Capitol Alert

The latest on California politics and government

January 8, 2014
Jerry Brown's budget predicts two-year prison overcrowding extension

20130918_PK_SAN QUENTIN_0037.JPG

Buried about a third of the way through Gov. Jerry Brown's leaked budget proposal is a hint of the next twist in a protracted dispute over California's prison population.

California is staring down a federal court order to reduce its prison population and is at work negotiating a solution. The court recently granted California an extension, from mid-January to mid-April of 2014, as it seeks to slip under a population cap.

The imperative to depopulate prisons led Brown to ask the Legislature last year for $315 million to spend on housing inmates.

But California will spend only $228 million of that in the current fiscal year, the new budget blueprint predicts. The reason for not needing to spend it all?

"The Administration has assumed the court will grant a two-year extension to meet the cap," the budget document states.

If true, that would buy Brown a substantial amount of breathing room as he seeks to mollify federal judges. If not, the budget proposal states, California will need to spend the full $315 million.

Lawmakers reluctant to back the governor's focus on expanding capacity, most prominently Senate President Pro Tem Darrell Steinberg, have emphasized instead spending more money fighting recidivism and promoting rehabilitation.

Brown's proposal would spend $11.8 million on substance abuse treatment and $11.3 million on mentally ill parolees while directing $40 million from the state's Recidivism Reduction Fund to re-entry programs.

That's not to say Brown is done pouring money into incarceration capacity. Despite spending $1.7 billion in jail construction, the administration argues there remains a significant need to house offenders. To that end, Brown proposes another $500 million for more facilities with a 10 percent county match requirement.

In his plan, which builds on Assembly Bill 109 of 2011, Brown also proposes legislation to require county jail felony sentences to be split between incarceration and mandatory supervision, unless the court finds it in the interests of justice not to do so.

PHOTO: Guard tower looks over the yard at San Quentin State Prison on Wednesday September 18, 2013 in San Rafael, Calif. The Sacramento Bee/Paul Kitagaki Jr.

January 8, 2014
Read Gov. Jerry Brown's budget proposal

Here is Brown's budget proposal:

2014 Budget Summary

January 8, 2014
Jerry Brown's $154.9 billion budget will propose repaying school funds, bolstering reserves

brownjanbudget.jpgGov. Jerry Brown will propose reducing the state's long-term debt by more than $11 billion next budget year and fully eliminating it by 2017-18, according to a copy of the budget document obtained by The Sacramento Bee.

He also will propose repaying about $6 billion in deferred payments to schools and contributing $1.6 billion to a rainy day fund.

Brown wants to restore some of the money cut from social service programs in recent years, and will propose a 5 percent increase in welfare grants.

The Democratic governor, who was scheduled to propose the budget plan Friday, shifted course after the document's leak, announcing he will introduce the proposal on Thursday, instead.

In the budget document, Brown calls for "fiscal restraint," saying "economic expansions do not last forever."

The budget projects $217.8 billion in unfunded retirement mandate and total state unfunded liabilities of $354 billion.

The budget calls for spending $154.9 billion from all funds, including $106.8 billion from the General Fund.

The plan's summary projects that spending on K-12 schools will grow to almost $70 billion by 2017-18, an increase of $22 billion from 2011-12.

The summary makes no mention of transitional kindergarten, something championed by Democrats in both the Assembly and Senate in recent days.

Brown proposes $670 million in new general fund spending to pay for the expansion of Medi-Cal benefits, including mental health, substance use disorder, adult dental and specialized nutrition services.

Several health-related programs would receive funding boosts. In-home supportive services, which saw dramatic reductions over recent years, will get a 6.4 percent increase over the current budget, bringing its general fund allotment to about $2 billion. Part of the increase stems from U.S. Department of Labor regulations that take effect Jan. 1, 2015 and require overtime pay for domestic workers.

Brown's budget proposal assumes that the state's finances will be sound enough to include $173.1 million for state employee pay increases to kick in July 1, although it doesn't firmly commit to it. About half that money will come from the general fund.

"A final determination will be made at the May Revision based on the latest revenue projections and updated expenditure information available," according to the draft document.

State managers and supervisors will receive similar pay hikes to avoid salary compaction, which occurs when rank-and-file wages exceed management's.

Brown's budget summary doesn't commit 2014-15 money to the struggling state teachers' retirement fund. Instead, "the Administration will begin working with the Legislature, school districts, teachers and the pension system," aiming to enact a plan in 2015-16 that will fully fund the system within 30 years.

Current obligations to CalSTRS' current and future retirees total $80.4 billion more than it has assets to cover. Stabilizing the system would require more than $4.5 billion per year for many years.

Unlike like other public pension systems, the California Teachers' Retirement System doesn't have the authority to charge employers more money to make up for investment losses. The Legislature has the power to raise employer rates or kick in money from state coffers.

