MOORLACH UPDATE — Budget Conference Season — May 30, 2019

The May Budget Revision was released recently. The five Senate Budget and Fiscal Review Committee Subcommittees have concluded their work. And now it is time for the Assembly and Senate to compare notes and adjust their differences.

Between January and May, Subcommittee members reviewed the Governor’s proposed January budget and listened to department representatives, Department of Finance officials, Legislative Analyst Office staff specialists, advocates and the public. Then–for some of the issues–we voted in agreement or disagreement, with recommended alternatives, on the various components of the budget in the Subcommittee’s area of focus.

Then five Senators and five Assemblymembers were selected to serve on the Budget Conference Committee. Subcommittee 1 and 5 Chairs were selected to assist the Chair of the Budget and Fiscal Review Committee, making up the 3 Democrats. For the Republicans, the Vice Chair of the Budget and Fiscal Review Committee was selected and I am the second Republican Senator, as the de facto Vice Chair of Sub 5, Corrections, Public Safety and the Judiciary.

What does this mean? It means that I’ll be figuratively locked in a room for the next ten days hammering out the differences with four other Senators, five Assemblymembers, Department of Finance and Legislative Analyst Office representatives and members of the public and advocates. The ten of us will determine the final budget that will be voted on by both chambers for the Governor’s signature.

This is the only bill that the Legislature is required to pass and present to the Governor every year. And, it must be delivered by June 15.

It is an honor to be selected. But, I go into this exercise with the full knowledge that this will be a budget determined by the Democrats. The Republicans on the Budget Conference Committee will be out-voted at almost every turn. But, we will have a voice to state the reasons for our concerns and opposition to those budget items that we object to. The Orange County Breeze provides our press release in the first piece below.

For a perspective on last year’s exercise, see MOORLACH UPDATE — Gov. Brown’s Final Budget — June 15, 2018.

The California Globe provides a good close to tomorrow’s deadline in the second piece below. May 31st is the last day for bills to be passed out of the house of origin. The Senate concluded this exercise this morning. Then, all but the five Senators serving on the Budget Conference Committee will supposedly go back to their Districts today.

I did not come to Sacramento to increase the number of income tax credits, and my voting record shows that. Why? Because this state must address its unfunded pension liabilities, and now, before dishing out more tax expenditures.

When SB 468 came before me in Government and Finance Committee, I voted for it with hopes that a thorough review of all tax credits, both individual and corporate, would be analyzed. But, that’s not the case. And, SB 468 strays into areas that would bring California even further out of conformity with Federal income tax law.

The author of SB 468 was hoping that I would be a co-author, but I told her that after the amendments, it did not go in the direction I preferred. Consequently, I abstained from voting on the bill on the Senate Floor.

25th Anniversary Look Back

The LA Times provided four Letters to the Times, under the heading “Citron’s Policy Defended, Questioned,” in their Sunday, May 29, 1994 issue.

The first letter was from then-Assemblyman Tom Umberg (D – Garden Grove), who had received a number of generous political contributions from his fellow Democrat, Mr. Citron. The letter concludes:

I am confident that the voters of Orange County will overwhelmingly re-elect Bob Citron to his seventh successful term. The investment of our hard-earned taxpayer dollars is too important to trust to “partisan political hacks” like Jeffrey Thomas and John Moorlach.

Twenty-five years later I have the privilege of working with Senator Tom Umberg (D – Garden Grove) in the California Senate.

Bonnie O’Neil of Newport Beach, who is still active in her community, provided these comments as the conclusion of her submittal:

Apparently people in the financial world agree with candidate John Moorlach regarding potential problems associated with the present county treasurer making high-risk investments at a questionable time. Isn’t that the problem which caused the downfall of so many savings and loans? This could be very dangerous and I appreciate Mr. Moorlach calling it to our attention. No matter who wins the election, let’s hope this situation will be addressed in a responsible manner.

Susan Guilford of Orange provided the brilliance of the Citron campaign’s major deflective theme:

Your editorial supporting Robert L. Citron for reelection (May 24) missed an important point: that Orange County Republican Chairman Thomas Fuentes has confirmed that Citron is being targeted for defeat, even though the job is supposed to be nonpartisan, because he is a “liberal, partisan Democrat.” Even Republicans should be offended by that kind of reasoning.

Mike Shepard, Mr. Citron’s Chrysler dealer and a Republican, concluded his commentary with:

I won’t engage here in a debate of the arbitrage techniques that Mr. Moorlach has attacked, except to say the rating services have not felt that the portfolio represents unusual risk. However, it is established fact that Mr. Citron has made well above average returns in good markets and bad markets, with high interest rates, and low interest rates. It is inexcusable to create the kind of misinformation Mr. Moorlach and Mr. Chriss Street are creating and then casually dismiss it as a normal campaign tactics.

For the last Look Back, go to MOORLACH UPDATE — Undergrounding In Paradise — May 28, 2019.

Moorlach thanks pro Tem for Conference Committee appointment

http://www.oc-breeze.com/2019/05/29/139360_moorlach-thanks-pro-tem-for-conference-committee-appointment/

The Senate President pro Tempore Toni G. Atkins (D-San Diego) appointed Senator John Moorlach (R-Costa Mesa) to the 2019-20 Budget Conference Committee.

The full makeup of the bipartisan committee is:

Senator Holly J. Mitchell (D-Los Angeles), Chair
Senator John M. W. Moorlach (R-Costa Mesa)
Senator Jim Nielsen (R-Tehama)
Senator Richard D. Roth (D-Riverside)
Senator Nancy Skinner (D-Berkeley)

“Thank you to the pro Tem for trusting this committee to reconcile the Senate and Assembly budgets in a manner that will advance the goals of fiscal responsibility and protect taxpayers,” said Senator Moorlach in response to his appointment.

There are generally differences in proposed spending levels in the budget legislation passed by the Senate and the Assembly. A bipartisan Conference Committee of members from both the Senate and the Assembly will resolve the differences and present the budget to the legislature to be voted on before sending to the governor. This is the third year in a row Moorlach has been appointed to Budget Conference Committee.

This article was released by the Office of Senator John Moorlach.

Bill to Repeal California Tax Credits = Backdoor Tax Increase

$65.2 billion per year in California income tax credits, deductions, exemptions, and exclusions targeted

By Katy Grimes,

https://californiaglobe.com/fr/bill-to-repeal-california-tax-credits-is-a-backdoor-tax-increase/

The $65.2 billion per year in various California income tax credits, deductions, exemptions, and exclusions, is now being targeted under the guise of “transparency and accountability.”

Senate Bill 468 by Sen. Hannah Beth Jackson (D-Santa Barbara), would not only seek to repeal these tax credits, it would create a new bureaucracy performing functions currently performed by a number of existing agencies.

Jackson says, “California has nearly 80 tax expenditures. These are provisions in the tax code – including tax credits, tax deductions, sales tax exemptions and income exclusions – that reduce the amount of tax collected in exchange for an intended public policy objective.”

The goal is more tax “revenue” into state coffers, even if that means repealing existing tax credits.

The California Teachers Association, in support of SB 468, said, “California has spent over $66.6 billion on the top ten most costly tax credits and exemptions in the past decade. Every dollar of a tax credit to the General Fund that does not generate its cost in new revenue takes approximately 40 cents out of California’s classrooms, representing the share of revenues that would have gone to Proposition 98 from the General Fund.”

The stated intent of the bill is to promote government accountability, however the bill would create another, costly bureaucracy, through the creation of the California Tax Expenditure Review Board, in an effort to repeal tax credits. As the California Taxpayers Association noted in their opposition, “Both the LAO and the State Auditor can initiate studies under their own authority or at the specific direction of the Legislature.” These agencies often independently analyze and make recommendations to the Legislature – without legislation directing them to do so.

Sen. John Moorlach (R-Costa Mesa) said he was having “buyer’s remorse” on the bill. Moorlach said going after 1031 exchanges to defer paying capital gains taxes on an investment property when it is sold, and ESOP employee benefit plans, should be reconsidered. “I hope another effort comes back instead of this,” Moorlach said.

“More recently, the State Auditor conducted an assessment of several of the state’s primary tax expenditures and recommended improvements to some, while noting that others appear to be achieving their objects,” Cal Tax said. “To provide a more accurate and comprehensive assessment of state revenue impacts, we suggest that any tax expenditure study incorporate ‘multipliers’ and their effects on the economy. Additionally, we believe it is critical to examine California’s policies in the context of competitiveness with other areas of the country.”

SB 468 passed the Senate on party lines.

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MOORLACH UPDATE — Undergrounding In Paradise — May 28, 2019

I do not issue that many press releases. But, after PG&E unilaterally decided to underground its utility lines in the city of Paradise, it was time for a shout-out. Undergrounding in areas that suffered a conflagration was one of the initiatives SB 584 was pursuing (see MOORLACH UPDATE — SB 584 Goes To Natural Resources — April 21, 2019 and MOORLACH UPDATE — Big Gas and Electric Costs — May 21, 2019). It was provided by the Orange County Breeze in the piece below.

25th Anniversary Look Back

Some newspaper editorial boards endorse in campaigns. Consequently, I met with the LA Times editorial board and pleaded my case. I was unsuccessful.

Steve Burgard, the Editor of the Editorial page, would rue the day that he endorsed Citron in their Sunday, May 24, 1994 edition. He would be reminded constantly about the “bum rap” conclusion for a long period of time. I remember scheduling lunch with him a few years after the debacle to bury the hatchet and move on. His editorial is provided in full below:

ORANGE COUNTY PERSPECTIVE : Another Term for Treasurer Citron

Robert L. Citron’s winning record as Orange County’s treasurer-tax collector is good enough that he deserves reelection.

As treasurer, Citron is responsible for investing county funds. In the last decade he has earned favorable returns for the county and has been so successful that all but three of its 31 cities, as well as school districts and government agencies outside it, have entrusted their money to him to invest.

How does Citron earn the higher rates? He takes greater risks. But experts say the risks are not foolish; an official of Standard & Poor’s, which investigates how likely companies and governments are to repay their debts, said company analysts recently gave Orange County a “very high” credit rating.

Citron entered county government in 1970 as tax collector and added the job of treasurer three years later when the Board of Supervisors combined the two countywide posts. This is the first election in which he has had opposition. Unfortunately, the campaign of Citron’s opponent and his supporters has the potential to jeopardize the county’s credit rating and the return it gets on the money it invests.

Citron’s opponent, certified public accountant John M. W. Moorlach, has expressed worry over the county’s investments if interest rates continue to rise. Citron answers that he has taken steps to protect against that possibility. Shrewd investors know that past performance does not ensure future results, but financial advisers urge people to choose, for example, a mutual fund that has been a winner in the past. It is not a guarantee of success, but it does increase the odds.

The concerns over outside nervousness in reaction to attacks made on Citron actually prompted state Sen. Marian Bergeson (R-Newport Beach) to withdraw her endorsement of Moorlach. Bergeson said she did not want to take part in anything that could be “detrimental to the county.”

During the campaign, the notoriously skittish stock and bond markets have shown some signs of nervousness about Orange County. A special district said it would have to pay more to investors in its securities and the county finance director said the county would delay refinancing of bonds in the hope that any worry would subside.

The challenger has no experience in investing billions of dollars, while Citron’s 24 years in office have included rising and falling stock markets. His successful stewardship of the county’s money has given the supervisors funds for programs they otherwise could not have afforded.

The cloud drawn over Citron increasingly looks like a bum rap. He deserves another term.

