Senate Democrats have sent a letter to Governor Schwarzenegger asking him to reconsider his veto of the renewable energy standard and subsequent executive order.  The strongly worded letter has about as much currency as the eleventy billion-dollar bill, but it does explain why the Governor’s hypocritical action is a bad deal for California.

Respectfully, an Executive Order does not have the force and effect of law. Additionally, such a proclamation will only cause confusion and uncertainty to California’s energy markets, jeopardizing California’s role as the world leader in renewable energy development and green jobs.

As you noted when you signed AB 32, the landmark “Global Warming Solutions Act of 2006,” administrative actions are no substitute for a statute that is permanent and enforceable.

Directing the California Air Resources Board to implement an RPS program is a fundamentally flawed approach. The CARB is not an energy agency; it is an air quality regulatory agency. There are numerous provisions of law which impair the CARB’s ability to implement a renewable portfolio standard. Assigning this new responsibility to the CARB will not result in new renewable energy being built soon–it will only lead to litigation, regulatory confusion, and delay.

In our view, it is essential to green businesses and the renewable energy investment community which bring jobs and capital into California, that California’s 33% RPS be statutorily established and not subject to the whims of changing administrations.

There’s only one reason that Schwarzenegger gave the CARB the ability to implement a renewable energy standard – so he can go on talk shows and crow that he’s instituted an environmental achievement.  Except, as is explained here, it won’t.  It will get tied up in court challenges and confusion, without a clear mandate for the standard or penalties thereto.  

Schwarzenegger has responded to this by calling the Legislature’s bill “protectionist,” and saying that if we get water from the Colorado River, we should be able to get renewable energy from other states as well.  The difference is that a commodity is not the same as a job.  The twin goals of a renewable energy standard are to spur the usage of renewables as a means to lower greenhouse gas emissions, and to build a green-collar economy that will create millions of new jobs.  Schwarzenegger would rather give those jobs away.  And given the perilous state of the economy here in California, we simply cannot afford that.

Job losses in the public sector will prolong the economic pain in California through 2010 even as a recovery gets under way nationwide, two forecasters predict.

Jeff Michael, a forecaster at the University of the Pacific, said Tuesday that California’s recession will be over before the end of the year. But the cutbacks in state and local government, along with the continuing fallout from the mortgage meltdown, will make 2010 feel like another year of recession, Michael said in UOP’s latest quarterly forecast.

Similarly, the newest UCLA Anderson Forecast predicts a sluggish recovery because of the weak public sector. UCLA senior economist Jerry Nickelsburg is more optimistic than Michael about the housing market, and says California will outperform the U.S. economy starting in 2011.

Yet both economists say Californians can expect continued high unemployment for a couple more years or so. The unemployment rate is currently 11.9 percent in California and 11.8 percent in greater Sacramento.

And yet here is Arnold Schwarzenegger vetoing the only major bill that would produce any semblance of an economic recovery for California.

The establishment in Sacramento has manned the barricades, battened down the hatches and gone on the offensive to prove their own worth.  They sent their best man in the media, George Skelton, out to prove that no, despite your lying eyes, the California Legislature had a real banner year.  After all, they managed to bring suffering to the lives of hundreds of thousands of state residents with consensus and bipartisan elan!

The current Legislature, regardless of Duvall and despite ideological polarization, has had a better year than it’s getting credit for.

Its main accomplishment was keeping the state afloat amid a flood of red ink, created primarily by the toughest economic times since the Great Depression. OK, so it did use some bailing wire and chewing gum! The bills got paid, even if briefly with IOUs.

With great difficulty and pain — at least for Democrats — the Legislature and Gov. Arnold Schwarzenegger slashed programs by roughly $30 billion. They also struck a major blow against “auto-pilot” spending by permanently eliminating all automatic annual cost-of-living adjustments, except for K-12 schools. And they summoned enough courage to temporarily increase taxes by $12.5 billion.

In the end, they found a way to restore health insurance for 660,000 low-income kids.

