2012 is the 200th anniversary of the peak of the Luddite movement in Britain. I think it's time everyone figured out that we're now in the early stages of what can be seen as the biggest manifestation of Luddite thinking in world history. No, it's not as dramatic as British laborers trashing factories to protest mechanization. But there is a reason the information technology productivity revolution that has made the U.S. private sector so vastly more efficient the past two decades has largely bypassed the public sector. It's not just because government is slow to adapt. I think eventually it will be realized that a crucial factor was that union types realized before the rest of us that the I.T. revolution could wipe out millions of bureaucratic jobs at the local, state and federal level. That this is how people in Sacramento thought first occurred to me a decade ago. That's when the late Assemblyman Keith Richman came up with a plan that the Republican physician thought would quickly win support from Democratic lawmakers: sharply increasing the number of poor kids taking advantage of free state- and federal-funded medical services by allowing parents to sign them up online. Richman told me the plan was killed because of union concerns that it would cost too many clerks their jobs in county welfare offices. What brought this to mind again was the weekend story about growing griping over using state education grants for online colleges. Now I have no doubts there are legit concerns in this matter. Some online colleges are shabby operations. But critics of online education often ignore its success stories and great promise in favor of a formula of criticism that offers cursory praise and then devalues praise for online learning from students and from administrators and depicts it as an assault on the noble goals of a liberal education (not liberal in the political sense, but in the liberal arts sense). Now especially in K-8 classes, a case can be made that school serves a crucial role in socialization. But by and large, we're not seeing this narrow argument. Instead, we're seeing the narrative that I call the alchemy argument -- something special happens when kids and teachers gather in a central location. Oh, bunk. As for regular government bureaucracy, there's no fig leaf akin to the alchemy argument. To borrow a bit from what I wrote a few years ago on my late lamented SDUT blog, in the private sector, it’s routine for employees to become more productive when pressured or given incentives to do so. When the recent economic downturn was at its worst, employers demanded workers do more with less. The result: In the second and third quarters of 2009, the U.S. government’s business productivity growth gauge went up at an annualized rate of 8.2 percent rate – a stunning gain that economists said was the biggest such surge coming out of a recession in nearly 50 years. How did they do it? To a considerable degree through efficiencies made possible by information technology -- efficiencies ignored by just about every government body besides the Pentagon and the intelligence agencies. This is why the McKinsey consulting group says "the opportunity to improve government productivity is huge ... [with] three classic management tools . . . organizational redesign, strategic procurement and operational redesign." And the key to that redesign is to stop building off the presumption that we need to have workers gather in the same building to handle routine tasks, and to require that consumers of government services go to these buildings, too. I once had to go to the Poway DMV to get a copy of a vehicle registration that I had lost because it was the only local DMV that had an appointment slot available within two weeks. Why? Why? Why? For God's sake, in an era in which you can design your next car and do a zillion other things on the Internet, why do you ever have to drive to a government office anywhere to fill out a permit or pick up a form? Where are the virtual offices? Where are the MBA consultants who come in and spot ineffeciences and outline changes that seem obvious in retrospect? Why don't we see the IT revolution depopulate government bureaucracies the same way it wiped out travel agencies? Because of 21st-century Luddites who hide behind claims of defending the middle class. The reality is that we're seeing what is in essence immense featherbedding across all levels of government. The McKinsey report I cited is at least seven or eight years old. Who knows how much more could be done with fewer government workers now as the IT revolution continues and picks up steam? I wish we could find out. Especially with governments being so broke at so many levels, it's time this revolution finally thinned out a government so bloated it makes the guy in the final scene of "Monty Python's The Meaning of Life" seem like a greyhound. Anti-Luddites of the world, unite! Believe it or not, the forces of history are on our side.
