“Climate change” is useful for political activism because, unlike “global warming,” it can’t be tested.

Fortunately, even more liberal news outlets are checking the political contentions of Tom Steyer, the billionaire California hedge-fund investor and anti-climate change activist. NextGen is his political activism group. The San Jose Mercury New reported:

The Washington Post’s Fact Checker blog in January, however, awarded its dreaded “four Pinocchios” rating to a NextGen ad citing Chinese investment in Canada’s tar sands and claiming the controversial Keystone XL pipeline would produce oil only for other countries. The Chinese investment is small, the Post found, and NextGen took an oil executive’s words out of context to imply that no oil carried by the pipeline will remain in the U.S. 

The ad “relies on speculation, not facts, to make insinuations and assertions not justified by the reality,” the Post said. 

Last October, PolitiFact — a renowned fact-checking project run by the Tampa Bay Times — gave its “pants on fire” rating to a NextGen ad claiming Virginia Attorney General Ken Cuccinelli, then running for governor, wanted to “eliminate all forms of birth control.” Cuccinelli has repeatedly said he has no interest in restricting contraception, PolitiFact noted. 

This month, PolitiFact gave “half-true” ratings to a pair of NextGen ads attacking Florida Gov. Rick Scott’s ties to energy companies and polluters. FactCheck.org, a project of the University of Pennsylvania’s Annenberg Public Policy Center, said it didn’t dispute the statement of critics that one of the Florida ads was “total fiction,” though the GOP response had “glaring factual problems” too. 

And PolitiFact this month deemed “false” a NextGen ad accusing Iowa U.S. Senate candidate Joni Ernst of having signed a pledge that “protects tax breaks for companies that ship jobs overseas.” The pledge was a broad vow to oppose all tax hikes.

I would add that, if Steyer is so concerned about shipping jobs overseas, then why did he increase Californians’ taxes $1 billion in 2012 with his Proposition 39?

And why is he trying to raise oil taxes in California, an expense that inevitably would be passed on to drivers through higher taxes at the pump?

And why is he backing the new tax of up to 20 cents a gallon to be imposed on Californians next January from the state’s Cap and Trade program? The higher tax especially would hurt poor commuters. Which is why Assemblyman Henry Perea of Fresno and other Democrats with poor constituents tried to cancel the tax hike. Perea charged the money would be grabbed “out of the pockets of hard working Californians who drive to work or school and make necessary trips to the grocery store or doctor’s office.”

Steyer’s stances are useful because they show what Californians’ positions will be under extreme  environmental rules: higher taxes breaking their budgets and seats in the back of the green bus.

Come and listen to a story about a city named Beverly Hills and its bubblin’ crude.

“The Beverly Hillbillies” still plays on TV in reruns, providing laughs about the Clampetts from Tennessee who strike it rich in oil on their farm, then move to posh Beverly Hills with its “swimmin’ pools, movie stars,” as the opening song goes.

But what’s not well-known is that there’s crude in “them thar” Beverly Hills, too.

And would a “reboot” of the series today include an episode about how the City of Beverly Hills has banned oil drilling by fracking – the horizontal fracturing of rock to extract oil and gas?

On May 6, the City Council unanimously voted to ban fracking, the first city to do so in California. According to the Beverly Hills Courier, the new fracking ordinance bans “hydraulic fracturing, acidizing or any other stimulation technique” from any area of the city.

The city press release said that, back in Sept. 2011, the council also passed an ordinance to phase out the oil wells next to Beverly Hills High School by the end of 2016. But horizontal drilling from outside the city – drilling under Beverly Hills — would continue.

So to what extent the new fracking ban will be effective is unknown because companies might set up wells in adjacent cities, then drill under Beverly Hills.

Budget

According to the U.S. Energy Information Agency, the Domestic Crude Oil Price for California hovered around $100 per barrel for 2013. That would roughly result in about $74,574,200 in gross crude oil production revenues from the Beverly Hills oil field in 2013.  According to data from the 2014 Los Angeles County Economic Development Corporation Oil and Gas Industry report, the Beverly Hills oil field would contribute about $5.839 million in local property taxes (745,742 barrels x $7.83 per barrel property taxes), not all of which would go to the city or its schools.

