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Undoing Davis

Governor Gray Davis is having trouble keeping Californians focused on the big issues. It‘s hard to feel sorry for him. After all, his administration is embroiled in a scandal over an overpriced, recklessly crafted $95 million contract for computer software from the Oracle Corp. The company also came up with a $25,000 campaign contribution for the governor, which he dutifully returned last week.

End of story? Not quite. Scandals, even small ones, take on a life of their own in Sacramento. The newspapers around the state are filled with seeming revelations: Sole-source contracts -- not subject to competitive bid -- are rampant. It turns out, of course, that this is old news. Such contracts have been business as usual in state government for a decade, and slipped in under legislation pushed by L.A. state Senator Richard Polanco.

Another old story resurrected by the media is the governor’s obsession with raising money. It‘s a hallmark of his administration, and, who knows, he’ll probably try to ask pallbearers at his own funeral for a buck or two. The latest round has Davis pressing the California Teachers Association -- which brandishes cash as a weapon with dozens of legislators, and gave him $1.3 million in his 1998 campaign -- for a million bucks. Guess what? If Gray Davis thought you had a million bucks and might give it to his campaign, he would ask you for a million bucks. He‘s not shy, though he probably wouldn’t mind if you kept it to yourself if you turned him down. He‘s defeated three super-rich candidates so far and is working on his fourth.

To borrow a line from an old movie: ”We are shocked, shocked to learn that there is gambling going on in this establishment!“ But of course there is; this is Casablanca.

It can be said that Davis is merely harvesting the karma of three decades of fund-raising mania, which began with his tenure as principal bagman for legendary ”Malibu Mafia“-figure-turned-campaign-reformer Max Palevsky, then finance chairman for Tom Bradley’s L.A. mayoral campaign.

All of this, however, is a sideshow that is distracting public attention from critical issues, such as the manipulation of California‘s energy market and the fate of a bill that would begin to take on global warming. Internal memos from the late energy giant Enron -- replete with schemes code-named ”Death Star“ and ”Get Shorty“ -- support Davis’ charges that the world‘s largest energy-trading company was manipulating the California energy crisis and that the state deserves a multibillion-dollar refund.

While the Enron memos are a windfall for Davis, the truth is that his suspicions of the company didn’t kick in till after he‘d taken $120,000 from Enron, before the onset of the crisis. Davis simply failed to anticipate the crisis, though warning signs were there, and he did not play hardball once the state was in it, though he halfheartedly threatened to do so, instead continually looking to Washington for muscle. That said, the Enron revelations buttress the state’s demand that the Federal Energy Regulatory Commission (FERC) order refunds, which Davis long said we should get, and which Republican foe Bill Simon did not. Simon championed deregulation even in speeches earlier this year, though he a doesn‘t want to talk about it now, and defended Enron from what he called ”a rush to judgment.“ A Nation magazine investigation reveals Simon’s extensive business dealing with Enron.

Simon spent last week leveling a series of what he called broadsides against Davis. Their tone was quite fierce, but Simon chose as his venues either right-wing radio shows or far-flung locales, and he got little in the way of questioning on his own contradictory positions.

Off the campaign trail, a historic bill to begin controlling global warming suddenly looks in doubt because of furious last-minute lobbying by the automobile industry. The Assembly delayed its Monday vote on amendments to L.A. Assemblywoman Fran Pavley‘s bill. AB 1058 would require automakers to drastically cut tailpipe emissions of carbon dioxide, a prime contributor to the greenhouse effect. The bill now appears to be in some trouble in the Assembly, even though it passed there in late January before undergoing some pro-business amendments in the state Senate, which passed it on a 22-13 vote. And even though U.S. Senator John McCain has called several legislators on its behalf to buck up its few Republican supporters in the Assembly.

The new Assembly speaker, Herb Wesson (D-Culver City), seems to be losing control of his caucus under extreme pressure from the car companies. The bill also has a new opponent sure to dismay progressives, L.A. County Labor Federation chief Miguel Contreras. Last year, Contreras also dismayed progressives on another energy-related issue, when he criticized the big state bailout of Southern California Edison proposed by Davis as too stingy!

Ironically, Davis, who had been on the fence, seems to be coming out in favor of Pavley’s bill. He supported its basic provisions 12 years ago when he backed the omnibus ”Big Green“ initiative, which included reductions on greenhouse-gas emissions in its ultimately unsuccessful everything-but-the-kitchen-sink package. But in addition to the predictable opposition of the automobile lobby -- including the autoworkers union, which also opposed a major effort in the U.S. Senate to increase fuel-efficiency standards -- some legislators may want to trade support for the global-warming bill for concessions on the state budget.

Two of Davis‘ persisting headaches are the state’s record budget deficit of $23.6 billion and the uncertainty over the massive state-bonds sale needed to cover $6 billion still owed the state‘s general fund for emergency power buying last year. People aren’t noticing, but this would be the biggest municipal-bond deal in U.S. history. Two outstanding hurdles remain on the California end: The Public Utilities Commission has to come up with a servicing agreement (means of payment) with the three big utilities, and PG&E‘s lawsuit, which seeks to clarify how much revenue the utility can keep, needs to be settled. PG&E is also the only utility with which the PUC hasn’t concluded the servicing agreement.

And the reworking of the state‘s massive portfolio of long-term power contracts, struck at the height of last year’s market hysteria, may itself need to be reworked. Energy economist William Marcus, who works with consumer and environmental groups, says the savings from the first set of renegotiated contracts are less than advertised. The Davis administration claims savings of 23 percent; Marcus thinks it is about half that. And in the wake of the Enron revelations, consumer advocate Harvey Rosenfield goes even further. ”Davis and FERC,“ he declared, ”should not make any new deals with power companies over long-term energy contracts that were signed while these companies were defrauding the state.“

Federal regulators, said Rosenfield, should also dismiss settlement talks concerning California‘s challenge to the contracts while investigations into market manipulation move forward. Last month, Governor Davis signed ”re-negotiated“ contracts with some power companies and released the firms from liability for market abuse. The governor should be shredding these contracts, not renegotiating them.

A lot of headaches for Gray Davis. Taken together, they constitute his real opposition, not the still hapless Mr. Simon.


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