Political Tidbits: VA GOP’s Bad Decisions & Jerry Brown vs. LAO vs. Legislature

Last week, Governor Brown presented his May Revision for the upcoming budget. In it, he treaded carefully with revenue expectations.  However the LAO came back with a somewhat rosier view on revenue giving the liberal state legislature what they wanted.  On the other side of the country, the Virginia Republicans met at their spring convention to nominate their candidates for Governor, Lt. Governor, and Attorney General.  They also decided to nominate by convention for the 2014 Senate election next year, leading to more ultra-conservative tickets in the future. Today’s tidbits will examine the political implications of these two events.

 

Virginia Republicans Make Their Lives More Difficult

As with caucus nominations versus primaries, the smaller the population that gets a voice in the nomination process, the further away from the voters a nominee actually be.

At their convention this past weekend, the Republican activists who attended the convention nominated candidates for Governor, Lt. Governor, and Attorney General.  The Governor and Attorney General nominations were relatively straight forward and quick, but the Lt. Governor decision lasted until 10:40 PM at night on Saturday. Over the course of their decisions, these activists put together the most conservative ticket Virginia has seen in a very, very long time.

Why is this a problem?  One simple answer: Barack Obama and Bob McDonnell. Obama has carried Virginia twice and Bob McDonnell managed to win in between by running a very pragmatic conservative campaign focusing on jobs, the economy, education, and transportation.  It will be very difficult for the Republican ticket to maintain a laser-like focus on the issues McDonnell successfully ran on because of the rather colorful past comments many on the ticket (particularly Cuccinelli and Lt. Governor nominee E.W. Jackson) have made about social issues.

The Virginia Republicans, striving for ideological purity and partisan discipline among their candidates, unnecessarily hamstringed themselves by nominating via convention.  Only hardcore activists attend conventions and only the most ardent of followers would have stuck around for hours (until after 10 PM at night) to continue voting on ballot after ballot for the Lt. Governor candidacy.  As such, they nominated a candidate as far away from the general voting public as you can get.  The convention also scared off current Lt. Governor Bill Bolling from seeking the Governor nomination.  He would have easily topped Democratic nominee Terry McAuliffe.

Now Cuccinelli has to run the best campaign he’s ever run with a running mate prone to making out-of-the-mainstream comments on social issues.  To put the cherry on top, the activists, naturally, decided to nominate by convention again for the 2014 Senate race when incumbent Mark Warner will be up for re-election.  Warner will be a tough candidate to beat no matter who the Republicans put up, but if this past weekend was any indication of the type of candidate the convention will yield, Virginia will instantly become a safe Democratic Senate seat.

The only up-side to the 2013 gubernatorial race is that the Democrats have Terry McAuliffe as their candidate.  But the Virginia Republicans can’t continue to rely on the Democrats putting up bad candidates of their own to make statewide races competitive.  Nomination by convention will likely hand the Democrats in this purple state election after election.  It’s time to return to primaries before the state GOP has completely ceded this once reliable state.

 

LAO Goes Optimistic While the Governor Tries to Pull in the Reigns

Governor Brown has a serious problem.  Brown desperately needs to make sure the Democrats in the state don’t ruin the good fortune voters provided them last November, while at the same time the ultra-liberal Democrats who occupy the state legislature desperately want to flex their new-found legislating ability.  The first showdown will be the budget and more specifically, how much revenue California has to spend.

Brown has been busy tampering down expectations, while the LAO last week only gave fodder to the legislature Democrats agenda.

While the recent news cycle has focused on the approximately $4.5 billion in extra revenue coming in, Brown’s May Revision actually drops revenue expectations from his January Budget proposal by about $1.3 billion in all.  The Governor gave a myriad of reasons for the discrepancy in expectations including the federal payroll tax increase and a downward revision on economic forecasts.  However, the LAO determined, based on rosier economic forecasts, that the revenue through the 2014 fiscal year would be about $2.8 billion over the Governor’s expectations.

The LAO’s economic assumptions may be too optimistic.  In many ways, they are expecting housing prices to continue to rise (and arguably even explode), expecting the stock market to continue to rise, and expecting joblessness and income growth to drop and increase, respectively, in a manner that I find overly optimistic. However, aside from the economic assumptions, the likelihood of anyone reading the LAO’s cautionary notes and suggestions at the end of their forecast/report is slim.  As such, the liberal Democrats will only read what they want to read to bolster their plan to spend more.

For instance, the LAO, despite its differences with the Governor, commend his caution.  As they write, “In our view, there is good reason for the Legislature to adopt a cautious budgetary posture.”  They also recommend that if the Legislature is going to spend the extra money, it should do it wisely by paying down the enormous amounts of debt California holds (both bonded debt and also unfunded obligations).  Or, the LAO suggests building up a revenue reserve for the next bust.  Since California experiences “boom and bust” cycles—because of its highly volatile tax system—a reserve could protect against enormous cuts in the future.

Here’s the problem for Governor Brown.  These are the same suggestions the LAO always gives and just like the many times before, the state legislature will completely ignore (or at best, give lip service) to them and focus on their own agenda.  There are two ways this looming battle could end up. 1) It could bolster his “I’m being the reasonable steward of California’s finances” if he holds his ground against a crusading liberal legislature or 2) it could completely discredit his positioning if he succumbs to his inner-liberal self.  We’ll find out on June 15.

2013/2014 Gubernatorial and Senate Election Update (May):

It has been a few months since I last visited the upcoming 2013 and 2014 gubernatorial and Senate elections and I thought it was time to re-visit these races.

 

2013 Contests:

Virginia – Lt. Governor Bill Bolling decided against making an Independent run at the Governor’s Mansion.  This essentially set the field on both sides.  Polling for this race has been close and should be taken with a grain of salt since both Cuccinelli and Democrat Terry McAuliffe are both relatively unknown statewide and both have major flaws as gubernatorial candidates.   Nevertheless, early polling shows Cuccinelli holding onto a slight lead.  Based on the RCP average, the Republican has a little over a 4 point lead, but it also shows a whopping 21% of the electorate is undecided.  While Cuccinelli probably has the slight advantage in this race, it still remains anyone’s game.

New Jersey – The gubernatorial contest between incumbent Chris Christie and state Senator Barbara Buono is the complete opposite from Virginia. Christie continues to be a political juggernaut raising huge amounts of money, maintaining record-level approval ratings and preserving a 30+ point advantage in the polls over his completely unknown Democratic challenger.  This race will close (some) by November, but Christie will easily dispatch his opponent in one of the bluest states in the country.

Massachusetts – The special election to fill John Kerry’s Senate seat got really interesting after the primaries unexpectedly gave Gabriel Gomez, a former Navy SEAL, business man, and son of Colombian immigrants, the Republican nomination.  Immediately, two polls came out that showed Gomez within striking distance of Markey.  Since then a few polls have shown a wider race, but the RCP average still has Markey up by only 9 points. Many are calling Gomez the next Scott Brown (and there is a path for Gomez to become that), but at this point, I think this seat will remain in the Democrat’s hands even if it’s just by a single-digit margin.

 

2014 Gubernatorial Contests:

Republicans will be on the defensive in 2014 for control of their gubernatorial posts.

Safe GOP Seats (10): AL, AK, ID, KS, NE, OK, SD, TN, TX, WY – none of these seats are in danger at all for the Republicans.

Likely GOP Seats (6): AR, AZ, GA, NM, NV, SC – Arkansas is likely to flip control in 2014; Arizona could become problematic under a confluence of best-case scenarios for the Democrats; Georgia’s Nathan Deal continues to have underwhelming approval ratings and is potentially vulnerable against the right Democratic challenger like Atlanta’s Kasim Reed or Congressman John Barrow; Susana Martinez and Brian Sandoval are both one of the most popular governors in the country, but I’m hesitate to call these safe quite yet because New Mexico and Nevada are such blue states now; Nikki Haley, if she survives a possible primary challenge, is vulnerable against the right Democratic challenger considering her middling approval ratings.

Lean GOP Seats (3): IA, OH, WI – All three of these states went for Obama twice, and each has a very conceivable path for their Democratic challengers to unseat them (more so than the Likely seats).  However, at this point, these seats are definitely trending toward the Likely category, not toward Toss-Up range.