This does not include additional city business license taxes, franchise fees for oil pipelines within city streets, or the oil extraction royalties that its mineral rights owners derive. In fact the city, Beverly Hills High School, Los Angeles County, the state of California, and some 6,200 holders of oil leases that get royalties from oil wells under Beverly Hills are secondary parties enriched by the oil field.

Even new Los Angeles City Mayor Eric Garcetti co-owns a personal trust with an oil-drilling lease with Venoco Oil with a drilling island located on the campus of Beverly Hills High School.  This does not include all the sales taxes paid by oil company employees buying goods and services in Beverly Hills and Los Angeles County.

So, despite the new law, it’s difficult to tell if Beverly Hills’ fracking ban is real or mostly symbolic. Especially because the city of 34,622 already is saturated in oil.

A portion of the city sits atop a 1,200-acre subterranean oil field that produced 874,000 barrels of oil in 2008, with no discernible negative effect on property values, human health or the environment.  No groundwater from the Hollywood Basin, which underlies Beverly Hills, West Hollywood and Los Angeles, has been contaminated.

In fact, the city itself, Beverly Hills High School, Los Angeles County, the state of California, and some 6,200 holders of oil leases that get royalties from oil wells under Beverly Hills are secondary parties enriched by the oil fields.

The wealthy people of Beverly Hills were not deterred in 1900 from locating their homes near a productive oil field.  A map of the Beverly Hills oil field shown nearby indicates drilling islands. The fields are four miles long, a half-mile wide and 10,000 feet deep.  Even new Los Angeles City Mayor Eric Garcetti co-owns a personal trust with an oil-drilling lease with Venoco Oil with a drilling island located on the campus of Beverly Hills High School.

Fracking allowed

State law would not impede fracking in the Clampetts’ back yard. Fracking in California was green-lighted in 2013 when Gov. Jerry Brown signed State Senate Bill 4. It strictly monitors fracking and regulates any fracturing of rock by acidizing techniques, but does not ban it.

Several bills are still pending in the Legislature that would ban or place a statewide moratorium on fracking. But given that Brown already gave his approval for fracking, he is unlikely to sign them.

Hedge fund manager Tom Steyer has called for a law mandating a vote of two-thirds of the people before local fracking is allowed.

Steyer also is interested in funding fracking bans in other states. Banning fracking could protect his green-power investment returns from competition from conventional oil and gas drilling.

Steyer has recently funded his own opinion poll that shows that Californians want an oil-extraction tax, and county control over fracking.

Steyer should be taken seriously because in the 2012 election he sponsored Proposition 39, a $1 billion tax on businesses that passed and has harmed California’s business climate. For five years, $550 million of the tax increase is dedicated to environmental projects.

By Wayne Lusvardi

A little known new accounting rule buried in the fiscal 2012-13 California state budget now will make it virtually impossible for the public to track where and when the tax revenues from Propositions 30 and 39 will be spent. Prop. 30 is Gov. Jerry Brown’s $6 billion tax increase. And Prop. 39 is hedge fund manager Thomas Steyer’s $1 billion tax increase. Both propositions were passed by voters on Nov. 6.

The new budget rule is Section 35.50 of the Budget Act of 2011-12, also known as Assembly Bill 1495.  The new rule authorizes a shift from cash (actual) accounting to an accrual (projected) accounting method. What this murky rule means is that budget revenues from two years can be applied to one year’s worth of expenses.  The result will be an inflated and non-transparent budget.

The key part of the new rule vaguely says: “The net final payment accrual methodology shall be implemented with regard to any change in state law which is enacted during 2012.”  The changes to state tax law in 2012 are Props. 30 and 39.

LAO Says Budget Forecasts Will Now Be Error Prone

The newly-released report prepared by the state Legislative Analyst’s Office, “The 2013-14 Budget: California’s Fiscal Outlook,” contains the following description of the new rule:

“Section 35.50 of the 2012–13 Budget Act institutes a new accrual method for the tax revenues generated by Propositions 30 and 39. A portion of final income tax payments paid in, say, April of one year will be accrued all the way back to the prior fiscal year (which ended ten months in the past). One effect of the change is that we will no longer have a good idea of a fiscal year’s revenues until one or two years after that fiscal year’s conclusion. Because the volatile capital gains-related revenues from Proposition 30 are the subject of the accrual changes, the late adjustments to revenues could total billions of dollars—much more than in the past. As a result, the chances of large forecast errors by us and the administration will increase.”