Brown's summary suggests whatever plan emerges should phase in contribution increases over time and cautions that "school districts and community colleges should
anticipate absorbing much of any new CalSTRS funding requirement."

Lawmakers have advanced the notion of safeguarding extra revenue in a rainy day fund, including placing a measure on the 2014 ballot to fortify the state's fund.

Saying that proposed measure does not go far enough, the budget proposes an alternate constitutional amendment that would regulate the flow of money into and out of the state's budget reserve.

Deposits into the fund would be tied to revenue from capital gains, triggering when such revenue accounts for more than 6.5 percent of the General Fund. Brown and others have warned about becoming overly reliant volatile sources of income like capital gains, and the proposal notes that California's heavy use on taxes on the wealthy means revenue can "swing both up and down quickly."

Payments to schools under Proposition 98, the voter-approved constitutional amendment setting a minimum baseline of education spending, would be managed through a reserve that would absorb funding bumps to be used in down years.

The fund's maximum size would also double, from five to ten percent of the General Fund. Safeguarding against depleting the fund too quickly during future downturns, the amendment would allow at most half of the fund's balance to be spent in the first year of a recession.

Under the proposed amendment, California could fulfill its obligation to deposit money into the fund by allocating money to pay down the so-called Wall of Debt.

For schools, the plan proposes $61.6 billion toward the constitutional school-funding guarantee in 2014-15, up from $6.3 billion above the current budget year.

The plan also includes a $6.4 billion payoff of school deferrals. Those involuntary loans from school districts to the state forced districts to borrow billions of dollars with interest from private lenders or else absorb the cost from reserves or cutting programs.

With school-construction bonds from 2002, 2004 and 2006 all but exhausted, Brown wants to revisit what role, if any, the state should play in helping districts build new schools or modernize existing classrooms.

Any future school-construction programs, the plan reads, should "avoid an unsustainable reliance on state debt issuance that characterizes the current school facilities program."

The budget, though, taps $188 million from the general fund for emergency school repairs.

To help carry out the first year of the Brown-championed Local Control Funding Formula, the budget increases general fund money for schools by $4.5 billion in 2014-15.

In addition, the plan would allocate $26.3 billion for higher education and repeats calls for major changes in how the system operates.

Instead of focusing on enrollment targets that increase costs, the University of California, California State University and community college systems need to do a better job ensuring that students complete their degrees in a timely manner, according to the budget summary.

The budget includes a funding increase of $142.2 million apiece for the UC and CSU systems. The increases reflect the second year of a four-year pact with the administration that trades more money for the systems' holding tuition at existing levels and making changes meant to "improve student success and to realize institutional efficiencies."

State funding for community colleges, meanwhile, would increase 11.4 percent in 2014-15.

Editor's note: This post was updated at 5:20 p.m., 5:37 p.m. and 5:46 p.m. to include additional information about the budget. It was changed at 11:40 on Jan. 9 to clarify that the proposed increase in K-12 spending to nearly $70 billion would occur by the 2017-18 fiscal year.

Jim Miller, Jeremy White, Christopher Cadelago and Jon Ortiz of The Bee Capitol Bureau contributed to this report.

January 8, 2014
FPPC investigating Roger Hernandez campaign for money laundering

RogerHernandez4.JPGCalifornia's political watchdog agency is investigating whether money laundering took place during Assemblyman Roger Hernandez's 2010 campaign and is fighting with his lawyer to get access to bank records, according to a filing this week in Los Angeles Superior Court.

The document says the Fair Political Practices Commission subpoenaed Hernadez's lawyer, Aldo A. Flores, for information about a $3,900 contribution he made to the assemblyman's campaign in 2009. The matter landed in court this fall when Flores challenged the FPPC's requests for his bank records.

"Evidence from the bank records may show (Flores) was reimbursed for his payment to the Hernandez for Assembly 2010 campaign committee," says the FPPC's filing that asks the court to uphold the subpoenas that are part of a "larger investigation."

"The FPPC is actively investigating political money laundering," the filing says, adding that "evidence uncovered thus far provides sufficient grounds to support the subpoenas."

State law limits the amount donors can give to candidates. The limit for contributions to legislative candidates is $4,100 now but was $3,900 in 2009, when Flores made the donation to Hernandez, a Democrat from West Covina.

Hiding the identity of a donor by passing the money through someone else amounts to political money laundering and violates state law.

"Making a contribution in another person's name is one of the most serious types of violations of the (Political Reform) Act, because it denies the public of information about where a candidate receives his or her financial support," the FPPC's filing says.

Hernandez issued a statement late Wednesday, suggesting the FPPC's case is "about one very old fact" and that "the FPPC has no information that the check was improper...This blanket attack is nothing more than an attempt to tarnish my name by powerful interest groups that see me as a threat for the work that I am doing on behalf of hard-working Californians."