The old theory was that any significant reform introduced by a Republican state lawmaker was DOA. So now a Democratic state lawmaker is proposing a freeze on the pay of state workers making more than $100,000, an audit of the Legislature's spending, and an end to the practice of allowing current and retired state lawmakers to get vanity plates for free. So what is going to happen to these populist, sure-to-play-well-with-the-public proposals? They're going to die without a hearing in the Assembly Appropriations Committee, and not just because the lawmaker behind them, Anthony Portantino, is a thorn in Speaker John Perez's side. They're going to die because all the talk about spending and restraint and a new era in Sacramento are pure bunk. And because Appropriations Committee Chairman Felipe Fuentes, above, is yet another Los Angeles Latino Democrat who talks up social justice on the campaign trail but in office defines social justice as protecting a status quo devoted to helping public employees, especially teachers. If the safety net is shredded, so be it.
SACRAMENTO -- As education groups battle over which California tax initiative would give the biggest boost to schools, advocates for low-income residents fear safety-net programs remain vulnerable no matter what happens on the ballot in November. Proponents for three competing tax measures are focusing heavily on schools because voters prioritize education funding most. But it remains an open question how other programs will fare. Gov. Jerry Brown's proposal raises several billion dollars for the state's general fund that he says would help protect schools from severe reductions. But he has proposed deep cuts in welfare-to-work and child care in the first year even if his taxes pass. That's from the Sac Bee's coverage last week. But wait, Chris, that's not fair. If you help schools, you help Latinos, so isn't Felipe Fuentes doing his bit for social justice? Give me a break, unseen interlocutor. In case you haven't been following the news the last few weeks, the school district that covers Fuentes' district is in the middle of a massive scandal over perverts preying on kids, often young Latinos, with the adults responsible being protected by rules set up to insulate teachers from ever losing their jobs and LAUSD's sluggish, indifferent bureaucracy. And then there's this key point: The proponents of upcoming ballot initiatives argue that taxing California’s Scrooges will restore our education system, thereby restoring our best path to income equality. But anyone who’s spent any time at school board meetings knows that the interests of children – especially the children in poverty and their families – are down near the bottom of the list, after the interests of the adult groups who got the board members elected. Give districts more money and sure, they might restore school days, summer school, and intervention programs for our state’s millions of Tiny Tims – but only after they’ve finished satisfying pent-up salary demands, backfilling pension and benefit obligations, increasing their reserves, paying off early retirement incentives, and recalling employees by seniority. That's from an essay by Arun Ramanathan, a liberal education reformer with The Education Trust West. Does any of this matter to Felipe Fuentes? Does he care that respected Los Angeles Latino Dems like former Sen. Gloria Romero have jumped off the CTA bandwagon because she concluded the CTA doesn't give a damn about fixing schools, only funding them? I doubt. Fuentes wouldn't have advanced if he were more like Romero than like Assembly Speaker John Perez, also a Los Angeles Democrat. The difference between Perez and Romero being, of course, that Perez sailed up the career ladder because he agreed to pretend funding the CTA equals social justice, while Romero was sandbagged by the CTA as "dangerous" in her bid to be state superintendent of public instruction. Details here. The chair of the Assembly Appropriations Committee would be ousted within hours by Perez if he indicated he really would fight for social justice instead of public employees, backed Portantino's measures and took on the status quo. But at least Felipe Fuentes' conscience could get a rest after his years of being a cog in a political machine that holds his constituents in contempt. Here's another take on Fuentes' from one of his hometown's newspapers. As for John Perez's conscience, I see no signs it exists. He remains the enforcer of a diseased education status quo, and seems to enjoy this role. Keeping the CTA happy: It's rewarding work! Just ask John Perez.
