As states and cities grapple with underfunded pension systems, they collectively pay out billions of dollars worth of fees for increasingly controversial “alternative investments.”
Co-published by Westword
When Karen Magnuson appeared before a Colorado senate panel in March, the 62-year-old retired teacher made a desperate plea: Avoid cutting her pension’s cost-of-living increase, or she and thousands of her fellow retirees throughout Colorado could be thrown into destitution.
“The costs of the things we need to live [on] keep going up and up,” said Magnuson, recounting how she is now working at a Target to make ends meet after a 32-year career teaching in Greeley, Littleton, Ault and Aurora public schools. “My calculations are telling me I better start preparing for poverty at 70. It seems that many elected officials are trying to fix PERA on the backs of retirees with little to no chance to make up for these losses,” she added, referring to the state’s Public Employees Retirement Association.
Lawmakers ignored her request. They instead voted to advance legislation reducing Magnuson’s benefits in the name of shoring up the state’s finances — a move that recently prompted a statewide teachers’ walkout and boisterous protests in a state whose public employees receive below-average pay.
California is paying nearly $1.5 billion each year in fees for its private equity investments.
As the legislature now considers the final version of the PERA reform bill in the waning days of the 2018 legislative session, the consensus among lawmakers seems to be that Colorado must ask for more sacrifice from the PERA’s more than 500,000 members, who on average receive $3,193 a month in benefits and who do not receive Social Security. And yet, despite all the talk of belt-tightening, lawmakers have not done anything to impede the nine-figure payments to one elite set of PERA beneficiaries: the wealthiest people on Earth, who live 1,600 miles to the east.
Ask legislators at Colorado’s capitol if they’ve even heard about the $1 billion of investment fees the state’s pension system paid out to external money managers between 2009 and 2016, and you will get blank stares. Ask them if they realize those are only the fees that are disclosed — and that there are likely hundreds of millions of dollars of additional fees being paid out — and they will express disbelief. Ask them if they know that state officials passed legislation — written by the financial industry — barring the details of the fee terms from being revealed to the public, and you will elicit outrage.
This is the little-discussed reality at PERA — just as it is at many retirement systems across the country. And lately PERA has moved to funnel even more money into an opaque fund that is a mishmash of exotic investments from timberland to hedge funds — and that has generated ever-higher fees while trailing the broader stock market.
PERA is no outlier: As states and cities throughout America grapple with underfunded pension systems, they continue to collectively pay out billions of dollars worth of fees for increasingly controversial “alternative investments” – a catch-all term for private equity, hedge funds, real estate and venture capital.
In nearly every state with revenue shortfalls, pension-reform debates primarily revolve around proposals to cut workers’ benefits.
In all, about a quarter of the $3 trillion of public retirement systems’ assets are now in “alternatives.” As of 2014, the shift into alternatives was generating $10 billion a year in fees — a 30 percent jump over the prior decade, according to the Pew Charitable Trusts.
In response, some states have lately considered bills to expand fee disclosure — and California recently passed legislation that ended up revealing that the state is paying nearly $1.5 billion each year for its private equity investments.
However, many of the highest-profile transparency efforts have followed the script of Colorado Treasurer Walker Stapleton. The second-term Republican has made headlines demanding PERA publish details of individual pensioners’ retirement benefits, but has mounted no similar effort to force the release of detailed information about the hundreds of millions of dollars Colorado pays the politically powerful financial industry. That’s the same industry that has pumped more than half a billion dollars worth of campaign contributions into state politics across the country, and whose asset managers are routinely among the top donors to the Republican Governors Association that Stapleton will be relying on if he becomes the GOP nominee for governor.
The result: in nearly every state with revenue shortfalls, the political debate over pension reform primarily revolves around proposals to cut workers’ benefits — while ever-larger payouts to financial firms are considered sacrosanct and are kept hidden from view.
The dynamic can be seen in Colorado: Few questions have been raised about why, for instance, the state’s pension fees helped Trump adviser Steve Schwarzman, the CEO of PERA money manager Blackstone, reap a personal $800 million windfall last year, all while lawmakers demand cuts to cost-of-living increases for retired teachers, firefighters, police officers and other government workers.
For their part, financial firms and their trade associations have cast themselves as part of the solution, arguing that their alternative investments have produced returns that appear to eclipse the stock market — and are therefore worth the cost and secrecy.
“The long-term outperformance of private equity funds provides an excellent investment opportunity for pension funds representing teachers, firefighters, and other public servants seeking retirement security,” said American Investment Council CEO Mike Sommers, whose group lobbies for the private equity industry in Washington. “Despite the recent strength of the stock market, investors in private equity generally received greater returns from these investments than public equities over the last 10 years.”
This argument is echoed by PERA’s chief investment officer, Amy McGarrity, who asserts that the investment strategy has made sure PERA has not fallen short of its target returns.
“We have consistently met our assumed rate of return,” she said in a recent interview at PERA’s office building a few blocks from the state capitol in Denver. She said that investing in alternatives has been part of a strategy to diversify the portfolio, so that it does not just rely on stocks.
“That does require that we pay these kinds of fees,” she said, adding that while the state paying out more than $1 billion in fees over the last few years “sounds like a gigantic number, the honest truth is, the way we’re able to generate this kind of return, which is far and above what you’re going to get in your 401(k), is because this is the price of doing business.”
Industry critics, though, say those comparisons are not as straightforward as they may seem, because the returns on longer-term investments in real estate and private equity are based on somewhat subjective calculations by the money managers themselves, rather than a daily, fluctuating stock price. They also note that many institutional investors betting big on high-fee alternatives have produced overall returns that trail low-fee stock index funds. In PERA’s case, the private equity and real estate returns have not matched the benchmarks that the system itself says should be used to measure the investments.
Such complexity — and fees — have led gurus like Warren Buffett and George Soros to warn pension funds to stay away from the investments.
“Huge institutional investors, viewed as a group, have long underperformed the unsophisticated index-fund investor who simply sits tight for decades,” Buffet wrote in his 2015 letter to Berkshire Hathaway shareholders. “A major reason has been fees: Many institutions pay substantial sums to consultants who, in turn, recommend high-fee managers. And that is a fool’s game. There are a few investment managers, of course, who are very good – though in the short run, it’s difficult to determine whether a great record is due to luck or talent. Most advisers, however, are far better at generating high fees than they are at generating high returns.”
Colorado has not heeded that advice. Instead, PERA has plowed nearly one-fifth of retirees’ savings — or $9 billion — into private equity, real estate, hedge funds and a blend of other alternatives. The result: The state’s returns have been subpar by many measures.
PERA’s 2016 report shows that in the previous decade, the retirement system delivered an annualized 5.2 percent rate of return — below the 5.5 percent annualized returns for the median public pension system, according to data compiled by the Wilshire Trust Universe Comparison Service. By comparison, Vanguard’s low-fee Balanced Index Fund — comprised of 60 percent stocks and 40 percent bonds — generated 6.4 percent annualized returns in the same time period.
Those differences in return rates may seem small, but when applied to tens of billions of dollars over the course of a decade, the underperformance translates into hundreds of millions of dollars that PERA failed to reap.
In a shorter time horizon, the picture is a bit brighter: In its 2016 annual report, PERA reported a 8.5 percent return over the most recent five years — but even that has trailed a traditional Vanguard fund, and it also trailed at least one of its peers in the Intermountain West. Nevada’s public pension system, which is 12 percent smaller than PERA and has far less exposure to private equity and real estate, earned a 9.1 percent return during the same five-year period. That outperformance came at a cheaper cost: Nevada paid 75 percent less in fees than Colorado, paying a half-billion dollars less to Wall Street than PERA did.
To be sure, Colorado could simply follow the lead of Nevada or even Montgomery County, Pennsylvania, which famously shifted its assets into index funds — but moving money into lower-fee investments, even if they performed well, would not singularly solve the pension system’s challenges (nor would transforming the system into a 401k-style system, which data suggest could generate even higher fees).
