MOORLACH UPDATE — Dubious Budget Trailer Bill — September 17, 2018

The LA Times and SD U-T find the world famous columnist, George Skelton, delving into the Legislative Democrats’ vote on AB 1829, interpreting the National Mortgage Settlement Fund. It is a budget trailer bill, a technique for many an abuse.

I argued against this bill in the Senate Budget and Fiscal Review Committee. I mentioned that it reminded me of the diversion by the state of the National Tobacco Settlement some 16 years ago. The joys of being older and having personal history with these arcane historical events (see MOORLACH UPDATE — Daily Pilot — April 1, 2012). I also voted against the bill on the Senate Floor.

We’ll be seeing a number of articles on bills that were approved during the last few days of this year’s Session. They couldn’t be covered by the media at the time, as the volume was too great. But, while digesting what occurred, it is nice to see this bill evaluated by a liberal columnist who concurs with not only my vote, but my historical context, in the piece below.



Taking money meant for financially pressed homeowners and using it to balance California’s budget is plain wrong

George Skelton

George Skelton
Contact Reporter Capitol Journal

Gov. Jerry Brown and the Legislature just showed why many voters don’t trust Sacramento politicians with money — and why last year’s gas tax increase could be repealed on election day.

Ruling Democrats never quite get it. They become caught up in crafty, hurry-up maneuvering in the dark and forget that what they’re concocting often looks ugly when the light shines, which it inevitably does.

Here’s the story briefly: In 2012, Brown and the Legislature took $410 million that was supposed to assist victims of abusive mortgage lending and used it to help balance the state budget. Homeowner groups sued. Two courts ruled against the state and ordered it to replace $331 million.

Just before the current Legislature adjourned Aug. 31, lawmakers passed a bill essentially telling the courts to go pound sand. The measure “confirmed” that Brown spent the money “consistent with the direction given” him by the 2012 Legislature. So there! The governor signed the bill last week.

“The Legislature and the governor said, ‘In your face, judge, we’re going to do what we want to do regardless of how you rule,’” says state Sen. John Moorlach (R-Costa Mesa), a former Orange County treasurer-tax collector.

Brown is appealing the case to the state Supreme Court, which hasn’t decided whether to take it.

But regardless of what the court does and whether what the governor and Legislature did was legal or illegal, it was plain wrong. You don’t take money meant for financially pressed homeowners — or former owners who were improperly foreclosed on — and spend it on convenient budget balancing.

“We were facing a difficult budget crisis in 2012,” says H.D. Palmer, spokesman for Brown’s finance department.

Yes, the state was. But it isn’t today. It’s rolling in money, on its way to amassing a $13.5-billion cash reserve.

That disputed $331 million should be spent belatedly to help victims of bad mortgages, or at least on some housing program.

The money came from a 2012 settlement reached by the nation’s five largest mortgage servicers — Bank of America, Wells Fargo, Citigroup, JPMorgan Chase and GMAC — in a suit filed by the federal government and every state except Oklahoma. Lenders were accused of deception and improper foreclosures.

The banks paid $20 billion directly to foreclosed homeowners. In addition, it sent $2.5 billion to the states, with California getting the biggest pot, $410 million.

“Each state attorney general shall designate the uses of the funds,” the agreement decreed. “To the extent practical,” it continued, the money should be spent to assist foreclosure victims and to avoid future mortgage abuses.

Then-state Atty. Gen. Kamala Harris — now a U.S. senator — helped negotiate the settlement and, as required by the agreement, designated several housing-related uses for the money. Brown and the Legislature virtually ignored her list.

What they mostly did with the money was use $316 million to make payments on $5 billion in housing bonds approved by voters in 2002 and 2006.

So, wait a minute: The settlement money was supposed to help current mortgage victims and prevent future calamities — not to be used for making payments on old bonds.

That’s essentially what trial and appellate courts ruled. And it’s certainly what Harris thought. In a rarity, there was dissension in the highest Democratic ranks, with Harris objecting to Brown’s use of the money.

In a 2012 written statement, she said: “These funds should be used to help Californians stay in their homes. I plan to work with the governor and Legislature toward a balanced budget that honors our obligations to California’s homeowners.”

The work didn’t pay off. And when the state was sued, Harris opted not to defend it. Brown was forced to hire private attorneys.

In its appeal to the California Supreme Court, the Brown administration is making the state attorney general a separation-of-powers issue. Wearing an odd-looking hat, the state’s chief executive is taking the Legislature’s side.

“Does the Legislature or the attorney general have final authority to decide how to spend money paid to the state?” Brown asks in a petition to the court. The lower courts’ rulings, he asserted, are “squarely at odds with the fundamental principle that the Legislature holds the power of the purse.”

The legislation telling the courts to take a hike passed on party-line votes in each house — Democrats for, Republicans against.

“The bill doesn’t make any difference for two reasons” says Neil Barofsky, a lawyer for the National Asian American Coalition and other groups suing the state. “What one legislature says six years later about what a previous legislature did doesn’t matter.

“And even if the court didn’t see it that way, it wouldn’t matter. The governor is bound to follow the federal consent order” — the mortgage settlement. “That’s his obligation.”

Sacramento politicians have long had a reputation for raiding pots of money set aside for one purpose and using it for another. Some of the reputation is deserved, some not.

In 2003, Gov. Gray Davis and the Legislature grabbed California’s share of a $206-billion national settlement with tobacco companies and used it for budget-balancing. It should have been spent on smoking prevention and treating health problems caused by tobacco.

Currently, opponents of the gas tax hike that’s raising money to repair dilapidated roads accuse the state of pilfering past highway funds for other purposes. It’s basic baloney, but an effective pitch to voters.

Regardless of what the state Supreme Court does, Sacramento Democrats already have lost by snatching the mortgage money.


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MOORLACH UPDATE — SB 1004 and CIRM — September 10, 2018

The LA Times and the San Diego Union-Tribune jointly opined on their websites in favor of SB 1004, which I joint-authored with the good Senator from San Francisco, Scott Weiner, and encourage the Governor to sign it.

How’s that for working with those on the other side of the aisle? I have an established history with addressing how to better direct Mental Health Services Act funding. With that focus, Sen. Weiner requested my collaboration on his bill (see MOORLACH UPDATE — Joint Author Details — July 7, 2018). The lead editorial is the first piece below.

The second piece is more than a year in the making. I was interviewed by the San Francisco Chronicle last year. They have done some very exhaustive analysis over this time period on CIRM, the California Institute for Regenerative Medicine (see MOORLACH UPDATE — I Told You So! — August 26, 2017 ).

The bonds that funded this dubious venture cost the General Fund $313 million in the current fiscal year and will cost $309 million in the next! Your taxes are paying for what I believe is the most egregious ballot measure abuse in recent state history.

I’m not against stem cell research. But, if there is progress and money to be made in this area, the private sector and institutional investors will make it happen. But, in 2004, when Proposition 71 was up for a vote, I was one of the three signatories in opposition to this measure because it was self-serving, unaccountable, and would be a fiscal bust (as the major patents had already been secured by the University of Wisconsin).

I recently did try to address my concerns about CIRM through the legislative process (MOORLACH UPDATE — Millstones and SCA 7 — March 30, 2017) and through messaging (see MOORLACH UPDATE — Showmanship Let Down — October 7, 2017).

Now the Chronicle provides a review of where the money went. Although thorough, it is silent on the administrative costs. That may provide information on high salaries and, therefore, high pensions, for well situated individuals who served in cushy positions. The piece also begs the question as to facilities. You can do research in a rented commercial building. But, I’ll save the rest for your reading pleasure with the second piece below.

California is sitting on hundreds of millions of dollars for mental health programs. Let’s put it to use

Like much of the rest of the nation, California went only halfway toward keeping its promise to improve mental health care. It closed psychiatric hospitals, some of which were really just costly warehouses for the sick rather than modern medical facilities offering effective treatment. But the state didn’t follow through on its commitment to provide better alternatives, like community-based clinics that deliver the treatment and services needed to integrate patients into society, working and living independently where possible.

We can see the result of those half-measures every day. About a third of homeless people in Los Angeles and across the country are on the street because of untreated mental illnesses that prevent them from staying housed or holding down a job.

We’ve begun to make amends, at least of a sort. Fourteen years ago, voters passed Proposition 63, known informally as the millionaires’ tax and more properly as the Mental Health Services Act. It raises billions of dollars for services.

The ranks of mentally ill homeless Californians are constantly being replenished.

More recently, Los Angeles voters adopted tax measures to raise money for supportive housing – units that will give homeless people, including those with serious mental health challenges, the opportunity for dignified and independent living while receiving the medical care and services they need to hold their illnesses at bay and stay off the streets.

These are fine programs, but if they’re all we’ve got they will be futile. The ranks of mentally ill homeless Californians are constantly being replenished. As fast as we can lead the sick and suffering into homes, they are replaced on the street by new generations of people whose mental illnesses were left undiagnosed or untreated at an early stage, when they still could have been held in check. If only California also had funding for that – for prevention, diagnosis, intervention and treatment early enough that patients’ illnesses do not progress to the point where they lose the ability to lead independent lives.

Actually, we do have the funding. The tragedy is that we haven’t spent it wisely, or in many cases haven’t spent it at all.

Twenty percent of Proposition 63 funding allocated to counties is supposed to be spent on prevention and early intervention programs and treatment. Yet a recent state audit found that counties hadn’t spent most of that money, despite statutory deadlines meant to deter hoarding. Hundreds of millions of dollars just sit in county accounts, still waiting to be put to use.

Why? There is too little guidance on how to effectively spend those tax dollars. A state Mental Health Services Oversight and Accountability Commission is supposed to direct counties to best practices, but that loose system has led us to where we are: unmet needs and unspent funds. There is little strategic vision. Programs aren’t measured for their effectiveness. Counties aren’t held accountable for results.

The law should be tightened to ensure data are gathered, outcomes are measured and the commission offers more exacting spending guidance that prioritizes treatment for young patients.

After all, researchers have found that signs and symptoms of mental illness – hallucinations, delusions and other evidence of psychotic episodes – first present themselves in the patients’ early teen years and into their mid-20s. Treatment at or just after the onset of these symptoms can prevent, or at least allow patients to manage, serious mental illness that worsens over time. Failure to respond quickly makes effective treatment later in life much more difficult – and feeds the pipeline that sends sick adults to the street.

A bipartisan proposal from state Sens. Scott Wiener (D-San Francisco) and John Moorlach (R-Costa Mesa) would provide the appropriate spending guidelines and promote some uniformity in treatment around the state while leaving counties the flexibility to spend on different priorities if they can make a persuasive case for them. The measure (Senate Bill 1004) cleared the Legislature and is now on Gov. Jerry Brown’s desk.

Brown’s Department of Finance opposes it, arguing that the commission can do everything the bill can simply by changing the appropriate regulations. Perhaps it could – but the point is that it hasn’t.

Some critics object to the move to increase the focus on the young. Yet that’s where the greatest need is for prevention and intervention services, and where funding can provide the greatest value. Besides, the bill would also direct funding to programs that address the particular mental health challenges of older people as well. The bill is a targeted solution to an exasperating problem. It deserves the governor’s signature.

Taking stock of California’s $3 billion bet on stem cell science

Erin Allday and Joaquin Palomino

It was an extraordinary political proposal: Approve a $3 billion bond measure to fund the cutting-edge science of stem cell therapy, and soon some of the world’s cruelest diseases and most disabling injuries could be eradicated.

The 2004 measure was Proposition 71, the California Stem Cell Research and Cures Initiative. The campaign to pass it was led by a Palo Alto real estate developer whose son suffered from an incurable illness that he believed stem cells, the keystones of human biology, could heal. Other supporters included preeminent scientists, Hollywood celebrities, business leaders and elite investors.

The need was urgent, they said. Federal restrictions had recently been imposed on funding research involving human embryonic stem cells, then the most auspicious field of study.

Among the campaign’s promises: Nearly half of all families in California could benefit from stem cell treatments Prop. 71 would help create. One study it commissioned found that new, life-changing therapies could emerge in just a few years. And Prop. 71 would pay off financially, the campaign claimed, creating thousands of jobs and potentially returning the state’s investment more than seven times over.

“How many chances in a lifetime do you have to impact human suffering in a really fundamental way, including possibly even in your own family?” Robert Klein, the campaign leader, would say shortly after the vote.

In November 2004, Prop. 71 passed with nearly 60 percent approval. It created the California Institute for Regenerative Medicine, or CIRM, an agency tasked with administering the $3 billion and making the campaign’s lofty visions a reality.

Fourteen years later, the money voters approved is nearly gone, and supporters of CIRM and the research it funds are preparing to ask the public for another $5 billion in 2020. This time, taxpayers will want to know: Has California’s initial bet on stem cell science paid off?

Over the past several months, The Chronicle conducted an extensive analysis of CIRM’s spending, reviewing the nearly 1,000 grants the agency has made, tracking how the money has been spent, and gauging whether the promises have been realized.