State Sen. Mark Wyland, R-Solana Beach, once told me that he would meet prominent people in Sacramento, not street-corner crazies, who were surprised to hear Wyland say the economy was in the dump or that unemployment was sky-high. I think today I figured out one of the people he was talking about. It's Assemblyman Warren Furutani, left, who revealed his obliviousness in a Sac Bee story about Democratic legislative leaders and union officials touting "CalPERS for all," a bill to force employers to set aside 3 percent of the pay of all private-sector employees to contribute on their behalf to a defined-benefit program that invests only in very safe but low-yield Treasury bills. Furutani noted pension reform was often fueled by resentment of big public employee pensions. Then the Gardena Dem said that giving private sector workers a tiny pension funded with mandatory paycheck deductions that are invested in a CalPERS-managed fund sure to have mediocre returns "turns that argument on its head." Ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha. Oh, Warren, you are a cut-up! What? You're serious? You CANNOT be serious if you think it's a wonderful idea to take 3 percent of private sector workers' pay and force them to make bad investments overseen by people with as wretched a reputation as CalPERS. And Warren, some will wonder if you're tired and emotional, as Private Eye would say, if you think this somehow will obviate public anger over absurdly generous public employee pensions. OK, OK, the other details that make this slightly less moronic: Employers can't opt out, but individual workers can opt out. And CalPERS might not be the fund manager, just an institution like CalPERS. But by and large, this is the most out-of-touch initiative championed by the California Democratic establishment that I have ever seen. Among its many problems: 1) It can easily be depicted as statewide 3 percent pay cut for private sector workers at a time when many are counting every last penny. 2) It can also be depicted as a truly bizarre response to the real pension crisis: requiring everyone who doesn't have one of the great public employee pensions to invest in the state's low-rent version of Social Security. 3) Does anyone really believe that this program wouldn't morph into something that's partly or largely subsidized by taxpayers or (more likely) private employers? 4) It is built on the assumption that everyone in the private sector is an idiot without the forethought to prepare for retirement. Poverty among the retired is low -- even among those who don't enjoy for decades 75 percent of their highest pay from their government pensions. 5) It presumes a faith in government that I just don't think Californians have. When I first heard about this earlier in the week, I assumed it was just a wacky bill introduced by Sen. Kevin de León, D-Los Angeles, that might make a little splash but then just fade into obscurity. I was shocked to see the Bee story that said it wasn't just de León but "Senate President Pro Tem Darrell Steinberg and other political and labor leaders" who came together to tout its glories, and that Gov. Jerry Brown had indicated he was intrigued. Wow. That's a pretty amazing array of support for something that is too dumb to be called half-baked. I think a better term is just plain baked, as the yutes like to say. So what pliant Democratic establishment journo was chosen to make the case for this goofball plan? Bingo. George Skelton loves it. The guy who infamously wrote in December that it was "hard to find anyone" who didn't think the Legislature and Brown should have shoved higher taxes down the public's throat is at it again. Now Skelton thinks private workers will welcome a 3 percent pay cut for a baked Cali version of Social Security. This is so dumb it's actually kind of a treat. It's going to be fun to watch it play out and see it slowly dawn on Dem lawmakers that they're tone-deaf dolts. Skelton? He'll never admit error. It's not what he does. As for Furutani, I've set up a Google alert to keep tabs on what he's up to. He's on fire. He's like Richard Pryor in 1979 or David Letterman in 1982 -- going to new places in comedy. It's a gift, Warren, so please -- just keep talking.
This writer is one savvy son of a gun: The proposal of a Democratic assemblyman to keep students from eating at food trucks instead of school cafeterias is ostensibly about public health, obesity and food safety. But while nanny state motives may be in play, it’s also easy to see this as the latest conscience-free effort to keep as much money as possible coming to public schools by any means necessary. Districts statewide face a constant struggle to find enough money for the salaries and benefits of their adult employees. In that sense, targeting food trucks is just like targeting charter schools’ funding. It’s all about preserving the status quo — and one more example of the pervasive moral bankruptcy that the California education establishment displays whenever it comes to money or accountability. More here.
