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Happy Thursday! You're almost there. Below we dive into:
As you likely know if you're up here, today is the Big Day of Giving in the Sacramento region. I plan to chip in to local causes Loaves and Fishes, My Sister's House, and the River City Food Bank. I already am a monthly donor to Capital Public Radio but if you are not, it's a great day to chip in and write "In support of state politics and policy coverage" in the "In honor of" box.
Of course, Open California, the parent of Capitol Weekly, continues to do great work and I hope you support the continued efforts to provide multi-media news coverage, events, and oral histories to the capital community. I have the pleasure of working with a great board of directors to steward the lean organization. I hope you'll join me by donating today!
Additionally, KQED is celebrating #WorldPressFreedomToday. Join and enter "in support of state politics and political coverage" in the notes field.
PPIC 25: Yesterday, there was a reception celebrating the twenty-fifth anniversary of the Public Policy Insititute of California. As you likely can tell from my writing in this space, I have turned into quite a fanboy of PPIC. For many years, I relied on the the organization's polling to get an understanding of voters' attitude toward higher education and to use to brag about the standing of community colleges, particularly during the successive rounds of budget cuts.
Since I began this iteration of my career, my radar has obviously has expanded and my policy appetite has grown much larger. I find myself digesting the largely foreign to me policy areas of water, immigration, health care, housing, public safety, the environment, and K-12 policy areas than just the top-line Prop. 98 issues I encountered in budget subcommittees.
I like to joke about the monthly policy presentations I try to attend on this breadth of areas that I attend because they always have great salads. I think it's the only policy briefing I can attend while doing a Whole30. While I joke, I really go because of the experts they bring to the table such as at the briefing on Water and the Future of the San Joaquin Valley held last month. The event brought together a panel of two state cabinet secretaries and a federal perspective.
For longtime Noonerites, thank you as I have been on this learning curve. For PPIC, thank you for being a constant source of nonpartisan perspectives on topics across the landscape affecting Californians. Happy #CAKEYEAR25, PPIC!
In the photo from left to right are Senator Bob Hertzberg, PPIC President/CEO Mark Baldassare, past board chairs Donna Lucas and Phil Isenberg, and PPIC board chair Steve Merksamer.
News after the jump!
IN THE GREEN: Here is LAO's final daily tracking report for April personal income tax (PIT) revenues, which came in $2.8 billion above Department of Finance projections for the month. Additionally, Corporation taxes--which in April includes final 2018 adjustments and 2019 estimates--came in nearly $800 million above projections of $2.6 billion.
Those are the two major state General Fund revenue sources for the month of April, accounting for about 92% of expected revenues. So, that means that April could come in around $3.6 billion higher in April than expected. Subtracting the $2.2 billion deficit we entered the month with from January's PIT shortfall, the monthly finance report we see later this month COULD show revenues performing $1.4 billion above the January budget's projections.
Conventional thinking (dangerous but engrained in those on the spending side of the budget) is to consider that $1.4 billion as one-time and inflate the 2019-20 "budget year" revenues by concomitant amount. However, as we've seen with the volatility year's revenues, it's not that simple. We had major flaws in withholding tables this year. Additionally, we had the major stock market correction (Dow down 18.8% between October 3 and December 24), and a lot of that sell-off resulted in capital gains.
Capital gains yield personal income tax revenue and can, and likely did, spike April tax revenues. So, the challenge for the experts in state government is discerning the share of that PIT revenue is from capital gains, which would mean they are one-time revenues and not ongoing that would be used to inflate 2019-20's projections. Discerning actual 2018-19 revenues won't be hard, but projecting 2019-20 will be one of the most difficult of the annual exercise.
However the Administration treats these revenues in the May Revision, April showers bring May Revision flowers, as all the leaves were brown and the sky was grey as we entered the month.
WILDFIRE LIABILITY: Well, the issue of utility liability for wildfires a just got a lot more interesting. In the SDUT, Jeff McDonald reports "After being rebuffed by state regulators and two California courts, San Diego Gas & Electric has taken its years-long quest to be reimbursed for hundreds of millions of dollars in 2007 wildfire costs to the U.S. Supreme Court."
I have explained "inverse condemnation" before in this space and on one of the "What a Week" podcasts--I think it was April 14th after Governor Newsom's "strike team" report around 41:00.
