taxes

Censored!

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news@sfbg.com

Peter Phillips, director of Project Censored for 13 years, says he’s finished with reform. It’s impossible, he said in a recent interview, to try to get major news media outlets to deliver relevant news stories that serve to strengthen democracy.

"I really think we’re beyond reforming corporate media," said Phillips, a professor of sociology at Sonoma State University and director of Project Censored. "We’re not going to break up these huge conglomerates. We’re just going to make them irrelevant."

Every year since 1976, Project Censored has spotlighted the 25 most significant news stories that were largely ignored or misrepresented by the mainstream press. Now the group is expanding its mission — to promote alternative news sources. But it continues to report the biggest national and international stories that the major media ignored.

The term "censored" doesn’t mean some government agent stood over newsrooms with a rubber stamp and forbid the publication of the news, or even that the information was completely out of the public eye. The stories Project Censored highlights may have run in one or two news outlets, but didn’t get the type of attention they deserved.

The project staff begins by sifting through hundreds of stories nominated by individuals at Sonoma State, where the project is based, as well as 30 affiliated universities all over the country.

Articles are verified, fact-checked, and selected by a team of students, faculty, and evaluators from the wider community, then sent to a panel of national judges to be ranked. The end product is a book, co-edited this year by Phillips and associate director Mickey Huff, that summarizes the top stories, provides in-depth media analysis, and includes resources for readers who are hungry for more substantive reporting.

Project Censored doesn’t just expose gaping holes in the news brought to you by the likes of Fox, CNN, or USA Today — it also shines a light on less prominent but more incisive alternative-media sources serving up in-depth investigations and watchdog reports.

Phillips is stepping down this year as director of Project Censored and turning his attention to a new endeavor called Media Freedom International. The organization will tap academic affiliates from around the world to verify the content put out by independent news outlets as a way to facilitate trust in these lesser-known sources. "The biggest question I got asked for 13 years was, who do you trust?" he explained. "So we’ve really made an effort in the last three years to try to address that question, in a very open way, in a very honest way, and say, these are [the sources] who we can trust."

Benjamin Frymer, a sociology professor at Sonoma State who is stepping into the role of Project Censored director, says he believes the time is ripe for this kind of push. "The actual amount of time people spend reading online is increasing," Frymer pointed out. "It’s not as if people are just cynically rejecting media — they’re reaching out for alternative sources. Project Censored wants to get involved in making those sources visible."

The Project Censored book this year uses the term "truth emergency."

"We call it an emergency because it’s a democratic emergency," Huff asserted. In this media climate, "we’re awash in a sea of information," he said. "But we have a paucity of understanding about what the truth is."

The top 25 Project Censored stories of 2008-09 highlight the same theme that Phillips and Huff say has triggered the downslide of mainstream media: the overwhelming influence of powerful, profit-driven interests. The No. 1 story details the financial sector’s hefty campaign contributions to key members of Congress leading up to the financial crisis, which coincided with a weakening of federal banking regulations. Another story points out that in even in the financial tumult following the economic downturn, special interests spent more money on Washington lobbyists than ever before.

Here’s this year’s list.

1. CONGRESS SELLS OUT TO WALL STREET


The total tab for the Wall Street bailout, including money spent and promised by the U.S. government, works out to an estimated $42,000 for every man, woman, and child, according to American Casino, a documentary about sub prime lending and the financial meltdown. The predatory lending free-for-all, the emergency pumping of taxpayer dollars to prop up mega banks, and the lavish bonuses handed out to Wall Street executives in the aftermath are all issues that have dominated news headlines.

But another twist in the story received scant attention from the mainstream news media: the unsettling combination of lax oversight from national politicians with high-dollar campaign contributions from financial players.

"The worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d’état," Matt Taibbi wrote in "The Big Takeover," a March 2009 Rolling Stone article. "They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders who used money to control elections, buy influence, and systematically weaken financial regulations."

In the 10-year period beginning in 1998, the financial sector spent $1.7 billion on federal campaign contributions, and another $3.4 billion on lobbyists. Since 2001, eight of the most troubled firms have donated $64.2 million to congressional candidates, presidential candidates, and the Republican and Democratic parties.

Wall Street’s spending spree on political contributions coincided with a weakening of federal banking regulations, which in turn created a recipe for the astronomical financial disaster that sent the global economy reeling.

Sources: "Lax Oversight? Maybe $64 Million to DC Pols Explains It," Greg Gordon, Truthout.org and McClatchey Newspapers, October 2, 2008; "Congressmen Hear from TARP Recipients Who Funded Their Campaigns," Lindsay Renick Mayer, Capitol Eye, February 10, 2009; "The Big Takeover," Matt Taibbi, Rolling Stone, March 2009.

2. DE FACTO SEGREGATION DEEPENING IN PUBLIC EDUCATION


Latinos and African Americans attend more segregated public schools today than they have for four decades, Professor Gary Orfield notes in "Reviving the Goal of an Integrated Society: A 21st Century Challenge," a study conducted by UCLA’s Civil Rights Project. Orfield’s report used federal data to highlight deepening segregation in public education by race and poverty.

About 44 percent of students in the nation’s public school system are people of color, and this group will soon make up the majority of the population in the U.S. Yet this racial diversity often isn’t reflected from school to school. Instead, two out of every five African American and Latino youths attend schools Orfield characterizes as "intensely segregated," composed of 90 percent to 100 percent people of color.

For Latinos, the trend reflects growing residential segregation. For African Americans, the study attributes a significant part of the reversal to ending desegregation plans in public schools nationwide. Schools segregated by race and poverty tend to have much higher dropout rates, more teacher turnover, and greater exposure to crime and gangs, placing students at a major disadvantage in society. The most severe segregation is in Western states, including California.

Fifty-five years after the Supreme Court’s Brown vs. Board of Education ruling, Orfield wrote, "Segregation is fast spreading into large sectors of suburbia, and there is little or no assistance for communities wishing to resist the pressures of resegregation and ghetto creation in order to build successfully integrated schools and neighborhoods."

Source: "Reviving the Goal of an Integrated Society: A 21st Century Challenge," Gary Orfield, The Civil Rights Project, UCLA, January 2009

3. SOMALI PIRATES: THE UNTOLD STORY


Somali pirates off the Horn of Africa were like gold for mainstream news outlets this past year. Stories describing surprise attacks on shipping vessels, daring rescues, and cadres of ragtag bandits extracting multimillion dollar ransoms were all over the airwaves and front pages.

But even as the pirates’ exploits around the Gulf of Aden captured the world’s attention, little ink was devoted to factors that made the Somalis desperate enough to resort to piracy in the first place: the dumping of nuclear waste and rampant over-fishing their coastal waters.

In the early 1990s, when Somalia’s government collapsed, foreign interests began swooping into unguarded coastal waters to trawl for food — and venturing into unprotected Somali territories to cheaply dispose of nuclear waste. Those activities continued with impunity for years. The ramifications of toxic dumping hit full force with the 2005 tsunami, when leaking barrels were washed ashore, sickening hundreds and causing birth defects in newborn infants. Meanwhile, the uncontrolled fishing harvests damaged the economic livelihoods of Somali fishermen and eroded the country’s supply of a primary food source. That’s when the piracy began.

"Did we expect starving Somalians to stand passively on their beaches, paddling in our nuclear waste, and watch us snatch their fish to eat in restaurants in London and Paris and Rome?" asked journalist Johann Hari in a Huffington Post article. "We didn’t act on those crimes — but when some of the fishermen responded by disrupting the transit-corridor for 20 percent of the world’s oil supply, we begin to shriek about ‘evil.’"

Sources: "Toxic waste behind Somali piracy," Najad Abdullahi, Al Jazeera English, Oct. 11, 2008; "You are being lied to about pirates," Johann Hari, The Huffington Post, Jan. 4, 2009; "The Two Piracies in Somalia: Why the World Ignores the Other," Mohamed Abshir Waldo, WardheerNews, Jan. 8, 2009

4. NORTH CAROLINA’S NUCLEAR NIGHTMARE


The Shearon Harris nuclear plant in North Carolina’s Wake County isn’t just a power-generating station. The Progress Energy plant, located in a backwoods area, bears the distinction of housing the largest radioactive-waste storage pools in the country. Spent fuel rods from two other nuclear plants are transported there by rail, then stored beneath circuutf8g cold water to prevent the radioactive waste from heating.

The hidden danger, according to investigative reporter Jeffery St. Clair, is the looming threat of a pool fire. Citing a study by Brookhaven National Laboratory, St. Clair highlighted in Counterpunch the catastrophe that could ensue if a pool were to ignite. A possible 140,000 people could wind up with cancer. Contamination could stretch for thousands of square miles. And damages could reach an estimated $500 billion.

"Spent fuel recently discharged from a reactor could heat up relatively rapidly and catch fire," Robert Alvarez, a former Department of Energy advisor and Senior Scholar at the Institute for Policy Studies noted in a study about safety issues surrounding nuclear waste pools. "The fire could well spread to older fuel. The long-term contamination consequences of such an event could be significantly worse than Chernobyl."

Shearon Harris’ track record is pocked with problems requiring temporary shutdowns of the plant and malfunctions of the facility’s emergency-warning system.

When a study was sent to the Nuclear Regulatory Commission highlighting the safety risks and recommending technological fixes to address the problem, St. Clair noted, a pro-nuclear commissioner successfully persuaded the agency to dismiss the concerns.

Source: "Pools of Fire," Jeffrey St. Clair, CounterPunch, Aug. 9, 2008

5. U.S. FAILS TO PROTECT CONSUMERS AGAINST TOXICS


Two years ago, the European Union enacted a bold new environmental policy requiring close scrutiny and restriction of toxic chemicals used in everyday products. Invisible perils such as lead in lipstick, endocrine disruptors in baby toys, and mercury in electronics can threaten human health. The European legislation aimed to gradually phase out these toxic materials and replace them with safer alternatives.

The story that has gone unreported by mainstream American news media is how this game-changing legislation might affect the U.S., where chemical corporations use lobbying muscle to ensure comparatively lax oversight of toxic substances. As global markets shift to favor safer consumer products, the U.S. Environmental Protection Agency is lagging in its own scrutiny of insidious chemicals.

As investigative journalist Mark Schapiro pointed out in Exposed: The Toxic Chemistry of Everyday Products and What’s at Stake for American Power, the EPA’s tendency to behave as if it were beholden to big business could backfire in this case, placing U.S. companies at a competitive disadvantage because products manufactured here will be regarded with increasing distrust.