In 2006, when the California Legislature was considering AB 32, Arnold was so worried that the bill forcing a shift to cleaner but costlier energy would harm the economy that he demanded it include a provision that would allow the governor to suspend the law during times of economic distress. Within three years, however, the lunatic idea began to spread from the green cultists to the regular media that AB 32 was actually a jobs program, not a dramatic government interference in the free market that would make energy much more expensive than in rival states and nations. The warning of U.S. Energy Secretary Steven Chu was ignored in favor of happy talk. Now, thankfully, someone is admitting that what was obvious to Arnold in 2006 and to Chu in 2009 is still true in 2012. Shockingly, it's the California Air Resources Board. What are the odds of that? My evidence: John Howard's excellent story in Capitol Weekly about the coming scrum over the billions to be generated by the fees companies pay to be allowed to emit air pollution: But some [polution emission] allowances – perhaps half of all those available -- will be given away, at least temporarily, based on a specific emitter’s efficiency. In total, between 2012 and 2020, the ARB will make available up to 2.5 billion allowances, with roughly 50 percent auctioned and 50 percent given away for free, according to an LAO analysis. The use of free allowances is seen as a way of preventing so-called “leakage” – the departure of companies to other states. As it turns out, all kinds of industries are at risk of "leakage" if energy costs go up. Here is a link to a Google search where the top result is a link to a 59-page PDF of an air board analysis of the "leakage" risk. The PDF makes a great case for Prop. 23, the 2010 ballot measure that would have suspended AB 32 until unemployment went down but was lied to death by opponents and their media echo chamger Will the Calbuzz guys notice this and apologize for their vapid 2009 claim that there is no downside to green regulations? Will the L.A. Times and Sac Bee finally get out of the green tank and admit that forcing California to have higher energy costs is not the equivalent of an economic stimulus plan? Don't hold your breath. Back to the Capitol Weekly article. I know because he's a neutral reporter he has to write it this way, but I bet Howard would have written this paragraph a lot differently if he were hooked up to a lie detector: Over the next eight years, the quarterly auctions by some estimates are projected to raise between $8 billion and $41 billion, with the money going to everything from helping balancing the state budget to promoting the virtues of clean energy to giving breaks to millions of residential and commercial electricity customers. Anyone who doesn't think the great majority of this money will go to "help the kids" -- that is, to preserve teachers' jobs and fund their ridiculous step and column pay raises -- isn't just naive. He's blind, deaf and dumb. The CTA loves itself some AB32, cuz AB32 is just the cash cow it needs to keep the broken education status quo in business for a few more years before there is finally a reckoning. Outside authorities consistently say California has the first-, second- or third-highest paid teachers of any state, sharing the top three with New York and Massachusetts. Meanwhile, estimates of how much the state spends per student compared to the other 49 states varies from the mid-20s to the low-40s, depending on how it's calculated. But think about what those numbers reflect: Whether it's the low end or the high end of that range for per-student spending, the fact that California's teachers are among the highest paid shows that a greater percentage of education dollars almost certainly goes to teachers' compensation here than in any other state. I can make this conclusion because New York and Massachusetts spend far more per student than California, by all measures. So that's why I am so sure fees generated by AB 32 will be coveted and probably mostly claimed by the CTA. The beast needs to be fed, and by any means necessary.
The lead item overnight on Rough & Tumble is about Gov. Jerry Brown's vague plans to consolidate regulation of Indian gaming in California. Be wary, here, Californians. The governor's quirky reputation obscures the fact that he's a conventional corner-cutting, favor-granting pol most of the time -- as he very much displayed in dealing with Indian gaming back in 2008. This is from what I wrote Sept. 10 of that year: Shame on Jerry Brown sandbags badly needed casino rules Of all the industries in the world, casinos are among the least suited to self-regulation. Dealing with vast amounts of cash, everyone from blackjack dealers to executives faces vast temptation to skim. But what's also not fully appreciated is how regulations protect consumers. Electronic games can be rigged in brazen ways, and promised mega jackpots can be illusory. Yet for nearly two years – since a federal court ruled federal oversight was unlawful – California's Indian casinos have operated without any meaningful scrutiny. This is why the California Gambling Control Commission began drafting its own standards for Indian gaming, which generates a staggering $8 billion a year. These standards would have required Nevada-style monitoring of cash transactions and electronic games. Last week, however, tribal representatives rejected the rules, setting the stage for a new court battle over whether Indian casinos are subject to governmental regulation. This was no surprise. What was absolutely shocking, however, was Attorney General Jerry Brown's decision to also formally oppose the rules because of vague, unspecified concerns. Brown has had nearly two years in which to raise these concerns while the commission drafted the rules. It is unconscionable for him at the last second to jump in and monkey-wrench the process. The only logical explanation for Brown's action is to view it in a political context. He has been preparing for the 2010 Democratic gubernatorial primary race since the day he was elected attorney general in 2006, courting powerful interest groups with dubious favors. Now Brown has done a huge favor for Indian tribes, which have perhaps the deepest pockets of anyone in state politics. This is contemptible – especially from someone who claims to be unusually idealistic and high-minded. Instead, Brown appears to be just another cynical pol who puts his own interests ahead of the public's. So when the details of Jerry's latest vague foray into casino regulation emerge, don't be surprised if they're favorable to casinos but not to the public in general. Jerry's got a tax measure he needs to pass this fall, yunno, and getting that done is going to take, uh, help from his friends.