One private equity firm’s contract with Colorado says the firm can use investors’ money to fly its executives around on chartered jets.
Right now, Colorado faces a $32 billion gap between the assets it has and the benefits it promises. A 2015 report from the Laura and John Arnold Foundation — which critics say has pressed for pension benefit cuts — found that much of the shortfall was created by the state government and local school districts, for failing for years to make their full employer-side contributions to the fund.
That same report, though, also noted that more than 17 percent of the gap was created by shortfalls in investment returns, as the state has continued to pay an average of $132 million in annually disclosed fees to external money managers in this decade.
“You can argue that Colorado should have used index funds, instead of wasting money on Wall Street fees,” said Johns Hopkins University professor Jeffrey Hooke, a former investment banker whose recent report shows that many pension systems heavily invested in alternatives have underperformed traditional stock and bond index funds. “The problem is that Colorado, like most state pension funds, hasn’t been able to beat the kind of simple index fund of 60 percent stocks, and 40 percent bonds that a place like Vanguard has.”
“No Industry-Standardized Method for Valuation”
Colorado began pumping state retirement money into private equity in the 1980s, before it was called private equity. Back in those pre-euphemism days, it was just explicitly called “leveraged buyouts,” and its promises of huge shareholder returns — regardless of social consequences — were popularized by Gordon Gekko in the film Wall Street.
In its simplest form, private equity executives raise money from investors like pension funds, which agree to give those executives retirees’ savings for about a decade. The private equity firms then use those resources and bank loans to buy up companies. In the Mitt Romney campaign ad version of the tale, the private equity executives then earnestly try to turn around a profit for investors by retooling the companies, making them more efficient and selling them off at a higher price. In the Occupy Wall Street version of the story — which seems to be at play in the demise of The Denver Post — the Mitt Romneys strip the companies of assets, lay off workers and make quick cash in a fire sale.
For pension funds, the move into private equity, hedge funds, real estate and other more exotic investments has always been about their potential to generate big returns that are not tied to the stock market — a situation that, in theory, insulates pensioners from the day-to-day ebb and flow of the S&P 500.
“This shift reflects a search for greater yields than expected from traditional stocks and bonds, an effort to hedge other investment risks, and a desire to diversify the investment portfolio,” wrote Alicia Munnell of Boston College’s Center for Retirement Research.
Since Gov. Roy Romer’s last term, Colorado has poured billions into 257 separate private equity funds, according to government records. In that time, PERA, along with the Denver Public Schools Retirement System that it merged with in 2010, pumped cash into funds run by Wall Street giants like Goldman Sachs, Warburg Pincus and Blackstone. Pension officials also dumped money into other obscure vehicles with names that sound like the codes Enron executives used for their shell companies — stuff like Euroknights V, JC Flowers Fund II and PMI Mezzanine Fund.
In all, between 1998 and 2016 the $10.6 billion of Colorado’s private equity investments has returned $10.8 billion to the pension fund — hardly the outsized returns that industry officials tout.
Real estate is a similar story. State records obtained by Capital & Main show that PERA’s portfolio includes 100 percent direct ownership stakes in far-flung properties across America — from shopping centers in Birmingham, Alabama and Tampa, Florida to an office park in Walnut Creek, California to a Disney distribution center in Memphis.
For PERA’s $4 billion worth of real estate investments, it has received a 5.6 percent annualized return over the last decade. In that same time, Vanguard’s 60-40 stock-bond fund delivered a 6.4 percent return.
That said, when it comes to PERA’s overall returns in alternative investments, the jury is still out because a sizable chunk of Colorado’s current $3.5 billion private equity portfolio remains locked up in ongoing private equity funds. In other words, depending on how well those investments perform, PERA is set to receive more payouts. State officials, in fact, assert that over the last decade, private equity has delivered PERA an annualized 8.4 percent return, and that over the portfolio’s entire life, there has been a 10.4 percent “internal rate of return.”
That calculation, though, is typically not based on any third-party verification, but is instead based on figures from investment firms themselves — a situation that PERA officials admit makes the figures difficult to rely on.
“Differences in IRR calculations can be affected by cash-flow timing, the accounting treatment of carried interest, partnership management fees, advisory fees, organization fees, other partnership expenses, sale of distributed stock, and valuations,” state records disclose in fine print. “Importantly, there is no industry-standardized method for valuation or reporting.”
Financial experts have long raised concerns about the fungibility of such calculations, raising questions about whether or not the purported value and returns of PERA and other pension-fund portfolios represent the actual value of the assets. Both New Jersey’s public pension fund and a recent academic study underscored those concerns.
In the New Jersey case, the state’s early sale of investments in real estate funds in 2012 showed a wide discrepancy between what Wall Street firms were saying the state’s investments were worth, and what they actually sold for on the open market. A few years later, a study published by the National Bureau of Economic Research found “evidence that some underperforming managers boost reported returns” when they are trying to sell prospective investors on putting money into their new funds.
“Until a private equity fund or real estate fund is fully liquidated, pension officials don’t really know what these investments are worth — they are taking the fund managers’ word for it,” Johns Hopkins’ Jeffrey Hooke said. “The returns could just be made up.”
Questions about the veracity of stated returns have only intensified in recent months, as federal regulators have been looking into whether private equity firms massage, tweak or otherwise manipulate those calculations to obscure less-than-stellar performances. One of PERA’s largest external managers, Apollo Global Management, was reportedly subpoenaed in that investigation.
What is not fungible is PERA’s own data: Buried in the retirement system’s 2016 annual report are figures showing that in the prior 10 years, Colorado’s private equity and real estate portfolio fell short of industry benchmarks that compare returns to other, lower-fee investments. The report also showed that the system’s $1.5 billion “Opportunity Fund” has delivered just 2.8 percent annualized returns in the prior five years — that’s compared to more than 10 percent annualized returns for the stock portfolio that PERA manages in-house. PERA in 2015 increased the amount of money it aims to put into the Opportunity Fund.
Amy McGarrity said that when it comes to the Opportunity Fund, “A lot of those investments in there have the J curve” — an industry term describing when returns are weak at the beginning, but then increase as investments generate a profit. As for the other alternative investments, she said they have delivered.
“The overall goal of private equity is to outperform [the stock market] over the long term and our performance has proved that,” she told Capital & Main, asserting that the high-fee investments have generated better returns than the system’s investments in stocks and bonds. “That’s its role in the portfolio and we believe it’s been successful in fulfilling that role.”
However, there are signs that the much-ballyhooed returns of the past may not be a thing of the future.
In October, a Cambridge Associates’ report showed its private equity index trailed the S&P 500 returns over the prior five years. That followed Blackstone’s head of private equity declaring that “this is the most difficult period we’ve ever experienced.”
Eileen Appelbaum and Rosemary Batt of the left-leaning Center for Economic and Policy Research say the trends are ominous for investors like PERA.
“Industry participants claim that these funds significantly outperform the stock market, but finance economists who study the industry have found considerably more modest results,” they wrote in a 2017 report. “The overall performance of private equity funds has been declining. While private equity buyout funds once beat the S&P 500, the median buyout fund has more or less matched the performance of the stock market since 2006. These findings raise serious questions about whether the recent investment explosion in [private equity] will pay off for pension funds and other institutional investors.”
“You Better Make Sure Their Hands Aren’t In Your Pocket”
Like statistics, performance returns are notoriously squishy — depending on timetables, weighting and other tricks, a math whiz can paint different portraits. The same is true for the fees being paid to financial firms managing retirees’ money, but for a different reason: The expenditures can’t exactly be massaged with fancy formulas, but they can — and are — hidden from view.
Indeed, even as PERA officials have been providing lawmakers with meticulous actuarial estimates of the costs of retiree benefits, those same officials may not actually know precisely how much Colorado is shelling out to Wall Street firms — and even if they did know, they are not allowed to tell you.
