No wonder Schwarzenegger endorsed McCain

Romney today is accusing McCain of using "Nixon-like" tactics. RMN, of course, was Schwarzenegger's first American political hero...

Schwarzenegger and McCain

Schwarzenegger is expected to endorse John McCain today for the Republican nomination.

At the GOP debate Wednesday night, Sen. McCain supported Schwarzenegger's policies to fight global warming, saying if he and Schwarzenegger are wrong, all they've done is left the next generation a cleaner world. Romney and Huckabee, meanwhile, said they believed California has the right to go its own way on global warming even if they fear the policy might damage the state's economy, and Romney said the US should not act unless China and India do so as well.

Here is the transcript.

Berkeley confronts the USMC

Even for Berkeley, this is a reach: an official resolution telling the Marines that their recruiting office in town is an unwelcome and uninvited intrustion. Also, several city actions to encourage and aid in the protest group Code Pink's efforts to impede the Marines' work at the office.

Prop. 93's best hope: uninformed voters

The latest LA Times poll shows Prop. 93 still leading, but by a narrow 50-46 margin that is within the poll's margin of error. Conventional wisdom (based on recent history) suggests that the term-limits measure is doomed, because voters are breaking against it, it's confusing, and typically a ballot measure needs to go into Election Day with a decent lead in order to survive.

I tend to assume that all of this is true for 93 as well. But don't forget the ballot description that opponents have been complaining about from the beginning. That description emphasizes that the initiative reduces the total time a lawmaker can serve from 14 years to 12 years. Before the campaign began, voters who were read that description by pollsters broke solidly in favor of the measure. Since then, many who have learned exactly how the initiative works have turned against it.

But many of the people who vote on Tuesday will be looking at the measure for the first time. When they read the ballot summary, they will probably break in favor of it. If there are enough of those voters, they could make the difference in a tight race.

I'm not saying that this is going to happen. But it might.

Health care entrails

While it's not terribly surprising that Schwarzenegger failed to get his health care reform through the Legislature, and the Senate Health Committee's action Monday had been telegraphed for days, when you step back it is still odd that it was the liberal Democrats in the Senate who blocked this plan. Their primary rationale -- that it was too risky as a fiscal measure -- seems even stranger.

It's a perfectly legitimate concern. AB1x was definitely a risky plan, and there was a good chance, if it passed, that future legislators and possibly the voters would have to fix it. But the senators who cited this issue are many of the same people who voted for SB 2 in 2003 without nearly this level of fiscal scrutiny, and for AB 8 last year. There was no similar LAO analysis of either of those bills before they passed the Legislature with overwhelming votes from the Democrats.

Both of those bills relied primarily on a payroll tax for their financing. The payroll tax has been growing at a slower rate than health care costs forever. That approach, then, was doomed to create a shortfall from the beginning. AB 8 sought to address this flaw by giving an adminitrative agency the power to increase the payroll tax without a vote of the Legislature if -- more likely when -- the revenues fell short. Sen. Perata considered this safety valve a feature of that plan, not a bug.

Perata also complained that AB 1x was linked to a ballot measure that would include its financing. But Perata voted for SB 840 -- Sheila Kuehl's single payer plan -- even though it employed the exact same strategy. And the single payer plan, to be financed primarily by a 12 percent payroll tax, would have run up a deficit unless its managers could have slowed the growth in health care costs to below the level of the growth in wages -- an extremely unlikely prospect. To control those deficits, the commission to be put in charge of health care would have been empowered to cut benefits and levy co-payments on consumers. Hardly a risk-free undertaking.

AB 1x included a tobacco tax and a hospital tax, which Perata has now advocated be passed without the rest of the comprehensive package expanding access to health insurance. He has to know that is extremely unlikely to happen. Meanwhile, he is leaving $4 billion or $5 billion in new federal money on the table that would have been used to expand access to health care for the poor.

In the end, factors other than the risk-analysis clearly played a role here. The dysfunctional, often testy relationship between Perata and Nunez was huge. Labor's uneasiness with the individual mandate and the unions' desire to stick it to employers were always part of the mix. The California Medical Assn.'s lack of support didn't help, and the tobacco industry's opposition hurt the bill's chances late. With the Democrats on a roll nationally, a lot of Democrats in the Legislature may have simply decided to take their chances that a Democratic president and Congress will attack this issue next year. If a Democrat doesn't win the White House, the Legislature could always come back at this in 2009 or 2010.

