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Newsom’s oil profit penalty passes first test

This story appeared in Calmatters

State senators discuss petroleum windfall profits penalties and whether Californians will get relief at the gas pump, at the state Capitol in Sacramento on Feb. 22, 2023. Photo by Rahul Lal, CalMatters

From CalMatters’ politics reporter Alexei Koseff:

Whatever lingering concerns legislative Democrats may have about Gov. Gavin Newsom’s recently revised proposal to punish oil companies for high gas prices, they seem ready to pass it anyway — and fast.

The bill sailed through its first committee hearing Wednesday, a week after Newsom’s office announced major changes — including a provision that would empower the California Energy Commission to establish a maximum profit margin for oil refiners above which they could be penalized, rather than asking the Legislature to determine that cap — and just two days after the amended language went into print.

The 13-2 party-line vote in the state Senate Energy, Utilities and Communications Committee followed hours of hand-wringing over how quickly the process is moving. But it set up the full  40-member Senate to pass the measure as soon as today, sending it to the Assembly for consideration before its spring recess at the beginning of April.

During the hearing, the Western States Petroleum Association, which represents the oil industry in California, lambasted supporters of the bill for rushing into a new regulatory scheme without fully considering potential unintended consequences:

  • Eloy Garcia, lobbyist: “We cannot have both, on the one hand, a first-of-its-kind, never-been-done-before bill and expect it to be done right in 10 days. That just does not reconcile.”

Yet aside from Sen. Shannon Grove, a Bakersfield Republican who represents a major oil-producing district and who grilled Newsom’s senior climate advisor Lauren Sanchez about definitions in the measure, there were few questions from the committee members about the proposal itself.

Sen. Brian Dahle, the Bieber Republican who ran against Newsom for governor last year, called it “socialism. This is pushing the government to pick winners and losers.”

The Democrats on the panel mostly used their time to monologue. Many of them lamented the speed at which everything was moving, then justified their votes by pointing to internal deliberations that had been happening for months, to how much better the new proposal was than its previous iteration, and to the urgency of acting on an issue that has slammed their constituents’ pocketbooks.

Sen. Dave Min, a Costa Mesa Democrat, cast the proposal as a “moral obligation” to fix a system that, regardless of whether oil companies are actually colluding to gouge customers, has become completely warped to their financial benefit — to the tune of $700 million per day at the height of last year’s price spike that prompted Newsom to call a special session of the Legislature.

  • Min: “We don’t have actual proof of collusion here, but I also think that’s missing the point, because what’s become clear as we’ve looked into this is that this is a fundamentally broken market.”

The lopsided vote in favor, pulling in even business-friendly Democrats who had expressed doubts about the governor’s original plan at an oversight hearing in late February, suggests Newsom has found a compromise that allows his party to score its political victory over a favorite liberal boogeyman without being too close to the fallout if prices at the pump soar again in the coming months. 

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1
A tale of two audits

A tent in downtown Los Angeles on Feb. 18, 2023. Pablo Unzueta for CalMatters
A tent in downtown Los Angeles on Feb. 18, 2023. Photo by Pablo Unzueta, CalMatters

California spends billions and billions of your money, but it’s not always clear how much difference it makes. Any legislative requests for audits have to get the blessing of a joint Assembly-Senate committee, which decided the fate of several proposals Wednesday.

First up: A look at the state’s spending on homelessness.

From CalMatters housing reporter Ben Christopher:

Between 2018 and 2021, California spent nearly $10 billion trying to tackle the state’s homelessness crisis. Between 2021 and the end of this year, lawmakers plan to spend at least $12 billion more. Meanwhile, the population of Californians sleeping on sidewalks, beneath underpasses and alongside railroad tracks has only grown.

So where is all that money going?

A bipartisan group of state lawmakers wants to know. The Joint Legislative Audit Committee voted unanimously to order the State Auditor’s Office to answer some fairly basic unanswered questions about state homelessness policy: 

  • How much of it has been spent on services and how much on overhead? 
  • How effective are various state-funded programs at actually getting people permanently into homes? 