GOP-Held Toss-Ups (4): FL, MI, PA, ME – Florida’s Rick Scott continues to have among the worst approval ratings in the country.  He will have a massive war chest in 2014, but that still might not be enough to get him re-elected.  A possible challenge by former Governor Crist could realistically be either a blessing or a curse.  Michigan’s Rick Snyder still hasn’t recovered from the fall-out of signing the Right to Work legislation.  That decision just may be too much for this blue state to handle.  Pennsylvania’s Tom Corbett is in Rick Scott territory with approval ratings and hasn’t found his groove like neighboring John Kasich has in Ohio. Maine’s Paul LePage is really unpopular, but like in 2010, could win re-election because of a three-way race between LePage, a Democrat, and an Independent.

Safe Dem Seats (4): HI, MD, NY, VT – none of these seats will be lost by Democrats no matter what happens.

Likely Dem Seats (3): CA, CO, OR – While it’s unlikely, strong challengers could make the California race against incumbent Jerry Brown, the Colorado race against John Hickenlooper, and the Oregon race against John Kitzhaber competitive, but that seems like a stretch at this point.

Lean Dem Seats (3): IL, MN, NH – New Hampshire is a fickle state politically, but at this point it looks like incumbent Maggie Hassan is in decent shape; Illinois’ Pat Quinn has terrible approval ratings and could face a serious primary challenge, but a lack of a GOP bench helps keep this out of Toss-Up range; Minnesota’s Mark Dayton also has unimpressive ratings, but like Illinois, few strong Republican choices keep this out of Toss-up range.

Dem-Held Toss-Ups (3): CT, MA, RI – I’m being very conservative here because fundamentals say none of these states should be considered Toss-Ups.  However, Connecticut’s Dan Malloy has bad approval ratings, doesn’t have many popular policy wins, and has a strong competitor already in his 2012 foe, who almost beat him.  In Massachusetts, incumbent Deval Patrick is not seeking re-election and the Democratic bench is actually quite underwhelming.  If Scott Brown seeks the job, this race becomes a Lean GOP seat; if not, another Republican like Charlie Baker could keep it in the Toss-Up column. Rhode Island is unique because it will likely be another three-way contest between unpopular incumbent Lincoln Chafee (Independent) and a Republican and Democrat.  As with Maine, you never really know what could happen in a three-way race.

 

2014 Senate Contests:

Most the action for the Senate will take place in only a handful of states.

Safe GOP Seats (12): AL, ID, KS, ME, MS, NE, OK, SC, TN, TX, WY, SC special – Nebraska’s Mike Johanns surprised everyone with his decision to retire, but that retirement won’t change this seat’s rating; Maine remains here as long as Susan Collins seeks re-election, which is appearing likely and both South Carolina seats are safe unless Lindsey Graham gets primaried and losses to an Akin/Donnelly-style candidate.

Likely GOP Seats (2): GA, KY – Mitch McConnell’s approval ratings in Kentucky is bad, which is what keeps this seat out of the safe category.  The Georgia race really depends on how the primary settles.  If an Akin/Donnelly-style candidate wins the Republican nomination, the Democrats have a chance.

Lean GOP Seats (2): SD, WV – Both of these seats would be Republican pick-ups but neither has an incumbent running.  Shelley Moore Capito could easily make this seat a Likely Republican one but I need to see more polling and a Democrat challenger needs to appear before I make that judgment.  South Dakota could become problematic, but Mark Rounds is a solid recruit for Republicans (even though a primary could happen on the Republican side).

Toss-Ups (5): AK, AR, LA, MT, NC – These are all states Romney won (by an average of 14 points).  All except MT will have a Democratic incumbent on the ballot, which the power of the incumbency will help, but the federal level voting records of these states make them problematic.  A lot of whether the Republicans can win them depends on recruitment.  However, Republicans have to win at least 4 of these states (in addition to the two Lean GOP seats) if they want to regain a majority in the Senate.

Lean Dem Seats (2): IA, NH – Iowa’s open seat can become a Toss-Up if Republicans can find a decent candidate.  They’ve had to move onto their second tier candidates.  New Hampshire, again, is a fickly political state, so you can never really be sure of what their voters could do this far out even if the incumbent is popular.

Likely Dem Seats (3): CO, MI, MA special – Michigan is an open seat with the Democrats having recruited a strong candidate and the Republicans lacking one now. If Markey wins the special election in June in Massachusetts, the Massachusetts special seat will become a Safe Dem seat.  Colorado Republicans have a light bench, but a strong candidate could make this one competitive.

Safe Dem Seats (9): DE, IL, MN, NJ, NM, RI, OR, VA, HI special – I don’t expect to see any of these races to become competitive.

Still Skeptical About Maldonado’s Prison Realignment Narrative

On May 1, in my political tidbits piece, I examined what appeared to be gubernatorial hopeful, former Lt. Governor Abel Maldonado’s first major campaign narrative against Jerry Brown.  As I laid out in my February piece examining possible Republican candidates for Governor, Brown’s perceived strength is only because the Republican Party is in such disrepair.  Therefore, whoever runs against him will a) have to run an extremely strong and competent campaign and b) focus on issues that will appeal to a broad range of voters.   At this point, I’m not entirely convinced by Maldonado’s obsession with the prison realignment issue.

From the looks of it, Maldonado not only plans to make this his first campaign narrative, but the defining piece of his gubernatorial efforts.  By announcing a ballot initiative campaign for 2014 to repeal Brown’s prison realignment, Maldonado has made clear that his gubernatorial campaign will run simultaneously with his referendum.  Therefore, whether he planned on it or not, the media and the voters will view both as one.  This could be tricky on two levels: 1) if something goes wrong with one campaign, it is likely to tarnish the other’s as well and 2) do the voters even care enough about the issue to focus an entire gubernatorial effort around it?

Let’s look at the second issue first.  According to a March 2013 PPIC survey, only 3% of Californians consider “crime, gangs, drugs” the most important issue facing the state.  This is about a third of the level “education, schools” and “state budget, deficit, taxes” receives and a whopping 1/15^th of the support “jobs, economy” garners. I’m not saying Maldonado and his campaign can’t increase those numbers, but it would have to take a brilliant campaign strategy and/or a terrible/high-profile scandal/crisis caused directly by prison realignment to shift voter sentiment enough to make it a central theme for a statewide campaign. As Scott Lay reminded us today in The Nooner, the last time a “law and order” campaign was run by a gubernatorial candidate in California was the 1998 race between Gray Davis and Dan Lungren.  At that time, 37% of Californians considered “crime and drugs” the most serious problem for the state compared to 20% for education and 6% for “economy and taxes” (as a note, the deficit wasn’t even included in the survey as a problem just showing you how much has changed in the state since then).  In that same September 1998 PPIC survey, only 2 months before the election, the true “law and order” candidate, Republican Dan Lungren, was losing to Democratic Gray Davis by 9 points; and let’s not forget, California at this point had elected a Republican Governor in the previous 4 elections.   Even in an election where the public was concerned about the issue and the Republican Party was a well-functioning organization, the law and order Republican candidate couldn’t even win.  This doesn’t bode well for Maldonado.

On the other issue, to even have a chance to unseat Brown, Maldonado will have to run the campaign of his life.  He will already have issues (see my April piece on his strengths and weaknesses) to achieve that status even without a ballot initiative campaign to deal with, but now he has committed himself to both.  In some ways, ballot campaigns can be even more daunting than a candidate campaign and even the best stumble at it (Brown’s Prop 30 campaign had its ups and downs and Brown is a very agile political campaigner).  Already the LA Times is picking away at the details of Maldonado’s press conference yesterday pointing out that the “poster child” for the prison realignment’s problems wasn’t even a criminal released under Brown’s prison realignment program.  Stories like this not only set back the ballot campaign, but also make Maldonado and his gubernatorial campaign appear sloppy and disorganized.