Usually, to determine liability requires at minimum negligence as to what a reasonable "person" might do. Of course, as we know from Citizens United, corporations are often treated as a person in a legal sense. (The California Constitution Article I, Section 19(e)4 defines "person" as "any individual or association, or any business entity, including, but not limited to, a partnership, corporation, or limited liability company.")
Let's try to make this first -year Torts.
If it's an icy morning at Heavenly ski resort and you slip in a parking lot on your way to the slopes, you ordinarily would have to prove that they did something a reasonable "person" would do. That's sort of difficult if you're outside at a ski resort.
Let's say you were cautious and made it inside the lodge. Staff had just mopped up the mud being tracked in but did not put a wet floor sign where they mopped and you slipped and fell and broke your wrist on the fall. In that case, a reasonable "person" would have put the piso mojado sign in the area that had been mopped and you have a legit claim.
That's a super-simplification of tort negligence law.
You're asking "Scott, what does ice have to do with fire?"
We have to jump over to Constitutional Law. You are undoubtedly aware that when the government wants to take your land to build a high-speed choo-choo through your field or a Walmart over your house, they have to pay fair market value for it under the Takings Clause of the Fourth Amendment to the United States Constitution. If you don't believe that what they are offering you, you can take it to court which will hold a hearing on what the fair market value is. In the high-speed rail context, it might include not just the specific land taken, but also a decline in market value of the fields that you own on either side of the land taken.
That's the basic bar exam stuff. If you are a California lawyer and don't practice in this area, don't feel deficient if you don't know "inverse condemnation." It's a unique concept because California has a more elaborate Takings Clause that has led to a different body of law than you would not find in other states and is not on the California bar exam.
Under California Constitution's broader Takings Clause (Article I, Section 19), the concept of the direct condemnation of property under the Takings Clause evolved to include "inverse condemnation." Therefore, in most cases other than the direct public safety responsibilities of government, if the government "takes" your property or person, it can be held responsible for damages under "strict liability." That means that negligence is not necessary to be proven to require compensation for a governmental taking that includes either a taking or damage. Just a direct link to a governmental action is required and it need not be contemporaneous.
As they like to say on Law and Order, this fact pattern has completely fictitious and has no relation to any current events.
Let's say the state hires a contractor to build a bridge and the contractor does a shoddy job and chunks of concrete fall from the upper deck to the lower deck where you were crossing a waterway. Fortunately, you are not hurt, but there is one big dent in your hood and your windshield has a spider-web crack. Fortunately, you have great insurance and they pay to make your car look like new. However, the side of insurance we usually don't see is that they often seek another party to refill their coffers. They look for the contractor that poured the faulty concrete, but the entity filed for bankruptcy years ago because of their shoddy work elsewhere.
Under the theory of governmental inverse condemnation and strict liability, the insurance company can seek compensation from the state, even if the state did everything a reasonable person would have done in validating the credentials of the contractor in awarding the project. That's different than if it was a private entity that awarded the contract, where the test of liability would be whether or not there was negligence in awarding the contract or knew of the shoddy work.
You're asking "Scott, what does a bridge and the State have to do with wildfires and San Diego Gas & Electric?"
State law has evolved to characterize utilities providing a public function as state actors under the California Constitution. Therefore, the utilities providing electricity, natural gas, and other services, can be held to the same strict liability standard for inverse condemnation. Again, there is a public safety exception to the theory. An example of that would likely be private ambulance companies.
To recover for the loss of property under this legal evolution, what needs to be shown is that the cause of the damage was from the activity of the utility. Negligence or malfeasance need not be shown (although could lead to punitive damages in court). In the wildfire case, the loss of property has generally been from live power lines falling in windstorms. As long as the fire is determined to have been started by lines (or other equipment) owned by the utility, property owners (insurance companies) can recover, even if the property is hundreds of miles away.
You can understand why utilities don't believe they should be held to the governmental standard, while some argue that even the government shouldn't be held to the inverse condemnation standard. After all, people pay for insurance for a reason--why should they not have to prove wrong-doing, proponents for eliminating strict liability argue.
In the case filed by San Diego Gas & Electric, the utility argues that it is unconstitutional under the United States Constitution for the state to impose inverse condemnation's strict liability on it unless it provides the ability for the utility to recover its costs.
This is after denial by the Public Utilities Commission of a rate adjustment request to recover costs of remaining payouts of $379 million by SDG&E from 2007 wildfires. The PUC's denial was upheld by the Fourth Circuit Court of Appeal and the California Supreme Court under California law, and thus SDG&E is seeking review by the Supreme Court of the United States of the state's PUC and court rulings.
