Tom Steyer’s $1 Billion “Green-Jobs” Initiative is a Bust

August 27, 2015 By John Seiler 7 Comments

prop. 39California’s initiative process has sometimes been a boon to taxpayers — think Proposition 13, which checked the uncontrolled growth of property taxes. On other occasions, however, it has yielded some mighty boondoggles. Chief among these are the “boutique initiatives” advanced by celebrities and Silicon Valley billionaires to make themselves feel good or to advance pet political causes — think Proposition 10, Hollywood director Rob Reiner’s early-childhood-development measure that created a host of busybody commissions funded by cigarette taxes.

Boutique initiatives usually come with boutique prices. Among the costliest is Proposition 39, a 2012 measure that hiked corporate taxes on out-of-state businesses to “create energy efficiency and clean energy jobs” and fund “green energy” projects. Prop. 39 was the brainchild of hedge-fund billionaire Tom Steyer, who happened to make a substantial chunk of his fortune from coal and other “dirty energy” investments. Steyer poured $29.6 million of his own money into the campaign. Opposition was negligible; even several large corporations that would face hefty tax increases, such as General Motors, backpedaled from their initial opposition. Sixty-one percent of California voters approved the measure.

Three years on, the results are in: Proposition 39 is a massive waste. An Associated Press investigation found that the state legislature spent half of Proposition 39’s tax revenues “to fund clean energy projects in schools, promising to generate more than 11,000 jobs each year. Instead, only 1,700 jobs have been created in three years.” Moreover, the initiative has fallen well short of the revenue the state Legislative Analyst’s Office projected it would generate. According to the AP, “Proponents told voters in 2012 that it would send up to $550 million annually to the Clean Jobs Energy Fund. But it brought in just $381 million in 2013, $279 million in 2014 and $313 million in 2015.”

Naturally, Steyer and his allies didn’t respond well to the AP’s revelations. State senate president pro tem Kevin de Leon, a Los Angeles Democrat, defended Proposition 39’s record in a joint statement with Steyer published Monday: “It’s irresponsible and more than a little misleading to prejudge a long-term, multi-year program this early in the process. We are disappointed that the Associated Press did not take time to present an objective or comprehensive analysis of what is still a developing program.” Would Steyer say the same about a three-year, private-sector investment that turned sour?

De Leon and Steyer have been super-glued together of late. As the Bakersfield Californian reported, “Steyer, a major donor to Democrats nationwide, is pouring money into the California Capitol, and de Leon is introducing bills that echo Steyer’s environmental agenda.” Steyer has appeared at hearings for de Leon’s Senate Bill 350, which would mandate a 50 percent cut in gasoline consumption in the Golden State by 2030. The only way to achieve that goal would be to increase prices substantially. Hardest hit by Proposition 39 and the scorched-earth environmentalism of SB 350 would be de Leon’s own constituents in East Los Angeles, one of the poorest areas in a state with the highest poverty rate in the nation. Working- and middle-class Californians with long commutes or who drive trucks for a living would suffer the consequences.

De Leon and Steyer’s protests notwithstanding, the AP investigation might spur some corrective action in Sacramento. “It’s clear to me that the legislature should immediately hold oversight hearings to get to the bottom of why yet another promise to the voters has been broken,” insisted Senate Republican Leader Bob Huff of San Dimas. “We should hold some oversight hearings to see how the money is being spent,” said Fresno Democratic assemblyman Henry Perea, “where it is being spent and seeing if Prop. 39 is fulfilling the promise that it said it would.”

At least somebody is getting a nice piece of the action: of the $297 million already doled out to public schools, half went to consultants and auditors. Turns out that “green jobs” means more green for government contractors. Maybe voters will respond more wisely the next time Steyer tugs at their environmental heartstrings.

John Seiler is editorial manager for the Orange County Register.

Originally published by city-journal.org

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Steyer’s Prop. 39 Promises Fall Flat

August 25, 2015 By Jon Coupal 7 Comments

Tom SteyerA decade ago, former CBS News correspondent Bernard Goldberg authored a book titled “100 People Who Are Screwing Up America.” If Goldberg were writing today about Californians, he would no doubt include billionaire Tom Steyer near the top of the list.

Steyer achieved his extreme wealth as a hedge fund manager, an uber capitalist whose profitable investments have included oil, gas and coal.

In 2012, he separated from the management of  his company – he still owns shares – and committed to a “green” agenda. He became the leading sponsor and financial backer of Proposition 39 on the 2012 ballot, which was sold as pro-environmental reform measure virtually guaranteeing its passage by Californians understandably concerned about the environment. Proposition 39 increased taxes on businesses — those evil companies that provide so many Americans their jobs — and directed the money be put into something called The Clean Jobs Energy Fund. Steyer promised it would bring in $550 million and create 11,000 jobs per year. But a recent investigation by the Associated Press reveals that it has raised less than 60 percent of that amount over three years, and has created only 1,700 jobs mostly for consultants and auditors.

Steyer has shied away from taking responsibility for, or being critical of, these dismal results, even though one of his top advisors serves on the Proposition 39 oversight committee that, ironically, has yet to meet.

However, Steyer continues to insert himself and his views into the political arena. In 2014, he spent $57 million of his personal fortune in support of out-of-state candidates for the Senate and governor, most of whom lost. And there is talk of his being a candidate for governor in 2018.

When it comes to Steyer, voters may continue to have a bad taste in their mouths if the promises of Proposition 39 are not kept. He may come to be regarded as a guy with a huge ego who uses his money as a megaphone to promote ill-conceived plans on which he stamps a green label to gain public acceptance.

