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Kevin James on Bringing Businesses Back to Los Angeles

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We continue our series of interviews with Los Angeles’ front-running mayoral candidates, with the first part of a talk with Kevin James, an entertainment lawyer and talk-show host, who has previously served as a U.S. prosecutor and AIDS Project Los Angeles co-chairman. (The interviews, which have been edited for clarity, include Eric Garcetti, Parts One and Two, and Wendy Greuel, Parts One and Two.)

Frying Pan News: What do you believe is the role of government in addressing the inequities of the free market system?

Kevin James: A mayor should not shy away from addressing inequality. I was [a] chairman for many years of AIDS Project Los Angeles and part of the work we did was to provide a better life for people who were struggling in theirs — to find a way with the private and public sectors to obtain assistance for people who needed our help. I think that the free market can be a complement to what government needs to do to help those most in need.

FPN: Would you support a requirement as mayor that residents and elected officials have a say over whether stores like Walmart can open up in their community?

KJ: Absolutely. I’ve always maintained that the decision for any kind of development in a community has to be made in partnership with that community. I’ve supported Walmart going into Chinatown – it’s a neighborhood market, not a big-box superstore, and the community wanted it. I’m not going to turn away any private employer who wants to come to the City of Los Angeles. We need jobs and there are communities that need low-cost, budget items. I’m not going to turn away 99 Cents [Only] Stores, Walmarts or Targets just because they’re unpopular with some – I’m going to let the community make that decision.

FPN: So it’s not the role of mayor to block a Walmart from coming in?

KJ: No. My opponents have signed pledges against Walmart but I’m not going to say to any private employer who wants to come to our city and open a legal business that Los Angeles is not available to you.

FPN: Can a mayor influence the regional economy and if so, how would you do that?

KJ: Of course, and let me point out where else I differ from my opponents. I have not supported Farmers Field in downtown Los Angeles. My support is for the Los Angeles stadium in the City of Industry, which benefits the entire region. My concern with the deal they’ve cut at Farmers Field is that there is real risk to the taxpayer in Los Angeles. And I am a huge football fan and do want to see football brought back to Southern California, but the Farmers Field deal is not the best deal for the city and the region.

I also believe that we should allow Ontario to control its own airport. Ontario has a much better feel for what works for their airport than LAWA [Los Angeles World Airports]. Los Angeles has to be a better partner to its neighbors.

FPN: What is your assessment of City Administrative Officer Miguel Santana, who has come under criticism for targeting workers to balance the budget?

KJ: I don’t think your terminology is fair – that Miguel Santana is “targeting workers.” He’s trying to do his job. He works to provide, in a tough political environment, an honest assessment of where we are fiscally – and we’re not getting that from the city’s elected officials. About keeping him, it’s just too early to answer that question. Every department head is going to have to reapply for their job.

Miguel Santana is certainly going to receive strong consideration from me. I do believe he has done his best and he has not been afraid to go toe to toe with very powerful political interests – and that’s something that’s attractive to me.

FPN: What is your position on privatizing the operation of the Convention Center and privatizing city services in general?

KJ: If the city can provide a critical service, it should do that. But there are some city services whose privatization would be something that would be prudent to look in to. Part of what we can do with the Convention Center is work through a public-private partnership to better run [it]. There’s no reason why Los Angeles should not be a Top Five destination city.

Another area where a public-private partnership should be considered is with the Los Angeles Zoo. What we cannot do is privatize critical services like police and fire. What makes me nervous about the fiscal mismanagement of the city is that we have such a deep pension fund obligation that we’re going to have to tamper with our ability to provide police and fire services.

FPN: One other area of debate has been whether the city should institute an exclusive franchise –

KJ: The answer is no!

FPN: – system for L.A.’s multi-family and commercial waste and recycling.

KJ: I am against the exclusive franchise proposal – it’s bad for small businesses, commercial buildings and tenants.

FPN: Much of the mayoral debate has focused on challenges with the city budget and whether we should cut benefits for city employees. Can you offer a broad vision of how we bring good jobs, clean air and healthy communities to all of Los Angeles?

KJ: There’s an incredible opportunity for a partnership between better economics in the city and a cleaner environment in the city – [by] making the city a more business-friendly city through elimination of the gross-receipts tax and streamlining the permitting process.

If City Hall will get out of the way with this burdensome gross receipts tax then we’ll see increased economic activity that will spawn good-paying jobs, so we will not have to go back to our city employees anymore and say, We need you to roll back your raises to invest in the city.

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Politics & Government

Tom Steyer and the Case for Impeachment

Tom Steyer, one of the Democratic Party’s biggest financial supporters, talks to David Sirota about his campaign to impeach Donald Trump.

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Tom Steyer at the Fortune Brainstorm Green conference in 2013. Photograph by Stuart Isett.

Tom Steyer has been one of the Democratic Party’s biggest financial supporters. He made his fortune in the investment world, and has spent tens of millions of dollars to support Democratic candidates, as well as to support efforts to reverse climate change. Lately, he has made headlines with a new project – a campaign to impeach Donald Trump. The campaign is called Need to Impeach, and can be found at www.needtoimpeach.com.

Capital & Main’s David Sirota recently spoke to Steyer about his impeachment campaign, America’s divided politics and the role of money in politics.

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Infographic: Charter School Money is Pouring into the California Election

Gubernatorial candidate Antonio Villaraigosa and state superintendent candidate Marshall Tuck are raking in donations from charter school supporters.

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Blue State/Red District

Seven Restless GOP Districts Revisited

This week, in a run-up to the June 5 primary, we are re-highlighting our profiles of seven Republic congressional districts whose flipping would signal a fundamental groundswell against the Trump administration.

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Julie Damon, a high school senior, sits outside a Democratic candidates' forum for California's 25th Congressional District, in Newhall. (Photo: Steve Appleford.)

On February 1 Capital & Main launched its Blue State/Red District series profiling seven Republican-held congressional red districts — specifically, the challenges shaping their destinies and the policy rifts between the districts’ representatives and their constituents. We began the series because, in 2016, seven of California’s 14 Republican-held congressional districts returned all GOP incumbents to the House of Representatives, yet majorities in seven of those districts chose Hillary Clinton over Donald Trump for president. The districts were located in places long associated with rock-ribbed conservatism: The High Desert, Orange County, interior San Diego County and the Central Valley.

This week, in a run-up to the June 5 primary, we are rerunning these stories in the hope of returning attention to these key districts, whose flipping would signal a fundamental groundswell against the Trump administration and its policies.


CA 49 (Northern and Central San Diego County) — Kelly Candaele. Co-published by International Business Times.

CA 48 (Coastal Orange County) — Judith Lewis Mernit. Co-published by The American Prospect.

CA 10 (Central Valley) — Larry Buhl. Co-published by International Business Times.

CA 25 (High Desert) — Steve Appleford. Co-published by International Business Times.

CA 21 (San Joaquin Valley) — Larry Buhl.

CA 45 (Orange County) — Judith Lewis Mernit. Co-published by International Business Times.

CA 4 (The Gold Country) — Kelly  Candaele.


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Blue State/Red District

Blue State/Red District: Trump May Blow Reelection Headwind at David Valadao

Co-published by International Business Times
A Central Valley Congressman may be worrying that the fallout from Donald Trump’s policies could land on himself.

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Pictured: Hanford, David Valadao’s hometown and political base.


Whether voters hold Valadao accountable for his repeated efforts to repeal Obamacare, and his failure to protect Dreamers, remains to be seen.