Why did I spend so much time on this today? Well, it could be a $10-20 billion issue based on past claims and billions more on a going-forward basis. And, at the end of the day, you will pay these costs one way or another through higher utility rates or higher payments for insurance coverage.
It may sound like individuals against utilities but in most cases and it looked like that when SB 901 was being debated on the last night of last year's legislative session, but it is more often the insurance companies against utilities.
Thus far, legislators have been put in the middle. However, legislators may wait to see what the the nine members of the Supreme Court of the United States do, but that wouldn't be until the October 2019 term at the earliest and likely not until October 2020 with a decision in 2021.
Given the uncertainty, I honestly don't know how the Legislature or Public Utilities Commission handles this issue now. The Court's last conference where they would even consider the writ for certiorari is June 20, before returning October 1.
I look forward to hearing from my legal beagle friends and utility experts to hear about any misstatements, but I think I have the gist down right. Look in this space tomorrow and I think Gibran and I will be talking about it on the pod that we record Friday afternoon for a Sunday drop. I have not seen the 178-page petition filed with the Supreme Court yet but look forward to it.
More and #CAKEDAY after the jump...
CENSUS 2020: The Department of Finance released the latest annual population report for the state and its political subdivisions yesterday. Javier Panzar and Sarah Parvini report that the increase is the slowest in recorded history. This doesn't portend well for next year's Census, which was already under great concern for accuracy, particularly if the "citizenship question" is allowed by the Supreme Court.
USE-OF-FORCE: The San Diego Board of Supervisors voted to oppose AB 392 (Weber and McCarty) yesterday during an emotional hearing. AB 392 is the police use-of-force bill favored by police reform groups, writes Charles T. Clark for the SDUT. The article doesn't mention if that meant that they were voting against the law enforcement-favored SB 230 (Caballero), which is the training and resources bill that is now joined to AB 392 after Senate Public Safety's jiu-jitsu last week.
It was a 3-2 vote, with Supervisors Greg Cox and Nathan Fletcher voting to support AB 392. Speaking of Fletcher, he was confirmed unanimously by Senate Rules to his appointment by Governor Newsom to the Air Resources Board. His proud wife was there to catch the hearing and it looks like she surreptitiously captured a photo because, well, she knows that pictures and video normally require approval of the chair.
HIGH-SPEED CHOO-CHOO: For CapRadio, Ben Adler reports that the cost of the scaled-down model train we want for Christmas just went up.
"The 'project update report' released Wednesday by the California High-Speed Rail Authority -- which Newsom told reporters hours before its release that he was still working on personally -- estimates the cost of the Central Valley segment currently under construction has jumped by $1.8 billion."
Meanwhile, Kurtis Alexander reports for the Chron, part of the plans under consideration to weather the cost overruns might be to use conventional diesel trains to meet requirements to become operational in time. Because, that's what the valley needs. More slow trains and more pollution.
Note that while I joke about the project, I would like to wave a want and see it happen and would be a user. I just don't have a wand, and there are zero right answers after borrowing money, taking grants from the feds, buying land, and tearing up the Valley with cement structures currently to nowhere. For now, let's dance.
FROM THE DESK OF THE DEAN: George Skelton writes in the Times on Governor's new approach to water wars "...it’s good that the new governor is taking a fresh look at water and hopefully heading in a better direction." Skelton gets in quintessential California "There's a reason why a quote attributed to Mark Twain has become a well-worn cliche: 'Whiskey is for drinking, water is for fighting.' It’s fact."
THE 916: For Capitol Weekly, Julia Lindbloom reports on Sacramento's ambitions for a Major League Soccer expansion franchise. "Sacramento’s soccer team, the Sacramento Republic FC -- known locally as Sac Republic -- just broke ground on a $250 million stadium located between 8th and 10th Streets in the historical plot of ground known as the Railyards just north of downtown. Ultimately, backers say, this privately funded stadium will soon be home to the state’s fourth Major League Soccer team."
#CAKEDAY: Happy birthday to Amy Brown, Nick Garcia, Barri Girvan, and Erika Hoffman!
DEPT OF CORRECTIONS: At least in recent history, unlike Assembly Governmental Organization, Senate Governmental Organization has not had jurisdiction over tobacco issues. This would be a great history topic for a student with a term paper due.
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