Economics aside, the implications of loose restrictions on toxic products are chilling: just one-third of the 267 chemicals on the EU’s watch list have ever been tested by the EPA, and only two are regulated under federal law. Meanwhile, researchers at UC Berkeley estimate that 42 billion pounds of chemicals enter American commerce daily, and only a fraction have undergone risk assessments. When it comes to meeting the safer, more stringent EU standard, the stakes are high — with consequences including economic impacts as well as public health.

Sources: "European Chemical Clampdown Reaches Across Atlantic," David Biello, Scientific American, Sept. 30, 2008; "How Europe’s New Chemical Rules Affect U.S.," Environmental Defense Fund, Sept. 30, 2008; "U.S. Lags Behind Europe in Reguutf8g Toxicity of Everyday Products," Mark Schapiro, Democracy Now! Feb. 24, 2009

6. AS ECONOMY SHRINKS, D.C. LOBBYING GROWS


In 2008, as the economy tumbled and unemployment soared, Washington lobbyists working for special interests were paid $3.2 billion — more than any other year on record. According to the Center for Responsive Politics, special interests spent a collective $32,523 per legislator, per day, for every day Congress was in session.

One event that triggered the lobbying boom, according to CRP director Sheila Krumholz, was the federal bailout — with the federal government ensuring that the lobbyists got a piece of the pie. Ironically, some of the first in line were the same players who helped precipitate the nation’s sharp economic downturn by engaging in high-risk, speculative lending practices.

"Even though some financial, insurance and real estate interests pulled back last year, they still managed to spend more than $450 million as a sector to lobby policymakers," Krumholz noted. "That can buy a lot of influence, and it’s a fraction of what the financial sector is reaping in return through the government’s bailout program."

The list of highest-ranking spenders on Washington lobbying reads like a roster of some of the most powerful interests nationwide. Topping the list was the health sector, which spent $478.5 million lobbying Congress last year. A close runner-up was the finance, insurance, and real-estate sector, spending $453.5 million. Pharmaceutical companies plunked down $230 million; electric utilities spent $156.7 million; and oil and gas companies paid lobbyists $133.2 million.

Source: "Washington Lobbying Grew to $3.2 Billion Last Year, Despite Economy," Center for Responsive Politics, Open Secrets.org

7. OBAMA’S CONTROVERSIAL DEFENSE APPOINTEES


President Barack Obama’s appointments to the Department of Defense have raised serious questions among critics who’ve studied their track records. Although the news media haven’t paid much attention, the defense appointees bring to the administration controversial histories and conflicts of interest due to close ties to defense contractors.

Obama’s decision to retain Robert Gates, Secretary of Defense under President George W. Bush, marks the first time in history that a president has opted to keep a defense secretary of an outgoing opposing party in power.

Gates, a former CIA director, has faced criticism for allegedly spinning intelligence reports for political means. In Failure of Intelligence: The Decline and Fall of the CIA, author and former CIA analyst Melvin Goodman described him as "the chief action officer for the Reagan administration’s drive to tailor intelligence reporting to White House political desires." Gates also came under scrutiny for questions surrounding whether he misled Congress during the Iran-contra scandal in the mid-1980s, and was accused of withholding information from intelligence committees when the U.S. provided military aid to Saddam Hussein during the Iran-Iraq war.

Critics are also uneasy about the appointment of Deputy Defense Secretary William Lynn, who formerly served as a senior vice president at defense giant Raytheon Company and was a registered lobbyist for Raytheon until July 2008. Lynn, who previously served as Pentagon comptroller under the Clinton administration, came under fire during his confirmation hearing for "questionable accounting practices." The Defense Department failed multiple audits under Lynn’s leadership because it was unable to properly account for $3.4 trillion in financial transactions made over the course of several years.

Sources: "The Danger of Keeping Robert Gates," Robert Parry, ConsortiumNews.com, Nov. 13, 2008; "Obama’s Defense Department Appointees- The $3.4 Trillion Question," Andrew Hughes, Global Research, Feb. 13, 2009; "Obama Nominee Admiral Dennis Blair Aided perpetrators of 1999 church Killings in East Timor," Allan Nairn, Democracy Now! Jan. 7, 2009; "Ties to Chevron, Boeing Raise Concern on Possible NSA Pick," Roxana Tiron, The Hill, Nov. 24, 2008


8. BIG BUSINESS CHEATS THE IRS


The Cayman Islands and Bermuda are magnets for Bank of America, Citigroup, American International Group, and 11 other financial giants that were the beneficiaries of the federal government’s 2008 Wall Street bailout. It’s not the balmy weather that inspires some of America’s wealthiest companies to open operations in the Caribbean archipelago: the offshore oases provide safe harbors to stash cash out of the reach of Uncle Sam.

According to a 2008 report by the Government Accountability Office, which was largely ignored by the news media, 83 of the top publicly-held U.S. companies, including some receiving substantial portions of federal bailout dollars, have operations in tax havens that allow them to avoid paying their fair share to the Internal Revenue Service. The report also spotlighted the activities of Union Bank of Switzerland (UBS), which has helped wealthy Americans to use tax schemes to cheat the IRS out of billions.

In December 2008, banking giant Goldman Sachs reported its first quarterly loss, and promptly followed up with a statement that its tax rate would drop from 34.1 percent to 1 percent, citing "changes in geographic earnings mix" as the reason. The difference: instead of paying $6 billion in total worldwide taxes as it did in 2007, Goldman Sachs would pay a total of $14 million in 2008. In the same year, it received $10 billion and debt guarantees from the U.S. government.

"The problem is larger than Goldman Sachs," U.S. Representative Lloyd Doggett, a Texas Democrat who serves on the tax-writing House Ways and Means Committee, told Bloomberg News. "With the right hand out begging for bailout money, the left is hiding it offshore."

Sources: "Goldman Sachs’s Tax Rate Drops to 1 percent or $14 Million," Christine Harper, Bloomberg News, Dec. 16, 2008; "Gimme Shelter: Tax Evasion and the Obama Administration," Thomas B. Edsall, The Huffington Post, Feb. 23, 2009

9. U.S. CONNECTED TO WHITE PHOSPHOROUS STRIKES IN GAZA


In mid-January, as part of a military campaign, the Israeli Defense Forces fired several shells that hit the headquarters of a United Nations relief agency in Gaza City, destroying provisions for basic aid like food and medicine.

The shells contained white phosphorous (referred to as "Willy Pete" in military slang), a smoke-producing, spontaneously flammable agent designed to obscure battle territory that also can ignite buildings or cause grotesque burns if it touches the skin.

The attack on the relief-agency headquarters is just one example of a civilian structure that researchers discovered had been hit during the January air strikes. In the aftermath of the attacks, Human Rights Watch volunteers found spent white phosphorous shells on city streets, apartment roofs, residential courtyards, and at a U.N. school in Gaza.

Human Rights Watch says the IDF’s use of white phosphorous violated international law, which prohibits deliberate, indiscriminate, or disproportionate attacks that result in civilian casualties. After gathering evidence such as spent shells, the organization issued a report condemning the repeated firing of white phosphorus shells over densely populated areas of Gaza as a war crime. Amnesty International, another human rights organization, followed suit by calling upon the United States to suspend military aid to Israel — but to no avail.

The U.S. was a primary source of funding and weaponry for Israel’s military campaign. Washington provided F-16 fighter planes, Apache helicopters, tactical missiles, and a wide array of munitions, including white phosphorus.

Sources: "White Phosphorus Use Evidence of War Crimes Report: Rain of Fire: Israel’s Unlawful Use of White Phosphorus in Gaza," Fred Abrahams, Human Rights Watch, March 25, 2009; "Suspend Military Aid to Israel, Amnesty Urges Obama after Detailing U.S. Weapons Used in Gaza," Rory McCarthy, Guardian/U.K., Feb. 23, 2009; "U.S. Weaponry Facilitates Killings in Gaza," Thalif Deen, Inter Press Service, Jan. 8, 2009; "U.S. military resupplying Israel with ammunition through Greece," Saed Bannoura, International Middle East Media Center News, Jan. 8, 2009.

10. ECUADOR SAYS IT WON’T PAY ILLEGITIMATE DEBT


When President Rafael Correa announced that Ecuador would default on its foreign debt last December, he didn’t say it was because the Latin American country was unable to pay. Rather, he framed it as a moral stand: "As president, I couldn’t allow us to keep paying a debt that was obviously immoral and illegitimate," Correa told an international news agency. The news was mainly reported in financial publications, and the stories tended to quote harsh critics who characterized Correa as an extreme leftist with ties to Venezuelan President Hugo Chavez.

But there’s much more to the story. The announcement came in the wake of an exhaustive audit of Ecuador’s debt, conducted under Correa’s direction by a newly created debt audit commission. The unprecedented audit documented hundreds of allegations of irregularity and illegality in the decades of debt collection from international lenders. Although Ecuador had made payments exceeding the value of the principal since the time it initially took out loans in the 1970s, its foreign debt had nonetheless swelled to levels three times as high due to extraordinarily high interest rates. With a huge percentage of the country’s financial resources devoted to paying the debt, little was left over to combat poverty in Ecuador.

Correa’s move to stand up against foreign lenders did not go unnoticed by other impoverished, debt-ridden nations, and the decision could set a precedent for developing countries struggling to get out from under massive debt obligation to first-world lenders.

Ecuador eventually agreed to a restructuring of its debt at about 35 cents on the dollar. Nonetheless, the move served to expose deficiencies in the World Bank system, which provides little recourse for countries to resolve disputes over potentially illegitimate debt.

Sources: "As Crisis Mounts, Ecuador Declares Foreign Debt Illegitimate and Illegal," Daniel Denvir, Alternet, November 26, 2008; "Invalid Loans to Ecuador: Who Owes Who," Committee for the Integral Audit of Public Credit, Utube, Fall 2008; "Ecuador’s Debt Default," Neil Watkins and Sarah Anders, Foreign Policy in Focus, Dec. 15, 2008

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OTHER STORIES IN THE TOP 25

11. Private Corporations Profit from the Occupation of Palestine

12. Mysterious Death of Mike Connell—Karl Rove’s Election Thief

13. Katrina’s Hidden Race War

14. Congress Invested in Defense Contracts

15. World Bank’s Carbon Trade Fiasco

16. US Repression of Haiti Continues

17. The ICC Facilitates US Covert War in Sudan

18. Ecuador’s Constitutional Rights of Nature

19. Bank Bailout Recipients Spent to Defeat Labor

20. Secret Control of the Presidential Debates

21. Recession Causes States to Cut Welfare

22. Obama’s Trilateral Commission Team

23. Activists Slam World Water Forum as a Corporate-Driven Fraud

24. Dollar Glut Finances US Military Expansion

25. Fast Track Oil Exploitation in Western Amazon

Read them all at www.projectcensored.org

Tax reform plan goes nowhere

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By Tim Redmond

The governor’s tax-reform commission released its report today, and it probably won’t amount to much, because nobody seems to like it.

