California Legislature plan falls short of closing entire deficit

COMMENT: The California budget plan was passed by the state assembly, but without two significant bills:

- the first, rejected, would have opened the coast off Santa Barbara to new offshore drilling and would have brought $100 million to the state in its first year

- the second, tabled, would have clawed back $900 million in gas-tax money from counties

This is the good news. The bad news is that an array of social programs have been sacrificed to reduce expenditures.

Earlier today, the plan in its entirety had been approved by the state senate.

Matthew Yi, Carla Marinucci, Richard Procter
San Francisco Chronicle
Friday, July 24, 2009

The Legislature passed a plan today that fell short of closing the state's gaping $26.3 billion deficit in part because lawmakers did not approve two controversial bills - one for new oil drilling off the Santa Barbara coast and the other a plan to take gas-tax funds away from counties.

Gov. Arnold Schwarzenegger indicated he would sign the deal, despite the fact that lawmakers did not include a $920 million reserve he had demanded. The governor said he intends to use his line-item veto power to reinstate the reserve.
Exhausted legislative leaders in both houses - who stayed up all night voting on the deal - pronounced the plan flawed, but also said they desperately needed to save the state from continuing to issue millions of dollars in embarrassing IOUs and from potential insolvency.

"This particular budget will be very, very difficult for a lot of people," said Senate President Pro Tem Darrell Steinberg, D-Sacramento, referring to deep spending cuts that will certainly result in larger class sizes, higher college tuitions, and loss of health and welfare benefits to the poor, the elderly and the disabled.

Earlier today, the Senate passed all 30-plus bills in the package. The Assembly, however, did not approve two the following two bills:

A bill tabled by the Assembly would have allowed the state to take about $900 million in gas-tax revenue away from counties that rely on those funds to repair local roads.

A bill rejected by the Assembly would have raised $100 million in the current fiscal year from new oil drilling off the Santa Barbara coast.

The package approved by the Legislature included $15.6 billion in spending cuts and nearly $9 billion in borrowing and accounting revisions.

Voting in both houses of the Legislature occurred during a grueling marathon session that began Thursday night and didn't end until this afternoon when the Assembly wrapped up its session.

Speaker Karen Bass, D-Baldwin Vista (Los Angeles County), said that "we were worried there for a while, but we got through it. We made our deal."

During the oil-drilling debate, Assemblyman Chuck DeVore, R-Irvine, running for U.S. Senate against incumbent Democrat Barbara Boxer, urged passage because he said it could bring $1.4 billion to the state coffers over the next two decades as well as hundreds of jobs to the state. He was countered by a passionate Assemblyman Pedro Nava, the Democrat whose district represents Santa Barbara, who reminded legislators of devastating oil spills in the region 40 years ago, and urged opposition.

In the end, the Senate approved that proposal, but it was rejected by the Assembly on a 43-28 vote.

Members in both houses also felt the heat from big city mayors who loudly denounced the proposal to grab billions in combined gas tax revenues, redevelopment funding and Prop. 1A monies from local governments - a move they said was unfair and unconstitutional. In the end, the compromise deal allows the state to use funding - about $200 million a year - as a loan that will be repaid over 10 years starting in 2011.

As their 24-hour session wore on, the growing pressure on Assembly legislators especially became evident. With the session dragging and legislators exhausted, Bass - facing recalcitrant lawmakers holding out on some measures - became increasingly impatient. At one point, making the traditional roll call for votes - a usually staid announcement of "all those vote who desire to vote" - she added pointedly to the holdouts, "Even those who don't desire to vote - vote."

Even after approving the stack of bills, legislative leaders said there was little to celebrate at the close with a plan that guarantees pain around California with slashing cuts to education, health and welfare programs, while grabbing needed funding from local governments.

"The only good news," said Steinberg, exhausted by the close of the Senate's grueling all-nighter which began Thursday afternoon, was "may it be the last."

In February, the Legislature pulled a similar all-night session to close a $42 billion deficit. That action relied on tax hikes, cuts and borrowing.

Steinberg said that legislators on both sides of the aisle deserved congratulations "for hanging in there and finding a way, in some ways against the odds, to get this done."