Senator John Moorlach calls on utilities to broaden effort to mitigate fire risks

http://www.oc-breeze.com/2019/05/27/139274_senator-john-moorlach-calls-on-utilities-to-broaden-effort-to-mitigate-fire-risks/

On Wednesday, Pacific Gas & Electric Co. (PG&E) announced a plan to underground electric lines in areas ravaged by the deadly Camp Fire. This came after CalFire determined PG&E electric power lines caused the most destructive wildfire in California’s history.

In response, State Senator John Moorlach, R-Costa Mesa, calls on all electrical utility companies to extend this endeavor to other areas of the state, such as Laguna Beach. Unilaterally undergrounding after a conflagration in a high-fire risk area should become the standard operating procedure. This is all the more essential after the Senate Appropriations Committee recently refused to pass Senate Bill 584 – Wildfire Mitigation through Undergrounding of Power Lines.

“For decades, cities like Laguna Beach have been ravaged by fires caused by fallen power lines. It is time to implement this common sense solution to prevent future tragedies from happening,” said Senator Moorlach.

SB 584 would have expedited unused Rule 20A credits to assist in the undergrounding of electric lines in jurisdictions located in Tier 3 fire-threat areas. Thus giving local jurisdictions the tools to initiate undergrounding projects to help mitigate the risks of devastating fires in their communities like the Camp Fire in Paradise.

“PG&E should be praised for their leadership and example subsequent to the tragedy inflicted on the city of Paradise,” Senator Moorlach stated.

This article was released by the Office of Senator John Moorlach.

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MOORLACH UPDATE — Sacred Votes — May 26, 2019

With the housing shortage, renewable energy and wildfires, the Democrats are having to initiate the pursuit toward balance. They are the ones who must now swing the pendulum back in the other direction. This past week provided one great example of their plight.

An area that has screamed for reform is the California Environmental Quality Act, known as CEQA. Thursday’s Senate Floor Session provided an excellent debate on CEQA when SB 25 was presented. What made the Floor discussion more interesting is that Republicans did not join in. It was a rare opportunity to remain silent and observe a Democrat-on-Democrat affair.

The high priests of CEQA, Senators Jackson and Wieckowski, strongly defended against any modification of this holy act. As a reminder, it was Senator Wieckowski, as then-Chair of the Senate Environmental Quality Committee, who killed my CEQA reform bill, SB 1248, in 2016 (see MOORLACH UPDATE — SB 1248 — August 28, 2016). These two Senators fought gallantly in defending the indefensible.

If you go to the link on SB 1248, you will see I was way ahead of this subject and its impact on the lack of housing stock — just sayin’. And, I even exhorted our new Governor to pursue CEQA reform after his successful election

(see MOORLACH UPDATE — Working With the Governor-Elect — November 8, 2018). But, let’s get back to the drama.

Fortunately, common sense prevailed and an historic and rare vote occurred, with some of the Democrats either voting against SB 25 or abstaining (which is similar to a vote of opposition). When the dust settled, the high priests had lost. The California Globe covers this epic battle in the first piece below.

After the Floor debate, I asked Senator Jackson what she meant with her reference to Miami Beach, as I have toured South Beach and the renewal there has been amazing. She felt that there was too much development along the Miami coast.

We also dealt with SB 360 by Sen. Hill on Thursday. The last time I discussed this bill, I raised the concern over constitutionality and the costs of litigation

(see MOORLACH UPDATE — Committee Season Has Started — April 3, 2019). Sen. Jackson was more than happy then to litigate.

I recently asked Attorney General Xavier Becerra what it cost his office to take AB 775 to the U.S. Supreme Court. After a few weeks the answer of $870,000 was delivered to my office to this unsuccessful effort. I believe I warned my colleagues on the Senate Floor that this would occur — and I’m not a Harvard Law graduate.

In the Senate Budget & Fiscal Review Sub 5 Committee, we recently had to approve an expense of $2.1 million to reimburse the prevailing parties in this litigation effort. A total of $3 million may seem like budget dust in a $214 billion proposed annual spending plan, but it can feed a lot of hungry children in poverty or who are homeless.

The argument was made that identical laws had been approved in numerous other states and have stood up to legal scrutiny. The East Bay Times, in the second piece below, seems to infer that SB 360 is not identical to those other states and may still be fraught with constitutionality issues.

My frustration is that one’s sins will find them out. The Roman Catholic Church’s inability to immediately extinguish the blight of pedophile priests is now coming back to roost. The reverberations will be long lasting, frequent, and will create a battle over religious liberties for them and many other faiths in our state. Consequently, I abstained (which is similar to a vote of opposition).

All the same, before this bill goes any further, I would like to know if my colleague authoring the bill has spoken with a cross-section of representatives of the tens of millions of adherents in the state like priests, pastors, bishops, ministers, rabbis, and imams about how they will deal with this issue?

Further, is he willing to convene an ecumenical council of sorts to discuss the current practices and procedures and discuss real clergy challenges that have little to do with cover-up, but a lot to do with trust, the repentance process, shepherding a flock, and showing justice and mercy in their congregations?

While the practice of penitence with a priest may not be an active part of my faith tradition, I understand just how complex and sensitive it is, especially for a well-intended legislator who just wants to fix a problem. But I fear if he rushes down this path, he may cause many other problems beyond the legal costs the state will incur. Therefore, I would recommend taking a time out in order to get this right.

Dems Squabble on Bill to Expedite California Environmental Review on Development Projects

The bill would expedite CEQA litigation, when used to delay or slay a project

By Katy Grimes

https://californiaglobe.com/fl/dems-squabble-on-bill-to-expedite-california-environmental-review-on-development-projects/

A bill by Sen. Anna Caballero (D-Salinas) to expedite California Environmental Quality Act provisions and judicial reviews on many types of developments, exposed a divide in the State Senate Thursday.

The idea behind SB 25 is to expedite CEQA litigation, when used to delay or slay a project. “SB 25 is a modest attempt to join forces with a federal tax credit designed to funnel an estimated $6 trillion from capital gains earnings into America’s poorest neighborhoods to create jobs and housing,” Caballero said. “SB 25 creates an incentive for green, sustainable development for critical housing statewide, and for economic development in the 879 Opportunity Zones, which includes California’s poorest census tracts.”

“If the Legislature can deliver CEQA litigation streamlining for billionaire sports team owners, then we can do it for all Californians,” Caballero said in bill analysis. “Many of the recently enacted sports stadium legislation language stems from SB 743 (Steinberg, Chapter 386, Statutes of 2013), which laid out special procedures for expedited judicial and administrative review of an EIR for the Sacramento Kings arena. SB 25 goes further, also applying the expedited judicial review procedures to challenges to NDs and MNDs and to a determination that the project is exempt from CEQA.”

“Designed to protect the environment, CEQA instead has become a bureaucratic monstrosity and NIMBY tool that greatly increases the time and cost of building housing of any kind,” Sen. John Moorlach (R-Costa Mesa) wrote in 2018. “When the will is there, CEQA has been magically modified to expedite construction for sports stadiums and arenas, including exemption bills this fall for the Oakland A’s and Los Angeles Clippers. I did not vote for those bills because I oppose CEQA favoritism.”

“What’s good for millionaire players and billionaire owners should be good for the middle class and the homeless.”

California = Miami Beach

Yet Sen. Hannah Beth Jackson (D-Santa Barbara), who voted against SB 25 warned, “If we’re prepared for the state of California to be turned into Miami Beach, support this bill.”

“Other problems we have established through the courts become secondary,” Jackson said, excoriating the bill. “Medical malpractice, elder abuse, restraining orders and domestic violence orders are all going to get pushed back. Opportunity Zones could be anything – not just a limited housing tract.”

“We are going to ignore or circumvent environmental concerns; to eviscerate CEQA is not the way to go,” Jackson added.

Warnings Rebuked

Sen. Scott Wiener (D-San Francisco), effectively rebuked Jackson’s denunciation of SB 25: “This does not eviscerate CEQA. This is about areas zoned X, Y, or Z, and having expedited review. It’s important not to overstate what the bill does.”

Wiener said he would not support the bill if it eviscerated SB 25.

Sen. Jackson, an attorney, frequently authors legislation for the trial lawyers. Sen. Wiener is also an attorney, as is Sen. Caballero, the author of SB 25.

Conversely, environmental review in Texas takes months, not years, as the chart on the right shows.

CEQA Reform

If CEQA is ever to be reformed, attorney’s fees in CEQA lawsuits need to be limited or eliminated, as legal challenges have become a cottage industry, says Andy Caldwell, executive Director of COLAB in San Luis County, next door to Santa Barbara. “CEQA must be amended to balance its provisions with economic considerations. Economic vitality and job creation must be considered and appropriately valued in the CEQA process and should be considered an overriding consideration in approving projects.”

“Additionally, we also need to set a limit as to what constitutes a resource and what constitutes a significant impact to a resource,” Caldwell wrote. “Currently, there is no limit on what can be construed as a resource to be protected, nor is there any limit as to what can be considered an impact to the same. Any “impact” to any “resource,” no matter how trivial, can be deemed significant.”

Caldwell continues: “For example, some years ago, the tag team of CEQA and the Endangered Species Act (ESA) stalled a hospital project out of concern for eight flies! We now actually have a fly preserve as a result! CEQA doesn’t always need the help of the ESA, it can kill common sense single handily. How about the fungus growing on rocks in a field in Santa Barbara that warranted a lichen restoration program! Flies and fungus! These are resources worthy of stalling projects?”

SB 25 passed the Senate 28-6, with four Democrat Senators abstaining.

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Should California force priests to report child-molestation confessions? Church leaders say it violates religious freedom

By John Woolfolk

https://www.eastbaytimes.com/2019/05/26/should-california-force-priests-to-report-child-molestation-confessions/

The law has long treated confession of sin to a priest as sacred. Even clergy who hear a fellow priest’s confession to sexually abusing a child generally can’t be compelled to report it to authorities.

But should they be?

California lawmakers are considering that fundamental question amid heightened scrutiny of the child sex abuse scandal roiling the Roman Catholic Church. The state Senate resoundingly approved a bill last week that would force clergy who hear confessions of child sex abuse from another priest to report it. Church leaders say it is an unconstitutional government intrusion and violation of religious freedom.

“Faith leaders have been the only exception to this rule,” the bill’s author, Sen. Jerry Hill, D-San Mateo, said, adding that even doctors and spouses must report suspected child abuse reported to them in confidence. “Instead of protecting children, some have been shielding abusers. It is time for California to put children first.”

The California Catholic Conference opposes Hill’s bill, SB 360, arguing it will not help protect children and dangerously weaken religious freedom by “interjecting the government into the confessional.”

“The ‘seal of confession’ is one of the most sacrosanct of Catholic beliefs and penitents rely on this unbreakable guarantee to freely confess and seek reconciliation with God,” the California Catholic Conference said. A priest who “breaks the seal,” the group added, “is automatically excommunicated.”

“We are dealing here with an egregious violation of the principle of religious liberty,” Robert Barron, auxiliary bishop of the Archdiocese of Los Angeles said in a statement.

However, the bill comes at a time when the Roman Catholic Church is under fire over priests who sexually abused children. Reporting of widespread abuse in the Boston diocese prompted U.S. bishops in 2002 to adopt a Charter for the Protection of Children, known as the Dallas Charter, to prevent child abuse within the church.