Co-published by International Business Times

 

California’s 21st Congressional District, which includes all of Kings County and portions of Fresno, Tulare and Kern counties, expands northward through the dusty flatness of the southern San Joaquin Valley, anchored by two main arteries, Interstate 5 and Highway 99. To the south, precisely planned orchards, occasionally interrupted by clusters of gas stations and restaurants at the exits, give way to pump jacks and fracking wells around Bakersfield.

The district is represented in Congress by Republican David Valadao, a dairy farmer, small-business owner and son of Portuguese immigrants. His vigorous support of agribusiness interests makes him a good fit for any politically conservative farming district, but CA-21 does not really tilt conservative. Although Valadao beat Democratic challenger Emilio Huerta in a roughly 57-43 percent split in 2016, Hillary Clinton won the district. Barack Obama carried it in 2008 and 2012.


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Valadao’s vocal support for immigrants should put him in good stead in a district that is 71 percent Latino, but it also places him at odds with his party, while other critics attack what they say is Valadao’s lack of concern for environmental and worker protections, as well as for his votes on health care. Valadao represents a particularly vulnerable constituency. CA-21 has a poverty rate of just over 30 percent, making it among the poorest congressional districts in the state. Only 57 percent of residents have earned a high school diploma or higher, and fewer than 10 percent have a bachelor’s degree or higher. The median household income is just under $40,000, significantly less than the statewide median household income of $64,000.

Oil fields and Kern River, viewed from Bakersfield’s Panorama Bluffs. (Dean Kuipers)

But these families do not form Valadao’s donor base. According to Open Secrets, oil and gas interests donated nearly $205,000 to Valadao between 2011 and 2018, making them his sixth-largest industry contributor (behind crop production, dairy and real estate). Leadership PACs, comprising contributions from unnamed sources, came in at number three.

Last year Valadao, along with fellow  Central Valley GOP representatives Jeff Denham, Devin Nunes and Kevin McCarthy, voted for the American Health Care Act (ACHA) or “Trumpcare,” the proposed Republican replacement for the Affordable Care Act (ACA). Valadao had also voted to repeal the ACA during the Obama administration. Though the effort to repeal and replace the ACA with the highly unpopular GOP bill failed in the Senate, a significant number of residents in counties that make up CA-21 would have suffered with the passage of the ACHA, which would have severely cut funding for Medicaid. According to the California Department of Health Care Services, 55 percent of the population of Tulare County was eligible for Medi-Cal, the state version of Medicare. Nearly 50 percent of Fresno County, 46 percent of Kern County, and 38 percent of Kings County were eligible for Medi-Cal.


After February’s ICE raids, “People are afraid to take their kids to school and to visit local businesses.”


The counties that comprise CA-21 also have a very high number of people who use the Supplemental Nutrition Assistance Program (SNAP), according to county-by-county data from the U.S. Department of Agriculture in 2011, the latest year available. That could present a political challenge for Valadao because, while the 2018 renewal of the House Farm Bill gives additional subsidies to cotton farmers (an important constituent in the district), it also imposes new restrictions on SNAP eligibility. Valadao voted for the Farm Bill, which passed in the House Agricultural Committee in mid-April. (Valadao did not respond to interview requests made through his Washington office.)

Whether voters hold Valadao accountable for his repeated efforts to repeal the ACA remains to be seen. Republican leaders now openly fret about the headwinds going into the 2018 midterms, though they’re reluctant to pin the blame on Trump, or even voter opposition to GOP policies. According to the political forecasting site FiveThirtyEight, Valadao has voted with Trump policies nearly 99 percent of the time, tied for second place as the “most Trump-aligned,” along with more than 40 other GOP House caucus members. If Valadao faces trouble going into the midterm, it could be in spite of the few important issues where he’s broken with the party line.

ICE Raids and Tariff Threats

Immigration and agriculture are intertwined in CA-21, which is dotted with historical markers of the farmworker movement. South along the 99 lies Delano, the site of the 1965 labor strike against grape growers by the Agricultural Workers Organizing Committee and the United Farm Workers. Farmworkers are the fuel of the economic engine here, and a large percentage are undocumented immigrants — the U.S. Department of Agriculture’s Economic Research Service pegs the nationwide percentage of undocumented farmworkers at 50 percent. Some estimates give California a much higher figure. Finding enough farmworkers during peak harvest times has been difficult, even before the Trump administration ratcheted up rhetoric about illegal immigration and border walls, as well as an improving economy in Mexico.

Increasingly, farmers have been turning to the temporary agriculture worker visa program, H-2A, which allows employers to bring in foreign agricultural workers if the growers can provide free housing, demonstrate an agricultural labor shortage and pay wages high enough that they wouldn’t undercut the local labor market.

Valadao has been an outspoken supporter of H2-A, despite criticism that it is too expensive and too bureaucratic.


The environment is one area where there’s little if any daylight between Valadao and Trump.


But Immigration and Customs Enforcement raids here have made it unlikely that the worker shortage will improve. In February, ICE made a sweep across the Central Valley and arrested 232 people, including 180 who ICE said were convicted criminals or had been issued a final order of removal or had been previously removed from the U.S. In an email, the United Farm Workers confirmed to Capital & Main that 26 of those arrested in the sweep were farmworkers and that it has received reports of even more detentions, and that ICE is still present in Kern County. One ICE raid in March in Delano led to a high speed chase and crash resulting in the death of two farmworkers.

Leydy Rangel, a UFW spokesperson, said the union has received reports of even more farmworker detentions than the 26 reported. “People are afraid to take their kids to school and to visit local businesses,” she said.

Valadao’s office provided a statement in response to the ICE raids: “Recent incidents involving immigrants and immigration authorities have left many in our community concerned and scared – which is exactly why we must pass comprehensive legislation that repairs our broken immigration system from the ground up. Just last month, I cosponsored H. Res. 774, a legislative maneuver that will allow the House to individually debate and vote on four different pieces of immigration legislation.”

A trade war could make a bigger impact on Valadao’s district than the farmworker shortage. In March President Trump announced tariffs on steel and aluminum, mostly aimed at China. Beijing quickly imposed retaliatory tariffs of up to 25 percent on $3 billion worth of U.S. imports, including pistachios and almonds, California’s first- and second-largest agricultural exports to China. Valadao signed a letter to President Trump urging him to “reconsider the idea of broad tariffs to avoid unintended negative consequences to the U.S. economy and its workers.” He also released a statement denouncing broad tariffs – but not tariffs generally – saying, “Agriculture continues to be the foundation of the Central Valley economy and we must protect strong trade relations with foreign nations.”

As far as Valadao’s 2018 electoral chances go, he may need to worry that the sins of his party – or its leader, Trump – on trade policy and the attendant fallout could be visited upon himself. On immigration, the popular perception is that his ties to Trump could hurt him even more.

On DACA, Taking Heat for His Party

The White House had set March 5, 2018 as the expiration date for Deferred Action for Childhood Arrivals (DACA), pushing 700,000 recipients of this Obama-era program into uncertainty, although that termination is now being challenged in courts. Valadao has supported a permanent solution for DACA, declaring in December that it was not a partisan issue and that Congress “must come together to provide a legislative solution so these individuals may continue to live in the only home they know: the United States.”

Valadao has continually affirmed his commitment to repairing the “broken immigration system,” and his website mentions his support of the failed 2013 immigration reform package, H.R. 15, as well as his vote against a defense bill amendment that would block undocumented youth from serving in the military, and his cosponsoring of both H.R. 496, Bar Removal of Individuals who Dream and Grow our Economy Act (BRIDGE) Act, and H.R. 1468, the Recognizing America’s Children (RAC) Act, which promised a path to legal status for undocumented immigrants brought to the United States as children.


