Posted on 03/18/2002 7:41:40 PM PST by gohabsgo
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These statistics and the criminals' histories have been closely guarded by the state agency that is responsible for running criminal background checks on everyone who works or lives at a child-care facility.
I know this up-close - I am an investor in Calpine Corp.
And I think it fair to say, the collapse in spot prices took everyone by surprise. No, that is NOT fair to say! Analysts were predicting that would happen, once you fixed the pricing mechanisms. Econ 101 says that increasing retail price would make the demand fall. In fact, Davis knew that and admitted it (i guess he does have a few neurons in working order). the thing is, he dithered for months on imposing it, and waited until too late, after there were billions in racked up bills, and the utilities were insolvent. the CPUC should have done it in June 2000, not in 2001!
Now Cali did get a lucky break in 2001 with the weather being cool in the summer. that was unexpected.
There does appear to have been some price fixing and withholding of supply. Hollow and false rhetoric. The only price fixing for real is by the regulators. I can tell you, it is beyond absurd to think that competitive energy companies were turning down $100+/mwh prices just for heck of it or just to squeeze consumers. this is lame-brain conspiracy nonsense. these companies wanted to sell as much as possible, but they needed to have a buyer who would pay with good credit. the witholding of supply, if any, was from suppliers who didnt trust the fact that they would get paid. Why was this? because PSE&G was going bankrupt and the state wouldnt back them up, NOR would they let them raise rates (see above). so the solution to BOTH supply AND demand was actually retail rate hikes.
guranteeing payments via DWR was one positive aspect of energy mitigation, because they were a buyer who could pay, but imho it should have only been temporary solution (ie it should have been 1/2 year, not 10 year). I think the contracts were a good part of the solution, if they were done right. unfortunately, they were done wrong. IMHO, they should have let the utils negotiate, and DWR could have guaranteed payment, in exchange for getting the rates necessary to cover the bill from the CPUC. the utils would have more incentive to get a better deal, and would have been more creative than the state was. (water under bridge).
The other part of supply is the actual plants and transmission. On this i cannot fault Davis, it is a long-term problem in Cali. I can fault his advisors, many of whom are these 'we dont need supply' gurus who sell energy/environmental policy snake oil. like wasteful alternative energy schemes that dont generate power in an economical way. cali spending millions on renewable energy subsisides that a simplay a fraud and a waste of money.
Quite how all that has played out, I am not sure. It is the ignorance of energy markets by most people that have kept Grey Davis' story plausible. Davis paid more attention to polls than to Econ 101, and it made a concern into a crisis, and a crisis now into a $40 billion liability for California. He surely doesnt deserve all the blame for this, but Hoover didnt deserve the blame for the Great Depression, and he got booted from office anyway. Davis deserves the same!
Friday, January 11, 2002
I?m delighted to join you this afternoon, and I?m especially happy to again be able to join my friends at the Public Policy Institute of California.
Not yet a decade old, the PPIC has established itself as one of California?s leading non-partisan public policy organizations. And I can tell you, when this group talks, policymakers listen ? sometimes with reluctant ears.
In a line of work and in a related field where partisan lines are often brightly drawn and bitterly battled, the PPIC has stayed above the fray, focused on the facts, and a leader in research, scholarship and analysis.
My friends, after 10 months in my present journey, I can offer you this much: If you?re looking for a real tutorial in public policy and state affairs, it?s hard to beat running for Governor of California.
California?s Budget: A Clear and Present Crisis
Among the most pressing problems California faces now, and in the future, is well-known to this audience: the out-of-sync, out-of-balance, and too often out-of-sight dilemma that is the California state budget.
This week brought with it the latest gloomy chapter in what?s been an annual sad story. For four years running now, California?s Governor has delivered a State of the State Address of hyperbole and rhetoric ? and followed it up with a state budget of shell games and fuzzy math.
In past years, despite warnings from many - including here at the PPIC - about the state budget?s structural flaws, nothing changed in Sacramento. With a strong national economy, low unemployment, and here in California, a ?dot.com? boom, it was clear sailing ahead.
The lights weren?t flickering. Revenues poured in. The state actually ran a budget surplus!