But more recent revelations like a bombshell Pennsylvania investigation in August that found widespread child sex abuse and cover-ups over decades in six dioceses has sparked fresh outrage. California Attorney General Xavier Becerra is now investigating the Golden State’s dioceses.

The bill is headed to the state Assembly after passing out of the Senate on a 30-4 vote. Senators Patricia Bates, R-Laguna Hills, Shannon Grove, R-Bakersfield, Brian Jones, R-El Cajon, and Jeff Stone, R-Murrieta, were opposed.

Four other senators — Benjamin Allen, D-Redondo Beach, Andreas Borgeas, R-Fresno, John Moorlach, R-Costa Mesa, and Mike Morrell, R-Rancho Cucamonga — did not record votes.

Supporters include Crime Victims United California, the Survivors Network of those Abused by Priests, the National Association of Social Workers and Consumer Attorneys of California.

Hill said that California hasn’t before attempted legislation challenging the “clergy-penitent privilege” protecting priests from having to disclose child abuse confessions. But he said Connecticut, Indiana, Mississippi, Nebraska, New Hampshire, New Jersey, North Carolina, Oklahoma, Rhode Island, Tennessee, Texas and West Virginia already have similar statutes.

Steve Pehanich, spokesman for the California Catholic Conference, disputed that claim, saying “we can’t find any that removed the exemption.”

An analysis of the bill for the Senate Public Safety Committee said “only 6 states deny the clergy-penitent privilege in cases of child abuse or neglect,” and added that their “ability to compel testimony from clergy who learned of abuse during a penitential communication may be limited.”

The analysis said the constitutionality of a statute that requires clergy to report child abuse but “does not provide an exemption for penitential communications remains an evolving legal question.”

Hill’s bill would not only remove the clergy-penitent privilege in formal confessions of child sex abuse by priests to fellow priests, but also clarify that admissions outside a formal confession to an ordained priest are not exempt from the reporting requirement.

Hill called it a “weak argument” that the Constitution’s First Amendment religious liberty protection allows a priest to keep secret a fellow priest’s admitted sexual abuse of a child. He noted that free speech rights don’t let someone incite a dangerous stampede by yelling “fire” in a crowded theater where nothing’s burning.

California, Hill added, outlaws polygamy practiced by some religious sects, and recently eliminated the religious exemption for being vaccinated against communicable diseases.

“None of our freedoms is absolute,” Hill said. “The reason they’re not absolute is there are times when the greater good is not being served by that purpose. If you look at child abuse and neglect, there’s no greater good.”

But Pehanich called it a slippery slope, arguing that if government can force a priest to disclose a confession of sexually abusing a child, why not anyone’s confessed misdeeds, like check kiting?

“You start doing it for this,” Pehanich said, “you start doing this for everything.”

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MOORLACH UPDATE — Votes on Treatment — May 25, 2019

After addressing some 300 bills in the last week, one of the more fascinating aspects of media coverage is the names of those who voted for or against the bills are rarely provided. Can you imagine if they did? My UPDATEs would be even longer.

In the first piece below, FOX KTVU Channel 2 provides its perspectives on a bill that I voted against, SB 132 by Sen. Wiener, and gives the names of the eight Republicans who voted against the bill.

I have served on the Senate Budget & Fiscal Review Committee since 2015. It is comprised of five subcommittees. I served on Sub 1 – Education for the first four years. This year I was assigned to Sub 5 – Corrections, Public Safety and the Judiciary. I’m learning a lot, but one of the biggest lessons is realizing the costs to implement legislation imposed on our prison system. Many of the budget requests have been for extra staffing and capital improvements for specific bills passed in the last Legislative Session. SB 132 will be expensive.

I’ve also learned our prison system is already trying to accommodate those with gender identity concerns. Since this effort is already underway, thus making this bill unnecessary, I was uncomfortable with it being “required.”

I did not have problems with the use of appropriate gender pronouns, as I voted for this in SB 900 (Wiener, 2018). But, housing individuals based on the inmate’s “perception of health and safety” does take the matter a step too far. As a clarification on the first piece below, the actual vote was 29 to 8, with one Republican abstaining and one voting for the bill.

The second piece is a press release issued by the Republican Senate Caucus which was picked up by Insurance News Net and NOQ Report. A faith-based self-insuring business model is under attack in Sacramento’s proposed 2019-2020 Budget. I voted against this effort in Thursday afternoon’s Budget & Fiscal Review Committee meeting, but the item passed with only Democratic votes.

25th Anniversary Look Back

In the May 27, 1994 issue of the LA Times, Shelby Grad provided the results of an LA Times O.C. poll in “Voters Unsure in Treasurer, Clerk Races.” In the remaining week before the June Primary election, I was able to double my support by picking up two-thirds of the undecided likely voters. Here are a few selected paragraphs:

Though the normally obscure jobs have received unusual attention this year, many voters still are not sure whom to support in the races for county clerk-recorder and treasurer-tax collector, according to a Times Orange County Poll.

Nearly half of those surveyed said they did not know who would get their vote in the clerk-recorder contest, while 36% were undecided in the treasurer’s race.

Treasurer Robert L. Citron, a 23-year incumbent, held a strong lead in his race, garnering the support of 41% of respondents to challenger John M. W. Moorlach’s 22%. Among the most likely voters, Citron has a bigger lead over Moorlach — 50% to 19%, with 30% undecided. Moorlach, a certified public accountant, has criticized the way Citron invested billions of dollars in county tax revenues.

The poll was conducted by Mark Baldassare and Associates, which surveyed 600 Orange County registered voters May 19-22.

The poll results indicate that Citron has not been significantly hurt by questions about his investment strategy, which Moorlach claims is risky and unwise in a period of rising interest rates.

Citron and other officials have defended the investment strategy, saying it has earned double the returns of comparable investment pools over the last decade.

To review the last 25th Anniversary Look Back, go to MOORLACH UPDATE — University of California Fiscal Realities — May 17, 2019.

Calif. Senate passes bill to require that transgender inmates be housed by gender identity

By Lisa Fernandez, KTVU

http://www.ktvu.com/news/calif-senate-passes-bill-to-require-that-transgender-inmates-be-housed-by-gender-identity

The California Senate on Thursday voted to approve a bill requiring that prison guards to classify and house transgender inmates based on their gender identity – absent specific security concerns.

The legislation, authored by Scott [sic] Wiender (D-San Francisco) passed 29-6 and now heads to the Assembly for committee hearings.

According Equality California, a supporter of the bill, when transgender people are housed according to their birth-assigned gender, which is currently the typical practice, they are at heightened risk of violence, including sexual violence. This risk of violence often leads to transgender people being placed in isolation “for their own protection,” resulting in loss of access to services.

“Trans women, in particular,” Wiener tweeted, “are now housed as men and then victimized. We should treat trans inmates with dignity and respect.”

Currently, inmates in California are housed based on the sex they are assigned at birth, not their gender identity or where they would be safest from harassment, abuse and violence, said Samuel Garrett-Pate, spokesman for Equality California. “This results in higher rates of sexual assault and other violence.”

Garrett-Pate added that transgender inmates are also placed in “administrative segregation” — or solitary confinement — ostensibly for their own safety. “But isolation has been shown to cause significant mental health problems and contribute to higher recidivism rates,” Garrett-Pate said.

If passed, SB 132 would require that the Department of Corrections and Rehabilitation record the individual’s self-reported gender identity, preferred first name and preferred pronouns during the initial intake process. It would also require that prison guards house people according to their gender identity, unless a specifically articulated security concern counsels otherwise, or the individual believes it would be safer to be housed according to their birth gender. Finally, it would require all staff and contractors “to consistently use the gender pronoun, honorific, and preferred name the individual has specified in all verbal and written communications with and regarding that individual.”

The bill has its share of critics.

A website called the “Women’s Liberation Front,” says the legislation will “harm one of the most vulnerable groups in society: incarcerated women.” The group’s authors write that the bill would “allow any male at any time to self-declare that he has a woman “gender identity,” and on that basis allow him to demand to be housed in a women’s correctional facility,” among some other complaints.

In addition, Senators Patricia Bates, Andreas Borgeas, Shannon Grove, Brian Jones, John Moorlach, Mike Morrell, Jim Nielsen and Jeff Stone voted no.

This story was reported from Oakland, Calif.

California Senate Republicans: Senate Democrats Penalize the Faith-Based Community’s Health Care Coverage

https://insurancenewsnet.com/oarticle/california-senate-republicans-senate-democrats-penalize-the-faith-based-communitys-health-care-coverage#.XOlm7YhKg2w

https://noqreport.com/2019/05/24/california-senate-democrats-penalize-faith-based-communitys-health-care-coverage/

The California Senate Republicans issued the following news release:

In a recent Senate Budget Committee hearing, members of the California Senate Republican Caucus voted against Democrats’ efforts to penalize members of Health Care Sharing Ministries (HCSMs). HCSMs are an alternative form of health care coverage for members of faith-based communities, and HCSM members are exempted from individual mandate penalties under the federal Affordable Care Act.

Senator Jim Nielsen, Vice Chair of the Senate Budget & Fiscal Review Committee, voted against the proposal.

“Californians should not be denied affordable healthcare because of their religious beliefs. Healthcare sharing ministries were a vital component of the Affordable Care Act signed into law by President Obama. With this action, the majority party is squeezing families who use healthcare sharing ministries, and will cause them a tremendous financial burden.” -Senator Jim Nielsen (R-Tehama)

“We must be inclusive and stop these attacks on faith-based communities. The latest action taken by Senate Democrats is hurtful, wrong, and affects thousands of families in California. I’m proud that members of the Senate Republican Caucus are advocating for families who find strength in their faith and standing up for religious freedom and consumer choice.” – Senate Republican Leader Shannon Grove (R-Bakersfield)

On a partisan vote, Sacramento Senate Democrats voted to eliminate the exemption from the individual mandate which was explicitly protected by the Affordable Care Act (ACA). Importantly, it is worth noting that even Governor Newsom’s individual mandate proposal does not extend the penalty to members of health care sharing ministries.

Republican Senators Brian Jones, John Moorlach, Mike Morrell, and Jeff Stone are also members of the Senate Budget and Fiscal Review Committee and in support of protecting the exemption from the individual mandate penalty for members of faith-based communities.

“A few Democratic legislators are continuing their attack on religious freedom and personal family decisions, including the right to have the level of health coverage, you want, or don’t want, for your family. To paraphrase a former President, ‘If you like your health coverage as is, you ought to be able to keep it.’ We finally got Congress to nullify the wrongheaded coverage ‘penalty,’ and yet those same Senate Democrats can’t seem to stop attacking our personal freedoms and sticking their hands in our pockets to pay for it.” – Senator Brian Jones (R-Santee)

“Health Care Sharing Ministries provide an alternative co-op business strategy for covering medical costs. They are the consummate community-based self-insurance model. Consequently, this long standing and ACA authorized approach deserves an honest critique, but not the harshness an improperly constructed budget trailer bill can impose.” – Senator John Moorlach (R-Costa Mesa)

“Participants in health care sharing-ministries have played by the rules in obtaining health coverage for themselves in accordance with their beliefs, needs, and what they have decided is best for their families. Now legislative Democrats are again ready to tax, overregulate, and penalize them for following the law. Their socialistic agenda to interfere in our personal lives should concern every Californian.” – Senator Mike Morrell (R-Rancho Cucamonga)

“Tens of thousands of hard working people across our state have chosen to utilize Health Care Sharing Ministries for their healthcare insurance needs. This program has been in existence for decades, and more than a million people across America have chosen to participate in this alternative to high-cost insurance plans. Californians using this successful option for healthcare should not be penalized for their choice to save money while also protecting their families.” – Senator Jeff Stone (R-Riverside County)

The recent action in the Senate Budget Committee is not the final decision, as the California State Assembly would have to vote to remove the exemption.

