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 CAMPAIGN UPDATE — Proposition 6 — August 11, 2018

Campaign season has started and November 6th is not that far off. One of the ballot measures you will be voting on is Proposition 6, which would repeal the gas and auto tax increase voted in by the Democratic supermajority and one Republican last year with Senate Bill 1.

The battle over Prop. 6 will be between taxpayers and tax-eaters. The “tax-eaters” are the cities, counties and state that will be fixing the roads. It is also the companies that will be retained to assist in this effort. So, the private sector industries benefiting from the taxpayers will be opposing this ballot measure in order to protect their potential profits. As they say, “when money talks, the truth is silent.” So you will hear plenty of reasons to oppose Prop. 6 by this well funded, and selfishly motivated constituency.

The sad story is that if this collaboration of tax-eaters could just convince Caltrans to be one of the better managed Departments of Transportation, we could have avoided this debate. Governor Brown failed in improving this department.

The “taxpayers” are you and your neighbors who are feeling the stress of being overtaxed. Last month, in the 29th Senate District, the voters showed their dissatisfaction with the gas tax increase by recalling their Senator, who had voted for it. The natives are definitely restless and this will be a fierce fall campaign battle.

The titular leader of the Proposition weighs in with two similar editorial pieces. The first is from the San Diego Union-Tribune and the second is from the San Francisco Chronicle. Carl DeMaio has been the energy bunny on this issue and continues to lead the charge. If you’ve been reading my UPDATEs since my election to the State Senate, you’ll see my research in both pieces.

Why Californians should repeal gas tax

By Carl DeMaio

Californians are struggling as the cost of living skyrockets higher. Unfortunately, state politicians are simply adding to the financial strain on working families with massive increases in our gas and car taxes.

That’s why it is important to vote Yes on Proposition 6 to repeal these regressive and unfair tax hikes that will increase the cost of living for the typical family of four by up to $800 more per year.

It gets worse! If we don’t pass Proposition 6, the car and gas tax hikes are slated to increase every year automatically — without a vote of the people.

This year Californians will pay nearly $1 more per gallon because of taxes, fees and other government mandates. By 2021, many Californians will be paying close to $2 more a gallon extra because of taxes, fees and other government mandates — that’s up to $40 extra each time you fill up your car.

Everyone agrees we need to fix our roads, but state politicians and special interests are lying to voters when they claim the gas and car tax hikes will be used to fix our crumbling roads.

As we have seen in the past, the gas tax money is largely diverted away from roads and what little funding that is provided to roads is riddled with waste, fraud and abuse.

State Sen. John Moorlach, R-Costa Mesa, released an independent analysis of CalTrans’ budget showing that only 20 percent of the gas tax funds were spent anywhere near roads.

Where do the politicians divert the gas tax money to? The funding has been diverted to cover budget deficits so politicians can continue to spend in other areas like higher salaries and pensions for state workers. For example, bus drivers in the Bay Area are earning six figures annually — with one bus driver earning $227,516 in pay and benefits last year alone!

Of the funds actually spent on infrastructure, the majority of funds get diverted from roads to transit buses, light rail projects, bike lanes (to replace roads), and even park land acquisition.

Our existing transportation agencies are riddled with waste and inefficiency. A recent study by the Reason Foundation shows for every $1 spent on average nationally to maintain or repair a mile of roadway, California spends $4.7 dollars for the same mile — a waste inflation factor of 470 percent.

Politicians will try to mislead you by bringing up the recently approved Proposition 69. Written entirely by politicians themselves, it is not the “lock box” they claim it is.

First, Proposition 69 did not cover all of the gas tax and transportation taxes we have to pay. Second, Proposition 69 contained zero accountability on where the gas funds will be spent — transit, bike lanes, parks, rail projects, etc. could receive all the funds instead of roads. Finally, the gas tax measure is specifically written to allow the governor to transfer the funds to cover General Fund shortfalls without a vote of the legislature or the people.

By voting Yes on Proposition 6 you can back a better solution to fix our roads without tax hikes.

Consider this simple fact: Before the latest gas and car tax hikes, Californians already paid one of the highest gas tax rates in the nation. That provides more than enough funding to have great roads, but only if the money is properly spent.

The Proposition 6 coalition not only seeks the repeal of the gas and car tax hikes, but we propose all of the previous gas tax be spent entirely on roads. We also propose earmarking the sales tax on cars to regional, inter-modal transportation projects. Finally we would impose significant accountability, efficiency and transparency reforms to make sure our funds are effectively spent.

A Yes vote on Proposition 6 will provide immediate tax relief to working families to help them with their cost of living. A Yes vote on Proposition 6 sends a message to out-of-touch politicians that we must make California more affordable, not less affordable. And a Yes vote on Proposition 6 puts us on the path to fixing our roads without a tax hike.

Nearly 1 million Californians signed the petition to get Proposition 6 on the ballot — Democrats, independents and Republicans all see our cost of living as unsustainable. Get more information on the Yes on Prop 6 campaign and join our grassroots effort by going to

DeMaio, a former San Diego City Councilmember, is Chairman of Reform California – Yes on Prop 6.



Repeal California’s gas tax increase and require road repairs

By Carl DeMaio

In this era of divisive politics, here’s something everyone can agree on: The cost of living in California is way too high. And the recently imposed increases in the state gasoline taxes and vehicle fees will hit working families hard by increasing the cost of living for the typical family of four by roughly $800 per year.

These tax increases are unfair, regressive and simply too much. That’s why nearly 1 million Californians from all walks of life signed the petition to get Proposition 6, the “Voter Approval for Future Gas and Vehicle Taxes and 2017 Tax Repeal Initiative,” on the ballot. Democrats, independents and Republicans all see our cost of living as unsustainable.

In addition to providing immediate tax relief to working families by repealing the gas tax and vehicle fee increases, a “yes” vote on Prop. 6 sends a message to out-of-touch politicians that we must make California more, not less, affordable.

If we don’t pass Prop. 6, a gas tax is slated to increase every year automatically — without a vote of the people.

This year, Californians will pay nearly $1 more per gallon because of increased taxes, vehicle registration and commercial weight fees and other government mandates such as the cap-and-trade assessment on fuels. By 2021, many Californians will be paying close to $2 more a gallon extra because of taxes, fees and other government mandates.

In addition to fighting the higher costs, a “yes” Prop. 6 will end this fraud being perpetrated by Sacramento: That the state spends the money to fix our roads. Want proof? Prior to these gas and car tax increases, California drivers were already paying some of the highest gas taxes in the country, and yet we still have the fourth-worst roads, according to Business Insider.

State Sen. John Moorlach, R-Costa Mesa (Orange County), a certified public accountant, has called out a California Legislative Analyst Office’s analysis of state highway and road programs funding and spending that shows only 20 percent of the gas tax funds were spent on roads.

The politicians will claim that Proposition 69, the “Transportation Taxes and Fees Lockbox” initiative approved by 81 percent of the electorate in June, provides a guarantee for road spending, but that is a flat lie.

Prop. 69 fails to cover all the transportation taxes we pay. It fails to guarantee even a single penny for roads. Instead, Prop. 69 allows the money to be diverted to a wide range of programs, including bike lanes, parkland acquisition, transit programs, light rail, and the state’s debt-ridden government pension program. Finally, the law gives the governor the ability to transfer all gas tax funds to cover General Fund shortfalls without even a vote of the Legislature or the people!

Bottom line: There is no guarantee for roads in these more recent gas and vehicle tax increases.

What little money that does make it to the roads is riddled with waste, fraud and abuse. The Reason Foundation’s Annual Highway Report reveals that California spends 2.6 times per mile more than the national average on state-controlled highways.

In 2014, California state auditors slammed Caltrans for “weak cost controls” that “create opportunities for fraud, waste and abuse.” Those same auditors also found Caltrans is overstaffed by 3,500 employees at a cost of a half billion dollars a year. One Caltrans engineer even golfed for 55 days while on the clock!

There is a better plan to fix our roads and transportation systems without a tax increase that will hurt working families.

