Thursday, November 29, 2012




          Back when movie muscleman Arnold Schwarzenegger ran for governor for the first time in 2003, seeking to oust Gray Davis from the post to which he had freshly been reelected, he was often accompanied by two types of people:

          One group was car dealers, eager to see the state vehicle license tax lowered by about 60 percent, putting about $6 billion back into the pockets of Californians and thereby greatly increasing car sales. The other was small business owners who invariably said they were thinking of moving out of California because of its high taxes and strict environmental regulations.

          “We need Arnold,” one owner of a San Gabriel tire recycling business declared in a prototype late September rally with Schwarzenegger smiling happily beside him. He threatened to move his operation to Las Vegas if Schwarzenegger didn’t win. “It’s just too expensive here and he’ll make things different.”

          Schwarzenegger swears in his month-old memoir “Total Recall” (co-written with Peter Petre) that he did just that. For sure, he cut the car tax by $6 billion. That was his first act after taking office, and its consequences still reverberate: That $6 billion per year now adds up to more than $50 billion in lost revenue, much more than it would have taken to pay off the entire state deficit without any of the taxes that became big election issues this fall, and also restore most of the programs that have been cut back since Schwarzenegger took over.

          Those includes everything from community colleges and state universities to work-for-welfare, road-building and in-home care for the frail elderly. But at least Schwarzenegger kept the promise he made both to voters and to the car dealers who were among the largest financiers of his campaign.

          But what about those small business owners? Listen to them now and you’d have to believe Schwarzenegger totally betrayed them. For the single law about which they’ve complained most over the last six years is the 2006 Global Warming Solution Act, promoted and signed by Schwarzenegger and better known as AB32, its legislative bill number.

          This one set up the cap-and-trade system that took effect this fall, limiting the amounts of greenhouse gases businesses can emit and gradually reducing them until they’re back to 1992 levels, when California’s populace was about 9 million less than today.

          Schwarzenegger’s book doesn’t mention any consequences of his cutting the car tax, nor does he say much about what business lobbies like the state Chamber of Commerce say will be the negative effects of AB32.

          He also ignores the middle class exodus from California which began in the mid-1990s and was largely spurred by coastal area residents cashing out their real estate and moving to less expensive states, a trend that increased all through his term in office, despite his promises to stem it.

          An often-cited October report from the Manhattan Institute titled “The Great California Exodus” uses federal tax data to find that, for example, net out-migration to Texas in 2006-2009 – the heart of the Schwarzenegger era, averaged 41,300 persons per year. To Nevada, it averaged 25,600 per year.

          That one also got by Schwarzenegger admirer Joel Fox, former head of the Howard Jarvis Taxpayers Assn. and an anti-tax crusader, when he wrote about Arnold on his Fox & Hounds Daily blog.

          “Schwarzenegger’s business-related record…deserves a bit of the spotlight,” Fox wrote shortly after the ex-governor’s memoir was published in October, without explaining why California regained from Texas its spot as America’s leading job producer only after Schwarzenegger left office.

          Yet Fox – who served as a Schwarzenegger adviser – called him “a refreshing change for the business community” in an article headlined “If there were an Oscar for business-friendly, Arnold Schwarzenegger would have won it.”

          Is that so? As with other parts of Schwarzenegger’s performance and personality, this was largely illusion.

          Major businesses that relocated headquarters or built major factories outside the state during his tenure included Nissan North America, which moved to Tennessee to be nearer its largest assembly plant; Northrop Grumman Inc., whose headquarters moved to the Virginia suburbs of Washington, D.C. after it was bought by a private investment company; and Intel, which built new plants in Texas and Idaho while keeping its headquarters here.

          Republicans and business advocates jump on Gov. Jerry Brown when similar moves occur on his watch, but neither Schwarzenegger nor pals like Fox ever said much about Arnold-era departures.

          So much for total recall. This book, like Schwarzenegger’s term in general, would better be titled Flawed Memory.