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MOORLACH UPDATE — Sugary Drink Warnings — May 24, 2019

Let me start by wishing you a solemn Memorial Day weekend with friends and family as we remember those who paid the ultimate sacrifice representing our nation in the armed services.

As one whose family personally benefited from those who served and died in the European front during World War II, I wish to thank the families who lost loved ones assisting in liberating the Netherlands from Nazi occupation.

We have finished a busy week of addressing some 300 bills. The LA Times Essential Politics electronic newsletter picked up on the debate of one bill requiring labeling on bottled beverages with a high sugar content. The wife of the bill’s author is a medical practitioner, so I appreciate the motivation for the legislation.

My opposition to SB 347 came from what I see as an imposition on bottlers that sell their product around the country. Requiring a special label just for California strikes me as anti-business, and the added costs will be passed on to this state’s consumers.

The good news is that we were able, again, to enjoy collegiality during debates on the Senate Floor this week. I speak to the few bills that peak my interest and try to persuade those on the other side of the aisle to reconsider their positions. Sometimes it comes close to working.

For some inside baseball, it is a rare occurrence when a bill does not pass in the first roll call vote. The author had to put the bill on call, allowing him some time to garner the necessary votes from his Democratic colleagues before the close of the day. Democrats rarely vote against a fellow Democrat’s bill, but in this case, two did. And five laid off of the bill by abstaining, which is the customary way for Democrats to vote in opposition. Not one Republican voted for the bill. So, with 28 Democrats, minus two voting against and five laying off, gets you to 21. That’s called passing by the skin of one’s teeth.

On a personal note, my last bill to be heard on the Floor before the deadline, SB 598, passed with a unanimous roll call of 38 votes (there are currently 2 vacant Senate seats which will be filled after their June 4 General Special Elections) (see MOORLACH UPDATE — House of Origin Deadline — May 23, 2019).

Also, for the third year in a row, I’ve been appointed to the Budget Conference Committee. Consequently, if my life wasn’t busy enough, it will be super packed between now and June 15th, the deadline for the annual budget’s passage.

A bill to put health warnings on soda and sugary drinks advances in California

By Patrick McGreevy

https://www.latimes.com/politics/la-pol-ca-warning-label-sugary-drinks-advances-20190523-story.html

California lawmakers on Thursday advanced the last major surviving bill in a package aimed at reducing consumption of sodas, approving a measure that would require health warning labels on sugary drinks.

The measure by Sen. Bill Monning (D-Carmel) received a bare majority of votes even though some Democrats withheld votes while others in the majority party joined Republicans in opposition.

The latest action follows this year’s shelving of measures that would have put a tax on soda and banned “Big Gulp”-style sodas in an effort to address health risks including obesity and diabetes that are posed by sugary drinks.

“They represent the single leading source of increased bad calories that are being promoted in our communities and pushed on communities of color,” Monning said during the floor debate, citing a “national epidemic” of diabetes.

Senate Bill 347, which goes to the Assembly next, would require labels on drinks with added caloric sweeteners that contain 75 calories or more per 12 fluid ounces.

The label on container would say: “STATE OF CALIFORNIA SAFETY WARNING: Drinking beverages with added sugar(s) may contribute to obesity, type 2 diabetes, and tooth decay.”

Monning amended the bill to exempt flavored milk drinks, but said it would apply to sport teas and energy drinks that have significant sugar.

Those who voted against the measure included Sen. John Moorlach (R-Costa Mesa), who said it would add to the cost of doing business in California and should be addressed nationally to avoid differing rules by state.

“Making California an outlier will make it difficult for businesses that sell nationally,” Moorlach told his colleagues.

Monning said his bill, which is similar to one that failed last year, would just allow consumers to make informed choices.

The American Beverage Assn. opposed the bill with a strong push by lobbyists and while making major political contributions to state lawmakers.

The industry argued that the bill and its health impact claims went too far.

“There are already more effective ways to help people manage their overall sugar consumption rather than through mandatory and misleading messages,” said Steven Maviglio, a spokesman for the American Beverage Assn.

Monning cited a study by the federal Centers for Disease Control and Prevention that said obesity affected about 93.3 million of adults in 2016, and the estimated annual medical cost of obesity in the United States was $147 billion in 2008 U.S. dollars.

Supporters of the bill included Sen. Richard Pan (D-Sacramento), a pediatrician, who said sugary drinks are a major contributor to medical ailments.

“We are seeing rising rates of diabetes,” Pan said during the floor debate. “We need to address this public health crisis.”

Legislators are also still considering a bill that would bar the soda industry from offering subsidies including discount coupons that encourage soda consumption.

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MOORLACH UPDATE — House of Origin Deadline — May 23, 2019

It is time to get bills out of the houses of origin. Consequently, I’ve been on the Senate Floor everyday this week.

On Monday I presented three of my bills, which all passed using the unanimous roll call opportunity by the presiding officer of the day’s Session. They were SB 359 (see https://moorlach.cssrc.us/content/senate-bill-359-municipal-referendum-petitions), SB 535 (see https://moorlach.cssrc.us/content/senate-bill-535-counting-greenhouse-gas-emissions-fires-scoping-plan), and SB 754 (see https://moorlach.cssrc.us/content/senate-bill-754-hoa-elections-acclamation and MOORLACH UPDATE — SB 754 — March 16, 2019 ).

On Tuesday I had two more bills approved by unanimous roll call, SB 496 (see https://moorlach.cssrc.us/content/senate-bill-496-protections-against-financial-abuse-elder-and-dependent-adults and MOORLACH UPDATE — Senate Bills 511, 584, 598, 496 and 640 — April 15, 2019 and MOORLACH UPDATE — SB 496 and SB 598 — March 6, 2019) and SB 184 (see https://moorlach.cssrc.us/content/senate-bill-184-judicial-fairness-act-2019).

I hope to have the same success with SB 598 today (see https://moorlach.cssrc.us/content/senate-bill-598-open-financial-statements-act and MOORLACH UPDATE — SB 598 Moves On — May 16, 2019 and MOORLACH UPDATE — SB 496 and SB 598 — March 6, 2019 ).

Bloomberg Environment picked up the successful vote on SB 535 in the first piece below.

One of the bills we debated on the Senate Floor Wednesday afternoon was SB 206 (Skinner). I was the last Senator to participate in the discussion and I asked a couple of questions about the potential repercussions of the proposal before us. The exchange converted me from a "no" vote to an abstention, as I do not want to jeopardize the athletic careers of California’s college students. The LA Times provides the details in the second piece below.

Wednesday morning we also addressed one of the more controversial bills of 2019, SB 276. I believe that inserting state bureaucrats in the process of obtaining medical exemptions is an invasion of the most important confidential relationship one has, one between you and your doctor.

One of the laments I have about Orange County is that someone was murdered on one of our beaches one evening. Consequently, all of our beaches are now closed at 10 p.m. You barely have darkness and the fire ring is going, everyone is comfortable and a Jeep drives up and tells you to shut it down. What? Punish everyone for one person’s actions? What?

Adding another level of bureaucracy rather than prosecuting perceived abuses is the wrong answer on these and many more levels, so I voted in opposition.

The Associated Press has an incredible photographer in Rich Pedroncelli, who captured me during my Floor speech in opposition of Sen. Pan’s bill, and it is the third piece below.

California Senate Passes Bill to Calculate Wildfire Emissions

By Emily C. Dooley

* California has seen intensifying wildfire seasons in recent years
* State air board would be required to calculate the emissions from wildfires under Senate-passed measure

California officials would have to officially report the amount of emissions spewed by wildfires in the state under a bill that passed unanimously in the state Senate May 20 and now heads to the Assembly.

Sponsored by Sen. John Moorlach (R), SB 535 would require the California Air Resources Board to calculate for the Legislature by May 2020 wildfire and forest fire emissions, including greenhouse gases, short-lived climate pollutants, and six criteria contaminants regulated by federal officials such as particulate matter and ground-level ozone.

In an analysis, Moorlach said the bill is an attempt to “ensure that when there are human-related catastrophic fires, we are measuring the large scale emissions, recognizing them in our high-level planning documents, and appropriately mitigating wildfires and their impact on California in the future.”

A CARB spokeswoman said the agency doesn’t comment on pending legislation.

The agency, tasked with reducing air pollution and fighting climate change, does estimate annual wildfire emissions using a U.S. Forest Service model, state re data and input from other federal agencies.

According to those estimates, fires in 2017 burned 1.34 million acres in California and released 36.7 million metric tons of carbon dioxide.

Those numbers have caveats, and estimates can vary widely. The state has said the estimates have an uncertainty factor of between 50 and 200 percent.

One reason is the model relies on outdated information, such as vegetation in an area and number of buildings present. It may also not account for previous fires, drought, or disease.

Last year’s Camp Fire was California’s deadliest and most destructive fire season, but federal and state officials disagreed on the emissions. The U.S. Forest Service estimated the carbon dioxide emissions to be 4.3 million metric tons, while CARB’s preliminary estimates hit 3.63 million metric tons.

California college athletes could sign endorsement deals under bill OKd by state Senate

By MELODY GUTIERREZ

https://www.latimes.com/politics/la-pol-ca-ncaa-college-sports-paying-athletes-20190522-story.html

College athletes in California would be able to sign with agents and profit from endorsement deals under a bill that cleared the state Senate on Wednesday, prompting a potential showdown with the National Collegiate Athletic Assn., which bars such compensation.

Senate Bill 206 by state Sen. Nancy Skinner (D-Berkeley) passed the Senate 31-4 and now heads to the Assembly for consideration in the coming months.

Skinner said universities and their coaches are raking in millions of dollars and the NCAA nets billions a year from collegiate sports — while athletes are barred from accepting any compensation beyond tuition, school fees, room and board and small cost-of-living stipends.

Skinner said her bill would treat college athletes the same as those who compete in the Olympics and give collegiate players an opportunity to “earn income from their talent” while retaining their amateur status.

In recent years, the NCAA has been the target of lawsuits, legislation and scrutiny stemming from the financial arrangement they have with athletes and the relatively small amount of money that is fed back into sports scholarships.

“Olympic athletes are also considered amateur, so this does not professionalize our college athletics and may in fact result in encouraging some of our students to stay in school rather than the motivation to go pro early because it’s the only way to earn an income,” Skinner said.

SB 206 would allow student athletes at public and private universities and colleges to earn money from the use of their name, image or likeness in endorsement deals starting in 2023. The bill would not allow the schools to directly pay athletes.

Skinner said the issue is particularly pressing for women athletes, who have fewer professional sports opportunities after college and typically have just one chance to profit from their talent. The bill would bar schools from offering sponsorship deals to high school students as a recruitment tool.

“These men and women put butts in seats of arenas and stadiums all across the country and the universities make millions of dollars selling their jerseys and other paraphernalia … but these athletes benefit not one dime,” state Sen. Steven Bradford (D-Gardena) said. “This is a civil rights issue. This is a fairness issue.”

But the bill has raised questions about how the NCAA would treat California collegiate sports programs if their teams were to violate the body’s rules should SB 206 become law. That has prompted concerns from the California State University system, University of California, USC and Stanford University, which are all opposed to the bill.

