Gov. Brown's cap-and-trade spending plan angers businesses

From: Los Angeles Times

Gov. Jerry Brown has found a new pot of money to help him fill a $9-billion hole in his proposed budget: $1 billion from auctioning credits to allow California companies to emit greenhouse gases.

But business groups are already denouncing Brown's plan as a back-door tax increase that they intend to challenge in court if the proposal is approved as part of the state budget for the fiscal year that begins July 1.

"At a time when the public is concerned about jobs and the economy, the budget proposes a new tax on California businesses for climate change activities," said Dorothy Rothrock, vice president of the California Manufacturers and Technology Assn. "The anticipated $1 billion is not windfall revenue. The funds will be paid by California employers suffering the worst recession since the Great Depression."

The so called cap-and-trade system is a critical piece of AB 32, California's landmark legislation aimed at cutting carbon dioxide emissions to 1990 levels by 2020. Modeled on a European program, it sets a cap on emissions of carbon dioxide, methane and other greenhouse gases for each industrial polluter or electric power plant. Facilities can exceed their cap only if they buy credits of other plants that have extra ones after reducing their own releases into the atmosphere.

The first auction, tentatively set for August, is projected to raise as much as $1 billion, which would be earmarked to "create jobs and deliver public health, economic and environmental benefits" as part of the state's effort to curb global warming, the governor's office said.

Brown's 2012-13 budget summary, released Thursday, dedicated three of its 173 pages to a bare-bones plan to use the auction proceeds to pay for a variety of environmental programs.

But business groups representing steel mills, cement plants, refineries and other heavy industries say such spending is not authorized by AB 32 and is probably unconstitutional.

At issue is whether the money paid by polluters to buy credits is a fee or a tax.

The difference is important because tax increases or changes require the approval of a two-thirds super-majority of members in both the California Senate and Assembly. But a simple majority of lawmakers can set fees on industries. Money collected from the firms can be spent only on activities that are closely related to regulation of a specific business, such as conducting a health inspection at a restaurant.

Reinforcing the principle of a tight linkage between a fee and how it is spent was enshrined in the state Constitution when voters approved Proposition 26, an industry-backed initiative, in 2010.

Such a connection clearly exists, the Brown administration said, noting that it plans to spend the auction proceeds in four broadly defined areas: clean and efficient energy, low-cost transportation, natural resource protection and sustainable infrastructure development.

"These are the types of programs spelled out in broad strokes in AB 32," said H.D. Palmer, a spokesman for the governor's Department of Finance.

What's more, some AB 32 supporters contend, the extra $1 billion in environmental fees — even if they are considered taxes — are not overly onerous since California's total corporate tax bite is on par with the U.S. average, according to a recent survey by the Council on State Taxation. Total corporate taxes are higher in Alaska, New York, Florida and even Texas, says the report by the business-friendly group.

Exactly how the proposed environmental auction money might be spent won't be clear until more than a year from now, although some of it could be used to pay for existing environmental programs, freeing up the money for other purposes, Palmer said.

Environmentalists generally support the governor's plan because it could lead to a net increase in spending on their favorite projects.

"Much as we hate to see it, some backfilling [for existing programs] is going to happen," said Jim Metropulos, a lobbyist for the Sierra Club, who called the governor's plan for spending auction receipts "a good thing."

For now, Brown's cap-and-trade spending proposal is too vague to draw any conclusions, said Tiffany Roberts, a specialist in environment and natural resource programs at the California Legislative Analyst's Office.

"Who knows if this can pass legal muster?" she said. "Until we see some kind of proposal, it's guesswork."

High-Speed Train Plan in California Derailing?

From: GOCTECH.com

A report released Tuesday, Jan. 3, by the California High-Speed Rail Peer Review Group threatens to permanently derail plans for a network of 200 mph trains in the Golden State.

The group, which exists by state law and was directed by the California State Legislature to conduct the report, concluded that “moving ahead on the [High-Speed Rail] project without credible sources of adequate funding, without a definitive business model, without a strategy to maximize the independent utility and value to the state, and without appropriate management resources, represents an immense financial risk on the part of the state of California.”

Presently the California High-Speed Rail Authority (CHSRA) intends to use $9 billion in voter-approved bonds — as well as $3.5 billion in promised federal funding — to construct an initial 130-mile segment of the railway between the cities of Chowchilla and Bakersfield in the state’s Central Valley. However, with that 2008 bond vote came the requirement for the California High-Speed Rail Peer Review Group to green-light the feasibility of CHSRA’s plan prior to the State Legislature issuing bonds. The group, headed by former CalTrans director and current Orange County Transportation Authority chief Will Kempton, advised via the report that the state Legislature shouldn’t fund the increasingly-criticized project.

The CHSRA authority immediately responded, saying that “while some of the recommendations in the Peer Review Group report merit consideration, by and large this report is deeply flawed, in some areas misleading and its conclusions are unfounded.”

The CHSRA contends the report includes “egregious errors and unsupported assertions” that “would have been avoided with even minimal consultation with the CHSRA.”

The report nonetheless likely deals a serious blow to Gov. Jerry Brown’s support of high-speed rail in California. Brown said as recently as late December he intends to ask the state Legislature to issue bonds. Yet the governor’s spokesman, Gil Duran, waved off suggestions that the reports put a stop to the rail plan. “The peer review report will be evaluated by the Legislature, but it does not appear to add any arguments that are new or compelling enough to suggest a change in course,” Duran said, according the San Francisco Chronicle.

Brown is slated to introduce his budget proposal on Tuesday, Jan. 10. Update: Brown will be introducing his budget Thursday, Jan. 5 at 2:30 pm PT

California Is Screwed

Californians have their head in the sand. They're broke and now pass single payer.

From: McClatchy

The national debate over health care can be summed up in a bill being debated in Sacramento.

Supporters of Senate Bill 810 say the legislation would be the only way to provide medical coverage for every Californian.

Opponents deride the measure as socialized medicine.

The California Universal Healthcare Act was introduced by Sen. Mark Leno, D-San Francisco. The bill would initiate single-payer universal health care for the state of California, Leno said. "What that means in short is Medicare for all," he said.

Supporter Keith Ensminger, a Merced resident and owner of Kramer Translations, said the largest benefit of the legislation probably would be that it would include everyone. "Everybody would have insurance, regardless of their income and regardless of their position in life," he said. "One of the bigger benefits for us is that nobody in the Central Valley would be required to remain poor for Medi-Cal. They would still have their insurance paid."

A high percentage of Central Valley residents are on Medi-Cal.

There would be other positive effects from the bill, said Ensminger, who's a member of Health Care for All, a statewide organization that helped developed the bill. It would lower the cost of insurance for most people, everybody in the state would have a health insurance plan and it would aid people in having medical conditions treated early rather than waiting.

In addition, it would prevent medical bankruptcies, he said.

Dr. Bill Skeen, executive director of the California's chapter of Physicians for a National Health Program, said the organization supports the legislation because it's the only way of providing coverage for everyone and controlling the skyrocketing costs of the health care system.