The Prop. 6 coalition not only seeks the repeal of the gas tax and vehicle fee increases imposed by the Legislature this year, but we propose that 100 percent of gas tax revenues be spent on roads. We also propose earmarking the sales tax on autos for regional inter-modal transportation projects approved by voters in the region served. Finally, we would impose significant accountability, efficiency and transparency reforms to make sure our tax funds are effectively spent.

A “yes” vote on Prop. 6:

•Puts us on the path to fixing our roads without a gas tax increase.

•Gives struggling working families a break when they need it the most.

Carl DeMaio, a former San Diego city council member, is the chairman of Reform California — Yes on Prop 6. For more information, go to To comment, submit your letter to the editor at



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MOORLACH UPDATE — Model Legislator — August 4, 2018

After having written several commentaries recently that have been published around the state, the question that has been coming to my mind is, “Where are the Letters to the Editor?” Why doesn’t someone pipe in and take me on. After all, the funnest part of writing editorials is enjoying the published reactions.

Well, no sooner after this thought crossed my mind and the San Francisco Chronicle publishes one! And, it was an affirming one, to boot. I’m not sure my “ulterior motive” was to eliminate a “fire prevention fee,” but I’ll take the kind words all the same. It’s the first piece below (also see MOORLACH UPDATE — Reducing Wildfires — July 31, 2018).

MyNewsLA provides the latest news on Judge David O. Carter’s efforts to address the homelessness crisis in Orange County (for a sampling on this topic, see MOORLACH UPDATE — Homelessness JPA Solution — July 11, 2018).

Judge Carter held a long hearing yesterday and the results are provided in the second piece below. Judge Carter really wants to use Fairview Developmental Center as a temporary solution. He asked if the host city would approve 3 or 4 beds. Costa Mesa has certainly carried its share of the load. But, it also needs to vision for the future for this closing facility.

In the meantime, I’m working to support a collaborative plan to house 2,700 in temporary housing units with supportive services countywide. In visioning for this effort, there is a way to help individuals help themselves. By providing temporary housing, and requiring an achievable plan to assist those who wish to obtain occupational skills, work at a job, and save money, thus allowing them to reenter the fulfilling life of self-sufficiency.

Letters to the Editor:

Model legislator

Regarding “3 practical steps to reduce wildfires here” (Open Forum, July 31): Thank you for publishing Republican state Sen. John Moorlach’s piece on how to address wildfires in California and about their impacts on climate change. We should put some Republican ideas on the table when they’re good ones. Instead of promoting President Trump, why can’t you publish more Moorlach?

He is a model legislator who has worked across the aisle with San Francisco’s own state Sen. Scott Wiener on SB384 (reforming the sex offender registry). That said, Moorlach has an ulterior motive — stopping the statewide fire prevention fee. He is right to do so: It just backfills the spiraling pension debt without increasing services. Too much Trump ignores this problem.

Thomas Busse, San Francisco

OC Officials Move Closer to Homeless Solutions



Santa Ana and Anaheim officials moved closer Friday to settling with homeless advocates who filed a federal class-action lawsuit to block law enforcement from enforcing anti-camping ordinances.

Santa Ana and Orange County officials have a tentative agreement to open a jointly operated 700-bed facility and Anaheim officials are working on a 200-bed site.

U.S. District Judge David O. Carter, who is presiding over the lawsuit, praised Anaheim and Santa Ana officials, but he prodded Santa Ana and Orange County leaders who had a memorandum of understanding that came a bit unglued Thursday to settle their differences.

Carter also pressed Costa Mesa City Manager Tom Hatch to consider using the Fairview Developmental Center in his city as a temporary shelter for transients.

Officials estimate there are 2,584 unsheltered transients in the county, so the goal is to provide shelter for 60 percent, or 1,550 people. Officials are hoping to set aside 425 beds for transients in northern cities, 200 to 300 for those in the central part of the county and 300 beds for transients in south county.

Carter said the county will receive at least $15.5 million in emergency shelter funds from the state in the coming year with $9.9 million for cities, including $5.1 million for Anaheim and $4.8 million for Santa Ana.

“So when I hear we don’t have any money, yeah we do,” Carter said.

Carter ordered all of the attorneys back to court Sept. 7 for a hearing in which he will consider issuing a temporary restraining order if more progress isn’t made to provide shelter beds.

Carter has the authority to issue a restraining order preventing cities from enforcing anti-camping ordinances until officials can provide proof they have enough beds for transients in their city.

The judge has been using the threat of the restraining order to prod local officials to work out a settlement or face “10 years of litigation” and the specter of scrambling to build shelter beds while being unable to arrest transients for camping.

Those cities could see a mass migration of transients from other cities where anti-camping ordinances could be enforced, Carter said.

Carter said he toured the Fairview Developmental Center in Costa Mesa and said it was “ideal” as a temporary shelter because it has dormitories and other facilities that are largely unused on a sprawling campus.

Earlier this year state Sen. John Moorlach, R-Costa Mesa, and Supervisor Shawn Nelson asked state officials who own the property previously used to treat severely developmentally disabled about using it as a temporary shelter for the homeless. The proposal didn’t set well with Costa Mesa City Council members and angry residents, prompting the council to pass a resolution opposing any such plan.

Hatch told the judge residents several years ago approved a general plan for the property which would set aside 50 percent of it for single-family homes, 25 percent for open space and 25 percent for “institutional activities.”

Carter pressed Hatch to have city officials call Gov. Jerry Brown, who the judge spoke with last night, to see if a deal could be worked out to let the county use the center as a temporary shelter.

“It’s magnificent. It’s perfect,” Carter said of the center.

The judge said any such move would be temporary to help officials work on more long-term plans for more permanent housing for the homeless.

Carter, however, said he understood any such move would be unpopular in the city.

“Costa Mesa is always wiling to do its fair share,” Hatch said.

Still up in the air is what leaders in south Orange County cities will do to address homelessness. Laguna Niguel City Manager Kristine Ridge said she heard Carter’s admonitions “loud and clear” and would alert her colleagues.

Attorney Carol Sobel, who represents the homeless in the lawsuit, said she was optimistic all sides could come to a settlement. She referenced her 18 years of involvement in similar litigation in Los Angeles County.

“So this is like a speedway,” she told reporters after the hearing.


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MOORLACH UPDATE — Reducing Wildfires — July 31, 2018

You can see the smoky haze in the Northern California area. Everything has a brown tinge from the sunlight. The area is literally covered in smoke. Some blame climate change. I blame poor public land management, cost cutting on electric transmission lines, and misdirected state budget spending.

This state must get out of this tragic haze and think more clearly about addressing wildfires. Otherwise, Sacramento’s previous efforts to address greenhouse gases are insincere and just more showmanship. Simply put, previous leadership efforts have been smoke and mist. With more residents tragically losing their lives in the past few days, it’s time for a turnaround in thinking at the Capitol.

I dare to propose three recommendations in the San Francisco Chronicle piece provided below.

3 practical steps to reduce wildfires in California

By John Moorlach

A single forest fire can release four or five times as much greenhouse gas than are reduced by a year’s worth of government-regulated industry and personal vehicles emission. Oddly, the California Air Resources Board doesn’t even count wildfire greenhouse gases in its carbon-reduction reports.

So if we want to get serious about reducing greenhouses gases, we’re going to need to take some bold steps to prevent out-of-control wildfires.

Are there actions we can take beside the usual precautions such as clearing flammable underbrush and planning for an evacuation? Yes.

1. We should revisit Senate Bill 1463, which I authored in 2018 but was killed in committee even though no one testified in opposition to it. Called “Cap and Trees,” it would continuously appropriate 25 percent of state cap-and-trade funds to counties to harden the state’s utility infrastructure and better manage wildlands and our overgrown and drought-weakened forests.

Although the new fires’ origins still are being investigated, both of last year’s major wildfires were caused at least in part by collapsing power lines whose sparks sent off blazes. Further, the bill required the Air Resources Board to include greenhouse gas emissions from wildland and forest fires in its updated scoping plan.

