopt a new rule after New York and a few other states who overtax their citizens at the state and local level had the audacity to create federal tax-dodging schemes,” EdChoice told Gannett. “These tax-dodging schemes do not compare in intent or purpose to the charitable programs created years ago to help children access K-12 education where they fit in and can learn.”

Treasury Secretary Steven Mnuchin, however, disputed the idea that the proposed IRS rule would have a heavy impact on donations to private schools and to school choice advocates.

In July, four states – New York, New Jersey, Connecticut and Maryland – sued the federal government over the deduction limit, saying it amounts to unconstitutional “double taxation.” The Tax Foundation says those states and California are the five where taxpayers will face the biggest hit.

But most tax experts think the lawsuit is unlikely to win, given the long-established primacy of Congress in setting tax laws and of the IRS in interpreting them.

California has already sued the Trump administration more than 50 times – but not, so far at least, over the tax deduction change.

It’s not even 2016 yet, but the first debate over a probable initiative on the November 2016 ballot took place in Dana Point Monday when former Board of Equalization member Conway Collis squared off with Howard Jarvis Taxpayers Association president Jon Coupal over the Lifting Children and Families Out of Poverty Act. The debate was hosted by the California Alliance of Taxpayer Advocates.

The measure, backed by charity organizations dedicated to reducing poverty, would raise property taxes on residential and commercial property valued at $3 million and more. The money would be deposited in anti-poverty programs outside the General Fund.

Collis argued that the initiative was a way for government to help relieve 2.4 million California children living below the poverty line. He said there was a moral and financial reason to do so. Leaving one-quarter of California’s children in poverty was an immoral position for the state. Lifting 50 percent of those suffering from poverty in 20 years — the goal of the initiative proponents — would reduce the dollars required for welfare programs and prisons while adding taxpayers to the rolls.

Coupal saw the measure as a direct attack on Proposition 13’s property tax protections. He asked: “Aren’t taxes high enough?” listing the state’s high tax rates in different tax categories. Coupal said voters were willing to support the Proposition 30 tax increases when the state budget was in crisis. There is no crisis now, he asserted, with the state sitting on a surplus of anywhere from $1 billion to $10 billion.

To Collis, a tax that touched only 1 percent of the taxpayers was worth the investment in attempting to save money in welfare programs while aiding those in poverty. He said business had a legitimate concern in annual reassessments on property (as proposed in a legislative bill to split the property tax roll) but that this plan “protects and builds” on the Proposition 13 framework and would preserve property tax predictability.

But Coupal said the economy and businesses would suffer, with more businesses packing to leave the state, especially because the great portion of the properties affected by the proposed tax increase would be commercial properties.

While Collis said the initiative has fail-safes to control programming that did not work to reduce poverty, Coupal countered that 30 programs are already in place to deal with poverty and that many suffer from fraud and abuse with recipients spending taxpayer-sponsored income in Hawaiian resorts and Las Vegas casinos.

Collis said his initiative would not simply help the poor but would boost all Californians. He said that the growing number of poor would “swallow the state budget” unless corrective measures are taken.

Collis insisted that polling and focus groups prove that voters understand that the tax was only on expensive property and would affect few taxpayers. He said signature gatherers were asking voters if they owned property over $3 million and if they answered “no” then they were told the measure would interest them. Collis said voters readily signed.

However, Coupal had a message for those voters should the initiative qualify for the ballot. The initiative breaks Proposition 13 by going after residential property. Once that door is opened other tax increase activists will want to charge through and all residential property owners would be at risk. That message will not be lost on voters, Coupal said. It is a concern that would be expressed in a political campaign.

The campaign messages are already being shaped and a long political campaign season has unofficially begun.

(Disclosure: I am associated with the committee that opposes the Lifting Children and Families Out of Poverty Act.)

Correction: Due to a reporter error, an earlier version of this article mistakenly reported that Assemblywoman Catharine Baker supports the extension of Prop. 30 taxes. Baker does not, in fact, support the proposed extensions. 

Steve Glazer – bald, bespectacled and mild-mannered – doesn’t look like a revolutionary. But the politically moderate Democratic state senator from Orinda hopes to be in the vanguard of a centrist coalition in Sacramento that challenges the Legislature’s entrenched partisan divide and loosens labor unions’ grip on power.