Critics say Valadao’s GROW bill would let California farmers grab more water at the expense of wildlife protections and public input on water projects.


Nevertheless, Tania Bernal, an undocumented immigrant and political science major at Bakersfield College, blamed Valadao for lack of legislation that would protect her.

“He said he would do everything in his power to protect Dreamers and he failed,” she told me. “It’s very disappointing because they are stringing us along. About 19,000 Dreamers have lost their DACA and they’re vulnerable to deportation right now.”

While admitting that technically it was the party, led by President Trump, that failed on DACA, Bernal said she and other local Dreamers also hold Valadao accountable for not delivering a “clean” Dream Act — legislation giving people covered under DACA a way to obtain permanent legal status in America, unconnected to border security upgrades or any other provisions.

A January, 2018 CBS News poll showed nearly nine out of 10 Americans want DACA recipients to remain in the U.S. Valadao’s stance should make him bulletproof on DACA. But he has faced resistance from the far right of the GOP in his attempts to do anything for undocumented immigrants. It’s not clear how many of his constituents will blame him for the inaction of his own party, especially as it relates to Dreamers. But people I talked with for this story who had an opinion on the matter were not willing to separate Valadao from the GOP.

While in Bakersfield, which is awkwardly split between CA-21 and CA-23, I visited a rally held by Faith in Kern, a grassroots group fighting for racial equity, outside the office of Valadao’s fellow GOP Congressman, Kevin McCarthy. The rally was part of a 40-day political action coinciding with Lent (the demonstrators promised to later protest at Valadao’s office on the other side of town). They said that they would hold both men responsible for the inaction of their party, which controls Congress. The three-dozen demonstrators were more polite and respectful than angry, and featured several DACA Dreamers who shared their stories. Eloisa Torres tearfully recalled that the recent deaths of her grandparents – whose funerals she couldn’t attend in Mexico because of her precarious status – emboldened her to speak out. “If you’re not fighting for what you want, you’re not going to get it,” she said.

Earlier, Stephanie Smith, a faith leader at Tehachapi Community United Church of Christ, had condemned Congress, Valadao and McCarthy for showing “a general disregard for people,” while scolding the representatives for voting for H.R.-620, which, she said, guts the Americans with Disabilities Act.

“There are no bills for a path to citizenship under consideration, no solution for them, but we’ve ramped up the deportation machine that terrorizes our families, or friends, or coworkers, the people who go to our church. Human connectedness should mean more than artificial borders.”

Diesel and Dust

Almost everywhere in CA-21 one is aware that mountains exist somewhere in the distance, to the east or the west. But most days they’re airbrushed gray-brown by the valley’s infamous smog. The American Lung Association’s “State of the Air 2018” report lists two regions within CA-21 – Bakersfield and Visalia as, respectively, second- and third-worst for year-round particle pollution, also known as soot. They were also, respectively, second- and third-worst in ozone pollution because of diesel particulates from semis whizzing through their thoroughfares, and from the dust stirred up by farm operations.

The environment is one area where there’s little if any daylight between Valadao and Trump.

Valadao has not supported efforts to combat climate change, and does not believe that the weather in the Central Valley, in which the last five years were the hottest in history, is a direct result of climate change. Climate activists have slammed Valadao’s support of S.J. Res. 24, a “resolution of disapproval” under the Congressional Review Act that would nullify the Environmental Protection Agency’s Clean Power Plan.

But Valadao’s office pushed back on any assertion that he had blamed California’s drought on regulation, rather than climate change. The office pointed to a more nuanced comment on his website, which stated, “While legislation cannot make it rain, it can provide relief by addressing complex and contradictory laws, court decisions, and regulations at the state and federal level that have made recent droughts increasingly detrimental.”

In 2017, Valadao introduced H.R. 23, the “Gaining Responsibility on Water Act” (GROW), that he has proudly touted as a plan to modernize water policies. Critics have said GROW would let California farmers grab more water at the expense of wildlife protections and public input on water projects. Also in 2017, Valadao co-sponsored, with Kevin McCarthy, H.R. 806 (the Ozone Standards Implementation Act), which has been criticized for undermining the EPA’s ability to set healthy ozone and particulate-matter standards, and delaying the implementation of clean-air solutions.

In March 2017, in the lead-up to the bill, the House heard testimony from the deputy executive officer of the California Air Resources Board, who said, “H.R. 806 would mean more people would breathe dirty air longer.” Jeff Denham and Devin Nunes, who represent the rest of the smoggy Central Valley, voted for Valadao’s bill.

Gary Rodriguez, a fourth grade teacher in Shafter, told me that people in the district are growing fed up with the air quality.

“Some days we can’t let kids out for recess because of the air quality,” he said. “The local air district does a lot of spinning about the cause of pollution. They’ll say it’s geography or that it’s blown in from the Bay Area, Los Angeles or even China.”

“You name it we’re breathing it, from fracking to pesticides to vehicles,” said Lupe Martinez, assistant to the director for the Center on Race Poverty & the Environment (CRPE), when I spoke with him in Delano. Martinez also connected the dots between the environment, immigration and poverty, saying that farmworkers, the backbone of agriculture, haven’t benefited from the success of the industry.

“There are communities that don’t have natural gas to heat their homes, so they’re using wood and butane. It’s not that they don’t want to have natural gas, it’s just that natural gas has bypassed the communities.”

And that wood smoke, he said, increases air toxicity, worsened by temperature inversions that trap soot from agricultural burn-offs, especially in the winter. Martinez said he and other activists are pushing the state Public Utilities Commission to increase access to natural gas. “I don’t even know if [Valadao’s] aware of it,” he said.


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Blue State/Red District

Blue State/Red District: The Education of Mimi Walters

Co-published by International Business Times
Lowering taxes, shrinking the size of federal government and reducing the deficit were issues that played well in Mimi Walters’ conservative Orange County district. Then came the Parkland massacre.

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Judith Lewis Mernit

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Donald Trump listens to Mimi Walters, far right. (Photo: Chris Kleponis-Pool/Getty Images)

Hillary Clinton beat Donald Trump in CA-45, a sign that at least some of its conservative voters might be more loyal to ideals of diversity and tolerance than they are to their party.


Co-published by International Business Times

 

Early in her political career Congresswoman Mimi Walters, a Republican from inland Orange County, California, minted her reputation as a gun-rights advocate. From 2004 to 2008, while representing the county’s southern coastal cities in the state Assembly, she twice voted against bills requiring the microstamping of bullets from automatic firearms, despite law enforcement’s support of the measure. Later, while serving in the state Senate, she said nay to background checks for ammunition buyers, to banning large-capacity conversion kits and to prohibiting people under domestic violence restraining orders from obtaining firearms.

Since she began representing California’s 45th Congressional District, Walters has had fewer opportunities to prove her Second Amendment bona fides; gun-related bills have rarely come up for a vote in House Speaker Paul Ryan’s Congress. But gun-rights groups continue to contribute to her campaigns. For her 2018 reelection campaign, gun groups have invested $5,150 in Walters, the third-largest contribution from gun groups to a single candidate in this cycle so far.

Before Parkland, the subject of gun rights almost never came up in Walters’ campaign statements, social media feeds or literature; it was just one part of the agreed-upon conservative platform, along with opposing abortion and beefing up the military. The issues Walters has chosen to focus on — lowering taxes, shrinking the size of federal government, reducing the deficit — have played well in historically conservative CA-45, where Republicans enjoy a nine-point registration advantage. On November 8, 2016, Walters won re-election with a 17-point margin.


The Cook Political Report has changed Congresswoman Walters’ district from solid red to “lean Republican.”