2. We should stop funding the high-speed rail project with cap-and-trade dollars — $621 million this year, according to the analysis of the fiscal 2018-19 budget by the Legislative Analyst’s Office — and divert it to protecting our forests. This makes sense as the construction of high-speed rail is also producing enormous quantities of greenhouse gases.

Doing so would be a “three-fer”: We’d stop sinking good money after bad; we’d manage our forests better, saving lives and property; and we’d actually make a serious dent in reducing greenhouse gases.

Some of this may involve prescribed burns in our forests, as authored this year in Senate Bill 1260 by my Democratic colleague, Hannah-Beth Jackson of Santa Barbara. Because the forests are going to burn anyway, we’re much better off reducing the fuel load safely. Prescribed burns, where fires are purposely set when humidity and temperatures limit damage, are the primary tool to use.

3. Where such burns are impractical, such as around homes and developed property, we can employ mechanical thinning. The mechanically harvested shrubs and saplings can be used for construction materials, thus sequestering carbon, and act as fuel for biomass power plants.

Unfortunately, decades of restrictive preservationist policy — letting the forests grow unfettered with little to no management — have devastated local economies and shuttered many of our mills and biomass energy plants. State policies should encourage a balanced vegetation management regime to foster the requisite institutional know-how and tools to proactively deal with these fire-prone areas.

As with so many problems in this state, solutions exist, but are being shunned due to misconceptions or political ideology. Until we pass and implement real solutions, the state will continue to burn.

State Sen. John Moorlach, R-Costa Mesa, represents portions of Orange County.

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MOORLACH UPDATE — SB 227 — January 15, 2018

Allow me to wish you a solemn Martin Luther King Day.

Well, the 2018 Session has begun. Last week found me in three of my committees, Public Employment and Retirement, Judiciary, and Governance and Finance, where I also presented three of my bills. I also had to present a bill in the Senate Health Committee. Of the four, two have moved forward.

On top of these multi-hour commitments, I also attended four hearings for Public Employment and Retirement, Judiciary, and Governance and Finance (two). It was a packed week, as I actually attend scheduled committee meetings and hearings. And I engage. If you have access to the CalChannel, you saw plenty of me over the weekend, as these meetings were broadcast one after another.

The one meeting that caught the attention of those in the media was Governance and Finance’s discussion of SB 227 (de Leon), which attempts to make a state tax a deductible contribution on the Federal Income Tax Return, Schedule A (see MOORLACH UPDATE — Contribution Contrivance — January 6, 2018 january 6, 2018 john moorlach). After nearly two decades of income tax preparation experience in my first career, I had a few questions. Bloomberg News and The San Francisco Chronicle pick up a small portion of the fun in the two pieces below.

If you make estimated tax payments, then today is the due date for the first one. And we both know that you are not considering this required remittance as a charitable contribution. For my closing remarks during Committee, go to

BONUS: I have a District fund raising event at the end of the month, January 26th at 5:30 p.m., and I would love for you to attend and to invite as many of your friends that are concerned about the direction of this state to participate, as well.

As you can see by this UPDATE, I’m engaged on your behalf and would really appreciate your support. Former Costa Mesa Mayor Steve Mensinger and current Costa Mesa Councilman Jim Righeimer are the hosts. We’re enjoying a great response and you will be glad that you attended.

For a copy of the invitation and an easy way to RSVP, please go to

California End-Run Around Tax Deduction Cap Passes First Test

By Laura Mahoney

A bill to let California taxpayers make charitable contributions to the state as an end-run around the new cap on federal deductions for state and local tax payments passed its first legislative test Jan. 10.

California Senate President Pro Tempore Kevin De Leon (D) said his bill ( S.B. 227) is creating pressure on Congress to repeal the new $10,000 cap on federal deductions for taxes paid at the state and local level. It passed on a partisan 5-1 vote in the Senate Governance and Finance Committee, with Democrats favoring and one Republican opposing.

“This new tax law deliberately targets taxpayers in blue states,” De Leon said. “It is designed to shield millions of Californians from significant tax increases.”

The new federal tax law (Pub. L. No. 115-97), signed by President Donald Trump in December 2017, allows taxpayers to deduct up to $10,000 of property taxes, and state and local income or sales taxes. The previous law placed no limit on the amount of state and local taxes that could be deducted—and many high-tax states are exploring options to combat the slashed tax break.

As it is now written, De Leon’s bill would allow state taxpayers to receive a 100 percent credit for amounts they donate to the California Excellence Fund to satisfy their state income tax liabilities. Taxpayers could claim the credit as a charitable contribution to reduce their federal tax liabilities.

3 Million Californians

De Leon said at least 3 million Californians who pay more than $10,000 combined in state income tax and property tax would benefit from the measure.

The bill moves next to the Senate Appropriations Committee, where amendments may fill out the details. Possible amendments could reduce the credit from the 100 percent proposed and make at least some of the contributions voluntary.

Gov. Jerry Brown (D) said he is willing to consider the idea.

“Yes, I’m certainly open to it,” he told reporters at a news conference to release his proposed budget for the next fiscal year. “It looks interesting. I have two questions: Does it work, and if it does work, will the Internal Revenue Service issue a regulation and completely subvert it?”

The bill must pass the Senate by Jan. 31 to move to the Assembly, where it must pass by Aug. 31 to reach the governor’s desk.

Help for Wealthy?

De Leon tried to beat back criticism from two Republicans on the committee that the bill would mainly help wealthy people, could harm overall charitable giving, lacks detail, and could be undone by the IRS or Congress.

“It’s rich that you guys are trying to help the wealthy now in California, so welcome aboard,” Sen. John Moorlach (R) said.

Sen. Janet Nguyen (R), the committee vice chair, asked De Leon to add provisions to hold taxpayers harmless from penalties if the state enacts the bill and the IRS disallows federal deductions for the state credit.

De Leon said the Republicans were erroneously claiming the bill would mainly benefit the wealthy—and said the bill will withstand scrutiny.

“I want to be sure we don’t mischaracterize this measure as protecting the 1 percent,” he said. “Let’s not go to Armageddon.”

Possible Amendments

Two legal scholars who helped De Leon present the bill to the committee offered ideas for amendments that they said would better protect the bill from administrative or legal challenges.

Darien Shanske, professor from University of California, Davis School of Law, and Joseph Bankman, a law and business professor from Stanford University, said reducing the credit below 100 percent would make it more like similar but smaller-scale tax credit programs in California and more than 30 other states. Making some of the contribution voluntary, rather than a mandatory contribution to satisfy tax liability, would help overcome questions about the benefit a taxpayer receives from the contributions.

“The amendments would make it extremely unlikely it would face a realistic administrative or judicial challenge, and, even if it did, I can’t imagine a taxpayer would be penalized,” Bankman said.

Most Generous

An analysis of the bill from committee staff points out some of the weaknesses that amendments could address.

“This bill would enact the most generous tax credits ever allowed in California, which when combined with the federal charitable deduction, would afford the donating taxpayer benefits that exceed the amount contributed,” the staff analysis said.

Jim Gross, a lobbyist representing the California Society of CPAs, told the committee the group doesn’t have a position on the bill but has concerns. The idea to make at least some of the contributions voluntary would address some of those concerns, he said.

No other witnesses testified for or against the bill. In the brief hearing, lawmakers barely touched on the mechanics or finer points of the proposal, although Moorlach, a CPA, questioned how taxpayers should handle withholding of taxes from their wages, and whether they could simply tell their employer not to withhold at all.

Bankman said taxpayers can already adjust their withholding, and other options can be explored.

To contact the reporter on this story: Laura Mahoney in Sacramento, Calif., atlmahoney

To contact the editor responsible for this story: Ryan C. Tuck at rtuck

For More Information

Text of S.B. 227 is at

Will plan to replace state-tax deduction with charitable donation fly?

By Kathleen Pender

A bill that would let Californians circumvent the limit placed on state tax and local deductions under the new federal tax law was passed by a state Senate committee last week after a group of law school professors defended the idea in a paper.