Even their most wildly optimistic projections did not match reality, as tax receipts from capital gains and stock options - historically seven to eight percent of state revenue - grew to more than 20 percent.
As it always does, the economic cycle turned. Because, as we all know, it?s still yet to be repealed.
But, it?s important to note - I believe Governor Davis didn?t plan to fail ? he just failed to plan.
Essentially, California has two types of budget problems ? one short-term and one structural, or long-term.
The short-term problem is that revenues for fiscal 2001-2002 are projected to be $9.4 billion less than the last fiscal year.
In just the time since he assumed office, Gov. Davis has taken California?s budget from a stratospheric $8 billion surplus ? to a subterranean $4.5 billion deficit. And that?s only today.
Revenues for next year - 2002 and 2003 - are expected to come in $8 billion below the excessive expenditure level established this year.
To hear Governor Davis tell the story, California?s fiscal health was just fine, until September 11. But we all know that?s not exactly true.
Just ask tech engineers in the Silicon Valley ? or farmers in the Central Valley.
Of course, the horrific events of 9-11 contributed to the economic downturn we face now. But in truth, when this current year budget was passed last August, the warning signs had been flashing for months ? and ignored for just as long.
Plain and simple: Governor Davis allowed spending to rise too quickly and aggravated the long-term flaws in our budget system through base budget building. And that?s the most expensive kind ? because it?s an expense that has to be covered not once, not twice ? but again and again.
Essentially, the budget contains systemic flaws - and nothing short of a major overhaul can fix it.
Of course, this isn?t all Gov. Davis? fault - as he and his defenders are quick to tell us.
But the fact he hasn?t tried to reform it, and now finds himself constrained by its flaws, that most certainly is.
A leader tells us not only those things we want to hear, but also those we must hear.
A visionary sees the spark before the flame.
And any Governor - Democrat or Republican - must try to be both.
Reviewing the Record
So let?s review the record. In his first year in office, the Governor spent liberally to be sure, but mostly on one-time spending ? seemingly acknowledging the importance of not base building.
While these allocations amounted to a full 15 percent above the previous year, he did hold the line against many of the more spendthrift elements that often dominate the State Legislature.
But, in his second year, the spending bonanza really began ? an increase of 20 percent.
And it was on behalf of long-term commitments that will mandate considerable future expenses every year.
In his third year in office, Governor Davis? panicky mismanagement of the power crisis quickly spent away what was left of the inherited surplus and plunged the state into the red.
Worse, he also signed contracts to buy electricity we don?t need at prices far above the market rate.
By locking in high electricity prices for 10 years, Davis struck a blow at the heart of a weakening economy, nearly doubling power rates when employers could least afford it.
Now, in his fourth year as governor, Davis? budget is projected to be a full $12.5 billion in arrears.
In fact, the nonpartisan Legislative Analyst?s Office projects deficits every year for the next five years, forecasted to reach a cumulative total of $36.5 billion.
And this deficit does not even include an energy debt of $10 billion that still requires resolution.
In the face of this growing crisis, last year, I began to take a close look at the Governor?s fiscal management.
Indeed, I commented nearly eight months ago that the Governor?s budget was irresponsibly out of balance, contained an inadequate reserve, didn?t prudently anticipate the dwindling revenue from an obviously softening economy, and raised taxes at a time we needed economic stimulus.
As Davis worked feverishly to bail out Southern California Edison and plunge the state into the power business, I called on him - in September - to bring the Legislature back into special Session, make cuts in the current year budget, and get out in front of the crisis.
If nothing else, the terrorist attacks should have confirmed the resolve that immediate action was needed.
As the autumn progressed, our worst fears were realized. Data from tax receipts even before 9/11 showed dramatically reduced collections.
Not having the hundreds of staff of the Department of Finance available to me, I worked with our small group to project how we might address the shortfall.
We quickly saw that our crisis was worse than most were foretelling. By early October, we projected the deficit for the period from July 2001 to June 2003 at $13 billion, again not including the energy debt.
I then proposed ?
Still, when I first issued this call to action, I pointed out that California was spending nearly $21 million more per day than it was taking in.
In the 104 days that passed from when I first asked the Governor to immediately address the budget crisis, the state has fallen more than $2 billion further in the red.
