SCV NEWSMAKER OF THE WEEK:
Assemblyman Keith Richman

Interview by Leon Worden
Signal City Editor

Sunday, October 5, 2003
(Television interview conducted Sept. 29, 2003)

Keith Richman

    "Newsmaker of the Week" is presented by the SCV Press Club and Comcast, and hosted by Signal City Editor Leon Worden. The half-hour program premieres every Wednesday at 9:30 p.m. on SCVTV Channel 20, repeating Sundays at 8:30 a.m.
    This week's newsmaker is Assemblyman Keith Richman, R-Granada Hills, who represents most of the Santa Clarita Valley. Richman is also co-author of Proposition 53 (Funds Dedicated for State and Local Infrastructure) on the Oct. 7 recall ballot.
    Questions are paraphrased and some answers are abbreviated for length.

Signal: There are 100-some-odd candidates running for governor, but there is something else on Tuesday's recall ballot that you want to discuss.

Richman: Proposition 53 may in fact be the most important thing on the recall ballot. Proposition 53 would dedicate a part of the state's general fund for infrastructure investment — for investment in roads, highways, water projects — water quality projects, water supply — parks and open space and other infrastructure needs. You know, back in the 1960s and early '70s, our state regularly invested between 15 and 20 percent of the general fund annually on infrastructure projects.

Signal: When Pat Brown was governor.

Richman: Pat Brown and Ronald Reagan. That's when we built our state highway system, that's when we built our state water project, we built our university system. But since then we've neglected our investment in infrastructure, and you can see it all around us with congested roads, highways that are crumbling, concerns about water every day, water supply, water quality, lack of open space, problems with public buildings, public hospitals and on down the line.

Signal: If we're not building anything, what are we — what are you all — spending our money on?

Richman: Not on infrastructure. In fact since 1990 the legislative analyst's office, which is a nonpartisan office of the Legislature, says that we've spent on average, on a pay-as-you-go fashion, two-tenths of 1 percent annually for infrastructure investment. So we've not invested in infrastructure, and it shows.

Signal: So how do you whip the Legislature into shape?

Richman: The Legislature hasn't been fiscally responsible. They've shown that they're not fiscally responsible in investing in infrastructure — not only over the last three decades, but in the year 2000, when the state had a windfall from capital gains tax receipts, in that one year, we took in $18 billion of capital gains tax receipts and the Legislature invested all of $511 million in infrastructure. So the Legislature hasn't had the fiscal discipline to invest in infrastructure, and I don't think that they will. So I think it's important that we say we're going to invest — starting at 1 percent of the general fund and gradually increasing to 3 percent of the general fund — this money into roads and highways and water projects and all those other infrastructure needs.

Signal: You wrote this Proposition 53, right?

Richman: I did. Myself and Joe Canciamilla were joint authors.

Signal: He's that Bay-area Democrat you did the compromise budget proposal with, that kind of went nowhere.

Richman: Right. Joe represents the East Bay, the Pittsburg area, and he's a Democrat from Northern California and I'm a Republican from Southern California.

Signal: So if Proposition 53 is going to take 1 percent to 3 percent of the general fund and spend it on roads and highways, isn't that money taken away from education?

Richman: It doesn't take it out of education at all. In fact the proposition protects education funding, it protects Proposition 98 fully, and it protects other general fund programs. There are a number of triggers in the proposition and protections for the general fund. It requires a certain growth in the general fund before infrastructure is funded, and if (the) general fund drops, (Proposition 53 funding) can either be partially suspended or completely suspended.

Signal: When does this kick in?

Richman: It would kick in probably in 2006, 2007, but the first year it would kick in, it would require a 4-percent growth above inflation, so probably somewhere in the range of 6- or 7-percent growth in the general fund before this infrastructure funding would even start.

Signal: Well if we've got this enormous deficit and the horizon is bleak and revenues need to be coming in at 4 percent ABOVE inflation before this even starts —

Richman: Right.

Signal: — So is it ever going to happen?