Finally, Maldonado has yet to communicate how he’ll fix the problem.  A roll-back of Brown’s prison realignment may keep criminals out of county jails and in state prisons, but it doesn’t change the fact that our criminal justice system, particularly the prison system, is massively broken.  Maldonado’s ballot referendum won’t do anything to remedy the overcrowding in state prisons or county jails and won’t do anything to control the growing costs associated with the prison system.  As I wrote in my May piece, Maldonado has a chance to go bold with his policy prescriptions.  This is anything but bold.  It is safe and predictable and in the end won’t really do much of anything.

Now, of course, I could be completely wrong on some of this.  Maldonado’s people may have done extensive focus grouping and polling and found this issue to be very salient with voters and a major weakness of Brown’s record.  Maldonado could also be extremely confident that his team can run two campaigns simultaneously.  However, I remain skeptical on both.

Yet, if he does want this to be a central piece of his campaign, I implore him to go bold with his solutions.  California doesn’t need rehashed ideas from the past and mundane fixes that are more politics and theatrics than real solutions.  If he wants people to get behind his candidacy he has to show voters he has a vision.  He has a chance to do so now while no other credible Republican gubernatorial candidate is in the race.

Sacramento Spotlight: AB 158/SB 405 – Statewide Plastic Bag Bans

Crossposted on Advancing a Free Society – Eureka

The “Sacramento  Spotlight” examines the policy merits of pending legislation in the California state legislature.  It is originally posted on the Hoover Institution’s Advancing a Free Society – Eureka blog.

I encourage you all to check out Eureka as well as the Advancing a Free Society homepage on a regular basis to see what Hoover Fellows are discussing.

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“Paper or plastic?”

Or, if you are shopping in California in the near future: “E. Coli cloth or E. Coli compostable?”

More than 60 cities and counties in California – roughly one-seventh and one-third of the Golden State’s municipal districts and population, respectively – have moved swiftly to ban plastic bags in grocery stores. Meanwhile, two statewide bans are maneuvering their way through the Sacramento legislative process. Despite being much ballyhooed legislation for their environmental and, oddly enough, pro-business merits, a closer examination of the statewide single-use bag bans reveals what these laws actually are superfluous, posturing and potentially, dangerous.

In today’s “Spotlight” are AB 158 (Democratic Assemblyman Marc Levine) and SB 405 (Democratic Senator Alex Padilla), which as amended will: a) ban single-use bags starting on January 1, 2015 for large stores and January 1, 2016 for smaller stores; and b) require that reusable bags made available for purchase meet various requirements as certified by the CalRecycle program administered by the state’s Department of Resources Recycling and Recovery.

Much like the various cities and counties who have instituted their own single-use bag bans, Levine and Padilla cite the environmental effects of making and disposing of the roughly 14 billion plastic bags Californians use annually.  The environmental, and more specifically the pollution, argument is not only emotionally charged, but also plays well in the environmentally progressive Golden State.  However, Sen. Padilla has taken the argument one step further by arguing that his legislation is pro-business as it simplifies business compliance – rather than multiple dozens of different ban policies, businesses will only have to comply with one.

There are two problems with this concept: the need isn’t valid, and the changes, if enacted, have unintended yet terrible consequences.

Based on a CalRecycle Statewide Waste Characterization Study, plastic grocery and merchandise bags account for just 0.3% of California’s total waste stream, which is 7% of the total the Senate Environmental Quality Committee suggests.   While proponents point to a 2009 CalRecycle study that shows just 3% of plastic single-use bags are recycled, that study only reviewed recycling in the official sense – i.e., plastic bags at recycling facilities.  This rate completely ignores self-recycling – i.e., the repeated use of plastic bags for reasons other than carrying groceries or merchandise. Just think about how often you re-use plastic bags after returning from your local grocer?

Proponents claim that banning the bags will prevent plastic litter.  Let’s ignore the fact, briefly, that plastic bag waste is actually very small and focus instead on whether a ban actually reduces plastic bag litter.  Litter studies show that plastic bag bans have minimal to no effect at all on the rate of plastic bag litter.  For instance, a year after San Francisco banned single-use bags, plastic bags comprised of 0.64% of the city’s litter, which statistically represents no change from prior to the ban. Finally, evidence of plastic bag ocean debris is highly mixed and inconsistent.  The Senate committee analysis argues that plastics (of which plastic bags is just one element) compose 60% to 80% of marine debris. However, environmental groups claim that plastic bags comprise of just 3%.

The litter and waste argument is just one part of the pollution problem, proponents claim; they also argue that banning plastic bags will reduce our nation’s dependence on foreign oil.  This is easily dispensed by the fact that the average plastic bag used by an American consumer is made from byproduct from domestic natural gas refinement.  As such, a ban wouldn’t reduce America’s dependence on foreign oil, but would eliminate one method of disposing of potentially hazardous natural gas byproduct.

Perhaps recognizing the environmental argument was flimsy, Sen. Padilla resorted to a different rationale to push his legislation: uniformity. Presently in California, businesses must comply with a piecemeal approach to bans. While at face value this problem makes sense, it actually is vastly overstated.  Megan McArdle’s quip while criticizing a national sales tax (whose proponents give the business compliance simplification argument as well) accurately sums up why the argument isn’t effective: “I mean, sure, hey, there’s all these different rates, but that’s what software is for!”

For large companies like Safeway, the additional marginal cost of this compliance would be minuscule.  For small stores, the likelihood of operating in different municipal zones with different rules is slim – if they do, the plastic bag ban is likely to be the least of their concerns regarding different municipal regulations.  And if Sen. Padilla truly were concerned about business compliance costs, wouldn’t a ban on plastic bag bans be both simpler and more pro-business?

The debate over the ban underscores the idea that legislation that stabs at problems that aren’t really a problem tend to succeed only in creating . . . more problems.  Both AB 158 and SB 405 push for the use of reusable bags, either washable cloth or compostable ones.  Let’s set aside the various regulatory requirements the bill places on the production and sale of such bags – which themselves also largely negate Padilla’s pro-business claims – and focus on the major and potentially dangerous problems these reusable bags create.

In the plainest of words, reusable bags can be disgusting and a public health hazard.

Multiple studies including one that examined reusable bags throughout California and Arizona as well as one that focused just on San Francisco have found extremely unsafe levels of E. coli and other dangerous bacteria living in reusable grocery bags.  For instance, in looking at San Francisco where the ban has been in effect, co-authors Jonathan Klick and Joshua Wright found that reusable bags resulted in a 46% rise in food-borne-illness deaths within San Francisco following the ban’s implementation.

To prevent this dangerous predicament, reusable bag producers recommend that users wash their bags after every use.  But that’s highly unrealistic: the San Francisco study showed that shoppers aren’t in the habit of doing that. And, again, it leads to unintended consequences: additional water consumption and introducing more laundry detergent pollutants to the local ecosystem. In short, the policy fix creates a daunting problem while fixing a non-problem.

Assuming plastic bag consumption does create a valid and noticeable policy problem – a negative social externality – Sacramento does have a more effective and more efficient tool at their disposal: a Pigouvian tax.  Democratic Senator Lois Wolk’s SB 700, which would institute a 5-cent tax per single-use bag with collected funds used for environmental projects, comes very close to a classic Pigouvian tax.  However, to be more effective and again, assuming an actual negative social externality does exist, the California State Legislature should amend SB 700 so that collected tax receipts are only used to clean-up single-use (particularly plastic) bag waste and litter. In its current form, SB 700 is just another tax to fund a pet project that is tangentially related to the perceived negative social externality.

At the end of the day, AB 158 and SB 405 aim to fix problems that are either overstated or invalid and would themselves create serious policy problems that would then require additional legislation.  Legislation for the sake of legislation never solves a policy problem and always creates more headaches – in this case, Sacramento adding more environmental bills to the compost pile.

Political Tidbits: Maldonado’s Crime Push and Gomez’s Senate Chances

I’ve been off the grid for a while as I’ve been traveling for a few weddings.  Tomorrow, Advancing a Free Society will be posting a new Sacramento Spotlight, which I’ll cross-post here.  In the meantime, I did want to comment on some political topics that are happening on either sides of the country.