        Elias is author of the current book "The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government's Campaign to Squelch It," now available in an updated fourth printing. Email him at




          Anyone who thought manipulation of California energy prices ended with the criminal penalties assessed against executives of companies like Enron and Williams Energy after the state’s 2000-2001 electricity crunch turns out to have been hopelessly na├»ve.

          All the available evidence now suggests price-fixing continues not only in electric power, but that gasoline is also in play. Those who believe that isn’t important to every Californian just haven’t been watching. For when companies talk about the difficulties some have conducting business economically here, they don’t just talk about the traditional right-wing bugaboos of regulations and taxes, but also electricity prices and the fact gasoline costs more here than almost anywhere else in America.

          One recent example was Intel, the premium maker of computer chips and other electronic items. The company announced the other day it will build its next factory in Oregon largely because its electricity bill there will be as much as 60 percent lower than it would be here.

          Over a decade, that can represent more than $1 billion, plenty of motivation for any company in a location decision.

          It’s easy and facile to say power prices here are high because of regulations. While it’s correct that rules on smog and renewable power cost electricity producers plenty, that’s only a part of the price picture. Manipulation is another. Sadly, it’s impossible to know the full extent of market and price manipulation, because authorities only know about the crooks they catch.

          But make no mistake, the companies then-Gov. Gray Davis labeled “out-of-state buccaneers” a decade ago in the months of rolling blackouts and rising prices – and others like them – are still at work.

          The latest to be caught was Florida’s Gila River Power, a subsidiary of Entegra Power Group, which in November admitted violating the anti-manipulation rule established in 2005 by Congress and the Federal Energy Regulatory Commission, paying a $2.5 million fine. That was far less than the firm made in selling power to California’s Independent System Operator from its 2,200-megawatt plant in the desert southwest of Phoenix.

          At about the same time, California electricity officials reported that Wall Street behemoth JPMorgan Chase & Co. is blocking a power plant conversion project that would allow production of far more juice from two AES Corp. Huntington Beach generating stations it partially controls. Failing to allow the conversions, needed to preserve energy reliability while the San Onofre Nuclear Generating Station is shut down, could create shortages and drive up the price of power all over California next summer.

          The move by Morgan came as the state ISO and the federal commission pursued separate charges that Morgan used improper wholesale trading methods to bilk California consumers of $73 million last year. As part of that case, FERC has suspended Morgan’s electricity trading operation for six months.

          Things are not much different in gasoline, where steep price hikes occurred in September and October, allegedly because of shortages caused by a refinery fire and several maintenance shutdowns.

          But an independent Oregon consulting firm, McCullough Research, afterward examined thousands of oil company documents and discovered some refineries were not really shuttered when the companies claimed they were. In one charge, the McCullough report said Shell Oil’s Martinez plant – supposedly contributing to a gasoline shortage because it was down for maintenance for two weeks in May – actually operated for at least a week of that time. Nitrogen oxide emission documents indicate the refinery was back to normal at least that long.

          Shell says it never claimed the entire facility was closed, but only most of it.

          Similar environmental records indicated Chevron’s Richmond refinery, hit by a fire and explosion Aug. 6, did not shut down completely in May for maintenance, as the company reported it had.

          McCullough also reported that the price spike was about 66 cents per gallon higher than what would be expected from oil price and gasoline inventory conditions.

          That led the Consumer Watchdog advocacy group to contend oil companies falsified information to help boost prices. Consumer Watchdog wants an investigation by state Atty. Gen. Kamala Harris.

          If the allegations are true, said Consumer Watchdog, “it is criminal conduct reminiscent of the Enron manipulation of the California energy market.”

          No oil company ever paid a penalty when similar price fixing was alleged in the 1970s, ‘80s and ‘90s.

          The bottom line is that if, as Thomas Jefferson is often reported to have said, “Eternal vigilance is the price of liberty,” then surely eternal vigilance also is the only way to prevent price gouging in the California operations of energy companies of many sorts.