“[When] I ran, a big part of it was to break down the power that exists in Sacramento,” said Glazer at a town hall meeting in San Ramon on Nov. 30. “There is no center anymore. It’s a polarized place, from the left and from the right. It’s unhealthy, it’s very unhealthy.”

“Everybody is afraid to try to occupy that center because you lose,” Glazer continued. “So, part of the reason that I got into this was to try to break it down, and say, ‘Look, I run, I lose, it’s OK.’ But it’s an unhealthy process.”

Glazer’s candidacy in a May special election sent alarm bells to Sacramento’s biggest power player, organized labor, which spent more than $2.7 million attempting to elect union-friendly Assemblywoman Susan Bonilla.

In that campaign a union front group played a dirty trick in an attempt to siphon votes from Glazer. Posing as an Asian-American business group, they sent mailers touting another Republican candidate, Michaela Hertle, but failed to mention she had dropped out of the race too late to have her name removed from the ballot.

“Maverick” status

Glazer touted his political maverick status to the standing-room-only crowd in the Amador Rancho Center, site of the recent town hall meeting.

“In my first week in office – the pro tem in the Senate [Kevin de León] is the top guy – I voted against four of his bills in my first week,” he said. “People said to me, ‘Steve, the Chamber of Commerce supported them.’ In the first week I voted against two of their top priorities on the floor of the Senate.”

He added, prompting laughter, “I can’t find anybody that’s really that happy with me.”

A question about why things don’t seem to get done in Sacramento prompted Glazer to elaborate on his view of Sacramento’s polarized, unhealthy atmosphere:

“Some of it is intractable and difficult to solve,” he said. “It’s because these interest groups are so powerful. When you have a choice to be made as an elected leader between what you might think is better for your community or the powers in Sacramento, what does that really mean?

 

“It means campaign contributions. It means the organizers that come into communities, they don’t live there, and influence the decisions that are made in that local community. It affects independent expenditure campaigns.”

For two months last spring those IE groups flooded mailboxes daily with mailers featuring Glazer’s face. Half praised him as a fiscal conservative and maverick willing to buck the special interests in Sacramento. The other half denounced him as a tool of business interests, including tobacco companies.

Score Card

Several legislative report cards affirm that Glazer is one of the most fiscally conservative, pro-business Democratic legislators in Sacramento.

The Howard Jarvis Taxpayers Association gave him a “D,” which sounds bad, except that every other Senate Democrat but one (Sen. Richard Roth, D-Riverside) received an ‘F.’ Glazer voted with the HJTA 57.6 percent of 16 bills.

The California Taxpayers Association scored Glazer as voting with taxpayers only 50 percent of the time on targeted legislation. But that still made him the third most taxpayer friendly Democrat in the Senate.

Glazer did better on business legislation, according to the California Chamber of Commerce. He voted with business interests on 11 of 13 bills, which is the highest score among Senate Democrats. Most Democrats voted the Chamber’s way only three or four times on those bills.

After casting more than 1,300 votes in his six months in office, Glazer said one of things he’s most proud of is his 100 percent voting score from the California League of Cities. It was based on votes on 15 bills mostly dealing with local control but also with marijuana, economic development and affordable housing.

Local Control

As part of his crusade for more local control, Glazer is cosponsoring Senate Bill 799. It would raise a state-imposed cap on local school districts’ reserve funds. The union-backed cap was designed to free up school district funds for increased employee compensation, according to the Contra Costa Times.

“The whole school district cap issue happened because all the power was in Sacramento,” said Glazer. “Think about it. It’s not just about we here engaged locally concerned about your local control, your local choices.”

He continued, “They, excuse my language, they – how do I use better language? [audience laughter] – they stepped on every school district in the state. Every legislator made the choice to step on every school district in their district to create an artificial cap because of that power, that grip that exists in Sacramento on school policy. It’s very unhealthy, but it’s a great example.”

Several attempts to remove the cap failed this year, but six Democratic senators who voted for the reserve fund cap have signed onto Glazer’s bill.

Bipartisan Cooperation

In an example of the bipartisan cooperation Glazer is hoping to increase in Sacramento, the town hall was co-hosted by Republican Assemblywoman Catharine Baker. She recently celebrated her first anniversary in office after fighting a similarly expensive, divisive election campaign against a union-backed Democrat.

She received 51.6 percent of the votes in a district with 32 percent registered Republicans, and is the only Republican state lawmaker in the Bay Area.

Baker is more fiscally conservative than Glazer. She received a “B” from Jarvis and a 100 percent score from CalTax.