Jerry Brown can bully and bluster and name-call all he wants to revive the deranged assault on sanity that is the bullet-train project, but there are Senate Democrats who just disregard his propaganda and point to the basics. In a polarized Capitol full of partisan hacks, these people are -- I'm going there, people, yes I am -- taxpayer heroes. What a comment on modern politics that being honest is all you need to rise to hero status. “There’s an inadequate business plan,” state Sen. Alan Lowenthal, D-Long Beach, said at a Friday luncheon of the Democratic Foundation of Orange County. “A UC Berkeley study found the ridership projections were too high. We have $10 billion in state funds and $3 billion in federal funds for a $98 billion project. To start in the middle (of the state) when you have no (financial) commitment is too risky.” For starters, Lowenthal said, the first leg of the line should serve higher population areas than the Central Valley, where groundbreaking is planned. That's from the Orange County Register. This is from AP: "I don't want the state of California chasing $3.5 billion in federal funds at a cost of $98.5 billion. That's not my idea of a bargain," said state Sen. Joe Simitian, D-Palo Alto, a one-time supporter. "If future funding is uncertain, then whatever we're going to build and pay for today has to have real value in and of itself." He calls himself a "supporter of high-speed rail done right," but said he'd yet to see such a project. Simitian questions whether the initial phase, a 130-mile section of track linking Fresno to Bakersfield, would have any value if the rest of the line is never built. Lowenthal and Simitian aren't going to go along with Jerry's Kool-Aid on this. They want something that makes sense. Good luck with that, guys! The AP story, by Judy Lin, also included this passage: "Spain can build it. China can build it. France can build it. Germany can build it. England can build it. Japan can build it. But oh, we can't build it," Brown said, mocking critics in a speech a week ago to the California Democratic Party convention. "No, we can build more airport runways, more freeways over the next 50 years. That's twice as expensive. So I'm not saying it's cheap; I'm just saying it's cheaper than the alternative, and it's a hell of a lot better." Brown was addressing the convention in San Diego, one of the major California cities left off the first phase of the high-speed rail line, which has led to local criticism. Bunk. Judy Lin shows zero familiarity with San Diego. The bullet train has faced derision for years in the city where I live because so many people here think the whole thing is a lie -- not because of the fact that the San Diego link is way down the list if the project is ever to be built. The latest evidence came just Sunday in this UT San Diego editorial, which is consistent with everything my paper has opined about the bullet train for years. The editorial also points out the big bullet train development that Judy Lin seems to have missed: Some state lawmakers and rail insiders expect the new proposal to essentially give up on building new tracks in the metropolitan Bay Area and in Los Angeles and Orange counties in favor of a system that links the southern tip of the former region with the northern tip of the latter region, then relies on upgraded existing tracks to get folks where they want to go, albeit at much slower speeds. This would certainly bring down the cost immensely by wiping out the need to build the most costly bullet-train tracks, in suburbs where activists and their lawyers would demand underground train lines or other extremely expensive ameliorative measures. A recent S.F. Chronicle article pointed to this. But I'll admit up-front to bias here; I may be picking on AP. Why? Because I've never gotten over how AP's California staff has accepted stupid union talking points without context for years and years, dating back to the 2005 special election. Here's how AP covered a June 15, 2005, rally in which Arnold was heckled for seeking reduced pensions, spending limits, teacher tenure reform and limits on the power of public employee unions: Schwarzenegger has been feuding for months with groups he calls "special interests" -- teachers, nurses and other public employee unions who accuse him of selling out to big business while shortchanging education, health care and other programs. Even seven years later, AP should still be ashamed. Fighting against the California status quo is "selling out to big business," say the non-"special interests." Sheesh. Bottom line: AP should be seen as a full partner in California's dysfunction.