 

Abel Maldonado’s Crime Narrative

Using Facebook, Twitter, Instagram, and Tumblr, former Lt. Governor and gubernatorial hopeful Abel Maldonado has begun to craft what appears to be his first campaign narrative hitting Jerry Brown.  During the first few years of Brown’s 3^rd term, Brown championed prison realignment.  The realignment sent many prisoners to county jails while releasing many others.  After a few years, we are starting to see the ramifications of such ill-thought-out and jerry-rigged policy.  Crime rates (particularly in the inland portions of the state) have increased (in some cases, quite dramatically).  As Maldonado points out, in Kern County, grand theft auto rates have increased 22%, burglaries by 17%, and robberies by 19%.  Of course, there may be other factors at work (high levels of unemployment, stagnating income growth, etc…), but the realignment has been widely panned by policy-makers, local officials, and law enforcement officers (and Brown can potentially be attacked for the other reason as well).

Starting on April 22, Maldonado has been on a massive push posting very nifty graphics on Facebook and Instagram (even creating a Tumblr website – http://moonbeammemes.tumblr.com/ – lampooning Jerry Brown’s nickname) highlighting the prison realignment and crime spikes.  While I’m skeptical that the prison realignment is actually on voter’s current bandwidth, I’m assuming Maldonado has focus grouped and/or poll tested this narrative and found a decent amount of concern and salience.

However, Maldonado needs to do more than just present the attacks on Brown’s prison realignment policies; he needs to present a bold vision for moving forward.

Maldonado is in a unique position to move his campaign out-of-the-box and toward bold policy messaging.  Candidates running in extremely safe elections who have a lot to lose from a slight campaign misstep make risk-averse and cautious decisions, but Maldonado will be running an uphill battle in a hostile state.  This means Maldonado can get creative, presenting a fresh approach to California.

Now that Maldonado has framed Brown’s prison failure, it’s time to go bold with policy prescriptions to fix the problem.  Voters want to vote for a vision and Maldonado is in the position to do that.  Below are some outside-the-box ideas that Maldonado could adopt and adapt.

1. Eliminate minimum sentencing: In a post-Prop 36 (which eased California’s 3-strikes law), prison sentencing can be drastically altered.  Eliminating minimum sentencing for misdemeanors and even for minor felonies and giving discretionary power to presiding judges could empower more creative and incentive-based punishments and keep minor criminals out of the prison system.  Senator Rand Paul has moved legislation forward to eliminate minimum sentencing on the federal level, which could be used as a model in California.
2. Restructure prison guard pensions: One of the major cost drivers for California’s crazy-high prison budget is former Governor Gray Davis’ salary/pension give-away.  Gray Davis gave a 34% raise to prison guards costing taxpayers an additional $500 million per year.  In 2011, 900 prison employees earned more than $200,000 a year with 11,000 prison workers making more than $100,000.  They then can retire at a ripe young age receiving these amounts (or close to them) for the remainder of their lives.  Maldonado could propose a drastic cut in both pay and pension terms for prison employees, which would ease the prison budget substantially.
3. Design an extensive prison infrastructure revamp:  Of the system’s currently operating 33 prisons, 2 were opened in the 1800’s, an additional 18 were opened prior to 1990, another 12 during the 1990’s, and only 1 since 2000.  Meanwhile since 2000, California’s population has increased over 10%.  California is the largest state in the country (population-wise) and yet it has an antiquated and small prison infrastructure system.  Texas, for example, has almost 3 times as many facilities in their statewide prison system. A re-design and investment into the current system as well as building new prisons will be expensive, but that’s where cutting the prison employee’s lavish salaries and pensions comes into play.
4. Bring HOPE to California:  California needs to get creative in non-prison punishments for its criminals.  Often petty criminals go into prisons and come out with a how-to felony manual.  Researchers are finding new ways to use incentives to gain positive results.  One such creative method is HOPE, which has been pioneered in Hawaii and is being experimented with in Washington.  This process follows a “swift and sure punishment” incentive approach to discourage probation violations keeping probationers honest and out of jail.  It was found to be widely successful in Hawaii reducing recidivism as well as prison crowding because judges were willing to lessen sentences if the convicted agreed to enroll in a HOPE program.  This approach alone could do wonders for California and even better, the key expert for the program is none other than Angela Hawken who teaches at Pepperdine University’s School of Public Policy in Malibu, California.

 

Maldonado’s first campaign narrative gives him a great opportunity to show California voters that he can be a bold leader with creative ideas to better the state’s future.

 

Gabriel Gomez’s Nomination Could Make the MA Senate Race Competitive

Could Gabriel Gomez pull off a Scott Brown-type upset in Massachusetts’ special Senate election?  Of the GOP candidates who vied for the nomination, many think Gomez has the best chance.  Last night, in a stunning and decisive upset, Gomez became the Republican nominee for the Senate seat John Kerry vacated when he became Secretary of State.

While being a Republican candidate in Massachusetts for federal office is never an envious position, Gomez’s unique combination of background and ideology makes him prime for a Brown-level upset.    A son of Colombian immigrants, Gomez learned English as a second language.  He attended the US Naval Academy and then became a Navy SEAL (no easy feat at all).  After leaving the Navy, Gomez attended Harvard Business School and then became a successful private equity investor.  His combination of immigrant roots, military and business accomplishments gives him advantages over his career politician Democratic opponent.

Massachusetts will never elect a Ted Cruz-type Republican to the Senate (or any other office, for that matter).  But as shown by the elections of Scott Brown, Mitt Romney, Bill Weld, and others, Massachusetts voters are prone to electing moderate Republicans.  Gomez fits the bill nicely.  He supported the Manchin-Toomey gun background check bill and supports gay marriage.  Despite being a pro-life Catholic, Gomez has stated that Roe v. Wade has made the issue an irrelevant debate topic.   His focus is squarely on fiscal and economic issues, which Massachusetts’ hordes of Independents will likely find agreeable.  In many regards, Gomez is the non-white guy version of Scott Brown, which should scare Democrats.

So, why are Gomez’s chances reasonably good?  The answer lies not only within Gomez, but also his opponent.  He’ll be battling against Congressman Ed Markey, who hasn’t held a job aside from being an elected politician and who doesn’t even reside in the state anymore (he lives in Maryland).  In addition, Markey is probably the most liberal member of Massachusetts’ Congressional delegation, which is saying something for a state as blue as Massachusetts.  While Democrats outnumber Republicans 3 to 1 in Massachusetts, Independents outnumber Democrats by roughly 1.5 to 1, which means 53% of the Massachusetts electorate is non-partisan.  If Gomez can gain name recognition and presents himself as a rational, non-scary Republican, Gomez can follow the same winning formula Brown did by keeping Republicans in line and winning Independents 3 to 1.

Of course, Democrats have learned their lesson from 2010 and won’t be caught flat-footed (low Democratic turnout really helped Brown in 2010).  However, Markey hasn’t run a truly competitive campaign for decades and he isn’t a truly lovable personality.   Even Stuart Rothenberg is out today warning pundits not to “write off” the race; so while, the election is still a Likely D race, we could see it start shifting to a Lean D or potentially a Toss-Up.  The Republicans have just turned a dismal race into a much rosier one and all because of strong candidate selection – amazing what can happen if Republicans stop nominating buffoons.

2016 Presidential Contender Update (April)

It’s been a little over two months since my last update on the 2016 possible bench.  Not much has really happened (predictably), but nonetheless, my opinions are shifting some on the power rankings for the two parties.

Democrats

This really is a story about Clinton and the “seven dwarves”.  Without Clinton, the Democratic field is a rather uninspiring group of mostly far-left ideologues.

Tier 1

Clinton – Do I really need to provide a rationale?  While she isn’t as infallible as the pundits are trying to make her out to be, at this point she is the one to beat.

Tier 2

Biden – He moves up not because of anything he’s done, but because of the fact that no one else has done anything.  As the sitting VP, he is in a position that affords him a lot of advantages.  He still has a lot of disadvantages, though, so any activity from other candidate could depress his standing quickly.

Gillibrand – She isn’t doing much to raise her profile in the Senate, but she is still a very attractive candidate with both a liberal Senate record and a moderate House record who could play well in both the primary and the general election.  She’d have the NY money behind her and be a prominent woman if Clinton doesn’t run.