But the proposal still faces an uncertain future. U.S. Treasury Secretary Steven Mnuchin has called the idea “ridiculous.” The Internal Revenue Service reports to Treasury.

The Republican-crafted tax overhaul limits the itemized deduction for all state and local income, property and other taxes combined to $10,000 per federal return starting this year. Previously, this deduction was unlimited. The bill also reduces federal tax rates, partly in exchange for reducing deductions.

SB277, by state Senate President Pro Tem Kevin de León, D-Los Angeles, would let California taxpayers donate money to a new state fund and get a dollar-for-dollar state credit on their tax return. Theoretically, the donation would be deductible as a charitable contribution on their federal (but not state) tax return. This would let taxpayers offset the loss of any state income tax deduction while recouping their entire donation.

If you’ve been wondering how this would work, here goes:

Suppose you owe $13,000 in state income taxes and $10,000 in property taxes this year. In calendar 2018, you pay $13,000 in state income tax through payroll withholding. You pay your property taxes as usual.

Under the old law you could have deducted $23,000 in state income and property taxes on your federal return. Under the new one you can deduct only $10,000, so you have “lost” $13,000 in deductions.

To make up for this, before the end of 2018 you donate $13,000 to a newly created California Excellence Fund.

When you file your 2018 taxes, you deduct $13,000 as a charitable contribution on your federal return. If you are in the new 24 percent federal tax bracket, this saves you $3,120 and replaces what you lost.

On your state return, you claim a $13,000 tax credit, which unlike a deduction reduces your tax bill dollar for dollar. Because you already paid $13,000 through payroll withholding, you get a $13,000 refund.

Some caveats: This works only if all of your itemized deductions will exceed the new federal standard deduction of $12,000 for singles and $24,000 for married filing jointly.

You can’t use this credit against property taxes.

If you donate an amount over your state income tax liability — in this example $13,000 — you cannot get a refund for the excess, but you can use it to reduce state taxes in future years, said Darien Shanske of UC Davis, one of eight law school professors (six in California) who wrote the paper.

You cannot deduct this donation as a charitable contribution on your state tax return; backers say that would be double dipping. But it also seems to undermine the idea that this is a donation.

If you gave $1,000 to the United Way and the United Way gave you $1,000 in cash or $1,000 worth of “Hamilton” tickets, you would get no charitable deduction. If the United Way gave you $200 worth of “Hamilton” tickets you could deduct $800.

Federal tax law makes it clear that donors cannot deduct “the fair market value of the goods or services the (charitable) organization provides in return” for a donation. This is known as a quid pro quo.

So why would California taxpayers get to deduct their entire donation to the Excellence Fund if they get back the same amount as a credit?

“Treasury regulations don’t specifically address whether a reduction in state tax liability constitutes a good or service, instead defining ‘goods and services’ to mean ‘cash, property, services, benefits, and privileges,’ an analysis of the de León bill says.

An IRS Chief Counsel Advice Memoranda published in 2011 suggested that a contribution to a state agency would be deductible even if the taxpayer received a state tax credit in return.

The theory goes something like this: A donation to the Red Cross generates a state and federal tax deduction. The state deduction has value because it reduces your state taxes. But the IRS does not reduce your federal tax deduction because you are getting something of value from your state. By the same token, a state tax credit for a charitable donation should not reduce your federal deduction.

In the chief counsel memo, “The IRS gives itself an out,” said Dennis Ventry, another UC Davis professor who co-wrote the report. “It ruled that these contributions for tax credit programs are valid … except in unusual circumstances, but it never defined unusual circumstances.”

The bill analysis also noted that chief counsel advice memos “have no precedential value and cannot be relied upon by taxpayers.”

The academic paper analyzed numerous court decisions that upheld what it calls the Full Deduction Rule. It noted that more than 100 programs in 33 states have charitable tax-credit programs that take advantage of this rule to support a variety of causes, including ones that benefit private and religious schools. Almost all of these programs, however, offer less than a dollar-for-dollar credit, which means donors are not made whole and the program does raise money for a cause.

One such program is the California College Access Tax Credit Fund. Donors can write off 100 percent of their contribution as an itemized deduction on their federal, but not state, return. They get a state tax credit equal to 50 percent of their donation. Taxpayers gave $6.4 million to the fund in 2017 and $5.4 million in 2016. Half of that went back to taxpayers, the rest went to Cal Grants for college students.

Shanske and Ventry recommend that the state reduce the credit to less than 100 percent for the new Excellence Fund as well.

Jared Walczak of the Tax Foundation said in a paper that the de León proposal is “clever” but would face “serious headwinds.” Contributions to governmental entities can qualify for the charitable deduction if the contribution is “solely for public purposes,” such as reducing the debt or maintaining a park, he wrote. But in this case the contribution “serves no public purpose (it has no net effect on state revenue) and is intended to leave the giver in better shape financially.” This “flies in the face of what the IRS considers a charitable contribution.”

State Sen. John Moorlach, R-Costa Mesa (Orange County), was the sole vote against the bill in the Governance and Finance Committee last week. As a former accountant, he said he had difficulty “with the contrivance component of this.” State Sen. Janet Nguyen, another Orange County Republican, voiced concerns but did not vote on the bill. All five Democrats voted for it.

The bill, if it passes, would put tax advisers “in a really precarious place,” said Gina DeRosa, a CPA in Torrance. “A litigious client could sue us for either not recommending they contribute or recommending a contribution that is then reversed. It’s the impossible quandary.”

Greg Turner, a state and local tax attorney in Sacramento, said, “Without some IRS guidance, it’s going to be hard to recommend to a client to utilize this strategy.”

I’ll leave you with Mnuchin’s remarks at a press briefing last week. “Let me just say again from a Treasury standpoint and IRS, I don’t want to speculate on what people will do, but I think it’s one of the more ridiculous comments to think you can take a real estate tax that you are required to make and dress that up as a charitable contribution.”

Kathleen Pender is a San Francisco Chronicle columnist. Email: kpender Twitter: @kathpender

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MOORLACH UPDATE — Contribution Contrivance — January 6, 2018

The Federal Tax Act of 2017 was certainly the big news in the month of December. State Senators, including myself, received calls complaining about our “votes” for this Federal bill. It became very obvious during the Christmas season that many constituents need to take a civics class, as State Senators do not vote on Federal legislation. But, I digress.

This Federal Income Tax Act of 2017 is as significant as the 1986 Tax Reform Act, which really changed my life as a recently admitted partner to the CPA firm of Balser, Horowitz, Frank & Wakeling.

This time, limiting state tax deductions to $10,000 is major. Increasing the standard deduction for married couples to $24,000 is a big deal. Lowering tax rates is a major move. But, a significant number of constituents in my District will not be amused. And our county Treasurer-Tax Collectors received a major increase in early April real property tax second installment payments in December.

What to do? The Democrats implicitly state through their legislative votes that they despise the wealthier residents of California (see MOORLACH UPDATE — More Taxes With SB 567 — May 18, 2017). When I recently protested a proposed tax increase on millionaires, I was complimented for defending the “yacht owners.” Their disdain is that visceral.

Now the Democrats want to institute a contrivance to make tax payments to the Franchise Tax Board deductible as charitable contributions. Cute. Comical, really. So, as a dues paying Certified Public Accountant, I’m looking forward to their legislation. In the meantime, let’s review some definitions.

Contribution: A gift or payment to a common fund or collection.

Contrivance: The use of skill to bring something about or create something (that gives a sense of artificiality).

An idea that is too cute by half will probably meet a quick downfall. All the Internal Revenue Service has to do is issue a Revenue Ruling to squelch this proposal. For the joys of how Revenue Rulings can be disruptive, see MOORLACH UPDATE — Critical Federal Tax Reform — November 28, 2017.

State personal income tax has to be paid. So characterizing it as a contribution is disingenuous. One can take a contribution deduction when it is a gift, over and above the value of what is received. It’s not a donation when there’s a gun pointed at your head forcing you to pay it.