It’s not a question that can be answered simply. Science often can’t be measured in quantifiable outcomes. Failures aren’t just common, they’re necessary — it’s impossible to expect every dollar invested in research to lead down a traceable path toward success.

CIRM can take credit for some notable progress.

It has helped make California a global leader in the field that’s come to be known as regenerative medicine. Anywhere significant stem cell research is taking place in the state, it almost surely has received support from CIRM.

At UCLA, doctors are using stem cells to cure a rare immune deficiency disease that kills children. At Stanford, early studies show that stem cells deposited deep into the brain could restore movement and speech to people devastated by stroke. At UCSF, a team is beginning human trials for a fatal genetic blood disease that involves transplanting stem cells into a fetus still in the uterus.

But as thrilling as such advances are, they fall far short of what Prop. 71’s promoters promised.

Not a single federally approved therapy has resulted from CIRM-funded science. The predicted financial windfall has not materialized. The bulk of CIRM grants have gone to basic research, training programs and building new laboratories, not to clinical trials testing the kinds of potential cures and therapies the billions of dollars were supposed to deliver.

Over that same time, many people suffering from incurable diseases have become impatient waiting for scientists to produce the miracle treatments the Prop. 71 campaign said were within reach.

Instead, a thriving, for-profit industry of clinics offering dubious stem cell therapies based on half-baked science has sprung up, defying attempts at government regulation and requests from scientists to proceed cautiously.

Now, as CIRM supporters prepare to approach voters again, some say its achievements shouldn’t be measured only against the claims made by the campaign that created it.

“What was promised was not deliverable,” said longtime CIRM board member Jeff Sheehy, a former San Francisco supervisor. “However, I would distinguish the promises from the impact and value. We have developed a regenerative medicine juggernaut.”

Klein, though, is unapologetic about the campaign he led. Indeed, as he lines up advocates and testimonials for the coming campaign, his message is familiar: Fund this research and we will save lives. Slow it down and the consequences will be grave.

“Do you want your son to die? Are you going to wait?” Klein asked recently. “Is that the price you are prepared to pay?”

In his airy, sunlit lab at San Francisco’s Gladstone Institutes, cardiologist Deepak Srivastava has used skin cells to produce heart cells. As they pulse in a petri dish, their steady, calming beat feels familiar, even viewed through the lens of a microscope.

Someday, he hopes, the work of his team at Gladstone’s Roddenberry Stem Cell Center will lead to a therapy that can reverse the effects of a heart attack.

“We got this far purely because of CIRM,” said Srivastava, the center’s director.

The dream of exploiting the human body’s remarkable ability to heal itself — to grow skin and bone, to replace muscle lost to wasting or disease, to undo systemic damage caused by infection — has long captivated medical scientists. In the late 1800s, they began to suspect that specific cells in the body were responsible for this repair and regeneration work.

A century later, in 1981, UCSF scientist Gail Martin gave the most powerful of these cells a name: embryonic stem cells.

It wasn’t until 1998 that the first human embryonic stem cells were isolated and replicated in a lab. These cells are uniquely potent, responsible for building every part of a human body. As an embryo matures, it rapidly replicates, transforming into bone cells and muscle cells, brain cells and heart cells.

Some doctors believed if they could harness stem cells, they could use them to treat all but the most disastrous threats to the body, perhaps even reverse the natural effects of aging.

The process of isolating them, though, involved destroying days-old embryos. Religious and antiabortion groups decried the science as unethical. In 2001, President George W. Bush instituted far-reaching limitations on federal grants for embryonic stem cell research.

In California, advocates for regenerative medicine sought a way around the funding restrictions. Their solution: Prop. 71, which would generate $3 billion in general obligation bonds, the type more often used for infrastructure projects like highways or dams. Including principal and interest, the total cost to taxpayers would be roughly $6 billion.

State-funded scientific research on that scale had never been attempted and, despite the campaign’s pitch, there was no guaranteed payoff. The state Legislative Analyst’s Office offered a cautious assessment: The potential financial benefits were unknown.

Klein, then a major Silicon Valley developer, helped conceive, bankroll and write Prop. 71. For him, the effort was personal. His son, Jordan, had recently been diagnosed with Type 1 diabetes, and Klein had become a ferocious advocate for people with brutal conditions and little hope.

More than 20 Nobel Prize laureates backed the proposal. So did Hollywood celebrities such as Michael J. Fox and Brad Pitt. Million-dollar donations came from the founders of eBay and the owner of the Cleveland Cavaliers basketball team.

Radio and television ads featured gut-wrenching appeals from people with incurable diseases. Patient advocate Joan Samuelson, later appointed to CIRM’s board, said in one ad that Prop. 71 “will rescue me, and a million people with Parkinson’s disease.”

In another, “Superman” actor Christopher Reeve, paralyzed from the neck down after a horseback-riding accident, said “stem cells have already cured paralysis of animals,” and called them the “future of medicine.” Dependent on a ventilator attached to his trachea, he struggled to breathe and to speak in the ad. He died before the spot aired.

Almost immediately, critics filed lawsuits. CIRM, the new stem cell institute, lacked public accountability, they said. While technically it was a state agency, the measure gave the Legislature little direct oversight of it. The legal challenges eventually were dismissed, but they slowed funding for nearly two years.

Meanwhile, the confident claims of the campaign were being tempered with more modest expectations. A year after moving into its San Francisco headquarters, CIRM would unveil a 10-year plan dramatically scaling back the pledges made by Prop. 71.

The field of embryonic stem cell research was still young, the report warned. The road to marketing new therapies would be long and expensive. Most research never reaches human clinical trials, it explained, and most of those trials fail. Potential treatments for just a handful of diseases might be tested, and it was doubtful that a single approved therapy would be developed from the state’s investment.

“The whole tenor of the campaign, what was said on television ads that flooded the state and by Bob Klein and his lobbying group, was that if California would fund this work, there would be cures,” said Marcy Darnovsky, executive director of the Center for Genetics and Society in Berkeley. “People that were saying that must have known you can’t schedule medical breakthroughs. Those hopes were just that, hopes, and completely speculative.”

But as CIRM ramped up, The Chronicle’s review shows, it began doling out grants at a furious pace, averaging more than $7 million a week in 2008, its first year of full-fledged operation. To date, CIRM has spent or committed more than 90 percent of its $3 billion allowance.

The grants can be broadly divided into four categories: basic science and training; infrastructure; translational and preclinical, which is the work that goes toward moving laboratory science into human studies; and clinical trials.

The Chronicle reviewed CIRM grants through May 2018, tracking who received money and how it was spent.

Bay Area institutions have been especially well-funded, with more than one-fifth of the bond money funneled to Stanford, UCSF, UC Berkeley and the Gladstone Institutes. Stanford, the biggest beneficiary, has received $360 million in grants. CIRM’s funding of Stanford, a private institution supported by a hefty endowment, has at times been sharply criticized.

Nearly 40 percent of the total bond money, more than $1.1 billion, has gone into training programs and basic research — work largely aimed at improving scientists’ understanding of stem cells and how they might be best used in medicine.

These basic biology studies have helped scientists develop techniques that could prevent immune rejection from an organ transplant. They discovered weak points in cancer stem cells that might become new targets for drug therapies. In addition to Srivastava’s beating heart cells, scientists have used stem cells to build mini-organs, including “brains” in petri dishes for testing drug therapies and learning more about diseases like Alzheimer’s.

CIRM’s focus, meanwhile, has expanded beyond embryonic stem cells. It has funded research involving adult stem cells, which exist in pockets throughout the body and are cheaper and less controversial than embryonic stem cells. It’s also invested in induced-pluripotent stem cells, first developed in 2006. Produced from other types of cells, they look and act like embryonic stem cells.

CIRM-funded researchers have published more than 330 scholarly articles in four of the most respected stem cell and academic journals. Each represents a new discovery in the field and has enabled the work California has funded to reach scientists around the world.

CIRM’s investments in infrastructure have amounted to $482 million — 16 percent of the bond money. Most of that went toward building a dozen stem cell research centers.

UCSF received a $35 million grant to help raise a glass-and-metal structure on the hillside overlooking its Parnassus campus. The independent Buck Institute for Research on Aging received $20 million toward a sleek white building on its Novato grounds. Stanford University won the largest single grant: $43.6 million toward a four-story structure at the edge of its medical school campus built around a glass-walled atrium.

About $388 million has gone toward preclinical and translational research: studies that take science out of the lab and try to apply it to humans. This phase of research, seldom backed by the federal government, can be particularly challenging. A therapy that looks promising when tested on a cluster of cells in a laboratory-controlled environment often fails when given to more complex organisms.

The preclinical studies funded so far reflect the immense possibilities stem cells offer: Scientists have examined a gene-modifying technique to try to treat HIV. They’re studying small molecule drugs that could destroy leukemia stem cells. They’re developing a gel derived from pig muscles that could stave off amputations among people with a disease that weakens blood circulation.

The research has helped CIRM-backed scientists license 107 invention disclosures. Some of the studies have paved the way for clinical trials, while others have hit dead ends.

CIRM funding helped push UC Irvine scientist Henry Klassen’s work from lab studies to clinical trials testing a stem cell therapy for a rare form of blindness. His research, which has shown success, has largely been carried out in a building at UC Irvine partly underwritten by CIRM.

“The whole reason I’m here in California is because of CIRM,” said Klassen, who had been working in Singapore and took a job at Irvine shortly after Prop. 71 passed. “This consistent source of funding has been critical as we go from the bench to the bedside.”

Still, critics and supporters alike say those who pushed Prop. 71 significantly oversold the short-term medical and financial prospects of stem cells.

No federally approved treatments have been produced. And without marketable therapies, the public is still far from reaping the up to $91 billion in health care savings by 2040 the campaign predicted.

CIRM has funded nearly 50 clinical trials, but just four have been completed, meaning scientists enrolled all the patients they said they would and finished compiling data. One of those trials was an observational study that tested no new therapy. The others involved treatments that are still years, at best, from reaching the market.

The state, once told to expect as much as $1.1 billion in royalties from CIRM-backed discoveries within 35 years, so far has received just a tiny fraction of that amount: a single payment of $190,000 from the City of Hope medical research center in Los Angeles County.

Other economic benefits, such as tax revenue and new jobs, have been measured only a handful of times. The most recent study, which CIRM commissioned using public funds and published in 2012, showed the state investment had helped create tens of thousands of jobs and generate hundreds of millions in tax revenue.

The aim of the report, however, was to aggressively support the goals and initiatives of CIRM, according to the California Stem Cell Report, a blog that has diligently tracked the institute.

CIRM and its 29-person governing board, meanwhile, have been a frequent target of attack.

State lawmakers have introduced multiple bills aimed at making the institute more accountable to the public and at ensuring that all taxpayers, not just biotech companies and universities, would benefit from the public investments.

Almost every effort has failed, in part due to the unusually restrictive language of Prop. 71: Any change in CIRM’s structure needs a voter initiative or a 70 percent vote in both houses of the Legislature and the governor’s approval.

The proposition also specified the precise makeup of the agency’s governing board, placing representatives of many of the institutions that CIRM funds to oversee its grants. Having such built-in conflicts of interest without the oversight expected of a public agency has undermined CIRM’s legitimacy, critics say. They have likened it to an insiders’ club that enriches its own members.

“These guys got away with an incredible amount of personal enrichment,” said state Sen. John Moorlach, R-Irvine, a longtime critic of CIRM. “And all they gave us was debt.”

CIRM leaders say they have strong protections to ensure that personal interests don’t influence funding decisions: Board members don’t discuss or vote on proposals they have a financial stake in, and an out-of-state review panel has a major say in which projects are funded.

Multiple audits, however, have found the sheer volume of recusals troubling.

Records obtained by The Chronicle showed that board members abstained from voting on grants roughly 1,770 times since 2006 due to reported financial conflicts. Tens of thousands of additional recusals were triggered by a CIRM policy that bars certain members from weighing in on any application.

In some cases, nearly half of the board was unable to vote on major and controversial proposals due to conflicts of interest.

One board member, UC Regent Sherry Lansing, a former film studio executive, has recused herself from more than 400 grant discussions because of a tangle of conflicts, most related to the universities she oversees. Lansing’s role is to advocate for cancer patients.

A pivotal Institute of Medicine review in 2012 found that such widespread conflicts had caused some to “question the integrity and independence” of CIRM, and it recommended sweeping reforms. Many of the suggestions were not enacted, although CIRM did make some significant changes shortly after the report published.

Klein, CIRM’s board chairman during its first seven years, has been a divisive figure. Despite his role at CIRM, he continued to run a patient advocacy group that regularly dismissed concerns about the agency and attacked many people, including legislators, who challenged it. A 2009 Little Hoover Commission report called him “a lightning rod for calls for more accountability.” There were multiple demands for his resignation.