But a lot has happened since then. For starters, despite Walters’ victory, Hillary Clinton beat Donald Trump in the district by five points, a sign that at least some of Walters’ conservative constituents might be more loyal to ideals of diversity and tolerance than they are to their party. (Irvine, the largest city in the district, is 40 percent Asian.) Nor has Trump’s reputation improved since he became president and promptly issued an executive order banning travel to the U.S. from seven Muslim-majority countries.

There are even some signs that Congressional Republicans more broadly have fallen from favor in Orange County. When Walters voted in May of 2017 in favor of the Republican replacement for the Affordable Care Act, a plan that would have left an estimated 23 million people uninsured, the Cook Political Report changed CA-45 from solid red to “lean Republican.”

Trump also pulled the U.S. out of the Paris Agreement. “That’s when a lot of people sprang into action, meeting with Walters and her staff,” says Kathleen Treseder, an ecology professor at the University of California, Irvine. Last October, Walters officially changed from a climate-change skeptic to a believer, Treseder says, and joined the Congressional Climate Solutions Caucus. Her voters, Walters’ staff explained, persuaded her.


After Parkland, Walters’ social media feeds became overrun with gun-control advocates.


Finally, a group of Parkland teenagers launched the #NeverAgain movement in response to the mass shooting at their high school, potentially altering the calculus of National Rifle Association monetary campaign support versus voter preference in the 2018 election. A survey conducted by the Public Policy Institute of California in late March found that California voters’ concerns about school shootings had risen dramatically, with 73 percent of respondents admitting they were worried about a mass shooting at their public school.

Orange County high school students, many in Walters’ district, and nearing voting age, rallied against guns in March and April, joining national events. And Rep. Walters’ social media feeds became overrun with gun-control advocates. From mid-February to late March, any conversation that Walters started — on tax reform, avocados or her own successful amendment to reduce sex-trafficking — was directed back to firearms in replies and comments.

“I am so inspired by all of the #Olympic athletes who continue to give it their all in #PyeongChang despite injuries and days of back to back competition,” Walters tweeted in mid-February.

“Gun control, Mimi,” answered @amysls, aka Amy Jones. “Focus.”

Thirty years ago, many CA-45 cities were in the throes of master-planned sprawl. Manicured suburbs mingled with strawberry fields and orange groves, remnants of the vast agricultural fields the suburbs displaced. Their curvy streets, lined with houses that are, literally, all the same, bespoke a politics of its own. Irvine, as Los Angeles architect William Pereira designed it in the late 1960s, reflected a dreamy utopianism, where children could safely play within traffic-calmed enclaves, high walls sheltering them from thoroughfares where cars moved at near-freeway speeds. As it was later constructed by the Irvine Company’s Raymond Watson, Irvine became an assemblage of little villages, buffered by tidy parks and shopping centers from the ragged, needy world beyond.


Irvine is no longer the bastion of white Midwestern transplants that it was in the 1980s.


Irvine no longer smells like an orange grove. Most of the strawberry fields have been replaced with more carefully plotted communities and some random sprawl. Nor is the city still the bastion of white Midwestern transplants that it was in the 1980s. Twenty percent of eligible voting-age adults in Irvine hail from South Asian or Asian countries or have parents that do. Among U.S. cities, only Honolulu has a larger Asian plurality.

That concentration of immigrants and first-generation Americans is not everywhere present in the district. Mission Viejo, for example, is less than 10 percent Asian. But overall, one-fourth of registered voters in the district are naturalized citizens, according to a survey conducted by California 45th, a grassroots, nonpartisan research group, in May of 2017. While 46 percent of voters in the district who were citizens at birth have registered as Republicans, 72 percent of naturalized citizens are either Democrats or no-party-preference voters.


Two of Mimi Walters’ Democratic challengers in the June primary say they were motivated to run because of Trump’s travel ban.


If previous polls and studies have shown that immigrants don’t participate in elections with the same enthusiasm as other voters, Trump’s travel ban may have politicized them — along with Iranian-Americans and Arab-Americans in the district. Two of Walters’ five Democratic challengers in the June primary — Dave Min, whose parents immigrated from South Korea in the 1970s, and Kia Hamadanchy, a first-generation Iranian-American and Irvine native — say they were motivated to run because of the travel ban. Hamadanchy says his grandmother has not been allowed to visit him in America since the ban went into effect.

“When people tell me to go back where I came from,” says the 32-year-old Hamadanchy, who graduated from Irvine’s Northwood High School, “I tell them that’s exactly what I’m doing.”

In past elections, the gun control issue — along with the environment, immigration policy and health care — might have taken a back seat to the economy, which residents of Orange County’s fiscally conservative cities consistently rank as their number one issue. They have voted, by and large, in the interest of keeping their federal and state taxes low, even as many of them invest relatively high local taxes in well-staffed public schools. (Eighty-six communities and school districts in Orange County are subject to a special tax, referred to as the “Mello-Roos tax,” that helps pay for schools, roads, parks and other public amenities.)


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As of the 2018 tax year, however, homeowners who itemize — more than 40 percent of the district — will have a $10,000 limit placed on the state and local taxes they can deduct from their federal taxable income. That will make a difference to the district’s wealthier residents. “If you can afford to live in a Mello-Roos development, that 10-grand limit is going to cost you,” says Alexandra Cole, a Mission Viejo resident who teaches political science at California State University, Northridge and leads the California 45th team. Two other Orange County legislators, Dana Rohrabacher and Darrell Issa, voted against the tax bill under pressure from their constituents. Walters supported it wholeheartedly.

“She keeps posting about how it will benefit the district,” Cole says. “But the problem I have as a constituent is at no time does she ever say how it will benefit the district, because so many of us take those state-and-local tax deductions.” For instance, she says, “I have 14-year-old twins. Once they turn 17, they reach the age where the child tax credit expires, and I’m paying higher taxes.”

When Cole conducted a survey of CA-45 voters’ opinions on the tax bill, she found only 45 percent of them supported the bill, while 47 percent opposed it — including, significantly, 63 percent of no-party-preference voters.

“That’s harsh,” she says. “People are really concerned that their taxes are going to go up.”

Cole is cautious, however, about suggesting any of it means a Democratic win in November. CA-45 is still a red district and even the no-party-preference voters, who now make up more than a quarter of the district’s voters, skew conservative on the economy, if not on the environment or immigration.

“There’s this real tunnel vision,” Cole says, “thinking that everyone’s angry and they’re going to rise up in this big blue wave in November. But you can’t rely on fantasies. You have to rely on what are issues that are of concern to people.”


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Blue State/Red District

Blue State/Red District: What Do the Suburbs Want?

Seven Republican congressional districts in California went for Hillary Clinton in 2016. CA-4 was not one of them but Democrats are hoping to unseat Tom McClintock in November.

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Kelly Candaele

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Video and images by Kelly Candaele.

 


CA-4’s Gold Country counties are recipients of an urban exodus fueled by affordable housing, a desire for good schools and the expansion of high-tech jobs into suburbia.


 

On the day of her funeral, Barbara Bush’s image beamed down from an electronic billboard along Interstate 80 outside of Sacramento, along with a quote: “Believe in something bigger than yourself.” Her image and words lasted five seconds before an insurance ad flashed up.

As an unofficial welcome to California Congressional District 4, which includes suburban and exurban Placer and El Dorado counties, plus several other rural and sparsely populated counties, the former first lady’s image is apt. Her husband and son both carried the district by wide margins in the presidential elections of 1988, 1992, 2000 and 2004. While no friend of the Bushes, Donald Trump won the district with 54 percent of the vote to Hillary Clinton’s 39 percent.