Richman: It absolutely will happen. This isn't going to impact at all the deficit that we face now. We're going to have to resolve the deficit that the state of California faces this next year. We're not going to have any choice. You know the budget that was passed this year out of the Legislature is a budget that I would call fiscally irresponsible. It borrowed $18 billion, had some accounting gimmicks, and rolled all the problems over into next year. We're going to have to solve this deficit problem next year. The funding for infrastructure under Proposition 53 comes out of the increase in revenues. So the trigger for that is a 4-percent increase in the general fund, above the inflation rate.

Signal: One criticism about Proposition 53 is that it's not specific. People are being asked to vote to let the Legislature do — what — with their money?

Richman: The funny thing is, we've heard opposition on both sides. (They've) said it's too specific, and set this money aside in the general fund. And the opposite side of the coin, almost in the same breath, they're saying it's not specific enough. What the proposition says specifically is that the money has to be spent on infrastructure, it has to be spent on capital outlay projects. It can't be spent on programs or operations.

Signal: Brick and mortar.

Richman: Brick and mortar. Either new buildings, maintenance or renovations. But it can't go to salaries, as an example. And 50 percent of the money will go to local governments — cities and counties — and 50 percent will be spent (by) the state government. Now, almost all propositions require implementing legislation. Originally in this proposition, we in fact had specific allocation formulas, which were taken out in the legislative process. You know that the legislative process oftentimes is compared to making sausage. My preference would have been that those allocation formulas were kept in the proposition, but they weren't. And so this year, in fact, Joe Canciamilla and myself introduced AB 1011, which ... would be implementing legislation for Proposition 53. And in that bill, which was agreed to by all of the interested parties but it has not gone through the legislative process yet, 50 percent of the money that goes to local governments would go for transportation, roads and highways; 15 percent would go for water projects locally; 15 percent for parks; and 20 percent (for) infrastructure needs determined by the county or the city. Of the state money, again 50 percent would go for transportation, 20 percent for open space preservation and 30 percent for infrastructure spending determined by the governor and the Legislature through the budgeting process, following the state infrastructure plan.

Signal: CLWA has endorsed Proposition 53; does this work like a bond where the local agency would apply for a grant?

Richman: No, they would get it regularly. In fact, not only did Castaic Lake Water Agency endorse it, but the water agencies throughout the state have endorsed it, just as the League of Cities and the county organization throughout the state of California have endorsed Proposition 53.
    But this would be a regular stream of money coming to the city. It's not a bond; in fact, a pay-as-you-go mechanism for infrastructure funding is much more efficient than bond financing because when you issue bonds, you have to pay the interest expense. So the legislative analyst's office ... says that bond financing, because of the interest expense, is about 30 to 40 percent more expensive than pay-as-you-go financing. Besides that, when you issue a bond — and remember, bonds are intermittent and episodic — we clearly haven't done what we've needed to do for infrastructure — bond financing locks in those principal and interest payments for 30 years. And so that money, to pay off the principal and interest, comes right off the top of the general fund. So in fact, Proposition 53 is more flexible than bond financing and more efficient because we don't have to pay the interest expense.

Signal: Let's talk about those triggers. If the state is back in black by 2006, then 1 percent of the general fund — which is how big?

Richman: Well the general fund this year is just about $70 billion.

Signal: Then $700 million would theoretically go to infrastructure, There are other triggers; eventually it will be 3 percent.

Richman: Correct.

Signal: If, then, there is another budget deficit, do we continue to spend 3 percent?

Richman: No. In fact, there are specific criteria in the proposition that define exactly how the infrastructure funding can be either partially suspended or completely suspended. So if revenues drop, even if they drop mid-year, the spending can be reduced in the third quarter and the fourth quarter of the year, and if they're projected to drop in the next year, the funding can be eliminated completely for that year. So there are good protections for the general fund, and again, the legislative analyst's office says that Proposition 53 protects education and protects the other general fund programs.

Signal: These triggers are reminiscent of another ballot measure the people voted in not long ago — Proposition 49, Arnold Schwarzenegger's after-school programs. That hasn't started yet, right?

Richman: No it hasn't.

Signal: Why not?