The tax increases hit the more vulnerable elements of society disproportionately, of course.  They actually found that way to restore children’s health insurance by lowering industry taxes and increasing the co-pay and deductible burden on the low-income families themselves, while reducing the covered care.  And anyone who adds cutting $30 billion in programs and eliminating COLA as an accomplishment is a bit of a social deviant.  But there are probably no lengths to which Skelton will go to defend the palace walls from the rabble who think, based on the evidence, that the system is horribly broken.

Steve Maviglio wisely steers clear of the more horrific achievements of this year’s Legislature, and offers a slightly more defensible outlook of the ’09 Legislative session.  Still, there’s a lot unsaid:

Looking back, getting the measures on the May ballot was a significant early success that required 2/3 votes. And toward the end of the session, in addition to the renewable energy bill, Speaker Bass pushed through measures on childrens health and domestic violence that won broad bipartisan support. (The Speaker also got a standing ovation, and she appears to have strengthened her support in Caucus. Compare that to the ouster of the two Republican leaders).

Okay, so the grand water deal didn’t get done. Big deal. Nothing like that has been done for a generation. Perhaps Senate President pro Tem Steinberg set the bar too high when he said he’d get it done. In any case, all parties agree that they got close and can pick up the pieces and get it finished in short order.

So for all those crying for major reforms, put it all into perspective. Sure, improvements could be made, and things could have been better, but this is not reason for drastic action. Far from it.

Of course, the renewable bill is veto bait, as are many of the other major bills pending the Governor’s signature.  And the domestic violence bill didn’t pass the Senate, so, um, that doesn’t count.  The prison bill offered decent parole reforms but stopped well short of a real solution.  Everyone keeps saying the water bill will happen but the two sides remain far apart, and the fact that they’ll have to go into overtime to reconcile it kind of proves the point, no?

But Maviglio tips his hand with the line “this is not reason for drastic action.”  Of course he would say that.  He’s profited well from the status quo.  Anything that messes with it could hurt him professionally, and what’s more, could stop the endless blaming of outside factors to account for stunning failure.

There is no shame in stating that this was a failed legislative session.  Just about everyone in California would agree with you, particularly the ones who are suffering the most from the destruction of social insurance caused by the most heartless cuts.  Simply put, the Great Recession dominated legislative activity, and the conservative veto from various 2/3 requirements restricts the Legislature from fulfilling the expressed will of the people through their votes (NOTE: This does not only come into play with the budget; late last Friday Republicans blocked over 20 bills that required 2/3 votes for one reason or another, probably because they knew they could get away with it).  That’s not something to explain away, it’s actually something to fight, every single day until the problem is rectified.

Skelton and Maviglio may want to tell themselves all is well, but the public knows better, and they’re going to demand major structural change.  Those who think that the Legislature can still be a force for good in the state can get aboard and provide the best ideas to break the supermajority gridlock and get the state moving again.  Or they can defend their narrow interests.  Their defense will fail, and it would be a shame not to see them on the right side of history.

If the Capitol Weekly is going to have a right-wing corporate shill on their editorial pages, the least they could do is get a good one.  Because I don’t know where anyone, even John Kabateck of the National Federation of Independent Business, gets the cajones, after the legislature just passed a cuts-only budget completely on the backs of poor people, to fret about the plight of possible taxes for the business community.

“Get the monkey off your back and relocate to Las Vegas”, barks a new ad trying to lure hard-working small businesses away from California. If legislators don’t listen, small businesses that have already been hit hard by the effects of a fragile economy and the billions in taxes that were passed earlier this year will go under.

Um, right, this “rich people and businesses are leaving California” Galt-ism is not true and has never been true.  But do go on.

The Legislature is back and up to its old tricks. The budget that was passed in February and revised in July will need to be “fixed” again this fall. If history is our guide, we all know that it will be an uphill battle and an unpleasant environment for small businesses. There are currently $2 billion in tax hikes being proposed, including taxes on everything from gas, internet purchases and vehicle license fees.

Oh noes!  Oil companies might have to pay for the natural resources they take out of California’s ground for the first time in a century of drilling!  Get the smelling salts!  The vehicle license fee might return to still-well-below-the-average-percentage relative to every state in the nation!  This is terrible!