“There’s a reason you have checks and balances, transparency and accountability when you use that much in public funds, and unfortunately none of that was in place,” said former state Sen. Deborah Ortiz, who strongly supported Prop. 71, then became a CIRM critic. “You can’t go to the voters and say, ‘Let’s use $3 billion in state funds,’ then say, ‘We don’t want the terrible government to bother us.’ ”

Even some of CIRM’s most ardent supporters — patients and patient advocates who stand to benefit most directly from stem cell therapies — have become critical. Their chief complaint: The science is taking too long, and they’re running out of time.

At the Gladstone Institutes’ Mission Bay campus last fall, CIRM held a public meeting to update patients about the research going on throughout California.

CIRM representatives and scientists told the story of a mother who had her vision partially restored after enrolling in Klassen’s trial at UC Irvine. They talked about an East Bay teenager, paralyzed the day before graduating high school, who regained some movement after receiving a stem cell transplant.

The $3 billion bond, they said, had made these achievements possible.

“What you will see over the next decade,” Srivastava of the Gladstone Institutes told the crowd, “are a series of breakthroughs for many diseases based on that investment.”

Not everyone shared his enthusiasm.

“I’ve met hundreds, thousands of people with spinal cord injuries,” Franklin Elieh, a quadriplegic man and patient advocate, said at the same meeting. “Millions are suffering needlessly and endlessly. Billions (of dollars) are being spent needlessly and endlessly. What can be done to really accelerate this?”

Elieh, like many people living with incurable diseases or conditions, is disillusioned with the dearth of clinical trials CIRM has backed.

Clinical trials are the goal of laboratory medical science. They are the moment that a possible treatment, studied only in a test tube or a dish or an animal, finally is tested on a human subject.

The first two trial phases primarily test safety: Does this treatment, when given to a human being at an effective dose, cause intolerable side effects? Phase 3 trials are typically the first to tell scientists how well a therapy works in large groups of patients, if it works at all. They are often the last step before scientists — usually working with a for-profit company that has financed the increasingly expensive research — seek FDA approval.

About 900 patients have been involved in the 49 clinical trials CIRM has backed so far, The Chronicle’s review shows. Nearly a fifth of CIRM’s funds, about $530 million, has gone to support the trials. Most of those grants were awarded in the past three years, part of a deliberate effort by the agency to direct more money toward testing treatments.

“Every single project we have is spectacular, and just a couple of years ago may have been considered science fiction,” CIRM President Maria Millan told a state legislative committee in August as she outlined many of the clinical trials the agency has funded.

Only six of the clinical trials, though, have been phase 3 studies. Of those, two were terminated or suspended, three are still recruiting patients, and one — for a bioengineered blood vessel that can be used in dialysis — is under way.

Meanwhile, the National Institutes of Health, the primary federal funding agency for medical research, has far outpaced CIRM in supporting clinical trials in stem cell research. A 2017 analysis by STAT, a science and health news publication, found that, dollar for dollar, the NIH funded 3½ times as many clinical trials as CIRM from 2006 to 2016.

In 2009, President Barack Obama lifted most of the restrictions on federal funding of embryonic stem cell research, but for both agencies, trials using those cells remain rare.

“When we voted for Prop. 71 we wanted clinical trials, we didn’t want basic research,” said Judy Roberson, a longtime CIRM supporter who has lost five family members, including her husband, to Huntington’s disease. Roberson has 17 other relatives who are also at high risk of developing the hereditary neurological disorder, which slowly erodes a person’s ability to walk and talk.

“Our loved ones are going to die. They’re sitting on time bombs,” she said. “You could do basic research for 100 years, but you’re never going to learn everything. So just get in there and try something.”

But accelerating the push of basic science toward human trials is not without its critics. The International Society for Stem Cell Research — the largest body of scientists looking at policy and politics in regenerative medicine — has cautioned against that approach. Many scientists say that, in general, it’s too early to be experimenting on people, particularly with embryonic and induced-pluripotent stem cells, which may cause tumors.

Gene therapy, a field related to stem cells, underwent more than 30 years of grueling research and repeated setbacks before establishing its first commercial successes in 2017: two cancer treatments approved by the FDA.

Embryonic stem cells were isolated for the first time just two decades ago. Induced-pluripotent stem cells were made only 12 years ago. Adult stem cells — the cells responsible for regular repair and upkeep — have been used in bone marrow transplants for more than 50 years, but their application beyond that started to be deeply studied only in the 1980s.

The science simply isn’t there yet, said Arnold Kriegstein, head of UCSF’s stem cell center, who has received $2.5 million from CIRM for basic research.

“CIRM touts 50 or so projects moving toward the clinic, and many of them will likely fail,” Kriegstein said. “It might be more prudent to spend dollars solving basic research problems, where a relatively modest investment can have a huge impact.”

Some suggest that CIRM’s recent aggressive support for clinical trials is directly tied to its plan to return to voters for more funding. The fact that its work is supported by taxpayers increases the urgency to produce results, said Timothy Caulfield, a Canadian law professor at the University of Alberta who closely follows CIRM.

“That creates a lot of pressure to frame the work in terms of near-future miracles, and that will almost always fail,” Caulfield said. “True medical breakthroughs with broad application are incredibly rare.”

To patients desperate for cures, CIRM leaders say stay hopeful. The work may be taking longer than promised, but it will pay off in the end. And the state has too much invested now to give up. Such hope, though, isn’t easy to come by for those beginning to realize that any therapies to help them probably will arrive too late.

“We see how slow progress is, and we know a lot of people are never going to be candidates for a treatment,” said Elieh, who is co-founder of the Northern California Spinal Cord Injury Foundation, a nonprofit patient support group.

Elieh, 54, was injured in a diving accident in 1989, shattering his vertebrae and damaging his spinal cord so badly that he lost movement in his legs and upper body. In the years afterward, he enrolled in clinical trials and costly rehab programs, but none helped.

During the Prop. 71 campaign, Elieh watched celebrities talk about the miraculous ability of stem cells to regenerate tissue. He saw videos of paralyzed rats that could walk again after receiving an injection of stem cells. Clinical trials, scientists said, were just years away.

“Everyone you talked with thought, ‘Wow, we’re going to put $3 billion into this,’ ” Elieh said. “It was really creating hope. And, unfortunately for me, false hope.”

Over the past decade CIRM has funded two clinical trials testing the same treatment for spinal cord injuries. The therapy, though, applies only to people newly injured, not the hundreds of thousands of men and women like Elieh who have been paralyzed for years.

So far, the therapy has proved safe. A handful of patients in the second trial regained some movement, though it’s too soon to say whether stem cells are the reason. While CIRM supporters are keen to hold up that trial as an example of the stunning potential of stem cell therapies, Elieh and many of his peers are more cautious.

“We’ve still barely taken the first step, and we have no idea when the second step will land,” Elieh said. “We all had a lot of hope back then, and we’ve just kept hoping.”

Seated on a stage before 50 people in a town hall-style meeting in Mill Valley, Art Torres had one word to describe the results of the CIRM-funded trial for spinal cord injuries: “Miraculous.”

Torres, former state senator and longtime member of the CIRM board, was enthusiastic in a way that would have made the more cautious scientists running the trial cringe. But CIRM needs a home run.

The looming end of its funding — and the need to ask voters for billions more — presents an existential moment.

Since 2004, the political and scientific climate has changed significantly. Federal funding for embryonic stem cell research is no longer tied up, and many voters are savvier about the limitations of regenerative medicine. The scientists backed by CIRM, meanwhile, face unconventional competition from an unexpected source: a vibrant consumer-clinic industry that’s marketing unproven therapies to those tired of waiting for cures.

Prop. 71’s most tangible achievements — cutting-edge academic buildings, discoveries in petri dishes, advances in lab rats, pioneering trials in human subjects — aren’t necessarily going to resonate with voters. What will are visible triumphs in real people. Those successes are what CIRM’s most ardent supporters are rallying around.

On the cover of the agency’s 2017 annual report was Ronnie, a wide-eyed infant who was cured of an immune deficiency disease called SCID, or “bubble-baby disease.” Children who have the condition typically live in isolation to protect them from fatal infections.

CIRM has helped fund four trials, all at different institutions, testing stem cell therapies for SCID. Ronnie was treated at UCSF using a treatment developed at St. Jude Children’s Research Hospital in Tennessee. A therapy out of UCLA, which has been in clinical trials since 1993, could win FDA approval — a first for CIRM-backed research — in a year or two, say the scientists who developed the treatment. In all, 40 babies have been treated with the UCLA therapy.

And there’s Rosie Barrero.

In a video posted on CIRM’s website, Barrero sits in a sunny room at the agency’s headquarters, now in Oakland, Lake Merritt glittering behind her. She’s earnest as she talks about retinitis pigmentosa, the disease that has slowly blinded her.

Barrero was treated in 2016 in Henry Klassen’s trial for patients with RP. Within months, she could pick out colors and shapes she hadn’t been able to see for years. She could tell her daughters apart. She has regained about “a pinhole” of sight, but that she’s had any improvement at all, she said, is amazing: It means that the therapy works.

“We’re definitely hoping that this work continues to get funded,” Barrero said in an interview. “It’s incredibly important, to all of us.”

If a new bond isn’t approved in 2020, said CIRM President Millan, it could devastate stem cell research in California. Private industry is still reluctant to back research that has yet to produce a treatment, let alone show it can be profitable.

And so, CIRM proponents are turning again to Klein, who plans to lead the 2020 campaign for more research dollars.

In Klein’s downtown Palo Alto office, a series of photos — colorful, fantastical close-ups of stem cells studied by CIRM scientists — hangs above his desk. Once they’d hung in CIRM’s offices. Today they reflect the deep connection he’s retained with the agency, despite not having an official role since stepping down as board chairman seven years ago amid a flurry of criticism.

Late last year, Klein addressed the CIRM board at a meeting about the fate of the agency. According to polls he had paid for — the full results of which he declined to share — 70 percent of voters would support another stem cell funding proposition. No other options for future financing — not private fundraising, not legislative efforts — would work, he said.

It was his son Jordan’s battle with Type 1 diabetes that drove Klein into patient advocacy and stem cell research. But the therapies that Klein believed were imminent did not arrive in time to save Jordan. Two years ago, at age 26, he died from complications related to the disease.

The loss seems to have cemented Klein’s resolve.

“We couldn’t get there fast enough for Jordan,” Klein said. “We have to get there for everyone else.”

Klein rejects the notion that expectations for CIRM were overhyped or voters misled in the 2004 campaign. If cures aren’t yet at hand, they’re surely years closer than they would be without CIRM, he said, and people already are benefiting from research paid for by Prop. 71.

During an interview in his office, Klein played a brief video of a young man who is part of the spinal cord injury trial CIRM has helped fund. Made quadriplegic after a devastating car accident, the man is shown in the video lifting weights.

“After the stem cell surgery, I’m able to live my life again,’ the man says in a quiet, halting voice. “Thank you for giving me my life back.”

Klein turned off the video, his eyes bright.

“I wish all the voters could see this,” he said. Christopher Reeve, whom he considered a friend, “would have been absolutely ecstatic” to have seen such a video, he added.

“In 2004 we had a vision of the future and data on animals,” Klein said. “In 2020, we will have patients who were paralyzed, patients who were blind, patients with cancer who will tell their story. The public will decide.”

Erin Allday and Joaquin Palomino are San Francisco Chronicle staff writers. eallday, jpalomino Twitter: @erinallday, @JoaquinPalomino


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MOORLACH UPDATE — California School District Rankings, Group 11 — August 25, 2018

Group 11 provides the next 66 California public school districts. This traunch represents $4.5 billion in cumulative unrestricted net deficits. The Unrestricted Net Positions (UNPs) range between negative $972 and negative $1,103.

We only see two Orange County school districts in this grouping:

#679 Westminster #808
#729 Newport-Mesa Unified #914

The second piece below is from the Los Angeles Times and provides the political intrigue we’re enjoying behind the scenes up here in Sacramento. The Assembly Speaker and the Senate President pro Tem want AB 84 passed. Almost every editorial board in the state has opined against implementing it. Needing a two-thirds vote, it will require one or more Republicans to assist. So, the pressure was on.

The Senate Republican Caucus decided to shut that door yesterday after our Caucus Chair, Senator Bates, was the recipient of the political power that the Democrats hold up here. This form of pressure was not appreciated and, since not enough Senate Democrats were on board with this bill, we shut the door on this strategy. It will be interesting to see what type of response we see in the last week of Session. Stay tuned.