Richman: No money. That proposition has specific dollar amounts in it that require the general fund to grow, and I think it's $1.5 billion, so because the general fund went down — quite a bit — this year, that proposition didn't start. And I don't know when it's going to start, but I think it's going to again take a couple of years to start.

Signal: Another criticism leveled against Proposition 53 is legislating by the ballot box. The argument is, we elect these people in Sacramento to do the right thing, spend our money wisely, and if you don't like it, then don't tie their hands with a ballot measure; instead just vote them out. What do you say to that, and what other kinds of restrictions are there already on the general fund?

Richman: Let me say first of all that if the Legislature had in fact been fiscally responsible, or I think would be fiscally responsible, you wouldn't need a proposition like 53. But I don't have any confidence that the Legislature is going to be fiscally responsible, and they've clearly shown that they're not fiscally responsible. And I think it's critical that we invest in our roads and our highways and water projects and other infrastructure needs. As far as the ballot-box budgeting, I think that it's very important that in fact we set aside this money for infrastructure investment. It's one of the key important things that we do need to invest in. These issues, whether it's congested roads or concerns about water or lack of parks and open space, they impact our quality of life on a daily basis. So I think it's in fact important that we invest in these things regularly. As far as the other arguments of ballot-box budgeting, remember, there's really only two ways to pay for infrastructure: one is the pay-as-you-go manner in Proposition 53; the other is bond financing — and we already talked about how the pay-as-you-go is more efficient and bond financing in fact has less flexibility for the general fund than Proposition 53. So as far as other programs, the largest program by far and away is education. Proposition 98. That takes up about 40 percent of the state budget. There are some requirements in health and human services — the Medi-Cal program is an example; welfare, but there is some flexibility in there; but the three largest components of the general fund are education funding, health and human services, and public safety including the courts, correctional institutions, the prisons, highway patrol, those types of things.

Signal: You and Joe Canciamilla came up with this bipartisan budget proposal; tell me about that. Do you think there needs to be some raising of taxes?

Richman: You know, I hate raising taxes. But let me tell you what Joe and I did. What we wanted to do was put in a fiscally responsible budget. We wanted to balance the budget, we wanted to resolve the long-term deficit that the state of California faced, and we also wanted to institute fiscal reform so we didn't get into this problem again — and reforms for economic stimuli to get businesses going again. What we did in our bipartisan compromise budget — in fact we reduced spending to a level that was below spending in 1998. You know you've heard from a number of candidates running for governor if all we did was reduce spending —

Signal: Roll back to 1998 levels.

Richman: Right. Well we did that. We went further than 1998 in fact. We proposed spending levels which were way below 1998. We proposed laying off state employees so the number of state employees on a per-capita basis was much less than in 1998, and even making those cuts, we couldn't balance the budget. It wasn't even close. So what we proposed is a temporary half-cent sales tax to pay off the debt that we had accumulated to this point in time — $10.7 billion — pay that off over five years — that would be dedicated solely to paying off the debt, and the budget would be balanced then. It was the only fiscally responsible plan that was out there. The budget that was passed this year — that in fact passed the Legislature — was irresponsible. The legislative analyst's office projects that we're going to face a budget deficit somewhere in the range of $10 billion to $12 billion next year, now that the pension obligation bonds have been thrown out by the courts. So we're going to start next year with a deficit in the range of $10 billion to $12 billion. We haven't solved any of the fiscal problems.

Signal: No matter who's governor after Tuesday.

Richman: That's exactly right. This is not an easy problem. The state of California is not out of our fiscal crisis. I had the opportunity last week to speak at a bond buyers' conference, financial institutions, and California has the lowest credit rating of any state in the nation. We are 1 or 2 notches above junk-bond status, and we are in no way out of our fiscal crisis.

Signal: Of course cities and counties are screaming that the state is robbing them. The California League of Cities is preparing a ballot measure — they're shooting for November 2004 — that would put a further clamp on the Legislature to stop them from raiding the coffers —

Richman: Stealing the money. Stealing the money from local governments.

Signal: Are you in support of their measure?

