FLASHREPORT

Below is a policy briefing prepared for Senator Benoit who, as Vice Chairman of the Senate Energy Committee, drives the Republican agenda on Energy matters.  AB 32, rushed through the legislature by Fabian Nunez and Governor Schwarzenneger, sets virtually unattainable goals for California's use of renewable energy.  (Compare to Federal Cap and Trade policy... on steriods!)
 
Senator Benoit for the past year has been seeking more reasonable timelines for implementation, and the inclusion of already in use renewable energy sources such as hydro and nuclear generation.  The bottom line compromise sought?  A reasonable, attainable policy that won't stick taxpayers with soaring utility bills.

Introduction - A Lesson From History
On both page and screen, "A Bridge Too Far" is the heartbreaking story of Operation Market Garden, the Allies' courageous but failed attempt to crack the German lines in the occupied Netherlands during World War II.

Tens of thousands of paratroopers were dropped deep behind German lines to secure a series of bridges over which Allied ground reinforcements would soon follow.

But what first appeared to be a stroke of strategic genius soon devolved into utter disaster - indeed, the last major Allied defeat of the war.  Why?  Historians have determined that the operation was hastily and haphazardly planned.

The fatal key to Market Garden was the attempt to secure the bridge in the distant town of Arnhem - an effort which has become famous in film as "the bridge too far" and infamous in idiom as the classic metaphor for overreaching.

Sixty five years later we watch as the California Legislature zealously pursues renewable energy as the sine qua non of a cleaner, greener and more energy-independent future.

But in our current hastiness to legislatively adopt the boldest goal and timeline to date, do we risk starring in our own production of "A Bridge Too Far?"  With our Renewables Portfolio Standard Program (RPS) cast as Operation Market Garden and the drive for "33% renewables by 2020" taking a turn as the Bridge at Arnhem?

And So Today...
You wouldn't know it from news media coverage, but both Republicans and Democrats see great value in renewable energy. They just differ on how much, how fast and at what cost.  This year the Legislature is considering several major omnibus RPS bills.  As the measures progress and evolve, we see brilliant, well-intended legislators working with regulators, consumer advocates, academicians, union leaders, environmentalists, and representatives from every conceivably relevant industry.

A Lesson From Recent History
In 1996, as the Governor and Legislature were enacting AB 1890, the restructuring of California's electricity industry, a nearly unanimous chorus of regulators and stakeholders joined hands and sang the new policy's praises.

The AB 1890 restructuring process was multi-year, deliberate and cautious. It brought together the best and brightest from government, industry, academia and consumer advocacy. They were the Dream Team. The 1927 Yankees of energy.

And yet they still got it wrong. Terribly wrong. Today their carefully crafted product is known as "The California Electricity Crisis of 2000-01."

But more than a few, who were around for the development and implementation of AB 1890, say today's RPS process is much more rushed than the AB 1890 process.  And that unsettles them.

These observers express concern that we may be a few months away from another major restructuring of our energy industry, regulatory scheme and policy goals.  At this point, they say, we should be engaging in last-minute fine-tuning of a policy framework that has been carefully designed and adjusted over a long period of time.  But instead, say the observers, at times it seems like we are still trying to decide if this newfangled car we're building will have four wheels or six, if the engine will be in the front or rear, and if it will run on gasoline, diesel or coal oil.

It seems that the only thing we absolutely know for sure is that in 2009 . . . or possibly 2010 . . . the Legislature will enact a requirement that Californians will be getting 33 percent (or thereabouts) of their electricity from clean renewable resources by year 2020 (or thereabouts).

Too Much Yet Unresolved?
Most large-scale renewables tend to be located in relatively remote locations that require long transmission lines to bring that power to our populated coastal areas.  Environmental and NIMBY concerns complicate siting of renewables transmission, and we have yet to decide how best to expedite the process.

And while large-scale solar energy may reduce your carbon footprint, it stomps a broad footprint onto the environment.  Many of California's best locations for large-scale solar are deserts with threatened species like the desert tortoise.  Some experts say that a solar thermal power plant that produces 100 megawatts of electricity requires at least 500 acres of well cleared land.