2002 - Gray?s Odyssey That brings us to this week.
In his fourth State of the State address, as well as his fourth budget proposal, Davis had one more chance to deliver to California the kind of decisive leadership California deserves.
But Davis offered no real solutions. No economic strategy. No straight talk in a time of serious crisis. But plenty of soft clichés and empty gestures.
The Governor?s budget document released yesterday is no more encouraging. This is unfortunate, for a budget should be more than a spending plan. It should be a setting of priorities, an explanation of philosophy ? a statement of principle.
My friends, effective management of the budget process and administration of the state?s expenditures requires many traits ? not the least of which are honesty, predictability and reliability.
When a funding figure is arrived at for any program, it should be the product of a process of gathering all necessary data and projections, weighing its priority as compared to other competing claimants and arriving at a realistic estimate of the total revenues available.
Quite simply: What programs are most important? How much will they cost? And ? how much money do we have?
Then, once that determination is made, an honest budget can be developed.
Now ? How is this budget flawed?
First and foremost, no matter how many times he states to the contrary, the Governor has balanced this budget with tax increases.
This budget has a $1.2 billion sales tax increase built into it, effective January 1st, that directly resulted from the Governor?s mismanagement.
And it?s clear by his careful rhetoric, that he would not veto additional taxes
Second, the budget irresponsibly shifts costs to future years - delaying the inevitable tough choices for a much, much later day.
This budget not only ignores the Legislative Analyst?s predictions of five years of operating deficits, but also exacerbates this problem.
Third, it assumes rosy economic growth while containing no plan for economic stimulus - as if it will just happen ? perhaps through the power of prayer.
Fourth, it raids $2.4 billion from tobacco settlement funds, which should be used on health programs, and uses it for general operations ? giving new meaning to ?balancing the budget with smoke and mirrors.?
And that doesn?t take into account the terms of the securitization, which, in all likelihood, are questionable, and may involve millions of dollars.
And finally, as we saw during the energy crisis, he?s looking to blame others. Davis has set up his budget with an expectation of $1 billion in federal assistance.
None dare call that leadership.
A Different Kind of Experience
My friends, In the two decades that I?ve been investing in private businesses, I?ve examined thousands of balance sheets, disclosure forms and economic forecasts.
And like many others, I?ve tried to assess whether a company or business is misguided or mismanaged ? under-performing or unrealistic ? overly cautious or simply overwhelmed.
So when I look at the California balance sheet, I see it from a perspective of someone who is familiar with many different types of businesses, and who knows what works and what doesn?t.
Here are the facts:
California relies heavily on revenue streams that are highly volatile.
In the last 23 years, California?s general fund revenue has seen annualized growth of eight percent. Yet in any given year, that growth has ranged from increases of 20 percent to slight revenue decreases.
This volatility is due, in no small part, to the fact that during this same period, the percentage of the general fund attributable to income tax revenue has grown from 38 percent to 58 percent.
So, we have a volatile revenue stream, which is not a problem in itself, because there are plenty of businesses of this type that survive, grow and prosper.
But these businesses require great discipline and an adequate working capital reserve to be managed properly.
That?s why it?s so important for California to establish a prudent benchmark - so that expenditures should grow roughly in line with the underlying rate of revenue growth.
Calling In The Reserves
Since historical revenue growth has averaged eight percent, we should be both cautious and skeptical of spending that exceeds that standard in any given year.
That?s why California?s Governor must not yield to the temptation that a year or two of rapid revenue growth will present ? because there will inevitably be years of little, no, or negative revenue growth.
Quite simply, to smooth out the highs and the lows, money from the good years must be put aside, so that it?s available during the slow years.
As a solution, I propose amending the Constitution to maintain two budget reserves ? one for emergencies, and another for revenue volatility. Only in the direst circumstances should these reserves be used.
The first reserve, at 2% of General Fund revenue, would provide for needs arising from unforeseen natural disasters.
This is especially important in California. the only thing ?unforeseen? about natural disasters is not ?whether?? but ?when? ? they will occur.
The other reserve, at 4% of General Fund revenue, would serve as a working capital reserve, evening out the inevitable highs and lows of the business cycle.