Between 2009 and 2016, PERA disclosed spending roughly $1.2 billion to manage all of its investments. Roughly than two-thirds of those expenses were fees paid to firms managing money in the private equity, hedge fund and Opportunity Fund portfolios, even though those managers only oversaw roughly 20 percent of the state’s overall investments.
On paper, PERA seems to be paying about 0.4 percent in fees on the system’s $47 billion in assets — not among the highest fee rates among pension funds, but also not among the lowest, according to a 2015 study published by the Maryland Public Policy Institute.
The trouble is, those are only the fees that are disclosed to the public — and there are many more fees that go unreported.
PERA, for instance, publishes a list of private equity firms it does business with — but it does not publish a list of managers in its real estate portfolio or the Opportunity Fund. You have to make a formal request for those records. Similarly, PERA publishes the aggregate annual cost of the flat management fees charged by its external firms — usually around two percent of an investment. The retirement system, though, does not disclose the so-called “carried interest” fees that financial managers extract from the system’s investments when those investments increase in value. That fee is typically 20 percent of the earnings, which according to Hooke means the system in practice is likely paying nearly double the amount of fees it admits to in its annual reports.
There also could be hidden fees that Colorado officials are not privy to — the kind that were flagged by law enforcement officials in a series of recent cases brought against a pair of private equity firms in which PERA has collectively invested more than $1.7 billion since the 1990s. In the Security and Exchange Commission’s actions against those two firms, Apollo and Blackstone, the regulatory agency said the managers failed to disclose fees they were charging to the underlying companies they were buying with investors’ money.
Those fees charged to investors’ assets are not necessarily fully shared with the investors themselves — they can be akin to your financial planner using your investment money to buy bars of gold, and then quietly breaking pieces off the bars for himself. And if you think those are isolated incidents, think again: In 2014 the director of SEC’s office of compliance said, “When we have examined how fees and expenses are handled by advisers to private equity funds, we have identified what we believe are violations of law or material weaknesses in controls over 50 percent of the time.”
PERA board member Lynn Turner said that when it comes to the debate over investment expenses, “The issue is what you get in return for what you pay. If you pay higher fees, but get higher returns for those fees then you could from other investments, then it is worth paying those fees.”
He added, though, that in light of the SEC’s recent fee cases, one of PERA’s toughest jobs is to police their own money managers.
“If you aren’t looking over their shoulder, you better make sure their hands aren’t in your pocket,” said Turner, who noted that as the SEC’s chief accountant he saw private equity firms use fee schemes to siphon money from investors. “When we see these people getting in trouble for what they are doing, any pension fund should ask if we should be doing business with these people. We shouldn’t turn a blind eye. I would like to see a lot more transparency and a lot more proactive due diligence about whether we should remain in business with them.”
“How Can They Tell If the Fees Are Excessive?”
With so much public money at stake — and with periodic shenanigans surrounding all that cash — legislators, state auditors, journalists, watchdog groups and PERA members themselves may at some point want to dig more deeply into the situation. But if that time ever comes, they will run into a wall of secrecy, thanks to a bill quietly passed in 2004 by unanimous votes in the Republican-controlled legislature.
The legislation was originally “developed by the venture capital industry,” according to PERA records — and it mimicked similar bills that the financial industry was then passing in most states as public pensions at the time were investing ever more money in higher-risk, higher-fee alternative investments. Colorado’s two-paragraph legislation gave PERA the right to hide all information about private equity, debt and timber investments if pension trustees determined that “disclosure of such information would jeopardize the value of the investment.”
PERA’s alternative investment portfolio was then a fraction of the size of its current portfolio. Witnesses from a private equity industry lobbying group called the Pension Preservation Alliance told lawmakers that financial firms were weaponizing open records laws — using them to get pension funds to disclose commercial trade secrets about their competitors’ investment strategies.
“Here’s the problem: PERA cannot decide to make an investment in a company until it receives and reviews enough proprietary information in that company to satisfy its investment concerns, but the company won’t share that level of information if it is at risk of public disclosure,” Pension Preservation Alliance executive director John Frew told senators in testimony supporting the legislation. Without an exemption, Frew asserted, “some alternative investment partners may choose to avoid public investments altogether.”
Lobbyists for the private equity industry reassured lawmakers that PERA could be judicious in its use of the exemptions, and could still disclose plenty of information about its Wall Street relationships. But a few months after Republican Gov. Bill Owens signed the final bill, PERA’s board unanimously approved a sweeping motion exempting all of its contracts with alternative investment firms — and all itemized fee information — from the state’s open records laws.
“The Colorado Open Records Act protects investment firms worried about the disclosure of trade secrets and confidential commercial and financial data — that sort of information typically is redacted from government contracts before they are made public,” said Jeff Roberts, executive director of the Colorado Freedom of Information Coalition, which advocates for more transparency. “So it’s difficult to understand why another provision in the law gives the pension fund so much discretion to withhold just about any information about alternative investments. When the records are closed, how can pension participants and taxpayers evaluate the investments? How can they tell if the fees are excessive?”
When in 2014, the SEC sounded an alarm about private equity fees, a prominent law firm began encouraging its Wall Street clients to pressure public officials nationwide to invoke these exemptions to prevent information from flowing to media organizations.
“We have recently observed a surge in freedom-of-information requests made by media outlets to state pension funds,” said a bulletin from Ropes & Gray. “The requests tend to focus on information about advisers’ treatment of fees and expenses…Record-keepers at state investment entities may reflexively assume that all information requested should be disclosed. But a prompt response, supported by the applicable state law, can help ensure that confidential information that is exempt from FOIA disclosure is in fact not released.”
Why do firms and pension systems want to keep these documents secret? There are clues in contracts republished by the website Naked Capitalism after Pennsylvania officials inadvertently posted them on the state government’s website.
A Blackstone contract, for instance, gives that private equity behemoth authority to charge fees to firms it has bought with investors’ capital — precisely the authority that the SEC regulators said that Blackstone abused in its 2015 case against the company.
A separate Apollo contract gives that firm the right to charge management fees on pensioners’ money, even if Apollo hasn’t yet invested the cash in the market, and it additionally says Apollo can use investors’ money to fly its executives around on chartered jets. The Apollo document also admits that when it reports asset values to its investors, those valuations may differ from “the values that would have been established by any person” and may differ from “the actual prices” that the assets may fetch on the open market.
PERA has collectively committed more than $230 million of retirees’ savings to those same Blackstone and Apollo funds whose rights those contracts outline.
“There are two groups of people who want to keep all this info secret — the pension plans and the fund managers — because they know that if these documents become public, people can see the true risks and costs of these investments, and how they they are not nearly as lucrative as the industry would have you believe,” said South Carolina State Treasurer Curtis Loftis, a Republican who has for years demanded more transparency from his state’s pension fund. “Put it this way: If the average businessperson read one of these private equity contracts they would never invest their own money in a private equity deal because they’d be able to see that these agreements favor nobody but the private equity firms.”
McGarrity told Capital & Main that under PERA’s interpretation of confidentiality law passed in 2004, pension overseers refuse to disclose fee and investment terms to not only the public, but also to legislators overseeing the system. She said that PERA staff and trustees have access to the information they need, and the public entrusts those officials to do their jobs.
“Almost all public funds do exempt these types of investments from open records acts and it’s really to enable us to participate with these partnerships and get to invest in these types of funds,” she said.
When asked why lawmakers are not allowed to even see fee details and investment terms that have nothing to do with a Wall Street firm’s commercial trade secrets, she said: “I don’t really have…I’m not really prepared to answer that question.”
At a recent “Red for Ed” rally at Colorado’s state capitol, many teachers had their own answers to the same question — and they were not forgiving.