The agency said last year that it was investigating two complaints against Hernandez. One questions a $100,000 loan he made to his campaign in 2009. The other alleges that spending on some campaign fliers in West Covina was not properly reported. Those investigations remain open, said Gary Winuk, the FPPC's chief of enforcement.

Messages The Sacramento Bee left for Flores have not been returned.

A hearing is scheduled for January 16.

PHOTO: Assemblyman Roger Hernandez at the California State Capitol in Sacramento in January 2013. The Sacramento Bee/Randall Benton

Editor's Note: This post was updated at 6:30 p.m. Jan. 8, 2014 to include Hernandez's statement.

January 8, 2014
California cap-and-trade off to good start, report says


California's first-in-the-nation carbon auction market had a promising inaugural year, according to a report by the Environmental Defense Fund.

The centerpiece of a 2006 law aimed at curtailing greenhouse gas emissions to 1990 levels by 2020, the cap-and-trade program allows industry to purchase carbon allowances. The "cap" refers to an overall ceiling on emissions, with companies able to obtain a finite number of permits that together fall below that limit. The ceiling will lower over time.

Over the course of five auctions, California sold 142 different entities the total available stock of allowances for 2013 - some 117 million, the report found. That added up to a $1.37 billion surge of revenue.

Power suppliers accounted for nearly half of the purchases, the report found, while the oil industry combined with food and agriculture to vacuum up another quarter of the allowances.

By law, that money must be spent in ways that reduce emissions. It promises to be a politically fraught process, illustrated by Gov. Jerry Brown's plan to use a chunk of the proceeds to pay for his troubled high-speed rail project.

A recent projection from Lawrence Berkeley National Laboratory found that California is on pace to thin the air to 1990 levels by 2020. Hitting a separate, more stringent target set out in a 2005 executive order issued by Gov. Arnold Schwarzenegger remains a challenge.

PHOTO: Union oil company refinery in Rodeo, Tuesday, December 17, 2002. The Sacramento Bee/ Michael A. Jones.

January 8, 2014
California health exchange to move headquarters in Sacramento


California's health insurance exchange needs a new home.

And officials with Covered California, headquartered at 560 J Street in Sacramento, are on the hunt, a spokesman confirmed Wednesday.

That's because its offices at Downtown Plaza are sitting on some important real estate: the presumed future home of the Sacramento Kings.

City and team officials have been working to clear the way for an arena. Last night, the Sacramento City Council moved to file eminent domain proceedings against a group that owns the former Macy's furniture and men's store in the mall.

Roy Kennedy, a spokesman for Covered California, said the exchange's facilities management team is in the process of securing a long-term location.

"The hope is Covered California will have a permanent home soon somewhere in the greater Sacramento area," Kennedy said.

The exchange, which began taking enrollments in October, also operates a trio of service centers in Rancho Cordova and in Contra Costa and Fresno counties.

PHOTO: Sacramento Mayor Kevin Johnson talks with Alice Huffman, president and chief executive of California NAACP before a Covered California press conference at Sacramento City Hall in October. The Sacramento Bee/Hector Amezcua

January 8, 2014
New year, new faces: California Assembly is majority-freshman

20140106_ha_ASSEMBLY00207.JPGAt the launch of the 2014 legislative year, the state Assembly is making history: For the first time in well over a century, a majority of members are freshmen.

Three new members took the oath of office on Monday with little fanfare beyond some applause from their legislative colleagues. But the pageantry obscured a milestone, with a majority of lawmakers on the 80-member Assembly floor serving their first terms.

This is the first time since the 19th century more than 40 Assembly members have been on their first go-around, according to Chief Clerk of the Assembly E. Dotson Wilson.

The 2012 election cycle was not momentous just for propelling Democrats to a two-thirds supermajority. It also inaugurated one of the largest freshman classes in history, with 38 of those neophytes taking Assembly seats.

Their ranks grew as 2013 progressed, with Assemblywoman Lorena Gonzalez, D-San Diego, scooping up the seat Ben Hueso left as he graduated to the Senate.

Add to that new members Sebastian Ridley-Thomas of Los Angeles, Matt Dababneh of Sherman Oaks and Freddie Rodriguez of Pomona, all three elevated by special elections during the latter part of 2013.

With the addition of that trio, 42 of the Assembly members casting votes and submitting bills this year will have taken their desks since the start of the 2013-14 session.

The influx of newcomers could play a role in the leadership transition set to occur some time this session, with Assembly Speaker John A. Pérez, D-Los Angeles, termed out at the end of the year. The names of a few freshman members recur during the who-will-be-next guessing game, reflecting a push to award the next speakership to a member entitled to a full twelve years in the lower house.