Capital Public Radio came by this week to inquire about my reactions and they are provided in the first piece below. You can hear the audio by clicking on the link.

This week’s San Francisco Chronicle piece (see MOORLACH UPDATE — 2018-2019 Budget Recommendations — January 4, 2018) generated a published Letter to the Editor in yesterday’s edition. It’s a little snarky, too. But, at least it was complimentary. You’ve got to admit that public employees are on the ball. It’s the second piece below.

BONUS: I’m having an event on January 26th and you are cordially invited to participate. For more information, see

California, Other Blue States, Look To Circumvent Federal Tax Change

California, New York and other large, left-leaning states are pushing back against the federal tax overhaul signed by President Trump last month, particularly a provision that puts them on the hook for a greater share of federal revenue. Put simply, they don’t want to pay.

“As Washington has shot an arrow aimed at New York State’s economic heart, the best plan is to get out of the way before it hits,” New York Gov. Andrew Cuomo said in his annual State of the State address on Wednesday. “So, we are exploring the feasibility of a major shift.”

The new law no longer allows taxpayers to write off more than $10,000 of state and local income and property taxes from their federal returns. New York — along with California, Massachusetts and other large, blue states — has some of the highest taxes and property prices, so they will feel the brunt of the loss of state and local tax deductions, also called SALT deductions.

Democrats in these states say Republicans in Washington intentionally targeted their states.

“They went out of their way to really penalize our taxpayers,” said California Assembly budget chairman Phil Ting, a Democrat from San Francisco. “So, we’re really looking at ways we can mitigate that for our tax base, and we’re looking at a variety of proposals.”

Many of these proposals are based off an analysis by 13 tax law professors, which explores ways individuals, businesses and states could look to take advantage of loopholes in the new tax law. Some might sound pretty zany.

In California, state Senate leader Kevin de León has a proposal for taxpayers to give to a new state-run charitable fund, called the California Excellence Fund, in exchange for a refund on income taxes. Californians donate to the charity and receive a credit that wipes away their state income tax liability. The charitable contribution is then federally deductible.

UCLA professor Kirk Stark has championed this idea. He says the Internal Revenue Service has sanctioned similar arrangements on a smaller scale, including when taxpayers give to the Cal Grant program for low-income college students.

“There’s no limitation whatsoever indicating that the donation or contribution has to be targeted to some specific program or something like that,” Stark said.

But Stark also acknowledges the IRS could react to the measure by trying to impose a limitation.

In New York, Cuomo says the state is looking to shift from income taxes to a new payroll tax — which businesses could still deduct, but would probably require employees to take lower pre-tax salaries.

David Kirk, a partner at accounting firm Ernst & Young, says that proposal comes with other problems.

“It’s payroll, which is inherently regressive,” Kirk said. “The billionaires, regardless of what state you’re in, have a relatively small W-2, relative to their overall wealth and income.”

California Republican state Senate leader Patricia Bates says the state has another option.

“I think that the best idea is for our Legislature to take a long, hard look at the tax rate that we put on Californians,” Bates said. “We can do a lot with that, because we have the power here to reduce taxes.”

She says Democrats are looking for any reason to clash with the Trump administration.

“That has certainly been the MO for the last year that we’ve been up here, since President Trump was elected,” Bates said. “It’s not the best way to go.”

Who really pays?

Most Californians do not use SALT deductions. Only about a third of filers have typically claimed them, and many of those still do not get the deductions, because they must pay the Alternative Minimum Tax.

And, because of other cuts in the tax overhaul targeted to wealthier income brackets, Kirk says most households will not pay more next year as a result of losing the deduction.

The ones who will pay more are “the individuals with the higher amounts of income — maybe over $600,000 — what you might call the working wealthy [with] large W-2s,” Kirk said. “What you’re probably going to end up seeing is a break-even for a vast majority of people.”

“It’s just that relative to someone in a low-tax state, their tax cut might be smaller,” said Frank Sammartino, a senior fellow at the Tax Policy Center.

In other words, with the loss of the SALT deduction, a state like California is now even more costly for higher-income taxpayers in comparison to a bordering state like Nevada, which has no income tax.

Economic analysts have said it could also make it more difficult for local and state governments in higher-tax states to gain public support for new taxes.

“It will blunt the effect of lower federal rates for many taxpayers,” Moody’s Analytics reports. “Public resistance to tax increases will likely rise, and that in turn will constrain local governments’ future revenue flexibility. In addition, if larger federal deficits caused by the tax cuts result in attempts to cut entitlement spending, states will be pressured to backfill cuts to federal funds from their own budgets.”

Some California Republicans are weighing whether they would support Democratic proposals to avoid the hit. State Sen. John Moorlach doesn’t rule it out.

“We’re going to benefit those we really need to keep here, because if we lose any of our top 1 percent, we lose a portion of about 50 percent of our income taxes,” Moorlach said.

A former accountant, Moorlach’s main concern is that the proposals being floated are “too cute.”

“I just wonder if it’s really something that should be pursued, because it will be squashed [by the IRS],” he said.

States are considering one other tactic to fight the loss of the SALT deduction — one that brought Cuomo a long ovation during his State of the State speech: Sue it as double taxation.

“We believe it is illegal, and we will challenge it in court as unconstitutional,” Cuomo said.

New Jersey has also threatened a lawsuit, while California Attorney General Xavier Becerra says he’s reviewing legal options.

Pensions should be honored

Concerning “More money than expected for new budget” (Open Forum, Jan. 4): Thank you, state Sen. John Moorlach, R-Costa Mesa, for urging Gov. Jerry Brown to use some of the $7.5 billion in surplus state funds to prepay public employee pension debt and pay down state retiree medical liabilities.

With many Baby Boomers now reaching retirement age, it is imperative that California be able to meet its pension obligations to its career teachers, nurses, firefighters and police officers. These public servants, often criticized in the media for their unions, deserve praise for the important services they provide every day to the citizens of this state. Their contributions to our well being — and to their pensions — should be honored.

Sasha Englander, San Bruno

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MOORLACH UPDATE — 2018-2019 Budget Recommendations — January 4, 2018

The 2018 Session started yesterday afternoon with a bang. Sen. Andy Vidak (R – Hanford) introduced Senate Resolution 69, a resolution to permanently expel Sen. Tony Mendoza (D – Artesia) from the California State Senate. This caused the Democratic Caucus to immediately meet in a closed door caucus, for several hours, while the Republican Senators simply spent the afternoon and early evening waiting for them to conclude. A little after 6 p.m., the Senate reconvened and Sen. Mendoza gave an “I’m taking a one month leave of absence” speech. This is something he should have done when the President Pro Tem offered him this solution at the end of last year, during the recess. And then yesterday’s Floor Session closed with a quick thud. No comments allowed from anyone in the Chambers. The fun has begun.

I return next week for a boatload of work. I have four two-year bills to address before committees, SB 656, SB 681, SB 688 and SB 722 (see the 2017 legislative package on my Senate website). I will also have Public Employment and Retirement Committee, Judiciary Committee, and Governance and Finance Committee meetings. Plus there will be two joint hearings, where the Senate and Assembly combine, addressing sexual harassment and the Ghost Ship fire. And, if that was not enough, the Governor will be announcing the 2018-19 Budget on January 10th.

In anticipation of one of next week’s upcoming events, I decided to submit a snarky but extremely serious op-ed on the proposed budget to the San Francisco Chronicle. It is the piece below.

The year of our Lord 2018 is here and it’s game on, as we try to message to the Governor and the Legislature that California needs to turn its ship of state around. We issued an ICYMI yesterday that proves the necessity of minding the fiscal store here in Sacramento (also see my Senate website at

Happy New Year!

More money than expected for new budget

Will Gov. Brown propose to spend more or reduce debt?

By John Moorlach

While you’re struggling to make ends meet, the California Legislative Analyst’s Office reported that this year the state’s coffers will overflow with an additional, unexpected $7.5 billion of your tax dollars. Will the governor propose to spend it or save it?