The Legislative Analyst’s Office also elaborated on the problems involved with this new rule:

“We are now convinced that the problems that this new accrual method will introduce to the budgetary process outweigh its benefits. We recommend that the Legislature direct the administration to develop a simpler, logical budgetary revenue accrual system by 2015. Alternatively, to help ensure the accuracy of our forecasts and improve transparency, we recommend that the Legislature require the administration to document accruals regularly online.”

In other words, the LAO is saying that even its impartial budget numbers will be unreliable because it will be impossible to track budget accruals and compare them with the actual cash status of the budget.

Cash Versus Accrual Accounting

The new rule involves what is called the accrual basis of accounting. According to the glossary contained in the 2012-13 State Budget, the accrual basis of accounting is defined:

“The basis of accounting in which revenue is recorded when earned and expenditures are recorded when obligated, regardless of when the cash is received or paid.” 

In cash-based accounting, the record of expenses is recorded when the cash is actually laid out.  In contrast, under accrual based accounting, revenue or expenses are recorded when the transaction is completed, not when it receives the cash or when it pays for supplies.

For example, even though the customer may not have paid the final bill yet, a carpenter records receiving payment when the job is completed. Or a carpenter buys materials on his account at Home Depot, not when he actually pays cash for the lumber maybe a month afterward.

“Trust Us” Budget Accounting

In other words, from now until 2019, when Prop. 30 expires, it will be impossible to know whether the budget figures released by the state are the actual numbers.  California’s budget accountability to the public will turn into a secretive game of “trust us.”

This new budget rule signals that it is unlikely the taxes generated from Prop. 30 will be spent on public schools, as advertised by Brown. And the revenues from Prop. 39 likely will be siphoned into CalPERS’s pension fund.

How do we know this?  We don’t know for sure because where the funds are eventually to be spent is intentionally left open-ended and vague.  But it can now be surmised that Brown will use Prop. 30’s tax revenues to patch shortfalls in other items in the general fund budget, such as Medi-Cal.  And an educated guess is that the tax revenues from Prop. 39 will go to CalPERS’ pension fund.

The effect of the new budget accounting method will be to count two years’ worth of revenue and only one year’s worth of expenses to create an appearance of a balanced budget and rising revenues.  Based on an inflated assumption of rising revenues, it follows that legislators can then plan on higher spending as well.

Surplus Forecast Counts Two Birds in a Bush

The Legislative Analyst’s new budget outlook for 2013-2018 forecasts budget surpluses of $1 billion or more starting in 2014, up to nearly $10 billion in 2018. Some newspapers are already reporting these surpluses without disclosing the risky and rigged assumptions on which they are based.

But Californians need to understand that budget estimates are no more reliable than their assumptions. And a key assumption the Legislative Analyst is forced to use is presuming the availability of two years’ worth revenues to apply to one year’s worth of expenses.

In other words the budget is based on counting the proverbial two birds in the bush rather than the one bird in hand. This results in an inflated forecast of budget surpluses.

This new budget rule is the result of one-party rule in California. Redistricting and supermajority rule by Democrats in the Legislature may result in more moderate candidates who are more favorable to increasing taxes.  But an unintended consequence of one party rule is that the status of the state general fund budget is more likely to be inflated and partly hidden.

By Brian Calle

CalWatchDog.com’s Katy Grines reveals the wealthy activist who is not only behind Proposition 39, but who is most likely to profit from its passage. For more information, check out our articles on Prop. 39 at CalWatchDog.com.

By Wayne Lusvardi

On Nov. 6, voters face a number of  initiatives on the ballot targeted at California’s endemic budget and tax problems. All promise reforms embraced by both liberals and conservatives.  Some even are being marketed as libertarian reforms.  Here’s a rundown.

Props. 30 and 38 tax increases

Proposition 30 is called, grandly, the Schools and Local Public Safety Protection Act of 2012. And Proposition 38 is called, even more grandly, the Our Children, Our Future: Local Schools and Early Education Investment and Bond Debt Reduction Act.

Prop.  30 is Gov. Jerry Brown’s $8.5 billion income and sales tax increase, purportedly for public schools and police that mainly would tax the “rich.”