Last month, the Newsom administration put out a report that offered a bird’s eye view of state homelessness spending. But that report notably did not get into how the money ought to be spent. That task now falls to the auditor.

Sen. Dave Cortese, a Campbell Democrat, initially proposed the audit after touring an encampment in San Jose last fall. Since then, he’s been joined by Cupertino Democratic Assemblymember Evan Low and three Republicans — Sen. Rosilicie Ochoa Bogh of Rancho Cucamonga, Sen. Roger Niello of Sacramento and Assemblymember Josh Hoover of Folsom.

That rare bipartisan coalition also wants the auditor, Grant Parks, to look at the management of homelessness dollars in the city of San Jose, plus in another city of the auditor’s choosing. 

  • Cortese: “This audit isn’t really about any city. It’s certainly not about going after any city and it’s not an indictment… But it is an indictment on the indecency that’s going on out there right now.”

Also approved: An audit on long delays in wage theft claims.

As Alejandro Lazo and Jeanne Kuang of CalMatters’ California Divide team report, the committee asked the state auditor to investigate the state Labor Commissioner’s Office to find out why it takes the agency so long to clear worker claims of wage theft.

This is despite labor unions, including the California Labor Federation, opposing the audit, saying that it is unnecessary and it would distract the department, already strained and understaffed, from carrying out real improvements.

As a compromise, proponents of the audit have agreed to push the start date to Sept. 1. And if the labor commissioner implements changes that will satisfy lawmakers before then, the committee can rescind its audit request.

By law, claims of wage theft are supposed to be in 120 days and decided 15 days after that. But in a multi-part investigation on wage theft, CalMatters revealed that from 2017 to 2021, California averaged 505 days, which later climbed to more than 800 days in 2022.

2
Legislators weigh in on LA Unified strike

Thousands of Los Angeles Unified School District teachers and Service Employees International Union 99 members rally outside the LAUSD headquarters in Los Angeles on March 21, 2023. Photo by Damian Dovarganes, AP Photo

Thousands of Los Angeles Unified School District teachers and Service Employees International Union 99 members rally outside the LAUSD headquarters in Los Angeles on March 21, 2023. Photo by Damian Dovarganes, AP Photo

The massive three-day strike of the Los Angeles Unified School District is anticipated to end today, and as school workers demand better wages and working conditions, members of the Legislative Black Caucus and other Democrats, not surprisingly, voiced their support.

  • California Legislative Black Caucus, in a statement Wednesday: “It is imperative that classified workers — a majority of whom are women of color — who have consistently demonstrated their commitment to the students and families of Los Angeles, make just and equitable wages.”

After a nearly years-long negotiation with the nation’s second-largest school district fell apart, members of Service Employees International Union Local 99 — which represents 30,000 L.A. Unified school workers who drive buses, prepare meals, clean classrooms and support students with special needs — began taking to the streets in protest on Tuesday.

According to a February 2022 survey, members of the union are 64% Latino, 20% Black and 74% women. Among other demands, the union is advocating for a 30% wage increase, better health benefits and more staffing.

The strike has upended the daily schedules of many Los Angeles residents, with students missing out on school and parents desperately looking for childcare options. The city’s mayor, Karen Bass, has also stepped in to assist with negotiations.

However, if “demands are not met,” union spokesperson Blanca Gallegos told the Los Angeles Times, another walkout may be in the works.

And on the subject of educators’ pay, from CalMatters higher education reporter Mikhail Zinshteyn:

The 28,000 educators of California State University earn roughly as much as professors at other similar campuses nationwide… or do they?

The overall findings, produced by Mercer, a global human resources firm that Cal State’s Office of the Chancellor hired, did not consider the higher cost of living in California compared to the rest of the nation, calling into question just how much the data reveal. 