No one in the Assembly, including all of the Democrats, scored higher than Baker’s 86 percent on the League of Cities report card. She received the same score as Glazer from the Chamber.

All of that commonality, including overlapping districts, has engendered a mutual respect society with each legislator praising the other at the town hall and urging a new way of doing things in Sacramento. In Glazer’s words:

“It’s the center we are trying to build and occupy. Both of us here, we see the value of bipartnership, in partnering, in building that center so it will be more reflective of what we are here to represent.”

 

“We wish every place was like San Ramon, but it’s not. But we are trying to break it down. We are creating a cluster here that’s very unusual in the state. A Democrat supporting a Republican, a Republican supporting a Democrat.

 

“So we are creating a cluster here of independently minded representatives that is unique in California. It’s part of the excitement of what we do. We are trying to recruit to find more members like that who want to join our centrist party.”

Baker is moving a companion measure to lift the school district reserve cap, Assembly Bill 1048, through the Assembly.

By John Seiler

In the great Clint Eastwood Western “The Outlaw Josie Wales,” the Yankee Terrill says, “Doin’ right ain’t got no end.”

So it is with busybodies everywhere. They just won’t leave us alone.

The California Center for Public Health Advocacy just sent out a press release:

“The City of El Monte’s City Council unanimously voted to put a soda tax measure on the November ballot at their meeting last night.

“With this vote, El Monte becomes the second city in California, after Richmond, to propose taxing soda and other sugary drinks as a way to counter their unprecedented childhood obesity crisis. El Monte has the ninth highest rate of childhood overweight and obesity out of 250 cities in California, according to a recent study released by the UCLA Center for Health Policy Research and the California Center for Public Health Advocacy (CCPHA).

“Overweight and obesity affect more than half (50.2 percent) of the children in the city of El Monte.”

The tax would raise $7 million a year. That’s assuming city serfs don’t trek to neighboring cities to slake their soda cravings.

Of course, it’s just a coincidence that the city has financial problems because, reported the L.A. Times:

“El Monte has also awarded generous benefits to some of its top employees. Former Police Chief Thomas Armstrong, who retired in May 2011, collected nearly $430,000 in his final year with the city through a combination of salary and payouts for unused time off. Armstrong and two other former police chiefs now receive yearly CalPERS pensions of more than $200,000.”

So the real bloat in the city is the obese compensation — salaries and pensions — given to unionized government workers. To pay for that, they’re going to loot kids and their parents even more.

After all, the cops and firefighters have huge bills for donuts.

By Wayne Lusvardi

The entire country has been focused on the recent Supreme Court redefinition of the Obamacare individual “mandate” to buy health insurance as a “tax.” Obamacare has been redefined to ObamaTAX.

The power to define or redefine is the power to reform. Here in California, political consultant Joe Rodota has recently reported on the efforts of the political “reform industry” in the state to bring about several radical changes, including redefining what the state budget deficit is.

Rodata states that, in the past, there was an effort to redefine the deficit as either:

(a) “inherited debt” — referring to budget gimmicks and short-term borrowing; and,

(b) “operating deficit” — referring to the current year problem of receipts being insufficient to cover expenses.

What happened to the simple term “spending deficit?”

Notice how such so-called political reformers conveniently have no term for a “spending deficit” created by either the governor or the legislature wanting to expand the budget level beyond existing revenues.

An example would be Gov. Jerry Brown’s proposal to increase the 2013 state budget from $87 billion to $92 billion, a 5 percent increase, by a new income tax hike on the wealthy and raising the sales tax rate.  Billionaire Molly Munger has a competing tax initiative on the November 2012 ballot that proposes a 10 percent increase in the state budget to $97 billion.  Both tax proposals would exceed the 2 percent combined rate of anticipated increase in the state population and monetary inflation for 2013.

Demographer Dowell Myers of the University of Southern California has forecast only a 1 percent statewide population increase for 2013. This assumes there will be no flight of businesses and residents out of the state due to the roll out of higher green power rates and Cap and Trade pollution taxes on all large industries and utilities starting in 2013.

And the U.S. Federal Reserve Board has forecast that monetary inflation will run from 1.2 to 2.0 percent in 2013.

This means that voters will be asked to approve new income and sales taxes that are 3 percent to 8 percent higher than population and inflation increases combined.  Aside from the sales tas hike, Gov. Brown’s tax hike would shift this added tax burden all on wealthy households making $250,000 or more.  Munger’s tax proposal would tax everyone but the poor making $14,300 or less per year.