670 Conejo Valley Unif Thousand Oaks Ventura 862 139,317 $(135,454,768) $ (972)
671 North Monterey Cty Moss Landing Monterey 620 27,381 $ (26,659,859) $ (974)
672 College Elementary Santa Ynez Santa Barb 399 6,123 $ (5,964,821) $ (974)
673 Monterey Peninsula Monterey Monterey 811 91,920 $ (89,552,616) $ (974)
674 Palermo Union Elem Palermo Butte 436 8,391 $ (8,178,944) $ (975)
675 Lammersville Joint Mountain House San Joaquin 484 12,195 $ (11,980,984) $ (982)
676 Chatom Union Turlock Stanislaus 370 4,694 $ (4,615,226) $ (983)
677 Adelanto Elementary Adelanto San Berdoo 748 59,676 $ (58,837,961) $ (986)
678 Bear Valley Unified Big Bear Lake San Berdoo 562 19,480 $ (19,227,029) $ (987)
679 Westminster Westminster Orange 808 88,390 $ (87,333,440) $ (988)
680 Stockton Unified Stockton San Joaquin 907 212,690 $(211,216,409) $ (993)
681 Jacoby Creek Elem Bayside Humboldt 315 2,676 $ (2,658,293) $ (993)
682 Oakland Unified Oakland Alameda 930 426,556 $(426,961,377) $(1,001)
683 Standard Elem Bakersfield Kern 599 24,141 $ (24,180,242) $(1,002)
684 Mountain View Elem El Monte Los Angeles 752 58,868 $ (59,086,569) $(1,004)
685 Lincoln Unified Stockton San Joaquin 717 49,944 $ (50,184,171) $(1,005)
686 Gratton Elementary Denair Stanislaus 196 573 $ (575,866) $(1,005)
687 Bonsall Unified Bonsall San Diego 555 18,347 $ (18,458,720) $(1,006)
688 Scott Valley Unified Fort Jones Siskiyou 383 5,156 $ (5,206,801) $(1,010)
689 Tulelake Basin Joint Tulelake Modoc 301 2,371 $ (2,399,686) $(1,012)
690 Eastern Sierra Unif Bridgeport Mono 362 4,192 $ (4,244,422) $(1,013)
691 Lake Elsinore Unif Lake Elsinore Riverside 852 128,172 $(129,801,800) $(1,013)
692 Sunol Glen Unified Sunol Alameda 240 1,031 $ (1,045,072) $(1,014)
693 Hamilton Unified Hamilton City Glenn 347 3,457 $ (3,508,596) $(1,015)
694 Lakeside Union Bakersfield Kern 457 9,308 $ (9,468,380) $(1,017)
695 Calaveras Unified San Andreas Calaveras 616 25,732 $ (26,358,309) $(1,024)
696 Burlingame Elem Burlingame San Mateo 647 31,833 $ (32,648,590) $(1,026)
697 Ventura Unified Ventura Ventura 847 122,268 $(125,596,180) $(1,027)
698 Holtville Unified Holtville Imperial 449 8,771 $ (9,013,880) $(1,028)
699 Davis Joint Unified Davis Yolo 801 79,936 $ (82,659,843) $(1,034)
700 Oro Grande Elem Oro Grande San Berdoo 249 1,161 $ (1,203,834) $(1,037)
701 Sierra Unified Prather Fresno 471 10,513 $ (10,917,002) $(1,038)
702 Kelseyville Unified Kelseyville Lake 490 12,260 $ (12,731,434) $(1,038)
703 San Carlos Elem San Carlos San Mateo 634 28,148 $ (29,277,653) $(1,040)
704 Twin Rivers Unified McClellan Sacramento 904 193,949 $(202,717,790) $(1,045)
705 Waterford Unified Waterford Stanislaus 467 10,126 $ (10,596,425) $(1,046)
706 Kings Canyon Joint Reedley Fresno 718 48,411 $ (50,660,720) $(1,046)
707 Inglewood Unified Inglewood Los Angeles 842 115,652 $(121,301,527) $(1,049)
708 Livermore Valley Jt Livermore Alameda 822 92,321 $ (96,976,891) $(1,050)
709 Woodlake Unified Woodlake Tulare 499 13,139 $ (13,809,588) $(1,051)
710 Gustine Unified Gustine Merced 461 9,147 $ (9,620,568) $(1,052)
711 Castle Rock Union Castella Shasta 170 363 $ (383,218) $(1,056)
712 Lancaster Elem Lancaster Los Angeles 844 116,342 $(122,985,308) $(1,057)
713 Lompoc Unified Lompoc Santa Barb 763 60,310 $ (63,919,071) $(1,060)
714 Twin Hills Union Sebastopol Sonoma 405 5,892 $ (6,252,305) $(1,061)
715 Laytonville Unified Laytonville Mendocino 332 2,918 $ (3,099,490) $(1,062)
716 Travis Unified Fairfield Solano 657 31,890 $ (33,939,299) $(1,064)
717 San Leandro Unified San Leandro Alameda 796 74,540 $ (79,579,156) $(1,068)
718 Long Beach Unified Long Beach Los Angeles 936 527,548 $(563,658,519) $(1,068)
719 Martinez Unified Martinez Contra Csta 653 31,269 $ (33,503,933) $(1,071)
720 El Tejon Unified Lebec Kern 460 8,873 $ (9,513,006) $(1,072)
721 Le Grand Union Le Grand Merced 310 2,371 $ (2,543,255) $(1,073)
722 Westside Elem Five Points Fresno 266 1,395 $ (1,500,726) $(1,076)
723 Galt Joint Union Galt Sacramento 651 30,628 $ (33,142,589) $(1,082)
724 Hueneme Elem Port Hueneme Ventura 761 57,951 $ (62,844,037) $(1,084)
725 Allensworth Elem Allensworth Tulare 194 496 $ (538,319) $(1,085)
726 Centinela Valley Un Lawndale Los Angeles 883 155,837 $(169,266,655) $(1,086)
727 Riverside Unified Riverside Riverside 921 267,663 $(291,442,489) $(1,089)
728 Bradley Union Elem Bradley Monterey 189 462 $ (503,114) $(1,089)
729 Newport-Mesa Unif Costa Mesa Orange 914 205,879 $(224,251,945) $(1,089)
730 Poway Unified San Diego San Diego 913 201,774 $(220,030,221) $(1,090)
731 Kerman Unified Kerman Fresno 591 20,797 $ (22,698,542) $(1,091)
732 Healdsburg Unified Healdsburg Sonoma 559 17,364 $ (18,993,256) $(1,094)
733 Redlands Unified Redlands San Berdoo 868 130,828 $(143,519,399) $(1,097)
734 Palmdale Elem Palmdale Los Angeles 870 134,142 $(147,687,951) $(1,101)
735 Anderson Valley Unif Boonville Mendocino 336 2,954 $ (3,255,280) $(1,102)
736 Greenfield Union Bakersfield Kern 742 51,846 $ (57,185,520) $(1,103)

Partisan spat puts California campaign fundraising bill in jeopardy


A controversial proposal to boost fundraising power for legislative leaders was put in jeopardy Friday when the Senate Republican Caucus said it would not vote for the measure amid concerns that two GOP bills have been held up by the Democrats.

An aide to Assemblyman Kevin Mullin (D-South San Francisco), who introduced the legislation, said the situation was “still fluid.”

But the letter signed by Senate Republican Leader Patricia Bates and 11 other members of her caucus puts a cloud over the future of the bill, which needs a two-thirds majority to pass.

“After careful review of Assembly Bill 84 (Mullin), the Senate Republican Caucus opposes advancement of the bill this year,” said the letter, which was delivered Friday to Senate Democrats after a Democratic-controlled committee put a hold on two unrelated Bates bills.

The campaign measure, which is opposed by the California Democratic Party and dozens of open-government groups including California Common Cause, would allow partisan caucuses in the Legislature to accept campaign contributions of $36,000 from individual sources for state races, up from the current limit of $4,400.

The Democrats lack a supermajority in the Senate and would need at least one Republican vote to pass the bill, but Capitol sources say some Democratic lawmakers are also reluctant to vote for the bill.

Sen. Joel Anderson (R-San Diego) did not sign the letter that went to the Democrats, and voted for the Mullin bill in committee. He said late Friday he was open to voting for the bill on the floor, but wanted to hear the arguments on both sides and would oppose it if Democrats hold Republican bills hostage.

The Assembly Transportation Committee held up two bills by Bates that would give more time for motorists to get Department of Motor Vehicles licenses renewed and honor a firefighter who died on duty by putting his name on a freeway sign.

Bates demanded an explanation, saying during the committee hearing that “It’s very curious” that her legislation was pulled with “no explanation.”

Assemblyman Jim Frazier (D-Oakley), the committee chairman, told Bates during the hearing that her bills were “pulled at the request of the speaker,” but he added later that there was “a very good possibility” that the bills would be heard in committee next week.

A spokesman for Assembly Speaker Anthony Rendon (D-Paramount) said the committee intends to move one of the bills forward next week and that it was held to work out some issues.

Sen. John Moorlach (R-Costa Mesa) said he signed the letter because he was uncomfortable with how the Mullin bill expands campaign financing in the Capitol.

“The issue is some people have to realize this bill is dead,” he said.

Emily Rusch of the California Public Interest Research Group hopes the Mullin bill is not being revived because she fears it will lead to more special-interest cash flooding to legislative leaders.

“Voting to create new avenues for big campaign contributions is unpopular and out of touch with what voters want to see their elected leaders focus on,” she said. “It’s bad policy and bad politics.”


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MOORLACH UPDATE — Gov. Brown’s Final Budget — June 15, 2018

The 2018-19 Budget votes occurred on the Senate Floor exactly after the bills had been in print for 72 hours. I do not mean to be the poop in the proverbial punch bowl, but anticipating a bumper crop and not reducing unfunded liabilities or sharing the wealth with struggling cities and counties, is very troubling.

I served on the Budget Conference Committee and it not only wipes out your calendar and life for a couple of weeks, it seems as if the Committee was irrelevant (see MOORLACH UPDATE — Conference Committee Cram Down — June 8, 2018). Or, as I put it in my Floor speech, a “nothingburger” (see

The disappointing point in this process for me, after leaving the Capitol last Saturday morning at 1:30 a.m., was that my flight a few hours later was cancelled. So, former California First Lady Gloria Deukmejian, I apologize for missing George’s Memorial Service.

A quick observation is that the Democrats still own it. A small rainy day fund will not hold back a recession and you can expect even more tax increases in the future, should you decide to continue living in California.

Here is a rundown of the various pieces covering yesterday’s legislative session.

The Associated Press covered it, which was picked up by numerous newspapers, including the OC Register. The first piece below is from, appropriately, The Press Democrat.

The Sacramento Bee covers the Capitol, of course, and its sister publication, The Modesto Bee, provides the second piece below.

The LA Times has a Sacramento correspondent, and it recently acquired the San Diego Union-Tribune, bringing us the third piece below.

Fox & Hounds weighs in on the process in the fourth piece below.

On to a different subject, every year I get to nominate a nonprofit organization to be recognized in Sacramento. Two years ago it was the Orange County Rescue Mission, where I was sworn in as Senator. Last year it was HomeAid (see MOORLACH UPDATE — First SB 2-Zone Victory in the OC — August 6, 2017).

This year the honor goes to Mercy House, which recently participated in a glorious facility in Newport Beach (see Congratulations to Larry Haynes and staff! The Daily Pilot and the Orange County Breeze cover the recognition in pieces five and six. Next week we honor the small business of the year.

What? You still want tax and budget news? Well, you’re in luck, as The Bond Buyer satisfies this need in pieces seven and eight below. It addresses the gas tax repeal efforts and the budget, respectively. But, beware, the strategy of “marketing all of the proposed wonderful projects that will be stopped” is being used in full force.

For even more on the gas tax, check out my Bonus directly below. Or, I should say “we interrupt this broadcast with a brief commercial announcement” of a political nature. If you do RSVP to attend, let them know that it was in response to this UPDATE.


You’re Invited…

Fundraiser to Repeal the Gas Tax

June 21, 2018 – 6-7:30pm


VIP Lounge

101 Avenida Vista Hermosa, Suite 190

2nd Floor above Customer Service

San Clemente, CA 92672

Featuring Our “Gas Tax Repeal Heroes”

Hon. Pat Bates, State Senate Republican Leader

Hon. Bill Brough, State Assemblymember

Hon. Carl DeMaio – Gas Tax Repeal Chairman

The Car and Gas Tax Hikes will cost the typical family of four more than $770 more per year! Don’t sit on the sidelines – be part of the taxpayer revolt that will shake up Sacramento. If we all work together, anything is possible!! Please attend this important event – and make a contribution today to the Gas Tax Repeal campaign to help roll back these tax hikes! Personal or corporate contributions welcome in any amount.

RSVP and Secure Contribution Link:

California lawmakers pass budget expanding help for poor

AP Photo/Rich Pedroncelli


State lawmakers approved a $139 billion budget Thursday that uses California’s massive surplus to boost funding for homeless programs, welfare, child care and universities while also socking some money into savings.

The budget, which boosts spending 9 percent for the fiscal year beginning July 1, was approved with support mainly from Democrats.

“We’ve done something pretty great for people in California,” said Sen. Connie Leyva, a Democrat from Chino in the Inland Empire.

The spending plan was negotiated by Democrats Gov. Jerry Brown, Senate President Pro Tem Toni Atkins of San Diego, and Assembly Speaker Anthony Rendon of Lakewood.