You’ll notice that Kabateck fails to mention the $2.5 billion annually in corporate tax cuts passed in the previous two budget agreements, which miraculously exceed the tax hikes – beaten back by the Yacht Party and the Governor in July – about which he is fretting so.  These massive corporate tax cuts do nothing to keep the largest corporations in America doing business in California – they would hardly abandon a market of 38 million people.  It’s nothing more than a kickback for services rendered.  And if that’s a transaction of prostitution, then John Kabateck is the guy who cleans up the courtesan’s antechamber afterward, eager to grab a buck for himself for the privilege of working for whores.

It’s amazing how little the California office of the National Federation of Independent Business speaks for independent business.  He could have written a nice little article about how corporate behemoths are screwing small businesses when it comes to state purchasing, which currently favors out-of-state multinationals.  Instead, he offers the party line that the structural revenue gap is fine and leaving citizens out on the street to die is a small price to pay for protecting oil and cigarette companies.  Kabateck doesn’t seem to understand that this mentality is destroying the California economy, and with it all of those small businesses he claims to represent.

Hacktackular job, CapWeekly!  With any luck, you’ll get Jon Coupal or Joel Fox to offer a rebuttal.

Whether it’s the continued foreclosure crisis, the impact of state budget cuts or the cumulative effect of depressed consumer spending, it’s now extremely clear that the state’s employment picture shows no sign of bottoming out, reaching an all-time high in the post-war period.

California’s unemployment rate took an unexpected leap in July, reaching a post-Word War II high of 11.9%. The increase contrasts with the national rate, which declined slightly over the same period, and reflects ongoing weakness in the state’s battered construction and financial services industries.

The state lost a net 35,800 jobs last month, more than any other state, the U.S. Labor Department said today. It has lost 760,200 jobs over the last year.

Every category of nonfarm jobs in the state except education and health services experienced year-over-year losses. The construction sector was the hardest hit, shedding 18.6% of its jobs. Manufacturing jobs fell 8.7% from the same time last year.

Job loss did slow relative to the previous two months.  But I don’t think anybody believes that 11.9% is a floor.  Los Angeles, where the jobless rate jumped 0.7% in just a month, is one of the worst big cities to find a job in America.  The city has 15,000 homeless veterans.  And areas of the Central Valley and the Inland Empire are in far worse shape.  It’s basically a depression in those parts.

And we are just starting to add a round of painful state budget cuts to increase the economic shortfall.  Whether it’s closing parks that provide economic benefits, or dropping or cutting aid to 100,000 IHSS recipients, or wiping out the entire domestic violence budget, the cuts will not only force the poor and infirm to slip through the cracks and cause mass suffering and even death, but the economic impact will be profound.  Caregivers will lose their jobs.  Relatives will shift their schedules to care for their families.  Productivity will reduce.  It’s just a plain fact that lowering public spending during a deep recession will negatively impact the economy.  Consumers aren’t spending, companies aren’t trading and businesses aren’t investing.  Government is the spender of last resort.  And that spending has been slashed.

I honestly don’t know where the bottom is.

Via Joe Mathews, here’s yet another powerful piece of evidence that the Yacht Party scaremongering over how high taxes force people to leave California is a load of fertilizer.

TALLAHASSEE — For the first time since the end of World War II, the growth state of Florida lost population, researchers say, in a sign that the economic recession is even worse than many had feared.

In all, the state lost about 58,000 people from April 2008 to April 2009, according to a new estimate from the University of Florida’s Bureau of Economic and Business Research.

“It’s such a dramatic shift from what we’ve seen in the past,” said Stan Smith, the bureau’s director.

“Florida’s economy is, in a lot of ways, driven by population growth,” he said. “Perhaps more importantly, population growth is a reflection of how the economy is doing both in Florida and in the nation.”

It goes without saying here that Florida has no state income tax.

Attributing population shifts to taxes is about as rational as attributing student test scores to rain.  If you want to correlate populations and the economy, the Occam’s razor explanation would be that people go where the jobs are.  And I would add that people who cannot find a job probably won’t stay around a place long if the social safety net is vaporized.