But the report shows how badly skewed the whole notion of “tax reform” has been warped in this state. The central premise of the report is that the top income tax rate — the rate that the very rich pay — should be reduced, and the overall income tax structure flattened. The argument: Since the income of the richest Californians changes with the economy, flattening out the tax structure will give us more budget stability.

But that’s an utter crock. As Lenny Goldberg, the director of the California Tax Reform Association, notes:

1. The top personal income tax rate should not be lowered, since figures presented to the Commission demonstrate clearly that the volatility problem is a function of the distribution of income, not a steeply progressive tax. In fact, the tax is relatively flat, assessing the same marginal rate on the upper-middle class (90k +) as the very rich, with a very quick ride through the brackets. If anything, the bracket structure should reflect the federal structure, which has increasing brackets and rates at $137,000, $208,000, and $372,000.

As Phil Spilberg’s presentation on March 16 pointed out, the top 1% take an extraordinary share of income (25%), nearly doubling since the early 1990’s. Their tax burden moves consistently with their share of income, so their disproportionate share of taxes is a function of their disproportionate share of income. That fact alone is what leads to volatility, but lowering their tax burden only exacerbates the mal-distribution of income. And any tax cuts share income with the federal government at a marginal rate of 35%, likely to become 39.6%, so are effectively a capital outflow.

In other words, the reason that tax receipts drop off so much during recessions is that the very rich have too much of the state’s total income. If anything, the tax rate is too flat now.

I’m somewhat intrigued by the new business tax proposals, which amount to what the Europeans call a “value added tax.” You take the total sales of a business, subtract its total costs, and tax the net proceeds, which are supposed to represent the value added during production. It’s a little trickier when you apply that to services, but I don’t think any sane person watching the state’s tax system disagrees with the concept that services ought to be taxed.

But overall, the tax reform commission has offered a very limited perspective — which is too bad, because California’s tax system is a mess and badly needs a comprehensive overhaul.

The national parks: A radical idea

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By Tim Redmond

I have two kids (with piano, gymnastics, tae kwon do, PTA and assorted play dates and sleepovers), a busy job, a dog to walk, dirty dishes to wash … you know the drill. So I haven’t been able to watch every minute of every episode of Ken Burns magnum opus on the national park system. I don’t think I know anyone who has that kind of time these days.

But I tuned in for a while last night, to Episode Two, which tracks John Muir, Teddy Roosevelt, the Antiquities Act etc., and I walked away with a very clear message:

This is a series about what government does right.

In the segment I saw, the feds were the good guys — Congress was saving wild areas, and when the western ranchers and developers tried to commercialize the Grand Canyon (in the name of private enterprise), Roosevelt used his authority to block them, infuriating the states-rights and anti-government Westerners but (of course) preserving what everyone know agrees is a national treasure.

There was a fabulous quote from environmental journalist Juanita Green.

“In other parts of the world,” she says, “there are places that are wild because some nobleman decreed it. In the United States, we don’t need a nobleman. … that’s democracy.”

At a time when the mayor of San Francisco is lauding the death of a billionaire who believed just the opposite — that the private sector should decide what gets saved and that private philanthropy (from fortunes built on tax cuts) is a better solution than public spending (fueled by taxes on the wealthy), we all ought to think about that a little.

If the national parks are “America’s best idea,” as Burns dubs his documentary, then the best thing this nation has ever done is exerted government supremacy over the private sector when it comes to the use of land. It’s sad to think how radical that sounds today.

The $2.8 billion rate hike

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news@sfbg.com

In the middle of what economists are calling the worst economic downturn since the Great Depression, when California unemployment rates have hit post-WWII records, commercial defaults are rising, and families and businesses are hurting, Pacific Gas and Electric Co. is asking for electricity rate hikes that would take at least $47 million out of the local community, a Guardian analysis shows. By some estimates, the impact could be has high as $787 million.

And the economy is already losing between $174 million and $483 million a year because the city hasn’t created a public power system. So the total impact on the San Francisco economy of paying PG&E’s high private rates could total $2.8 billion. That’s money that local residents can’t spend on good and services, local businesses can’t use to hire more workers and city government can’t collect taxes on.

The analysis is based on work done in 2002 by Irwin Kellner, chief economist for Marketwatch and a former economics professor at Hofstra University. Kellner analyzed the savings to the Long Island economy after that community replaced a private utility with a public power system (see "The $620 million shakedown, 9/4/2002).

It’s not a complicated set of calculations.

During the fiscal year ending in 2009, San Francisco residents and businesses paid $644 million on electricity, according to data from the city’s Controller’s Office. If PG&E’s proposed 6.5 percent average rate hike is approved for 2011 (with additional hikes of 1.4 percent and 1.1 percent the following two years) that number would ultimately rise to $704.5 million.

Over the next four years, as those rate hikes kick in, San Franciscans would be handing PG&E an extra $157 million. That’s $106 million businesses won’t have to pay employees or make capital improvements, and $51.3 million consumers won’t have to spend in local businesses.

"That’s $51 million less that would otherwise go into San Francisco neighborhood businesses," said Ted Egan, chief economist in the city’s Office of Economic Analysis. "Instead the $51 million goes to PG&E, and they won’t spend it all in San Francisco. Some will go to shareholders and outside the region, so the rate hike would end up having a larger impact than the initial $51 million."

That "larger impact" is called the multiplier effect: if you give one dollar to someone likely to spend it locally, he or she will buy shoes at a local shoe store, whose owner will use the dollar to buy groceries at the local grocery store, whose owner will pay the counter worker, who will spend the money on paint at the local hardware store — and by the time it’s circulated through the local economy, that dollar has created far more than a dollar’s worth of economic activity.

Economists argue on how to figure the exact impact of that dollar. Kellner has done studies of the economic impact of utility rates and estimates the multiplier — the economic impact of electricity rate hikes — to be five, expanding the $157.4 million to over $787 million.

Egan takes a more conservative view of the San Francisco economy and consumer spending. He estimates that the multiplier for utility rate hikes is closer to 0.3 — or slightly higher when commercial rates are factored in. According to his estimate the impact would be closer to $47,231,083.86.

The multiplier suggested by federal government economists during the stimulus bill discussion is 1.8, the number cautiously posited by Cynthia Kroll, senior regional economist for the Fisher Center for Real Estate and Urban Economics at UC Berkeley. Based on her calculations, PG&E would be yanking $283 million out of the local economy.

Either way, it’s a huge sum of money, particularly in a bad economy.

A PATTERN OF RATE HIKES


This latest rate hike, Mindy Spatt, communications director of the Utility Reform Network told us, is only part of a pattern of attempts by PG&E to raise rates. Every three years, utility companies present a general rate case to the California Public Utilities Commission. But Spatt said utilities can come to the PUC in between to ask for other rate hikes.

"They’re constantly coming back to the commission for this that and the other thing," she said. "[PG&E] came back after they got money for smart meters to get money for smarter meters.

"Overall, the pattern is that rates continue to go up," she continued. "The only other thing going up is executive compensation. We are still plagued with blackouts, we still get crappy service."

She’s right: data from other local utilities show that PG&E rates are anywhere from 20 percent to 40 percent higher than cities that have public power. PG&E would like its customers to believe that higher rates will improve service and reliability — but that’s not what’s happening.

"They don’t spend the money on giving us good service, instead [they focus] on convincing us they are giving us good service," Spatt said.

In its announcement of the proposed hike, PG&E claimed the rate hikes are to maintain infrastructure and reliability. A further $1.1 billion is also being asked for as part of a Cornerstone Improvement Project to increase reliability.

"Reliability" is an old battle horse trotted out every few years as the justification for rate hikes. PG&E is consistently less reliable than other local utilities and even less reliable than other large private utilities. So the company constantly asks for money to upgrade its system — except that reliability doesn’t seem to improve much, and it hasn’t improved much in the past decade, according to California Public Utilities Commission data.

"It’s interesting to compare their rates to municipal utilities and how much higher they are," Spatt said. "What do we get for the extra money we pay? Because by most measures they’re not doing a great job."

In fact, Guardian research shows that local municipal utilities have consistently better reliability records than PG&E (see "The blackout factor," 8/5/09).

PUBLIC POWER SAVINGS


The direct cost of PG&E’s high rates costs the local economy — and those losses are compounded by the money that could have been saved with public power.

A detailed Guardian analysis concluded last year that San Francisco would be able to cut electric rates by 15 percent if it ran its own utility (see "Cleaner and cheaper," 9/10/2008). That’s an entirely reasonable estimate, according to Jeff Shields, general manager of the South San Joaquin Irrigation District, which is fighting with PG&E to take over electricity distribution in its service area. He projects similar savings for his customers.

Shields thinks his system (and one in San Francisco) could cut rates even further. As nonprofit, he explained, SSJID can save money in multiple areas and pass those savings onto customers.

"We don’t pay taxes on earnings," he told us. "PG&E, as a shareholder company, can collect an 11.45 percent margin of profit. We don’t pay that. We don’t have the same overhead. We don’t have high-rises or corporate jets."

Public power agencies pay less to borrow money, are eligible for tax-exempt financing, typically have a higher credit rating and often keep a substantial cash reserve.

"[Selling electricity] will continue to produce substantial income," he said. "As a nonprofit, the only thing we can do with that income is continue to drop rates."

Other municipal utilities, like Silicon Valley Power in Santa Clara, have been able to keep rates low as PG&E has continued to raise rates. Larry Owens, customer services manager at SVP, said its residential rates are half of PG&E’s, and less for larger users.

The opportunity cost of not having municipal power — factoring in PG&E’s proposed rate hike and the assumption, based on Guardian and SSJID analyses, that rates would be lowered by at least 15 percent — is approximately $545 million over the next four years. Theoretically, that money could have resulted in a $980 million to $2.8 billion bump in the local economy.

This doesn’t include what some municipal utilities call "general fund transfers" or money that goes directly into a city’s piggy bank to be spent on libraries, schools, public health, and other services.

"Private sector utilities pay money to shareholders," said Joyce Kinnear, utility marketing services manager in Palo Alto. "We give these payments to the general fund to give services to local residents."