California is riding a wave of economic growth that has produced the largest surplus since at least 2000. Even the most conservative forecast pegs the surplus at nearly $9 billion.

Lawmakers and Brown are using that windfall to fill the rainy day fund to the maximum allowed under the state constitution and boost other savings, producing $16 billion in total reserves. Nearly $14 billion of that will be in the rainy day fund, which can only be spent during a budget emergency caused by a natural disaster or decline in revenue.

Republicans praised the focus on savings but said the budget doesn’t do enough to pay down debt and irresponsibly increases long-term commitments that will hamstring the state in the future. Sen. John Moorlach, a Republican from Costa Mesa in Orange County, said the state isn’t doing enough to address growing obligations for pensions and retiree health care.

“In a year when one enjoys a bumper crop, one must set aside cash and pay down the credit card balance,” Moorlach said. “We’ve got to get ahead of this mess.”

The budget will boost assistance for people living in poverty, including more than 13,000 new slots for subsidized child care. People on CalWorks, the state welfare program, will see monthly grants rise by 10 percent in April, the start of a multiyear effort to lift the income of the poorest Californians to 50 percent of the federal poverty level. Advocates said the boost would ensure children aren’t living in deep poverty, which harms their brain development and hinders future performance in school and work.

It includes $500 million for emergency grants to help cities and counties reduce homelessness. The grants can be used on a range of programs, including housing vouchers and shelter construction to help address California’s rapidly rising costs and growing homeless population.

The budget also boosts university funding, forestalling tuition increases at both California State University and University of California, and creates an online community college to offer credentials to working adults unable to attend classes in person. Brown’s administration announced that the first program will offer a credential in medical billing and coding.

The deal left out an expansion of Medi-Cal health care coverage to young immigrants living in the country illegally and financial assistance for people who buy their own insurance in the individual market.

California’s nearly $200 billion total budget includes $138.6 billion in general fund spending, $57.1 billion in special funds that must be spent for specific purposes and $3.9 billion in money from bonds.

As part of the budget negotiations, Brown and lawmakers agreed to allow victims of a notorious California serial killer to get a renewed chance to seek compensation for their emotional trauma or financial losses. Normally, victims have just three years to file with the California Victim Compensation Board for crimes, but the legislation would open a new window for victims to file claims after 72-year-old former police officer Joseph DeAngelo was charged in the Golden State Killer case.

$200 billion California budget sent to Gov. Jerry Brown



California lawmakers approved and sent Gov. Jerry Brown a $200 billion state budget on Thursday, using revenue from a rosy economy to build $16 billion in reserves and steer hundreds of millions of dollars in new funding to universities and programs for the homeless.

The budget agreement passed both houses easily despite some Republican opposition. Democratic majorities highlighted a projected $9 billion surplus as a sign of the state’s recovery since the recession a decade ago.

“This is the best position we’ve been in in years,” said Senate President Pro Tem Toni Atkins, D-San Diego.

The budget hewed fairly closely to the plan Brown presented in May, boosting reserves by billions of dollars rather than committing money to proposals that would have expanded health care and offered tax breaks to undocumented residents.

The budget includes a $138.6 billion general fund. That’s about $70 billion more than the general fund in the state’s 2011-12 budget.

The new budget provides $78 billion for K-12 education, which is about $30 billion more than the state’s recession budget seven years ago.

The budget also frees up $500 million in grants that cities can use to address homelessness. It increases the value of welfare grants through the CalWORKS program, raising spending there by $360 million.

It boosts ongoing funding for the California State University system by $105 million, and provides of hundreds of millions of dollars more for it and the University of California in one-time allocations.

“We have historic investments in K-12 education, historic investments in our higher education. We now have a budget reserve that is larger than the general funds of 33 states,” said Assembly Speaker Anthony Rendon, D-Lakewood. “It’s an investment in our future with respect to early childhood education. It’s also really helps to protect a lot of what we really love about the state, with respect to the environment and our great public schools.”

Republicans warned that the budget did not make a serious dent in the state’s unfunded pension commitments, and that those debts could trigger a financial reckoning in the near future.

“We look like passengers on the Titanic,” Sen. John Moorlach, R-Costa Mesa, said.

But Democrats countered that they’ve carefully accumulated reserves to help the state navigate the next financial downturn.

The budget aims to “fill” the so-called Rainy Day Fund, which by law can hold a sum equivalent to 10 percent of general fund revenue. It sets aside another $2 billion for uncommitted reserves, and opens a new “safety net” reserve for social services with an initial $200 million.

“This is what we’re doing to prepare ourselves for the future because a recession is an inevitability,” said Assemblyman Ian Calderon, D-Whittier.

Some Republicans argued the money would be spent as a rebate to taxpayers. The savings, they asserted, help to lock in high spending that they consider to be irresponsible. “You want a blank check for the future? That’s what this is,” said Assemblyman Jim Patterson, R-Fresno.

California lawmakers meet deadline, sending nearly $200-billion state budget blueprint to Gov. Jerry Brown

By John Myers

Both houses of the California Legislature took final action Thursday on an overarching framework and a few key details of a new state budget, sending the package to Gov. Jerry Brown one day before their legal deadline to take action.

Twenty-five separate pieces of legislation comprise the budget for the state government’s fiscal year that begins next month. Fourteen of the bills were sent to Brown on Thursday, while action is expected early next week on the remaining details.

The $199.6-billion spending plan hews to Brown’s suggestion that a sizable portion of the state’s massive tax windfall be funneled into cash reserves as similar funds were last year, while increasing spending on K-12 education, healthcare and social services. It also provides more than $600 million for new efforts to help California’s homeless, a key component to the deal struck last week by the governor and Democratic legislative leaders.

“This is a solid budget,” Senate President Pro Tem Toni Atkins (D-San Diego) said. “And it builds upon what we’ve already done.”

Republicans provided only a few votes for the overall budget framework in the Assembly and Senate. Other GOP members insisted that the state continues to ignore long-term problems, including looming debt in the years to come.

“We’ve got to get ahead of this mess,” Sen. John Moorlach (R-Costa Mesa) said.

Democrats, however, insisted that the budget offers a reasonable approach to addressing the state’s needs. As is the case in most years, the lion’s share of spending is contained in three categories: education, health and human services, and corrections and rehabilitation.

“We continue our efforts to strengthen the state’s commitment to a human infrastructure,” said Sen. Holly Mitchell (D-Los Angeles), chairwoman of the Senate’s budget committee.

Under state constitutional mandates, K-12 schools and community colleges receive the single largest portion of general fund tax dollars. The new budget puts K-12 funding at $11,639 per student, up slightly from the current year. It includes a phase-in of an effort promoted by Brown to divvy up community college dollars with a new emphasis on student performance outcomes. It also provides $100 million in start-up funds for online community college courses and instruction.

Both the University of California and California State University systems receive funding increases under the budget agreement, though most of the education bills won’t be voted on until next week. The plan offers a combined $344-million one-time boost to the school systems, as well as new ongoing funding that’s expected to expand enrollment on UC and Cal State campuses while allowing university leaders to keep tuition at current levels.

Significant dollars will be spent, too, on health and human services. According to figures provided by the Assembly, almost 1 in 3 state dollars spent under the new budget will go to these programs. Much of it is earmarked for services provided by Medi-Cal, California’s version of Medicaid providing healthcare for its poorest citizens. Some care — including access to physicians, hospitals and child-screening services — is mandated by the federal government, while California adds additional benefits. The governor’s revised budget last month pegged Medi-Cal spending at about $35 billion in the coming fiscal year.

Democratic lawmakers pushed for more spending in one key social services program, persuading Brown to accept a small boost in monthly cash grants to the working poor enrolled in CalWORKS, the state’s welfare assistance program. Those monthly grants have remained unchanged for years, even as inflation pressures have reduced the purchasing power for low-income families. The budget adds $90 million to the grants beginning next spring, as well as a method to more fully fund annual cost-of-living increases in the future.

Subsidies for child care based on income and additional slots in preschool programs are also included in the budget framework. And both Brown and legislative leaders advocated for expanding access to California’s earned income tax credit to an additional 700,000 households. The tax credit, which provides cash to those with very low incomes, will be modified to account for increases in the state’s minimum wage, and it will be made available to workers between the ages of 18 and 24, and those over 65.

While spending increases under the plan, the budget reflects the continued insistence by Brown and lawmakers to stash funds for future economic downturns. Legislative staffers project that the budget passed Thursday will lead to a $15.9-billion cash reserve by next summer, larger than the general fund of 33 U.S. states.

The bulk of that money — $13.8 billion — will be in the “rainy-day fund” established by voters in 2014. Much of what’s left will be in the state’s regular cash reserves, while $200 million is being set aside in the event future budget deficits trigger cuts to CalWORKS.

Those dollars are the result of multibillion-dollar tax revenue windfalls, which have become surprisingly common in recent years. Lawmakers are taking steps in the new budget to change the process of how those dollars are set aside for future needs.

But the mechanics are complicated. The plan to be signed into law by Brown includes a new and unusual “budget deficit savings account,” which will serve as an initial way station for surplus cash. Most of the money will ultimately be sent to the voter-approved reserve fund, but the accounting maneuver could offer new options for other excess dollars.

Some Republicans asked whether the proposal is a move to avoid triggering a 1979 state spending limit — one rarely breached since its inception and the focus of months of debate about how to properly calculate that limit. The provisions of that constitutional limit could require tax refunds.

“It’s been rigged so that no refund can ever be given to the taxpayers,” Assemblywoman Melissa Melendez (R-Lake Elsinore) said. “And that’s disgraceful.”

Others wondered whether a different plan involving tax windfalls — injected late into budget talks by Brown — would actually subsidize the state’s beleaguered high-speed rail project.

“We’ve set in motion a chain of events that this bill compounds,” Sen. Steve Glazer (D-Orinda) said.

Lawmakers were under the gun to pass key portions of the state budget by Friday or lose a portion of their salary under a 2010 law enacted by voters. That law also lowered the threshold for legislative passage to a simple majority in each house. Those two changes have helped create on-time California budgets for six straight years.


The Good Old Days of the Big 5 Budgets?

Joel Fox

By Joel FoxEditor and Co-Publisher of Fox and Hounds Daily

The state budget passed on time but does anyone long for the good old days of the dragged out budget debates? Remember the deal making to get some Republicans to join majority Democrats to reach the required two-thirds vote? OK, you don’t miss those days because no one enjoyed those drawn-out affairs with IOUs issued to state workers and public services delayed. Yet, by reducing the decision making from the Big 5 (governor, majority and minority leaders of both houses) to the one-party Big 3 (Governor, Assembly Speaker and Senate Pro-tem) something important has been lost in missing hearings and debates over budget priorities.

Listen to Republicans left out of the budget process. Senate Budget Committee Vice-chairman Jim Nielsen complained about cancelled public hearings. “This is a manipulation of the budget process whereby the public and their representatives are completely shut out.” “This year’s mismanagement of the committee hearings is done by design – to keep the public in the dark.”

Senator John Moorlach reacted to Gov. Brown’s announcement that he had reached an agreement on the budget with the speaker and the pro tem with a fair question: “Would somebody explain why I am even here and why am I voting tonight on this “behind closed doors” agreement?”

There are good things in the budget, but that is not the point. The $200 billion state budget seemed to be crafted by three individuals directing their staffs. This was not the way state government was taught in school—or are the workings of state government even taught in school anymore?

Sure, under the Big 5 system came wheeling and dealing, which was also not mentioned in school overviews of the legislative process. But at least under the Big 5 system sections of the budget, the more controversial parts, got an airing before the public and the press. And, we didn’t have to deal with the sneaky and often underhanded process of budget trailer bills that include items that should be part of budget debates.

The Big 5 era was not exactly the Good Old Days but the current budget gamesmanship is not a good-government replacement.

State Sen. Moorlach picks Mercy House as Nonprofit of the Year

State Sen. John Moorlach (R-Costa Mesa) named Mercy House — a Santa Ana-based homeless services provider — as his Nonprofit of the Year.

In a resolution last week, Moorlach praised the organization “for providing invaluable services to the people of the local area” and applauded its “long history of community support.”

Moorlach represents the 37th Senate District, which includes Costa Mesa, Huntington Beach, Laguna Beach and Newport Beach.

Screen Shot 2018-06-15 at 8.11.09 PM

On June 6, Sen. John Moorlach, R-Costa Mesa, took great pleasure in issuing a resolution selecting Mercy House of Santa Ana as the 37th Senatorial District’s 2018 Nonprofit of the Year.

A California gas tax repeal would halt thousands of projects

Keeley Webster

Thousands of road projects funded by a recently enacted California gas tax are in jeopardy if voters repeal it.

A Republican-led effort to repeal the gas tax has qualified for November’s ballot and has signs of momentum.

A May 21 USC Dornsife/Los Angeles Times poll found that 51% of California voters favored repealing the law while 38% want to keep it. A poll by the Public Policy Institute of California in February had voters evenly divided with 47% favoring repeal and 48% opposing it.

