Sen. Lena Gonzalez Shows What’s Going on in California

California State Senator Lena Gonzalez speaks at an event in Long Beach, Calif., on Feb. 22, 2021. Patrick T. Fallon/AFP via Getty Images

Commentary

I have a saying: If you listen to people long enough, they’ll tell you what’s really going on. If you want to know what’s going on in California, read the entire interview state Sen. Lena Gonzalez (D-Long Beach) gave to Capital and Main, a left-wing publication. Also note the website didn’t bring up the topics I will here.

Gonzalez sponsored SB 1173, which in the bill’s language “would prohibit the boards of the Public Employees’ Retirement System and the State Teachers’ Retirement System from making new investments or renewing existing investments of public employee retirement funds in a fossil fuel company.” And “would require the boards to liquidate investments in a fossil fuel company on or before July.”

Among the six reasons the bill gives for these actions are:

“(2) Climate change affects all parts of the California economy and environment, and the Legislature has adopted numerous laws to mitigate greenhouse gas emissions and to adapt to a changing climate. …

“(4) The production of fossil fuels and the effects of climate change resulting from the use of fossil fuels all lead to disproportionate adverse impacts on low-income communities and communities of color.

“(5) A transition away from fossil fuels to clean energy will create greater employment, support the economy, and improve public health.” The article says the bill was supported by “more than 100 environment and climate-focused groups and others, including the state Treasurer’s Office, the city of Los Angeles and the California Federation of Teachers.”

SB 1173 passed the Senate, but was killed in the Assembly because Public Employment and Retirement Committee Chairman Jim Cooper (D-Sacramento) dropped it before it was taken up for a vote.

Gonzalez huffed, “So Cooper just decided he wasn’t going to hear it. Which I think stymies the democratic process.”

Actually, what Cooper did is “the democratic process.” Any democratic body larger than a New England town hall is going to have committees to investigate numerous issues, then take votes on bills. A committee chairman always will wield great power. Democracy is not about fulfilling the whims of a single senator from Long Beach.

Note the origin of this bill. When asked how the bill would have served her constituents, Gonzalez said, “The bill came from one of my constituents. He was a Sierra Club member. He’s an environmentalist back home in Long Beach, and he wrote an op-ed in the local newspaper in Long Beach saying we should divest fossil fuels from CalSTRS and CalPERS pensions. And if anybody can do it, Lena Gonzalez can do it.”

It’s natural for a legislator to get ideas for bills from constituents. When I was state Sen. John Moorlach’s press secretary from 2017-20, constituents always were feeding him ideas, some quite good. He was limited to 20 bills a year—just eight in the COVID year of 2020—so he had to pick his best shots. But those ideas helped the process.

Gonzalez’s description shows the kind of constituents she listens to, in this case environmentalists. (Who are known to exaggerate the threats the fossil-fuels industry poses to the environment.) The regular constituents in her district, who will pay for this bill as described below, are an afterthought, if that.

As you can see driving around her Long Beach district, the area boasts a large refining district. That’s where the gas comes from to pump into your vehicle. Unless you’re well off and can afford a Tesla. Destroying that industry would throw into unemployment lines tens of thousands of her constituents who take home good, middle-class paychecks to support their families.

Investment Genius

Here’s a great quote from her in the interview on why she sponsored the bill: “Secondly, the financials—with the war in Ukraine and oil prices that are very high—I’ve been told by many economists and experts that the time to get out is now.”

If she can predict the oil market, why isn’t she a billionaire? And who are these economists and experts? The oil industry is notoriously volatile, especially in wartime.

Just over two years ago, the oil price was just $20 a gallon in April 2020, as the pandemic started. Did she predict that? And in April 2020, did she predict the price would quadruple to $104 in July 2022?

Then I just read this in Fortune: “JPMorgan Chase analysts warn global oil prices could reach a ‘stratospheric’ $380 a barrel if Russia were to retaliate against the sanctions imposed by the G7 countries by cutting its crude oil output.” But “Citigroup is signaling crude oil could collapse to $65 a barrel by the end of the year and possibly even slump to $45 by the end of 2023, if a recession brings on a destruction in the demand for energy.”

The Problem with Divestment

This is why divestment is so dangerous. If a pension fund loses money due to being forced to avoid a good investment, the shortfall has to be made up either by reducing the payout to retirees, or by raising taxes—probably the latter. Ultimately, the fund could go bankrupt.

That’s why CalPERS, CalSTRS, and the other big funds employ high-paid investment analysts. They’re experts in these fields. Of course, they can make mistakes too, such as CalPERS’ losses from speculative real estate investments.

In 2001 CalPERS divested from tobacco companies. According to CIO.com, CalPERS “has lost $3.581 billion in investment gains by divesting from tobacco stocks, which amounts to about 1 percent of current assets, during a 17-plus-year period ending June 30, 2018, shows a new report by Wilshire Associates, the pension system’s general investment consultant.”

Meanwhile, CalPERS’s account is only 80 percent funded; and CalSTRS’ is only 67 percent funded, according to the latest reports.

It makes no sense to hurt these funds further by divesting from the world’s biggest commodities industry.

Just a Drop in the Ocean

Gonzalez downplayed the size of the divestment, “We’ve seen other portfolios that have divested within a year, portfolios with far more invested in fossil fuels than what we have in our own state pension funds, which is up to $11 billion.”

Then why does she think this will have any influence on the global markets other than being another California virtue-signaling moment that actually hurts our people?

Her $11 billion divestment would be just a drop in the ocean of a global oil and gas sector of $2.1 trillion in 2021. Any California divestment obviously would see the stocks snapped up quickly by other global investors.

Is Vladimir Putin going to be impressed by such posturing? How about Saudi Crown Prince Mohammed bin Salman? They’re raking in record oil profits.

In Europe, they’re facing a long, cold winter because of the war boycott of Russian energy—even as they can’t entirely cut off their supply from Moscow. Meanwhile, first Germany, and now Holland and Austria, are going back to using coal, the dirtiest energy source.

I spent three winters in Germany in the U.S. Army from 1979-82. I can report that, although not as frigid as my native Michigan, Northern Europe can get mighty cold. Global warming hasn’t yet turned Amsterdam into Gonzalez’s balmy Long Beach.

What This Tells Us

What does this escapade tell us about California? It shows us a powerful state senator represents a sector of the state political establishment that has become totally divorced from reality. They think their posturing is going to reduce oil drilling from Azerbaijan to North Dakota’s Bakken fields.

But there are a few members of this Democratic majority machine with a little sense, such as Sen. Cooper. When one party dominates so much, inevitably rifts develop. That’s what’s now happening.

Because the state’s massive budget surpluses have covered over the rifts by spreading the money around to everybody—except the taxpayers who pay for everything—these rifts have been only partly visible so far. But the onrushing recession is going to open up those rifts like the Grand Canyon.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.