So do we protect our environment by looking outside the state for renewable energy resources?  Not if the unions who desperately want those generation jobs - especially in the present economic climate - have anything to say about it.

And it gets even more complex. Pacific Gas and Electric Company wants to contract with parties in British Columbia to bring clean, renewable hydroelectric power into California. The proposed "run of river" hydro projects would satisfy liberal Canada's tough environmental standards - but California environmentalists are working to block this renewable power because they want to hold Canada to California standards.

Nor have we decided how much and in what way we will employ tradable, unbundled renewable energy credits to help our RPS-obligated businesses comply with program mandates.

We have yet to decide what cost-control mechanisms we will rely on to protect our utilities and ratepayers from the soaring above-market costs of purchasing expensive renewables by mandate. (Remember, after AB 1890 was enacted, the utilities were making money hand over fist initially. But once the wholesale electricity market went crazy, the utilities went from flush to flat in less than a year.  Of the three giant investor-owned utilities, one actually went bankrupt and the other two were on life support.)

Will our newly modified RPS program provide obligated entities with adequate "flexible compliance" rules that will afford them financial breathing room during those inevitable times when the immutable laws of economics insist on flexing their muscle?

And will the fervor to reduce greenhouse gases allow enough new natural gas-fired power plants to provide base load power, back up intermittent renewables like wind, and ensure grid reliability?

Finally, we have had an RPS goal of 20% renewables by 2010 and we're not even on track for that.

There is still so much up in the air, say some of the experienced observers, that Californians should focus less on trying be the first state to enact a 33% RPS standard and more on slowing the process down and getting the design and implementation right.

[Publisher's Note:  In this post, Barry appropriately recognizes legislators from his region who have been tapped by the new Assembly Republican Leader with new positions.  Congrations all.  For those who have inquired, we're prepared a major piece detailing all of Blakeslee's many appointments -- but we're waiting for these announcements to finish coming out.  For some reason, unknown to us here at FR HQ, instead of one release detailing his leadership team, Blakeslee has put out many, many releases.  That's fine if his team wants to do that much work on their end, we just want to write about it once on ours ;)  - Jon]

Assembly Republican Leader Sam Blakeslee recently made the following appointments:
 
Freshman Assemblyman Jeff Miller, R-Corona, will oversee caucus political staff and recruit candidates for targeted seats for potential pick ups.  This position allows a member to gain some political capital as they choose candidates, consultants, and interface with donors.

Second term Assemblyman Kevin Jeffries, R-Lake Elsinore, will serve as the liaison between the GOP caucus, the California Republican Party and "grassroots Republican leaders."  Kevin improved communication and morale as our County Chair, and he'll need those skills to energize a fractured party.

Freshman Assemblyman Brian Nestande, my brother, was appointed as a Republican Floor Whip.  He brings legislative experience, political savvy, and an ability to build consensus to the position.

The Los Angeles Times did a must-read expose of teachers that should definitely not be in the classroom.  These bad teachers have an impossibly-high standard of proof to meet before ultimately getting tossed.  It seems that you need to get a United States Supreme Court decision on each teacher before they're let go, all the while they receive checks for completing crossword puzzles while being "housed."

Waste Watchers- Here is a Shocker: Los Angeles Unified School Pays Teachers Not To Teach

Is it your life long dream to secure tenure and gradually become a non-productive burden upon students and taxpayers—achieving a perfect deadwood state of zero productivity with maximum profitability?  Well, look no further than Los Angeles Unified School District.

This installment of government waste is relatively small in this era of billion and trillion dollar deficits.  As comparison, this example is like having gum stuck to the bottom of your shoe and tracking it across your carpet at home - annoying, leaves a spot or two on the rug, and over time, accumulates with a lot of other spots to necessitate new carpet.

Waste Watchers- Only Government Would Pay For A Free Lunch 

A couple of weeks ago, the California State Auditor released a goldmine of government waste.  The 84-page report, "Investigations of Improper Activities by State Employees," examines just nine instances of improper activities, costing taxpayers thousands of dollars and lots to be embarrassed about.