Prop.  38 is attorney Molly Munger’s proposed alternative, a $10 billion income tax increase on nearly all income levels except the poor to fund schools and pre-school programs.

Except that public schools have been overfunded the past few years. Some $4 billion was “borrowed” from public education to plug the state budget deficit since 2008.  Despite this loss of funding, no core teachers had to be laid off statewide.  In other words, public schools didn’t need the money.  On top of that, statewide enrollments in public schools have declined 1 percent and are projected to continue to decline.

The $4 billion borrowed from education funds was “internal borrowing,” not bonds.  These borrowings could be paid back in the long run with cost savings by shifting from politically protected “categorical” jobs programs for ancillary school personnel to block grants.

Sure, taxes from either Prop.  30 or 38 will go to public schools. But that would only free up already guaranteed education funds for other programs that are running deficits.  This is called “fungibility”: funds are interchangeable and can be used for education, social services, or road repairs.

School children are only political poster children to fund less popular programs such as Medicaid and public employee pensions. President Obama’s policy of shifting 1.5 million of the unemployed nationwide to Social Security Disability has put a $5 billion hole in California’s general fund budget, by this writer’s estimate.  Brown’s and Munger’s school tax proposals are just false fronts to cover up Obama’s financially ruinous policies to California, along with paltry state pension reform.

Proposition 98 already guarantees public schools about 43 percent of the entire state general fund budget no matter if attendance is declining or they didn’t even need $4 billion over the past few years.  Voters need to be informed that Props. 30 and 38 do not specifically earmark new funds for public schools.

Prop.  31 on the budget

Proposition 31 is called the Government Performance and Accountability Act. It promises five budget reforms:

1. A two-year budget cycle instead of annual budgets;

2. A requirement to identify funding for all legislative bills more than $25 million;

3. Authorization for the governor to declare a fiscal emergency;

4. Authorization for the governor to exercise line-item budget veto;

5. Requires performance budgeting in all state agencies.

The undisclosed problem with all of the above so-called reforms is that they already are on the books or can be implemented without voter approval or a constitutional amendment.   They are just an enticement to entice voters into approving the creation of an unelected new layer of government called Strategic Action Plan Committees — SAPs.

These committees supposedly would be able to relax environmental laws and other regulations to get public projects and programs done more cost effectively.  But then why do we need such phony committees in the first place?  Why not just deregulate the revenue sharing funds that flow from Sacramento to local cities and counties?  What Prop. 31’s Strategic Action Plan Committees are all about is tax sharing between financially strapped big cities and wealthier suburbs.

Let’s look at just the provision in Prop. 31 that funding needs to be identified before passing any bill in the legislature of $25 million or more.  This can be so easily gamed by creating only $24.9 million expenditures, fudging the numbers of spending cuts to afford new programs, using projected revenues that never materialize for new spending programs, and padding expenditure bills so that the governor can appear to reduce them with his veto.

Prop. 31 is a pretense for elites to grab public funds away from local governments for their pet projects and programs.  It would undermine representative government and the cost savings are artificial.

Proposition 39: Interstate protectionism

Proposition  39‘s title seems so wonderful: the Tax Treatment for Multistate Businesses, Clean Energy, and Energy Efficient Funding Initiative Statute.

It is a proposition being funded by another billionaire, “hedge-fund king” Tom Steyer, who has bankrolled it with $20 million.

Prop. 39 is a sort of new version of the Smoot-Hawley Act of the 1930’s that was blamed for triggered the Great Depression. The Smoot-Hawley Act raised U.S. tariffs on imported goods.  Likewise, Prop.  39 will increase taxes on out of state businesses trading with California.  Ballotpedia.com more accurately calls Prop.  39 the “Income Tax Increase for Multistate Businesses Initiative.”

Prop.  39 supposedly would level the playing field between businesses inside and outside of California.  But it would be ripped off by well-connected elites, such as Tom Steyer, to reap a windfall on overpriced alternative energy schemes. This will only add to the cost of higher energy under California’s Cap and Trade program to be rolled out in January 2013.

And it will raise the price of consumer goods from out-of-state suppliers.  So Prop. 39 may close a $1 billion tax “loophole” in “lost” revenues for California.  But this would be offset by increased costs for electricity and consumer goods from other states.

In short, the November election gives voters a choice on how they will structure state finances for years and even decades to come. Let’s hope they choose wisely.