With the Sacramento politicians, led by the current governor, continuing to dedicate themselves to spending nearly 100 billion taxpayer dollars on a “green” bullet train that will be neither fast nor cheap, as promised, will they be ready to accept another politician with a pie-in-the-sky agenda, one who seems to have more money than sense?

Average Californians are tired of paying high taxes for little or no return. They are rapidly getting fed up with having to carry the burden for the dreams of limousine liberals who are concentrated in idyllic coastal enclaves where only the wealthy can buy homes. Those who can afford to insulate themselves from life’s rough edges should not ignore those who struggle to get to work, feed their families and keep a roof over their heads. If they do, they do so at their own peril.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

Originally published by HJTA.org

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Tough Education Reform, not More Borrowing and Spending, is What Students Need

August 6, 2015 By Ed Ring Leave a Comment

School bond studyLast week the California Policy Center published a major new study that compiled, in exhaustive detail, both the amount that Californians have borrowed to finance public school construction and upgrades, as well as documented the abuses that have diminished the return on these substantial investments. Californians simply don’t realize how much borrowing is going on.

In 2001, voters passed Prop. 39, which lowered the threshold for passage of a school bond from 66 percent to 55 percent. Prior to the passage of Prop. 39, only 42 percent of school bond proposals would pass – since then, 88 percent of them pass. The scale of this borrowing is amazing: Since 2001, Californians have approved 911 local school bond measures totaling $110.4 billion. In addition to local bonds, voters approved three state measures which added another $38.8 billion.

If the proceeds of these bonds were being spent efficiently, on worthy projects, under repayment terms that were fair and appropriate, there would not be an issue. But they’re not. Thanks to costly project labor agreements, environmentalist lawsuits, and a shocking lack of public oversight, school construction projects – along with all public infrastructure projects – cost far more than they should.

When considering what projects might be considered worthy, at whatever cost, one of the biggest reasons cited for local bond proposals is to fund “deferred maintenance.” For examples of this, view the summary of the 2014 Local Elections provided by CalTax (scroll down to “Bond, School”), and read the “description” column. “Upgrade and repair,” “modernize and upgrade,” “fix leaky roofs,” “make safety repairs,” “repair outdated heating and ventilation systems,” etc., etc. But why can’t maintenance work come out of existing budgets? For that matter, why wasn’t the work done using funds from earlier rounds of local school bond proceeds, instead of deferred?

This is not a rhetorical question. California’s K-12 student population has been stable for nearly 20 years. At 6.2 million students, it has actually declined slightly. Meanwhile, over the past 14 years, $146 billion has been borrowed and spent to maintain and improve schools for these 6.2 million students.

That’s $10.4 billion in construction spending every year, which based on 30 students per classroom, equates to approximately $50,000 per classroom, per year. Could you maintain one classroom and that classroom’s share of common facilities if you had $50,000 to spend, year after year?

How much is enough? Since 2001, construction bond proceeds have poured $700,000 into every K-12 classroom in California. Why do the roofs still leak?

When it comes to the terms of this debt, the story gets even worse, because these bonds are complex financial instruments with ample room for “gotchas” that harm taxpayers. One of the worst examples of this are so-called “capital appreciation bonds,” which don’t require any payments for 10-20 years, then demand massive sums of principal and interest payments, long after the original promoters have retired, and often after the improvements and upgrades have worn out again.

It is relevant to discuss California’s $146 billion in school bond debt in the context of all California’s state and local debt. A few years ago the California Policy Center attempted tabulate it, including unfunded liabilities for pensions and retirement health care for state and local government employees. Those findings, using a 5.5 percent discount rate to estimate pension liabilities, and using our updated amount for school bonds, come in at $976 billion. That’s $76,250 of debt per household. Just interest payments on this debt, at 5 percent per year, come out to $3,812 per household per year.

The topic of school bond debt is vast and complicated, which is one reason why there is rarely meaningful public debate. The California Policy Center’s complete study on California’s school bond debt, including appendices, came in at 361 pages (view PDF), and took a team of researchers lead by policy analyst Kevin Dayton nearly a year to write. Here are key recommendations from that report:

  • Provide adequate and effective oversight and accountability for bond measures.
  • Enable voters to make a reasonably informed decision on bond measures.
  • Eliminate or mitigate conflicts of interest in contracting related to bond measures.
  • Reduce inappropriate, excessive or unnecessary spending of bond proceeds.
  • Improve understanding of bond measures through public education campaigns.

And here are a few additional recommendations:

  • Make construction bond proposals contingent on enforcing the Vergara ruling – making it possible to fire bad teachers, changing layoff and retention criteria from seniority to merit, and extending the time period required to acquire tenure.
  • Hold teachers accountable for the academic progress of their students, and prohibit construction bond proposals for any school districts in violation of the state’s teacher evaluation law, the Stull Act.
  • Reduce the number of administrators and support staff, increasing the proportion of public education employees who actually teach in classrooms. This will result in a proportionate reduction in support facilities, at the same time as it frees up budgeted funds to be used to perform deferred maintenance.

The reason Californians have borrowed $146 billion in recent years for school construction is because Californians believe there is nothing more important than educating children. That’s a noble sentiment. It’s why Prop. 39 passed back in 2001, carving out an exception to California’s two-thirds vote requirement for new taxes. And while the process of approving and spending all this money has been riddled with corruption and excess, it would be inaccurate to say all of this money was wasted. But all the money in the world will not improve California’s educational system, if great teachers and principals aren’t given the latitude and incentives to inspire their pupils, and if poor teachers and administrators are not terminated.

Californians should reform their system of K-12 education before borrowing another dime for construction. The return-of-investment is simply far better.

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Ed Ring is the executive director of the California Policy Center.

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