On Jan. 10, Gov. Jerry Brown is scheduled to release his budget proposal for fiscal 2018-19, which begins July 1. It will be his 16th and last budget proposal and likely will include a small surplus, more funding for the Rainy Day Fund and money for his pet boondoggle, the high-speed rail project.

Meanwhile, the stock market is up some 20 percent for the year since our new president was elected. And the value of your home has been rising at a rapid clip. You’re doing great, so you’re able to spend more for gas and pay a little more in taxes. You’re a giver.

But, what about those with no savings? No stock portfolio? No home? Those who cannot afford to live close to their job? You know, those in the middle class the Democrats always talk about protecting? Those who oppose the $5.5 billion-a-year gas tax whom the governor referred to as “freeloaders”?

Guess what? The Democrats have bamboozled this significant segment of our state’s people, because the new budget, like last year’s, likely will not include adequate reforms to reduce the $8 billion to fund pension liabilities.

In 2012, Proposition 30 was approved by voters as a “temporary” fix to get us past the Great Recession, and was to expire in 2018. But, at the behest of the public employee unions and other special interests, California’s voters approved Proposition 55 in November 2016. It extended this reliance on the highest income and sales tax rates in the nation another 12 years!

Then earlier this year, the Democratic supermajority in the Legislature increased your gas tax, effective Nov. 1, 2017, starting at 12 cents more a gallon. It goes on indefinitely, with adjustments for inflation. All this tax revenue, yet the Golden State’s fiscal condition is awful.

There is some good news, however: The state’s ranking on fiscal condition no longer is the worst — it has risen to 43rd, according to a 2017 Mercatus Center Study. (New Jersey is the worst.)

We know the Democrats aren’t going to decrease tax rates and these taxes will be collected. So, what to do? As a serious corrective, here are some proposals Brown should announce in his new budget to smartly use that $7.5 billion in unexpected revenues.

Pay off bonds. The Department of Finance can proffer a list of lenders who should be paid off in advance. A state cannot rack up a $169 billion deficit without borrowing money. Sacramento could use a strategy whereby it puts in escrow enough cash to service the debt, thus saving the interest payments. The controller could then call the debt paid, as the funds in escrow will pay off the bonds as they are regularly scheduled.

Make another prepayment on public employee pension debt to both the California Public Employees’ Retirement System (CalPERS) and California State Teachers Retirement System (Cal STRS), as he did last year. This will reduce required payments in future years. This debt comes at a 7 percent cost, so paying it down is a no-brainer.

Get more aggressive in paying down the state retiree medical liabilities — exceeding $76.7 billion as of June 30, 2016. (A revised estimate is expected later this month.)

Pay cash. Get really radical and start making infrastructure investments without borrowing. The bond measures on the June and November 2018 ballots would be unnecessary if California made improvements the way many of us do on homes or business buildings.

Jan. 10 will let you know if Brown is trying to balance his budget with some serious balance-sheet debt reductions. Otherwise, his legacy will be presiding over a financial bottom-dweller state.

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

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MOORLACH UPDATE — Bonuses and Bogusness — October 21, 2017

I’ve got bonuses for you. The first is that Newport-Mesa Unified School Board Trustee Judy Franco is being acknowledged for her long-term service. I want to wish her all the best and thank her for her dedication to the community.

Judy has been in the trenches over the decades and, when I stayed at the Hyatt San Diego several years ago for a California Republican Party Convention, she was also there for a School Trustees Conference. She has always been serious about her fiduciary role and has been a bonus to me. The Daily Pilot covers her decision to not rerun in the first piece below.

The second piece is from the Voice of OC and needs one slight clarification. The title is bogus. Of the 20 worst bills that I suggested the Governor should veto (one of the bonuses below), Senator Josh Newman (D – Fullerton) did not vote against one of them. He’s a liberal Democrat and votes with the herd. However, Sen. Steve Glazer (D – Rialto) voted against 6 of these lousy bills and is fully deserving of the moniker “centrist.” There is your inside bonus on this posturing. As always, actions speak louder than words.

The third piece shows that, although the 2017 Session has concluded, our office is still working daily on the pressing issues. My Chief of Staff, who has been a serious bonus during my tenure, was a panelist at a recent technology conference and was identified as a contributor in Government Technology.

Our efforts for transparency were thwarted last year with the introduction of SB 1251 (see MOORLACH UPDATE — Upcoming SB 1251 Hearings — April 9, 2016 and MOORLACH UPDATE — SB 1251 and SB 1140 — April 12, 2016). I shared this experience in my speeches last fall (also see Again, we’re trying.

Talking about trying, the San Francisco Chronicle provides the fourth piece below. Although it does not mention me by name, it does address my only vetoed bill, SB 1463, so I’m throwing it in as a bonus (see MOORLACH UPDATE — Conflagration Legacy — October 12, 2017). It provides stronger clues as to why SB 1463, which did not receive one vote in opposition when it went through the Legislature, was vetoed by the Governor. Perhaps his veto message was bogus?

Now, for two additional BONUSES. The Governor had to address the Legislature’s bills by October 15. It’s time for the results.

BONUS: Governor Jerry Brown vetoed 7 (35 percent) of the worst 20 bills of the 2017 Session (see MOORLACH UPDATE — 2017 Top 20 Veto Worthy Bills — September 22, 2017).

Although it’s not 100 percent, as these are bills written by fellow Democrats, more than two-thirds is better than his signing them all. Four of the Top 20 also made it to our “Who’s Your Daddy?” listing (noted as “WYD?” and further explained in the next BONUS). More on those results in the next UPDATE. Here are the results:

1 AB 20 (Kalra) Send Jobs, Not Investments to Dakota Signed
2 AB 168 (Eggman) Across the Board Salary Lowballing Signed
3 AB 199 (Chu) Construction Reduction Act WYD? Signed
4 AB 569 (Gonzalez- Discrimination of Church by State Vetoed
5 AB 890 (Medina) Voter Suppression Act Vetoed
6 AB 1008 (McCarty) Employment Meddling Act Signed
7 AB 1209 (Gonzalez- Women Employee Reduction Act Vetoed
8 AB 1269 (M. Stone) Mobile Home Tax Vetoed
9 AB 1274 (O’Donnell) Fee Hidden as a Tax Signed
10 AB 1455 (Bocanegra) Public Employee Bargaining WYD? Signed
Secrecy Act
11 AB 1461 (Thurmond) Food Handler Cards – Farmers Next? WYD? Vetoed
12 AB 1513 (Kalra) Union Invasion of Privacy WYD? Vetoed
13 SB 2 (Atkins) Killing Homes and Jobs for the Signed
Middle Class Act
14 SB 3 (Beall) California Legislature’s Housing Signed
Sub-Prime Act
15 SB 5 (De Leon) Park Bond Boondoggle Signed
16 SB 54 (De Leon) Sanctuary State Nonsense Signed
17 SB 63 (Jackson) Small Business Meddling Act Signed
18 SB 149 (McGuire) Do As I Say, Not As I Disclose Vetoed
19 SB 239 (Wiener) HIV Assualt Act Signed
20 SB 285 (Atkins) Bargaining Meddling Act Signed

BONUS: There is no disputing that public employee unions dominate and control the majority party in Sacramento. This year had another crop of bills at the end of Session that were so slanted to benefit unions, I decided to create a “Who’s Your Daddy?” list. It is that bad (see MOORLACH UPDATE — Who Do You Answer To? — October 1, 2017 october 1, 2017 john moorlach).