Bob Sillen's ouster

I am surprised that Federal Judge Thelton Henderson has fired Bob Sillen as the receiver over the prison health care system. Everything up to now made it appear that the two were in sync and that Henderson was OK with Sillen's confrontational style. But by replacing him with Clark Kelso, a state government insider, Henderson is making it clear that he no longer wants to take no-holds-barred approach favored by Sillen.

It was an interesting experiment. Sillen was given immense powers over one very troubled state government program, more power in some ways than the governor. But his exercise of that power ticked a lot of people off, from the old guard in Corrections to the correctional officers, vendors and legislators. His mouth also got him in trouble. He wasn't bashful about lording his power over people and making it clear everyone knew he was in charge. In the end, it caught up to him.

Kelso is a talented guy and might be able to accomplish the same goals without all the bombast. But it won't be easy. Sillen was right about one thing: Improving medical care for prison inmates is a very low priority for politicians, because it is a very low priority for the public. But if the courts have ruled that the inmates have a constitutional right to a reasonable level of quality care, the state is going to have to provide it.

The problem with health care reform

A coalition of big labor unions today announced its opposition to AB 1X, the health care bill drafted by Gov. Arnold Schwarzenegger and Assembly Speaker Fabian Nunez and pending in the Senate. The California Nurses Assn, long a leading opponent, was joined by the Teamsters, the United Food and Commercial Workers, Communcation Workers, California School Employees Assn. and others, as well as the League of Women Voters, in opposing the bill. Their main reason: It preserves insurance companies and part of the system and would require Californians to buy coverage without stating in advance how much that coverage would cost.

At the same time, a Democratic member of the Senate Health Committee, Leland Yee of San Francisco, said he would vote against the bill in committee, which puts its fate in considerable jeopardy.

The union opposition and their leaders' comments suggest to me that, policywise, maybe we really are stuck with three choices: move toward a more free-market health care system, move to a single-payer plan, or stick with what we have. Attempts to provide universal or near-univeral coverage within the current framework of part-employer-based, part-private, part-government appear to be doomed to failure because either labor or business, or both, will oppose them. Most employers want fewer burdens and oppose a government mandate. But labor unions want either single payer or a system financed predominantly by taxes on employers. Labor, for the most part, is not interested in using new taxes to pay for health care for people who are not in the workplace. They just want mandates on employers to cover their workers. After all that, you still have to deal with doctors, hospitals, drug companies and others who are part of the current system and will jealously guard their position.

If you were to blow the whole thing up and start over, the explosion might be big enough to overcome all of these interest groups. But tinkering around the edges, tweaking, trying to fill gaps in the current system, yields too much opposition, because there are always going to be provisions that some, if not many, of these interest groups oppose, perhaps intensely. Support, meanwhile, will be less intense because the people who stand to benefit most (the working poor or people excluded for pre-existing conditions) don't have a lobby, and interested bystanders who might be inclined to support it have other things to do and don't fight with the same passion as do the opponents.

Let's chat

I'll be doing a live online chat with Sacramento's News10 here at 11 a.m. The subject is independent voters and my new book on Schwarzenegger: "Party of One." Come join the conversation.

Rattling cages

The governor's blunt admission to the Sacramento Bee's editorial board that he does not expect to close any state parks -- despite proposing to shutter 48 of them in his budget plan last week -- is further evidence that his entire cuts-only budget plan was really designed only as a way to get discussions going with the Legislature. Schwarzenegger said the parks proposal was meant to "rattle the cages" and get people talking about raising park fees or finding other entities, including cities, counties and private foundations, to take over the parks. His after-the-fact candor is refreshing, even if it reveals that his budget plan was less than candid.

Term limits and health care

Schwarzenegger said he wouldn't back term limits reform unless voters got another chance to vote on independent redistricting. He didn' get redistricting, but now he has endorsed Prop. 93, the term limits measure. If anyone doubted that the health care reform bill pending in the Senate would pass, you can forget that now. It must be a done deal.

LAO on the budget

The LAO is out with their quickie analysis of the governor's budget proposal. Bottom line: his economic, revenue and spending assumptions are reasonable, but they don't like his across-the-board approach to cutting spending and they warn that his budget reform proposal would take power away from the Legislature.