Gina Kirkpatrick, a 37-year-old Spanish-language arts teacher at Kepner Legacy Middle School in Denver, said that while she had never previously heard of the fees and the secrecy, she was not surprised because “I feel like there’s corruption at every level.”
Jennifer Strand, a 56-year-old teacher from Mitchell High School in Colorado Springs was even more direct, declaring: “PERA doesn’t want people who receive benefits to know all this. They don’t want us to know how they may be mismanaging our funds. My god, I’m going to retire in six years and I’m petrified that I’m not going to have any retirement. And with all the proposed changes, they want us to cover their bad mistakes, they want us to pay for it.”
Lynn Turner, the former SEC auditor, conceded that he too was frustrated with the fees and secrecy — and said one solution may involve bringing the management of private equity and real estate investments in-house, much as the teachers’ pension system does in Ontario, Canada.
“If we or a group of public pensions can do our own thing and be more efficient and get the same returns, then there’s no sense in paying these firms tons of money,” he said. “My hope would be that over time we would figure out how to do that with other funds — and then they wouldn’t have to pay these fees, and the fees we do pay would be lower because the big firms would have to reduce their costs to be competitive. It’s something we should look into because right now, we are basically transferring a lot of wealth from Americans who are putting up the money to those guys on Wall Street.”
McGarrity made a broader argument, insisting that any question about transparency and fees is really “a question of our custodianship and the trust that [PERA members] engender in us every day. I think over time, we’ve generated the kind of investment performance that [is] keeping our members in retirement security.”
That kind of explanation, though, didn’t fly with Jeff Buck. Basking in the warm spring sun in a sea of red T-shirts at the education rally, the 52-year-old math teacher said he still remembers that a decade ago, a debt refinancing deal at the Denver teachers’ retirement fund ended up going bad, while generating a huge payout for financial firms. Today’s PERA situation, he said, is more of the same.
“It doesn’t surprise me, because this is the game that’s now being played in finance,” said Buck, who has been in Denver Public Schools 19 years. “In the United States in general, money is flowing towards the top half a percent, and away from everyone else. This is the same effect. Everything is sort of getting looted right now, and if you are aren’t doing better than 15 percent or so, which is what the S&P did, then you are not generating great returns. They can pat themselves on the back if they want, but I don’t see it.”
Copyright Capital & Main
The Governor and the Oil Lobbyist: Report Blasts Jerry Brown’s Friendship With Lucie Gikovich
Co-Published by Fast Company
How much influence has a former Jerry Brown staffer-turned-lobbyist had over the governor?
A report calls on incoming governor Gavin Newsom to investigate a lobbyist’s efforts in California.
Co-Published by Fast Company
Lucie Gikovich, a longtime friend and former member of California Governor Jerry Brown’s staff, repeatedly lobbied his office on behalf of a group of oil and gas companies that won major concessions from the governor on important state legislation, according to a report released today by a New York-based non-profit organization.
Gikovich’s decades-long friendship with Brown has previously been reported by the Sacramento Bee, including the fact that he stays at her home while on official business in Washington, DC. But her oil and gas industry ties have not received attention prior to this report, according to report author Derek Seidman, a research analyst with the Public Accountability Initiative, which is funded by foundations and the American Federation of Teachers.
Lucie Gikovich, her business partner and firm have donated $114,500 to Brown’s campaigns over the years.
“She’s someone that Brown clearly completely trusts and yet is being extremely well paid by her clients to lobby on behalf of their interests,” said Seidman, whose report is titled The California Oil Veto: The Lobbyist Behind Governor Jerry Brown’s Concessions to Big Oil. Gikovich, who works with the D.C.-based Crane Group, has lobbied Brown’s office on behalf of corporate clients for a range of industries since 2011. Gikovich, her business partner and firm have donated $114,500 to Brown’s campaigns over the years.
For her part, Gikovich denies having an outsized influence on Brown and minimizes her role in legislation that the report says she influenced. “Governor Brown, more than anyone I know, makes up his own mind after hearing from all sides and carefully analyzing all aspects of the issues,” she wrote in an email. “He makes his decisions on the merits, regardless of his relationships with those involved.”
Evan Westrup, a spokesperson for the Governor, added a few choice words about the then-unpublished report, when it was described to him in an email. “This report is about as factual – and substantive – as a tweet from Donald Trump,” said Westrup. “The governor had no knowledge that any of these companies were her clients, but even if he did, it would’ve made no difference. On these bills – and the thousands of others that have crossed his desk – the focus has always been on what’s best for California, which is why the state’s record of climate action is unmatched in the Western world.”
Phillips 66, one of Gikovich’s clients, has paid her $937,500 in fees and retainers to lobby the governor’s office and state regulatory boards since 2012.
The Public Accountability Initiative’s report builds on a longstanding critique of the California governor who, many environmentalists claim, has been too cozy with Big Oil interests in spite of his reputation as a national leader in combating global climate change and reducing demand for fossil fuels in the state. The report also calls on incoming governor Gavin Newsom to investigate Gikovich’s lobbying efforts in California and to “sever the state’s ties to Gikovich.”
One of Gikovich’s clients, the oil refinery operator Phillips 66, has paid her $937,500 in fees and retainers to lobby the governor’s office and various state regulatory boards since 2012. She was the Houston-based firm’s highest paid lobbyist in California, according to the report.
Gikovich served as a top aide to Brown during his first two terms as governor and he hired her as his federal lobbyist when he was mayor of Oakland, a job that earned her $780,000 from 2001 to 2007, according to the report. She also served as Brown’s press secretary during his failed 1982 run for the U.S. Senate. As governor, Brown has included her in trade delegations to China and Mexico.
Brown reportedly stayed with Gikovich in her Washington D.C. home in 2013, at the time she was lobbying on behalf of Phillips 66 and Halliburton, and other corporate clients. Such hospitality might not violate ethics laws if the stay “is related to another purpose unconnected with the lobbyist’s professional activities,” according to the state’s ethics rules at the time.
“I find it hard to believe that they would’ve not talked about any official business but no one can know for certain, of course,” says Seidman, whose report says those visits may constitute a “possible violation of ethics rules.”
The visits were “all personal, not business” and evidence of Brown’s frugality as well as his desire to visit with friends, according to Gikovich’s email.
Gikovich’s client during the battle over two bills to extend California’s landmark climate program, known as cap-and-trade, was Phillips 66, which operates oil refineries in Santa Maria and Rodeo. The package that the governor signed last year included major concessions to the oil industry and split the environmental community, with mainstream environmentalists supporting the compromise and environmental justice groups turning against it.
Gikovich said that her work on the cap-and-trade program—for which she reportedly was paid $105,000 in 2017—was mostly confined to monitoring the legislation. “There was no contact with the Governor personally on these issues,” she wrote.
In 2013, Gikovich also reported lobbying Brown’s office on behalf of Houston-based Halliburton, the oilfield services giant, on a proposed senate bill sponsored by then-Democratic State Senator Fran Pavley that regulated hydraulic fracturing—”fracking”—an oil extraction method that brings with it the risks of drinking water contamination and of inducing earthquakes, as well as air pollution.
That bill lost the support of environmentalists after the oil industry lobbied to amend it to allow fracking to continue while the process was being studied, as High Country News reported at the time. Westrup countered via email that “prior to this bill, there was no integrated, comprehensive regulatory oversight of this production stimulation method, which has been used in California for more than 30 years.”
Gikovich wrote that the Crane Group “had a small subcontract” to provide strategic advice to Halliburton and that she “never spoke even once to the Governor or staff on their issues, including fracking.”
The report also credits Gikovich with playing a key role in advocating for the Southern California Gas Company after its Aliso Canyon natural gas storage facility sprung a massive methane leak in 2015, causing the evacuation of thousands of nearby residents. She lobbied Brown’s office on behalf of the utility in opposition of a bill that would have granted disaster victims more latitude in litigation against the company. In an email, she said that she submitted a lengthy policy memo, but did not speak to Brown or his staff.