If neither of these tax proposals is passed by the voters, there would be no budget deficit because spending would have to be brought into line with revenues; and Munger’s spending increase would not occur.

“Inherited Deficit” a Doublethink Term

The proposed term “inherited debt” sounds like a term right out of British novelist George Orwell’s “doublethink.”   “Inherited Debt” is an invented term for politicians to blame their predecessor for any budget deficit. But how can you blame your predecessor, when by law a budget must be balanced prior to approval?  So how can a governor inherit a deficit?  The use of budget gimmicks and wishful thinking about tax receipts from capital gains taxes on stocks often result in a phony balanced budget. And the word “inherit” sounds like something beneficial, like an inheritance.

“Inherited deficit” must be the term President Obama refers to when he says that there still is no economic recovery because of the debts inherited from former President Bush.  But this definition is getting stale, as the national recession was officially declared over in 2009.  It is never clear when an “inherited” deficit becomes the responsibility of the presiding president or governor.

“Operating Deficit” Is Like the Term “Drought” in California

The suggested term “operating deficit” is used like the term “drought” in California.  The term “drought” is overused to explain dry spells, court-ordered droughts during wet years, and too much snowpack water running off to the ocean.  Just as the term “drought” explains all droughts, including non-natural droughts, the term “budget deficit” explains every kind of funding shortfall or overspending, including non-deficits. If everything is considered a drought, nothing is. The same with the term “deficit.”

When a Deficit is Not a Deficit or a Smaller Deficit

The term “Operating Deficit” ignores that there is such a thing as fund transfers between “general funds” and “special funds.”  Government apparatchiks will tell you with great certainty that “special funds” can’t be used for “general purposes” to fund operating costs. But when Gov. Jerry Brown shifted $5 billion in special redevelopment funds to public schools, the two types of funds merged as “general funds.”

Just as state and federal water systems can merge their water systems through the Mendota Canal in central California, special funds, bond funds, and federal funds are often merged into California’s general fund in its budget.  The “general” fund often appears to run a deficit but when “special” and “bond” funds are combined, the deficit often washes out.

Consider the following table from the California Department of Finance, which shows a 10.1 percent deficit in the General Fund washes out to be a 0.5 percent deficit when all funds are considered. Put in terms of real dollars, a $10 billion deficit become less than $1 billion — $738 million — when you add in “special” and “bond” funds.

Historical Budget Expenditures (in billions of dollars)

It is not the General Fund that counts as much as the total of all operating funds.  California depends on its General Fund for about 64 percent of its operating expenditures, on its Special Fund for 28 percent of its expenditures, and on Bond Funds for 8 percent of operating funding.

Figure SUM O4 – 2012-1013 Total Expenditures by Agency

A budget deficit is like a pea shell game: which funding shell is the deficit under? Bonds? Special Funds? Federal Funds? Total Funds?

Gov. Brown claims he has a $16 billion deficit.  But it’s a contrived “spending deficit” anyway because, without spending $16 billion more than last year’s budget, the budget would be balanced.

Yes, there may be a deficit or fiscal drought in the state General Fund.  But the term is meaningless when you can balance the state budget “teeter totter” high, or balance it low.  Either way will work.

California has been running budget deficits for the last decade.  Government has not collapsed or fallen into the ocean. Public order has been maintained. Public schools may have annually ordered teacher layoffs, but no massive layoffs of core teachers have ever occurred.  So why do the newspapers keep calling it a “structural deficit”?  It might as well be called a “wish budget deficit” or “the Moonbeam Budget.”

A Budget Deficit “Mandate” or a “Tax?”

When Obama declared “Obamacare was not a tax” in 2009, that was not a one-line joke on “Saturday Night Live” entertainment show.  But it ended up like a joke anyway after the U.S. Supreme Court redefined it as a tax.

California’s budget deficit isn’t a “mandate” that requires raising taxes to fix. Constantly defining wishful over-spending as a budget deficit is part of the problem. But in California, there is no court of law to declare a “deficit” as another ruse for a “tax” increase. Nor do the Main Stream Media report on it. You only find it on alternative sites like CalWatchDog.com.