"We're a bit of a beleaguered institution," Steinberg said, but said legislators could "take pride in the fact that...we have now resolved a $60 billion plus deficit - and California is still standing."

Still, he warned that while Democrats who hold the majority in both legislative houses were willing to make painful slashes in the state's social safety net, they would hold the line on future cuts - and expect Republicans to be more willing to talk about raising revenue and taxes.

But Senate Republican leader Dennis Hollingsworth of Murrieta (Riverside County), said lawmakers should be applauded for solving the entire deficit that includes government reforms such as rooting out fraud in welfare programs and consolidating state agencies without raising new taxes.

Schwarzenegger had a higher deficit estimate - of $26.3 billion - because it partly assumed on lost savings from the missed June 30 deadline to pass a deal. But the losses turned out not to be as high as expected, budget experts said this morning. In addition, Schwarzenegger initially wanted a deeper reserve - around $2 billion, a figure that was built into the estimated deficit. But in the end, the Legislature eliminated the reserve.

Still, lawmakers were keenly aware of the increasing pressures and growing criticism regarding the budget package's many complex facets.

On Thursday, the mayors, led by Los Angeles' Antonio Villaraigosa, angrily charged that the proposed deal constituted "highway robbery" that illegally raids billions of dollars in cities' share of gas taxes and redevelopment funding. "We want to be part of the solution ... but we're not going to allow this proposal to be balanced on the backs of our cities," Villaraigosa said.

As of Thursday, 188 cities across the state - including San Francisco and Oakland - had signed resolutions indicating their support for a lawsuit that is expected to be filed by the League of California Cities and the California State Association of Counties as soon as the budget is approved by the Legislature, said the league's executive director, Chris McKenzie.

"I've never seen a reaction like this. They are livid," said McKenzie of the local leaders.

With the state's bond ratings plummeting, hundreds of millions of dollars in IOUs going out and the day fast approaching when the state's coffers are completely bare, the mayors were only the start of what appeared to be growing anger and efforts to block the budget's passage.

State Insurance Commissioner Steve Poizner, a Republican running for governor, said in a radio interview that he is considering a lawsuit over the provision in the budget that would sell a portion of the State Compensation Insurance Fund for $1 billion.

Leaders representing the 95,000 state workers who belong to the Service Employees International Union protested in the state Capitol Thursday, threatening to sue the state over the furloughs of three days per month - which are to last through June 2010.

E-mail the writers at cmarinucci@sfchronicle.com and myi@sfchronicle.com.

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/07/24/BACE18UH4P.DTL

California Coast Spared by Vote of Assembly

By a vote of 43-28, the California Assembly defeated a proposal that would have allowed the first first new oil drilling lease in California State waters since the 1969 Santa Barbara oil spill.

“The Governor made Santa Barbara a target for new oil drilling. I am proud that we rejected this insidious proposal,” said Assemblymember Pedro Nava. “The plan would have unraveled critical environmental protections, put the coast at risk, and set a terrible precedent while the federal government is considering their 5 year drilling plan for the outer continental shelf.”

It was a proposal that every major environmental organization in the state opposed. As Assemblymember Nava put it, “This bill has only two supporters, the Governor and the oil company.”

Under the proposal, the Governor would submit his oil drilling plan to an ad hoc committee where he is assured approval. The three member committee would include two appointees from the Governor (Secraties of Resources Agency and Cal EPA) along with the Attorney General.

“This is a sham. Other than the Attorney General, the Governor controls the ad hoc committee and there is little doubt that two of the three votes will quench the Governor’s thirst for more oil,” said Assemblymember Nava. “If your child’s little league team tried this kind of do-over, they would be disqualified and kicked out of the league. “

In a letter from 53 environmental organizations published Friday on the California Progress Report [see below]:

“While the precise language has not been released for legislative or public review, and may not be in time for any legitimate discussion, it is our understanding that it overrides the State Lands Commission’s legitimate denial of this project, creates an ad-hoc commission dominated by gubernatorial appointments, instructs this commission to find that the lease is in the best interest of the state, extends the duration of drilling operations, gives the public a mere five days of notice prior to a hearing, and fails to include any specifics on royalty payments that are supposed to be the rationale for approving this lease in this most unprecedented manner.”