I giggled, I really did, when I went to Rough & Tumble on Thursday morning and saw this headline on an L.A. Times story: "CalPERS report undermines Gov. Jerry Brown’s pension overhaul plan." Michael J. Mishak has only been with the Times a couple of years, but doesn't he have access to archives? Doesn't he have editors? Yo, Mike: CalPERS has less credibility on pension issues than Newt Gingrich does on family values. It largely created the crisis in 1999 with a series of lies that would have resulted in prison time if put forth by finance executives in the private sector. Ever since, it's been trying to cover its tracks. For CalPERS to embrace pension reform now after 13 years of deceit and deception would be the institutional equivalent of waiving its Fifth Amendment rights against self-incrimination. In 1999, CalPERS persuaded lawmakers that a 50 percent retroactive increase in the formula governing pensions for state employees would cost little if anything -- as if CalPERS' great tech-bubble investment returns in the late 1990s would never end. This started the dominoes falling that led to huge retroactive pension increases at the local level -- a catastrophic policy bandwagon that CalPERS directly encouraged. Ever since then, CalPERS has been running from responsibility for this debacle on several fronts. As the nutty prediction that returns would always be great proved its nuttiness, CalPERS used gimmicks like "smoothing" local government payment obligations over a long time frame to hide the fact that pensions were far more costly than predicted. As the media picked up on this fiasco, CalPERS turned to juvenile tricks like calling reporters who were skeptical of the agency "anti-pension ideologues" and "vultures" -- the terms CalPERS' top PR person, Pat Macht, used a few years back for a Reuters reporter who dug into and raised questions about CalPERS' confident investment forecasts. The juvenile quality of CalPERS' attitude knew no bounds. In September 2009, on my old blog, I posted an item about CalPERS' now-former actuary, Ron Seeling, warning that its practices were "unsustainable" -- a rare moment of honesty from a top CalPERS official that may have led to its appointing a new actuary. I also quoted leading pension reformer Marcia Fritz questioning CalPERS' assertion that the status quo was fine, just fine.. What turned up in the comments? Remarks mocking Fritz as a poorly informed liar -- posted by someone whose IP address I confirmed was from a CalPERS computer server. And in June 2009, as the 10th anniversary of the SB 400 debacle approached, I sought CalPERS' response repeatedly to how it viewed the fiasco in retrospect. Officials ducked comment for days, before finally grudgingly saying that was for others to judge. Groan. So much for a powerful institution dealing honestly with its history. The capper came in July 2010, when the inestimable Ed Mendel of calpensions.com dug up evidence that CalPERS knew back in 1999 that it was playing with fire by encouraging a 50 percent retroactive pension spike for state employees. Officials were told by number-crunchers that it could go wrong -- disastrously wrong -- if investment returns were mediocre. But they kept the information from the Legislature. Attention, Michael J. Mishak: This sort of behavior would be criminal in the private sector -- persuading people to make a multibillion-dollar commitment while hiding adverse facts from them. On a scale of 0 to 10, with 0 being abjectly stupid, "CalPERS report undermines Gov. Jerry Brown’s pension overhaul plan" is a 0. An accurate newspaperese head would be this: "Despite daunting numbers, CalPERS defends pension status quo." My preference would be this: "CalPERS continues dishonest crusade to hide its past perfidy." per·fi·dy n. pl. per·fi·dies
1. Deliberate breach of faith; calculated violation of trust; treachery:
2. The act or an instance of treachery. If karma is real, and not just a theory, the people who ran CalPERS in the late 1990s are going to hell. Perhaps Michael J. Mishak can do some browsing with Nexis so he grasps that this is the case -- instead of taking the villains at face value when they comment on their villainy.
