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Roundtable: UCAN Dissolves; SDUSD Fiscal Dilemma; Open Primary Confusion

March 2, 2012 2:40 p.m.

Roundtable: UCAN, SDUSD, June Primary
Guests: Jeff McDonald, Watchdog reporter, UT San Diego
Dave Rolland, Editor, San Diego CityBeat
Michael Smolens, Government Editor, UT-San Diego

Related Story: Roundtable: UCAN Dissolves; SDUSD Fiscal Dilemma; Open Primary Confusion

Transcript:

This is a rush transcript created by a contractor for KPBS to improve accessibility for the deaf and hard-of-hearing. Please refer to the media file as the formal record of this interview. Opinions expressed by guests during interviews reflect the guest’s individual views and do not necessarily represent those of KPBS staff, members or its sponsors.

Read Transcript

SAUER: A grand jury probes San Diego's key watchdog group amid allegations of embezzlement and fraud. San Diego voters will face a very different system in June with California's new open primary. I'm Mark Sauer, filling in for Maureen Cavanaugh. It's Friday, March 2nd, and this is KPBS Roundtable. Joining me are Jeff McDonald, investigative reporter for UT San Diego. Good to see you.

MACDONALD: Thanks for having me.

SAUER: With us is Dave Rolland, editor of San Diego City beat. Welcome.

ROLLAND: Good to see you.

SAUER: And Michael Smollens, government editor at UT San Diego.

SMOLLENS: Good to be here.

SAUER: The blockbuster story of the week in San Diego concerns the turmoil within UCAN. The group is it subject of a federal grand jury probe. Jeff, let's start with UCAN, the organization, their role as a watchdog.

MACDONALD: Well, it's a nonprofit that was established in the early 1980s to fight utilities taking advantage of their customers. They have a until now stellar reputation for fighting on behalf of consumers and saving millions of dollars in rate payer bills.

SAUER: And what's happened this week?

MACDONALD: Well, we learned this week that they filed for dissolution in superior court as a seemingly protection against some unspecified threats, some cash flow problems, and it turns out they're the subject of a grand jury investigation. The subpoena was issued about two weeks ago, and it took a week for the board measures to respond, and there was response was to file for dissolution in superior court.

SAUER: What does that mean?

MACDONALD: It's similar to I bankruptcy proceeding: They would appoint a receiver, deal with all of its contract, obligation, until the organization can be wound down and closed.

SAUER: So we're just at the process now where the grand jury obviously operation in secret is conducting an investigation.

MACDONALD: Well, according to the documents I saw, are the board chairman is required to appear next week in US district court with a wheelbarrow full of documents. A man named Kendall Squires.

SAUER: Who brought these allegations, and how did that come about?

MACDONALD: Well, last year, at least one of the employees of the organization wrote some letters to the board campaigning about some practices, and some transactions on the part of the executive director, Michael shames. The board responded by hiring an independent investigator to review these allegations. No merit was found to them, and the case was seemingly closed. We learned last week that the staffers, the whistle blowers weren't satisfied with that response. They engaged former city attorney, Michael Aguirre, and he began a series of negotiations with the board. And those negotiations were not fruitful enough to Mr. Aguirre's satisfaction so that -- I'm not sure what role Mr. Aguirre's allegations played in the federal investigation, but we know there's a federal investigation now. And they're looking for some of the same material, and perhaps additional material that Mr. Aguirre as seen.

SAUER: And whose decision was this to take it into the dissolution? The quasi bankruptcy proceeding?

MACDONALD: This was a board decision at the recommendation of Mr. Shames.

SAUER: Now, Mr. Shames remains on the scene. He's very forceful today. We've got a response, I believe, on his Facebook page, do we not?

MACDONALD: Yeah, he's going to stay in town. His take is that the dissolution was a strategic decision to insulate the organization from any legal threats that may be looming, IE, Mr. Aguirre's possible litigation. He said it's possible you can will dissolve, it's just as possible that UCAN will survive this, and this was a tactic to force Mr. Aguirre to basically put up or shut up.

SAUER: So that fight is looming. Now, some of the specifics on those allegations, there was something about mail coming in, where it wasn't the consumer's network, it was misspelled the Comsumer's network, and also some relationship with a film production; is that right?