Sen. John Moorlach (R-Costa Mesa) said the bill could result in California schools being excluded from the NCAA, which he said would hurt the prospects of athletes at those schools even more.

“We have a chess game going on,” Moorlach said. “What does this do for the students we are trying to assist?”

Tougher vaccine rules move forward in California

By DON THOMPSON

https://www.apnews.com/d5b0d1c5520447c38e11521a9e9f3310/gallery/media:50297e783d964c9ba2c3fbd2c089549f

State Sen. John Moorlach, R-Costa Mesa, calls on lawmakers to reject a measure to toughen the rules for vaccination exemptions Wednesday, May 22, 2019, in Sacramento, Calif. The Senate approved the bill, SB 276, by state Sen. Richard Pan, D-Sacramento, that gives state public health officials instead of local doctors the power to decide which children can skip their shots before attending school. The bill now goes to the Assembly. (AP Photo/Rich Pedroncelli)

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MOORLACH UPDATE — Big Gas and Electric Costs — May 21, 2019

Senate Bill 1074 (2018) is back in the news. The LA Times provided a letter to the editor from none other than Ronald Stein.

Ron Stein has been the main proponent of SB 1074. Here’s a chronology of this 2018 bill’s history:

* MOORLACH UPDATE — SB 1297 – COO — April 19, 2018

* MOORLACH UPDATE — Worked So Hard — May 19, 2018

* MOORLACH UPDATE — Conference Committee Cram Down — June 8, 2018

* MOORLACH UPDATE — Homelessness Discussion — February 4, 2019

* MOORLACH UPDATE — High Gas Prices — February 25, 2019

* MOORLACH UPDATE — Capitol Dances — May 1, 2019

With Ron’s firsthand knowledge of this bill, he hits the nail on the head in the first piece below.

The second piece, from the California Globe, provides a drive down memory lane with SB 1463 from 2016 and the similar SB 1463 from 2018 (see MOORLACH UPDATE — SB 1463 And The Facts — November 19, 2018 and MOORLACH UPDATE — SB 1463 Epilogue — October 4, 2018).

It also discusses this year’s SB 584, my effort to utilize Rule 20A credits to assist in the undergrounding of electric lines (see MOORLACH UPDATE — SB 584 Goes To Natural Resources — April 21, 2019). After this bill passed through two committees, without opposition, it was killed in the Senate Appropriations Committee by being quietly left on the suspense file. So much for helping the Newsom Administration’s desire to improve fire safety. SB 584 would have helped by expanding existing programs.

image 16

Let drivers see how much environmental rules increase the price of gas

Gas PhotoA Chevron gas station in Malibu advertises self-serve gasoline above $4 per gallon on April 15. (Los Angeles Times)

To the editor: Sure, when California’s strict environmental regulations force a switch to a summer blend, it costs more. When refineries are down for repair, the costs go up as well. (“Why are gas prices so high? California will probe possible ‘market manipulation,’” May 17)

But the big costs we all pay are the excessive taxes and environmental regulation costs lawmakers have placed on fuel. These are costs placed squarely on the backs of our state’s hard-working blue-collar workers who typically commute the farthest.

A bill, SB 1074, was proposed in 2018 by state Sen. John Moorlach (R-Costa Mesa) to have all those costs transparent to the public. But members of the Senate Committee on Business, Professions and Economic Development were adamant that they didn’t want the public to know why we’re paying so much and voted at a hearing to kill SB 1074. I know, because I was there testifying.

It’s time to let consumers see all the taxes and environmental costs they are paying at the pump. When drivers moan, they will certainly know whom to blame.

Ronald Stein, Irvine

The writer is an engineer and the founder of a staffing firm for oil and gas companies.

California Globe Masthead

With Planned Power Outages This Summer, Is California Experimenting in ‘Green New Deal’

Fire 1

PG&E plan to cut power on windy days could leave millions in the dark, without power

By Katy Grimes

Following the devastating California wildfires of 2018, Pacific Gas and Electric recently announced it will cut power this summer to electricity customers on high-wind days to avoid future wildfires.

While PG&E’s transmission lines ignited fires, others say many years with little to no forest management and cleanup of the forest floor and dead timber allowed the forests to ignite, and was the real cause of the devastation.

“After a very meticulous and thorough investigation, CAL FIRE has determined that the Camp Fire was caused by electrical transmission lines owned and operated by Pacific Gas and Electricity (PG&E) located in the Pulga area. The fire started in the early morning hours near the community of Pulga in Butte County,” California fire officials said in a statement, adding that “the tinder dry vegetation and Red Flag conditions consisting of strong winds, low humidity and warm temperatures, promoted this fire and caused extreme rates of spread.”

PG&E has cut power pretty regularly this fall and winter in the northern parts of the state. I own a cabin and land within the El Dorado National Forest, and received 12 text alert notifications of power outages from PG&E since October, most of which lasted days. The utility adjusted my electricity bill accordingly, but everything in the refrigerator and freezer had to be thrown out several times this winter and spring.

Cabin owners can expect this to happen. But imagine if this happens all over Northern California this spring, summer and fall when temperatures hit 100 degrees plus.

California’s Climate Change Policies Driving Decisions

Mismanaged, overcrowded forests provide fuel to historic California wildfires, experts say. The 129 million dead trees throughout California’s forests served as matchsticks and kindling during the most recent fires, and still threaten future fires.

Former Gov. Jerry Brown took the Clinton and Obama-era regulations — which added excessive layers of bureaucracy that blocked proper forest management and increased environmentalist litigation and costs– a step further when he vetoed a bipartisan wildfire management bill in 2016, authored by Sen. John Moorlach. While this bill may not have stopped all of the wildfires, it would have greatly helped some communities.

It is estimated that “for every 2 to 3 days these wildfires burn, GHG emissions are roughly equal to the annual emissions from every car in the entire state of California,” USA Today/Reno Gazette reported in 2017. What is disturbing is when California burns, the state’s clean air achievements also go up in smoke.

The blazes spew enough carbon into the air to render the state’s climate and clean air policies moot. Not addressing the causes of the state’s historic wildfires makes any policy discussion about the need to reduce greenhouse gases pointless.

Turning off the Power

With the threat to cut power this summer, many are asking what about power to hospitals, health clinics, schools, businesses, government buildings and offices, public transit, street lights, sports arenas and stadiums, convention centers, hotels… the list is long.

Most do not realize just how much our country and state depend on electricity – particularly now that the state is pushing electric cars on everyone, amidst the threat to ban internal combustion engine cars. How will the Tesla and Volt drivers charge their electric cars with no power? Or will there be a two-tiered system determining whose power is cut?

Plunging millions of residents into darkness isn’t a good long term solution. But the serious question is “why?”

While the plan may potentially solve one problem for PG&E, it obviously creates another with residents, businesses, hospitals and government facing blackouts. The last California Governor who authorized rolling blackouts was recalled by the voters.

After he signed off on $42 billion in vastly overvalued energy contracts in 2001, Gov. Gray Davis instituted random, rolling blackouts that created chaos and severe economic damage in many parts of the state. “And it was Davis’s state energy traders who arranged for the state to pay prices for energy that were well above market,” Human Events reported in 2003.

Attempts to Address Wildfire Issues and Causes

Following the veto of his 2016 wildfire management bill, in 2018, Sen. John Moorlach (R-Costa Mesa) proposed SB 1463 which would have dedicated 25 percent of state cap-and-trade funds to wildfire mitigation efforts. That bill was killed. But parts of its concept were incorporated into SB 901, which did pass, and uses $200 million a year of cap-and-trade funds over five years for wildfire mitigation – how much per year.

Fire 2“The connection with cap-and-trade is crucial. Cap-and-trade is intended to fund the reduction of greenhouse gases,” Moorlach wrote. “Yet a few days of wildfires may generate a volume of greenhouse gases as great as every vehicle in the state operating for a whole year (in addition to the other toxic emissions and co-pollutants, not counting the immense loss of life and property).”

“Don’t even get me started on the amount of cap-and-trade money that is going to the high-speed rail boondoggle. Perhaps we should divert every last cent to our fire-prone areas and abandon the not-so-bullet train? Especially since it will be electric-powered?”

In 2019, Sen. Moorlach authored Senate Bill 584 which would expedite opportunities for local jurisdictions located in Tier 3 fire-threat areas to underground current overhead electrical infrastructure for wildfire mitigation. The bill will also establish a Wildfire Mitigation Oversight Board to develop and implement policies that reduce the looming threat of more wildfires.

Moorlach says overhead utility lines and equipment have caused many devastating blazes, with the equipment of California’s three largest utilities being responsible for igniting over 2,000 fires between 2014 and 2017.

“The current utility company solutions of turning off the power and managing vegetation have been largely ineffective,” Moorlach said. “Utility companies propose ‘hardening’ the overhead systems as a means of fire mitigation, but Southern California Edison noted in its Grid Safety and Resilience Program that hardening overhead systems is only 60% as effective as putting overhead systems underground.”

Lastly, there is no discussion of how utilities can keep expensive and unreliable renewable energy contracts for wind and solar when they have to constantly cut the reliable power that generates electricity and is needed as backup for wind and solar. The electric power supply is primarily coal, the second-largest energy source for U.S. electricity generation in 2018. Perhaps this is something the bankruptcy judge in the PG&E case should address.

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MOORLACH UPDATE — University of California Fiscal Realities — May 17, 2019

The University of California underwent another employee strike yesterday, continuing a theme of financially distressed educational systems facing employee angst while not fully appreciating or understanding that their employers’ cupboards are bare (also see MOORLACH UPDATE — UC, CCC and CSU — May 11, 2018 ).

Yesterday, I issued an ICYMI providing the twelve largest June 30, 2018 unrestricted net deficits out of California’s 944 school districts. And several of these districts also endured employee strikes in recent weeks.

The Governor and the Legislature need to prepare for funding demands if public employee union bargaining unit demands are actually agreed upon. Something is going to break. In the meantime, I submitted a piece with some suggestions for those representing University of California employees in the Fox & Hounds piece below.

25th Anniversary Look Back

On May 18, 1994, I had the opportunity to speak to the Orange County Society of the Institute of Certified Financial Planners (ICFP) at their quarterly meeting. I prepared a handout providing an outline of what my research and audits had found. I used words that started with the letter “D:” Debt; Derivatives; Diversity; Devaluation; Duration; Dysfunctional; Dangerous; Defense; Depart; Divorce; Disingenuous; Deceptive; Disclosure; Denial; Deflection; Debate; Dealers; Detect; and Differences.

The presentation was eerily precise. Allow me to provide a few of the bullet points.

Derivatives — 25% of the portfolio; 75% are inverse floaters; no secondary market.

Diversity — In certain cases, the portfolio owned 100% of an issuance.

Devaluation — Mark to market.

Duration — Average life of derivatives and FNMAs is four years.

Dysfunctional — Money market fund (should have a weighted average maturity of between 60 and 90 days and) SEC disallows using inverse floaters.

Dangerous — A major bull market bet at beginning of a bear market.

Defense — Minimal hedging for interest rate increases.

Depart — Top of the bond market was October 15, 1993. The smart money has gotten out of this approach.

Divorce — You don’t marry an investment, you manage it.

Disingenuous — “Risk free investments.” “Risks are prudent.” “Hold to maturity.”

Disclosure — First to use California freed of information act to obtain copies of the Pool.

Denial — Government bureaucrats are upset with my candidacy. Don’t comprehend Finance 101: for higher return you must take higher risks.