Warren – It pains me to move her up to the second tier, but Warren’s national prominence and devout admiration by the Democratic base would make her a strong contender in the primary.  Would she play well in a general election: absolutely not.  Plus she’s from MA and MA candidate seems to be able to win nominations and then squander the White House.

Cuomo – Despite the recent corruption scandal that has engulfed New York, Cuomo has the record, political name, and ability to organize a top-notch campaign.  How he handles the NY Mayor scandal could determine whether it harms his future aspirations, but at this point, he is really the Democratic Governor to watch.

Tier 3

Klobuchar – This senior Senator from Minnesota is a darkhorse female contender who has the potential to really challenge Tier 2 candidates.  She falls into the third tier because of her low national presence and the fact that she hails from a state with little money or national prominence.

Hickenlooper – Looking at the top contenders, we see a similarity – they all hail from the Northeast (Biden pushes that description, but is close enough). Hickenlooper is the amazingly popular Governor of an important swing state.  He may be too moderate for the primary, but his record would potentially fit well in the general election.  He could easily consolidate the non-Northeast support.

O’Malley – Although O’Malley has been the most blatant in preparing himself for a 2016 run and despite the fact that he has had a number of liberal wins this legislative session, O’Malley is shaping up to be the T-Paw of 2016—a candidate who has a strong record and should excel, but lacks the x-factor to push him into the top tier.

Warner – He is immensely popular in Virginia and has a strong record as Governor/Senator.  But he has had a very low profile Senate tenure.  He is not well-known at all outside of Virginia and has little behind him that could propel him onto the national stage.

Tier 4

Former Senator Evan Bayh, Senator Tim Kaine, Senator Jon Tester, Governor Deval Patrick, Governor Mike Beebe, former Governor John Lynch, Governor Brian Schweitzer, and Mayor Michael Bloomberg all have possible paths up the ladder into higher tiers, but haven’t done much to position themselves in such a manner (except for Bloomberg, who you could make an argument for).   Even if they move up, none really appear (at this time) to be compelling darkhorse candidates who could move all the way up to the top tier.

Republicans

While there isn’t a mega-name on the GOP side for 2016, there is a dynamic group of forwarding thinking, up-and-coming leaders most of whom have a conceivable path to the nomination.

Tier 1

Rubio – Still the prohibitive favorite at this point, despite the desire by Republicans to nominate a Governor.  His leadership on many issues in DC have propelled him to the national spotlight and his ability to straddle both the activist and establishment branches of the party doesn’t hurt.

Christie – Despite his run-ins with the activists, Christie is cruising to an impressive re-election and has the record to run on and the personality to diffuse any misgivings.  Of the GOP Governors, Christie is definitely sitting in the driver’s seat for the nomination.

Paul – His filibuster really worked to raise his national profile.  While I think his time in the sun may be relatively short-lived, he has definitely shown a political ability his father never seemed to master.

Ryan – He remains one of the highest profile Republicans in the country guiding the party’s fiscal policy.  He has a bright future in the House, but appears to have really enjoyed his VP run in 2012.  It’s rare for a House member to make a strong run for the President, but his national boost in 2012 has positioned him well to do just that.

Tier 2

Walker – The Governor of Wisconsin has jumped the most in my rankings mainly because he appears to be eying a 2016 run.  He still has to win re-election, but it appears his 2012 recall results have scared off strong Democratic challengers.  His record is excellent and he has proven deftness in communicating conservative ideals on a personal level.  If Ryan sits it out, Walker will become the Wisconsinite to watch.

Bush – His last name is a liability and he does represent the past, but this Bush has always been the most forward-thinking of the dynasty and would have the support of the entire Bush network, which cannot be discounted.

McDonnell – He finished off his last legislative cycle with some excellent wins and has shown an ability to push conservative legislation in a mild manner.  His personality and home state are both winners, but he will have been out of office for 3 years by 2016 and some unfavorable donor stories are popping up with his name in the mix.

Jindal – His approval ratings in Louisiana are plummeting to the point where Obama is actually viewed better than him.  He has had to abandon his center-piece tax reform proposal and he continues to be extremely awkward on the national stage.  Yet, he is a bold thinker, but that may not be enough.

Tier 3

Martinez – She had a great legislative session in New Mexico despite the left-leaning tilt of her state legislature.  Her ability to connect with people of all walks of life is inspiring and her story continues to make her an attractive candidate for national office.  However, she hasn’t shown an interest in the White House and New Mexico isn’t a strong base to launch a national career (just ask Bill Richardson).

Sandoval – The popular Governor of Nevada (swing state alert) continues to push for conservative reforms in his state and somehow manages to placate the liberal state legislature at the same time.  However, he is a bit rough on the stump and is pro-choice.

Huckabee – A likable guy who is a compelling public speaker, Huckabee is the strongest of the two social conservative cultural crusaders (Santorum is at the bottom of Tier 4).  However, he’ll have been out of office for some time in 2016 and represents more of the past than the future.

Tier 4

Huntsman, Thune, Portman, and Toomey are all in Tier 4 because of some dryness or lack of an x-factor to make them exciting.  All could conceivably, however, push their way into the 3^rd tier.

Nikki Haley and Rick Perry are in Tier 4 because of their inability to rally support in their own home states despite hailing from deep-red parts of the country.  Perry is also here because of his terrible 2012 performance.

Santorum, Gingrich, and Palin are all more charactertures than actual candidates.  Santorum and Gingrich only managed to stay in as long as they did because of the general weakness of the 2012 bench.  2016 has 2 tiers of strong candidates and a 3^rd tier of potentially strong ones.

Pawlenty and Condi Rice have been removed because they have shown absolutely no interest in running particularly considering their current employment.

The invisible primary is starting to begin, but won’t really ramp up until post-2014 midterms.  However, be mindful of everything these individuals do.

Abel Maldonado’s Gubernatorial Advantages and Drawbacks

Last week, Abel Maldonado announced he was opening an exploratory committee to challenge Jerry Brown in 2014.  Maldonado has had a long and mixed career in public service, yet may be exactly what the California Republican Party needs to remain competitive in 2014 and set up the party’s revival for 2016 and beyond.

 

Why Maldonado Might Be What the GOP Needs in 2014

Based on electoral analysis, the average Republican candidate can expect to receive roughly 43% of the two-party vote in California.  A strong Republican can push the percentage to about 47%—still not enough to win in the top-two general election.

As such, it is important to find a candidate who has the ability to appeal outside of the typical Republican voter group.   Looking at electoral comparisons of Schwarzenegger, Whitman, Fiorina, and Cooley, we see a distinct path to a Republican success.   A Republican has to run up large margins in the “Republican” safe zones (the Inland Empire, San Joaquin Valley, the Sierras, and Orange county in the Southern Coast),  win the “swing” regions (San Diego and Ventura counties in the Southern Coast, the Sacramento Valley, and the Central Coast – focusing specifically on Santa Barbara, San Benito, and San Luis Obispo counties), and close the large gaps in the “liberal” strongholds (LA county, the Bay Area, and the Northern Coast).

To help achieve this regional strategy, the Republican has to compete with Latino and Asian voters.

Abel Maldonado is uniquely positioned to achieve this rather difficult confluence.

Central Coast Base: Maldonado was born and raised in Santa Barbara county and attended college at CalPoly in San Luis Obispo.  Disgusted with city regulations and inefficient government, Maldonado decided to run for Santa Maria City Council at the age of 26 and two years later, successfully challenged the incumbent Mayor.  At the age of 31, Maldonado ran for and won a state Assembly seat representing San Luis Obispo county and western Santa Barbara county.  He was re-elected in both 2000 and 2002 (his average voter percentage for his three terms was 63%).  After three terms in the Assembly, Maldonado went on to represent almost all of the Central Coast as a state Senator.  In all, Maldonado spent roughly 16 years representing some portion of the Central Coast.