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There are seven congressional districts in California with Republican incumbents that Clinton won but CA-4 is not one of them. What gives Democrats buoyancy here is the general chaos of the Trump presidency, along with positive results of special elections elsewhere in the country, and some solid-looking candidates running in the CA-4 Democratic primary. Conservative Republican Tom McClintock, who actually lives 15 miles outside of District 4, first won the seat in 2008, when his Democratic opponent got within 1,800 votes. In the last four races, he has beaten every challenger by at least a 20 percent vote margin.

If CA-4 is dicey as a flippable district, part of the reason is because of demographics (it has relatively few Latinos or Asians) and because, in many ways, McClintock’s hard-line anti-immigration policies and close hewing to President Trump fit the district’s conservative tilt. According to the Kaiser Family Foundation, over 26,000 people in CA-4 were enrolled in an Affordable Care Act (ACA) health plan in 2017 and another 49,000 gained coverage from the expansion of Medicaid. McClintock voted against the January 2017 congressional budget resolution to repeal Obamacare – a resolution that Trump supported – only because it did not go far enough in repealing the ACA. The political analysis site FiveThirtyEight has McClintock, some of whose largest contributors are real estate developers with projects in his district, voting in line with Trump’s wishes about 86 percent of the time.

Main Street, Placerville.

McClintock has shown no sympathy for DACA (Deferred Action for Childhood Arrivals) students, describing the program as an “unconstitutional usurpation of legislative authority,” and he is a reliable vote against a woman’s right to have an abortion. The large mega churches that often accompany suburban sprawl, like Bayside Church in Granite Bay, with its 12,000 members, help anchor the district’s culturally conservative base with a mixture of Christian/New Age uplift and entrepreneurial flair.

On a recent Friday afternoon, while watching her son play Little League baseball at a Roseville park, Heather McCarthy reflected on why she has become increasingly active in politics. “I’ve never been concerned that our political system could be taken over by billionaires and corporate interests,” she said, “so it has been a wake-up call for me.”

McCarthy, a Roseville real estate agent, participated in the Sacramento Women’s March last January, but has not followed the congressional race closely. She has a college degree, is not particularly ideological and is concerned that the Trump tax reduction, which McClintock supported, will mainly benefit the wealthy and explode the deficit. “I don’t think the average person realizes how disproportionate the benefit is, or how the Republican Party that used to be fiscally conservative has abandoned that.” she added.

Two articulate women candidates, Jessica Morse and Regina Bateson, have experience in policymaking and have demonstrated an ability to attract supporters and raise money, and now lead a field of four Democratic primary contenders. In rural Calaveras County, where Mark Twain invented his story about jumping frogs, ordained minister and Democratic Party activist Mickey Williamson outlined the long-shot logic of her party’s campaign at a park in Angels Camp. Williamson says the political atmosphere feels different this year: “The [Democratic] candidates are moving up and down the district, events are happening, thousands of dollars are being raised. It’s just a different ball game than we have ever had before.”

Robin McMillan Hebert.

Williamson has a worry, however: That after the June 5 primary, supporters of the losing candidates will stay home, replicating some of the internecine fighting that characterized the Clinton/Sanders contest and which continues to roil the Democratic Party throughout the country.

While most of CA-4 is rural, the key geographic areas where the majority of voters live, and where elections are won or lost, are found along the I-80 and I-50 corridors — places whose dairy farms and orchards not too long ago reached to the outskirts of Sacramento. The cows have been replaced by “Tuscan”-style housing estates with names like Serrano Village, and by retirement communities, large retail centers, high-tech business parks — and relatively few people of color. Over 70 percent of the congressional vote will come from here.

Ricardo Calixtro holds a Bible as he stops to talk in front of St. Patrick’s Catholic Church after services one April Sunday. An anti-abortion banner hangs on the front of the church asking for prayers for the unborn. He says that the abortion issue is the first priority for him and that it would be difficult to vote for someone who does not share that position.

Calixtro, a registered Democrat who lives in Murphys, a town tucked in the Sierra foothills, works three jobs as a bartender, baker and house cleaner. “I don’t mind working hard,” he says, “but it’s hard for a regular Joe trying to make it on minimum wage.” Calixtro voted for Bernie Sanders in the 2016 Democratic primary and, later, for the Libertarian Gary Johnson for president.

When told that McClintock agrees with him on abortion but is opposed to raising the minimum wage because it would “hurt minorities,” Calixtro becomes speechless for a long half minute. “Wow, that’s a tough one,” he finally responds. He says he is contemplating leaving the area for better opportunities: “I’ve heard Oklahoma and Kentucky are good states to live in right now.”

Calixtro is not the stereotypical working-class voter duped by “cultural” issues instead of watching out for his own economic interests. Yet President Trump has triggered feelings and responses that are pulling many voters away from single issues like guns and religion that previously determined their vote.

Others are sticking with Trump and McClintock despite the president’s seemingly daily scandals. In Placerville, an old gold-mining town along the route to Lake Tahoe, Trump supporter and former correctional officer Robin McMillan Hebert was concerned that gun rights and public safety were under threat. “I believe in law and order, otherwise there would be chaos — and I don’t believe in chaos,” she said. “Sacramento is a good example. There have been a lot of recent protests there.” A registered Republican, she compares President Trump’s treatment of women to Bill Clinton and John F. Kennedy’s. “I’m not going to expect someone to be perfect when I myself can’t be perfect.”

In Roseville, a man who works for the city utility company and is a member of the International Brotherhood of Electrical Workers, talked about the threat of outsiders.

“I’m tired of seeing cities burning down, and all the lawlessness,” he said, directing traffic for his crew of municipal workers. “It started with Occupy Wall Street.” He added that homeless people were like cats: “If you feed them they keep coming back.”

The man, who refused to give his name, said his wife is a vice principal at a local public school, and claimed she “got emotional” last January and went to the local Women’s March. He believes it was organized “not to defend women but to hate Trump.” He also thinks that homosexuality is morally wrong and is “pushed in your face” by liberals.

He said he supports McClintock but is reluctant to talk publicly about electoral politics because he thinks liberals will “throw a brick” at him if he expresses his opinions. “Now we have to accept transgender. Come on.”

Placer and El Dorado counties are recipients of the flight from cities — an exodus fueled by affordable housing, the desire for good schools and the expansion of high-tech jobs into suburban and exurban environments. Indeed, the suburbs surrounding Sacramento were among the top 25 growth areas in the country between 2015 and 2017.


Retiree: “Men have screwed it up a bit,
let’s put some smart ladies in there.”


The evolution of such suburbs is complex. In general suburbs are becoming more diverse and increasingly polarized economically, and more people are living in them today than in cities.

Following the June primary, Democratic frontrunners Morse or Bateson will have to work to attract significant numbers of Republican moderates and those with no party preference if Democrats are to pull off another Conor Lamb-type upset and topple McClintock. And since registered Republicans outnumber Democrats by over 60,000 voters, many Republicans will also have to stay home in November for such a reversal to occur.

Two local residents — former Republicans who intend to vote for a Democrat — explained why they think it’s possible for a Democrat to win here.

Jack Chittick stands on his front lawn in Sun City, a retirement community in Roseville built by Del Webb. Instead of carpool lanes, Sun City has lanes for golf carts. Chittick, an 84-year-old retiree who was a top executive at the Pirelli Tire Company, points to the hardcore Republicans who walk past his house to the golf course across the street. “I like the cleanliness of this place,” he says, “the golf course, the big homes, the shopping areas and the good hospitals.”