In Palo Alto’s case, this amounts to more than $9.25 million annually, or 9 percent of annual sales revenue, according Ipek Connolly, senior resource planner for the Palo Alto Utilities Department. Alameda Municipal Power’s Alan Hanger says AMP pays at least $4.2 million into city coffers. Silicon Valley Power, according to Owens, sends 5 percent of its revenue back to the city in the form of $12.92 million.

Shields, at SSJID, said the utility plans to give 4 percent of revenue to a public benefits program for "various social services, conservation, and energy efficiency programs." This, in addition to general fund transfers, constitutes a direct contribution to the community 50 percent larger than PG&E’s.

"Public power systems provide a direct benefit to their communities in the form of payments and contributions to state and local government," Nicholas Braden, director of communications at the American Public Power Association, told us. "The total value of the contributions made by the publicly-owned utilities often comes in many forms and is not always easily recognized. In addition to payments such as taxes, payments in lieu of taxes, and transfers to the general funds, many of the utilities make other contributions in the form of free or reduced cost services provided to states and cities."

San Francisco has a 7.5 percent utility user tax, but the tax is only levied on homes and businesses. In other words, PG&E takes hundreds of millions out of the local economy — and gives back nothing.

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HOW SF COULD LOSE $2.8 BILLION

Amount San Franciscans paid for electricity IN 2009: $644 million

Additional cost of PG&E rate hike (per year): $157 million

Multiplier (maximum estimate): $787 million

Reduction in costs under public power: $483 million

Multiplier: $2.1 billion

Total impact of high PG&E rates: $2.87 billion

SOURCE: Guardian research based on public records

————

RATE HIKES HIT THE POOR HARDEST

Pacific Gas and Electric Co. estimates that its current rate hike proposal will add between $2.23 and $16.76 per month to an average residential electricity bill. That may not seem huge — but it adds up.

"Each rate hike in and of itself isn’t that much money," acknowledges Mindy Spatt of the Utility Reform Network (TURN). "But overall, rates are very high."

And if you’re in one of the 24,000 San Francisco families that, according to U.S. census data, livie in poverty, even the smallest increase in utility bills can have serious ramifications.

"A few dollars here, and a few there can really affect low-income households," said Stephanie Chen, legal fellow at the Greenlining Institute, a public policy research and advocacy group. "It can mean the difference between ‘Do I pay the power bill, or do I buy groceries?’"

Utility bills are not a discretionary expense, and, as unemployment continues to rise and adjustable rate mortgages continue to adjust upward, more households are finding themselves squeezed on all sides. Depending on timing and cash flow, Chen said it would be easy to imagine a formerly stable household unable to pay the utility bill.

And if a household can’t pay the bill for two weeks, PG&E sends a notice of termination and shuts off power. According to Spatt, PG&E shuts off 15,000 households in its service area each month.

"Rate hikes are certainly not going to bring down that number," she said. "These are not people who can’t pay for a Mercedes and got it repossessed. They are people who are losing heat, electricity, the ability to cook."

To turn the power back on, PG&E requires a deposit of twice the average bill to reestablish credit. If a household can’t pay its regular bill, paying twice the amount is even harder.

Spatt says TURN is working to push the CPUC to do something about this and help consumers who are struggling. Chen says utility companies already know their customers are hurting during the recession.

"All the utilities are facing decaying infrastructure concerns and renewable energy goals," Chen said. "They are facing increased costs, which they pass on to ratepayers. We know rate increases are inevitable — but we want to make sure they are necessary and cost-effective."

Stopping PG&E’s fraudulent initiative

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EDITORIAL A ballot measure that could spell the end of public power in California is headed for either the spring or fall 2010 ballot — and so far, the opposition is missing in action. This is a profoundly important issue, and every elected official, city council, board of supervisors, and utility agency in the Bay Area needs to immediately come out in opposition and start organizing to defeat it.

The source of the proposition, of course, is Pacific Gas and Electric Co. PG&E is facing political wildfires all over the state as communities rebel against bad service and high rates. In Marin County, a community choice aggregation (CCA) plan is moving along, full speed. In San Francisco, CCA is a little slower, but still on track. These efforts could turn two of PG&E’s most profitable territories into public power beachheads. Meanwhile, in San Joaquin County, a public power movement is trying to take over part of PG&E’s service area, and PG&E just spent millions of dollars fighting a similar effort in Davis.

So the utility has decided to fight back — not just in the local communities where activists can beat PG&E back, or in the state Legislature, where the giant company has fewer and fewer friends, but with a ballot initiative that has a misleading name, a misleading political message — and tens of millions of dollars to back it up.

Signature-gatherers are out in force already, collecting names for a measure called "New two-thirds requirement for local public electricity providers." The paid petition crews are describing it as a "right to vote" measure, giving the public a chance to weigh in on government action.

What the measure would really do is require a two-thirds affirmative vote before any public power agency could add new customers, or any local agency could get into the power business. It would force the existing CCA movements to get two-thirds of the local voters to approve their efforts.

That’s an almost impossible standard — particularly when PG&E spends millions to block public power efforts everywhere they appear.

The two-thirds voting requirement is increasingly being assailed as undemocratic. The state Legislature has been paralyzed by its own two-thirds requirement for passing a budget, and there are multiple moves to reduce that threshold. The two-thirds mandate for passing local taxes has been widely blamed for driving cities and counties to the brink of fiscal ruin.

And yet PG&E is trying to add a new, crushing mandate — aimed entirely at snuffing out public power advances. The impact on the state will be enormous. As Megan Rawlins reports on page 8, high PG&E rates and the lack of public power cost the San Francisco economy alone as much as $2.8 billion a year. Multiply that by a factor of 10 or 20, and you see what a devastating financial blow this PG&E move would be to California’s crumbling economy.

So where, exactly, is the opposition?

Sup. Ross Mirkarimi called a meeting last week at the offices of the Utility Reform Network (TURN) to try to get other public power communities involved in a statewide campaign. But it’s been slow going.

That’s not going to work. Every elected agency in the Bay Area needs to get this on the agenda — now. Every city official (starting with Mayor Gavin Newsom, who wants to be governor) and every state official (starting with Attorney General Jerry Brown, who also wants to be governor) needs to loudly and publicly denounce this move, help establish a high-level coalition to beat it back, and start raising money for the campaign.

There may be a legal strategy, too. The law that authorized cities and counties to set up CCAs bars PG&E and other private utilities from interfering with local CCA efforts — and it’s pretty clear that this initiative is designed to do exactly that. City Attorney Dennis Herrera needs to immediately investigate the possibility of suing to get this disastrous initiative off the ballot. *

Editor’s Notes

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Tredmond@sfbg.com

The governor of California loves to talk about the state "living within its means." That, of course, means cutting education funding, closing state parks, stealing money from cities, wiping out hundreds of social programs, and never, ever, raising any taxes.

He has a different line on water.

The state’s economy is in a severe downturn, but California itself is far from broke. This is still a wealthy state. Between the big businesses and the rich individuals, there’s actually plenty of money in the overall economy to pay for schools and colleges and parks and health care. Defining our "means" as a level of spending that’s possible without raising taxes is a purely political decision that has nothing to do with economic reality. In fact, the California economy would be a lot better off today if Gov. Schwarzenegger hadn’t cut the vehicle license fee the day he took office. (Remember: public-sector jobs are just as legitimate a source of employment as private-sector jobs, and government spending is an excellent way to stimulate private growth.)

Freshwater, on the other hand, really is a finite resource. There’s only a certain amount of rain that falls on the state every year, only a certain amount of snowpack that melts in the spring, only a limited amount that can be stored in reservoirs. You can’t raise new water the way you can raise new revenue; even building new dams just takes water that would have gone downstream and holds it for another purpose.

The state’s freshwater has to meet a lot of demands. Farmers rely on it to irrigate crops — some of them crazy, unsustainable crops — in what is naturally a dry Serengeti. Giant cities and suburbs in the southern part of the state rely on it to fill swimming pools and water lawns. Most of the 38 million people who live in this state rely on precipitation runoff for their drinking water.

And if too much water from Northern California gets diverted before it reaches the Sacramento-San Joaquin Delta, then the complex, fragile ecosystem of the delta and the bay gets badly, maybe irreparably, damaged. And that has wide-reaching consequences (including the collapse of fisheries worth $250 million a year).

And yet, as Rebecca Bowe points out in this week’s cover story, the governor refuses to live within our hydrologic means.

It’s insane what’s been happening with the state’s water. Every year the Department of Water Resources offers to sell more water than the state actually has. In the severe drought of the early 1990s, water diversions from the delta were at record levels. In the current drought, diversions remain high. And that, the numbers suggest, is directly affecting fishing stocks. At this rate, there won’t be any salmon left in the delta in a few years. And that’s before the full impacts of global warming (and the likely decline in freshwater) play out.

Schwarzenegger’s solution: build more dams and a new canal to take more fresh water away from the delta.

The state Legislature is wrestling with a new water policy, and five bills are making the rounds. Some areas are getting desperate and trying what not long ago were considered nutty ideas — Marin County, for example, now wants to build a desalination plant, an expensive and energy-intensive way to get freshwater from the bay.

What nobody seems to want to say is that California, particularly the big agricultural operations in the Central Valley, simply waste too much water. The conservatives in the state capitol don’t believe in conservation.

Any serious Legislative plan has to start with a few fundamental facts. Freshwater flowing into the delta and out through the bay is not a wasted resource; the delta needs a lot more water than it’s currently getting to survive as an ecosystem. If that means the big water districts have to tell their clients to cut back on water use — using proven conservation methods and possibly switching to less water-intensive crops — then that’s a reality we’re going to have to live with. And more dams, canals, and pumping projects will just shift the problems from one part of the state to another.

California can survive on the water it has — if we stop the insanity.

Chronic debate

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sarah@sfbg.com

For decades, proponents of marijuana reform have argued that cannabis is less dangerous than alcohol or cigarettes, has legitimate medical uses, and should be decriminalized on the grounds that prohibition doesn’t work.

In 1996, these arguments helped convince California voters to approve Proposition 215, which allows the use of marijuana for medical purposes. And in March, U.S. Attorney General Eric Holder signaled a major change in federal drug policy when he said that the Justice Department does not plan to prosecute medical marijuana dispensaries that operate legally under California law.

But the federal government still classifies marijuana as a Schedule 1 controlled substance that has no medical value and a high abuse potential. As a result, cultivation, distribution, and sales of pot primarily occur on the black market, a shadowy mix of small-timers and powerful cartels.