Brown nixed the bill, writing that “nothing has been shown to indicate that current law is insufficient to holding polluters accountable.”
“It seems pretty clear that Gikovich’s lobbying of his office correlated really closely with his veto of this,” said Seidman.
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Big Pharma Bankrolled Pro-Trump Group As Trump Pushed Pharma Tax Cut
In 2017 the Pharmaceutical Research and Manufacturers of America gave $2.5 million to America First Policies Inc. — a major dark money group supporting President Donald Trump’s political and economic agenda.
The major dark money group supporting President Donald Trump’s political and economic agenda raked in millions of dollars directly from the pharmaceutical industry’s main lobbying group — at the same time Trump backed off his position on a major drug issue and promoted a tax plan that was a windfall for the industry.
The Pharmaceutical Research and Manufacturers of America gave $2.5 million to America First Policies in 2017, according to IRS documents. America First Policies was formed by former Trump advisers in 2017 and proudly touts itself as a pro-Trump organization. The PhRMA money represented more than 10 percent of America First Policies’ revenues in 2017, according to the group’s own IRS filings.
The IRS documents were obtained by MapLight, a nonpartisan group that tracks the influence of money in politics.
While campaigning for president, Trump pledged to take action to generally reduce drug prices and to allow Medicare to negotiate lower prices for prescription medications. He then appointed a former pharmaceutical executive to run the Department of Health and Human Services, and slammed the Medicare negotiation concept after a meeting with pharmaceutical executives.
“I’ll oppose anything that makes it harder for smaller, younger companies to take the risk of bringing their product to a vibrantly competitive market,” Trump said. “That includes price-fixing by the biggest dog in the market, Medicare.”
While Trump has moved to allow limited negotiation in some parts of Medicare, he has rejected the larger policy he campaigned on, leaving it out of his prescription drug proposal released earlier this year.
Trump also passed a tax cut that benefited the pharmaceutical industry, but that has not corresponded with a drop in prescription drug prices. America First Policies launched an ad campaign to promote those tax cuts, and spent the end of the 2018 campaign promoting them. PhRMA also gave $1.5 million to the American Action Network, which aired an ad campaign in support of the tax-cut legislation.
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ICE’s Stealth Campaign to Expand Its Budget
The new Democratic majority in the House of Representatives could pose a challenge to the agency’s chronic overspending — and to its aggressive detention and deportation policies.
In June the Dept. of Homeland Security asked Congress to allow it to transfer $200 million to ICE to cover agency overspending, continuing a pattern of such requests.
Big spending on immigration enforcement at the Department of Homeland Security promises to be a major sticking point as Congress prepares to negotiate a budget deal early next month.
Even though illegal immigration to the United States appears to be at its lowest point in 46 years, spending on immigration enforcement is at an all-time high. (The U.S. Border Patrol reported that in 2017, the last year for which statistics are available, apprehensions at the U.S.-Mexico border had dropped to 303,000, and had been declining nearly every year since 2000, when a record 1.6 million people were arrested.)
By overspending its congressional allocation, ICE is effectively writing its own budget.
U.S. Immigration and Customs Enforcement’s detention operations exceeded the agency’s budget this year, while ICE spending on its vast system of immigration jails shows no sign of slowing.
But a newly elected Democratic majority in the House of Representatives could pose a challenge to the agency’s chronic overspending — and to its aggressive detention and deportation policies.
ICE jailed so many immigrants in 2018 that it ran out of space in its more than 200 lock-ups, and placed 1,600 people in medium-security prisons.
Congress set detention and deportation spending for 2018 at $4.4 billion, enough to detain some 40,520 people annually.
However, by June, 44,000 men and women languished in immigration detention, filling 4,000 more beds than Congress authorized. DHS asked Congress to allow it to transfer $200 million to ICE to cover agency overspending. The department plucked the funds from several of its agencies, including the Federal Emergency Management Agency, the Coast Guard and the Transportation Security Administration.
Critics of ICE say that by overspending its congressional allocation, the agency has engineered a stealth expansion of the U.S. detention system, effectively writing its own appropriation, and skirting the Constitution’s separation of powers in which Congress, not the executive branch, has the authority to set spending limits.
Congressman: “We shouldn’t be using FEMA as a piggy bank to fund detention beds.”
“It allows them to quickly expand the detention system contrary to congressional intent,” said Heidi Altman, director of policy at the National Immigrant Justice Center, a non-profit immigrant rights group.
Such intradepartmental funds transfers aren’t uncommon, but a congressional staffer who asked that his name not be used for this story said this one was controversial because nearly all of the money went to ICE for detention and deportation. ICE has received other big budget increases in the past two years. In March 2017, the agency got a $2.6 billion supplemental appropriation; three months later, ICE was back, requesting that Congress approve a $91 million funds transfer.
The $200 million June 2018 transfer, wrote DHS spokeswoman Katie Waldman in an email, was “in line with the FY 2019 president’s budget request for U.S. Immigration and Customs Enforcement.”
However, the additional funds covered FY 2018 overspending – not future shortfalls in 2019; Congress has yet to agree to a permanent fiscal year 2019 budget. Waldman didn’t answer an email asking to clarify her comments.
Congressional Staffer: Whenever ICE outspends its budget and adds detention beds, it gains leverage for the next round of budget negotiations.
The same congressional staffer who discussed the controversy surrounding the $200 million DHS funds transfer also noted that when ICE outspends its budget and adds detention beds, it gains leverage for the next round of budget negotiations because reducing beds would mean freeing detainees and, ICE argues, their release could jeopardize public safety.
Growth by funds transfer also generally avoids public scrutiny. Transfer documents submitted by government agencies are not released to the public. But earlier this year, Sen. Jeff Merkley (D-OR) released DHS’s June 2018 transfer and reprogramming request, noting that $10 million had been taken from FEMA just as Hurricane Florence was making landfall in North Carolina.
DHS shot back, claiming the funds were administrative and weren’t earmarked for hurricane relief. But according to Ur Jaddou, director of the advocacy group DHS Watch, and a former Chief Counsel at U.S. Citizenship and Immigration Services, the DHS agency that oversees immigration and citizenship applications, “The government these days doesn’t operate on a plethora of administrative resources. It’s really functioning on a very limited budget. When they say they’re using unused money, it’s just a ruse.”
Congress has shown its frustration with ICE’s disregard for its authority, but hasn’t acted to rein in agency spending.
Congress has scolded ICE for its “lack of fiscal discipline and cavalier management.”
In budget recommendations for fiscal year 2019, the Senate Appropriations Committee wrote, “In light of the Committee’s persistent and growing concerns about ICE’s lack of fiscal discipline, whether real or manufactured, and its inability to manage detention resources…the Committee strongly discourages transfers or reprogramming requests to cover ICE’s excesses.”
Two years before, the explanatory language in the supplemental appropriations bill was even harsher. Appropriators pointed to a “lack of fiscal discipline and cavalier management” of detention funding, saying the agency seemed to think its detention operations were “funded by an indefinite appropriation. This belief is incorrect.”
“We shouldn’t be using FEMA as a piggy bank to fund detention beds,” said Rep. Dutch Ruppersberger (D-MD). “Unelected agency heads shouldn’t unilaterally shift taxpayer dollars for purposes they weren’t intended.”
Still, despite congressional annoyance with ICE’s free-spending ways, it hasn’t conducted meaningful oversight of the immigration detention system, said Greg Chen, director of government relations for the American Immigration Lawyers Association.
“The current leadership in Congress hasn’t been interested in conducting hearings on detention spending and whether detention is even necessary at the scale it is now,” Chen said.
When President Trump issued an executive order calling for no-holds-barred arrests of undocumented immigrants in January 2017, the border patrol reported that apprehensions at the U.S.-Mexico border were lower than at any time since 1972 — when the detention population was a fraction of its current size.