The lack of political media in the state allows urban legends like this to take hold through the only outlets left, right-wing radio and persistent rumor.  You get the falsehoods you pay for listening to such garbage.  If we had 100 Peter Schrags in the media and twice that in the Democratic Party leadership forcefully rebutting such misinformation and making the value-based case for the kind of progressive government they’d like to see, at least there would be a counterweight.  But it’s hard to argue something with nothing.

(I’m putting some of Schrag’s article below the fold, because it’s brilliant and a great resource for arguing with friends and neighbors.  Read the whole thing.)

But the truth is far more complicated. California’s tax burden – total state and local taxes as a percentage of personal income –is just slightly higher than the U.S. average and ranks 17th among the states. In personal income and corporate taxes we’re high among the states. In property and sales taxes we’re low.

The same goes for spending. According to a recent analysis by the California Budget Project, California’s expenditures as a percentage of personal income ranked 22nd among the states in 2007-8 — they’ll probably rank far lower in the current fiscal year. Our school spending per-pupil is well below the national average and our spending on highways is near the bottom. National experts rate California’s highways, once the national model, as among the most congested and in the worst condition of any state in the nation.

We are among the biggest spenders on corrections, thanks to three-strikes and other rigid mandatory sentencing laws and the power of the prison guards’ union. But even so, the state now faces a federal court order to reduce its prison population by some 40,000 inmates – roughly 25 percent of the total — because its overcrowded correctional institutions lack the resources to give them even minimally adequate medical care. Our spending on pensions for cops and firefighter is past obscene.

But while mythology says – as it probably does everywhere — that the state staggers under a bloated workforce of bureaucrats and other public employees, California has the second lowest ratio of public employees per capita in the nation. And of course there is the persistent mythology, discussed several times before in this space – that high taxes are driving affluent individuals and job-producing businesses to Arizona, Nevada, Texas and other states. That, too, according to studies by the Public Policy Institute of California, is mostly myth.

Arnold Schwarzenegger will sign the FY2010 budget revision quietly tomorrow, with up to $1 billion dollars of line-item cuts that could potentially cause more pain for California citizens.  He’ll claim that he was acting responsibly and in the best interests of the people.  As CalBuzz says today in about as shrill a way as imaginable, it’s a load of crap.

“(T)he biggest winner to emerge from our negotiations is California,” the governor bragged, “our state’s legacy, its priorities, and its budget stability.”

Wrong, wrong, wrong!!

Schwarzenegger’s triumphalist braying was little more than a one-step-ahead-of-the-posse exercise in spin control, a pathetically transparent bid to establish a positive narrative for the budget disaster over which he’s presided, in hopes that voters and his suck-up pals in the national media will buy his story without bothering to check it out.

(NOTE TO NATIONAL POLITICAL WRITERS: Schwarzenegger did NOT solve or stabilize California’s budget. Despite his assertion to the contrary, his budget – passed in February and now revised twice – actually RAISED TAXES by $12.5 BILLION. With the latest revision, he threw off enough ballast to keep his hot air balloon afloat but in no particular direction.) […]

In truth, Arnold’s entire tenure has been one continuous failure of leadership. This is just the latest chapter.

From his first days in office (when he sowed the seeds of today’s never-ending fiscal crisis by his irresponsible cut in the vehicle license fee) to his ill-considered $15 billion borrowing bond (which helped make interest payments the fastest growing item in the budget) and his current shameful spending plan (which gives the University of California a major push into mediocrity while continuing the slow death of K-12 education and punishing the aged, blind and disabled), he has been little more than a narcissistic, tone-deaf poseur, surrounded by sycophants and devoid of principle or conviction.

Allow me to sit up and take notice at the shrill-ness.

And their points are completely inarguable.  It’s not just this budget revision, which makes draconian cuts and multiple faulty assumptions of revenue in order to pretend to fill a partially self-created deficit (we’re not getting $1 billion from the federal government for Medi-Cal reimbursement, for example, nor will we sell the State Compensation Insurance Fund for $1 billion).  It’s that his entire tenure has had the goal of enforcing the tax revolt and eroding the New Deal consensus that Californians still by and large support as an electorate, though they lack the governmental structure to carry it out.  And in that respect, he was wildly successful.  Except Californians have figured out implicitly that this vision of the future is abhorrent, and while they haven’t yet put their finger on who to blame, they could do worse than looking at the Governor.  It is no accident that Schwarzenegger is viewed unfavorably by both parties, having driven the state completely into a ditch and hastened the near-depression in which we find ourselves.  The structure of government resists workable solutions to our fiscal problems.  But Schwarzenegger’s reckless management has greased the skids and achieved nothing for the citizenry but future pain and suffering.