Of course, I?m aware we won?t get to a 6% reserve in a single year ? it must be phased in over several years.
We simply should not have to make the kind of painful cuts that now face us today. Call it the ounce of prevention that would have staved off the pounds of cure Gray Davis will have to eventually impose.
The Simon Specifics
I want to speak out in some detail about how my budget plan differs from the Davis budget.
First, I would achieve the maximum savings in the current year through cuts in both one-time and ongoing programs in the following way:
Now, I know this will be a tough sell, especially with this Legislature.
We know this because we?ve already seen the Legislative leadership?s plan for how to grow our economy and eliminate our budget debt: Tax increases.
A quarter cent here ? a few percentage points there ? sticking it to taxpayers everywhere.
But that?s why it?s so important to realize that cuts made in the current year budget and carried through to next year save us two dollars for the price of one.
Gray Davis? three-month delay in making these reductions has necessitated making some of them deeper than I originally proposed ? but that, my friends, is the price of inaction.
A Better Way
Simply put: I believe California deserves better.
And a better way is how all of us manage our personal and professional needs: openly, honestly, realistically.
That?s why the work you do here is so vital. I urge you to give special attention to developing major structural reforms of our state budget process. I pledge to work with you to implementing these reforms.
With these principles, we can achieve a balanced budget that gets California?s fiscal house in order and sets the stage for long-term reforms that will prevent a similar crisis in the future.
Call me an optimist, but i believe it can be done ? and with a new resident and a new attitude in the Capitol?s Corner Office, it will be done.
Help ? is on the way.
Thank you very much.
California governor seeks to boost renewable energy
SAN FRANCISCO, March 18 (Reuters) - California Gov. Gray Davis on Monday backed legislation that would force the state's investor-owned utilities to almost double the amount of power they get from renewable energy sources.
Now remember some of these investor-owned utilities are bankrupt!
This says it all:
"A Chicken in every pot & a windmill in every garage".
New dem motto
An analogy would be with the gas lines of 1979. Carter tried all sorts of schemes; they all failed to stop the lines. Reagan in 1981 just finished the job of oil price decontrol - no more gas lines, ever again. sure, fears of higher prices, but actually by 1986 prices were way down from 1979.
Same situation as bread lines in the soviet union. in fact, you can say emphatically that "lack of supply" is just another term for "price controls gone awry".
Matching reatil rates to actual wholesale costs will NOT increase prices over the long-term. It would only hurt short-term. ... BUT IT TAKES LEADERS TO THINK ABOUT THE LONG-TERM. I know it would have created short-term pain for consumers to jack up rates; when they finally did it, it *did* hurt. But that is leadership, doing what is right even if it hurts short-term. hard choices. wouldnt you agree?
Amen!
good point. It's important that Simon stays on message and tries to get Davis OFF message. Simon is an appealing candidate. And, regarding the economy, Davis has passed so many job killer bills that it'll take a long time for the economy to recover.
Torie ... I'll give you a *moderate* break, and steer you to a report by Pacific Research Institute since you liked their other report about the energy crisis. This new one, released last week, is about collective bargaining in schools and why it is counterproductive to improving education. Davis and his cronies have pushed through many pro-union education bills ... all to the detriment of the children and the education (or lack there of) that they receive.
Maybe this will help change your mind: A Contract for Failure
Also, regarding your comment about Davis having more experience than Simon ... with his complete panic and mismanagement of the energy problem (turning a problem into a crisis and costing taxpayers $46 billion over the next ten years); his pandering to the unions; his disregard for real education reform; his gross malfeasance in spending ... if this is experience, I'll take inexperience any day of the week.
I'm tired of career politicians. Give me a REAL citizen legislator. I think that Bill Simon has the right ideas at the right time.
Davis is using 'funky accounting' to try to get his budget to balance this year, and the LAO isn't buying it. He's cutting the school's budgets THIS year, with millions in MID-YEAR cuts, something unheard of, all so he can restore the funding levels next year and tout it as "increasing the budget for schools again" With the LAO predicting many more years of deficit budgets, how can anyone balance it, except for tax increases (after he safely wins re-election, of course!)
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