This region is probably the “swingiest” of all of California. Based on PPIC studies, it has a political ideology of 0.00—meaning it is perfectly moderate.  Interestingly, though, if you remove Santa Cruz and Monterey (which only account for 46% of the region’s registered voters), it has an ideology rating of -0.06, which is ever so slightly conservative.  If combined with the Inland Empire, San Joaquin Valley, the Sierras, Orange, Ventura, and San Diego counties, winning the Central Coast means the candidate has won almost a majority of the state’s registered voters.  Maldonado is a known entity in the Central Coast and has cultivated a political identity that fits well with the Central Coast.  Hailing from an important swing region will help to broaden the GOP’s appeal and expand its map.

Background:  Maldonado is the eldest son of Mexican-American immigrant farm workers.  His story is one of the finest examples of the American Dream.  His parents worked hard to eventually purchase their own small strawberry farm in Santa Maria, which enabled them to help send Maldonado to college, where he majored in Crop Sciences.  Maldonado was, then, able to help transform his small family farm into 6,000 acre farm employing hundreds.  His entry into politics wasn’t self-serving, but rather from frustration of a government inhibiting people’s success rather than fostering it.

While in the Assembly and Senate, Maldonado served on the Business and Profession committee, the Budget and Fiscal Review committee, the Education committee, the Health committee, the Veterans Affairs committee and served as Vice Chair of the Food and Agriculture and Human Services committees.  Not only does he have a successful business background, he also understands the legislative process in important policy areas. His Latino heritage and his family’s story is one that will connect with many voters (not only Latino, but also Asian) in California.  Maldonado’s background not only exudes success, but also diversity.

Ideology: California, while not as liberal as the elected officials make it appear, is not a bastion of conservatism.  California has an average ideology rating of -0.07, which is ever so slightly center-right.  That said, however, California continues to vote Democratic.  California’s two-party PVI has shifted from D+7 to D+9 between 2008 and 2012.  This means, on average, California votes 9 points more Democratic than the nation as a whole.  Key regions also have a left-skewed PVI—Central Coast: D+12 (D+5 w/o Monterey & Santa Cruz), San Diego (D+2)—and even the Republican zones are not excessively Republican—Orange (R+5), San Joaquin Valley (R+4), Sacramento Valley (R+4), Inland Empire (R+2).

California’s political landscape will never be hospital to a conservative firebrand.  Even Republican Governors of the past were largely moderates (especially relative to national Republicans).  Maldonado will be derided as being among the Sacramento Six (more on that later), but overall, he is a moderately conservative Republican who fits nicely with the overall ideology of the state.

• His 2008/2009 average Capitol Weekly Legislative Scorecard rating was 38% (100 being liberal).  Of the Senators who were scored in both 2008 and 2009, Maldonado was the most moderate Republican, but ranked as the 10^th most conservative member of the chamber.  His overall conservative rating (based on Vote Smart) is 42%.
• He has an overall average score of 49% on abortion issues (100% being completely pro-choice), which puts him in line with Pete Wilson, Meg Whitman (and Steve Poizner), and Arnold Schwarzenegger.
• On Agricultural issues, he scores an average of 85%, which signifies strong support for a $44 billion industry.
• On budgetary, taxation, and spending issues, Maldonado has an overall average score of 87% (100% is anti-tax, anti-spending, pro-balanced budgets)—proving his 2009-2010 state budget vote is an anomaly not the norm.
• With an average score of 71%, Maldonado scores strongly on business and consumer issues as well.
• He has strong pro-family credentials (73%), relatively strong positions on women’s issues for a Republican (55%), decently strong record on environmental issues for a Republican (43%), and is blatantly anti-union (20%).

Pulled together, Maldonado’s record, geographical base, and background should make him a strong candidate for the top spot in Sacramento.  However, these strengths can easily be derailed by three problematic issues Maldonado must address immediately.

 

Items Maldonado Must Immediately Address In Order To Run a Successful Campaign

Business Tax Issues:  According to an IRS audit, Maldonado’s business owed an additional $470,343 in taxes due to unreported income.  Maldonado immediately said that he believed his 2010 filings were accurate and that he paid all taxes owed.  In addition, the family company was in settlement phase with the IRS over the supposed underpayment of almost $4 million in taxes between 2006 and 2008.  This is a problematic narrative that any smart opponent would immediately latch onto (like Lois Capps did in 2012). Maldonado should work expeditiously to resolve any tax related issues with the IRS so that they do not linger into a future campaign.  If the IRS is right, Maldonado should apologize expressing his regret for the mistake/oversight. He should then quickly pivot on the issue turning it into a relatable problem that many Californians face (threats by the tax man) and say that while Jerry Brown wants to continue to raise taxes and make the tax environment more punitive, he understands the need for across the board tax reform. Nonetheless, Maldonado should do everything possible to make sure this isn’t still a problem by the time he officially declares.

John Weaver: According to reports, John Weaver will be a consultant/strategist for Maldonado’s gubernatorial campaign.  If Maldonado wants to make into the top-two general election come 2014, John Weaver must go and must go now.  He is a failed political consultant, who will only inhibit the campaign, while adding nothing of value.  Weaver’s two best known political clients have been John McCain and Jon Huntsman (as well as the DCCC).  Weaver worked for McCain’s failed 2000 campaign and was forced out of his 2008 run in July 2007 as McCain’s campaign was imploding.  Without Weaver, McCain finally went on to win the nomination.  Weaver then went candidate shopping in 2012 eventually finding Jon Huntsman.  Somehow, he took a fiscally conservative Governor from deep-red Utah who had business acumen and an amazing foreign policy record and created the atrocity that was the Huntsman 2012 campaign.

Weaver openly antagonizes conservatives, seeks to make his candidate more darlings of the media than of the voters, ignores political realities, treats staff terribly, over spends while under fundraising, and (at least from an outsider) never appears to actually have a strategy (which is ironic since he calls himself a strategist).  In the end, he always has more excuses than self-assessments.  As the Daily Caller effectively put it, “He throws himself into campaigns only to lose, to be pushed out, or to leave under questionable circumstances.”  He has no place in a Maldonado campaign (or, actually, any other).

John Fleischman: Ever since Maldonado voted in favor of the 2009-2010 state budget, which raised taxes, in exchange for placing Prop 1F and Prop 14 on the ballot, hard-core conservatives (particularly in Orange county) largely lead by John Fleischman (editor of FlashReport.com) have been a thorn in Maldonado’s behind.  Really, the problem stems from a seemingly sense of betrayal.  Maldonado had signed Americans For Tax Reform’s “No Tax Pledge” during his Assembly and Senate tenures, but then voted for the budget which included tax increases.

Fleischman and other conservative crusaders are never going to join hands and sing Kumbaya with Maldonado; however, Maldonado cannot let this rift fester any longer.  His inability to neutralize the far-right conservative critics inhibited his campaign against very liberal Lois Capps in 2012.  Activists refused to support his campaign.

Do I agree with Maldonado’s vote?  No, not necessarily.  But Maldonado had a 16 year career in politics prior to that vote.  Shouldn’t we examine his entire record rather than just one vote?  If you say no, then you are saying that Ronald Reagan doesn’t deserve all the conservative fawning he gets.  Let’s not forget, Reagan sought out and signed the largest tax increase in California history while Governor.

Maldonado must get out in front of this issue; frame himself as a responsible leader looking to push solutions and alternative rather than being a roadblock.  Discuss his overall strong record on spending, taxes, regulations, and education.  Acknowledge that Fleischman and others have a chip on their shoulder, which is now old news.  At the end of the day, California was a high tax, high spending, overly regulated state prior to the 2009-2010 state budget vote and was a high tax, high spending, overly regulated state following the vote.

In my previous CA gubernatorial power ranking, I kept Maldonado at #4 because of his relationship with conservative activists.  These individuals, more so than the liberals, will be what potentially prevents Maldonado from the Governor’s Mansion and as such, he needs to reach out and neutralize them quickly.

Fundraising: This is a problem that largely stems from the one above, but can be mitigated even if the Fleischman problem isn’t fully neutralized.  In his 2012 Congressional campaign, Maldonado only raised $1.9 million.  To you and me that may sound like a lot, but considering his opponent raised over $3.3 million and the average Republican in a competitive district was outraised by just $142,000, Maldonado’s $1.4 million fundraising deficit severely hampered his ability to campaign effectively against a sitting incumbent.  He needs to aggressively raise money if he plans to compete with the union-financed Jerry Brown.