In the last six months of 2008, the State Auditor's Office received 2,163 calls of suspicious behavior.  The report is an investigation of just 9 of the 338 new cases.  What follows is a classic example of the left hand not knowing what the right hand is doing:

The Department of General Services provides "custodial service, window washing, and building maintenance service" on State buildings.  In the course of this work, General Services provides emergency plans and emergency preparedness training to employees in its buildings.

Amazingly, the Auditor reported that, due to poor oversight, DGS paid $3,000 to a private vendor for consulting services that another State agency offered at no charge.  The investigation found that DGS needlessly entered into a contract to conduct emergency preparedness training to L.A. employees in October 2005 - even though the CHP provides this service at no cost!

What makes this particularly egregious is that the CHP provided the safety training courses before 2005 - and continued to do so after the contract.  Someone at DGS knew that CHP provided free training.  Yet General Services was "unable to sufficiently determine if the contract with the vendor was appropriate" because the single employee with contract-making authority (and institutional knowledge) left in 2006.

The State Auditor concluded ... given that General Services was unable to sufficiently answer why it paid for services when comparable services were available at no cost, we must conclude that its decision to enter into a contract with a private vendor constitutes a waste of State funds."

Clearly, State government is so outsized that it's difficult for State agencies to be mindful of services already provided by another agency.  Government can not run as a well-oiled machine when agencies continue to re-invent the wheel... paying for free parts!  For a peek inside the labyrinth of complex government bureaucracies, take a look at the State agency phone list.

The California Department of Corrections and Rehabilitation spent nearly $1.3 million in just two fiscal years to pay unemployment benefits to workers who had been fired, according to a report released March 30 by the California Office of the Inspector General. The sum represented nearly 25 percent of the department's spending on unemployment benefits in 2006-07 and 2007-08.

The report went on to say, that "CDCR's lack of internal procedures to effectively process UI claims and poor communication between the CDCR and the Employment Development Department (EDD) contributed significantly to adversely separated employees receiving UI benefits. Of the 1,045 employees adversely separated during fiscal years 2006-07 and 2007-08, 186 employees received UI benefits."

"Three case studies included in the report reveal that unemployment benefits were given to: a peace officer who was fired after she committed a hit-and-run accident while driving under the influence and then refused to cooperate with the California Highway Patrol; an officer who was fired because he was affiliated with a prison gang and possessed an illegal assault weapon; [and] an employee who was let go because she failed to report for work 132 days (the equivalent of six months of work) during her 15-month probationary period."

These are just a few examples of a very serious problem within the CDCR and EDD. California government faces a crisis of confidence at all levels for its poor recordkeeping of how public funds are spent.  Polling consistently shows that taxpayers are discouraged by the too often irresp onsible way government spends their hard-earned dollars. And yet, year after year, money is misused by state agencies without clear accounting.

Taxpayers have a right to expect all public agencies to be good stewards of their money. For this reason, the state should push for greater transparency and accountability in the way these agencies conduct the people's business, in order to prevent further government waste and restore taxpayer confidence in the " Golden State." 

 

 

 

 

This morning, my boss, Senator John J. Benoit, weighed in on the implementation of the higher State sales tax rate.  Just a note, here in Riverside County, we don't have too many local add-ons, so our rate is 8.75 percent.  As the Board of Equalization notes (follow the link to see your own local sales tax rate), some jurisdictions have already topped a 10 percent sales tax!

Today, April 1, the State sales tax increase approved as part of the recent budget deal in February will go into effect, raising the sales tax in Riverside County from 7.75 percent to 8.75 percent.  This one-cent tax increase represents a 12.9 percent increase in the sales tax, and is, at present, set to expire in two years.