Differences — (Should) Emphasize financial fundamentals: 1. Safety of principal; 2. Liquidity; 3. Yield. Transparency = accountability = democracy.

To catch up with the rest of the string of Look Backs, go to MOORLACH UPDATE — SB 598 Moves On — May 16, 2019.

Union should face UC’s fiscal realities, work for sensible reforms

John Moorlach

By John MoorlachState Senator representing the 37th Senate District
Thursday, May 16th, 2019

http://www.foxandhoundsdaily.com/2019/05/union-should-face-ucs-fiscal-realities-work-for-sensible-reforms/

California high-school seniors soon will receive their diplomas full of hope and eager to learn more in college. Which is why the last thing they need is a tuition increase.

Yet that’s just what could happen for those about to attend the University of California if the school meets the demands of unions threatening to go out on strike on May 16. It would be the fifth strike the past year, affecting as many as 39,000 service and patient care workers. At their last strike, on April 10, about a third of those workers went on strike.

According to the Sacramento Bee, the strike by locals AFSCME 3299 and UPTE-CWA 9119 would be “to protest the UC’s unilateral decisions to outsource tens of millions of dollars in work that should be performed by their members.” Earlier strikes were because, “Both unions have rejected offers of 3 percent annual increases in wages.”

Employees and union officials should be aware of the perilous state of UC finances due to unfunded pension and retiree medical liabilities. UC’s latest Comprehensive Annual Financial Report, for the fiscal year ending June 30, 2018, tallied an Unrestricted Net Deficit of $18.9 billion and a net Retiree Medical Liability of approximately the same amount.

Put another way, just that $18.9 billion deficit comes to about $473 in liabilities for every person in California, including freshman students and even newborn babies.

Then there’s the housing crisis among students, so severe it even has caused homelessness. Last year I voted for Senate Bill 1227, by state Sen. Nancy Skinner, D-Santa Barbara. It required cities and counties to grant a density bonus for housing projects that contain at least 20 percent of the total units for lower-income students.

And there’s UC President Janet Napolitano’s plan to increase out-of-state tuition by $762 a year, to a total of $42,324. As EdSource reported, UC Regents at their March 14 meeting “revolted” against the plan because it “would push out all but the wealthy.”

But if the unions’ demands are met, such a tuition increase would be inevitable to pay for everything – followed by new tuition hikes on California residents.

Another branch of AFSCME, Council 31 in Illinois, last year lost as the defendant in the Janus decision of the U.S. Supreme Court. The court ruled employees not in the union cannot be forced to pay “agency fees” for collective bargaining.

Local 3299 should be aware that, if it pushes too far in negotiations, its members simply could leave, taking their dues with them, while retaining their jobs in the UC system. Talk about an easy way to increase their take-home pay.

And let’s not forget California student debt averages $22,785 per student.

If these unions really want to help their members and students, there are four things they could do.

First, work with the administration to reform unsustainable pension and retiree medical benefits.

Second, insist on an analysis of the fast growth in administrators, who in 2018 numbered 13,358 in the ranks of the Senior Management Group and Management and Senior Professionals. That’s more than the 10,195 in “faculty–ladder-rank and equivalent,” according to UC data.

Third, ask Gov. Gavin Newsom and the Legislature’s Democratic supermajority for more funding out of the state’s general fund. They control the purse strings and the unions backed them.

Fourth, discourage voters from approving a potential $8 billion bond measure on the 2020 ballot, Senate Bill 14, by state Sen. Steve Glazer, D-Orinda. That additional $500 million per year in general fund debt payments inevitably would lead to future tax increases on students, parents and everybody. This would choke out potential additional funding for the UC system.

Fifth, repeal Senate Bill 574, by then-state Sen. Ricardo Lara, D-Bell Gardens, which makes it more difficult to contract out services. The UC response said, “SB 574 significantly undermines the University’s ability to achieve administrative cost savings that could be directed to the University’s core missions of teaching, research, and public service.” And, I should add, current employees.

In conclusion, union officials might sit in on some UC accounting classes to learn how to read their system’s financial reports. Any new revenues won’t get close to covering the $18.9 billion deficit.

A recession, long overdue, will expose UC’s financial distress. By then, it may be too late. The unions need to be a part of the solution, not the proverbial straw that breaks the camel’s back.

John M. W. Moorlach, R-Costa Mesa, represents the 37th District in the California Senate

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MOORLACH UPDATE — SB 598 Moves On — May 16, 2019

SB 598, The Open Financial Statements Act, was one of my two bills that made it out of the Senate Appropriations Committee today (see MOORLACH UPDATE — SB 496 and SB 598 — March 6, 2019, MOORLACH UPDATE — Open Transparency — March 8, 2019, MOORLACH UPDATE — The Week That Was — April 26, 2019, and MOORLACH UPDATE — Senate Bills 511, 584, 598, 496 and 640 — April 15, 2019).

The other was SB 184 (see https://moorlach.cssrc.us/content/senate-bill-184-judicial-fairness-act-2019).

Regretfully, the Committee decided to hold back two of my other bills, SB 241 and SB 584 (see MOORLACH UPDATE — The Week That Was — April 26, 2019 and MOORLACH UPDATE — SB 584 Goes To Natural Resources — April 21, 2019). We’ll see if we can move them forward early next year.

CalMatters printed my editorial requesting the Senate Appropriations Committee release SB 598 and move it forward for further discussion and legislative approval in the process of getting it to the Governor’s desk. This is an initiative the country is watching and I appreciate the support and encouragement I have received from the State Treasurer’s office.

The second piece, hot off the press from Bloomberg Tax, provides a component of my Senate Floor speech this morning in support of SB 531 (Glazer). I am infuriated by municipal “easy money” schemes. Robert Citron provided one by running a hedge fund that eventually imploded (see the 25th Anniversary Look Back below). A total of 187 different municipalities suffered immense embarrassment when the collateral was called.

Then there came Redevelopment Agencies (RDAs) that provided an incremental property tax revenue source for cities to address blighted areas. If it is a good idea for a segment of the city, then why not the entire city? RDAs imploded in 2011. Two cities in Orange County had to explain embarrassing decisions.

Then came interest rate swaps. A variation of the Citron yield curve play. It usually is a small component of a larger borrowing deal. Using this vehicle, utilizing the short-end of the yield curve, thus lowering interest costs, made the borrower a genius. Until the short-end of the yield curve rose to unprecedented heights, like during the liquidity crisis of 2008, bankrupting Jefferson County, Alabama. This county’s $4 billion financing package was entirely comprised of interest rate swaps and it choked on weekly payments of 8 percent-plus, versus the 1 percent they were accustomed to. Oops.

Now it’s sales tax trade offs that give a host city higher revenues at the cost of reduced sales tax revenues to neighboring purchase destination cities. Get ready for another “oops” in the near future. And, just like it is difficult to explain why you fell for the Citron or RDA or interest rate swap schemes, it will be difficult for a number of cities to explain to its residents why it still has to pay the owner of a warehouse a massive incentive after the income stream spigot has been turned off.

25th Anniversary Look Back

On May 12, 1994, I sent the portfolio, along with specific questions, to the reporters covering my campaign for Orange County Treasurer-Tax Collector
(see MOORLACH UPDATE — Shining a Light — May 8, 2019).

Question number 5 was: “The pool has already paid out more than $300 million in margin calls to cover its outstanding loans. If rates continue to soar, couldn’t the size of the calls top $1 billion?”

Question number 8 was more eerily on point and the predictor of what was to come: “If rates continue to increase, ultimately isn’t it possible that the fund will experience significantly decreasing cash flow on its derivatives, huge margin calls (topping $1 billion), and rising short term borrowing costs, all at the same time that the value of the total portfolio will be decreasing? Isn’t it this possible scenario that keeps most other municipal fund managers from employing such strategies utilizing so much leverage to buy such unpredictable instruments?”

With my three-page letter in hand, Kevin Johnson of the LA Times provided the reaction below on the May 13th, titled “Treasurer Candidate Reiterates Concerns.”

Before you read the piece, which is a concise version of the entire campaign and spells it all out for everyone to see, there are a few comments I would like to share.

1. Kevin Johnson was the husband of fellow LA Times reporter Jody Wilgoren
(see MOORLACH UPDATE — SB 584 Goes To Natural Resources — April 21, 2019 and MOORLACH UPDATE — State of the State Reaction — February 13, 2019). Jody Wilgoren had researched concerns raised by Newport Beach resident Chriss Street and concluded that he was not accurate in his assessment of Newport-Mesa Unified School District’s involvement in the Investment Pool and its willingness to borrow money to increase its participation. So, the skepticism transferred to her husband.

2. I put myself through college. One of the jobs I held was working the evening shift of the Pacific Coast Coin Exchange in Long Beach. While employed there, it moved its offices to Newport Beach and rebranded its name to Monex International. Their building was the only one on Birch Street when I was in college. The area around John Wayne Airport doesn’t seem to have an empty lot now. While working there, I was trained in margin calls. Investors would purchase a bag with $1,000 of silver dimes and quarters (when I was a kid, these coins would receive a sandwich of copper and nickle and pure silver coins would slowly disappear from circulation). The investment would be in the silver, not in the numismatic value of the individual coins.

If you purchased a bag worth $1,200 with a down payment of $400, you would pay interest on the $800 loan (margin). If the value went up to $1,300 in a month, and you sold, then you made $100 on your $400 investment. Making 25 percent in a month is rather satisfying. However, if the value went down to $1,000, Monex would contact you and demand a $200 margin call. It’s equity needed to stay at $800 to properly cover (collateralize) the loan. You could meet the collateral call or you could sell. Taking a $200 loss on a $400 investment is a tough 50 percent hit. I learned about borrowing to invest. If you’re right, you’re a hero. If you’re wrong, you’re a goat.

I fully appreciated collateral and margin calls because I had been marinated in them at Monex. Market swings happen. But, how could I possible expect a non-business reporter to understand this concept. Difficult math calculations are hard to explain, just like defined benefit pension plans, retiree medical liabilities, unfunded actuarial accrued liabilities, and unrestricted net deficits are not easy subjects to fully absorb.

3. I found it incredulous that not one reporter did a piece on the fact that I had to use the California Public Records Act to obtain data. Newspaper publishers to this day demand it. They went silent in 1994.

4. There were 187 outside investors in the Investment Pool. This should warn you,those working in the public sector are not financial wizards. That’s why I have opposed Secure Choice (see MOORLACH UPDATE — Retire Secure Choice — December 19, 2017) and why implementing Single-Payer scares me to death (health care managed by the DMV, are you serious?).

5. Citron did not respond to reporter questions. Consequently, it seemed like my opponent was his Assistant Treasurer Matt Raabe. Although I cannot confirm this assumption, but it is possible Mr. Citron ran again in order to win and then retire, handing the reins over to Mr. Raabe. Knowledge of my impending candidacy may have prevented a clean run in 1994 by Mr. Raabe. The subsequent bankruptcy of Orange County had a devastating impact on Mr. Raabe. He moved up to the Bay Area and literally disappeared into the woodwork.

6. Kevin Johnson simplified things, but they were accurate overall. He could have mentioned that the short end of the yield curve could rise and be higher than the four-year section. We are in a similar situation today (see MOORLACH UPDATE — May Revision 2019-20 — May 10, 2019).

7. I raised legitimate finance-related concerns, as I continue to do today. I have always told you the truth based on the facts presented. The joys of being a Certified Public Accountant and Certified Financial Planner.