You’ve probably heard of Stockholm Syndrome, where hostage victims end up identifying with the hostage takers. Here’s Wikipedia’s definition:

In psychology, Stockholm syndrome is a term used to describe a real paradoxical psychologicalphenomenon wherein hostages express empathy and have positive feelings towards their captors; sometimes to the point of defending them. These feelings are generally considered irrational in light of the danger or risk endured by the victims, who essentially mistake a lack of abuse from their captors as an act of kindness.^[1][2] The FBI’s Hostage Barricade Database System shows that roughly 27% of victims show evidence of Stockholm syndrome.^[3

There’s also what I call “Government Stockholm Syndrome,” where victims of government abuse end up identifying with the government abusers.

That’s what’s happening with the “Amazon Tax” imposed Thursday by Gov. Jerry “Jobs Killer” Brown.

To avoid being forced to pay an unfair tax, Amazon.com “fired” its small, California affiliates, about 10,000 of them. Including other out-of-state businesses, about 25,000 California affiliates have been fired in the last two days. We’ve written about this recently here on CalWatchDog.com.

But some of the affiliates destroyed by “Jobs Killer” Brown, instead of blaming him and the rest of the government, blame Amazon! See what I mean: Government Stockholm Syndrome.

Here are a couple of these folks suffering from the Syndrome.

The L.A. Times reported:

However, another Amazon affiliate, Glenn Richards, an independent recording artist in Orange County (MightyFleissRadio.com), is angry with Amazon and its head Jeff Bezos.

“I think that Amazon.com’s decision to throw their affiliates, (including myself) under the bus is a national disgrace,” Richards said. “Jeff Bezos should be ashamed of his conduct. His bully boy practice and tactics of extinguishing small business in California should be (condemned). Small business has no power…and no hope to confront Internet giants like Amazon.com.”

The San Francisco Chronicle reported:

Former Chronicle business reporter Dan Fost is an Amazon associate. “Meaning I have an Amazon ad on my Web site, and if anyone clicks through to buy my book, I get a little share,” said Fost, author most recently of “Giants Past & Present,” about our favorite baseball team.

“I barely make anything on this, but I presume others do very well.”

Fost, who also received a notice Wednesday, said he was “intrigued that Amazon is threatening to take that away from me and other associates if the Brown tax passes.”

“I don’t see the connection at all – they’d rather not make the sales from our sites if they have to pay tax on those sales? I think they’re just trying to punish Californians for whatever the governor and Legislature do.”

July 1, 2011

I’ve been writing about the suicidal idea for California to tax Internet sales. In a comment to that post, a small business operator wrote how it would kill his business, and others like it. I thought it worth reprinting here on the blog. This shows what’s really going on in California.

Contrast its realism with the fantasies dreamed up in the union-dominated Legislature or the hothouses of such think tanks as the California Budget Project, whose lobbying for such a tax I reported on here.

Here’s what the small businessman wrote:

I can speak from personal experience on this issue, because I’m one of those small fry affiliates desperately trying to scratch out a living from Amazon’s affiliate program (and others). I was laid off in 2009, haven’t been able to find a new job since, and have no realistic expectation that I will find a new one any time soon, given California has the 2nd highest unemployment rate in the nation. I’ve been working every day, often 15 hour days, creating blog pages to try to get to the point where I can at least cover my monthly expenses. At this point, affiliate marketing is my only realistic hope of keeping off the welfare rolls and out of food banks. If any of these bills go into law, Amazon, Overstock, and other affiliate programs will dump me, and then I don’t know what I will do. The rich affiliates will move out of state, taking their jobs, personal income, etc. with them, I don’t have that option.

I can tell you from personal experience, switching over to new vendors would require re-doing the months worth of work I’ve already done. I would get ZERO future income from hundreds or even thousands of hours worth of work I’ve already done, and switching everything over would prevent me from doing hundreds of hours worth of work that I could do as I end up having to spend that time re-doing work I’ve already done. Anyone who thinks you can just flick a switch and change everything over doesn’t understand how affiliate marketing works.

As for Barnes & Nobles offer to pick up some of the dumped affiliates, note the word “some”. The beauty of Amazon’s affiliate program is that anyone, anyone, with a website, no matter what their traffic, no matter if they have no prior affiliate experience, no matter how small their website, can join the Amazon Associates Program and start in affiliate marketing. You don’t have to have a fully completed website, you don’t have to have a minimum traffic level, you aren’t scrutinized by some affiliate manager, you can just join and start working. It doesn’t matter how small you are, how poorly you perform in the beginning, you can still join, participate, and work towards bigger and more profitable times. That’s a large part of WHY amazon became as big as they did, their open door policy towards all affiliate marketers.

