Power Emergency Pushes Other State Programs Aside

The headline on the press release got right to the point: “Is it about energy? No!”

That emphatic declaration sums up a pervasive grumpiness in the state capital today. Ever since the Legislature lumbered into motion this year, it’s been all energy, all the time. Patience is wearing thin.

At least temporarily, the power crisis has out-muscled everything else on the state’s 2001 policy agenda, from expanding mental health treatment to reforming foster care and ensuring that all California children attend preschool.

“It’s nobody’s fault. It’s just reality,” lamented Assemblyman Darrell Steinberg (D-Sacramento). “But it’s very, very frustrating.”

And as lawmakers begin to piece together a state budget this month, anxiety abounds: Will the ongoing drain of the electricity crisis, coupled with the state’s murky economic outlook, leave no money to do anything else?

Anticipating such a possibility, legislative leaders are proceeding cautiously, warning their members to rein in spending expectations. A new swimming pool in your district? Maybe not. Expand health coverage to millions of California’s uninsured? Next year, perhaps.

While final budget decisions remain months away, a Senate committee already has tentatively sliced $1.9 billion from Davis’ proposed spending plan. Casualties include $40 million for parkland along the Los Angeles River, $100 million to protect beaches from polluted runoff and $50 million in grants to people who buy or lease electric vehicles.

The fiscal prudence comes just a few months after forecasts of a $6-billion budget surplus nourished hopes that this year would be a bountiful one, with plenty of cash for ambitious expansions in education, health care and other arenas.

Predicting continued prosperity, Gov. Gray Davis in January proposed a record $104.7-billion state budget that would, among other things, boost school spending, increase funding for roads and mass transit and raise salaries for community college teachers.

But since then the state has committed a whopping $3.7 billion to buying power on behalf of the debt-ridden electric utilities. Most of the money has come from the state’s general fund, and the buying spree continues at a clip of about $45 million a day.

Davis has committed another $1 billion to programs to cut energy consumption, and legislators are mulling proposals for everything from loans to businesses that install energy-efficient equipment to rebates and tax credits for those who buy solar power systems--all multimillion-dollar items.

Spending billions just to keep the power flowing in California makes lawmakers decidedly uncomfortable. In fact, veterans say today’s apprehensions are almost worse than those of the early 1990s, when the recession spawned massive budget deficits. Back then, legislators at least knew the parameters of the problem; the energy crisis, by contrast, is a cyclone of unknowns, many of which are beyond government control.

“Where’s it going to end?” said Assemblywoman Dion Aroner (D-Berkeley). “When you see millions and millions of dollars going out every day, just to keep the lights on, it’s scary. And what becomes of all the other pressing needs we face?”

Under legislation approved last month, the state’s mushrooming bill for the short-term power purchases is supposed to be covered by the sale of $10 billion in revenue bonds to investors. State officials say the bonds, which ultimately will be retired by ratepayers, will be issued in late May.

But skeptics are asking questions, among them, whether $10 billion won’t be enough--a danger state Treasurer Phil Angelides has voiced.

Estimates suggest the power bill could top $6 billion by May. The bonds also must cover service on the debt and fund long-term electricity contracts that have been negotiated separately in recent weeks--and are the linchpin of plans to free California from sky-high wholesale prices.

“I’m just not sure the $10 billion gets you enough money to cover all those different bases,” said Jean Ross, director of the nonprofit California Budget Project. “If it’s not enough, do they go to the ratepayers and say, ‘Guess what, your rates are going up after all?’ Do they try to soften that blow with more state money? This is what I lie awake at 3 a.m. obsessing about.”

Other questions linger as well. What if a snag delays what will be the biggest municipal bond issue in U.S. history? And will summer--a time when energy consumption surges as Californians switch on their air-conditioners--bring more expensive surprises for the state?

There are also qualms about the state’s credit rating. Standard & Poor’s Corp. has put the state on credit watch for a possible downgrade, a move that could diminish the value of all its outstanding debt. And perhaps the biggest wild card is whether the uncertainties about energy will slow the California economy and cause a drop in tax revenues.

Trying to Minimize Risks, Rate Hikes

Davis administration officials say their response to the energy crisis is designed to minimize the state’s financial risk while protecting consumers from rate increases.

Finance Director Timothy Gage said there is no reason to believe the bond sale will not go smoothly, allowing the state to “make the general fund whole.”

“We’re using the general fund basically as a short-term cash flow mechanism,” Gage said. “Nobody is telling us we won’t be able to sell those bonds. It’s really a question of timing and financing.”