In the latest outrage, he enthusiastically endorsed a budget process that will help push the whole country into a deeper recession by canceling out the impact of the federal stimulus package.

Tens of billions of dollars are cascading into California from the federal stimulus package, but the economic oomph is being weakened by massive cutbacks in state spending.

The financial crosscurrents show up in places like downtown Sacramento’s old railyard, now undergoing a huge facelift. Stimulus money from Washington, D.C., will help move the train tracks, a key element of the plan. Separately, though, the slashing of redevelopment funding by the Legislature might derail a housing project at the site.

This push-pull effect will play out in education, transportation and other sectors. Economists say the likely result will be prolonged pain and a weaker recovery despite the $85 billion coming to California from the stimulus program over the next two years or so. Unemployment stands at 11.6 percent in Sacramento and statewide, and is forecast to exceed 13 percent next year.

The state budget “absolutely … will blunt the impact of the stimulus,” said Chris Thornberg, head of Beacon Economics consulting in Los Angeles.

Remember all this when you see some Twitpic of the Governor brandishing his pen and telling his list of followers tomorrow that he “fixed” the budget.  The fix is in, to be sure – and the people will feel the results.

Bloomberg reports that people are lining up for those souvenir Arnoldbucks.

Controller Chiang said the warrants can be transferred between individuals, setting up the possibility that a secondary market for the IOUs may develop. Already ads are appearing on Web sites such as Craigslist offering cash for the IOUs at below face value.

In such a transaction, the person who gets the IOU would get most of the cash they were due the state, while the person buying the IOU might then hold onto it until maturity and earn the face value plus the 3.75 percent interest.

At least one person offered to buy an IOU at more than face value as a keepsake.

“I am interested in purchasing a ‘State of California IOU’ as a souvenir,” the ad reads. “I figure it would be an interesting thing to have around when my grandchildren are fighting over my stuff after I’m dead and gone. I will pay two times face value (up to $100, or $50 face value) for a warrant/IOU.”

Of course, after July 10, the deadline that banks like BofA and Wells have given for exchanging these IOUs for cash, souvenirs may be the only value for these IOUs for a few months.  Maybe Arnold will go to a baseball card convention and sign them himself!

Here’s another FAQ about who receives IOUs and who does not.  The unemployed, SSI/SSP recipients, state employees and retirees, IHSS and Medi-Cal providers will NOT receive IOUs.  Welfare recipients, contractors with the state, local governments, and income tax refund recipients WILL get them.  Felix Salmon made a handy chart that suggest the haves will keep getting paid and the have-nots won’t, and that’s somewhat true, but some have-nots who have the benefit of their services being partially provided by the Feds will get paid as well.  In general, where you stand does depend on where you sit, in this crisis.  This again makes clear that the idea of California debtholders, who get priority of payment in the state constitution over everything but education, getting stiffed by the state is a ridiculous one that pretty much cannot happen, and lowering bond ratings should be rightly seen as Wall Street gouging.

And I’ll allow Karen Bass to explain exactly who’s responsible for this particular outcome of IOUs and lowered bond ratings.

Small businesses, students, seniors, and taxpayers will all start receiving IOUS. This shameful day didn’t have to arrive. In fact, Governor Schwarzenegger had several opportunities to prevent it.

On June 12 Governor Schwarzenegger unilaterally blocked the Controller’s authority to secure short-term loans to avoid the cash crisis. He said, “let them have a taste of what it is like when the state comes to a shutdown — grinding halt.”

On June 25 after the governor called Senate Republicans to his office for private meetings, $4 billion in immediate cash solutions that had been passed on an overwhelming bipartisan majority in the Assembly were killed in the Senate.