Instead, the study factored in “cost of labor” which is not the same thing. Cost of labor deals with the wages and benefits paid to employees. Cost of living refers to the cost of maintaining a certain standard of living — stuff like housing, food, and transportation — within a specific geographic area.

Several trustees stressed the full salary picture is incomplete without considering California’s higher cost of living. 

  • Tony Thurmond, a trustee who is also the state Superintendent of Public Instruction: “One salary compared to other institutions and locations is not the same when you take into account the cost of living in California.”

The study’s national comparison group of roughly 80 public campuses didn’t include the University of California or the state’s community colleges, which have different missions than Cal State, Mercer’s representatives said. Many of the campuses in the comparison group were in states with far lower costs of living than California, such as Georgia, Indiana, Minnesota and Texas. Only one school from New York, a high-cost state, was on the list.

  • Leslie Gilbert-Lurie, another trustee: “I am concerned about what we consider our peer groups, because it seems to me that what we decide our peer groups and what we decide is a median then makes us feel satisfied or not satisfied.”

3
Prioritizing cheap apartments

An apartment building under construction in San Francisco on June 2, 2015. Photo by Robert Galbraith, Reuters

An apartment building under construction in San Francisco on June 2, 2015. Photo by Robert Galbraith, Reuters

From CalMatters housing reporter Ben Christopher:

Experts have dubbed it “naturally-occurring affordable housing,” but you might know it better as “cheap apartments.” 

Whatever you call it, it’s increasingly endangered in California, according to a new report out today from the California Housing Partnership, a nonprofit that advocates for more affordable housing.

In legislative circles, “Affordable housing” with a capital-A seems to get all the attention. Those are the units usually found in buildings built by nonprofits, that are subsidized with taxpayer dollars and legally restricted in how much they can rent for. 

In California, there are a little more than 500,000 of those types of units, and they’re the destination of choice for billions of dollars in state spending each year.

That’s in contrast to nearly 864,000 affordable units of the “naturally-occurring” variety, according to the report, which drew on a database of private real estate data. 

Looking at market rental data, property age, building quality and a list of other factors, the report estimates that:

  • 38% of those units are currently “at-risk” of becoming unaffordable, either as a result of rental increases or acquisition and redevelopment.
  • The areas of the state with the highest share of the affordable stock at risk are in the fastest growing: the Inland Empire, the southern Central Valley and Sacramento.

Matt Schwartz, the partnership’s president, argued that state legislators need to start prioritizing this stock of cheap housing as the vital resource of still-affordable housing it is.

  • Schwartz: “The scale of the affordable housing challenge cannot be met, in the short term at least, by just relying on the federally- and state-assisted affordable homes… (but) the state has no program that’s specifically designed to preserve these.”

This isn’t just a California phenomenon. A 2021 report from the consulting firm McKinsey & Company said these unsubsidized cheap rentals, rented “predominantly” by low-income people of color, make up “the lion’s share of affordable-housing units” across the country.

For about 1.6 million Californians, mobile home parks are their answer to affordable housing. 

But as CalMatters’ Manuela Tobias reported this week in a groundbreaking five-month investigation, state oversight of these parks is questionable.

She talks about her reporting in the latest episode of the “Gimme Shelter” podcast with Liam Dillon, a housing reporter for The Los Angeles Times. They discuss how poor housing conditions in California impact displaced residents and what state agencies are doing (and not doing) to address issues of substandard housing.

And coming next week: Manuela will have a follow-up report examining one possible solution: A loan program, run by the state housing department, designed to help mobile home park residents turn parks into co-ops. But even as parks have deteriorated, roughly $34 million has sat mostly untouched for a decade. With a program overhaul and $100 million infusion, the housing department is hoping to change that this spring.

CalMatters Commentary


CalMatters columnist Dan Walters: Will the third time be the charm for Newsom’s crusade against California gasoline refiners for what he alleges have been unjustified price spikes in recent months?

CalMatters columnist Jim Newton: The water crisis in the West and the decline of the Colorado River are going to require painful changes for Southern California farms, and a lot less water.

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