8. Other than the piece below, my letter would be received by radio silence for nearly the rest of May. Not one reporter did a darn thing to follow up on the concerns my campaign delivered up to them on a silver-platter. Not one Orange County reporter broke through for what could have been a Pulitzer-prize winning story. By contrast, Timothy Heider and Joel Rutchick of the Cleveland Plain Dealer were awarded the prestigious Loeb Award for their journalistic efforts in exposing an identical financial scheme by the Treasurer of Cuyahoga County, Ohio, occurring in the same year (see MOORLACH UPDATE — GASB — July 21, 2011 and MOORLACH UPDATE — OC METRO — March 1, 2010).

Completing his analysis of county Treasurer-Tax Collector Robert L. Citron’s investments of public money, political challenger John M. W. Moorlach on Thursday reiterated his claim that Citron has been pursuing an overly risky strategy and has left the county’s investment pool vulnerable to rising interest rates.

“After reviewing the portfolio, it becomes clear that the possibility of loss is real,” Moorlach said. “I don’t think that anyone could come to a different conclusion.”

Moorlach, a Costa Mesa certified public accountant, had been studying the county’s management of a $7.5-billion portfolio for several weeks after obtaining treasurer records requested under the California Open Records Law. The portfolio contains contributions from more than 180 government agencies.

Citron is facing his first challenge in 24 years to the elected post of county treasurer, and Moorlach has waged an increasingly contentious campaign against him in recent weeks as the June 7 election nears.

Citron was unavailable for comment, but Assistant Treasurer Matthew R. Raabe said the candidate’s conclusions differ little from his past criticisims of Citron’s investment management strategies.

“He has the right to say what he wants,” Raabe said. “But there are plenty of people who think that what we are doing is exactly the right strategy. He’s been making the same claims for the past six weeks. I thought he would have something different to say by now.”

Moorlach’s recent review again takes issue with Citron’s frequent use of “reverse repurchase agreements” to enhance investment returns.

The strategy relies heavily on using the county investment pool’s U.S. Treasury bills and bonds as collateral to borrow short term at low interest rates, and investing the borrowed funds in corporate bonds and securities that pay a higher rate of return. This can yield large returns while interest rates remain low and stable. But the strategy can also fail when interest rates rise, as they have in recent months.

Since January, Moorlach said, the county has had to post an additional $300 million in collateral because the value of the securities used to borrow the money has declined as interest rates have increased.

Raabe confirmed Moorlach’s findings but indicated that the office was not concerned about the developments because the county investment pool is protected by about $1 billion in liquid assets.

Moorlach, however, said county officials are ignoring a potential problem.

“If rates continue to soar, couldn’t the size of the calls top $1 billion?” Moorlach asked rhetorically. “My problem is, why aren’t people making a connection here? I have not been screaming fire in a theater. I have legitimate concerns.”

To catch up with the rest of the string of Look Backs, go to MOORLACH UPDATE — Tax Cuts and Jobs Act — May 4, 2019.

This legislation would pry open hard-to-find government data

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By John M. W. Moorlach, Special to CALmatters

https://calmatters.org/articles/commentary/open-data/?utm_source=CALmatters+Newsletter&utm_campaign=4183a999a7-WHATMATTERS_NEWSLETTER&utm_medium=email&utm_term=0_faa7be558d-4183a999a7-150219273

Good government is open, clear government. There was a day when taxpayers had to purchase a paper copy of their city’s audited financial statements, known as the Comprehensive Annual Financial Report.

Now, these annual reports are free on most cities’ websites. But this still does not provide search capabilities or comparative analyses with the Comprehensive Annual Financial Reports of neighboring cities.

That’s why I introduced Senate Bill 598, the Open Financial Statements Act.

For all state and local governments in California, SB 598 encourages the adoption of a digital reporting standard. It goes by the initials, iXBRL. Please excuse the computer speak, but that stands for Inline eXtensible Business Reporting Language.

Its terrible name notwithstanding, Inline eXtensible Business Reporting Language means the financial information can be read by machines and–thank goodness–humans.

I’m a certified public accountant and love to dig into a Comprehensive Annual Financial Report. But citizens who are not accountants also should be able to easily read government financial documents.

That’s my goal with SB 598. By tagging categories in the financial reports, they would become searchable just like websites.

And the bill would require that the data be easily uploaded so people could produce comparison charts and graphs, and readily see how your city or school district budgets compare to those nearby.

A decade ago, the U.S. Securities and Exchange Commission required publicly traded companies it regulates to adopt an earlier version of the standard, called just XBRL. And last year the commission moved to the improved iXBRL.

It’s like migrating from film to digital cameras.

The Securities and Exchange Commission explained the new “format will bring disclosure data to life: computers will have the ability to parse the data in a timely manner, while humans can continue to view … that data within the same document.”

Why do I believe it is this necessary to adopt this private industry standard for governments?

Over the past year, I have issued reports on the financial soundness of California’s 944 public school districts, 482 cities, 58 counties and three higher-learning systems, as well as all 50 states.

It took weeks for my staff and me to comb through documents on the internet.

We only looked for one key balance sheet data point, the unrestricted net position, which should be positive (good) and not negative (bad).

This helped me write commentaries on the school districts in several counties. One in the Orange County Register was on the 27 districts in Orange County, finding all but one district bleeding red ink.

And just before teachers went out on strike in January in the Los Angeles Unified School District, I wrote a commentary in the Los Angeles Daily News. It detailed the terrible fiscal condition of the LAUSD, whose most current unrestricted net deficit was a staggering $19.6 billion, or $4,180 per person living within the district’s borders.

Obtaining this number for all of California’s school districts would take seconds if the Comprehensive Annual Financial Reports were iXBRL compatible, not weeks.

The unrestricted net position was just one data point. But if we had SB 598 in place, you easily could access dozens of other data points of these nearly 1,500 government bodies; and not just for one year, but many years.

The iXBRL standard has been adopted internationally, providing significant cost savings for accounting data publication. It’s free. And conversions are simple and result in significant cost savings.

SB 598 also would advance California’s reputation as a high-tech citadel. Florida passed a similar bill last year. So our computer state should seize the initiative and sprint in front of the crowd.

Such new fiscal transparency could also help cities, counties and school districts get their fiscal houses in order. Those in great shape, such as Irvine and its positive unrestricted net position of $442 million, could be held up as doing what’s right.

The Senate Appropriations Committee will consider SB 598 on Thursday.

It would open the books to easy analysis by everyone. An immense power to improve government would be given to legislators, local officials, credit rating agencies, bond investors, journalists, researchers and citizens.

John M. W. Moorlach is a Republican from Costa Mesa who represents Senate District 37,   senator.moorlach@senate.ca.gov.  He wrote this commentary for CALmatters. Read his previous commentary here.

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Apple, Best Buy Tax Perks Reined In Under California Bill

By Laura Mahoney

https://news.bloombergtax.com/daily-tax-report-state/bill-to-ban-tax-sharing-with-retailers-passes-california-senate

Deals that allow California cities to give millions of dollars each year in sales tax revenue to online retailers that locate warehouses or sales centers within their boundaries would be banned under a bill passed in the Senate.

S.B. 531 by Sen. Steve Glazer (D) targets a practice among some cities to give a portion of the sales tax that consumers pay back to major companies including Apple Inc., QVC Inc., and BestBuy.com LLC. Cities would be allowed to keep existing deals in place, but would be barred from entering into new ones.

Glazer said retailers are unfairly leveraging a 1 percentage point share of the state’s 7.25% sales tax that cities receive based on the location of a sale, and not the location of the customer. They negotiate with cities to receive a share of that revenue when choosing where to locate their warehouses or designate their statewide sales.

“This results in a rigged process driving cities to accept increasingly onerous tax sharing agreements in exchange for online retailers building or locating in their jurisdiction,” he said.

The Senate passed the bill May 16 by a vote of 27-8. It now moves to the Assembly, where it must pass by Sept. 13 to reach the desk of Gov. Gavin Newsom (D). He hasn’t taken a position on the bill.

Hundreds of Millions

Bloomberg Tax investigation found that some cities agree to give about half of their 1 percentage point share back to retailers every year for decades. About 10% of the state’s 482 cities are using the deals, giving hundreds of millions of dollars back to retailers annually.

An agreement between QVC and the city of Ontario could mean $112 million for the retailer over 41 years. Cupertino gives Apple 35% of its sales tax revenue from sales to businesses in California, and retail sales at its two stores in the city. The city has said the amount Apple receives is confidential.

The cities—some of them economically distressed—negotiate the deals to lure warehouses and call centers for retailers racing to meet demand from online shoppers. In some cases they’ve been used to keep existing jobs in town.

City officials say the agreements are one of few economic development tools they have left following the legislature’s repeal of other long-standing incentives, and that they generate additional tax revenue even with some of the money going back to the companies. But some city officials oppose the deals, saying they only benefit the retailers while pitting the cities against each other.

‘Profiteers’ Play Role

Glazer and Sen. John Moorlach (R) were also critical of consultants who profit from negotiating the deals between cities and retailers. A Bloomberg Tax investigation found one lawyer who could receive $20 million for brokering three deals.

“Bloomberg News just did a big story on the profiteers that have used [the tax rules] to manipulate arrangements with cities and taken profits for themselves,” Glazer said. “It was a great expose. I am certainly interested in trying to stop that.”

Moorlach was the only Republican to vote for the bill. Sen. Melissa Hurtado was the sole Democrat to vote against it. She represents Dinuba, a city in California’s Central Valley that has a 40-year agreement to share revenue with Best Buy.

The California League of Cities and the California Labor Federation support the bill. The California Retailers Association, and the cities of Fresno and Perris, oppose it.

To contact the reporter on this story: Laura Mahoney in Sacramento, Calif. at lmahoney@bloomberglaw.com

To contact the editors responsible for this story: Jeff Harrington at jharrington@bloombergtax.com; Karen Saunders at ksaunders@bloombergtax.com

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MOORLACH UPDATE — May Revision 2019-20 — May 10, 2019

Gov. Gavin Newsom released his May Budget Revision yesterday morning. As a member of the Senate Budget & Fiscal Review Committee, my calendar will be packed between now and June 15th, the constitutional deadline for the Legislature to send a budget bill to the Governor for signature (followed by a plethora of abusive budget trailer bills to get a lot of legitimate and not so legitimate financial and other efforts passed after the official deadline).

The OC Register and LA Daily News published my immediate reactions to the Governor’s updated budget proposal in the first piece below.

KCRA News Channel 3 addresses the school funding component in the second piece below. My analysis of the 944 school districts in California shows about two-thirds are in fiscal distress. How can a state government that is enjoying such a large budget "surplus" not provide even more funding to the state’s schools? If a recession should raise its ugly head, then Sacramento will start crumbling like a house of cards when the districts show up on the Capitol’s front porch.

The budget also includes the Fairview Developmental Center. Funding for the closure study has already been approved, so the Governor’s request may be redundant (see MOORLACH UPDATE — Senate Bill 59 — February 7, 2017).

However, this is still a win, not because I’ve been advocating for homeless housing on the property (which I have not), but because we’re avoiding other bad things from happening to this property (like a recent budget request from the Department of Developmental Services to have their Southern Regional Center there). Providing services for the mentally ill has been my focus.

The budget narrative for Fairview is consistent with my office’s series of requests, going all the way back to SB 59 in 2017, and the subsequent budget appropriation. It took my office holding the Department of Finance and the Governor’s Administration responsible to get this money for the study, since Legislative Counsel has articulated that the process for the disposition of the land was not all that clear.