Democratic state Sen. Josh Newman was recalled by voters in his primarily Orange County district June 5 after conservative talk-show host Carl DeMaio launched a recall effort after Newman voted for Senate Bill 1. DeMaio is also a leading figure in the effort to repeal the gas tax.

SB 1, the gas tax increase approved by the majority Democratic Legislature last year that is expected to raise $5.4 billion annually for 10 years, has fast-tracked projects, but that could stall if the repeal effort succeeds.

“The money collected since last November would still be available for projects since the repeal effort is not retroactive, but the 5,000 projects underway — or those slated to begin soon — would be halted in their tracks,” said Roger Dickinson, executive director of Transportation California, a transportation advocacy organization that supported the gas tax.

“If they could not be paid for with existing funding, they would be dead — and that would apply to the vast majority of projects,” Dickinson said.

“There are smaller ones that could be completed in a year, but many jurisdictions are planning on multi-year funding, and they would not be able to finish the projects they had programmed,” he said.

The tax raised $367 million last year for local streets and road repairs, which was a partial fiscal year for the program, and is expected to bring in $1.1 billion in fiscal 2018-19, said Mitch Weiss, chief deputy director for the California Transportation Commission, the state agency responsible for allocating funds for the state’s transportation construction projects.

The law increased the gasoline tax by 12 cents a gallon, the diesel excise tax by 20 cents a gallon and the diesel sales tax to 5.75% from 1.75%. It also raised annual vehicle registration fees by up to $175. And it created a $100 annual fee, starting in 2020 for zero-emission vehicles that don’t pay gas taxes.

The CTC in May approved $2.7 billion in funding for 61 projects in three programs funded by the gas tax.

Those allocations represent four years of funding for three of the 10 SB 1 programs: the Local Partnership Program, the Solutions for Congested Corridors Program and the Trade Corridor Enhancement Program, according to the state Department of Finance.

Weiss estimates that half of the 4,000 local streets and road projects are solely funded by SB 1 money and would have to be cut. It would then be up to local leaders to figure out how to fund the projects or call them off, he said.

“The bottom line is that projects that are only funded by the SB 1 gas tax are going to be stopped, because they would only receive a year’s worth of funding,” he said.

Santa Barbara and Sonoma counties received $132.8 million and $84.7 million, respectively, for projects that include adding carpool lanes on 15 miles of U.S. 101 through Santa Barbara and on 6.6 miles of the freeway through Marin and Sonoma counties. The San Mateo County Transportation Authority would receive $20 million toward the $540 million cost of a 22-mile carpool lane in both directions on Route 101 between San Francisco International Airport and the city. Other freeways throughout the state received funding for similar projects.

Many smaller cities received awards for everything from road reconstruction to bike lane projects. SB 1 funds also supplement a pre-existing California Department of Transportation program that distributes grants for transit projects.

Gov. Jerry Brown, who promised in his January 25 State of the State speech to do “anything in his power to defeat the repeal,” spent the last weeks of May attending groundbreakings of southern California projects funded by the gas tax.

Brown proposed $4.6 billion in spending from the gas tax in his 2018-19 budget proposal.

Planned projects to construct or rebuild highways, bridges, culverts, local streets and roads, and mass transit already programmed with SB 1 funding “would have to be rescheduled/reprioritized/reprogrammed by the state or local sponsors and moved out to future years to be funded over a longer period with the lower, existing, non-SB funding sources,” California Department of Finance spokesman H.D. Palmer said.

The state’s existing transportation programs are funded using federal and state gas tax revenues, and others receive funding through greenhouse gas cap and trade and diesel sales tax funding, Palmer said.

But new programs created through SB 1 including local partnerships, commuter rail and intercity rail, local planning grants, congested corridors and trade corridors would likely be halted, even on projects that have started, until funding alternatives are identified, Palmer said. Most of the programs received funding following a vigorous series of public meetings to develop program guidelines, he said.

If the gas tax is repealed, Palmer said the suite of projects selected to receive the $400 million estimated to be collected between passage and possible repeal may need to be reevaluated.

“If SB1 revenues are no longer collected, then there would be nothing against which to bond, and there are no plans at this point to pursue GO bonds to fund transportation infrastructure,” Palmer said.

Lodi Mayor Pro Tem JoAnne Mounce, former president of the League of California Cities and a Republican, fervently supports the gas tax.

“It took us almost 10 years to get legislators to come together to create SB1 – and there is nothing to replace it,” Mounce said. “In the meantime, the average citizen is spending $739 dollars annually on vehicle repairs due to the condition of our roads.”

The poor condition of the state’s roads and highways has resulted in highway deaths as well, Mounce said.

“As you know, with the rising cost of pensions, cities have less and less money to do anything else,” Mounce said. “Even in good times, there is not enough money for transportation, that is why the League has been tracking the condition of the state’s roads and bridges.

“We have been saying for the last 10 years they are in deplorable condition – and they are continuing to get worse,” she said.

California state Sen. John Moorlach, R-Cosa Mesa, in a hallway at the State Capitol in Sacramento.

State Sen. John Moorlach, R-Costa Mesa, supports repealing the gas tax.

Sen. John Moorlach, R-Costa Mesa, who supports the repeal, said there are alternatives and he has proposed them in the Legislature.

He advocates for reforms at the California Department of Transportation to better use the $13 billion the agency spends annually, rather than increase the budget to $18 billion.

“I believe there is money there. We just have to get an effective CEO to run Caltrans,” Moorlach said. “We have to have a completely different mindset in our budgeting. California just seems to spend everything every year – rather than setting money aside – and then wakes up and says, ‘Our roads are bad.’ ”

The state senator said he studied Caltrans in comparison to other state agencies and discovered it is among the least efficient in the country.

“We need to have a modification in the budget that if you build something you need to set aside money to repair or replace it,” Moorlach said. “California needs to be more disciplined in how it manages its finances in terms of addressing whatever it needs to maintain.”

He proposed a bill that would stair-step Caltrans up to outsourcing 25% of its work, but it failed – and the brunt of the opposition came from the Caltrans engineers’ union, not its leadership, he said.

SB1 does require Caltrans to produce efficiencies that result in $100 million in savings, but Moorlach said no metrics have been created to track that goal.

What he believes should happen is first reforms should be made so that the state agency spends the money it already has well – and then if more money is needed, voters should be asked to approve a tax increase. Of every $1 that Caltrans spends, he said, only 20 cents makes it to road improvements.

The state’s failure to keep up with housing demand has forced state residents to commute long distances, he said, which puts more pressure on roads.

A significant percentage of his constituents are struggling financially and the senator said he does not want to make it harder for them to make ends meet.

He pointed to Newman’s recall.

“If you look at who voted to recall him, that wasn’t a Republican vote, it’s an across-the-board vote,” Moorlach said. “People get upset when you start messing with their finances.”

The June election provided a favorable sign for gas tax supporters as a lockbox on gas taxes produced through Senate Bill 1 received 80.8% of the vote to pass. The measure amends the state constitution to ensure that the anticipated revenues from the gas tax are dedicated to transportation spending.

“Transportation funding has not necessarily gone to what it’s earmarked for,” Mounce said. “Several years ago, money for roads and bridges was reallocated for high-speed rail and to projects mandated by Assembly Bill 32’s greenhouse gas reductions.”

Funding for transportation projects has just been spread too thin, she said.

The last state gas increase was approved in 1994 and it wasn’t pegged to the consumer price index, Weiss said.

“I am confident that when people start looking at the list of projects happening in their areas, they will see the benefit of those projects to them and why it is important to keep SB 1,” Weiss said. “No one likes paying taxes, but the bottom line is we need a transportation system that can move people and goods.”

Brown’s final California budget approved without drama


California lawmakers broke their tradition of going down to the wire on budget passage by reaching an agreement on a $199.6 billion spending plan Thursday evening.

A rosy economy and an estimated $9 billion surplus by the most conservative estimates resulted in swift passage of the budget through both houses despite some opposition from the Republican minorities.

A constitutional change that allowed budget passage by simple majority, rather than the previous two-thirds supermajority, has enabled the state to pass a budget on time the past six years.

Typically that has meant a budget has passed near midnight on the July 15 deadline, but even that represented a vast improvement over prior years.

Gov. Jerry Brown, who has made efforts to prepare for volatility in state revenues a rallying cry during his nearly eight years in office, convinced lawmakers to set aside $15.9 billion in total reserves, the maximum allowed under the state constitution. All but $2 billion of that goes into the rainy-day fund, which can only be spent during a budget emergency caused by a natural disaster or shrinking revenues. The total also includes $200 million to create a new safety net reserve for CalWorks, the state’s public assistance program.

“This budget strikes an appropriate balance that strengthens our state’s fiscal stability with an unprecedented level of reserves, while prioritizing investments that will address the pressing needs of this state,” said Senator Holly J. Mitchell, D-Los Angeles.

Democrats wanted a significant chunk of the surplus to go for homeless shelters and to build housing for very poor people – and they got that.

The budget agreement included an additional $250 million in one-time emergency aid to local governments to reduce homelessness for $500 million total. It also provides $109 million in ongoing funds for homelessness and $300 million per year for three years beginning in 2019-20 for affordable-housing construction.

“This budget fully funds K-12 and provides $3.6 billion for the neediest schools to provide more resources for their students,” said Sen. Jim Beall, D-San Jose. “We have expanded childcare for the working poor, increased funding for mental health services, and made available a half-billion dollars for local governments to combat homelessness.”

K-14 school funding grew to $78.4 billion in Proposition 98 funding – a 66% increase since 2011-2012. Lawmakers also approved a $3.6 billion increase in the Local Control Funding Formula, which is more than $1 billion above the Jan. 10 proposed budget, and $300 million in one-time money for low-performing students. California State Universities received an additional $260 million while the University of California system got a $210 million increase to prevent tuition increases.

Lawmakers also approved spending $5 billion in Senate Bill 1 transportation funds – money being challenged by an initiative to repeal last year’s gas tax legislation. The budget also included $300 million to tackle deferred maintenance for levees, courthouses, and the two university systems.

“For the first time in years, the state and cities are making progress in maintaining and repairing our aging roads, tunnels and bridges, thanks to Senate Bill 1,” said Beall, the legislation’s author.

They also approved $700 million to rebuild the state Capitol annex. A proposal to expand Medi-Cal health care coverage for immigrants was scrapped.

The Senate Republican caucus decried the 9% increase in spending over last year’s budget.

“While we applaud the governor and the Senate President pro Tem for increasing the rainy day fund, we should also be wary of future economic downturns and pay down more of the massive pension and health debts,” said a joint statement by Senate Republican Leader Patricia Bates, R-Laguna Niguel; Sen. Jim Nielsen, R-Tehama, vice chair of the Senate Budget and Fiscal Review Committee and budget conferee; and Senator John Moorlach, R-Costa Mesa, member of the Senate Budget and Fiscal Review Committee.

In testimony following budget passage, Moorlach called the budget half-baked, saying it will create a fiscal reckoning for future lawmakers.

“When you have a bumper crop you need to set aside money and pay down the credit card balances,” Moorlach said.

Brown has until July 1 to sign the budget.

This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District. If you no longer wish to subscribe, just let me know by responding with a request to do so.

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

The annual budget bill must be approved by June 15th. That means I’ll be in Sacramento next Friday to vote on the one bill that is required every year, according to the California Constitution.

I usually fly home Thursday evenings, but I’m still up here this Friday because I serve on the Budget Conference Committee as one of the two Republican Senators selected for this annual ritual (also see MOORLACH UPDATE — Selected to Serve — May 28, 2018 and The Conference Committee is a short-term assignment with a lot of responsibility. It reviews three proposed budgets and reconciles the various differences, should they occur, from the recommendations made by the Governor, the Senate and/or the Assembly and crafts one agreed-to, take-it-or-leave-it document for approval by both Chambers.

With the 72-hour rule, under which a bill must be published “in its final form before final passage,” logistically, the Budget Conference Committee has to conclude by tonight. Then Legislative Counsel has to work around the clock to assemble the bill in its formal, legal language. And Senate Floor Managers have to prepare the official notification and agenda documents for the proper procedural process to legally vote on this matter. It is a lot of work that goes on in the periphery. But, we’ve all been in a holding pattern for the last several days, discussing a handful of issues up to now.

The Committee has received the agenda around noon! We have asked for five hours to review, digest and opine on the materials in preparation for the meeting, which will start at 5:30 p.m. For the fifth largest economy on the planet, it has a Banana Republic feel to it. The whispering campaign blames the Assembly Democratic staff, which is in charge of this reconciliation task this year. No one is amused.

Worse, at 9:40 a.m., the Governor issued a press release with the following introduction:

Governor Edmund G. Brown Jr., Senate President pro Tempore Toni Atkins and Assembly Speaker Anthony Rendon today announced that they have reached an agreement on the 2018-19 state budget. The budget agreement makes record investments in schools and universities, creates the state’s first online community college, fully fills the Rainy Day Fund, boosts child care and combats homelessness and poverty.