He doesn’t think McClintock represents the average person in the district and wants a congressperson who can make the tax structure fair for the middle class. Reflecting on his life, he admits he got “carried away” with his career as a corporate manager and the values that came with it. “I had achieved everything by myself,” he once believed, “so why couldn’t everyone?” But he had a change of heart when his wife started working with the homeless, and pointed out to him that the challenges they face were enormous.

“Democrats have a 50-50 chance,” he says, handicapping the race. “Men have screwed it up a bit, let’s put some smart ladies in there,” he adds, referring to Morse and Bateson. “I’m sure they couldn’t do worse, and they could do a lot better.”

Bob Toste is another Roseville retiree and former Republican, who “bought into the trickle down theory” before it registered with him that birth determines economic class more than any other factor. He is careful about who he talks to about politics in his neighborhood, especially on immigration issues. Toste wants someone who is sympathetic to the undocumented immigrant students called Dreamers and is angered by McClintock’s vote to repeal Obamacare. “I have good health insurance, having retired from a utility. But health insurance for our nation is very important for me. And trying to go back on that right now is horrendous,” he said.

If the Republican National Committee and its well-funded conservative political action committees pour money into CA-4 after the June primary to shore up McClintock, it will be an indication that the party brand is in deep trouble.

Come November here, Barbara Bush’s billboard admonition might come to pass. Sun City retiree Jack Chittick also wants voters to believe in something bigger than themselves – a change of political heart in District 4.


Video and images by Kelly Candaele.

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Education

County Ballot Measures Would Fund Child Care, Early Education

Research that shows early childhood education can profoundly impact the future success of children. But early childhood educators are still chronically underpaid.

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Teachers in West Virginia, Arizona and Oklahoma are not the only educators struggling to improve conditions in a profession they say is undervalued.

Alameda County’s low-income child care workers are joining cash-strapped parents in an attempt to raise wages, improve quality and expand access to care in a region where pay has not kept pace with the dramatic increases in housing costs for many families.

They are taking their fight to the ballot on June 5 with Measure A, an initiative to raise approximately $140 million per year to expand preschool and child care access and improve retention of teachers by boosting pay. In neighboring San Francisco, already considered a leader in early childhood education, voters will also have the option to vote for Proposition C, which would expand the number of child care slots and increase wages.

In many ways, child care workers face a steeper climb than newly emboldened red state K-12 teachers. As tough as things may be for school teachers in right-to-work states, there is some consensus that what they do is a necessary public good.

That’s not been so for early childhood educators in spite of research that shows that 90 percent of a child’s brain develops in the first five years of life and that quality child care programs can fuel the future success of children and stabilize families, especially those who are low income.

“Some of it has to do with historical baggage about whether mothers should be working outside the home,” says Marcy Whitebook, an expert on the childcare labor force at the Institute for Research on Labor and Employment at the University of California, Berkeley.


The United States lags far behind other developed nations in both preschool funding and enrollment.


Unlike the public schools, which are centralized and government funded, the early childhood education system is decentralized — taking place at a mix of private and public schools, centers and homes — and the funding is fragmented, with parents expected to shoulder the lion’s share of the cost.

Nancy Harvey, a former elementary school teacher, who runs a child care business out of her West Oakland home, feels the consequences of this underinvestment.

She serves a mix of middle and working class families in a diverse neighborhood that she says has been gentrifying. “Every other year, I’m looking for new staff because they get burned out or they need higher wages,” says Harvey. Meanwhile, she says, some of her families have had to leave the state because “between having to pay child care and rent, they simply couldn’t make it.”

Alameda County’s Measure A, a half-cent sales tax, would expand access to child care and preschool for low and middle income families, provide supports for homeless and at-risk children, and raise the wages of child care workers to at least $15 per hour. The scholarships could impact more than 20,000 children as the program ramps up, according to Angie Garling, who heads Alameda County’s Early Childhood Education Office.

In neighboring San Francisco, advocates gathered enough signatures to place Proposition C, a 3.5 percent surtax on commercial rents over $1 million a year on the ballot. The estimated $146 million raised annually would clear a waitlist of families who are in line to receive early child care and education services.

Prop. C would also make quality early child care more affordable for families earning as much as $207,500, and increase wages for child care workers beyond the $15 per hour to be required by the city’s minimum wage law as of July 1. A little over $20 million of the revenue would be set aside for the general fund.

The two local ballot initiatives – in Alameda County and San Francisco – represent a “down-payment” on the kind of investment that only the state and federal government can provide, says Whitebook. And the measures are part of a wave of activism at the local level, according to Margaret Brodkin of Funding the Next Generation, who says other cities and counties plan to include child care measures on their ballots in future elections.

The state has been gradually increasing funding for child care since the end of the Great Recession, after cutting funding for 110,000 child care slots, according to Chris Hoene, executive director of the California Budget and Policy Center. But California is still 67,000 slots short of where it was, he adds. Even a substantial boost in federal child care dollars, recently approved by Congress, will not be enough to address the funding deficit, say advocates.

Those revenue sources help those who meet income eligibility thresholds. The U.S. generally lags behind other industrialized countries when it comes to providing universal preschool. The overall enrollment in preschool of 3-to 5-year-olds in the United States is 67 percent, the lowest of all but two of the 34 countries that are part of the Organization for Economic Cooperation and Development, according to an OECD study published last year.

And both measures will also help child care workers, many of whom rely on public assistance, according to a recent UC Berkeley study co-authored by Whitebook. Those who obtain bachelor’s degrees, as required by Head Start and some public pre-K programs, do not usually earn much more for their troubles, according to the study.


In Alameda County, center-based child care exceeds tuition at UC Berkeley and is often a family’s second largest cost after housing.


A child care worker in Alameda County earns $29,000 a year on average, about 79 percent of what it would take for a single person in the county to afford the bare necessities, according to the California Budget and Policy Project. Meanwhile, the cost of center-based care exceeds tuition at UC Berkeley and is often a family’s second largest cost after housing.

These statistics are more than just academic to Morgan Pringle, a child care center substitute teacher who is also pursuing a degree in human development at California State University, East Bay.

While she was growing up, she says her mother, also a child care worker, supplemented her main job with fast food and house cleaning gigs. When the car’s transmission gave out, “we just had to go without a car for a couple of years,” says Pringle, who also recalls stints living with her grandmother and aunts. “The pay of an early childhood educator has never matched the cost of living here in Alameda County,” she adds.

Like Harvey, she’s joined Raising Alameda, a coalition that has brought family day care providers, parents and child care center employees together in support of Measure A. The Service Employees International Union Local 521, which represents child care providers, is a member of the coalition.

Even advocates acknowledge that an increase in sales tax, which is generally considered a regressive tax, is not ideal. Measure A will raise the sales tax in some Alameda County cities to close to 10 percent.

But local governments do not have many progressive funding options since the passage of Proposition 13, the 1978 ballot initiative that limited tax increases on real estate, according to Hoene.

Voters who want to expand child care services in San Francisco will be able to vote to levy a surtax on commercial rents. However, they must choose between Proposition C and a rival measure, Proposition D, which would fund housing and supportive services for seniors, the mentally ill and homeless youth. Proposition D, which also would tax commercial rents, is endorsed by the city’s acting mayor and five supervisors, including mayoral candidate London Breed.

Proposition C, an initiative backed by Supervisor Norman Yee and Breed’s rival in the mayor’s race Supervisor Jane Kim, only requires a majority vote, while Proposition D — which was placed on the ballot by a vote of County supervisors — requires a two-thirds vote. However, if they both win, only the one with the most votes will be enacted.

At least one voter has already voiced frustration that the city’s political leaders have pitted the need for affordable housing against the need for child care.