Email Thomas Elias at His book, "The Burzynski Breakthrough, The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It," is now available in a soft cover fourth edition. For more Elias columns, visit

Sunday, November 25, 2012




A key question has raged in California for more than one year, ever since Gov. Jerry Brown first proposed two of his key tactics in the ongoing battle against seemingly perpetual state budget deficits.

That question: Who do tax dollars really belong to? There are also these corollary questions: Are taxes collected by cities the exclusive property of those cities? Do dollars sitting in special state funds earmarked for particular uses belong to all the people, thus implying they could be used for anything state legislators think best?

          These questions are in the forefront of debates over state finances today because of the storm over the summertime revelation that the state Parks Department was sitting on more than $30 million in a special off-road vehicle fund, plus another $20 million in its Parks and Recreation Fund even as park units were threatened with closure.

          They are valid questions, with good arguments on many sides. For some special funds get their money from virtually all taxpayers and/or utility customers, while others are funded strictly by one type of user.

          The Beverage Container Recycling Fund is an example of the latter. Only people who buy certain kinds of drinks pay into this fund. Purchase only milk, bottled wine and hard liquor and you won’t help fund reimbursements of bottle and can deposits, nor will you help pay for the education and outreach effort that has caused a remarkable 85 percent of all recyclable containers to be turned in. That was 17 billion containers out of an eligible 20 billion in 2010-11. At a nickel or dime per can or plastic bottle, reimbursements are supposed to use up almost nine of every 10 dollars paid into the fund.

          But state controller’s records showed at midsummer that the fund had an unreported, uncommitted balance of $113 million. Should that money be available for other state programs or should it simply sit in a bank account and draw interest?

       That’s a key question now, when some other special accounts like the Energy Resources Surcharge Fund – all utility customers pay a little into this one each month – also have multi-million dollar balances that are not spoken for.

          Brown’s view and that of the majority of state lawmakers plainly is that these excess money in these pots of tax or fee dollars should be open to uses other than what they were collected for, if only because it’s almost impossible to refund some of those dollars because there’s no way to track who paid into the funds. Beverage recycling money is a classic example of this.

          Which brings the discussion to the two Brown tactics that started the discussion: His move to disband local redevelopment agencies, with the bulk of their funding going into state coffers, and his prison realignment effort, which is sending tens of thousands of supposedly low-risk convicts from prisons to county jails, where many have been paroled because of space problems and county budget shortfalls.

          No, neither of these moves has led any city into bankruptcy, despite the claims of some that the demise of redevelopment agencies would lead to disaster. In fact, the main reason for city defaults has been the collapse of the housing market, which led to lower property taxes, lower sales taxes as homeowners stopped remodeling, swimming pool and air conditioning purchases, while greatly diminishing virtually all other forms of city revenue.

          Brown’s idea was that the increased property taxes paid on newly redeveloped property should not be used just to buy up more land for redevelopment, but rather that those tax dollars belong to everyone. So far, courts have upheld this concept by going along with the redevelopment cuts.

          But cities won’t stop bleating. Their advocates write op-ed pieces claiming lack of redevelopment money has caused most of the immediate troubles of Stockton, Compton, San Bernardino and other cities nearing bankruptcy.

          That, of course, ignores the reckless pension contracts agreed to by those cities and their public employee unions, plus myriad other forms of mismanagement. When housing activity was healthy, all that was papered over, and maybe it will be again someday. But not just yet.

          Meanwhile, neither Brown nor any state lawmaker has yet paid any political price for what they did to redevelopment agencies.

          Which means Brown may have tapped into a previously unknown public sense that all taxes and all state, city and county monies belong to all Californians.

          As things are now going, only a voter initiative appears likely to reverse the trend of tapping both wealthy special funds and local tax dollars for uses the Legislature and the governor deem higher priorities than those for which they were originally collected.

