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Economy: Families Vs. State Agencies

Frank Bigelow

While California is slowly recovering from the great recession, state agencies are busy passing new regulations that will increase energy costs on families and business.
State bureaucrats function as though they have been given a green light to act unilaterally in the fight against climate change, with little or no discussion about the unintended consequences of climate and energy programs that are contributing to manufacturing job losses, businesses exiting the state, and  high wage jobs being replaced by minimum wage jobs.

As we are witnessing both within California and nationally, people are frustrated that even though they are working longer and harder in their jobs, they’re finding that their income does not go as far and the dreams they have for their children and for their retirement are no longer possible. So as most Californians cut back to meet a changing reality, we need our Legislature to start asking tough questions about the programs that are creating a burden on working families.

Why are electricity rates rising for residents and business? California is only part of the way toward its 2020 greenhouse gas (GHG) reduction target under the 2006 climate change law, AB 32. The law requires the state to reduce GHG emissions to 1990 levels by 2020. A new law, SB 350, requires that target be raised from 33% to 50% by the end of 2030. In the wake of these policies, we are seeing electricity rates beginning to rise. The state’s own estimates project electricity rates increasing 26-42% from 2012 to 2020. Natural gas rates, meanwhile, are projected to rise 62-77% from 2012 to 2020.

But rising energy costs are not the only cost increases we are seeing in the state. California businesses on average already pay 19% higher operating costs per job than the rest of the country in addition to paying 53% more in workers’ compensation. Corporate income tax is 43% higher than the national average and per employee is the ninth highest in the nation.

Meanwhile, California has a poverty rate of 23.5%, the highest in the nation.

How much will all the new climate programs add to the increasing burden on California families? This could be just the beginning for rising costs as state agencies continue to grow new climate and energy programs at the expense of businesses and families. For example, there are more than a dozen state agencies developing their own climate policies and regulations, including the Governor’s Office of Planning & Research, Department of Public Health, California Energy Commission, Caltrans, and the Department of Resources, Recycling & Recovery.   There no end in sight, no chance to stop and reevaluate what we have done and where we are going.

Do the benefits of the program actually offset the costs? At a legislative hearing in February, lawmakers were exasperated at the inability to discern what benefits were realized for certain ARB programs or what the cumulative costs added up to. The Board says it does not collect data on the success of individual programs and as a result, there is no way for the Legislature to assess whether any given program is actually successful. If there is no data, how can the state determine if a program has achieved its goals and at what cost?  Are more programs the answer?

State agencies function as though climate programs the most important priority of state government. Perhaps they are, but given that climate is a global problem that has to be solved by national government s ARB’s budget and the lack of data on whether program goals are being met, how do we know we are achieving results? In 2005-2006, the board had about 1,000 employees and a budget of about $240 million. In contrast, the board’s proposed budget for 2016-2017 proposes a budget of nearly $1 billion – an increase of 400%. With this cost, shouldn’t we know what the ARB is achieving and why the drastic growth of the agency is necessary?

Meanwhile, the California Legislature is considering a broad expansion of AB 32 this year.  This expansion includes reducing emissions 80 percent below 1990 levels by 2030. Can families and businesses afford yet another intense mandate piled on top of the existing ones?

In our zeal to combat climate change, we are choosing to de-prioritize growth in local economies and in the taxpayer wages. Instead we chose to grow agencies and expensive programs without any way of tracking their success outcomes. Is this the best we can do for California families?

Originally appeared in Fox & Hounds