Hoping to replenish the general fund sooner rather than later, Angelides is trying to line up some short-term financing. That financing, which Angelides hopes to nail down by the end of the month, would come through a smaller bond issue of $3 billion to $6 billion.

So far, the energy mess has not interfered with the passage of any legislation, which normally occurs later in the year. And in some ways, it could not have hit at a better time. The first two months of a legislative session are typically slow, a time when lawmakers chart their policy agendas, prepare bills and find the best dry cleaners.

This year, there was little time for such luxuries. Instead, January and February were a whirl of emergency hearings, endless party caucuses, briefings with energy experts and marathon floor sessions.

In the Assembly, Speaker Bob Hertzberg (D-Sherman Oaks) appointed working groups on every conceivable aspect of the crisis. One legislator is touring the state, harvesting public testimony. Others are tackling the dwindling natural gas supply, pondering the perils that summer’s high energy demand will pose, and considering how we got into this mess.

Although legislators still found time to write bills--the number introduced by the Feb. 23 deadline, 3,064, was about average for the first year of a legislative session--they said many measures are thin because they had no time to put meat on the bones.

“Energy has just pushed everything else aside,” said Assemblyman Alan Lowenthal (D-Long Beach).

Hertzberg himself scrapped many of his usual winter duties, such as scrutinizing members’ bill ideas to make sure there’s no overlap. He has had no time to prepare legislation of his own and was forced to scale back a retreat for committee chairmen to craft a policy agenda for the coming year.

“It has been all-consuming,” the speaker said.

Assembly Republican Leader Bill Campbell (R-Villa Park) has maintained a frenetic pace, too. Acknowledging the strain, he recently invited reporters to enjoy “coffee, doughnuts and ginseng”--said to boost energy--at a briefing in his office.

Crisis Has Stolen the Show

Though lawmakers understand why the power woes have topped the priority list, they aren’t happy about it. Nobody ran for office on a pledge to stabilize electricity prices and save utilities from financial ruin. Before January, few knew what a kilowatt hour was.

“The things that brought me here--working to improve transportation, provide more housing, make sure all our kids have good schools--have all taken a back seat to energy,” said Assemblyman Joe Simitian, a freshman Democrat from the Silicon Valley.

For first-termers like Simitian, the crisis has been especially exasperating. Not only were they forced to grapple with a complex subject while still figuring out where the Capitol bathrooms are, but with term limits, lawmakers have little time to build a record in office. Resolving the power emergency is taking a significant bite out of that.

Still, many legislators have tried to press forward on other fronts, with mixed results.

Consider the experience of Virginia Strom-Martin, chairwoman of the Assembly Education Committee. Diligently preparing for a year when education was expected to once again dominate debate--and the budget--in Sacramento, Strom-Martin scheduled several hearings to help members of her committee get up to speed. Topics included student testing, teacher credentialing and vocational education.

“We had great witnesses, wonderful testimony,” said Strom-Martin (D-Duncans Mills). But most legislators were knee-deep in energy assignments and didn’t show up.

Most troubling, of course, is the sense that resolving the power crisis will gobble up the budget surplus that legislators--and lobbyists for everything from hospitals to veterans’ groups--have been eyeing so lustily.

Aroner, for instance, is pushing bills to improve the foster care system. Price tag: $300 million.

Steinberg wants $100 million to help counties better serve the homeless mentally ill.

Republicans want $3.2 billion for tax cuts. And Strom-Martin hopes to expand professional development for teachers, which would run about $320 million a year.

The list goes on and on and on, but it could all go into deep freeze.

“Nobody knows what’s going to happen,” said Assembly Majority Leader Kevin Shelley (D-San Francisco). “But I’ll tell you one thing: We’re not running around talking about all our grand plans anymore.”

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Power Points

* The U.S. energy secretary said he believes Californians face certain power blackouts this summer, but he rejected the state’s call for federal price controls on energy.

* Two state assessments predicted that California will be able to avoid summer blackouts and might even see a slight cushion in the energy supply.

* Interior Secretary Gale A. Norton said the crisis justifies increased extraction of oil, gas and coal from public lands.

Verbatim

“Where’s it going to end? When you see millions and millions of dollars going out every day, just to keep the lights on, it’s scary. And what becomes of all the other pressing needs we face?”

--Assemblywoman Dion Aroner (D-Berkeley)

Complete package and updates at www.latimes.com/power

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Times staff writer Rone Tempest contributed to this story.