“In my day, we would go into a room with these two competing great ideas and take as much time as we needed, and not come out until we’d resolved them,” former Mayor Art Agnos said at a Board of Supervisors committee meeting earlier this year, according to a report in Mission Local.

Back in Alameda County, Trisha Thomas, who runs a family day care in North Oakland while also selling life insurance and working as a church musician, says she is happy to be raising the visibility of her profession through a ballot campaign that has involved testifying at public meetings and phone banking.

“For many years, people just saw us as babysitters,” says Thomas, who has a bachelor’s degree and plans to pursue a master’s degree. “My kids can do math. My kids can read. My kids are well above the average child starting school.”

“To be viewed as a teacher, it’s important to me,” she says.

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Environment

Critics Worry Proposition 70 Will Bring Back Budget Gridlock

Among other things, the ballot measure could endanger the bullet train, one of Governor Jerry Brown’s favorite projects, by giving Republicans a say over how cap-and-trade money is spent.

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Jerry Brown photo by Mark Miller.

There are not as many propositions on the June ballot as usual, but none has fewer supporters than Proposition 70, a constitutional amendment calling for a one-time, two-thirds vote in 2024 to determine how the billions of dollars generated by California’s cap-and-trade program will be spent. That two-thirds vote requirement conjures up frustrating memories of the gridlock that occurred each year before past budgets were finally passed.

Supporters are a collection of strange bedfellows: Governor Jerry Brown, former Assembly GOP leader Chad Mayes (R-Yucca Valley), who crafted the amendment, and the state Chamber of Commerce. Opponents include the Democratic and Republican parties, every environmental group in the state and nearly every major newspaper.

Cap-and-trade requires that polluting companies buy permits allowing them to release greenhouse gases into the atmosphere. Money from these permits now goes into the Greenhouse Gas Reduction Fund (GGRF), and the legislature decides by a simple majority vote on how to spend that money each year during budget negotiations.

If Prop. 70 passes, money from those permits would be deposited into a new state reserve fund starting in 2024, until each chamber in the legislature passes that one-time bill on a super majority vote that would decide how to spend the money. But once that bill passes, new money collected through cap-and-trade would once again go into the GGRF and again could be allocated on a simple majority vote.

Prop. 70 emerged from a compromise last year to extend cap-and-trade, California’s ambitious climate change program, until 2030. Brown has called climate change a “threat to organized human existence.” But some Democrats were skeptical of the extension and their support was shaky at best. Republicans were also looking at the program with wary eyes. Gov. Brown knew he would need Republican votes to extend the program, and decided it was time to deal. He enlisted Mayes to round up the needed GOP votes.

Brown sought the supermajority vote, when only a simple majority was required, as an insurance policy against unforeseen future legal challenges.

Prop. 70, however, could endanger the bullet train, one of Brown’s favorite projects, by giving Republicans a say over how cap-and-trade money is spent. By the end of 2016, about $800 million had been spent on the high-speed rail project. Given the GOP’s opposition to the train, it could strangle the project if their votes are needed in 2024 to provide a two-thirds majority to continue its subsidy.

Opponents of Prop. 70 say that it makes sense for cap-and-trade allocations to be reviewed, but that review should be done every year through the budget process on a simple majority vote. If passed, Prop. 70 could change the mix of cap-and-trade funding sent to state and local programs.

“We’ve seen other legislation where the two-thirds vote holds hostage money for disadvantaged communities,” says Strela Cervas, interim director of the California Environmental Justice Alliance. “This would be budget gridlock and backtracking.” Cervas worries that one major program benefiting from cap-and-trade investments, Transformative Climate Communities, could be starved of funds if Prop. 70 passes.

Bill Magavern, policy director of the Coalition for Clean Air, said that a two-thirds vote would lead to budget gridlock, regardless of the partisan composition of the legislature in 2024.

“For years we had budgets that were delayed. Since 2010, when we passed Prop. 25, which required a simple majority vote, we’ve have had balanced and on-time budgets. Brown’s success in getting his climate agenda passed is largely due to this.”

California’s major political parties oppose Prop. 70. With the exception of the Bakersfield Californian, all major newspapers have opposed it. The San Jose Mercury News called it a “colossal waste of voters’ time.” And the Los Angeles Times described it as a “pointless exercise.” The only institutional supporter of the ballot measure, the California Chamber of Commerce, didn’t respond to requests for comment.

So far there’s no evidence of big money backing Prop. 70. But Magavern said he isn’t complacent. “Our side definitely doesn’t have the money to fight this,” he said.


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Politics & Government

Colorado Slashes Pension Benefits for Government Workers; Senator Calls for Hiking Education Funding

Co-published by Westword
Colorado lawmakers passed landmark legislation Wednesday night reducing pension benefits for thousands of teachers, firefighters, cops and other public sector workers.

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David Sirota

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Co-published by Westword

Colorado lawmakers passed landmark legislation Wednesday night reducing pension benefits for thousands of teachers and other government workers. But the measure also included language designed to give lawmakers more information about controversial investments that have delivered hundreds of millions of dollars in fees to Wall Street firms. Now, Colorado’s senior U.S. Senator Michael Bennet, a Democrat, tells Capital & Main that Colorado must consider a ballot measure to better fund the state’s public education system.

The narrow disclosure language in the pension bill – which still keeps fee details hidden from the general public – was added following a Capital & Main investigation showing that in recent years, Colorado’s Public Employees Retirement Association (PERA) has paid more than $1 billion in such fees even as the pension fund has delivered returns that have significantly trailed a low-fee stock index fund.

The bill slashes cost-of-living increases and requires higher pension contributions from educators, firefighters, cops and other public sector workers covered by Colorado’s PERA. The changes – opposed by the state’s largest teachers union and approved after recent teacher protests at the capitol – were designed to shore up the finances of PERA, which faces a $32 billion gap between what it has promised retirees and what it has in the bank.

Much of that gap comes from Colorado lawmakers refusing for years to make full annual contributions to PERA, but a sizable portion of it stems from PERA’s shortfalls in the pension system’s investment returns. Over the last 10 years, PERA has shifted about a fifth of its money into high-risk, high-fee private equity funds, hedge funds, real estate funds and other so-called “alternative investments.” That shift has generated an average of $132 million of annual fees, all while PERA’s returns have trailed the median for public pensions as well as a standard Vanguard stock-bond index fund.

Information about the fees and the deals with alternative investment firms have been kept secret by PERA officials after state lawmakers in 2004 passed a bill allowing those officials to exempt the information from Colorado’s open records law. That was one of many such secrecy bills that passed in various states in roughly the same time period. Colorado pension overseers quickly used the new law to block the release of nearly all detailed information about the investments from retirees, the public, and also from lawmakers charged with overseeing the pension system.

In response to Capital & Main’s recent investigation into the fees and secrecy, Colorado lawmakers in the waning hours of the legislative session added language to the final pension bill allowing — though not requiring — pension officials to provide legislators information about the system’s alternative investments, but only when those legislators are in confidential executive sessions. The provision also says that if pension overseers have signed contracts with Wall Street firms that let those firms decide if information can be public, then the information can still be withheld from legislators.

“If the association cannot disclose such information without violating confidentiality provisions, then the association shall provide enough information to the legislative members of the commission . . . to inform the legislators regarding whether such investments continue to be in the public interest,” the final bill says.

A new $225 million infusion into PERA is also included in the final bill, but the prospect of Colorado continuing to make such contributions and increasing education funding runs into the Taxpayer Bill of Rights which constrains state spending. That constraint has prompted activists to begin collecting signatures for an education funding initiative in the 2018 general election.