Spending numbers, LAO v DOF

Here is an oddity from the governor's budget numbers Thursday: he projects far higher spending in the years ahead than does legislative analyst Liz Hill. The difference inflates Schwarzenegger's estimate of the out-year problem and could play a crucial role in shaping the viability of any long-term solution.

The difference is relatively small in the budget year, 2008-09, where Hill projects programmed spending of $111.4 billion and the Department of Finance says it would be $111.8 billion if no changes are made.

But in 2009-10, Hill projects spending of $117 billion and finance says it would be $3 billion more than that, at $120 billion.

And in 2010-11, which will be Schwarzenegger's final budget, Hill says $120.4 billion and DOF pegs it at $125.8 billion.

If Hill's numbers are good, they make a good case for fashioning a three-year workout plan to bring spending back into line with revenues. The gap that needs to be closed in 2010 would be only about $4 billion in a budget of $120 billion, compared to $14 billion in a $104 billion budget today.

But if Schwarzenegger's numbers are more reliable, the problem isn't likely to shrink much on its own. He is projecting a $9 billion operating deficit in 2010-11.

Perata on health care reform

It almost sounded as if Don Perata was endorsing the health care reform bill at his budget press conference today. Noting that the bill is now in the Senate, he said it would be taken up and, he assumed "acted on." He said they might make some changes, but not in the financing part of the plan, which is headed for the ballot in an initiative, the language for which has already been submitted to the attorney general. And he said the best thing about the proposal is that it allows the voters to make the final decision at the polls. Sounds like he is assuming that they will get the chance.

On budgets and leverage

Some thoughts on the governor’s budget proposal:

--It’s not real. I know, as Schwarzenegger said in his speech the other night, “Duh!” He knows and we know that there is no way the Democrats in the Legislature are going to suspend Prop. 98 and then cut $4 billion from the schools next year. Nor are they going to cut a similar amount from Health and Human Services. We’re talking here about real year-to-year reductions, not just shaving the rate of projected growth. It would mean teacher layoffs and larger classes in the schools, and real cuts in health and social services for the poor. Assuming cuts of that magnitude are going to happen on the Democrats’ watch is no more realistic than it would be to assume the Republicans are going to approve an increase in income taxes.

--So if it is not real, what is the real plan? He may not have one at this point. But I would guess he is using this document to try to force lawmakers from both parties to come up with something better. Some of the cuts – in prisons, parks, and schools – cut deeply into things the Republicans value. Perata even talked about restructuring the education budget to punish schools in districts represented by Republicans who vote against the budget. So there seems to be some effort afoot to engage Republicans by showing them that they can no longer vote “no” and still have their priorities funded.

--But what about the Democrats? Perata and Nunez were softies at their press conference today. Perata sounded as if he was on medication, and Nunez sounded as if he needed to be on drugs. Maybe they’re just sick. But their tone was so conciliatory toward the governor that it sounded as if they had promised him that they would not attack him personally. It sounded as if the three of them have a game plan of some kind for how they want this thing to roll out, and it does not include all-out partisan warfare.

--Another way? Even assuming the Republicans continue to balk at tax increases, I still think some form of short-term revenue relief is going to be part of the final package. Democrats dissed the governor’s lottery idea a year ago at budget time, and again in the context of health care. Today Nunez said it was worth another look. If Liz Hill’s trend line is accurate, it might make sense to do something along those lines: use a temporary measure to address one-time issues in the short term while agreeing to a long-term workout package that solves the problem as far as the eye can see.

--If Schwarzenegger is smart, he will insist that any short-term moves be tied to real, long-term change in the budget so that the problem is solved once and for all. Amazingly, all the stuff he proposed today still does not solve the problem. They are still forecasting deficits, though smaller ones, in the years ahead. Finance Director Mike Genest says the governor’s budget reform would fix that. But if so, it would do it by assuming that the Democrats are forced by his new spending limit to cut 5 percent from projected spending a couple of years from now. But it seems crazy to go through all this pain and still plan on using a formula to force cuts in a year or two. Why not just try to fix it now?

--Cash flow. Unlike in past years, this year the state is also facing a cash shortage. This is separate from the budget, and potentially scarier. The state borrows every year to smooth out the ups and downs in the annual flow of taxes into the treasury, which don’t line up neatly with the flow of spending going out. That borrowing must be repaid within the same fiscal year in which it is executed. This year’s amount is due in March, and will be repaid by the sale of the last of the deficit bonds voters approved in 2004. But the state will be out of cash again in July or August and will need another short-term advance on its tax receipts to pay its bills. The administration is proposing to solve that problem by pushing scheduled payments back later into the fiscal year to provide a cash cushion.