The State Lands Commission report stated in part: ““The goals of the agreement could not be reliably enforced and the legal context for the public benefit requirements of the agreement prevented staff from devising mechanisms to improve enforceability. The Commission cannot reliably require PXP to stop and close production on federal leases.”

Victoria Rome of the Natural Resources Defense Council said, "I think it should be very troubling to the public that a decision that was made through a public process in the light of day can be overturned by a few leaders behind closed doors."

Speaking on the Assembly floor Assemblymember Nava, “The Governor’s proposal implies that when times are tough we ignore long established public policy, set aside our values, and if the state needs money it is acceptable to put our environment at risk.” He continued, “I strongly oppose this approach to development of environmental policy.”

Lieutenant Governor John Garamendi said earlier this week, “The Governor just put California's coastline up for sale when he had other options that don't put our natural resources at risk. He refused to approve a plan to tax oil companies that now extract oil in California to fund health care services, children's programs and education. California is the only oil producing state without an oil severance tax, and it would generate $1.2 billion dollars annually for our state,” Lieutenant Governor John Garamendi said.

“Instead, we are taking dirty money. Big Oil has offered to California $100 million dollars to seduce the state into granting the first new oil drilling lease in California since the Santa Barbara oil spill 41 years ago. The loan must be repaid by forgiving future royalty payments to California. This is an incredibly reckless fiscal policy.”

“This individual project off the Santa Barbara coast simply is not a Budget issue,” said Willie Pelote, California Political & Legislative Director, American Federation of State, County and Municipal Employees. “If the Governor really wants to generate more revenues he should charge oil companies for extraction just like they do in Texas, Alaska, and other oil producing states.”

Richard Charter, of Defenders of Wildlife, has 35 years of experience in coastal drilling issues. “The Administration has triggered the political equivalent of the Santa Barbara Blowout, rolling the State Lands Commission and the Democrats in the Legislature, while punching a big hole in the 40-year precedent that has protected California's own nearshore coastal waters from new offshore drilling.”

“The oil lobby, reaping tens of billions in taxpayer dollars from this scam, is laughing all the way to the bank, confident that any removal of rigs or facilities cannot be enforceable without congressional legislation they know is not even pending. If this deal goes forward, the driller's next stops are Malibu, Santa Monica Bay, and La Jolla,” said Charter.

“The enduring image of nearly every oil spill is a dead or dying bird lying on a blackened beach, its feathers covered with oil,” said Graham Chisholm, executive director of Audubon California. “Californians have stated many times that they don’t want to see any more of that destruction, and yet the budget crisis is prompting our leadership to risk exactly that. Our shorelines are too precious to take those kinds of chances.”

Assemblymember Nava concluded his remarks Friday, “This is a historic moment. How we deal with this issue will affect generations of Californians. Long time residents of Santa Barbara still clearly remember the 1969spill. Washington is looking to California to see how we handle this issue. If we approve this bill, we are sending the Obama Administration a strong message that we want more drilling.”

53 Environmental Groups Oppose Use of Budget Process To Approve New Offshore Oil Drilling Project

California Progress Report
July 24, 2009

On July 22 and 23, 53 leading California environmental organizations sent letters to Governor Schwarzenegger to express their united opposition to the reported budget deal that would overturn the recent decision by the independent State Lands Commission denying the Tranquillon Ridge project proposal based on legitimate substantive reasons including concerns over a lack of enforceability. This proposal, if approved, will represent the first new offshore oil lease in California waters in over 40 years, and a major reversal of the Governor’s past assurances that there would be no new oil drilling off California’s coast. Please visit: http://www.youtube.com/watch?v=HpdegV6g1WY

While the precise language has not been released for legislative or public review, and may not be in time for any legitimate discussion, it is our understanding that it overrides the State Lands Commission’s legitimate denial of this project, creates an ad-hoc commission dominated by gubernatorial appointments, instructs this commission to find that the lease is in the best interest of the state, extends the duration of drilling operations, gives the public a mere five days of notice prior to a hearing, and fails to include any specifics on royalty payments that are supposed to be the rationale for approving this lease in this most unprecedented manner.