Richman: I am in support of it because it's another instance where the Legislature is not fiscally responsible. You know the budget that Joe and I proposed had a one-time hit for local governments of about $500 million, and instead the Legislature ended up taking about $1.2 billion. So it's easy to take it out of cities and counties, and that's what the Legislature does, and I think it's irresponsible because cities and counties are really where the rubber meets the road in providing services to the citizens of the state.

Signal: What do you think about the call on Tom McClintock to bow out of the race? Should he?

Richman: I think he should. I think the numbers just don't work easily with both Arnold Schwarzenegger and Tom McClintock in the race. I think it's critical from my perspective that we get a Republican governor in Sacramento. That will provide some balance in the Legislature.

Signal: Are you saying this because you support Arnold?

Richman: No. I do support Arnold, but I think it's important that we have some balance to the government in Sacramento. Right now we have a Democratic Legislature, a Democratic governor, and I don't think that that's good for California. I think by having a Republican governor, it'll bring some balance. It'll force the Legislature to work together a little bit more in a bipartisan manner, so we can get solutions that are common-sense, pragmatic solutions to the problems that California faces. You know we've had some pretty wild bills come out of Sacramento recently under the political overhang of this recall. We've had the driver's license bill for illegal immigrants —

Signal: What do you think about that one?

Richman: I don't support that at all. I think that to give a driver's license at this time, when we're worried about security to our nation, is just ridiculous.

Signal: What about Senate Bill 2, the almost-universal health care bill?

Richman: I don't support that either. You know I've been a real leader in the Legislature, pushing for increased health-care coverage. But SB 2 would require mandatory health insurance from businesses. It says that if you're a business with more than 50 employees, you have to buy insurance for your employee or pay a payroll tax, which is estimated to be somewhere between 8 and 10 percent. And if you're a business with more than 200 employees, not only will you have to buy insurance for your employees, but also (their) dependents. Besides that, SB 2 has a minimum benefit package which is very broad, a very good benefit package, and also says that the employers will pay at least 80 percent of the employee's cost and the employee will pay no more than 20 percent. So I think that's going to drive up health-care costs; I think it's going to be another mandate on business which is just going to kill more jobs here in the state of California. And besides that, I don't think it's the right way to go. I think the right way to go would have been to put in a voluntary program for small businesses to partner with the state and the federal government and help them with either tax credits or subsidies, to help them purchase insurance for their employees. You know, most of the adults who lack health insurance work in small businesses with under 50 employees, and SB 2 doesn't address that.

Signal: You're a medical doctor. Wouldn't Keith Richman the medical doctor like to see more people having more insurance?

Richman: Absolutely. And that's why I've pushed for people to have insurance. I mean, not only is it beneficial for those people who lack health insurance — clearly, their health status will be better — but it also removes some of the financial pressure that is on our entire health-care system, because those people who lack health insurance are going into the emergency room and typically not paying their bills.

Signal: Isn't forcing the employer to step up to the plate the way to get more insurance for more people?

Richman: I think what you want to do is do no harm. And we don't want to drive more businesses out of the state of California. Right now businesses are leaving California — big businesses, small businesses — between skyrocketing workers compensation premiums, unemployment costs, high energy costs, burdensome regulations, things like the lack of flexibility on the 40-hour work week, the family leave bill, and now the mandated health care. All of these are driving businesses out of the state of California. And I think unless we have an economy where businesses can succeed, and people can get good middle-class jobs — and then pay taxes so we can invest in education, health care, roads and highways — then we're not going to have a society that's going to succeed. So I think the key thing we have to make sure of is that we have an economy that's going in the right direction.

Signal: Why aren't we looking at Keith Richman for governor this year?

Richman: It just wasn't the right thing to do. I've known Arnold for a number of years, I've known (former Los Angeles Mayor Richard) Riordan for a good number of years, and early on I said that if either one of them ran, that I would support them and not run.

Signal: How did that go down? Did Arnold call you up and say, "I'm going to run, so you stay out"?