Not so with Barnes & Noble. I’m sure they’ll be glad to scoop up the top performers, well, the ones who don’t relocate out of state, that is, but they won’t be interested in the small fry. I applied to their affiliate program and was rejected, and I’m sure I’d be rejected today too. They’re far less attractive than Amazon in any event, Amazon has a better site, better prices, better range of products (its not just books, folks) and I’m sure better conversion rates. There’s a reason why Amazon is the biggest online retailer.

If these bills pass in California, I’ll essentially be killed as an affiliate marketer, unless I can get an out of state friend let me come and live on their couch. California still won’t get any sales tax from Amazon, Overstock, etc., the rich affiliates will take their jobs and their income out of the state, and I’ll either be forced into going onto welfare and begging my way out of the state so I don’t lose thousands of hours invested into my affiliate sites. That’s the reality.

May 9, 2011

Some budget action might take place today. But who knows.

Meanwhile, government apologist Peter Schrag charges that Republicans, “having swallowed Grover Norquist’s no-new-taxes Kool-Aid, and intimidated by a couple of Southern California radio talkers, would try to block any version of Gov. Jerry Brown’s split-the-difference budget solutions.”

But Schrag is the one who “swallowed…the Kool-Aid.” The reference is to the the 1978 massacre at Jonestown, Guyana of 918 people. Most of them were forced by the “Rev.” Jim Jones (actually a non-religious con man) to drink Kool-Aid laced with cyanide.

Jones and his followers were left-wing Democrats tied into the state’s Democratic establishment during the first governorship of Jerry Brown. Jones even met several times with then-First Lady Rosalyn Carter, wife of liberal Democratic President Jimmy Carter.

The real Kool-Aid being drunk now in 2011 is by those who believe the state’s budget problems will be solved by a massive, $13 billion yearly tax increase for five years, costing each family $5,000 over that period.

Meanwhile, back outside Schrag’s own private Guyana-in-California mental world, the Daily News reports that we soon may be paying $5 a gallon for gasoline. Schrag probably is aware that gas prices have risen.

But our servants in the state Legislature probably missed that one because they get free cars and gasoline, courtesy of the taxpayers of California. Here are some of the models they’re currently driving (some legislators make payments above what the state pays, as noted in the link):

Calderon, Ron, D-Monterey Park: 2006 Cadillac STS

Cedillo, Gil, D-Los Angeles: 2007 Lexus RX 400H Hybrid

Cogdill, Dave, R-Modesto: 2009 Chevrolet Silverado

Florez, Dean, D-Shafter: 2007 Lexus RX 400H Hybrid

Hollingsworth, Dennis, R-Temecula: 2007 Ford Expedition

Huff, Bob, R-Diamond Bar: 2008 Cadillac CTS

Runner, George, R-Lancaster: 2008 Toyota Highlander Hybrid

Wright, Rod, D-Inglewood: used 2005 Cadillac XLR Roadster (pictured above)

GOP Redevelopment Hypocrisy

Schrag does quote Gov. Brown on the hypocrisy of most Republicans in backing the continuation of wasting $1.7 billion a year on redevelopment. As my colleague Steven Greenhut noted in his column yesterday:

California Republicans love to talk about limiting government, fighting bureaucracy and keeping taxes low, but March 17 they proved that this is nothing more than a rhetorical device. Given the opportunity to rein in the size and power of government in a tangible way, Assembly Republicans — with a sole exception — punted. They rallied to save some of the most abusive and wastrel government agencies around.

The sole exception was Assemblyman Chris Norby, R-Fullerton.

If Californians had any sense, Norby would be made governor in a special election.

But too many people, beginning with Brown and Schrag and redevelopment-obsessed Republicans, would rather keep chugging the Kool-Aid.

March 29, 2011

BY WAYNE LUSVARDI

Call it the Green Water Tax. It’s a proposal advanced in a White Paper on the Web site of the California Public Utilities Commission (CPUC) to impose a $3.4 billion surcharge on the energy-related costs to pump and treat water. The new surcharge — effectively a tax — is “pernicious,” charged David Powell, an expert on California water policy.

The surcharge would be enacted in 2012 to meet the administrative costs of implementing AB 32,  the Global Warming Solutions Act of 2006. Last November, voters had a chance to suspend AB 32’s implementation by passing Proposition 23. The measure lost heavily, keeping AB 32 in place.