Data from the National Survey on Drug Use and Health (NSDUH) suggests that U.S. growers produced 22 million pounds of marijuana in 2006, worth $35.8 billion, and that California accounted for almost 39 percent of U.S. pot production.

Now, with California’s economy in the crapper, the state budget a mess, and federal judges ordering substantial reductions in California’s prison population, reform advocates are making an intriguing argument: if state or local governments legalize and tax even a fraction of marijuana sales in California, the state could see billions of dollars in new annual revenue and reduced enforcement costs.

Assembly Member Tom Ammiano recalls some laughter in February when he introduced Assembly Bill 390, state legislation to regulate marijuana much like alcohol. "But the budget fiasco has made some people who were dismissive take a harder look," Ammiano said.

A recent California Board of Equalization analysis of Ammiano’s bill estimates that if the state charged $50 per ounce, California would generate $1.4 billion in marijuana taxes annually.

Voters in Oakland also advanced the marijuana policy discussion last month when they approved a special tax on the city’s medical cannabis dispensaries. And in August, a three-judge federal court ruled that California must develop a plan to reduce its prison population by 44,000 over two years.

The public also seems to support making a change. In April, a Field Poll confirmed that for the first time a majority (56 percent) of California voters support legalizing pot.

Depite these advances, Ammiano says he wants to be strategic with his bill, gradually building support. "That’s why we made it a two-year bill," Ammiano said. His bill is scheduled for its first hearing at the Public Safety Committee, which Ammiano now chairs, by year’s end.

But some Bay Area activists aren’t waiting on Ammiano. Last month, Richard Lee, who operates four medical marijuana dispensaries in Oakland, filed initiative paperwork with the state and hopes to gather enough signatures to qualify a Tax Cannabis initiative in 2010.

Ammiano’s bill and Lee’s initiative allow recreational use of marijuana, penalize driving under the influence, and charge a $50 fee per ounce. But they differ around regulation and how to deal with the overarching problem of federal law. Ammiano’s legislation assumes a statewide system that mirrors the federal Department of Alcohol Beverage Control. Lee’s initiative leaves regulation to each county, similar to the patchwork approach to alcohol in other states.

Lee believes his initiative gives people more options. "We can’t order people to break federal law — that would be thrown out," Lee said. "Forty jurisdictions already permit medical marijuana cooperatives in California. So we already have that system, and we’ll follow that reality."

Sup. Ross Mirkarimi, who authored San Francisco’s medical cannabis dispensary regulations, believes it’s important to lay the groundwork at the local level. He points to the relative lack of growth in new municipalities that allow medical dispensaries since voters approved Prop. 215, calling it evidence of pot-related NIMBYism.

"Everyone says they support it, but they don’t want it in their own backyards," said Mirkarimi, who wants San Francisco to become the first U.S. city to add marijuana to the list of medicines it dispenses. "But the city Attorney’s Office is shy about pushing this envelope."

Mirkarimi wants to follow Oakland’s example and add a gross receipts tax to medical marijuana dispensaries in San Francisco.

But the legalization push has its fervent critics. At a recent Commonwealth Club debate on the economics of marijuana, El Cerrito Police Chief Scott Kirkland, who led the charge to ban medical dispensaries in his city, tried to discredit arguments that legalization will save money.

"I’m very disappointed with the state," Kirkland said, claiming that the BOE’s analysis drew almost exclusively on the work of Jon Gettman, a former director of National Organization for the Reform of Marijuana Laws.

"We have to have statistics we can rely on," said Kirkland, who then cited the same BOE report — it estimates that pot prices will drop 50 percent and consumption will increase 40 percent — to support his contention that legalization will lead to increased substance abuse.

Kirkland also challenged the notion that Mexican drug cartels will leave once the pot business is legitimized and regulated. "They understand that the money involved is astronomical," he said. "It’s wishful thinking that if you legalize marijuana, all of a sudden the cartels go away."

He also disputed claims that legalization would help empty state prisons. "It’s very common for advocates to associate legalization with reducing the costs of incarceration, but it’s a fallacy," Kirkland said. "It’s very rarely that a person goes to prison for their original offense."

Kirkland topped off his attack by citing the state’s June 19 decision to add marijuana smoke to its Proposition 65 list of substances known to contain carcinogens.

But BOE spokesperson Anita Gore refuted claims that their analysis relied entirely on reform advocates’ research. "Being as this is an underground activity, the resources are limited," Gore said. "But our researchers and economists used econometric models that are generally accepted and looked at all the available resources, which included academic and law enforcement studies."

Gettmann told the Guardian he uses data from NSDUH, the U.S. Drug Enforcement Agency, the Office of National Drug Control, and the Bureau of International Narcotics — sources the prohibitionists also draw on. He admits that it’s hard to quantify a black market.

"But it’s easy for anyone to understand basic regulatory economic theory," Getmann said. "Marijuana use produces costs for society, but is largely untaxed. So users and sellers reap benefits, while taxpayers bear the costs."

He believes many advantages of legalization are qualitative. "It’s a better regulatory system for financial and fiscal reasons and for restricting access on the part of teenagers," Gettman said.

Stephen Gutwillig, state director of the Drug Policy Alliance, points to research by the Center for Juvenile and Criminal Justice in San Francisco, which found that arrest rates for everything in California have declined since 1990 — with the exception of low-level marijuana crimes. CJCJ’s research shows that rates for this group increased 127 percent since 1990, and 25 percent in the last two years.

"It’s a system run amok," Gutwillig said. He notes that of the 74,000 people arrested for marijuana-related offenses, 20,000 are youth. "The marijuana problem is increasingly becoming a mechanism for social control of young black and brown men in California."

"We feel that money is definitely a fine consideration," he continued. "But even if reguutf8g marijuana didn’t produce a dime, these punitive, wasteful laws must end."

Gutwillig’s group has estimated that legalization would save California’s state and local governments $259.7 million annually in court and incarceration costs alone, a figure DPA researcher Betty Lo Dolce said is very conservative.

"I don’t know if folks have a secondary offenses, so I don’t know if marijuana was legalized, if they wouldn’t be in state prison," Lo Dolce said. "Or conversely, if they may not have been arrested for drug-related crimes, but then those charges got dropped and they ended up inside because of secondary drug-related offense."

Bruce Mirken, communications director for the Marijuana Policy Project, believes that advocates of California’s Campaign Against Marijuana Planting (CAMP) should have to justify that the program does some good.

"The idea that enforcing prohibition and seizing 5.5 million plants last year would be less costly than legalizing is crazy," he said.

But what about the public health costs?

UCLA pulmonologist Dr. Donald Tashkin said that the state added marijuana smoke to its Prop. 65 list, based on finding carcinogens in that smoke. "But you cannot translate chemistry into chemical risk because you have to take into account potential opposing effects," Tashkin said.

His research has found no association between heavy marijuana use and increased risk of lung cancer and pulmonary disease. Conversely, he and Dr. Donald Abrams, a cancer researcher at UCSF, have found that THC, marijuana’s main psychoactive ingredient, has an anti-tumor effect.

"The bottom line is that you cannot use pulmonary risk as a justification for not legalizing it," Tashkin said.

Dr. Igor Grant, director of medical cannabis research at UC San Diego, said the question around marijuana smoke is quantity. "It’s not like cigarettes," he said. "Most people don’t smoke 20 joints a day for 20 years. But even if it was declared safe for patients, you wouldn’t want parents filling the room with smoke."

James Gray, an Orange County judge and a member of Law Enforcement Against Prohibition, believes marijuana is here to stay. "Instead of moralizing and punishing people for failing on moral chastity grounds, let’s manage its use," Gray said. "If people are using it, they should be able to know what’s in it."

The most harmful thing about marijuana, Gray contends, is jail. "The remedy is far more dangerous than the disease itself," he said. "There are thousands of people in prison because they did nothing but smoke pot, and a dirty drug test was a violation of their parole…. But I understand that some people in law enforcement stand to lose a great deal, and that the Mexican cartels are going to invest a lot of money in Madison Avenue advertising."

Lee, too, acknowledges the opposition, but remains hopeful. "People are coming out of the closet," he said. "That’s what caused the gay rights movement to take off. It’s starting to happen around marijuana use."

Editor’s Notes

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tredmond@sfbg.com

Nobody really thinks the state budget deal is going to hold, and nobody really thinks San Francisco’s budget deficit is actually closed. So while the Legislature is in recess and the supervisors are moving on to other things, it’s worth thinking about what the next few months will bring. It won’t be pretty.

Paul Hogarth, writing for the online publication BeyondChron, pointed out Aug. 6 that San Francisco will lose more money due to state budget cuts than the city will gain from federal stimulus spending. The numbers are complicated and fluid (San Francisco will lose $100 million that the state will "borrow," but the city can immediately go to the bond market and borrow against the state debt — with any luck at the same interest rate the state will pay the city, so that should be a wash. Should — unless the lenders don’t want to gamble on the state’s debt.) But no matter how you slice it, San Francisco will be out something on the order of $18 million in state cuts alone.

There’s also the fact that nobody knows what the economy will do over the next six months. If employment doesn’t pick up, and consumer sales don’t pick up, and enough businesses get away with demanding property tax reductions, the revenue numbers projected by the Newsom administration will be wrong and things will be even worse. Sup. Ross Mirkarimi, who’s on the Budget Committee, told me he’s expecting at least $100 million in red ink for next year’s budget, and some of that will start to show up this fall.

I can’t even imagine what the 2010-11 budget will look like. By the time budget hearings begin next June, Gavin Newsom will either have won the Democratic primary for governor, and will have entirely checked out of City Hall, or he will have lost and will be angry, bitter, and vengeful.

We were mildly critical of Budget Committee Chair John Avalos this summer; he cut a deal with Newsom that requires the supervisors to believe that the mayor will work with them on any midyear cuts. The problem is that Newsom can’t be trusted. He’s already broken parts of this budget deal. So when, as is almost certain, he breaks his promise to work with the board on midyear cuts, the supervisors will have to take a much more aggressive stance than they did this summer.

Newsom will be in the middle of a heated race for governor — he won’t want to cut cops or firefighters, and he won’t even talk about taxes. (Although a recent Gallup Poll shows that only 46 percent of Americans think their taxes are too high, the lowest number to hold that view since 1961.)

It’s going to be war, and the progressives on the board need to be ready for it — or they’re going to get rolled, again. *

Editor’s Notes

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tredmond@sfbg.com

I am done talking about Chris Daly’s personal life. It’s been a nasty, ugly discussion this past week or so, and if you want a taste, you can go to the Guardian politics blog and read dozens and dozens of comments attacking Daly, attacking me, attacking progressives in general, and raging about hypocrisy.