Richman: No, Arnold didn't call me up. We had been talking just about every week before he announced, and in fact I, like everybody else, thought he wasn't going to run, and that Dick Riordan was going to run.

Signal: Did he at least give you the courtesy of a call before he announced?

Richman: No he didn't. He didn't give me the courtesy of a call. I spoke with him the day after, told him I was very surprised, and that I would —

Signal: Any hard feelings?

Richman: No, I knew that either he or Dick Riordan were going to run, so by that point in time I knew I wasn't going to run. I spoke with Dick Riordan a day or two after that, and I think Dick Riordan was surprised also, but — you know, I've known Arnold for a few years. He's a smart man, he's capable, and I think he'll make a good governor.

Signal: You're considered one of the most intelligent men in the Legislature. You don't hear people saying that sort of thing about Arnold. What can say to give people confidence in his ability to lead the state of California?

Richman: I think they're underestimating Arnold. I'll tell you an interesting story. About three years ago I got a call from Arnold out of the blue. He had read a couple op-ed pieces that I had written, and they in fact were about health care. And he called me up, we talked on the phone, we talked another time on the phone, and then he invited my wife and me over to dinner. So we had dinner with him and Maria (Shriver), and in fact I was very pleasantly surprised at how much he knew, his interest in public policy, and even at that time, three years ago, it was clear that he was interested in giving back to the state of California. He's a smart man, he shouldn't be underestimated, and I think he's going to be a good governor.

Signal: This past Monday, the Legislature had to go back into session because for whatever reason, I guess Republicans and Democrats couldn't agree on Megan's Law, and so everybody went home at the end of the regular session without bothering to extend it. It was going to die on Dec. 31; no more Megan's Law, no more sex offender registry. Why could the Democrats and Republicans not get that done during the regular session?

Richman: Well that's a good question. That was really just another example of partisan gridlock in Sacramento. I mean, the Legislature has been dysfunctional. It's not doing its job with the budget, it didn't do its job with workers compensation, we haven't solved the energy crisis, the unemployment costs for businesses, and we didn't resolve it for Megan's Law ether.

Signal: It needed a two-thirds vote. It needed 54 votes; it was 51-0. There just weren't enough Republicans, including you —

Richman: Including me.

Signal: - on the floor at the time. Why not?

Richman: Well the real issue on Megan's Law in that debate had been going on for months in the Legislature. It certainly crystallized on that (final) night, but it had been going on for months. Because we on the Republican side of the aisle thought it was important to make the law better. It was certainly critical that we renew it and not let the law lapse, but we felt it was important that sex offenders have to register their exact address rather than by ZIP code — we thought registering by ZIP code was sort of useless information — we wanted to make the law permanent, and we also wanted that information to be available on the Internet. Well, we couldn't get that agreement with the Democratic side of the aisle, and so they kept putting up a rather simple and straightforward bill that simply renewed Megan's Law. In fact the bill that subsequently passed continues to have a sunset — meaning in 2007, that law's going to have to be renewed again.

Signal: The Republicans wanted to make it permanent.

Richman: We wanted to make it permanent, we wanted the home address of the sex offender, and we wanted that information to be on the Internet. Eventually, this past Monday, we passed a law, because we couldn't get anything better.

Signal: The Democratic version.

Richman: That's exactly right. It was the Democratic version. Even Mark Klaas, Polly Klaas' father, says that the bill has to be much better, and in fact somewhere around 40 states in the nation and the District of Columbia have a much more comprehensive Megan's Law bill than the state of California. So if you ask me why the Legislature couldn't work together to come up with a better bill and pass it on time, I think that's just another example of the Legislature not working well and being dysfunctional.

Signal: One last question. The next regularly scheduled gubernatorial election is in 2006. Is Keith Richman going to run for governor?

Richman: Well, we'll see. I think I'm going to run for statewide office in 2006. But let's see what happens on the recall.

    See this interview in its entirety today at 8:30 a.m. and watch for another "Newsmaker of the Week" on Wednesday at 9:30 p.m. on SCVTV Channel 20, available to Comcast and Time Warner Cable subscribers throughout the Santa Clarita Valley.


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