Democrats probably won’t object too much to that move, even though it will make things difficult for local agencies on the receiving end of that money, including schools, counties and transportation districts. But it’s possible that some Republicans might object, arguing that instead of deferring obligations the state should be making real, permanent spending reductions. If so, they would be in position to cause a real crisis, and a threat of default by the state, if they hold out on the budget well into July or August. Talk about leverage. Keep your eye on that one.

LA to try congestion-based tolls

It sounds as if LA County is finally ready to try congestion-based tolls on its freeways. People using what are now car-pool lanes will pay tolls that are higher during rush hour and lower at other times. That's smart. They need to find a way to shift traffic from the peak hours to times of the day when the roads are relatively clear. It's crazy to try to keep building more and more capacity so that everyone can travel at top speeds between 6 am and 9 am and 4 pm and 7 pm, which means there is a lot of wasted capacity the rest of the day when fewer people are using the roads. It's the same with our electricity consumption. Incentives do work. Price signals help people make rational decisions about consuming scarce resources.

Phrma neutral on health care bill

The Pharmaceutical Research and Manufacturers of America (Phrma) have taken a neutral position on AB1X, the health insurance reform plan backed by Gov. Arnold Schwarzenegger and Speaker Fabian Nunez. That's a pretty big deal. Phrma and Big Pharma -- the individual drug companies -- had expected to fight the plan -- and spend perhaps tens of millions of dollars against it -- because the bill allows the state to buy drugs in bulk as a way to drive down prices. But amendments taken just before the bill passed the Assembly removed the association's opposition. The individual companies are expected to follow suit. That would leave Blue Cross, the tobacco industry and the California Nurses Association as the biggest potential opponents.

Illegal windshield fluid

Ace Hardware has been fined $850,000 for selling windshield wiper fluid that violates state air pollution rules.

Funny, I just ran into this problem a few weeks ago, when for the first time I was told at a local auto parts store that I could not buy windshield fluid in Sacramento that would not freeze when I drove to the mountains around Lake Tahoe.

Apparently, it is legal to sell that kind of fluid in the mountains but not in the warmer parts of the state.

Now, even if this is a significant contributor to air pollution, does it really make sense to ban it in regions adjacent to mountainous areas?

A lot of people in Sacramento and the Bay Area drive to Tahoe all the time in the winter. It is a pain in the neck, not to mention wasteful, to empty your fluid container when you arrive in the mountains, buy the kind of fluid that won't freeze at low temperatures and put it into your car.

If you don't do so, however, you risk having a serious accident, because if your fluid freezes and you are driving in a light drizzle or snowstorm, it is impossible to clean your windshield. If a truck passes you or you pass a truck, and it kicks up a light film of mud, you can be blinded with no way to clean the windshield.

I'd be curious to see if anyone did a risk analysis on the potential deaths from the air pollution this fluid causes versus the risk of injury, death or property damage from accidents caused by dirty windshields.

9th Circuit says SF likely to win health care suit

The Ninth Circuit Court of Appeals has issued a stay of the federal court ruling against San Francisco's new health care plan. The appeals court says there is a "strong likelihood" that the city will prevail on the merits when the substance of the case is heard. At issue is whether the "pay or play" employer mandate violates federal law that prohibits states and local governments from requiring employers to provide certain benefits. The state plan endorsed by Gov. Arnold Schwarzenegger and passed by the Assembly includes a similar provision.

The air conditioning czar

Is the government planning to shut off your air conditioner on the hottest days of the year?

Ironically, these proposed regulations designed, in part, to make customers more sensitive to market conditions and the price of electricity, also include a provision that appears to subject everyone to the whims of an air conditioning czar.

New air conditioners sold in California under these rules would have to include themostats that send price signals to customers, allowing them to set their units to shut down when the price of power climbs to a certain point. So far, so good.

But Section 112 (c)) 2B on page 64 also has a paragraph about "emergency events." It says every new AC unit must also be programmable by radio signal from the utility so that it can be set at any temperature point, and that setting will not be adjustable by the consumer during an "emergency event." While the utility would do the setting, the government would no doubt do the emergency declarations.

California's energy efficiency rules have saved a huge amount of energy and money and helped clean the environment. While any particular rule can appear to be nitpicky in isolation, taken together they have been a good thing.