Okay, I’m almost done. I want to say a word about hypocrisy. I’m not so into buying foreclosed houses; it does stink of profiting off someone else’s misery. But the banks are the ones doing the foreclosure and eviction, not the buyer.

Which is not the case with Ellis Act evictions and tenancy-in-common purchases/condo conversions. You buy a TIC, you’re evicting someone, some tenant who is not quite as well-off as you. It’s legal, and not everyone who buys a TIC is evil, and I know all the caveats — but nearly all the people who have been attacking Daly (and me) in the online comments I’ve read (and in print articles, witness Michela Alioto-Pier) are supporters of TICs and condo conversions, which they refer to as homeownership opportunities.

Yes: homeownership opportunities. Yes: evictions. I’m not defending Daly here, I’m just saying.

Now then: The thing I’m not done talking about is the constant, implied, and often direct supposition that the suburbs are better places than San Francisco to raise kids. I beg to differ.

I grew up in a suburb, mostly white, mostly middle class. (More middle class than the suburbs today because the middle class was bigger and doctors, plumbers, and factory workers lived in the same subdivisions — but still, pretty homogenous.)

Today’s suburbs are more racially mixed, slightly. But they’re still essentially homogenous.

My kids go to a wonderful public school (McKinley Elementary) where everyone isn’t just like them. Some kids have one parent, or two, or are raised by relatives. Some kids go on nice fancy vacations for spring break, and some kids get their main caloric intake from the subsidized breakfast and lunch. A lot of kids don’t speak English as a first language. And for my son and daughter, they are all classmates and friends.

Yes, Chuck Nevius: Michael and Vivian see homeless people on the streets. Usually we give them money. And we talk, my kids and I, about why there are people who have no place to live, and why it’s important not just to give to charity but to try to change the conditions that allow billionaires to pay low taxes while people sleep on the streets.

And last Friday, Vivian and the other seven-year-old campers at Randall Museum camp (public, city-funded, open to all) finished a two-week session on hip-hop dance with a performance that literally made me cry.

My kids are city kids, San Francisco kids. We kick suburban ass. *

California: Fragmented, or what?

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By Tim Redmond

Calitics is awash with talk about the new Field Poll on California demographics And although the SF Chron has ignored it, ol’ Dan Walters at the Sacto Bee is all over it, lamenting that the poll shows “the division of a once-cohesive society into its many component parts.”

Robert Cruikshank takes issue with Walters:

California’s society has never, ever been cohesive. Not in the 20th century, not in the 19th century, not even during the dozens of millennia of Native American settlement. Certainly our electorate hasn’t been cohesive. Until the 1950s state politics were defined by an urban-rural split with a crosscutting cleavage (apologies for the poli sci jargon) of intensive racial division. Even after the legal barriers of racial exclusion came down at mid-century segregation and discrimination persisted.

All of which is certainly true. He continues:

Some fragmentation is likely to continue. Californians are continuing to self-segregate according to political preference, leaving only the newer and affordable exurbs as the few places in the state up-for-grabs.

And blames the political structure:

What I see as the main problem facing California is obsolescence. Our government and our politics are still stuck in 1978. We’ve had fragmentation and a well-governed state, and fragmentation and a badly-governed state. That suggests to me we need to look at a system of governance that has remained almost unchanged since 1978 despite all the demographic changes reported in the Field Poll.

Again, true — and getting rid of the two-thirds majority for budget approval would make a big difference. It wouldn’t, however, undo all of the other awful things about state politics, including Prop. 218, which makes it almost impossible for local government to raise taxes, and Prop. 13, which is in many ways the root cause of the state’s total economic meltdown.

Paul Hogarth at Beyond Chron imagines

a California where the state legislature passes a budget by majority rule, and you can register to vote on Election Day. Three Strikes has been reformed to require the third “strike” to be a violent felony, and we have single-payer health care. The wealthy pay a higher income tax rate, and – just like in Alaska and Texas – oil companies must pay a modest tax for the privilege of extracting oil.

And Hogart argues that the progressives need to take back the initiative process to make that happen.

For once, I’m going to be the downer here: I don’t see progressives winning a whole lot of major statewide initiatives that make structural reforms in California government. We can win one or two — we can certainly overturn Prop. 8, and maybe repeal the two-thirds tax rule.

What went wrong

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EDITORIAL David Dayen, a political blogger at Calitics, had the best line on the California budget crisis.

"Whoever cares the least about the outcome wins," he wrote July 20. "If you don’t care whether children get health care, whether the elderly, blind and disabled die in their homes, whether prisoners rot in modified Public Storage units, whether students get educated … you have a very good chance of getting a budget that reflects that."

In the end, the Republicans largely carried the day because they had all the power: they could block any budget deal, they refused to raise any taxes, and they don’t really care if the state goes bankrupt. In fact, Gov. Schwarzenegger was happy to draw the crisis out as long as necessary — it helped his poll rating.

San Francisco should have had a very different situation and a very different outcome. The progressives control the Board of Supervisors and the mayor is in a tight spot — he’s running for governor and wants to show that he can manage San Francisco better than anyone in Sacramento is managing the state. It’s part of his campaign theme. A prolonged budget standoff was not in his interest.

And while the city budget is far, far better than the state budget, and the progressives managed to get a few concessions, the bottom line remains: this is a no-new-taxes budget, balanced largely with cuts and regressive new fees. In fact, for all the mayor’s talk of working with the board on possible tax measures, it now appears likely that there will be no revenue proposals whatsoever on the November ballot.

And the mayor is going to make another deep round of cuts soon, when the figures on what San Francisco will lose in state funding (almost certainly more than $150 million) become available.

It took last-minute efforts by Sup. Ross Mirkarimi, supported by Sup. David Campos, to win back funding for the Public Defender’s Office and at least a shot at funding the public finance system for the next local elections.

The supervisors, frankly, should have pushed harder. The message to Newsom should have been: no budget without new revenue. And as the board approaches the next fiscal year — projections already call for a $300 million deficit — that absolutely has to be the bottom line. Critical services have been cut too deeply already.

The process needs to be better too. Allowing two supervisors — the budget committee chair and the board president — to negotiate a closed-door deal with the mayor without briefing their colleagues or letting the other stakeholders know what was going on was a big mistake that can’t be repeated.

The New York Times ran a front-page story July 21 describing in bleak terms how California has abandoned its safety net and given up the ambitious dreams that for so long defined the state. "At no point in modern history," reporter Jennifer Steinhauer wrote, "has the state dealt with its fiscal issues by retreating so deeply in its services, beginning this spring with a round of multibillion-dollar budget cuts and continuing with, in total, some $30 billion in cuts over two fiscal years to schools, colleges, health care, welfare, corrections, recreation and more.

That can’t be the model for San Francisco to follow. *

Editorial: What went wrong in Sacramento

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In the end, the Republicans largely carried the day because they had all the power and could block any budget deal, refuse to raise taxes, and don’t really care if the state goes bankrupt

EDITORIAL David Dayen, a political blogger at Calitics, had the best line on the California budget crisis.
“Whoever cares the least about the outcome wins,” he wrote July 20. “If you don’t care whether children get health care, whether the elderly, blind and disabled die in their homes, whether prisoners rot in modified Public Storage units, whether students get educated … you have a very good chance of getting a budget that reflects that.”

In the end, the Republicans largely carried the day because they had all the power: they could block any budget deal, they refused to raise any taxes, and they don’t really care if the state goes bankrupt. In fact, Gov. Schwarzenegger was happy to draw the crisis out as long as necessary — it helped his poll rating.

Destroying the California dream

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By Steven T. Jones

A front page story in today’s New York Times correctly notes that California’s political leaders have abandoned the “California Dream” that made this such a great state: a social safety net that prevented the economic system’s losers from falling too far, a high-quality and affordable education system to give people the skills and knowledge needed to succeed, reliable and efficient infrastructure, and an appreciation for diversity.

“The California dream is, for now, delayed, as demonstrated by the budget state lawmakers and the governor agreed upon late Monday,” Times reporter Jennifer Steinhauer wrote. “At no point in modern history has the state dealt with its fiscal issues by retreating so deeply in its services, beginning this spring with a round of multibillion-dollar budget cuts and continuing with, in total, some $30 billion in cuts over two fiscal years to schools, colleges, health care, welfare, corrections, recreation and more.”

Anti-government conservatives including Gov. Arnold Schwarzenegger and just about every Republican in the Legislature (and many of the Democrats) have succeeded in destroying California as we know it with their mindless “no new taxes” mantra (which even our own Mayor Gavin Newsom pays fealty to as he runs for governor). They need to be recognized for what they are — a hostile threat to civil society, to the basic bargain among people on which government is based — and I’m happy to see the Times help with this analysis.

Things have already gone too far. It’s time to ease our way out of this abyss, and for San Francisco’s leaders to point the way. Some already are. Assessor Phil Ting is pushing for reform of Prop. 13 so commercial property taxes can be based on what the land is actually worth, Sen. Mark Leno is leading the single-payer health reform fight, and Assemblymember Tom Ammiano is trying to legalize and tax marijuana, which would bring in about $1.4 billion in annual revenue and save billions more in decreased enforcement costs.

That’s a pretty good start, but it’s just the beginning of a long slog back from oblivion.

How healthy is Healthy SF?

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news@sfbg.com

San Francisco is getting national attention for its attempt at universal health care. President Obama even applauded the city’s efforts in a speech: "Instead of just talking about health care, [San Francisco has been] ensuring that those in need receive it."

But Healthy San Francisco — a pioneering effort to do at the municipal level what the federal and state governments won’t — is running into some troubling problems, made worse by Mayor Gavin Newsom’s budget cuts.

The program was initiated by Tom Ammiano, now a state assemblymember, with backing from organized labor. Ammiano’s goal was to provide easy access to affordable health care for all of S.F.’s 60,000 uninsured. A local version of a single-payer program, he argued, could provide accessible primary and preventative care, alleviating the need for indigent patients to use the overcrowded and expensive San Francisco General Hospital emergency room as their primary medical provider.

Healthy San Francisco was launched on July 2, 2007, at two Chinatown clinics. It has grown dramatically, and now provides services to more than 34,000 residents at 27 clinics.

Although Newsom sat on the sidelines while Ammiano pushed the legislation, the mayor has now unashamedly claimed the program as his own to promote his gubernatorial campaign. On his Web site he boldly declares that "he’s created the only universal health care program in the country" — with no mention of Ammiano.