Jerry Brown would not be our Governor, but for the campaign funding he received in 2010 from public employee unions to overcome billionaire Meg Whitman’s personal financial resources. So, how did the Governor do with these 15 blatant union bills? He vetoed five of them. Killing one-third of these bad bills is commendable. Here are the results (four of them were also in the Top 20 list):

1 AB 45 (Thurmond) Teachers Pet Act – Housing Benefits Vetoed
only for unionized teachers
2 AB 55 (Thurmond) Oil Refinery “Skilled Journeyperson” Signed
3 AB 73 (Chiu) Requires higher prevailing wages for Signed
low income housing construction
4 AB 83 (Santiago) Unionizes Judicial Council Employees Signed
5 AB 168 (Eggman) Across the Board Salary Lowballing Signed
6 AB 199 (Chu) Construction Reduction Act Signed
7 AB 621 (Bocanegra) Back Door School District Pay Raises Vetoed
8 AB 670 (Thurmond) Picket Lines in the Sandbox? Unionizes Signed
Part-Time Playground Attendants
9 AB 848 (McCarty) Bans State Colleges from Outsourcing Signed
Jobs to Foreign Countries
10 AB 1320 (Bonta) Eliminates Prison Outsourcing Vetoed
11 AB 1424 (Levine) Allows UC System to Use “Best Value” Signed
Bidding Methodology
12 AB 1455 (Bocanegra) Public Employee Bargaining Signed
Secrecy Act
13 AB 1461 (Thurmond) Food Handler Cards – Farmers Next? Vetoed
14 AB 1513 (Kalra) Union Invasion of Privacy Vetoed
15 AB 1651 (Reyes) Complicates Process of Removing Bad Signed

‘She’s given her life to these schools’: Newport-Mesa trustee Judy Franco prepares to step aside after nearly 4 decades

By Priscella Vega

When Judy Franco was appointed to the Newport-Mesa Unified School District board in 1980, she didn’t imagine that 37 years later she would still be representing Area 5.

She said she had dropped hints about stepping down at the end of her current term, but when she announced Tuesday that she wouldn’t run in the 2018 election, some observers nevertheless were surprised.

Franco, 80, said she needed to clear up rumors about why the school board may have preferred one map over another in adjusting trustee zone boundaries in time for next year’s election.

In one proposal, labeled Map B, Franco and board President Karen Yelsey’s current addresses would be in the same zone, Area 5, resulting in the possibility of them running against each other in a future election.

Some critics of the other proposal, Map G, speculated it was created to help them avoid a possible faceoff. Yelsey and Franco denied that.

“I didn’t want to make the announcement, but I was sick and tired of hearing innuendo of reasons why we chose Map G,” Franco said Friday. “It made me very angry, and the blame was somehow not put on me but on Yelsey by many people, and it’s totally untrue. It irritated the devil out of me.”

Criticism aside, Franco said she had previously promised her husband that she wouldn’t run for another term so they wouldn’t have to schedule trips around school board meetings.

Franco will complete her time on the school board in December 2018.

During her tenure, Franco has seen the district close multiple elementary schools, embrace a growing number of Latino families from Costa Mesa’s Westside, and deal with controversy surrounding a Mariners Elementary School Gold Ribbon Award and the transition from the controversial Swun Math to new math materials.

Recently the district settled a lawsuit alleging that its election system, in which the seven trustees are chosen by voters throughout the district, violates the California Voting Rights Act. The lawsuit led to the district decided to change the system so trustees will be elected by voters in each zone.

Franco said her career development was an organic process, beginning as a teacher, transitioning into a PTA president at Newport Elementary School and later being appointed to a seat on the school board, though she didn’t expect to stay long. But she was elected to the seat the following year and has been there since.

“It wasn’t a dream of mine, it just sort of happened,” she said. “Every time the election was coming up, I’d get phone calls from people and so I continued to run.”

During her first year as a trustee, she went into “learning and listening mode” until she found her voice, she said.

In an interview Friday, state Sen. John Moorlach (R-Costa Mesa) called Franco “a real trouper” for the school district and the Republican Party. He said he recalled bumping into her during a conference in San Diego where he could tell she “took her job seriously and loved it.”

Two of her passions have been establishing sailing as an official sport and program in Newport-Mesa and taking on a leadership role for Youth and Government, an independent study program.

Sean Boulton, who started working in the district in 1999 and is now principal of Newport Harbor High School, credited Franco with helping establish sailing as an official sport.

“It’s a unique feature in Newport-Mesa because of her,” he said. “It takes hoops and steps to establish a sport like that, and she gave us the clarity to make it official.

“She’s given her life to these schools.”

In 2001, Franco was diagnosed with breast cancer but remained active in the district. She said she has missed about 12 meetings throughout her time on the board.

Trustee Martha Fluor, a board member since 1991, described her colleague as a mentor and a “true dedicated warrior” with an “immense amount of knowledge.”

“One of her strongest assets is that she’s truly [a] committed board member,” Fluor said. “There were times she was going through cancer treatments early on when she’d come to board meetings even in the midst of chemo and radiation.”

During her tenure, Franco said, she learned to resist criticism as long as she remained dedicated to her philosophy of making sure that programs, resolutions and motions were for the good of students.

When she finishes her final term next year, the board will be in good hands, Franco said.

“It’s a good balance with a breadth of knowledge,” she said.


Twitter: @vegapriscella


Reiff: Recall Target State Sen. Josh Newman Says He’s ‘Not a Politician, Not a Lefty, a Centrist’


Recall target Josh Newman of Fullerton says he’s “probably the least ideological Democrat in the state Senate” and dismisses as “hyperbole” attempts to portray him as a “crazy lefty” who is out of step with his traditionally Republican-leaning district.

“The irony is I’m the guy who’s targeted … I’d argue that as an Army vet, former business guy, I’m actually quite reflective of my district, which is a politically centrist district,” Newman said on the “Inside OC with Rick Reiff” public affairs show.

Newman voted along with 25 of his fellow Democrats and just one Republican to increase gas taxes and vehicle license fees, a measure that passed with the bare-minimum 27 votes. And that has triggered a GOP-led recall campaign; those wanting to undo the Democrats’ two-thirds super-majority in the Legislature see Newman, a freshman lawmaker with less than a year in office, as the weakest link.

“The tax is an opportunity to try to overturn the result of the last election, mine,” Newman said. “It’s really about changing the balance of power in the Legislature.”

Recall backers have validated more than enough signatures for a recall, but are now in court challenging a new law that gives petition signers time to rescind their names. Newman said he supports the Democratic counter-measure because it is “clear” that “a very large, indeterminate number of people” were deceived into thinking the recall petition was actually a petition to repeal the gas tax.

Nonetheless, Newman said the Democratic moves will merely delay the Republicans. He said there will be a recall election sometime next year and “I accept the recall process.”

Newman strongly defended his vote for the gas tax: “We have a real problem. Our roads and bridges are in sub-standard condition due to 20 years of neglect.”

“I thoroughly appreciate those are precious dollars that are an additional burden to voters, motorists.” Newman said. He said he is open to ideas for spending transportation dollars more wisely, including from his Senate Republican colleague and fierce Caltrans critic John Moorlach.

But “you don’t solve one problem by ignoring another,” Newman said of his gas-tax vote.

Newman recounted his underdog campaign last year. A political novice, he out-polled favored Democrat Sukhee Kang, former Irvine mayor, in the top-two primary to advance to the general election, where he edged favored Republican Assemblywoman Ling Ling Chang.

Newman trailed Chang after election night, but prevailed over the next three weeks as votes continued to be counted from his far-flung district, which takes in parts of three counties — Orange, Los Angeles and San Bernardino.

“I was down and then sort of dumbstruck and then elated,” he said.

His unorthodox campaign included a bear mascot, which was Newman himself – he said he didn’t want to subject anyone else to heatstroke from wearing the heavy costume. And his campaign signs – a “Hello” name tag signed “Newman,” a cheeky reference to “Hello, Newman” from the TV show “Seinfeld” – won the national political consulting Pollie Award for best yard sign.

“I’m not a politician,” Newman said. “I didn’t have the relationships or the endorsements or the access to funds.” Especially in the primary, before sizable Democratic donations became available, “I had to figure out how to run a creative, low-dollar campaign.”

Newman said he decided to run for public office after testifying before a state legislative committee on the issue of veteran employment. He was perturbed that many lawmakers were checking their cell phones instead of listening to him:

“I came home and my wife admits, although she’s regretted it since, she said, ‘Hey, if you really want to make a difference you should think about running.’”