But allowing an outside agency, either a utility or a government agency, to shut down your appliances by remote control against your will is taking things too far, don't you think?

Post-partisanship, the sequel

Schwarzenegger's speech today was yet another example of what he means by post-partisanship: citing FDR in one breath and calling for deep budget cuts in another. The governor still wants to pursue his health care reform, which is pleasing to most on the left. He is proud of suing the federal government to win approval for California's global warming rules. Yet he hints that his next budget proposal will call for 10 percent cuts in projected spending, says the state has a "revenue problem, not a spending problem" and wants the Legislature and the voters to give him and future governors the power to cut spending unilaterally if a deficit appears and lawmakers fail to act.

He also proposes to intervene in school districts whose students are failing to meet federal benchmarks, and he embraces the use of private investment to help pay for California's infrastructure needs.

It's simply impossible anymore to categorize Schwarzenegger politically or ideologically. He is a fusion politician, taking ideas from the left and the right and the center as he sees fit. He is one of a kind.

It is not accurate to call him a moderate. In some ways he is a radical. All of his positions, taken together, might average out to somewhere near the center, or left of center. But he is no centrist on taxes or the environment, and not on health care either.

Education data

Schwarzenegger seems to have finally gotten religion on the need for a comprehensive system to track student data in California. He and his advisers say he is going to create a commission to bring him recommendations by Memorial Day on how best to implement and expand a data tracking system that has been in the works for a decade.

One important potential idea: make the data available to teachers and administrators on the local level in a way that they can use it, instead of using the data only as part of an accountability program. If the locals get something back from the system they are more likely to support ways of putting good data in.

A good data system is the first step in finding out what is working and what is not working in the schools, in assessing the value of any reforms adopted by the state or local districts. Just about everyone who has looked at California's schools has suggested that an information system that tracks every student's programs and results is crucial. It sounds as if Schwarzenegger has finally embraced that notion as well.

Revenue averaging

I have always been a big fan of the idea of averaging the state's revenues over time as a way to reduce the volatility that has become a hallmark of California's state budgets.

Here is an excerpt from my blog on Dec. 2, 2003, in the first weeks of Schwarzenegger's Administration:

One possible method I’ve been exploring but haven’t seen mentioned anywhere: base each year’s spending on some kind of running average of past revenues, say, three years. Currently, lawmakers budget based on real-time projections of next year’s revenue, and when those projections prove overly optimistic, you get a deficit. Budgeting based on revenue averaging isn’t foolproof but basically slows down the process, preventing budget-writers from spending a windfall for ongoing programs until it’s clear that the new money is here to stay. Such a device all but assures that you won’t spend more than you take in for any one year, which would please Republicans. But it also allows legislators to eventually spend all that the state takes in, which would please Democrats. And for good-government types, revenue averaging would provide insurance against deficits while leaving the debate over the proper size of government to each new generation of policymakers.

I still think all of that is true today, and I like what I've seen of the governor's latest proposal. He uses a 10-year average rather than a three-year, but the concept is the same, and I think the 10-year plan makes it easier to implement. I have not seen the modeling, but I would like to know what would have happened if Schwarzenegger had won approval of this plan in March 2004. I'd bet the problem today would be much smaller than it is, and maybe non-existant.

I am not so fond of the other piece of Schwarzenegger's reform: automatic budget cuts and an expansion of the governor's powers. First, I don't think they would be all that necessary if you had true revenue averaging and it worked the way it should. Second, anything that gives the governor the power to cut without the approval of the Legislature is going to raise accusations of a power grab, which in fact it is. Even if such a provision might help avoid future problems, as a political matter, I'd leave it out of a ballot measure.

A better idea would be to stick with Schwarzenegger's proposal to require the Legislature to adopt, along with its budget, a fallback plan in case revenues fall short. That plan could then go into effect if revenues did not meet projections. If you want to include the governor, require him to submit a plan of his own. But it should still require the approval of the Legislature.

Post-retirement benefits

The commission appointed by the governor and the legislative leaders to review pension and retiree health benefit obligations has released its report. You can dpwnload it here. Among the recommendations: state and local governments should begin pre-funding retiree health benefits the way they do pension benefits, so that obligations for each generation's employees are paid at the time they are accrued. Such a system would also allow for that money to be invested and earn a return the way pension fund contributions do.