Today's tax hike further cements California 's title of highest sales-tax State in the nation.  Small businesses were already struggling through a down economy.  A tax increase that will undoubtedly further depress consumer spending was not the lifeline these businesses were looking for.  I predict that our economy will feel the pinch of this tax increase, as Californians seek places elsewhere, such as our neighboring Western states, to make big purchases.  The movement of capital to states with friendlier business climates will continue the pattern of job losses in all industries reliant on consumer spending, further increasing Riverside County 's 12.6 percent unemployment rate.

These counterproductive consequences, and the thought of punishing California families with higher taxes to bail out Sacramento overspending, are chief among reasons why I voted to reject these tax increases when the vote was before the Legislature in February.

Yesterday, the Tax Foundation in Washington, D.C. released its annual report on the arrival of Tax Freedom Day.  They calculate the tax burden of the average worker and determine how many days of work it takes to pay off taxes to federal and State government.  Calculations are based on what percentage of our income is taken for taxes, which is 28.2 percent for the average American, according to the Department of Commerce's Bureau of Economic Analysis, and then converted into days worked.

This year, Tax Freedom Day will arrive on April 13, a week and a half earlier than 2008 due to decreased tax collections from the receding economy.  However, California 's high taxes mean residents here will have to wait until April 20 to bring in Tax Freedom Day, a full week later from the federal average and the fourth-latest date among the fifty states.  Having the fourth-highest tax burden, measured this way, is not a fact or figure to take pride in.

Given the other increased taxes recently approved in the latest State budget agreement (increased vehicle registration fees, higher income taxes, reduction of the child tax credit), I thought it pertinent to add a special feature on my website to determine the impact of $12 billion in increased taxes on your household.  You can access this feature by following the link here. 

 

My wife and I are doing a bit of financial planning to provide for our boys in case of an emergency.  We have a 20 year old moving through college, and a five year old that we would like to put through school as the years roll on.

One of the components of our plan involves life insurance policies.  Today, a woman came by to take blood and perform an exam for my policy.  She was probably mid 50's, extremely pleasant and fun to talk to.  Since I wanted her to write good things about my health, I was "chatting her up!"

We started talking about her job.  She works for a corporation that contracts with insurance companies to perform medical exams to use in underwriting policy risks.  I asked her if she was busy, and if the company was good about scheduling her in a way that her appointments would be grouped together instead of spread out.  She said they had been, but, the company recently moved all of their operations to Dallas Texas because, and I quote, "California is too hard to have a business in."

There you have it.  Word on the street.  Everybody knows how the overregulation and overtaxing is hurting California businesses, except for the folks who keep overregulating and overtaxing!

President Obama's plan to assist struggling home owners is well intentioned, but almost completely worthless for us in Riverside County, or California, or any other states with plunging real estate markets.  Under the plan, people who are current on Fannie Mae and Freddie Mac mortgages for their principal homes could obtain less expensive loans for up to 105% of the property value.

For example: A person whose house was worth $300,000 could get a loan for $315,000.

The problem is that 46% of Riverside County mortgage holders owe more than 105% of their homes' value. San Diego and San Bernardino have more than 30% over that limit. And in Los Angeles County, 29% will not be eligible.  The plan would have to be hiked up to 140 or 150% to be of any real help.

For those ineligible for the first part of his plan, there is a second part.  Loan interest rates could be dropped to as low as 2%, loans extended to 40 years, and/or the borrower could skip interest payments on a portion of the principal, or finally, a portion of the debt could be forgiven.  Unfortunately, the second part doesn't exist yet and will be optional for the lenders to participate.  I won't hold my breath.

As Jim Brown, the great Cleveland Browns running back said in the latest issue of Vanity Fair, "A liberal will cut off your leg so he can give you a crutch."

We need to fix the system that put us in this position, not try to bail people out of it.

My wife, Merrilee, is a long time mortgage broker and she illustrates the problem wonderfully in regards to back end ratio.  She had a client a few years ago whose adjusted income was $1.2 million annually.  He could not qualify for a loan on a second residence because his ratio of debt to income (back end ratio) would be pushed to 60%.  That included car loans and revolving debt, also. Keep in mind, he still had $40,000 per month remaining!  Another client came in who was clearing $2500 a month and qualified for a loan that put his ratio at 60%, with just his mortgage payment.  His monthly payment was $1400.  The difference?  Fannie Mae and Freddie Mac were forced to guarantee his loan. 