The show aired this week on PBS SoCal, KDOC and Cox, and can be viewed on You Tube.

Opinions expressed in editorials belong to the authors and not Voice of OC.

California Open Data and Transparency Efforts Continue Progressing Despite Challenges

Speakers at the Data Coalition’s annual Data Demo Day say tech improvements and culture changes are coming, but much room for progress remains.


SACRAMENTO, CALIF. — The Data Coalition, an advocacy group for widespread standardization and publication of government data, hosted its annual California Data Demo Day on Thursday, Oct. 19, featuring panels of experts who work for and with the state’s legislative and executive branches of government.

Lance Christensen, chief of staff for California Sen. John Moorlach, sat on the legislative panel and showed up with a whole bunch of paperwork: a couple of thick blue binders, some weighty reports, another book of rules that barely fit in a pocket. He plunked it all down on the table and told the civic tech vendors, lawmakers and policy wonks in attendance that the stacks contained important public info about California’s budget info only available in outdated paper formats kept at the capitol in Sacramento. Essentially Christensen brought the props to show that despite California’s progressive values and booming tech industry, gov tech at the state level still has much room for improvement.

“If I were to say go find the budget, outside of a Google search, could you really find it?” Christensen asked the room.

He went on to note that if business owners, thought leaders or any other residents of California wanted certain budget info, “You have to drive to the capitol and spend a day picking this up.” He lifted a bulky binder to illustrate.

Indeed, a duality emerged throughout the event. Everyone in attendance — from government employees to politicians to technologists to lobbyists — voiced support for open data practices, while at the same time acknowledging that California could do a better job of execution.

That’s not to say no progress has been made in recent years. There was a sense of optimism in the discussions, a sense that state leadership is committed to doing its best to improve but is, of course, limited by challenges. The event’s keynote speaker California Sen. Richard Pan described how the failure of SB 573, which would have required the state to support open data and hire a chief data officer, had to do with politics but ultimately led to discussions that resulted in most of what the bill was asking for coming to pass, including the hiring of a chief data officer.

Pan also emphasized that the power of open data lies in not just transparency but also in its potential to improve efficiency within government.

“Through open data, we want to empower government to make decisions and see what the results of those decisions are on the public,” Pan said.

He said the best way to ensure that open data culture becomes entrenched in California is to develop better tools that the public will want to use to engage with government. Christensen, the chief of staff who brought all the papers, called for the public to show up at hearings, ask questions about why certain open data isn’t readily available and put videos of politicians answering on Facebook or other platforms where they can be shared.

Jan Ross, California’s deputy treasurer for technology and innovation, had the clearest examples of how open data practices in California are steadily improving, pointing to many of the open data and transparency efforts taking place within her department under the leadership of Treasurer John Chiang. Those efforts include the DebtWatch portal, which provides detailed information about $1.5 trillion of debt issued by state and local governments over the past 30 years.

It’s dry information, to be sure, but Ross talked about how citizens concerned with the government loaning taxpayer money in service of infrastructure and other projects could use the portal to see exactly where in their communities the money had gone, how it had made things better.

“You can see where this impacts your community and why you should care about it,” Ross said.

The challenges discussed included finances — especially for cities that did not generate as much revenue as major metros like Los Angeles and San Francisco. Another hurdle, experts said, is the sheer mass of data government collects, which can be cumbersome — as can finding ways for dozens of disparate public agencies to funnel that much data into a unified format.

“If the government chooses to publish its data, to standardize its data,” said Hudson Hollister, executive director of the Data Coalition, “the tech community can do amazing things with it.”

Arguably, the best indicator for open data’s bright future in California was the seemingly total acceptance that more gov tech companies are popping up with simpler ways to use tech to further open data uses.

Zack Quaintance Staff Writer

Failure to adequately regulate utilities helped fuel wildfires

By Jamie Court




Corruption can kill.

The fires that laid waste to California’s Wine Country and at least 42 lives were not merely the product of a changing climate and extra-heated winds.

Early reports suggest the failure of Gov. Jerry Brown and his appointees to adequately regulate our public utilities to prevent such fires also fueled the fast-moving flames.

Investigators are examining downed power wires and exploding transformers from Pacific Gas & Electric Co., which were reported on multiple 911 calls, by PG&E workers and by witnesses as the immediate cause of many blazes.

Reports from fire responders, residents and PG&E itself also point to the flames spreading so quickly because of overgrown trees too close to the utility’s power lines.

The Butte Fire in 2015, which destroyed more than 500 homes and killed two people in Calaveras County, was caused by PG&E’s failure to cut back a pine tree that hit a power line and sparked the fire.

PG&E’s negligence to identify the weakened trees led to bipartisan legislation in 2016, passed unanimously by both houses of the Legislature, to reduce the risks of wildfire from overhead utility lines by clearing out dead trees. The bill required the Public Utilities Commission to identify and map high-risk wildfire hotspots due to overhead utility lines, taking into consideration local governments’ concerns, so that utilities would have to step up their mitigation efforts in those areas.

Unfortunately, Gov. Brown shockingly vetoed that fire prevention legislation, claiming that the state Public Utilities Commission and the California Department of Forestry and Fire Protection had a process in place. The furious spread of fires along trees in the path of power lines last week lays naked that claim.

PG&E itself put the blame on “hurricane-strength winds” and “millions of trees weakened by years of drought,” contributing “to some trees, branches and debris impacting our electric lines.”

In fact, winds were only half the level of hurricane force, peaking at 30 miles per hour when the Tubbs Fire started, according to the Bay Area News Group, but overgrown trees as fuel for the fire were all too real. Attorney Frank Pitre, who sued PG&E over the Butte Fire, said it’s “the utility’s very responsibility to identify a weakened tree and remove it before it strikes a power line.”

Unfortunately, cronyism in the Brown administration has allowed a long-standing culture of neglect at PG&E to continue undeterred because PG&E and its brethren fear no real consequences.

PG&E has long been the darling of the Brown administration, supplying his top aide, Nancy McFadden, from its executive ranks, as well as his former Cabinet secretary. It’s little wonder the unanimous fire cleanup bill was vetoed when McFadden, Brown’s top legislative adviser, was a former senior vice president at PG&E who left the company with a $1 million payout.

The veto came despite the fact that explosive electric power equipment is among the top three causes of California wildfires.

Brown has also stacked his Public Utilities Commission with PG&E and utility partisans in the wake of corruption scandals that should have shaken the commission to its core.

PG&E’s former lobbyist was caught in a pay-to-play scheme with former PUC President Michael Peevey, but Brown did all he could to support Peevey and keep the pro-utility commission pro-utility. “He gets things done,” Brown said of Peevey, after the scandal broke, calling him “a very effective leader.”

We often think of public corruption as an academic, antiseptic issue. In this case, it has real-world consequences. Brown’s refusal to get tough on PG&E and other utilities has led to repeated safety issues that endanger lives.

Consider the San Bruno explosion in 2010 that claimed eight lives and leveled neighborhoods. PG&E neglected gas pipelines and kept shoddy maintenance records. It even took ratepayer money intended for gas pipeline repairs and used it for executive bonuses and shareholder dividends. Emails showed PG&E’s lobbyist worked surreptitiously with PUC commissioners to pick its own PUC judge to hear the case. It took a federal conviction this year to reveal PG&E was a criminal.

City officials in San Bruno still wonder why no one at the company was ever punished. Under PUC President Michael Picker, a top former aide of Brown’s, the commission continues to stonewall the release of documents related to the blast.

Of course, PG&E has been generous to Brown and his causes as well, shelling out six-figure contributions over his term.

The irony is Brown has made combatting climate change his signature issue, but his hostility to regulation has made California more vulnerable than ever to its ravages.

That’s a lesson the next governor should learn as prerequisite for the job.

Jamie Court is the president of the nonprofit nonpartisan group Consumer Watchdog. To comment, submit your letter to the editor at

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