The $200 million-<\d>a-<\d>year program is partially funded by an employer-mandate requiring businesses with more than 20 employees either to provide health insurance or pay a fee to the city. The fees are broken down according to the size of the business; as of January 2009, employers pay between $1.23–<\d>$1.85 for every hour an employee works.

Like any traditional health insurance program, Healthy SF has annual fees and point-of-service charges paid by participants. The remainder of the program is funded through state grants.

Opposition to HSF surfaced immediately. The Golden Gate Restaurant Association sued the city even before the program started, alleging that the employer-spending mandate is a violation of federal law.

Kevin Westlye, the association’s executive director, claims his beef is not with the health care system, just with the employer mandate. He suggested that the city raise its sales tax to pay for the program — or that the financial burden should fall on the backs of the billionaires that run privatized health care and pharmaceutical companies.

But the city has only a limited ability to raise taxes, and any tax hike would require voter approval. The employer mandates and fees were much more politically feasible.

Deputy City Attorney Vince Chhabria, who is representing the city on the case, argues, "It is difficult to imagine, in these budget times, that San Francisco could provide universal coverage without employer health care spending requirements."

Federal courts sided with the GGRA initially, but the Ninth Circuit Court of Appeals agreed that the employer-spending mandate was legal. The GGRA appealed to the United States Supreme Court; the court will announce Oct. 5 whether it will hear the case.

That’s not the only litigation facing HSF. A group of low-income residents are suing the city, saying that the system’s annual fees and co-pays are too high. The program’s fees are scaled to the federal poverty level, which is currently set at an annual income of $10,830. A single person making between 101 percent and 200 percent of the federal poverty level — that is, between about $11,000 and $20,000 a year — pays $180 a year for HSF membership. People earning between $40,000 and $50,000 pay $1,350 a year.

There are also co-pays of $10 for medical visits and $5 to $25 for prescriptions — again, typical of health insurance plans.

Bay Area Legal Aid and the Western Center on Law and Poverty are representing three San Francisco residents who say those fees violate federal and state mandates, which stipulate that the city must provide free health care to those who can’t afford to pay. Healthy San Francisco is only one element of the lawsuit; it also claims that San Francisco General Hospital charges low-income people too much and that the city’s medical bills and collection practices aren’t fair.

One of the plaintiffs is Robyn Paige, a San Francisco resident with spine, foot, and hip injuries. Paige contends that she can’t afford the co-payments on her multiple medications each month and must either go without pain medication or borrow money. Lisa Qare, 21-year-old resident with MS, had to wait three weeks for medication for an eye condition that developed as a result of her condition.

A $10 co-pay may not seem like much, but when a patient needs several doctor visits a month and must pay $5 to $25 each for multiple prescriptions, it adds up. "As a result," Michael Keys, a Bay Area Legal Aid lawyer, told us, "those who can’t afford the charges are falling into medical debt or skipping services or medication."

And, not surprisingly, the cash-strapped city is having trouble finding enough staff and facilities to meet all the needs. Nancy Keiler, a Mission District resident and HSF participant, complains that clinic visits are too short, and that "the doctor is too hurried and has too many patients." (That’s a common complaint about private health plans, as well.) After waiting three hours, another HSF participant had to leave without her prescription to get back to work on time.

The long lines and waits will only get worse in the face of budget cuts. Pink slips were already handed out to several hundred San Francisco health care workers and 1,000 more may be laid off this fall.

Robert Haaland, who works with the Service Employees International Union Local 1021, told us the staffing cuts will make the situation much worse. Martha Hawthorne, a public-health nurse, said she thinks that there won’t be enough providers to provide good care — and that many health care workers losing their jobs will have to enroll in HSF themselves, putting even more strain on the system.

Ammiano, the author of the plan, is concerned too. "I’m very worried about it," he said. "It seems to me now that if there’s this budget pain, there will be impacts to San Francisco."

Nathan Ballard, the mayor’s press secretary, tersely denied that HSF will feel any budget pain. Asked about critics’ allegations, he said, "They’re wrong. We are going to expand Healthy SF this year."

Earlier this month, insurance giant Kaiser Permanente joined HSF — meaning that the health care giant will now participate as a provider in the program. Haaland voiced concern about that move, calling it "privatizing through the back door."

Mitch Katz, the city’s public health director, agrees there are flaws to the system, but defends its success. "It is by no means a perfect program," he said, "but we’ve made a big impact." With national health care costs rising three times faster than wages (some believe that health care costs are rising five times faster than wages) the nation is starting to seriously talk about overhauling the entire system. San Francisco is being considered as a model for national health care reform.

Labor leaders have lauded the basic formula of HSF and pushed for the federal reforms to use it as a model. As San Francisco Labor Council executive director Tim Paulson said in a prepared statement, "In San Francisco we demonstrated that legislation providing public health access and corporate participation creates a real path to universal health care coverage."

Research assistance by Gabrielle Poccia

Why the budget deal really sucks

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By Tim Redmond

Calitics, which has done an outstanding job covering the state budget mess from the beginning, has the best line on the rotten deal that the Big Five reached yesterday:

Whoever cares the least about the outcome wins.

If you don’t care whether children get health care, whether the elderly, blind and disabled die in their homes, whether prisoners rot in modified Public Storage units, whether students get educated… you have a very good chance of getting a budget that reflects that.

If on the other hand you claim to care, you will concede and concede and concede so you can at least play the responsible part and say at the end that you didn’t completely eliminate the social safety net, though what you did get in return will be totally unclear.

And you will do it every single time.

On Forum this morning, the talk of course was all about the budget, and of course some of the callers were curious about the prospects for a state Constitutional Convention to rewrite the rules for approving a budget. The California Democratic Party is already on board with eliminating the two-thirds requirement, which is a fine thing and may wind up on the ballot soon. The Constitutional Convention is a bit more tricky.

See, the problem is how you decide who gets to be in the room; who will be the delegates to this convention? And one of the very bad ideas out there is to choose the delegates more or less at random, the same way we choose jurors.

What you will wind up with, I guarantee, is a majority of people who don’t want to raise taxes.

A large part of what has to happen in California is the education of the population, and that’s where the Democratic Party and the other stakeholders ought to be taking the lead. Perhaps the candidates for governor and the senior elected officials can all help raise money for a major statewide campaign explaining to people how the cut of the vehicle license fee, the lack of an oil-severance tax, the corporate loopholes and Prop. 13 have led directly to the cuts that are preventing qualified kids from getting a college education, preventing sick people from getting care, destroying public schools and the like.

Ever few years the Dems, the unions and the other activists have to raise big chunks of money to fight some ballot measure or another. How about, say, $50 million now to try to show the voters what’s really going on, so we don’t have to keep doing this dance over and over and over?

This is the way the budget deal ends — badly

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By Tim Redmond

We all know that the main reason we don’t have a budget deal is that everyone — but particularly the governor and the Republicans — wants to escape from this mess with his or her political hide intact. The GOP members all signed a moronic pledge never to raise taxes, and the ones who wind up voting for even minor tax hikes get slammed in their home districts. The Democrats don’t want to cut education or health or other essential services, but have been far more willing to compromise. The governor just wants to look tough.

Seriously — he just wants to look tough, and the longer the standoff continues, the more he gets this sort of press, and the more his abysmal poll numbers go up.

So now the talks are still stalled and the state is losing $25 million a day just to make a washed-up action-movie star happy with his image.

Even after the “big five” — the leaders of the Legislature and the guv — come to a deal, it’s no sure thing. Because in the past, all of the Republicans have refused to vote for deals that their own leadership and their own governor have put together.

And some Democrats may not vote for it, either. Senator Leland Yee of San Francisco told me he won’t vote for any cuts to education. “The Republicans have drawn a line and said no new taxes,” he told me. “We need to draw a line and say no more cuts to health care and education.”

In fact, in the famous late-night session that almost led to a budget deal last week, Yee was holding out, refusing to go along with the cuts until State Sen. President Darrell Steinberg called the lobbyists from the teacher’s unions at 11:30 pm and told them to tell Yee it was okay to accept the leadership plan.

Yee, of course, wants to be able to say after the dirty deal is done that he refused to accept the cuts. So do a lot of the other Dems — but at some point, most of them will bit the bullet and accept some kind of bad deal to end the IOUs and keep the state afloat. Yee wants to see the GOP take some of the heat, too: “If the governor wants us to vote for a bad budget deal, he needs to make the Republicans vote for it, too,” he said.

Which also won’t happen.

So the most likely outcome is that the Democrats will be the ones voting for a shitty deal that screws all of the traditional Democratic constituencies.

I’m sick of being held hostage by Orange County. It’s time to split up this state.

Newsom figures out what a tax is (sort of)

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By Tim Redmond

This is a fun little gotcha moment from the SF Appeal. Newsom loves to say that he balanced the SF budget withour raising taxes — but then he admits that all those fees he raised (to avoid raising taxes) were actually … taxes.

Why Sarah Palin resigned

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palin_243.jpg

Text by Sarah Phelan

As Moveon.org is pointing out, Palin’s op-ed in today’s Washington Post is a pretty strong indication of why she resigned: Sarah wants to become the pit bull for Big Coal and Big Oil, and scare folks from supporting a stronger clean energy bill with her misinformation about “energy taxes.”

Palin’s op-ed-is also further evidence that Sarah is not throwing in the towel on politics, didn’t resign because of a mystery lover in her caribou closet, and is instead getting ready to seriously focus on her 2012 presidential bid.

Guess she’ll be finding support from those who don’t believe climate change is connected to human activity, want to drill in the Arctic National Wildlife Refuge, and would like to otherwise accelerate the destruction of the planet, so they can extract natural resources as fast as possible and make lots of money in the process.

Unfortunately, there is plenty of big money happy to accommodate someone like Sarah Palin.

So, give up on the dream that Palin is leaving the scene–and find the best strategy to counter her kind of campaign. And start doing it now.

What’s wrong with San Francisco?

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EDITORIAL In the end, Mayor Gavin Newsom got his way. The San Francisco supervisors made some significant changes to the budget and saved some $40 million worth of programs that the mayor wanted to cut or privatize, but the Newsom for governor ads will still be able to proclaim that the mayor solved his city’s budget problem without raising taxes or cutting police and firefighters.

Instead, this fall some 1,500 city employees are slated to be laid off, 400 of them in the Department of Public Health. Many recreation directors will get pink slips. Human services will lose at least 100 people. Nonprofit service providers will see much of their city funding disappear. The money to pay for public financing of the upcoming supervisorial and mayoral races is gone. Newsom’s pet (and expensive) 311 service will still be open 24 hours a day (with a lot of the money coming from Muni).