Maldonado has a few significant challenges to overcome, but I think at this point I would move him up to the #2 spot on my power rankings.  His geographical base is a politically important region.  His background meshes nicely business, agriculture, and Latino roots.  His ideology is almost a perfect match for the California electorate (and let’s not forget, he’d be a more conservative Governor than Jerry Brown).   He needs to address some issues, however, to become a truly potent candidate. At the end of the day, Abel Maldonado may be exactly what the California Republican Party needs to revitalize its image and its prospects for future competitiveness.

Sacramento Spotlight: A Cornucopia of Fracking Legislation

Crossposted on Advancing a Free Society – Eureka

The “Sacramento  Spotlight” examines the policy merits of pending legislation in the California state legislature.  It is originally posted on the Hoover Institution’s Advancing a Free Society – Eureka blog.

I encourage you all to check out Eureka as well as the Advancing a Free Society homepage on a regular basis to see what Hoover Fellows are discussing.

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California currently has about 50,000 producing oil and gas wells scattered throughout the state, of which about 750 (or 1.5%) use hydraulic fracturing – “fracking”, for short.   While fracking has been used in California for over 60 years, the state is just now getting around to proposing regulations and legislation to govern the controversial drilling practice.

Recently, fracking has become the favorite punching bag for environmental activists and liberal prognosticators.  However, based on recent polling, the public is effectively split on whether it favors or opposes the practice.  Over the next few months the California State Legislature must struggle with two seemingly dispirit agendas:

1) environmentalists, who wish to end fracking in California because of over-blown environmental and health concerns;

2) economic growth proponents, who see fracking as a way to unleash an economic renaissance the state desperately needs.

In the “Spotlight” are eight pieces of introduced legislation that run the gamut of taxation, strict moratoriums, arcane regulation, and permitting and disclosure surrounding the fracking issue.

• Permitting and disclosure: SB 4 (introduced and amended by Democratic Senator Fran Pavley), AB 7 (Democratic Assemblyman Bob Wieckowski), AB 288 (Democratic Assemblyman Marc Levine),  AB 982 (Democratic Assemblyman Das Williams) would all allow the continued practice of fracking with a robust public disclosure and permitting process (with some variation).
• Moratoriums: AB 649 (Democratic Assemblyman Adrin Nazarian), AB 1301 (Democratic Assemblyman Richard Bloom), and AB 1323 (Democratic Assemblywoman Holly Mitchell) would all institute an immediate moratorium on the procedure pending commissioned scientific studies.  While not an overt moratorium, the intent of Democratic Senator Hannah-Beth Jackson’s SB 395, which would broadly define “produced water” and classify it as a hazardous waste material, is to effectively ban the fracking process.
• Taxation: Democratic Senator Noreen Evans’ SB 241 would impose a 9.9% oil severance tax on all oil extraction in California with the funds allocated to the UC, CSU, and Community Colleges systems as well as the Department of Parks and Recreation.

 

In addition to these pieces of legislation, California’s Department of Conservation/Division of Oil, Gas and Geothermal Resources has proposed a list of fracking regulations in 2012 that would institute “rules for storing and handling fracking fluids, well monitoring after fracking, and preventing water contamination,” as well as require the disclosure of the chemicals used in the fluid. The proposed regulations mimic closely Colorado’s fracking regulations, which were championed by Democratic Governor John Hickenlooper, the oil and natural gas industry, and environmentalists like Earthjustice.

Currently, the operators of the 750 wells using fracking are not required to report anything about their operations.  However, environmentalists find the proposed DOGGR regulations completely inadequate for a practice that has been linked to groundwater contamination in Pennsylvania, increased levels of ozone in Wyoming, health risks in Colorado, and possibly to induced seismic activity. Using these environmental and health degradation concerns, environmentalists have successfully lobbied for moratoriums in New York, New Jersey, Vermont, and North Carolina.  It is their hope to institute a clear and immediate moratorium on fracking in California despite any positive externality.

However, the environmental and health effects of fracking are not as clear cut as the environmentalists would have you believe.  Based on analysis by Susan Brantley of Pennsylvania State University and Anna Meyendorff of the University of Michigan, water quality in Pennsylvania was largely the same before and after the fracking of wells nearby. Hickenlooper has called attempts to vilify fracking as “all hyperbole and anxiety…and no science.” And a year-long independently-verified study of the Ingleside Oil Field near Los Angeles found no negative health, air quality, or seismic effects.

While the environmental and health impact is hotly debate, the second issue – economic growth – is anything but debatable.

At issue in California is the 15.4 billion barrels of shale oil reserves lying under the 1,752 sq. mile Monterey/Santos shale play.  Based on a geological study by the U.S. Energy Information Administration, this region of California represents 64% of all shale oil reserves in the nation. To put this in perspective, according to EIA data, California’s Monterey/Santos reserves alone could conceivably feed the American oil appetite for roughly 2.2 years.

Unleashing this vast amount of natural resources could yield an economic growth similar to the dot-com boom. According to a recent USC study, opening the Monterey/Santos shale play could boost per capita GDP by over $10,000 (an increase of 14.3% over the projected 2020 baseline). This economic boom would yield substantial employment growth – an additional 2.8 million jobs in California representing a 10% increase over the projected baseline. The additional employment coupled with increased GDP output would increase total personal income by about $220 billion – a 10% increase over the 2020 baseline.  And all of this economic growth means a boon to the state budget. By 2020, the oil production would add an additional $24.6 billion to the state, local, and county government coffers.

Contextually, during the dot-com boom, California non-farm employment increased by 1.4 million (9.7%), per capita GDP and total personal income grew by almost $6,700 (18.3%) and $248 billion (29%), respectively.  Even if only half of the additional $25 billion in government revenue went to Sacramento, it would equal around 125% of California’s 2011 collected corporate income tax receipts.

So while environmentalists would like Californians to believe that fracking would lead to an environmental apocalypse, scientific evidence is mixed and divergent.  On the other hand, economic impact studies are uniformly positive.  In a state plagued by chronically high unemployment and critically low GDP growth, it would be fiscally irresponsible to so blithely ignore potential economic motivators.

However, California should not blindly embrace fracking.  Like Colorado and Pennsylvania, which both engaged in transparent and streamlined fracking oversight under Democratic gubernatorial administrations, California would be wise to replicate such a system to protect against possible environmental and health hazards while fostering economic growth. The DOGGR proposed regulations as well as certain introduced legislation, like the amended SB 4, build on the success of other states, such as Colorado. A strict moratorium ignores the positive economic benefits and is unwarranted considering fracking’s limited use in the state and the fact that there have been no major incidents related to the procedure despite 60 years of unregulated activity. While public scientific studies should be conducted, using them as a method to stall further fracking development—like AB 649, AB 1301, AB 1323, and possibly, SB 4—irresponsibly prohibits regulated production that would produce significant economic gains.

Californians should be wary of creating too many layers of fracking bureaucracy.  While AB 982’s permitting process is similar to DOGGR’s and SB 4’s, it would add an additional layer of red tape by giving both the DOGGR and the Regional Water Quality Control Board responsibility for oversight.  DOGGR was created to oversee oil and natural gas exploration and production; therefore, additional layers of oversight would impose additional costs, unnecessarily slowing down the process and stymieing potential economic activity.  If DOGGR isn’t doing its job properly (and there is no evidence to suggest so), the appropriate method to fixing the regulatory process isn’t to add more layers, but rather to reform the division.

At the same time, Sacramento shouldn’t and doesn’t need to impose further taxes and fees on the industry.  Tax windfalls will occur without the need of further taxation.  Instead of greedily hording the additional funds for pet projects, California should a) prudently pay down its debt and unfunded liabilities to put itself on sounder fiscal footing and/or b) use the additional revenue to lower the taxation burden on businesses within the state to foster broader economic growth.

Despite his environmentalist background, Governor Jerry Brown has taken a much more pragmatic view of the oil industry in his current term and has expressed a moderate tone on the future of fracking in the Golden State.  Odds are: some sort of action will take place in 2013 on California fracking; the only real question is whether the process is hijacked by environmentalist fear-mongering or if the Legislature and Governor Brown take a measured approach accurately weighing both the procedures’ benefits and costs.