ICE reported that in fiscal year 2017, 41 percent of crimes of which detainees had been convicted were traffic- or immigration-related. Just 11.4 involved murder, sexual assault, kidnapping, robbery or assault.
Chen argued that ICE has a legal responsibility to screen each person in its custody for risk – either of flight or to public safety. “ICE is just not doing that and defaulting to the practice of detaining people.”
Democrats in Congress could take on a more robust role in overseeing ICE spending, now that they’ve gained a majority in the House. They could put conditions on spending, call for Government Accounting Office reports and hearings, cut funding, demand answers if ICE overspends and bring its actions to the attention of the press, said DHS Watch director Ur Jaddou, who is also a former congressional staffer.
“The next time they [ICE] need something,” Jaddou said, Congress can respond, ‘Do you really want it? You better listen.’”
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Will New York Fund Amazon Subsidies or Student Debt Relief?
New York Gov. Andrew Cuomo made headlines begging Amazon to site its second headquarters in the state. Now, however, prominent Democrats in the state Senate and Assembly have slammed the idea of offering taxpayer subsidies to the retail giant.
Co-published by Splinter
Elections have consequences, and they may have particularly immediate consequences for billionaire Jeff Bezos, as newly empowered New York Democrats appear to be positioning themselves to try to block new state subsidies for Amazon, now that the online retailing titan has chosen New York City and Northern Virginia as new headquarters locations.
A day before last week’s midterm elections, when Amazon’s choice was still up in the air, New York Gov. Andrew Cuomo made headlines begging Amazon to site its second headquarters in the state. “I’ll change my name to Amazon Cuomo if that’s what it takes,” said Cuomo, as reports surfaced about Amazon potentially moving in to Long Island City.
The next day, though, Democrats won control of the state Assembly and state Senate. Now, prominent Democrats in those chambers have slammed the idea of New York offering taxpayer subsidies to Amazon. And one lawmaker wants the legislature to decide between giving Amazon taxpayer largesse or addressing the state’s student debt crisis.
Democratic Assemblyman Ron Kim announced that he will introduce legislation to slash New York’s economic development subsidies and use the money to buy up and cancel student debt — a move he said would provide a bigger boost to the state’s economy. The legislation, says Kim, would halt any Cuomo administration offer of taxpayer money to Amazon, which could reap up to $1 billion in tax incentives if it moves to Long Island City. The deal is a goodie bag for Amazon: It includes everything from a $325 million cash grant to a promise that taxpayers will help secure a helipad for Amazon executives.
“Giving Jeff Bezos hundreds of millions of dollars is an immoral waste of taxpayers’ money when it’s crystal clear that the money would create more jobs and more economic growth when it is used to relieve student debt,” said Kim, who recently published an op-ed with law professor Zephyr Teachout criticizing the Amazon deal. “Giving Amazon this type of corporate welfare is no different, if not worse, than Donald Trump giving trillions in corporate tax breaks at the federal level. There’s no correlation between healthy, sustainable job creation and corporate giveaways. If we used this money to cancel distressed student debt instead, there would be immediate positive GDP growth, job creation and impactful social-economic returns.”
New York has the most expensive set of corporate subsidy programs in the country, and a report by the W.E. Upjohn Institute for Employment Research found that such subsidies “are not cost-effective, with either no statistically significant effects or large costs per job created.” Kim noted that in 2015 alone, New York gave out more than $8 billion in corporate incentives. He pointed to a recent study by the Levy Institute that found cancelling student debt would result “in an increase in real GDP [and] a decrease in the average unemployment rate.”
In New York, student debt has ballooned. A 2016 report by State Comptroller Thomas DiNapoli’s office found that “the delinquency rate among New York student loan borrowers rose by more than a third over the past decade while average borrower balances in the State increased by nearly 48 percent, to $32,200.” A memo outlining Kim’s bill says the legislation would empower New York officials to “exercise their eminent domain powers to buy, cancel, and/or monetize the state’s out of control student debt,” which the memo says totals more than $82 billion.
Kim’s move followed criticism of a possible Amazon deal by Senator Michael Gianaris, who led Democrats’ successful effort to win control of the chamber, and who is expected to be in one of the Senate’s top jobs.
“Offering massive corporate welfare from scarce public resources to one of the wealthiest corporations in the world at a time of great need in our state is just wrong,” Gianaris and City Council Member Jimmy Van Bramer, both of whom represent Long Island City, said in a press release. “The burden should not be on the 99 percent to prove we are worthy of the one percent’s presence in our communities, but rather on Amazon to prove it would be a responsible corporate neighbor.”
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7 Takeaways from California’s Elections
Two of the biggest shockers happened in Los Angeles and Orange counties, in races that have historically drawn the most conservative voters: sheriff and district attorney.
Official voting results are weeks away from getting verified for the 2018 general election, but big, historic trends are already emerging: some old, some new, some bad — and a lot of Blue.
1. Real estate interests prove again that they’re some of the evilest people in California history
The people who helped to bring to the Golden State housing covenants, redlining, Proposition 13, the overturning of the Rumford Fair Housing Act, McMansions in canyons that always burn and so much more housing nastiness were on the wrong side of history again this election cycle. They spent at least $74 million to demonize Proposition 10—which would only allow municipalities the right to consider rent control—to the point where even renters felt it was a nefarious plot to destroy property values and bankrupt elderly landlords. Unsurprisingly, Prop. 10 lost by a nearly two-thirds majority, and real estate special-interests groups will spend even more if another such measure ever goes statewide again.
2. The Democrats’ next big battleground will be the Central Valley
Most of the Dems’ millions were spent on flipping Orange County blue, but as I wrote for the Los Angeles Times recently, the Democrats can learn a lot for 2020 by what’s happening in the Central Valley. There, Latino candidates have climbed the political ladder from school board seats to a majority of the Valley’s state Assembly and state Senate seats, flipping two of the latter with Latinas (Anna Caballero in the 12th, Melissa Hurtado in the 14th) on Tuesday. What they yet don’t have is one of the congressional seats held by the region’s Four Horsemen of the Apocalypse: David Valadao, Jeff Denham, Kevin McCarthy and Devin Nunes, all whom won their races this time around (although Denham is still sweating his out). Expect the Dems to groom some rising stars for 2020—and expect them to mine data from the Valley about how to attract rural voters.
3. People in Southern California mistrust law enforcement more than ever before
Two of the biggest shockers happened around elected positions that have historically drawn the most conservative voters: sheriff and district attorney. In Orange County, Supervisor Todd Spitzer handily beat 20-year incumbent DA Tony Rackauckas, who has been dogged by a jailhouse snitch scandal for years. But even more surprising was the Los Angeles County Sheriff’s race, where Jim McConnell—supported by virtually the entire L.A. political class—lost to former deputy Alex Villanueva. Villanueva will be the first Democratic sheriff in more than 100 years.
4. Los Alamitos is now unofficially Southern California’s City of Hate
The tiny northwest Orange County town made news earlier this year when the city council decided to pass an ordinance protesting California’s sanctuary state law. The councilman who pushed that resolution, Warren Kusumoto, was reelected this week. But also winning a seat was former councilmember Dean Grose, who made national headlines in 2009 when he emailed a racist cartoon of a watermelon patch growing outside the Obama White House.
5. AIDS Healthcare Foundation needs to stop wasting money on propositions
The nonprofit giant spent over $23 million on the Yes on 10 battle, two years after spending $4.5 million on Proposition 60 to mandate condoms on adult films sets in California and more than $14 million on Proposition 61 to regulate prescription drugs bought by the state. Last year, it spent $5.5 million on Measure S, an anti-development ordinance in Los Angeles. All that money went to nothing, as each measure lost handily. Maybe AIDS Healthcare Foundation head Michael Weinstein should’ve spent that $47 million on services?