At the capitol protest leading up to the vote to slash teachers’ pension benefits, Senator Bennet did not endorse a specific initiative, but he told Capital & Main that it is time for Colorado to consider a ballot measure to increase funding for public education.

“I believe it is overdue,” he said. “We have to create the right political circumstances to make sure that a campaign is successful and to do that we have to build support among a lot of people who don’t know that schools are underfunded in Colorado . . . I hope we find a way to do it as a state. I think we need to do it.”

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Politics & Government

Why Is Colorado’s Public Pension System in High-Fee, High-Risk Investments?

Co-published by Westword
Pension officials across America have been willing to use retirees’ money to pay huge fees for investments that may not beat low-fee stock index funds, but seem to reduce politically problematic volatility.

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David Sirota

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Colorado Capitol photo by David Sirota.

Did PERA pay $1 billion in fees to avoid the “political issue” of having to answer retirees’ uncomfortable questions about the ups and downs of the stock market?


Co-published by Westword

Are taxpayers and retirees willing to give billions of dollars to financial firms in exchange for the potentially false perception of financial stability? As states move to slash the retirement benefits of teachers, firefighters, cops and other government workers, it is a question at the heart of an intensifying debate over high-risk, high-fee investments that enrich Wall Street money managers, but do not necessarily deliver the outsized returns they promise.

That debate has most recently surfaced in Colorado, where in the waning days of the legislative session, lawmakers are considering legislation to slash government workers’ retirement benefits, all while the Public Employees Retirement Association continues paying roughly $140 million in fees each year to outside money managers in private equity, real estate and other “alternative investments.” In a new Denver Post op-ed, PERA board chairman Tim O’Brien has called for “shared sacrifice among all parties” to fix PERA’s shortfalls. But to date, those calls do not include any demands to reduce those annual nine-figure PERA payouts to financial firms.

With PERA’s fees increasing and its returns lagging behind a low-fee stock index fund, some critics have asked why Colorado has not considered following other pension systems that have moved money out of alternatives and put more retirees’ money into far less expensive Vanguard-style funds that simply track the broader market.

A recent PERA meeting. (Photo: David Sirota)

O’Brien, Denver’s city auditor, said being all-in on stocks would mean that “with all of our constituents, particularly the members, they will ask, ‘What happened to my money?’”

So did PERA pay $1 billion in fees between 2009 and 2016 primarily to avoid the “political issue” of having to answer retirees’ uncomfortable questions about the ups and downs of the stock market? And is that a wise expenditure at a time when the state is threatening to slash retirement benefits for government workers who don’t get Social Security?

Many financial experts say it is nearly impossible to beat the returns of the stock market over the long haul. And to critics, PERA failing to beat even Vanguard’s simple stock-and-bond fund seems to illustrate that truism. However, O’Brien’s comments allude to the fact that on a day-to-day basis, the market is notoriously volatile. At any given moment, the S&P 500 can be a veritable roller coaster.


Idaho Pension Fund Officer:
“It may be phony happiness, but we just want to think we are happy.”


Private equity and real estate, by contrast, are not priced day to day and can therefore seem less volatile. Such investments that appear to reduce year-to-year volatility may not actually deliver the best long-term returns for pensioners, but they can reduce the scrutiny and criticism pension officials could face because the investments appear to smooth pensions’ returns on a year-to-year basis.

In recent years, pension officials across the country have been increasingly frank about their willingness to use retirees’ money to pay huge fees for investments that may not beat low-fee stock index funds, but do seem to reduce politically problematic volatility.

Last year, for instance, Oregon’s chief investment officer John Skjervem acknowledged that officials there were becoming concerned that the state has been paying huge fees for a private equity portfolio that was not meeting benchmarks. In response, he said, “For a public plan, I could make a philosophical argument that even if we do nothing but match public market returns, there’s a place for private equity because of the appraisal-based accounting, which artificially smooths our total fund volatility. And there’s a genuine benefit to that.”

Similarly, Bob Maynard, the chief investment officer of Idaho’s public pension system, admitted in 2015 that when it comes to high-fee private equity investments, “we’re happy if it gives public market returns, anything extra, because of its effect having some smoothing of the risk as seen by the accountants and actuaries.”


“The smartest money manager isn’t smarter than the market.”


He added: “It may be phony happiness, but we just want to think we are happy.”

Even if you agree that pension officials should be shelling out big cash for less volatility, Maynard’s reference to “phony happiness” raises an even deeper question about whether, in fact, high-fee investments are less volatile in the first place.

Remember — while stocks and bonds are priced on a moment-to-moment basis, alternative investments are not valued by any kind of transparent market. They are long-term investments in assets like buildings or companies that do not have an easily discernible price until they are ultimately put up for sale. In the interim, they are given valuations by the investment firms. That is, they are valued by the very money managers who are trying to sell the promise of supposedly ultra-smooth returns to pension officials who just so happen to particularly value a lack of volatility.

Concerns about those potential conflicts of interest have of late been exacerbated by recent research challenging the entire premise that alternative investments are less volatile.

Johns Hopkins University researchers Jeff Hooke and Ken Yook created a stock index fund in a 2017 study, comprised of the kinds of companies typically bought by private equity firms. Despite the similarities of the investments, the data showed that private equity firms were self-reporting far less volatility in the values of their assets than the publicly traded stocks of similar companies.

“Unlike investment pools that specialize in publicly traded securities, buyout funds determine the residual values, one-year returns, and the volatility of their fund returns, while having few checks and balances,” the researchers wrote. They concluded that “buyout fund returns are more volatile than public equity market returns” and declared, “Future investors may have second thoughts about purchasing buyout funds instead of listed securities. Moreover, past buyout-fund investors may have been unfairly induced to place monies into these investment vehicles.”

The findings came on the heels of previous academic research suggesting that private equity firms inflate the self-reported valuations of assets when they are pitching new funds to prospective investors.

For their part, PERA officials defend their overall strategy, and board trustee Marcus Pennell says Colorado cannot just put its money into an index fund, even if it could lower fees and raise returns.

“There are more sophisticated issues than just simply returns over a 100-year time period,” said Pennell, a high school physics teacher in Jefferson County. “You’ve got cash flow issues; you’ve got to actually pay benefits. So putting 100 percent of the money into stocks and [letting] it sit there doesn’t generate the kind of cash flow that you need to pay benefits. It’s more sophisticated issues in terms of the month-by-month and year-to-year operations that don’t really allow you to go 100 percent stocks and forget about it for 100 years. So while in a vacuum that might sound like a good idea, when you delve down into the details of how the operation actually functions, that doesn’t become workable.’”

Public pension systems in Nevada and Montgomery County, Pennsylvania, though, don’t appear to be running into those problems. Those two systems famously reduced their investments in high-fee Wall Street firms, and increased their investments in stocks and bonds. In the first three years of Montgomery County’s move, its fund delivered five percent returns, which beat PERA’s return in the same time period. Same thing in Nevada. Over the last decade, that state’s pension system has outpaced PERA’s earnings.

“The volatility argument was put forward by all of the lobbyists and money managers who told me at the time that I was the dumbest guy in the world for doing this, but it seemed to me to be a hollow threat and it ended up not coming to fruition,” said Pennsylvania Attorney General Josh Shapiro, a Democrat who, as Montgomery County commissioner, initiated the shift into index funds. “We had no issues with liquidity, no issues paying benefits and no issues with volatility. These are all red herrings designed to protect the status quo and the money managers. The smartest money manager isn’t smarter than the market. What I mean by that is that there’s going to be ups and downs, but over the long haul — which is what a pension fund should be focused on — nobody will outperform the market.”


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