MOORLACH UPDATE — Booming Struggles — July 13, 2019

The Commentary section of tomorrow’s Sunday OC Register is expected to have the editorial below, which is the first piece provided. It seems to be channeling what I’ve been communicating (see MOORLACH UPDATE — Biggest Budget, Biggest Deficit — June 10, 2019). For more on the CalPERS meeting that is referred to, go to MOORLACH UPDATE — OC’s Newest Landmark Plaque — September 20, 2017.

The second piece below is by the Associated Press and is in the Reading Eagle. It provides the news of Gov. Newsom’s appointment of Marybel Batjer as the new president of the California Public Utilities Commission (CPUC). Ms. Batjer recently testified before a Senate Budget & Fiscal Review Committee meeting this year on the subject of the DMV. She made a good impression.

I have stated my concerns about the size of the CPUC and how it has become a massive and ineffective bureaucracy that is slow moving and reactive, versus proactive (see MOORLACH UPDATE — Wildfire Cost Reverberations — May 9, 2019).

Where was the CPUC in its encouragement to PG&E to harden its assets in a more expeditious manner? Where were the fire maps and why has it taken more than 8 years to complete them (see MOORLACH UPDATE — Snopes is Fired Up — November 14, 2018))?

Even AB 1054 hints at some modifications to the CPUC. This bill, signed yesterday by the Governor, created the California Wildfire Safety Advisory Board that will "currently" be housed within the CPUC (see MOORLACH UPDATE — AB 1054 and Investor-Owned Utilities — July 9, 2019)..

I wish Ms. Batjer all the best. I just know that, after receiving major negative State Auditor reports on departments, such as a scathing one on the CPUC from 2016 (see, nothing much happens to improve the situation. We need a "change agent" and I hope she can provide a model for other bureaucrats in Sacramento.


Despite booming revenues, California struggles with debts


The California Public Employees’ Retirement System reported an annual return on investment of 6.7 percent on Thursday – lower than its goal of 7 percent, but still a decent return rate. Meanwhile, California cities have seen a booming real-estate market, with property tax windfalls soaring by more than 6 percent in many areas. California’s budget is in surplus territory, with the governor earmarking billions of dollars to pay down state debts.

By any measure, this is good news, yet California cities and counties are struggling to make ends meet. They are facing something known as service “crowd out,” whereby their expenses are consuming so much of their budgets that there’s a dwindling amount left to pay for fundamental services. Many California public-school districts are likewise concerned about their financial straits.

Part of the problem is inherent in all governments, which tend to spend money until they run out of it. But there’s a lot more than that going on here. As columnist Dan Walters wrote in October, “The reason is that even with strong property tax gains, local governments’ pension costs are growing faster than revenues, thus putting the squeeze on their budgets.”

Nothing has changed since last year, except that the California Supreme Court has refused to revisit the “California Rule.” That’s the doctrine that public employee benefits cannot be pared back even going forward. Without a change in the rule, cities are largely helpless to rein in these costs. They can do little more than raise taxes and cut services.

Whenever he released a budget, former Gov. Jerry Brown featured big charts showing that recessions are often around the corner. He was reminding lawmakers not to pass permanent spending programs because they can go upside-down if the economy goes south. Gov. Gavin Newsom’s budget has record spending, but he, too, has boosted the state’s rainy day fund to buffer against a recession.

None of those warnings or savings, however, will cushion the blow for the state’s pension systems if the stock market starts to fall. CalPERS only has 70 percent of the funds it needs to fulfill all of its participating agencies’ pension promises. A 6.7-percent rate of return would be fine under most circumstances, but not when it’s already in a deep hole. And consider that the stock market has been soaring. State pension funds are in dangerous territory after years of unprecedented economic growth. What happens in a serious downturn?

Back in 2017, California city officials made the trek to Sacramento to speak to a CalPERS hearing to support a proposal by Sen. John Moorlach, R-Costa Mesa, to require that the pension fund provide more actuarial data about pension costs. The idea was shot down, but city officials talked about their constant budget cut backs as they try to pay the growing pension and medical tab for public employees. One official even raised the specter of municipal bankruptcy.

Despite their pleas, pension reform hasn’t captured serious attention in the Capitol. It’s ironic that state officials, who see themselves as the Trump resistance, are increasingly dependent on the Trump economy to keep bailing them out. But what goes up must come down eventually. It would be nice if state officials dealt with that possibility before the pension debt hits the fan.

California governor taps new top utilities regulator

California Gov. Gavin Newsom names new top utilities regulator to California Public Utilities Commission


SACRAMENTO, Calif. (AP) — California Gov. Gavin Newsom said Friday he is tapping Marybel Batjer, a veteran of state government, to serve as the state’s top utilities regulator.

Batjer will serve as president of the California Public Utilities Commission, overseeing power companies and other services ranging from water systems to telecommunications and limousines.

The commission has a particularly daunting job as the state grapples with big goals for reducing carbon emissions and seeks to curb the threat of wildfires caused by electric utility equipment. Power lines have sparked catastrophic fires in recent years and the state’s largest electric utility, Pacific Gas & Electric Corp., has filed for bankruptcy in the face of billions of dollars in claims for damage as well as questions about the company’s neglect of its aging equipment.

Newsom said he is confident Batjer will challenge utilities to embrace reforms. But plenty at the state Capitol will be watching to see if Batjer can also reform the commission itself, which critics say is too slow and inefficient.

Batjer is currently secretary of the California Government Operations Agency. Former Gov. Jerry Brown appointed her to that post in 2013. She is a veteran of state government, previously working as cabinet secretary to Gov. Arnold Schwarzenegger and as chief of staff to Nevada Gov. Kenny Guinn. Batjer worked in the administrations of Presidents Ronald Reagan and George H.W. Bush, and was later vice president for public policy at Caesars Entertainment Inc.

Batjer declined to comment for this story.

In Newsom’s administration, she is quickly gaining a reputation as a person to call when dealing with big bureaucracies.

Newsom, who took office in January, named Batjer earlier this year to head a strike team focusing on the state’s beleaguered Department of Motor Vehicles.

"We’re very encouraged that the governor has chosen someone with a strong background in managing and transforming large government institutions. We think the PUC needs that right now," said Mark Toney, executive director of The Utility Reform Network, an advocacy group based in San Francisco.

Legislators are already skeptical about the commission’s capacity to effectively oversee the services it regulates.

Sen. John Moorlach, a Republican from Costa Mesa and vice-chair of the Senate Energy, Utilities and Communications Commission, said he hopes Batjer will be a "change agent."

"I think there’s some signals this Legislature — and certainly this legislator — would like to see the (commission) trimmed down," he said.

Batjer will succeed Michael Picker, who announced in May that he would retire after almost five years in the post.


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