The Daily Pilot provides this component of the Governor’s budget discussion in the third piece below. Unfortunately, it’s missing a mention of my recently modified bill, SB 718, which may have changed the tenor of the article (see http://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201920200SB718).

OPINION

Gov. Newsom’s May Revision

helps some, but still spends too

much

By John Moorlach

https://www.dailynews.com/2019/05/09/gov-newsoms-may-revision-helps-some-but-still-spends-too-much-john-moorlach/

My thoughts are not all that different from Gov. Gavin Newsom’s regarding his May Revision budget proposal for fiscal year 2019-20, which begins on July 1. Overall, we have a governor who’s looking at a large, potential budget “surplus” of $21.5 billion. He’s certainly trying to use a decent portion of it for one-time expenses.

Economic trends show that, when the economy is doing well, more revenue than anticipated comes in from higher returns on capital gains and personal income tax receipts. In times of surplus, governors must show restraint and save for rainy days. When they don’t, they get in trouble – as former governors Gray Davis and Arnold Schwarzenegger can attest.

The new proposal warns, “[T]he state must be prepared for the possibility that even a moderate recession could result in revenue declines of nearly $70 billion and a budget deficit of $40 billion over three years.” Yet the state Rainy Day Fund is expected to have only $16.5 billion. Which certainly is better than having no fund at all, the condition before voters passed Proposition 2 in 2014.

Indeed, just hours before his presentation, Bloomberg reported, “The yield on 10-year Treasury notes fell below the 3-month bill yield for the first time since March. The curve between 3 months and 10 years has been hurtling toward zero this week as prospects for a trade agreement between the U.S. and China have dimmed.” Such an “inverted yield curve” historically has been a harbinger of a recession.

So prudence ought to be the word of the day.

The governor only partly dealt with the state’s approximately $256 billion in unfunded pension and retiree health liabilities. We will have a more accurate number later this month when Controller Betty Yee finally releases a late Comprehensive Annual Financial Report for the state for the fiscal year ending June 30, 2018.

He also called for a $140 million new annual tax to pay for clean water, when the record surplus easily could take care of that.

And he called for new regulations on charter schools. In the proposal’s words, “The May Revision proposes a statute to level the playing field for both traditional and charter schools,” supposedly to help minority students. Yet the San Diego NAACP maintained in a recent resolution that charter schools are top priorities for them, and “there are only 10 public schools in California with majority African American student enrollment that perform in the top half of student performance statewide…and eight of those schools are public charter schools.”

If the governor wants to achieve his stated goal of lifting state student test scores, then he should leave charters as they are.

The governor also is making a serious commitment to fighting homelessness. This “epidemic,” as the budget calls it, will be fought with $650 million in spending, up from the $500 million of the governor’s January proposal. Part of the solution is to reduce the cost of living in the state, but that will take discipline to stop increasing taxes and expanding state mandates and regulations that drive people from their homes.

At his press conference on the budget, Newsom mentioned mental health, the primary cause of homelessness, was a personal interest. So it has been for me.

I’m hoping he will support Senate Bill 640, which I authored, to change the definition of “gravely disabled” to help those whose mental illness won’t allow them to get adequate treatment without spending time in jail.

We’re finding out the state’s solution to mental institutions in the 1960’s only moved the problem to our streets and jails. And we are increasingly grappling with how to help the mentally ill who truly need care, while not forcing care on those who actually do need it. I believe SB 640 would be a significant step in the right direction.

On homelessness in general, I concur with the governor that we need to support local efforts. And his budget proposal would spend $2.2 million to complete the review of the disposition of Fairview Developmental Center, in the 37th District of the Senate which I represent. As we had requested several years ago – and had approved in a previous budget – we will finally have the ability to better understand the options in using the property. And we will be able to consult with our partners in Costa Mesa and Orange County to see if there is a proper and effective use of the facility for those with mental illness issues who may also struggle with their housing needs.

In sum, we have a state that’s got a surplus. But we have cities, counties and school districts still trying to make things come together and balance budgets, even though we have a thriving economy. The governor is trying to set aside reserves, but may find they are not adequate if we have a blip in the economy.

As a member of the Senate Budget and Fiscal Review Committee and the only CPA in the Legislature, I look forward to working with the governor on crafting a budget for our great state. The surplus rolling in is an opportunity both to deal with current needs and prepare for a future when the cupboard is bare.

John M. W. Moorlach, R-Costa Mesa, represents the 37th District in the California Senate

3 things to know about Gov. Newsom’s proposed education budget

Mike Luery

https://www.kcra.com/article/3-things-know-about-governor-newsom-proposed-education-budget/27425936

California Gov. Gavin Newsom proposed a $213 billion state budget Thursday that boosts spending on K-14 education, wildfires and ending homelessness while putting more money toward state reserves and debt.

Why is education the big winner in Newsom’s budget proposal?

“Forty-five percent of the budget is going to education,” Newsom said during his budget proposal Thursday. “We will have the highest investment in our K-14 education system in California history.”

The governor’s May Revision calls for $101.8 billion in spending on education. The general fund provides $58.9 billion of that, while $42.9 billion comes from other funds.

Newsom’s spending plan includes $696.2 million in funding for special education. That’s an increase of $119.2 million from the governor’s budget proposal in January.

There is also extra money for recruiting and retaining quality teachers.

“By some estimates, upwards of 8,000 teachers have been hired that have not had adequate training or that have been credentialed under the waiver program," Newsom said. “We are having that kind of trouble keeping teachers in the state of California.”

As for higher education, the governor’s May budget plan provides $240 million for the University of California from the general fund – plus an extra $153 million in one-time funding, with the understanding that UC will not raise tuition for California residents in school year 2019-20.

California State University and its 23 campuses will get $300 million from the general fund, plus $264 million in one-time funds, again with the expectation of no tuition increases for California students in the upcoming fiscal year.

Community colleges, with 115 campuses statewide, will be getting an extra $45 million under Newsom’s plan to extend free tuition from one year to two years.

“That would be so helpful,” said Sara Sanchez, a student at Sacramento City College. “I have so many bills at home. My parents don’t have that kind of money to help us with school.”

“So there’s just one less thing to be worried about,” said Sacramento City College student Julia Macay. “We can just focus on get all those A’s, you know?”

Is the extra money for public schools going to the classroom or to pay for teacher health care and pensions?

“Well, the health care reduces the costs overall to each district,” Newsom said.

The governor’s plan originally called for reducing employer contributions to CalSTRS from 18.3 % to 17.1% in the upcoming fiscal years. But now, Newsom plans to add $150 million more in one-time spending to reduce employer contributions to 16.7 percent.

But Newsom indicated some of the additional spending would be used on teachers.

“We talk about enhancements for teacher training,” Newsom said. “The enhancements for kindergarten and other related enhancements. We think that’s part of a larger bucket.”

Newsom’s budget would provide approximately $5,000 more per student compared to eight years ago.

How do Republicans feel about the governor’s spending plan on education?

“We need more money going directly to the classrooms,” Senate Republican leader Shannon Grove said.

“And for the students, we need more local control with our dollars for education,” Grove said.

But some Republican lawmakers wondered why a state with a $21 billion surplus could have so many school districts, like Sacramento City Unified, that are running out of money.

“These districts, either they’ve been mismanaged or they have overpromised,” said Sen. John Moorlach, a Republican from Costa Mesa. “And so that is something that is lingering. It’s in the shadows."

“The state is flush (in money), but school districts are not,” Moorlach said. “So why isn’t the state allocating more to the kids?”

State looks to explore developing homeless services at Fairview Developmental Center in Costa Mesa

By LUKE MONEY

https://www.latimes.com/socal/daily-pilot/news/tn-dpt-me-fairview-homeless-20190509-story.html

Though the long-term future of the Fairview Developmental Center is still to be determined, state officials are again raising the possibility of using the Costa Mesa property to provide services for the homeless.

In a revised budget proposal released Thursday, Gov. Gavin Newsom called for designating $2.2 million “to complete a site evaluation of disposition options” for the 114-acre, state-owned center at 2501 Harbor Blvd.

That effort would “include identifying constraints and opportunities, working with the city of Costa Mesa and Orange County to identify local stakeholder interest in the reuse of the property, particularly related to meeting housing and homelessness needs, and identifying options that will generate the greatest benefit to the state,” according to the budget summary.

At the same time, the state would “explore options to immediately enter into a long-term lease with a local jurisdiction to provide housing and supportive services for up to 200 individuals with cognitive disabilities who are currently homeless.” Fairview would be considered for that purpose.

Assemblywoman Sharon Quirk-Silva (D-Fullerton), who previously proposed the concept through her Assembly Bill 1295, said in a statement Thursday that “these men and women are our hidden neighbors; they come from all over Orange County and need shelter and medical care in order to find stability and hope.”

However, Costa Mesa leaders were cooler to the concept. Mayor Katrina Foley said she believes a better tactic would be for the state to help fund the city’s ongoing efforts to address homelessness — such as a recently opened 50-bed temporary shelter at Lighthouse Church of the Nazarene — “to help us help people immediately.”

“From our perspective, we would rather have the governor redirect funding from studying options at Fairview Developmental Center to investing in a plan that we have community support for,” Foley said Thursday. “We have a system of care that has been shown to be effective already, just since we opened in April.”

Assemblywoman Cottie Petrie-Norris (D-Laguna Beach), whose district includes Costa Mesa, also said she favors the state putting its resources toward supporting more-immediate, locally based solutions to combat Orange County homelessness.

“We have a list of projects that need funding now, will start to get people off the streets now and will save lives now,” she said in a statement. “The quickest and most effective way for us to build capacity is to invest in existing local programs that are working.”

Petrie-Norris said in an interview that it’s vital for the local community to play a major role in determining the next chapter for Fairview so “we come up with a future use that … does good and serves a positive purpose for Orange County.”

“I think it’s premature to determine the specific use of that property given how far away that use would be and given how urgent I feel the need is here and now,” she said. “As state leaders, I think the most powerful role that we can play is to use our capacity to amplify the work of the groups that are already getting results on the ground.”

Fairview — like similar facilities around the state that serve adults with intellectual and developmental disabilities — is scheduled to close as part of an effort to transition people out of institutional-style centers and into smaller accommodations that are more integrated into communities. As of April 24, 57 people were living in the Fairview center, according to the state Department of Developmental Services.

Fairview’s remaining clients are expected to move out by the end of this year, according to the state budget summary.

Previous proposals to house regional homeless services at the developmental center have been met with swift and fierce community condemnation.

In March 2018, then-county Supervisor Shawn Nelson announced that he and state Sen. John Moorlach (R-Costa Mesa) were looking into the potential of using the site as an emergency homeless shelter. Costa Mesa City Council members responded by quickly convening a special meeting to voice their unanimous disapproval.

Since then, the city has spent millions of dollars to develop its temporary homeless shelter at Lighthouse Church and purchase a property near John Wayne Airport for potential use as a long-term location.

“We’re having to dip into our reserves to pay for the permanent shelter,” Foley said. “We certainly agree with the governor that the homeless crisis and solutions for people who are suffering mental illness are incredibly important, and we have a plan. We’d love to have him partner with us to implement our plan today instead of someday in the future.”

It’s incumbent on all Orange County cities to “do their fair share in terms of addressing homelessness in their community,” she added, because “if we all participate, then there isn’t one city that has to become a regional space for caring for the most vulnerable in our county.”

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