Not one of the city’s hugely redundant fire stations will close, even for a few days at a time. The bloated police budget will see no significant cuts, and the cops and firefighters will still get raises. The mayor will continue to employ five people in his press office.

And the only new revenue in the budget comes from fee increases on Muni, public parks, after-school programs, street fairs, restaurants, and the like.

Sup. John Avalos, chair of the Budget and Finance Committee, told us this was the best deal the supervisors could get, and it’s true that the board forced Newsom to add back a lot of money he wanted to cut. But the committee stopped far short of doing what it should have done — fundamentally changing the priorities of the Newsom budget.

Campos told us that he had "mixed feelings" about the deal and expressed concern about the board’s ability to shape midyear cuts and the lack of commitment from Newsom to support support placing revenue measures on the November ballot. Mirkarimi said he was happy with the dollar amounts of the add-backs but proposed holding in reserve some funding for the mayor’s pet projects — a tool for ensuring that Newsom consults with supervisors on the midyear cuts as promised — but Avalos opposed the idea.

Avalos said he’s relying on Newsom’s commitment to him: "The mayor has given me the assurance that he will not make unilateral decisions." But Newsom has a history of breaking such promises.

And the supervisors have not included any new tax revenue in the budget projections. Which puts San Francisco far behind Oakland.

The Oakland City Council has plenty of problems, and the mayor of Oakland, Ron Dellums, has been missing in action on a lot of the city’s problems lately. But when the mayor and the council had to address the budget problems, they came up with a solution that includes at least $6 million in new taxes. While that sounds like a small number, it’s almost 10 percent of Oakland’s budget shortfall. And the new taxes, which will need voter approval in a special July 21 election, are included as part of the budget plan for fiscal 2009-10.

Two of the new taxes — a levy on pot clubs (which the clubs themselves strongly support) and a loophole-closing measure that forces big businesses to pay their fair share of real estate transfer taxes — require only a simple majority vote to take effect. The reason: the council voted unanimously to declare a fiscal emergency and put the measures on the ballot. That allowed the city to avoid the state law that requires a two-thirds vote on most new taxes.

Measures C, D, F, and H make up a generally progressive package that has the support of Council Members Rebecca Kaplan and Jean Quan and Rep. Barbara Lee. We’re happy to endorse all four.

Measure C is a 3 percent increase in the city’s hotel tax, which would rise from 11 percent to 14 percent. Half the new money would go to the Oakland Convention and Visitors Bureau while the other half would be split between the Oakland Zoo, the Chabot Space and Science Center, and cultural arts programs and festivals in the city. We could argue with the distribution (arts festivals should probably get more money and the Visitors Bureau less) but overall, it raises the hotel tax to the level of most other cities in the area and would raise money for the sorts of programs hotel taxes typically fund.

Measure D is a technical amendment to the Oakland Kids First law that mandates spending on programs for children and youth. It changes the spending requirement from 1.5 percent of total city revenues to 3 percent of the general fund. That’s slightly less money than the program currently gets, but a lot more than it has had over the past decade. The coalition that put Kids First on the ballot in 1996 (and modified it in 2008) supports this modest change.

Measure F is a creative new tax. It would impose a 1.8 percent gross receipts tax ($18 per $1,000 in sales) on medical marijuana businesses. Most efforts to hike business taxes face bitter opposition from business owners, but in this case, the pot clubs are happy to pay. In fact, the four dispensaries in Oakland are among the measure’s strongest supporters. Paying taxes tends to legitimize the clubs — and while it’s going to be tricky to track sales in what is still largely a cash business where records have in the past been kept vague to avoid the threat of federal prosecution, this is a strong step in the right direction.

Measure H would prevent big corporations from cheating Oakland out of real estate transfer taxes. Under current law, a business that owns property in Oakland and is bought by another business (or becomes part of a merger) doesn’t have to pay transfer taxes on the property it owns. Closing that loophole could bring in as much as $4.4 million a year.

There’s a lesson here for the much larger city across the Bay.

San Francisco desperately needs new revenue. And while the mayor has talked, in vague terms, about maybe supporting some sort of tax measures in November, he hasn’t committed to anything. There are several proposals floating around the board, the latest of which is a Labor Council-supported tax on alcohol consumption, but no coherent package. The progressives on the board — both those who support the compromise Newsom budget and those who don’t — need to set aside those differences, now, and get to work on finding ways to bring in enough new money to deal with the impacts of further state cuts and stave off some of the layoffs slated for the fall.

The main obstacles are Sups. Sean Elsbernd and Michela Alioto-Pier. Everyone who cares about saving services in this city needs to pressure them to back away from their GOP-style no-new-taxes stands. If those two would at least agree to let the voters decide on new revenue measures, the city would likely get a unanimous board — and the ability to raise taxes with a simple majority vote.

Oakland’s pot club tax and real estate transfer tax are great ideas that can be directly imported to San Francisco. The city’s business tax could be made more progressive (and bring in new revenue) with a simple change in the tax rates (higher on the big outfits, lower on the small ones). We’re dubious about a sales tax increase — even a half-percent hike would bring the local tax rate to 10 percent. And, even though the alcohol tax isn’t exactly progressive, those ideas could be acceptable as part of a package.

The main thing is that the city will need, at minimum, another $100 million this fall, and probably ought to be looking at raising twice that much. Oakland — a city with far fewer resources, a much smaller business base, and radically less wealth — is managing to fight its deficit with progressive taxes. What’s wrong with San Francisco?

P.S.: Sup. Chris Daly was outspoken in his criticism of the budget deal, blasting Newsom and even taking on his former aide and longtime ally, Avalos. But for all his bluster about the mayor, Daly couldn’t bring himself to oppose Anson Moran, Newsom’s nominee for the Public Utilities Commission. Moran was a staunch ally of Pacific Gas and Electric Co. when he was the PUC’s general manager, and the full board should reject him. *

Editor’s Notes

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Tredmond@sfbg.com

There was plenty in the long New York Times Magazine cover story profile of Gavin Newsom to induce the Technicolor yawn. But the sentence I found most offensive was buried after the jump, down at the bottom of a page of type: "While generally considered a liberal by people outside of San Francisco, Newsom has not shied from confronting the left with tough love."

Say, what?

Whenever you read something in the Almighty Times that uses terms like "generally considered," you need to stop and think. Considered by whom? And what the hell does the Times mean by "liberal?"

You can define that word any way you want — Wikipedia has a long history, and outlines the difference between the classical liberalism of John Locke, Adam Smith, and David Ricardo (much of which we would now call libertarianism) and the social liberalism of the postwar era. I think any honest definition, though, rests in significant part on the notion that unregulated free markets are not always the best way to allocate resources, that government has a role in helping the needy, and, perhaps most important, that one of the primary functions of government is to reallocate income and resources to increase equality — that is, to tax the rich to feed the poor.

Liberalism got a bad name in the 1960s, particularly when it was used to apply to politicians like Lyndon Johnson and Hubert Humphrey, who had the right ideas about using exceptionally high taxes on the very rich (the marginal rate in that era was more than 70 percent) to fund programs like the Great Society, but were utterly wrong about the Vietnam War and the use of U.S. military force abroad. And in the 1970s and 1980s, liberal politicians like Phil and John Burton in San Francisco became way too close to the real estate developers.

But words have to mean something, or the whole gig is over. And, as far as I’m concerned, a mayor who refuses to raise taxes to cover a huge budget deficit, and instead cuts wholesale from programs that help the poor, is not by any definition a "liberal."

He’s not terribly good at "tough love," either.

The Times uses his implementation of Care Not Cash as an example — the program, the magazine says, "essentially ended direct payments to homeless people and put the money into service agencies instead." Not exactly true — Newsom ended direct payments to homeless people, but the "care" part of the package was never really there. And it’s all gone in this latest budget. That’s not tough love — it’s just tough.

The idea that Mayor Newsom of San Francisco is a good liberal who is still willing to challenge the left every now and then is just mythology. Newsom (generally, to use the Times’ favorite word here) has no relations whatsoever with the left. That fact might help him in the campaign — Californians as a whole are not as progressive as San Franciscans. But let’s at least be honest about it.

And of course, the lavish story is another sign that the Newsom campaign is rolling ahead very nicely. "The fact that a national newspaper of the stature of the Times decides that Gavin Newsom is the story in the governor’s race is certainly a plus," Eric Jaye, Newsom’s chief political advisor, told me. I’d say that’s a bit of an understatement. *

Editorial: What’s wrong with San Francisco?

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The only new revenue in the budget comes from fee increases on Muni, public parks, after-school programs and the like.Meanwhile, Oakland is fighting its budget deficit with progressive taxes.

EDITORIAL In the end, Mayor Gavin Newsom got his way. The San Francisco supervisors made some significant changes to the budget and saved some $40 million worth of programs that the mayor wanted to cut or privatize, but the Newsom for governor ads will still be able to proclaim that the mayor solved his city’s budget problem without raising taxes or cutting police and firefighters.

Instead, this fall some 1,500 city employees are slated to be laid off, 400 of them in the Department of Public Health. Many recreation directors will get pink slips. Human services will lose at least 100 people. Nonprofit service providers will see much of their city funding disappear. The money to pay for public financing of the upcoming supervisorial and mayoral races is gone. Newsom’s pet (and expensive) 311 service will still be open 24 hours a day (with a lot of the money coming from Muni).

The cops and the carpetbaggers: Part II

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This week, we report on the political fireworks surrounding the city’s budget process, which got especially loud last week at the dueling rallies outside City Hall.

As the Chronicle noted, Police Officer’s Association President Gary Delagnes — who lives in Novato — made waves by calling the city’s progressive Supervisors “carpetbaggers” and “idiots” while speaking at a rally organized by the police and firefighters’ unions to protest the Board’s changes to the mayor’s proposed budget. (“What the fuck right does Delagnes, who doesn’t live in the city, doesn’t pay property taxes in the city, doesn’t even get to vote here, have to complain about [Sup. John] Avalos?” Guardian editor Tim Redmond wondered on our blog.)

Mayor Gavin Newsom was onstage shaming the Supes right alongside the police and fire union leaders, helpfully reminding everyone that seismologists have said it’s not if, but when the Big One will strike. (Speaking of earthquakes, do we really want our hospitals to be understaffed and cut to the bone if disaster hits?) To really get a sense of how over the top the whole spectacle was, check out this slideshow of photos from the rally, set to the audio of Delagnes’ speech.

Photos, audio and slideshow produced by Rebecca Bowe

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