Victoria Rome of the Natural Resources Defense Council said, "I think it should be very troubling to the public that a decision that was made through a public process in the light of day can be overturned by a few leaders behind closed doors." Approval of this project via the budget fails to take into account the consequences of reversing 40 years of long-standing state policy in opposition to new federal leasing and additional leasing in state waters. Further, the proposal is contrary to the principle of independence of California’s system of independent boards and commissions and their right to take action. It would weaken the State Lands Commission and establish the precedent that controversial decisions of this agency or any other State agency could potentially be reversed by creating case-by-case mechanisms for appeal and automatic approvals

Michael Endicott of Sierra Club California said, “We do not see how the Governor’s reversal on offshore oil drilling can really be in the best interest of the state, especially when there is a superior alternative that: 1) does not pose the risk of opening up new oil drilling off California’s coast, 2) does not send the message to the federal government that we want to encourage more offshore drilling activity at a time that it is reviewing its offshore drilling policies, and 3) would raise substantially more money for the people of California.”

Instead, we ask the Governor, and legislative leaders to withdraw this proposal and replace it with a much better alternative – the severance tax. The severance tax would generate much more revenue for the state. The PXP proposal would only generate with certainty a single $100 million payment that is really just an advance on royalties which would be credited to PXP’s benefit to reduce future royalty payments. A severance tax would raise up to 8 times more on an annual basis.

Dan Jacobson of Environment California observed, “Even Texas, Alaska and Oklahoma collect on the volume of oil extracted/severed from their territories. This alternative would indeed be in the short and long term best interest of the state because it would raise more revenue (not borrow against future revenue), use existing operations as its basis, and not set a bad precedent for federal regulatory activity which is reviewing offshore drilling policies as we speak.”

We stand united in our opposition to this attack on the independence of the State Lands Commission and the approval of new off shore oil drilling and urge the Governor to allow the established process to proceed.

American Cetacean Society Monterey Bay- Carol Maehr
Amigos de Bolsa Chica- Dave Carlberg
Audubon California-Dan Taylor
Beacon Foundation- Vickie Finan
Bolsa Chica Land Trust- Paul Arms
Buena Vista Audubon- Joan Horowitz
Cabrillo Wetlands Conservancy- Mary Jo Baretich
California Coastal Network- Steve Asceti
California Coastal Protection Network- Susan Jordan
Citizens for the Preservation of Parks & Beaches- Shari Mackin & Carolyn Kramer
Clean Water Action- Miriam Gordon
CLEAN-Marcia Hanscom
Coast Action Group- Point Arena- Alan Levine
Coastal Environmental Rights Foundation- Marco Gozales
Coastwalk California- Fran Gibson
Committee for Green Foothills- Lennie Roberts
Defenders of Wildlife- Richard Charter
Ecoslo-Morgan Rafferty
El Dorado Audubon- Mary Parsell
Endangered Habitats League- Dan Silver
Environment California- Dan Jacobson
Environmental Action Committee of W. Marin
Environmental Health Coalition- Laura Hunter
Friends of Harbors, Beaches and Parks- Jean Watt
Heal the Bay- Sonia Diaz
Humboldt Baykeeper- Pete Nichols
Inland Empire Waterkeeper- Autumn De Woody
League for Coastal Protection- Mel Nutter
League for Coastide Protection- Scott Boyd
Madrone Audubon- Diane Hichwa
Malibu Coast Land Conservancy- Steve Uhring
Natural Resources Defense Council- Victoria Rome
North Coast Environmental Center- Jennifer Kalt
Ocean Outfall Group- Jan D. Vaandersloot
Orange County Coastkeeper- Garry Brown
Pelican Network- Jack Ellwanger
Residents for Responsible Desalination- Merle Moshiri
San Diego Audubon- Jim Peugh
San Diego Coastkeeper- Bruce Reznik
San Luis Obispo Coastkeeper- Gordon Hensley
Santa Monica Baykeeper- Tom Ford
Save or Shore- Lauren Gilligan
Sea and Sage Audubon- Scot Thomas
Sierra Club California – Michael Endicott
South Laguna Civic Association-Bill Rihn
Surfer’s Environmental Alliance- Douglas Ardley
Urban Wildlands-Catherine Rich
Vote the Coast- Sara Wan
Western Alliance for Nature- Larry Wan
Wild Heritage Planners- Jack Eidt
Wildcoast- Serge Dedina