6. The California GOP’s last, best hope are Asians
The party has long been dead in the state, but a glimmer of hope has emerged for it in Orange County. Asian-American Republicans there now hold one congressional and state Senate seat, two state Assembly spots, three of the five chairs on the Board of Supervisors, and multiple school board and city council positions. And the new mayor of Anaheim, Orange County’s largest city, is Indian-American Harry Sidhu. Leave it to Orange County to get minorities to side with the Party of Trump!
7. With five of seven congressional seats now Democrat, this ain’t your dad’s Orange County anymore
It’s not even your Orange County. A brave new OC awaits all of us, indeed….
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Why Was Climate Change Omitted From Colorado’s Debate Over Fracking?
Co-published by Westword
The total absence of climate change discussion in Colorado’s 2018 election was striking, considering the state’s intensified floods, droughts and wildfires.
Over eight debates between gubernatorial candidates Jared Polis and Walker Stapleton, Colorado’s press corps mustered just three questions about climate change.
Co-published by Westword
It is no overstatement to say that Colorado’s Proposition 112 and Amendment 74 were two of the most significant and far-reaching climate change measures in America’s entire midterm election. But don’t blame yourself if you didn’t know that. While the initiatives sparked a pitched battle about the fossil fuel industry just as scientists were issuing a dire warning about climate change, that term — “climate change” — was largely absent from the state’s political conversation in 2018, even though some local officials say climate change could cost the state hundreds of millions of dollars in the near future.
While Colorado’s oil and gas industry was asserting that burning carbon-emitting fracked gas is “helping to reduce carbon emissions,” it sponsored an anonymous website attacking journalists who report on energy and climate issues.
Oil and gas corporations spent roughly $40 million to oppose 112, which would have mandated larger distances between fossil fuel extraction sites and schools, hospitals and residential neighborhoods, and likely restricted some fossil fuel development. Some of that money also went into promoting 74, which would have empowered those same oil and gas companies to sue towns that try to restrict drilling and fracking. While the industry offered a smorgasbord of arguments in its campaign — it would defund schools, it would kill jobs, etc. — those criticisms were all based on one central premise: that the setbacks measure would allegedly ban all new oil and gas exploration.
Had climate change been a central topic of conversation, that assertion could have boomeranged on the industry — proponents could have argued that an all-out ban was in fact urgently needed in light of a recent United Nations report warning of a full-fledged dystopia if new fossil fuel development is not halted. And they might have found a receptive audience: Recent polling from the University of Colorado has shown that 70 percent of Coloradans say they are at least somewhat concerned about climate change — and that survey was done before a summer of climate-change-intensified wildfires.
Even though Prop. 112 was not a total ban on fossil fuel extraction, at least a few national voices noted that it represented an important front in the climate change battle.
However, the Colorado press corps barely mentioned climate change in its coverage of the fight, and groups pushing the proposition never made climate change a central argument in their campaign.
An analysis by Media Matters found that out of 12 Colorado newspaper editorials about 112, just one — that of the Boulder Daily Camera, which endorsed the measure — even mentioned climate change. News coverage of 112 focused alternately on the health and environmental hazards highlighted by activists and industry doomsaying about its economic and budgetary implications, but reporting on fossil fuel-related carbon emissions and their contribution to climate change was almost nonexistent.
That was true not only of the fight over 112, but of the state’s wider political discourse. Over eight debates between governor-elect Jared Polis and opponent Walker Stapleton, the Colorado press corps mustered just three questions about climate change, accounting for less than 10 minutes of discussion during eight and a half hours of debate.
Meanwhile, the Colorado Oil and Gas Association was sponsoring an anonymous website attacking journalists who report on energy and climate issues. And as a backup measure to defang any potential climate arguments, the industry also ramped up its production of promotional PR asserting that burning carbon-emitting fracked gas is “helping to reduce carbon emissions,” as COGA insists. That assertion relies on the public never realizing that it’s only true in comparison to burning coal, but not actually true overall: Natural gas is a fossil fuel, so carbon is emitted when it is burned — no matter what COGA tries to insinuate.
The defeat of an explicitly climate-related ballot measure in Washington State suggests that many voters are not willing to support even modest efforts to frontally address climate change.
That context, though, is rarely noted in a political arena that has long been dominated by armies of fossil fuel lobbyists and millions of dollars of fossil fuel campaign spending. This year, much of that money was spent on ads designed to narrow the debate to one primarily about jobs and economic impact, thereby precluding 112 campaigners from broadening the conversation to one about the climate change dangers of fossil fuel extraction. Colorado Rising, the group behind Proposition 112, was boxed into making arguments only about better protecting the public health and safety of those living near fracking rigs, and to defensively insist that the measure wasn’t an actual ban.
In a media environment that was already erasing climate change from the conversation, there was no space for them to more straightforwardly argue that dramatic reductions in fossil fuel extraction are necessary to address climate change.
“What the polling is showing is that if people are really convinced that it’s an outright ban, they aren’t going to vote for it,” Colorado Rising’s Anne Lee Foster told Capital & Main when asked why climate change wasn’t a more prominent part of the campaign. “It’s not about what the actual percentage [ban] is, it’s proving that they have been blowing this out of proportion the whole time.”
At times, 112’s proponents ended up publicly asserting that the measure would not significantly reduce fossil fuel extraction at all, even as climate scientists argue that’s exactly what’s necessary.
“The oil and gas folks out there will still be able to do their thing,” said Mark Williams, a former Democratic congressional candidate, at a Longmont town hall where he promoted 112. “My concern is you have all these operators that are out there that are trying to make a quick buck, [but] Colorado does not have strong enough regulations.”
There’s no guarantee 112 would have been more successful had the proponents tried to focus the fight on climate change; the oil and gas industry’s success in defeating an explicitly climate-related ballot measure in Washington State suggests that many voters are not willing to support even modest efforts to frontally address climate change.
However, the total absence of the issue in Colorado’s 2018 election was striking, considering not only the IPCC report, but also the state’s own specific struggles with the effects of climate change. After all, leading scientists say that climate change is already intensifying Colorado’s floods, droughts and wildfires. And although COGA has demanded that “natural gas must be part of the climate change conversation,” many of those scientists disagree.
“There is more than enough carbon in the world’s already developed, operating oil, gas, and coal fields globally to exceed 2°C,” wrote a group of 26 climate scientists in a July letter to California Governor Jerry Brown, urging him to immediately halt the approval of all new oil and gas drilling. “There is simply no room in the carbon budget for any new fossil fuel extraction.”
“Absolutely no new fossil fuel developments. None,” said climate scientist Will Steffen, when asked earlier this year what the U.S. needs to do to help avoid global catastrophe. “That means no new coal mines, no new oil wells, no new gas fields, no new unconventional gas fracking. Nothing new.”
This is why even though 112 was not a total ban on fossil fuel extraction, at least a few national voices noted that its potential to somewhat reduce that extraction represented an important front in the climate change battle.
In a guest column for the Denver Post, former NASA scientist James Hansen encouraged Coloradans to vote for 112 because it would “help prevent climate change by making oil and gas harder to access.” Senator Bernie Sanders, who has called for a nationwide ban on fracking, also endorsed the measure on climate-related grounds. And toward the end of the campaign, 350.org founder Bill McKibben promoted the measure as part of his organization’s nationwide push to combat climate change.
But by that point, the industry’s PR machine was already skilled at suppressing any discussion of climate change and transforming every 112 argument into economic alarmism. An editorial in oil magnate Phil Anschutz’s Colorado Springs Gazette was emblematic: In attacking McKibben, it didn’t even bother to mention climate change, much less address his substantive argument.
Instead, its headline simply screamed, “Out-of-stater comes to kill Colorado jobs.”
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CA-49: A GOP District Realigns With Democrats After Mike Levin Victory
Republican Diane Harkey ended her dispirited campaign by attempting to distance herself from Trump’s personality but supporting him on “substance.”