So, would somebody explain why I am even here and why am I voting tonight on this “behind closed doors” agreement?

Maybe I should have worn one of my Mickey Mouse ties today? It may have been a subtle way to communicate how the Democrat majority runs your state. Or maybe I should purchase a tie with mushrooms on it? It may be another way of expressing the joys of being kept in the dark.

I hope to be out of the Capitol by 3 a.m., Saturday morning. Then I board my flight to Orange County at 10 a.m. From there I drive to Long Beach to, hopefully, attend former California Governor George Deukmejian’s Memorial Service. And, then it’s back to Newport Beach for the annual Wooden Boat Festival. The fun life continues.

So, let’s go from local to state to international news. The Newport Beach Independent covers the Wooden Boat Festival in the first piece below. I am a big fan of wooden boats, especially tall ships (see MOORLACH UPDATE — HB Independent — September 15, 2011). I also had the privilege of overseeing the State of California’s Sesquicentennial efforts to secure visiting tall ships for this historic commemoration (see MOORLACH UPDATE — California Lawyer — September 8, 2010).

On the state level, the online OC Register provides another piece mentioning SB 1074 in a fascinating editorial submission (see MOORLACH UPDATE — Selected to Serve — May 28, 2018, MOORLACH UPDATE — Worked So Hard — May 19, 2018, and MOORLACH UPDATE — The Joys of Presenting Bills — April 24, 2018).

On the international front, the opening of the United States Embassy in Jerusalem was met with protests from Palestinians who reside in the immediate area, as no other neighboring nation wishes to locate them within their borders. But, human migrations are not pretty. This delicate matter became a major Senate Floor discussion as a result of the vote on a Resolution (which may explain why I rarely do Resolutions).

I am a supporter of Israel. You know my love for Western State Jewish History (see MOORLACH UPDATE — Western States Jewish History — May 25, 2012). As someone whose parents survived Nazi occupation, I am very supportive of Holocaust survivors and bear the sorrow of those who suffered from this tragic genocide (see MOORLACH UPDATE — Remembrance — June 1, 2012).

So I stood up and mentioned my Sesquicentennial experience. Celebrating 150 years as a state of California was not appreciated by our native populations, who suffered from displacement and death from diseases transmitted by the gold seekers. But, history is replete with these tragic events. We live in a broken world with broken people, like Hitler. But, who has time to give a grand history lesson? So, this goy kept it short and sweet. The Mondoweiss provides an editorial piece on this matter from a pro-Palestinian perspective in the third piece below. The actual vote was 37 for, 2 abstaining, and 1 vacancy due to resignation.

Wooden Boat Festival Returns to Newport Harbor

By : Newport Indy Staff

Guests enjoy the annual Newport Beach Wooden Boat Festival, hosted by the Balboa Yacht Club, in 2017.
— Photo by Tom Walker/courtesy BYC

Seafaring history floats into Newport Harbor this weekend with the return of the annual Newport Beach Wooden Boat Festival, hosted by the Balboa Yacht Club.

Now in its fifth year, it is considered “yachting’s equivalent of the Concours d’Elegance,” officials proclaimed in a press release.

“So many boats – so many stories,” officials wrote.

On Friday, June 8, nearly 50 vessels will begin arriving for the festival, which is open to the public Saturday from 10 a.m. to 5:30 p.m. A closing celebration will be held at 4:30 p.m. Saturday.

On Sunday, the boat parade will begin from Bahia Corinthian Yacht Club at 11 a.m., circling most of Newport Harbor. At 1 p.m., the Heritage Sail-By down the bay will begin near Lido Village.

More than 4,000 visitors are expected to attend this free event, which also offers complimentary shuttle and water taxi service to and from Balboa Yacht Club.

In addition to being able to view and board these wooden treasures, there will be family activities, including toy boat building, live music by the Dave Stephens Band, a presentation by Senator John Moorlach, maritime art and exhibits, food and libations, and a silent auction (including an original painting by famous artist Jim DeWitt).

This year’s featured vessel is the Spirit of Dana Point, the 118-foot schooner built as a replica of a 1770s privateer and previously known as Pilgrim of Newport. It started out life in a Costa Mesa backyard and has a rich local history.

Included in this year’s Festival is Lady Isabelle, one of the Little Ships Fleet of Dunkirk. In May 1940, she was one of the fleet of private boats that rescued more than 330,000 Allied troops stranded in Dunkirk, France. The story recently appeared in Hollywood’s Academy Award winning film “Dunkirk.”

Featured for the first time is the 86-foot schooner Astor, built in 1923 by Fife & Sons of Scotland for an Australian surgeon who named her Ada. He sailed her to his native Australia, where she gained sailboat racing notoriety winning the Sydney to Hobart race three times and competing in the TransPacific races. During the last 18 years, she departed Newport Harbor and traveled the world, just returning in 2017.

Then there is also the 50-foot wheelhouse cruiser, Phantom, whose history includes being requisitioned by the U.S. Navy in World War II to protect the Kaiser Shipyards on the Columbia River. After the war, the battleship gray paint was removed, along with the machine gun, and she was returned to her former glory as a luxury yacht.

For more information, visit


Look in the mirror for climate change


Until the first steam locomotives were invented in the early 19th Century, man could travel as far as he could walk or as far as his horse would take him. Life was dirty, smelly, difficult – and short. Life expectancy was short and human misery was assured.

In the decades and centuries after 1900, after the discovery of oil, and the inventions of the automobile and the airplane an airline industry that can take us anywhere in the world consuming 225 million gallons of aviation fuels every day to move almost 10 million passengers and other things every day, a cruise line industry that takes us to all parts of the world consuming 30 to 50 gallons of fuel for every mile, a leisure industry of hotels, resorts, theme parks, and a transportation industry of rail, trucks and automobiles that can deliver products from around the world and take us to virtually any destination. We also have an electronic and aerospace industry that has everyone wired and wireless, and elaborate infrastructures to support the growing populations.

All of those infrastructures did not exist prior to the 1900’s and they could not exist without the chemicals and by-products manufactured from crude oil, but the primary economic reason refineries exist is to manufacture the fuels for our military, heating and transportation industries. Interestingly, there are no economic reasons just to manufacture the other “stuff” of chemicals and by-products from crude oil that are the basis of virtually everything in our daily and leisurely lifestyles.

Today, these byproducts of fossil fuels often are forgotten when debating whether or not we should move to a future free of carbon-based energy. But those byproducts are real, and essential to our lives. Yet environmentalist extremists still want to eliminate the main source of their current production.

Surprise! Almost everything we use comes from oil, thus we need to look in the mirror for climate change.

Our leisurely lifestyles are based on transportation systems, sewage treatment, sanitation systems, water purification systems, irrigation, synthetic fertilizers and pesticides, genetically improved crops, agricultural productivity, dams, seawalls, heating, air conditioning, sturdy homes, drained swamps, central power stations, vaccinations, pharmaceuticals, medications, eradication of most diseases, improvements in manufacturing productivity, electronics, communication systems, and so on.

Other benefits from fossil fuel energy include the ever reduction in infant mortality and is the major contributor to the longest life expectancy in history all of which directly impacts our quality of life.

The electric vehicle crusade may have limitations to replace the internal combustion engines as current battery technology for EV’s is the lithium-ion battery which is dependent on cobalt for its energy density. Today, there is already a worldwide shortage of Cobalt.

The unintended consequence of too many EV’s from the crusade is that a reduction in the need for manufactured fuels may incentivize closures of refineries that are also manufacturing the other “stuff” for our lifestyles and may be inflationary on all those other crude oil products if that is the primary reason for those refineries to exist economically.

So, do we want to go back to pre-petroleum, horse-and-buggy days, without all of our modern “stuff?” Well, that would solve the persistent problem of unfunded liabilities to pay Social Security and public-employee pensions as few would live past 30 years!

Seriously, we don’t want to roll back civilization. There are better ways to achieve a cleaner environment for ever-growing populations with an increasing numbers of vehicles. Such ways include continual improvements in the fuel efficiencies of internal combustion engines, EVs and hybrids.

And we need sensible legislation at all levels, such a Senate Bill 1074, by state Sen. John Moorlach, R-Costa Mesa, titled Disclosure of Government Imposed Costs. It would require gas stations to post next to fuel pumps a list of all taxes and regulatory costs of every gallon pumped. It would give consumers more information so they could make better judgments on fuel efficiency, while knowing how to influence the policies of their own government.

Ronald Stein is founder of PTS Staffing Solutions, a technical staffing agency that serves the energy industry.


News & Opinion About Palestine, Israel & the United States

Celebrating in Jerusalem, killing in Gaza, pandering in Sacramento

US Politics

David L. Mandel

The May 14 split screen of Israeli and U.S. elites toasting a symbolic embassy opening in Jerusalem while 62 unarmed Palestinian protesters were gunned down by Israeli snipers in Gaza or suffocated by tear gas became an international media meme.

In Sacramento, a third screen could have underlined the stark contrasts even more. At the Capitol, both houses passed resolutions (HR 107, SR 109) congratulating Israel on its anniversary, declaring in the fourth of 12 “Whereas” clauses:

“Israel has much to commemorate and celebrate, most notably that it has established, in its 70 years of existence, the most successful and politically stable democracy in a Middle East that continues to experience great turmoil.”

“Great turmoil” indeed. The toll of 120-plus dead and thousands shot, many with permanently disabling leg wounds and amputations, has been condemned as criminal by UN officials and the world’s major human rights organizations, including B’Tselem in Israel, which called on soldiers to refuse “flagrantly illegal” orders to shoot civilians. From personal experience in the Israeli army, my educated guess is that a significant number may have heeded that call and were sent away from the “front,” silenced by threats of court-martial if they spoke up. Or perhaps the snipers’ ranks were simply pre-purged of any who might have moral qualms. The recently disclosed video of two soldiers celebrating after a long-distance “hit” of a Palestinian who posed no threat whatsoever was jarring. Even more so was the military command’s response: Criticism of the video’s leak, not of the soldiers’ behavior.

Whatever the state of mind in the military, it’s dispiriting to hear from Israeli friends that for the most part, there is anything but “great turmoil” among Jews inside the country. Protests have been small, as most of the population has swallowed the absurd assertions that one of the strongest, most high-tech equipped militaries in the world had no choice but to open fire on what was mostly a peaceful, family-oriented encampment, with many of the victims shot hundreds of meters from fortified positions behind a triple fence that encages some 2 million; and that otherwise, the desperate Gazans would somehow have overrun Israel and slaughtered its population.

And how about that “successful and politically stable democracy” praised in the Capitol resolutions?

Only one state senator, Bill Monning of Monterey, dared to speak of the reality unfolding 10,000 miles away, decrying “the shooting of over 50 unarmed Palestinians at the wall, protesting a history in their view of discrimination, of occupation and a denial of human rights.” Indeed. How complicated should it be to understand that when one national-religious group rules over another that lacks all or most basic rights (depending on where they live), it can’t be called a democracy? In the hellhole that Gaza has become after 11 years of suffocating blockade, who can be surprised that well over 100,000 people, most of them the descendants of Palestinians expelled from their homes around Israel’s establishment in 1948, would march for their human right, unassailable under international law, to return? Fulfilment of that right may well be complicated by all that has happened since, but do they deserve to be shot for asking?

In the end even Monning voted for the resolution along with 57 of 59 senators; he said that his unease was not over what it actually said. But his surprisingly strong words about the Gaza massacre sparked a 25-minute floor discussion, unusual for such congratulatory measures. In between praising Israel and invoking the Holocaust, several senators at least challenged the wisdom of President Trump’s provocative embassy move, and evidenced some discomfort with the day’s juxtapositions. For this, it’s worth watching the video (find the May 14 “Floor Session,” starting at minute 12) of the “debate.” (Nausea alert: They made a whole party out of it, having the Israeli consul-general and a slew of Israel lobby people there on the floor as special guests.)

A Republican senator, John Moorlach of Orange County, had an interesting take in his speech supporting the resolution. At one point he referred to the ethnic cleansing/genocide of California’s native population and the internment of Japanese Americans. Was he alluding to the similar treatment of Palestinians? Well maybe, in fact. It could be that he’s less immersed in and driven by the mythology surrounding Israel’s creation and has a clearer view of reality than many Democrats. If so, he seemed to reconcile these crimes with support of Israel by implying that shit happens and we need to move on: “We live in a broken world,” he sighed. Interesting, though; perhaps it may lead someone, somewhere, to recognize the similarities and draw different conclusions.

One brave senator publicly abstained (one other was absent): Bob Wieckowski of Fremont (suburban Bay Area), in a short statement, cited the incongruity between the resolution’s praise for the fact that “Israel regularly sends humanitarian aid, search and rescue teams, mobile hospitals, and other emergency supplies to help victims of disasters around the world” and the ongoing, human-caused disaster in Gaza.