PHOTO: Newly sworn-in Assemblyman Matthew Dababneh joins other Assembly members in the pledge of allegiance during the first session of the California Assembly on Monday, Jan. 6, 2014. The Sacramento Bee/Hector Amezcua.

January 8, 2014
Transgender rights referendum moves to full signature count

BB PROP 8 RALLY 056 Frank Schubert.JPGActivists seeking to repeal a law that aims to protect transgender students will have to wait until next month to learn if their effort qualifies for the statewide ballot.

Secretary of State Debra Bowen said Wednesday that the referendum of Assembly Bill 1266 will move to a full count of signatures due by Feb. 24. Bowen's announcement comes after county election officials determined the repeal did not have enough valid signatures to qualify by random sample.

The full count was triggered by about 3,000 signatures. It would have needed more than 72,000 additional valid signatures to avoid another count and qualify for the ballot outright.

Privacy for All Students, the proponents of the referendum, argue the law signed by Gov. Jerry Brown last year would make students uncomfortable and infringe on the will of parents. They described their efforts as centering on safety and privacy. The campaign is managed by Frank Schubert, who helped lead the Yes on Proposition 8 campaign.

The new law allows transgender students in public schools to join athletic teams and access facilities such as bathrooms that correspond with their gender identities. Authored by Assemblyman Tom Ammiano, D-San Francisco, it was held up by supporters as a needed protection for students who suffer humiliation and bullying.

PHOTO: Frank Schubert, adviser for effort to repeal a transgender rights law, was campaign manager for the Yes on Proposition 8 campaign. He is shown here at a news conference at the Riverside Wesleyan Church in Sacramento, CA, Monday Oct. 20, 2008. The Sacramento Bee/Brian Baer

January 8, 2014
AM Alert: What does Colorado's weed legalization mean for California?

MC_POTFARM_04.JPGSince going into effect a week ago, Colorado's legalization of marijuana has been a smoking success in at least one sense: recreational pot shops have seen extremely high demand, with hour-long lines on opening day and supplies already running low.

Could this be a preview of what's to come in California? A Field Poll last month revealed that, for the first time, a majority of voters in the state support legalizing marijuana. And with possible ballot measures collecting signatures, that question could be put to the test as soon as this November.

Sacramento Bee reporter Peter Hecht—who has covered pot issues in California extensively and has written the upcoming book Weed Land—will offer his thoughts during a live chat today at 11:30 a.m. Readers can join in with questions and comments at

VIDEO: The legislative leadership broke with budget tradition in a big way this year, Dan Walters says.

HELPING HAND: After shelving the legislation last spring, state Sen. Joel Anderson has revived his bill that seeks to prevent the state from taxing income lost to criminal fraud such as Ponzi schemes. The Alpine Republican will be in Room 113 of the Capitol at 9 a.m. to discuss the proposal before heading across the hall for a hearing of the Senate Governance and Finance Committee, which is scheduled to consider the measure. Anderson will be joined by state Sen. Mark Wyland, R-Solana Beach, and victims of investment fraud.

MAKING THE GRADE: A new scorecard from the California Food Policy Council, which advocates for healthy food and sustainable agriculture, focuses on the Legislature's action on food- and farm-related issues in 2013. The report will be released following a press conference on the north steps of the Capitol at 11 a.m., where representatives from the organization will be joined by Assemblyman Roger Dickinson, D-Sacramento.

PHOTO: Marijuana plants at an illegal grow site off Interstate 5 and the Twin Cities exit on August 30, 2013. The Sacramento Bee/Manny Crisostomo

January 8, 2014
Dan Walters Daily: Legislative leaders break with budget tradition

Announcing their budget priorities before Gov. Jerry Brown presents his 2014-2015 budget was an unorthodox--and highly political--move by state Senate President Pro Tem Darrell Steinberg and Assembly Speaker John A. Pérez, Dan says.

Have a question you'd like Dan to answer? Post it on our Facebook page.

See other Dan Walters Daily clips here.


Capitol Alert Staff

Jeremy White Jeremy B. White covers California politics and edits Capitol Alert's mobile Insider Edition. Twitter: @capitolalert

Amy Chance Amy Chance is political editor for The Sacramento Bee. Twitter: @Amy_Chance

Dan Smith Dan Smith is Capitol bureau chief for The Sacramento Bee.

Christopher Cadelago Christopher Cadelago covers California politics and health care. Twitter: @ccadelago

Micaela Massimino Micaela Massimino edits Capitol Alert.

Laurel Rosenhall Laurel Rosenhall covers the Legislature, the lobbying community and higher education. Twitter: @LaurelRosenhall

David Siders David Siders covers the Brown administration. Twitter: @davidsiders

Dan Walters Dan Walters is a columnist for The Sacramento Bee. Twitter: @WaltersBee

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