Was the victory of Democrat Mike Levin in the 49th Congressional District race a decisive one? It seems so. Levin’s roughly seven point victory over Republican Diane Harkey might make newcomers to the district – running from southern Orange County down the coast to northern San Diego – wonder how Republicans have dominated that stretch of California for so long.
Demographic shifts explain part of what happened. Educated high-tech workers have moved into the area, and Levin targeted Latinos and women in this “year of the woman.” Levin was also blessed with a weak opponent plagued by her husband’s financial scandals.
But perhaps something beyond political math was also taking place. Decades ago political scientist Walter Dean Burnham worried that American political parties had deteriorated to such an extent that they could not deal with critical national and international issues. Burnham lamented the decline in voting participation, particularly among the lower classes, and trained his analytical eye on “realignment” elections that led to durable shifts in political coalitions and public policy. The results in the 49th district could be such a realignment where a general political crisis can force a breakthrough and renewal.
One sign of how much has changed in the 49th is that Levin brought Bernie Sanders to campaign with him in the final week of the campaign, a risk in what most political observers regard as a “centrist” district. Sander’s message denouncing the state of our health care system and the cost of higher education is neither scary nor politically costly when it resonates with the realities of so many people’s lives.
Harkey ended her dispirited campaign by attempting to distance herself from Trump’s personality but supporting him on “substance,” meaning the “booming” economy she said he created.
For many voters, the “substance” now is their aesthetic and existential disgust at how President Trump is attempting to re-create our country.
The current battle may lead to the rebuilding of a political force on the progressive side that is able to fight more effectively by forging broader, more sustainable coalitions. That rebuilding is certainly under way in the 49th Congressional District.
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Proposition 11: Emergency Crews Lose Out
Framing Prop. 11 as necessary to protect public safety was a strong argument, but it didn’t help that the opposition failed to file paperwork in time to have their arguments against the measure included in the state’s voter guide.
Proposition 11, which rewrites California’s Labor Code to allow private ambulance companies to require paramedics and EMTs to be on call during breaks, cruised to an easy victory on election night, with 60 percent voter support. The result wasn’t surprising; polling showed the measure was leading by a two-to-one margin. Prop. 11’s primary supporter, private ambulance company American Medical Response, vastly outspent the opposition, pouring $22 million into the campaign to argue that response times to emergencies would increase if the measure were defeated.
The proposition came in the wake of a 2016 California Supreme Court ruling that private security guards are required to be given uninterrupted rest breaks. That ruling likely would apply to the state’s private sector EMTs and paramedics, who are also on call during breaks, and who have filed several lawsuits challenging the practice, including one against AMR. Last year, a legislative attempt to solve the problem stalled in the face of AMR opposition; one of the sticking points was whether the bill would protect AMR from active lawsuits. (As written, Prop. 11 shields AMR from liability regarding breaks in pending litigation.)
Framing Prop. 11 as necessary to protect public safety was a strong argument, but it didn’t help that the opposition, led by the United EMS Workers, an American Federation of State, County and Municipal Employees local, failed to file paperwork in time to have its arguments against the measure included in the state’s voter guide. (Disclosure: AFSCME is a financial supporter of this website.) AMR largely drowned out the local’s attempts to highlight the grueling working conditions faced by emergency workers, and the need for extra staffing to allow more predictable breaks.
What remains to be seen is whether Prop. 11 will in fact shield AMR and other private ambulance companies from pending lawsuits, a decision likely to be determined in court. Jason Brollini, president-executive director of United EMS Workers, estimates that AMR could owe workers as much as $100 million in settlements if the cases are allowed to proceed.
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CA-25: Katie Hill Ends Knight Reign in Changing District
While Hill’s youth, bisexuality and comfortably modern persona got the attention of Vice and other media, Steve Knight was seemingly out of touch with his own constituents.
Katie Hill went to bed last night at the end of an excruciatingly tight congressional race, not knowing if her home district was red or blue. At stake was California’s 25th District, where Hill spent the last 18 months on an unlikely quest to unseat two-term GOP Rep. Steve Knight. By six this morning, Hill, a 31-year-old first-time candidate, appeared to have won by more than 4,000 votes.
The seat was among several Republican-held offices targeted by the Democratic Party, in districts won by Hillary Clinton in 2016, but it was never going to be easy. CA-25 had been in Republican hands since 1993, representing territory stretching from northern Los Angeles County to parts of Ventura County. It may have been tilting from red to purple, but Hill wisely shaped her campaign to the immediate kitchen-table interests of the district, and avoided all discussion of presidential impeachment, Russia or special counsel Robert Mueller.
“We’re not running an anti-Trump campaign,” Hill told Capital & Main early in the campaign. “I just don’t think that’s the issue that people care the most about here.”
Hill grew up in the tiny district town of Rosamond and, later, in Santa Clarita, and now resides in rural Agua Dulce. She was a cop’s daughter running against former LAPD officer Knight. Hill began her campaign after working eight years at PATH, one of the largest homeless services providers in California. Growing homelessness in CA-25 was one of her core concerns, along with health care and economic opportunity.
While her youth, bisexuality and comfortably modern persona got the attention of Vice and other media, Knight was seemingly out of touch with his own constituents, many of whom commuted daily to Los Angeles. He was on record as supporting legislation banning gay marriage and voted with President Trump 99 percent of the time, including the failed attempt to eliminate the Affordable Care Act. If her lead holds through the week’s final ballot count, Hill will join an unprecedented wave of women elected to Congress and presumably will take a new and far different path than Knight.
Capital & Main
CA-10: AP Calls Election for Josh Harder Over Republican Incumbent
Four-term Central Valley Congressman Jeff Denham appears to have been defeated after a week of ballot counting.
UPDATE, Nov. 13: The Associated Press tonight has declared Democratic challenger Josh Harder to be the winner over GOP incumbent Jeff Denham in the hard-fought 10th District race. According to AP, “With votes continuing to be counted, Harder’s edge has grown after Denham grabbed a slim lead on Election Day. After the latest update, Harder had a 4,919-vote lead out of about 185,000 votes counted, a margin too large for the congressman to overcome with remaining votes.”
A TV ad
A TV adfor incumbent Republican Congressman Jeff Denham stated that his Democratic challenger Josh Harder “shares Nancy Pelosi’s liberal San Francisco values.” The ad, running in the Sacramento media market and on digital platforms throughout California’s 10th District, went on to state that Harder, if victorious, would leave residents of this Central Valley district with dramatically worse health care options.
It was a puzzling claim, considering Denham voted with his party to repeal the Affordable Care Act, or Obamacare, several times, and voted for the Republican replacement, the unpopular American Health Care Act.
As of Wednesday morning, Jeff Denham clung to a lead of 50.6 percent of the vote, with Harder claiming 49.4 percent. While 100 percent of precincts had reported, the race had not been called, pending the counting of mail-in and provisional ballots. Democratic activists said enthusiasm and campaign cash were up. Harder raised more than $7 million in this cycle to Denham’s $4.4 million.
Back in February, most of the volunteer canvassers trying to boost Democratic registration in Modesto, the heart of the district, were from the Bay Area. They said they had driven east to turn this purplish district solid blue. CA-10, which voted for Hillary Clinton by three points in 2016 while giving Denham a similar margin of victory, was one of the top Democratic targets for flipping in 2018.
Whether Denham or Harder end up winning, the trend of people relocating from the pricey Bay Area could end up re-shaping the electorate in the district. New research from BuildZoom and the Terner Center for Housing Innovation at the University of California, Berkeley shows a growing connection between the Bay Area and its neighbor to the east, CA-10. “More than 55 percent of Bay Area out-migrants in households earning less than $50,000 a year stayed in California, [heading to] more affordable markets, such as the Sacramento region or Central Valley metro areas, like Modesto or Fresno,” the study said.
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