In the state Assembly, the nearly identical resolution passed without opposition, and 73 of 77 members (there are two vacancies and a suspension due to sexual harassment allegations) jumped on the co-sponsorship bandwagon when it came to the floor. More typically, there was no debate, but at least three members abstained out of discomfort – at least with the timing. (One disclosed this to me in a phone call. The others’ decisions were reported by staffers, but none was willing to speak publicly.)

Compared to such resolutions in the past, even minimal dissent felt satisfying. Well, better than nothing, anyway, but still a frustrating testament to the fear so many legislators clearly feel. It came on the heels of regular efforts by human rights advocates to oppose the drumbeat of legislation and resolutions pushed by Israel-aligned organizations in the Legislature, some of which have been more successful:

  • While a Senate resolution “On anti-Semitism” was rushed through with no opportunity for public input in the closing days of the 2017 session, a similar one in the Assembly was delayed for a committee hearing, then dropped by its author after opponents noted that contained false and dangerous “facts” and included code indicating support for penalizing boycotts of Israel.
  • California’s version of the wave of anti-boycott bills that coursed through statehouses in 2016 passed amid vehement opposition and only after being watered down to pretend it was about discrimination. There is nothing to enforce, but unsurprisingly, it is being cited, quite absurdly at times, in efforts to chill speech critical of Israel. And of course that was its real purpose.

In each of these instances, the introduction of shamefully anti-Palestinian legislation in California, win, lose or in between, provides opportunities to educate and build relationships with lawmakers, their staff and sometimes, media personnel. The same is true in other states and on the federal level. It’s a long haul, but in the process, support for Palestinian rights has become an inseparable part of the progressive agenda.

On May 15, a day after the embassy festival, Gaza massacre and Capitol pander, dozens of us stood broadcast our message to rush hour traffic a few blocks away at 16th and J streets in Sacramento, demanding an end to the killing and Palestinian freedom. The ratio of supportive honks and waves to hecklers was noticeably way up compared to past actions.

To me, the trajectory looks positive.

This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District. If you no longer wish to subscribe, just let me know by responding with a request to do so.

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MOORLACH UPDATE — City CAFR Rankings, Vol. 10 — February 27, 2018

Well, here we are, the 50 California cities with the best per capita unrestricted net positions. It is the first piece below.

This was a fun exercise. So, I’ll be doing it every six months, as Comprehensive Annual Financial Reports (CAFRs) seem to dribble in at their own pace. Note that for one small city below, Doris, the most current CAFR is from 2013! Get ready for more fun in August.

The three cities from Orange County include two from my District, Irvine (#41) and Tustin (#34), but the winner is Cypress (#33), which was in my Supervisorial District and its Chamber of Commerce recognized me, a former Cypress resident, as their 2014 Man of the Year (see MOORLACH UPDATE — Man of the Year — April 11, 2014). Congratulations!

There’s so much drilling that can be done. For instance, city number 482, Vernon, should consider merging with city number 1, City of Industry. It’s too bad that they are not adjacent.

Five years ago, I did a similar analysis of Orange County’s 34 cities, based on their 2010 CAFRs, less unfunded liabilities (see MOORLACH UPDATE — Atwater — October 1, 2012 and MOORLACH UPDATE — Voice of OC — October 10, 2011). The second piece below is an update of the previous list.

Here are the cities that made the biggest moves down the list (movements of three or less spaces are not included):

Villa Park (9 places)

Seal Beach (8)

Stanton (5)
Laguna Niguel (4)
Lake Forest (4)
La Palma (4)

Here are the cities that moved up the list:

Laguna Beach (15)
Irvine (14)
Tustin (6)
Cypress (5)
Yorba Linda (5)

It would be interesting to know the stories behind each city’s repositioning. Comparisons are always difficult. But, it is a measurement from which management can make decisions. This may be a good thesis assignment for someone pursuing a Masters in Public Administration (MPA).

The one big lament I have about Donald Trump being elected President of the United States is that I did not reposition my personal investment portfolio in order to allocate more into equities. The stock market has gone up like a rocket since November of 2016. I guess he is making American great again.

The LA Times Business section had this to say about Orange County:

LOOKING UP, UP, UP: Thanks to a churning U.S. economy, experts have upgraded their already shining assessment of the Southland–and particularly Orange County. It referred to E. Scott Reckard’s piece, titled “County’s Shining Payroll Picture Gets Brighter Still — Jobs: Humming national economy helped create more employment than foreseen.”

Unfortunately, the date of the issue was April 23, 1999. Four months later, with a dramatically amended SB 400 coming to the Floor at the end of session, voted on in the lateness of night, without serious analysis, the California Legislature approved one of the most horrific fiscal missteps in state history. It would be signed by Governor Davis, to his personal regret (see It allowed for public employee defined benefit pension formula upgrades retroactive to the date of hire. And, it was promoted by a public employee union dominated CalPERS board, relying on internal actuaries and their overly optimistic forecasts.

Shortly thereafter, the investment markets would provide three straight years of negative returns, something not seen in modern history.

In the third piece below, I want to remind Californians that high municipal debts, rising interest rates, and a volatile stock market are warning signs. The cities at the bottom of my list need to wake up and get serious, and soon. For when the next downturn arrives, they will be unable to borrow from lending institutions or from the municipal bond market. It will not be pretty. It’s provided in the third piece below in the electronic version of The Sacramento Bee, including their promo from “The Take.”

Rank City Population UNP UNP Per Year of
(Thousands) Capita CAFR
50 San Pablo 31,053 $41,967 $1,351 2017
49 Montague 1,441 $2,058 $1,428 2017
48 Hawaiian Gardens 14,753 $21,723 $1,472 2016
47 Portola 2,127 $3,150 $1,481 2016
46 Ripon 15,132 $22,515 $1,488 2017
45 Monte Sereno 3,501 $5,223 $1,492 2016
44 Ross 2,543 $3,917 $1,540 2017
43 Los Altos Hills 8,634 $13,378 $1,549 2017
42 Solvang 5,593 $8,799 $1,573 2016
41 Irvine 267,086 $433,617 $1,624 2017
40 CarmelbytheSea 3,842 $6,267 $1,631 2014
39 Westlake Village 8,370 $13,921 $1,663 2016
38 Danville 43,355 $72,257 $1,667 2017
37 La Mirada 49,434 $82,798 $1,675 2017
36 Palm Desert 50,740 $87,092 $1,716 2016
35 Agoura Hills 21,018 $36,600 $1,741 2016
34 Tustin 82,372 $144,443 $1,754 2017
33 Cypress 49,655 $89,651 $1,805 2017
32 Morgan Hill 44,145 $80,663 $1,827 2017
31 Point Arena 452 $827 $1,830 2017
30 Malibu 12,742 $23,870 $1,873 2016
29 Avenal 12,491 $24,358 $1,950 2017
28 Dublin 59,686 $120,464 $2,018 2017
27 Lathrop 23,110 $47,769 $2,067 2017
26 Carlsbad 113,725 $249,816 $2,197 2017
25 Half Moon Bay 12,591 $28,173 $2,238 2017
24 San Juan Bautista 1,856 $4,214 $2,270 2017
23 West Hollywood 35,882 $82,141 $2,289 2016
22 Rolling Hills 1,922 $4,595 $2,391 2016
21 Foster City 33,225 $83,096 $2,501 2017
20 Cerritos 50,039 $131,068 $2,619 2017
19 Bradbury 1,107 $3,196 $2,887 2016
18 La Quinta 40,677 $118,125 $2,904 2017
17 Yountville 2,935 $8,659 $2,950 2017
16 Truckee 15,904 $48,246 $3,034 2017
15 Commerce 13,064 $42,452 $3,250 2017
14 Hidden Hills 1,885 $6,569 $3,485 2017
13 Trinidad 369 $1,354 $3,669 2016
12 Shafter 18,868 $73,581 $3,900 2017
11 Rancho Mirage 18,295 $72,676 $3,972 2016
10 Coronado 24,543 $102,264 $4,167 2017
9 Etna 733 $3,511 $4,790 2014
8 Emeryville 11,854 $65,636 $5,537 2017
7 Dorris 966 $5,469 $5,661 2013
6 Beverly Hills 34,646 $250,974 $7,244 2017
5 Colma 1,506 $17,650 $11,720 2016
4 Indian Wells 5,450 $65,151 $11,954 2017
3 Irwindale 1,423 $23,748 $16,689 2016
2 Sand City 384 $11,396 $29,677 2016
1 Industry 440 $67,314 $152,986 2016
Num City Feb. 2018 2010
1 Cypress 33 6
2 Tustin 34 8
3 Irvine 41 17
4 Laguna Beach 55 19
5 Laguna Niguel 56 1
6 Lake Forest 86 2
7 Dana Point 89 4
8 Laguna Woods 100 11
9 La Palma 104 5
10 Aliso Viejo 107 7
11 Yorba Linda 129 16
12 Villa Park 130 3
13 San Clemente 142 12
14 Stanton 150 9
15 Rancho Santa Margarita 156 13
16 Mission Viejo 171 15
17 Laguna Hills 198 14
18 Seal Beach 201 10
19 San Juan Capistrano 223 18
20 Buena Park 302 22
21 La Habra 315 23
22 Los Alamitos 328 21
23 Garden Grove 330 20
24 Westminster 346 24
25 Placentia 349 26
26 Fountain Valley 362 25
27 Orange 367 28
28 Fullerton 386 27
29 Huntington Beach 422 29
30 Santa Ana 423 30
31 Anaheim 426 33
32 Newport Beach 434 32
33 Brea 438 34
34 Costa Mesa 444 31

California Forum

Sen. John Moorlach: A spike in state liability for retiree health care and recent stock market tremors are red flags that the economy isn’t as healthy as we think. Read more.

Welcome to The Take, your opinion-politics newsletter, produced by The Sacramento Bee’s editorial board. Please sign up for it here and tell your friends.


Two red flags that California’s economy isn’t as healthy as we think


Special to The Sacramento Bee

Two recent financial tremors should caution California and its municipalities that they had better get their financial houses in order. The first came from Controller Betty Yee in her update on the state’s retiree health care liabilities.

On January 31, she reported “the state’s cost for retiree health and dental benefits” has grown to $92 billion, up from last year’s $77 billion.

This is only the second year she has issued this report, following the standards issued by the Governmental Accounting Standards Board. But it was a $15 billion increase.

Let’s hope this spike is an anomaly and not a trend.

Yet Yee warned the liability “will be unpredictable and will remain a paramount fiscal challenge over the next three decades.”

This $92 billion becomes the second largest number in the state’s list of outstanding liabilities. Even larger, as Gov. Jerry Brown itemized in his January 10 budget proposal for fiscal year 2018-19, is the $176 billion owed for underfunded pensions.

Add in $3.28 billion for several lesser liabilities, such as loans from special funds, and $19.3 billion for University of California retirees’ health care, and the total comes to $290 billion. This means every man, woman and child in California owes $7,300 to pay this balance off.

The Brown budget proposes paying down only $1.5 billion of that. The rest is left to his successors to tackle.

The second tremor came on Feb. 5 with the massive stock market drop, the beginning of the worst week for investors since 2008.

Turbulence and volatility are now the concern. With some indicators showing inflation rising again, the New York Times reported a week and a half later that “nearly all mainstream economists agree that at some point, higher interest rates and inflation hurt stock prices.”

My purpose here is to simply reiterate that the state and its counties and cities need to get their financial cards in a row. Even if the stock market continues moving up, a $290 billion unfunded liability simply isn’t sustainable. And if the market crashes, and stays crashed, then what?

I’ve been here before. In 1994, I warned that Orange County’s cash investment strategy was unsustainable because of “interest rate risk.” I was running, but lost that June, against longtime county Treasurer-Tax Collector Bob Citron, whose Midas touch with investments seemed to be invincible – until it wasn’t.

When Government Fails: The Orange County Bankruptcy,” published in 1998 by Mark Baldassare, president and CEO of the Public Policy Institute of California, recounted what happened. He cited a May 31, 1994 letter I sent to then-Supervisor Tom Riley, warning that the fund had lost $1.2 billion since interest rates started rising in February 1994.

Baldassare explained how I explained Citron’s approach would work “only if there were declining interest rates over several years, which was impossible to predict” – a situation eerily similar to 2018. Riley “dismissed” the warning based on the advice of “financial experts.”

Orange County filed for Chapter 9 bankruptcy protection that December in what then was the largest municipal bankruptcy in American history, with losses totaling $1.6 billion. In addition to Baldassare’s, dozens of books have been written quoting my warnings as a cautionary tale for today’s fiscal stewards.

What people do with their own money is their business. What government officials do with the people’s money is everybody’s business.

Elected officials need to encourage an emphasis on building cash reserves, cutting fluff and focusing on debt management, before their debts define who manages their municipalities.


This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District. If you no longer wish to subscribe, just let me know by responding with a request to do so.

Also follow me on Facebook & Twitter @SenatorMoorlach.