Email Thomas Elias at His book, "The Burzynski Breakthrough, The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It," is now available in a soft cover fourth edition. For more Elias columns, visit




          A time bomb that could bring major changes to California politics has been set in place and is very likely to become explosive before the next presidential election.

          Right now, Democrats are licking their chops over the potential benefits they expect from same-day voter registration, a practice that’s been allowed in nine other states and will become the norm here the year after the secretary of state, California’s top election official, certifies a new high-tech voter registration database. That will take several more years, but most likely will be done before the fall of 2016.

          Same-day registration is a system hated just now by Republicans, who say it will invite fraud even though ballots cast by same-day registrants will be considered provisional, with election officials in all counties having until the end of the election canvassing period (about a month post-election) to determine whether new registrants were really eligible to vote.

          Democrats believe the new system will provide them hundreds of thousands of new voters, perhaps enough to decisively control several swing districts created in the 2011 redistricting plan devised by the Citizens Redistricting Commission, which got its first test this fall.

          They anticipate that myriad citizens who have been uninvolved and not interested enough in government to register to vote by the current deadline two weeks prior to Election Day will take heed at the last minute and go vote.

          Republicans, meanwhile, see the practice as inviting illegal immigrants and shady sorts into the voting booth. For one example, they ascribe the 2008 election of Democratic U.S. Sen. Al Franken of Minnesota to “over 1,000 illegal Election Day registrations.” Franken won election by fewer votes than that.

          The predicted effects of same-day registration are reminiscent of what so-called experts believed in 1976, when California okayed unlimited voting by absentee ballot. Previously, absentee voters had to certify they were either too ill to vote in person or would be away on Election Day. The practice has grown to the extent that almost half of all ballots here this fall were cast by mail, voters getting the chance to mark their ballots as they made up their minds proposition by proposition and candidate by candidate.

          Republicans licked their chops at the prospect of all those absentee ballots, knowing they had always before dominated the smallish mail vote because the GOP has traditionally done better among high-wealth groups that travel a fair amount.

          That’s how it went, too, for the first six years or so of unlimited absentees. Then Democrats learned how to stage ballot-marking parties and began to send absentee voter applications to targeted groups, many of whom were registered but didn’t vote very often. Gradually, Democrats began winning more and more mail votes, until these days they consistently take a majority of them statewide.

          Might this work in reverse with same-day registration, with Republicans figuring out new ways to entice party sympathizers who don’t often vote to come out at the last moment? There’s every possibility for that.

          A similar delayed reaction was already felt this fall from Gov. Jerry Brown’s 2011 signature on a bill allowing online voter registration for anyone who already has a signature on file with the Department of Motor Vehicles.

          Again, Republicans lamented potential fraud, as 22,000 persons registered by computer on the first day it was possible last September. By the registration deadline, almost 1 million new voters had been added to the rolls this way, mostly among people who found registering in person inconvenient.

          Legislative Republicans voted against this step, but it may turn out to benefit the party in the long run, again because of that wealth factor: It takes a certain modicum of cash or credit to buy a computer and get online with it. That’s probably why most online polls taken without randomized sampling come out favoring the conservative side of whatever issue is up for question.

          “If I wanted the ideal conditions for voter fraud, I would select the California laws for an A+,” said Steven Frank, conservative blogger and former head of the California Republican Assembly. “Will these new voters be verified? When they ask to be permanent absentee voters, will anyone ever check to see if these are real people?...All this has the potential to end honest elections.”

          But just as no one could anticipate the eventual impact of unlimited absentee voting, no one can now be certain who will be the long-term beneficiary of the newly liberalized voting laws. It all depends on who comes up with the best system for taking advantage of the system to register and turn out voters who might lean their way.

      Email Thomas Elias at Elias is author of the current book "The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government's Campaign to Squelch It," now available in an updated second edition. For more Elias columns, go to