Most recently, the governor vetoed a comprehensive package of budget solutions supported by majorities in both houses of the legislature that would have resolved the $19.5 billion deficit, left a $4.0 billion reserve, avoided the cash crisis and prevented IOUs […]

We did offer, as a sign of good faith, to begin work immediately on reforms regarding restructuring Medi-Cal and eliminating fraud in the IHSS program. We also committed to working with the governor on other reform legislation for him to sign. But the governor wouldn’t take “yes” for an answer. So California businesses, taxpayers and students will be receiving IOUs simply because Governor Schwarzenegger thought it was more important to immediately force last minute changes such as reducing future employee pensions, fingerprinting elderly and disabled Californians who receive services, and denying kids food stamps if their families can’t access a computer to sign them up for the program.

See Noreen Evans for more.

The budget gap grows by $25 million a day and we have wasted billions of taxpayer dollars because the Governor wants to teach everyone a lesson.  I hope that IOU secondary market is bigger than eBay, because those suffering with the consequences of dysfunction are going to need the help.

The IOUs are on the verge of being distributed.  The Pooled Money Investment Board met today to hash out the terms for the IOUs, and surprise, there were some differences.  The Governor wants a paltry 1.5% interest rate for the IOUs, and flexibility on repayment until as late as June 2010.  That would be worse than a 1-year CD.  Controller Chiang supports the staff recommendation of 3.75% interest rates and repayment in October.  Chiang won.  The board approved his terms.

The reason to offer a more attractive interest rate is to ensure that banks will actually cash them.  Wells Fargo and Bank of America announced they will accept them, but only until July 10; after that, it’s anybody’s guess.  Golden 1 Credit Union and Tri Counties bank of Chico also agreed to accept the warrants.  This article gives a good rundown of how the IOUs will work.  If your bank won’t cash them, you’re basically stuck with a piece of paper until October.

The most important question, of course, is why we’re going down this costly route at all, when the Assembly and Senate Democrats fashioned a solution to avoid this.  The answer is that the Governor wanted some leverage, the people be damned.

If the stigma of issuing IOUs triggers a budget deal in the coming days, Gov. Arnold Schwarzenegger might find redemption in his strategy of quashing a stopgap solution that would have avoided those non-cash payments.

But if no budget deal emerges soon, Schwarzenegger will have helped saddle the state with a lower credit rating and have nothing to show for it.

As a negotiating strategy, Schwarzenegger is counting on public pressure to mount against the Legislature as California issues IOUs today for only the second time since the Great Depression. The Republican governor could have backed legislation to avert IOUs this week, but he demanded that lawmakers solve the entire budget problem, which grew Wednesday to $26.3 billion […]

Schwarzenegger wanted a full budget deal, and part of his calculation was likely that IOUs ramp up the stakes and force lawmakers to reach that goal sooner. Without IOUs, he figured lawmakers might have delayed compromise on the rest of the package, costing the state in a different way.

“If he had signed the stopgap measures, the Legislature would have gone home for Fourth of July weekend and come back when the threat of IOUs came up again,” said Tim Hodson, executive director of the Center for California Studies at California State University, Sacramento. “I’m sure the governor went over this and thought: Are the consequences of the delay worse, and would he have lost the leverage that he has now?”

Well, this is a game played with people’s lives.  If banks won’t cash IOUs, you can be sure Rite-Aid won’t accept them.  Or landlords.  Or health care providers.  In addition, this little power play cost taxpayers between $2 and $7 billion dollars, which I don’t see Schwarzenegger going into his wallet to cover.

Rather than shock doctrine the legislature into making major policy changes as a condition of passing a budget, a more likely scenario is that this train wreck will spark reform efforts to finally get off this perpetual track of hijacking and stubbornness.

If California has become ungovernable, and teeters now on the brink of bankruptcy, it is due less to excessive spending than a deficit in democracy – the very essence of which is majority rule. A simply worded, one-paragraph initiative to restore majority rule in the Legislature might well prove resoundingly successful with a crisis-weary electorate. And while it may not be sufficient in itself to repair the state’s balance sheet and fix its broken governance, restoring majority rule is the necessary first step toward ending gridlock, renewing public confidence, and preventing extremists of whatever stripe from holding future legislatures hostage to their own narrow agendas.