But did voters know that they might have been voting for a $3.4 billion tax? And on what would this $3.4 billion be spent?

CPUC White Paper

The Green Water Tax proposal was put forth in a “White Paper” released in September 2010, by the University of California, Berkeley Public Policy Division. Its name: “Implementing a Public Goods Charge for Water.” Due to the approaching November election, little notice was made of this proposal. The charge would be implemented starting in 2012 to meet the administrative costs of AB 32.

To give you an idea of the magnitude of the proposed water surcharge, it takes $1.1 billion to operate the entire State Water Project each year, the largest state-built water and power development and conveyance system in the United States. And the entire annual budget for the California Department of Water Resources is $3.6 billion.

If enacted in 2012, the Public Goods Water Surcharge would be in addition to the 19.7 percent water rate increase enacted by the Metropolitan Water District of Southern California in 2009, and another 20 percent rate hike expected in 2011, as a result of drought and environmental lawsuits restricting water deliveries.

According to the White Paper, the water surcharge is slated to go toward defraying the administrative cost of AB 32. For clarification, I contacted David O. Powell, P.E. (Caltech) in Pasadena. Powell is a retired water resources engineer formerly with the U.S. Army Corps of Engineers, the California Department of Water Resources, Bechtel Corporation, Alameda County Water District, and Bookman-Edmonston Engineering. He also was a court-appointed Special Master in the historic Colorado River vs. Arizona case.

Powell clarified the difference between two things: 1) a water replenishment assessment, which is levied to recover the costs of groundwater recharge programs; Powell favors such assessments, which can only be assessed by water agencies. And 2) a Water Public Goods Charge. Powell said he “read the PUC document and realized it was a far more pernicious proposal.”

Powell said that while he is “pretty much convinced that global warming is probably taking place and that it is in part the result of fossil fuel use,” he does not believe “the nature and magnitude of the effects are that well defined, nor is he convinced that the proposed cure isn’t worse than the malady.”

On the U.S. White Paper, he said:

The report seems to suggest funding a substantial portion of AB 32’s administrative cost from a volume-based monetary surcharge on the use of water.  The aggregate amount of this surcharge initially would be $680 million per year, with provision for future increases.

The reasoning behind making the water user a major funder of AB 32’s administration appears to be that energy use associated with water use makes up some 20 percent of the energy use in California.  It is not clear to me whether this 20 percent figure is after deduction of the energy recapture, which occurs from hydroelectric generation accompanying water supply development.

If the amount of $680 million represents 20 percent of the total cost of AB 32 administration, this would imply that the initial total cost for AB 32 is some $3.4 billion per year. [$680 is 20 percent of $3.4 billion.]

It is clear to me that either the total costs of administering AB 32 are unconscionable or the proportion assigned to water users is excessive.  Either of those possibilities is unacceptable.

The U.C. White Paper’s front page notes that it was principally prepared by “student authors and consultants” from the Goldman School of Public Policy at U.C. Berkeley and reviewed by CPUC staff.  On that, Powell said:

The PUC document seems to have been written by student academic theoreticians devoid of experience in the real world.  As an example of the nonsense that permeates the PUC document, I cite the following quote from Page 4: “Decisions about groundwater extraction are not coordinated amongst the various communities that share an aquifer….”

Good Lord!  Have these people never heard of adjudicated ground water basins?!?!  Who knows what additional evidence or flawed understandings would be revealed by more detailed review?

Among many other apparent flaws, the White Paper is also confusing in its assertion on pages 11 and 25 that a Public Goods Water Charge would “save” 2.1 to 3.8 million acre feet of water; while on page 27 it asserts that water use would increase by 5.5 million acre feet by 2030.

To give you an idea of how much 5.5 million acre feet of water is, that is enough water for at least 32 million more people or up to 5.5 billion acres of farmland. California currently has a population of about 37 million.

A Water “Civil War”?

Although the White Paper specifies that such a water surcharge would go toward “administrative costs,” Leslie Mink, a Plumas County environmental manager, commented on the CPUC website that such a surcharge would fund ecological restoration:

Just perused the paper. Good job. Looks like it missed one of the things that we have been working on in the Feather River, though. Sierran meadow restoration can kill 3 birds with one stone — improve agricultural use efficiency, restore natural water storage in the Sierra (also a climate change adaptation since snowpack is diminishing), and sequester carbon. We have data and reports on all of these effects of meadow restoration in the Feather River. See our website at feather-river-crm.org.