Has a hallucination-inducing version of Legionnaire's disease struck the heating/cooling system at the office building at 55 Water Street in Manhattan that is headquarters to Standard & Poor's? Does Jerry Brown have embarrassing pictures of S&P analyst Gabriel Petek? What brings these questions to mind is the two upgrades in California's credit outlook since last summer. What good news is S&P pivoting on that has somehow escaped those of us who live in California? I'm not saying this out of a reflexive desire to express disbelief at good news. I'm honestly saying I just don't get it. Yes, as S&P notes, state spending has been reduced -- real cuts, not reductions in projected wish-list spending. That's great news. But I don't know anyone who honestly believes we have anywhere close to a balanced budget this year or will have a balanced budget next year. The budget is built on shabby and silly presumptions that would be called lies outside of polite society. This is not normally the sort of government behavior that a credit rating agency would tolerate. And there is no reason to believe this picture has gotten better over the past eight months, since S&P began getting bullish on California. Here's the short list of things that have gone wrong since then: 1) The state budget built on phony revenue estimates fell apart, as widely predicted, but Jerry Brown still refused to fully pull the trigger on allegedly automatic budget cuts, meaning the state, as noted, is running a deficit in 2011-12 -- another one. 2) Democrats in the Legislature balked at meaningful pension reform, and state Attorney General Kamala Harris sabotaged two ballot initiatives meant to allow voters to curb generous benefits. The result will be a big drain on state coffers and a devastating drain on many local governments, which may have to be propped up by state government. 3) The state continues to offer no suggestions at all on how it plans to pay back the $10 billion-plus it owes the federal government for loans to cover the cost of unemployment benefits. 4) The state revenue picture is grim. Just two weeks ago, we were told .... California is running out of cash, the state controller warned in a letter to lawmakers Tuesday. Controller John Chiang said lawmakers need to scrape together $3.3 billion by March -- assuming the state's financial situation doesn't get any worse. 5) Jerry Brown's tax hike proposal probably will have two rivals on the November ballot, making it likely that all will fail, per the conventional wisdom. 6) Brown is committed to the high-speed rail project, the project that objective critics say could prove the biggest public works boondoggle in world history. He sounds increasingly passionate in his commitment even though the total amount of state and federal funds now available for the project -- about $13 billion -- is less than one-seventh of what's needed to build even a limited version of the statewide system. Where is the rest of the money coming from? Beyond the usual myths about private investment, Brown says maybe from state coffers, specifically the fees from cap-and-trade pollution auctions that will start rolling in during coming years. You can barely make this stuff up -- California may be in awful shape fiscally, but the gov is eager to devote funds to a project that every objective evaluator calls an epic nightmare. 7) A federal judge has blocked hundreds of millions in state cuts in payments to Medicare providers, exactly as predicted by budget observers last June as Brown pushed them through. This list could easily go on. But I will wrap it up with the unlucky seven above, and note that I'm not the only one who thinks S&P is insane in the membrane. This is from a Bloomberg News analysis: S&P’s action ignores concerns about California’s liquidity, said Richard Larkin, director of credit analysis at Herbert J. Sims & Co. in Iselin, New Jersey. Brown’s budget for the fiscal year starting July 1 assumes voters will pass tax increases in November, without which the state would cut $4.8 billion from public schools, the equivalent of taking three weeks from the academic year. “S&P’s rating action is either vastly forward-looking or oblivious to real-time cash-flow problems,” Larkin said by e- mail. California collected $528 million less in taxes in January than Brown estimated in his latest budget, Controller John Chiang said Feb. 10. Most of the shortfall was in income taxes, down $525 million, or 6.3 percent less than projected Chiang said. Corporate taxes were down $127.9 million, while sales taxes were up $42.8 million. California’s fiscal situation doesn’t “warrant consideration of an upgrade until their budget is truly stabilized,” Larkin said. “I am at a loss as to what prompted today’s decision.” Larkin isn't the only one. S&P has gone bonkers. Or maybe it's just succumbed to political pressure. But whatever your theory, based simply on known facts, the credit agency's decision is almost impossible to fathom.