Who thinks of this stuff?

It was Barney Frank who led the defense of Freddie Mac and Fannie Mae whenever anybody questioned their solvency and threatened any regulation.  It was President Clinton's administration through the Community Reinvestment Act who freed up a couple of TRILLION DOLLARS for mortgages in the largest expansion of home loan aid ever. What good is a chicken in every pot if you don't have a kitchen to cook it in? 

Now this problem has grown larger than the ability of any program to help it.  We need to remember that the people, who were given cheap, easy, "liar loans" and interest-only loans inconsistent with their income, probably can't be helped in any meaningful manner; and, until the fallout from these irresponsible loans work their way through the system, this real estate market can't turn upwards.

Another reality is that many of the people who default on their mortgage and walk away from their homes just don't want to wait until their values come back.  Defaulting on a mortgage simply doesn't carry the negative credit consequences or social stigma that it used to.  Some folks actually seem to use it as a type of financial planning!  It does, however, guarantee a future downturn even as we work our way though this one.

Why is that?  Many of the folks who bought at the top of the market bail out and default on their loans here at the bottom of the market.  They are dinged for five years and unable to buy another home now, at these bargain prices.  In 5+ years, when they are in position to once again buy, the market is likely up and they will once again pay inflated prices.

That's where we're at.  And until our Democrat friends quit hacking off legs to subsidize the crutch industry, we are doomed to repeat these cycles time after time.

In a special presentation last weekend at the Sunday floor session of the California Republican Party Convention in Sacramento, the Temecula/Murrieta Valley Republican Women Federated club took home the honor of "Chairman's Grassroots Club Award."

Recognized for "outstanding volunteerism on behalf of the Republican Party," the Republican women were honored for registering over one thousand new Republican voters (in the middle of one of the most difficult periods to register new Republicans) and logging an impressive total of 4,500 hours from August to Election Day in the Southwest Riverside County headquarters for the McCain campaign.  Accepting the award from CRP officials was President Adele Harrison.



One volunteer present at the Convention, but too humble to take credit for the honor, is Bridget Blanton.  This dedicated young lady volunteered six days a week, for at least a twelve-hour shift each day (10 AM-10 PM), working a total of 1,700 volunteer hours during the fall campaign!  I was told that as the election drew nearer, she even volunteered on her Sundays too!

Bridget's efforts were highlighted in a Press-Enterprise story when Vice Presidential nominee Sarah Palin visited Carson:

Long hours of unpaid work, short nights of sleep and lots of under-eye concealer paid off recently for Bridget Blanton.

The 48-year-old Republican volunteer got a backstage pass to hear Alaska Gov. Sarah Palin speak during a recent swing through California. Blanton caught the attention of state GOP officials for her 50-hour unpaid work-weeks in the Temecula Republican Party office, and they got her the pass to see Palin before a rally last weekend in Carson.

"She just exuded self-confidence, poise," said Blanton, a Temecula resident. "As a conservative Western woman, I've never been more proud."

Blanton said she's been working hard to register new voters and train volunteers, and she credits Palin with energizing many activitists — especially the young women. Blanton said she's tired, but excited. Getting to sit just 6 feet from Palin in a room of a few dozen people just added to her energy level.

"She exemplifies what I have been doing as a Republican woman for years now," Blanton said.

In addition to their Party-building efforts, the Temecula/Murrieta Valley Republican Women have been defending their conservative beliefs on the streets, joining the Murrieta Temecula Republican Assembly in counter-protesting anti-Israel demonstrations that have sparked up in the normally-quiet foothills of Temecula.

This is the kind of hard work, energy, and teamwork that wins elections for Republicans.  Southwest Riverside County Republicans were well-represented during the Convention, with newly-minted Senate Republican Leader Dennis Hollingsworth (he hails from Murrieta), Congressman Darrell Issa, and the Republican Women taking center-stage!