We have been hoping for a PGC for water for some time since southern California users benefit from the Feather River water supply, but don’t assist with maintaining the watershed’s ability to provide it. We have a lot of degraded meadows, and are constantly seeking funds to restore them.

Mink describes herself online as a “partner” with the Plumas Corporation to restore the flood plain function of the Feather River.  The Plumas Corporation is a nonprofit agency whose goals are to form public-private partnerships for “tourism promotion, economic development and stream restoration.” In other words, Leslie Mink sees the water surcharge going toward what might be called rural “ecological redevelopment.”

To help reduce the state’s $25 billion budget deficiit, Gov. Brown is trying to divert $5.5 billion in urban redevelopment money to the general fund.

But a Public Goods Water Charge would just shift about $3.4 billion from urban water ratepayers to “green redevelopment.” California urban tourism and retail mall development would be phased down or out, but rural tourism and water-related economic development would be phased in.

There is the possibility of this setting off a civil war between urban and rural redevelopment interests. It would be a reverse of the Owens Valley vs. Los Angeles “Little Civil War” of 1927, in which the Los Angeles Department of Water and Power grabbed water from Eastern California

This time, wilderness and riparian areas would be grabbing money and water from big cities and farmers through a Public Goods Water Surcharge for “eco-tourism,” rustic recreation, the development of new water reservoirs and lakes and possibly fishing industry redevelopment.  A Public Goods Water Surcharge is sure to be controversial, as water and money would flow away from farmers and urban water users to rural wilderness and riparian areas where water, not carbon, would be “sequestered.”  California would be going backward to an economy of more than 150 years ago.

Ethically Taxed

The White Paper has a disclaimer that the report does not represent the views of the CPUC, that the CPUC does not approve or disapprove of the report or warrant its accuracy or adequacy, nor assume any legal liability for it.  The document is printed, however, with a glossy artistic cover clearly labeled “California Public Utilities Commission,” not “U.C. Berkeley Goldman School of Public Policy.”  The document has all the appearances of being an official CPUC document and is posted online at the CPUC’s Web site for public comment.

Disturbingly, both the CPUC and U.C. Berkeley apparently provided considerable staff resources for what appears to be a political advocacy document.

The appendix to the White Paper provides political advocacy advice for “possible legislative sponsors” for “taking on” water “Public Goods” legislation. The document recommends a political strategy of approaching State Sen. Fran Pavley (D), original author of AB 32; Sen. David Cogdill (R), who authored SBX7-7 to reduce statewide water consumption by 20 percent by 2020 (i.e., “20x 2020” Bill); and State Sen. Dennis Hollingsworth (R) who also co-sponsored SBX7-7.

Cogdill and Hollingsworth no longer hold their seats.

The White Paper adds: “Sen. Cogdill may have difficulty supporting a bill that increases taxes or assesses a fee.” Clearly, U.C. Berkeley and the CPUC put substantial staff resources into a student “White Paper” that is political advocacy, not an impartial analysis worthy of public comment.

The White Paper clearly identifies the CPUC as a “client” and the students call themselves “consultants.” Even the Association of California Water Agencies felt obligated to respond.

Advocacy and Conflicts of Interest

The CPUC did not respond to questions as to whether its staff provided substantial public resources to the preparation of this document and whether the report was vetted through the CPUC ethics officer. It also didn’t respond whether there were any conflicts of interest involved when one of its staff members, Cynthia Truelove, who reviewed the report. But she also is a member of the California Sustainability Alliance that is associated with Navigant Consulting, a green tech marketing management non-profit.

The California Sustainability Alliance is an organization funded by California’s investor-owned utilities (PG&E, SDG&E and Edison) apparently to facilitate green businesses and entrepreneurs funded by electricity ratepayers’ money.

Can you imagine the outcry if CPUC staff also were allowed to serve as consultants, lobbyists or brokers for Chevron Oil or for the California Independent Petroleum Association to facilitate start-up businesses? The CPUC did not respond to questions about why this apparent, or real, conflict of interest is allowed to exist.

The white paper is political advocacy, has perceived conflicts of interest and is so obviously flawed as to confuse the public. The CPUC “Implementing a Public Goods Charge for Water” white paper should be withdrawn from the CPUC website and instead deposited wherever professors dump flawed term papers.