Now let me get this straight: In the 2012-13 federal budget unveiled Tuesday, when it comes to California, the Obama administration wants to cut programs helping devastated Central Valley farmers, to slash federal funding to deal with the huge state cost of jailed illegal immigrants, to reduce money for beach environmental programs and to scale back plans to upgrade national parks in California --- at the same time it pushes to shower money on high-speed rail? In a rational state, a project that's gotten less favorable coverage than anyone or anything outside of Mark Berndt would be dead. It doesn't have long-term financing, it's been terribly planned, it was sold with a farrago of lies, it faces intense opposition in Silicon Valley and the Central Valley, and every independent review concludes the bullet train is a fiasco waiting to happen. But a federal government running staggering, jaw-dropping deficits wants to spend billions and billions more on it, and a state government that's coming off years of budget dysfunction and chaos wants to commit to a $98 billion (minimum) project that is at best about 13 percent funded. Why? The only reason that makes sense is that Barack Obama and Jerry Brown have both come down with edifice complexes. And high-speed rail is the best that they can do. (Which is a pretty sad commentary in its own right, separate from the feasibility question.) Meanwhile, it's becoming increasingly clear what the gov's reboot of the bullet train project will look like: a proposal to link San Jose and Lancaster or somewhere in north Los Angeles County with a high-speed rail line, and then to just pretend that this is what voters wanted to spend tens of billions of dollars on, not a true statewide system. This story offers hints that is where Brown is headed. But the problem is a high-speed rail line that links the southern fringes of the Bay Area metro area and the northern fringes of the L.A. metro area just isn't that attractive -- whether you're thinking about convenience or cost. Once you get to San Jose or Lancaster, then you have to switch to conventional, slower rail to get to where you want to go. That's true even if these urban/suburban rail systerms are upgraded using some of the billions that the state has in hand, as Jerry appears to want to do in the Bay Area.. This doesn't sound like an inspiring vision for the 21st century at all. Beyond that question/concern -- Is that all there is? Really? -- it will be amazing to see the contortions the Brown administration will have to go through to pretend the new business plan laying this all out complies with the letter of Prop. 1A. It's already a full-blown assault on the spirit of Prop. 1A. I expect a blast of semantic game-playing that makes Bill Clinton's "It depends on what the meaning of 'is' is" seem elemental. That's the case not just on the likelihood that state officials will seek to guarantee private investors a minimum level of ridership or revenue even though Prop. 1A experts like Legislative Analyst Mac Taylor say that violates the law's requirement that the project never receive taxpayer-funded operating subsidies under any conditions. A state lawmaker I was talking to recently said he had heard that the California High-Speed Rail Authority was ready to argue that the bullet-train would meet this Prop. 1A requirement ... .... the train system be capable of sustained maximum speeds of at least 200 miles per hour .... .... by having one stretch of track and one stretch only somewhere in the state be that fast. Why give up on such a basic promise? Because there's no way to get to 200 mph for an L.A. to S.F. bullet train route if big chunks of it are covered by commuter rail in L.A. and S.F. I'm still amazed at how this is playing out. The bullet train is such a preposterous boondoggle that this should be a clean kill. Instead, we face a messy, prolonged fight for a project that amounts to the Big Dig on Victor Conte's best steroids. If Jerry Brown thinks this will add to his legacy, he needs to talk to people in Fresno or Atherton. If this is Zen, Zen is for dummies.