California Tidbits – High Speed Rail Boondoogle & Small Business Competitiveness

The following is a brief discussion on two recurring California topics.

 

The High Speed Rail Boondoogle Continues

The $68 billion High Speed Rail project hurdles forward despite the fact that no one is really sure where the money will come from for completion of the project or where the route will eventually go or how long this high speed trip will actually take.  Despite criticism from supporters of Prop 1 (the proposition passed by voters to authorize selling $9.95 billion in bonds for construction) that the current construction plans would violate the proposition’s 2 hour and 40 min maximum travel time, high speed rail enthusiasts insist everything will come out just fine.

Now, one more question and unrealistic assumption is being forced upon everyone.  A leaked GAO study insists the High Speed Rail Authority’s assumed ridership of between 16.1 million and 26.8 million annually is reasonable.  Let’s set aside the fact that the 10.7 million person range is a ridiculously massive guesstimate and focus on the Authority’s assumptions.  The Authority needs these ridership assumptions in order for the math to work. If ridership is lower, ticket prices would have to jump to make the project economically viable.

Let’s put these numbers in perspective.  Amtrak’s FY2011 total nationwide ridership was just 30.2 million (and as they proudly promote, “the largest annual total in Amtrak’s history”).   It’s most used portion—the Northeast Corridor—saw just 10.9 million riders. The combined California corridors (Pacific Surfliner and San Joaquin services) saw just 3.8 million riders for FY 2011. In 2011, LAX had a total of 22.4 million domestic passengers go through its airport.

Under the Authority’s assumptions, not only would the High Speed Rail transport essentially the same number of riders Amtrak moves in the entire nation for a year, but also as many people LAX accommodates within a year.  This whole project continues to operate in fantasy land.

 

California’s Continued Place at the Bottom of Business Rankings

Thumbtack and the Ewing Marion Kauffman Foundation joined forces to survey about 8,000 small businesses throughout the country to asses a state’s and city’s friendliness to this important component of the US’s economy.

Unsurprisingly, California found itself at the bottom again, coming in as the 4^th worst state for small businesses beating only Rhode Island, Maine, and Hawaii.  On the survey components (Ease of Starting Businesses, Regulatory Friendliness, Employment/Labor/Hiring, Licensing Regulations), California falls either 4^th from last (Ease of Starting a Business), 3^rd from last (Regulatory Friendliness and Employment/Labor/Hiring), or 5^th from last (Licensing Regulations).

While California scored a D on their overall score, half of our neighbors scored an A or B (Utah – A+, Nevada – A-, Washington – B-).  Competitor states like Texas (A), Virginia (A), and North Carolina (B+) also all perform significantly better than California.

On the city level, none of California’s assessed cities (LA, San Diego, San Jose, San Francisco, Oakland and Sacramento) performed better than a C.  However, all of Texas’ cities (Dallas-Fort Worth, Austin, San Antonio, and Houston) scored an A or A+.

California continues to rank at the bottom of business climate surveys.  At some point our awesome weather isn’t going to be enough to keep the state competitive anymore.  Sacramento should wake up sooner rather than later.

The GOP 2016 Dark Horses

No sooner did the networks call the 2012 election for Obama did the pundits’ attention turn to 2016.

However, while the pundits are buzzing about on 2016 topics, the public as a whole is not really paying attention.  Why do I say this?  While Marco Rubio has a weighted power ranking (essentially the media’s “invisible” primary) of 2.4 (the highest among the Republican field), according to the most recent national PPP poll, still 36% of voters have no opinion of him (compare this to Paul Ryan: 15% or Hillary Clinton: 9%).

As such, there is no clear frontrunner for the 2016 GOP nomination nor is there a field clearer.  On the other hand, Clinton is definitely both on the Democratic side.  However, without Clinton, all the Democratic candidates for 2016 are dark horse candidates.

A dark horse candidate is a relatively unknown person who jumps to prominence who otherwise wasn’t expected to or for some reason shouldn’t.  In 2012, one could argue that Rick Santorum was a dark horse.  When he jumped into the race, no one considered him a serious challenger to Mitt Romney; however, he proved tenacious and gave Romney probably his greatest scare.  Besides Clinton and Biden, no other Democratic candidate regularly mentioned is widely known. However, the GOP side has a group of modestly known contenders (Rubio, Paul, Christie, Huckabee, Ryan, Bush, Jindal) and a host of relatively unknown possible candidates.  Without a clear frontrunner or field clearer, these unknowns could surprise many.

Below I list the top 5 possible dark horses who could conceivably surprise everyone and win the GOP nomination in 2016.  Remember, at this point in the 2008 cycle, Barack Obama was only featured in 1 public poll.  3 years in politics can be a life-time.  Right now Rubio and Paul are the hot commodities, but at one point so was Dean, Edwards, and Giuliani.

Scott Walker: Based on Smart Politics’ weighted power ranking, Walker comes in at 9.5.  The Wisconsin Governor made national headlines when we dared to challenge the powerful labor unions in the budget battle that turned a projected $3.6 billion deficit into a $300 million surplus. Not only did he win that battle, but he humiliated the unions in the process. Walker won the union-backed recall with over 50,000 more votes than his initial election. Since then, he has become less visible focusing on education reform and further government reform.  He gave one of the best CPAC speeches telling Republicans to focus on being “relevant, optimistic, and courageous.”  He has the record, background, and demeanor to win the nomination and would be a very formable general election candidate.

Susana Martinez: With a weighted rank of 8.3, Governor Martinez of New Mexico easily is a dark horse candidate.  If she decides to run, this extremely popular, conservative governor of a deeply blue Hispanic state would have the record to run on as well as a personal story that trumps everyone except maybe Marco Rubio in the field.  At the RNC, she had to follow Condi’s fantastic speech and managed to do so not only eloquently, but also emphatically.  In many ways, she has Sarah Palin’s vigor and star appeal, but with substantially more substance and articulacy—which makes her a very potent contender.

Bob McDonnell:  Coming in at a rank of 5.8 on Smart Politics’ scale, the Governor of Virginia is the highest ranked dark horse.  Besides Senator Mark Warner, McDonnell is the most popular politician in Virginia proving that one can govern as a pragmatic conservative.  His transportation plan has caused some ire from staunch conservatives, but when governing you can’t please everyone.  Overall, McDonnell has governed Virginia effectively, conservatively, and efficiently putting together a strong record on spending, education, and infrastructure.  He has a personality that is hard not to like and hailing from an increasingly important swing state doesn’t hurt either.

Mike Pence: Tied with Walker on the weighted ranking, the newly elected/inaugurated Governor of Indiana was silently courted by many social conservatives in 2012 to run for President. He decided against it to instead run to become Mitch Daniel’s successor.  While he’d just be finishing his 1st term in IN, Pence has an ability to unite the social and fiscal wings of the GOP making him a strong contender not only in the Iowa caucus and New Hampshire primary, but also in South Carolina.  With both legislative and executive experience (he served in Congress prior to his gubernatorial election), Pence would also bridge the insider-outsider worlds.  He’s has the social credentials of Mike Huckabee and the fiscal street-cred of Paul Ryan.

Brian Sandoval: Many will remember me pushing Sandoval for VP (I still stand by my decision), but in the weighted rankings, the Governor of Nevada closes out the list at #14 (well besides for Dr. Ben Carson who is 15^th). Sandoval is one of the most popular Governors in the country and hails from the important swing state of Nevada.  His background and record in Nevada makes him a clear challenger and while he is pro-choice, he has managed to placate the staunch conservatives in his home state on the issue. His sunny disposition makes it easy to overlook his not so suave public speaking skills and in a party eager to nominate someone other than a white male, Sandoval has the demographic appeal Rubio has, but with the additional bonus of executive, legislative, regulatory, and judicial experience.

At this point in the race (and yes, the nomination race has already implicitly begun), I think it’ll come down to Marco Rubio, Rand Paul, or Chris Christie, but any of these dark horses or any other of the many possible contenders could easily topple any of those three.