MACDONALD: Yeah, the allegations include a series of seemingly secret bank account, according to the whistle blower that neither the board nor the staff were aware of. There were some bank accounts that had similar sounding names to the network. There were transactions that were questionable, according to the staff. The staff didn't feel like those complaints were addressed by the independent investigation. There were alleged to be illegal bonuses paid to Mr. Shames. The UCAN board and Mr. Shames say that all of these issues have been address the and vetted, and no evidence of wrongdoing was uncovered. That seemingly hasn't satisfied the whistle blowers nor the federal investigators.

ROLLAND: We talk about these whistle blowers as Jeff is calling them, a lot of people are calling them. The two people that have come out publicly are Charles Langley, who sort of does media outreach, and some other things. He's always talking about gas prices. He talks to KPBS all the time about gas prices. And David Peffer, who is an attorney on staff at UCAN. And I think -- I believe was involved in their cases with the City of San Diego and water rates, and that sort of thing. So those are the two guys that have come out publicly. And they were on KPBS's TV show, evening edition, basically saying we're not really whistle blowers. We tried to do this all behind the scenes, tried to do this just in communication with the board. And UCAN was the one that sort of blew it up with this dissolution. And I talked to Michael shames yesterday at length, and he said really this has been going on for the better part of a year where there's just assistant new claims of allegations where these guys would come forward and say this and that, claiming wrongdoing of various sorts as Jeff was saying. UCAN's own internal probe where they hired people from the outside to come in and look at these allegation, they said they would knock them down. And then more allegations would come up. And Mr. Shames told me there are more allegations that are -- he used the word jaw-dropping that haven't come out.

SAUER: Oh, really.

ROLLAND: And he's basically saying we spent a lot of money on outside attorneys and auditors, and this is really as Jeff said, this is UCAN's tactic, its strategy to say Mike, all right, it's time to get this all out in the open. Now he has 30 days to do it.

SAUER: Michael Smollens, do you think that UCAN can survive this? This is a nonprofit, folks who depend on the good will of funders and supporters in the community. This can't be good.

SMOLLENS: Of course it can't be good. I think in the moment now, it looks horrible. I think we need to see where it goes. I don't know the timeline. Dave mentioned 30 days. A federal grand jury, that's tough. It's one thing to have some members on staff complaining and putting forth allegations, and Michael Aguirre. But a federal grand jury, however that got triggered, is a big deal and I think usually takes a while. The question I have is what does this mean for the consumers? These people have been the consumer advocates for what? 3†decades? And is this like getting caught in quicksand. They're already dealing with attorney, accountant it is spending a lot of money on stuff that I don't think has much to do with their role. And one of the questions I have is are any of these allegations linked at all to their representation of consumers and any wrongdoing there? It all seems very financial and then there's this weird documentary with Peter Navarro in China, which I have no clue how the heck a consumer organization like that would get involved in. I wonder what this means for the consumer while this is all percolating, and it sounds like it's just going to get a whole lot hotter before we see any the light on this.

MACDONALD: I would think that a lot of that would be determined by the course of the federal investigation. Mr. Shames' position is he's going to keep working on behalf of ratepayers and consumers, and representing those populations before the public utilities commission.

SMOLLENS: That's got to be tough though when you've got Michael Aguirre and a federal grand jury demanding your attention.

MACDONALD: I'm sure he has a lot of distractions right now. But there are some important issues racing the ratepayers that Mr. Shames and others are advocating against the utility, and I think those will persist.

ROLLAND: I think it was somewhere between about December, 2010, and summer 2011 where UCAN internally kind of divvied up its budget into areas of interest. They've got the projects that they work on that they're super excited about, obviously Shames' big personal project is his battle with SDG&E. As Jeff says, he will continue working on that. Then they've got this privacy rights clearing house.

SAUER: Right.

ROLLAND: That they work on. I believe that's been sort of taken off site, out of the main office, to give that some independence. They've got the new media rights, I believe it's called, project. So those are the ones -- and I think that they operate on their own budgets, and I think that was -- that might have had something to do with the -- you know, with the internal politics at UCAN where some projects were really getting the backing of Shames and the board, other projects that may be weren't pulling in the kind of revenue in terms of grants and that sort of thing were maybe getting short shrift.

SAUER: Let's talk about the key battle that the folks at UCAN have chronically with SDG&E. And the one building at the moment is this -- I don't know how to characterize it. This message that was put into some papers in one line here where out of the 2007 wildfires, they've exhausted their $1†billion insurance count, they've got hundreds of millions of dollars left in claims, and the battle is who is going to pick that up? The ratepayers or the share holders? And that is one I think Shames and UCAN were taking on squarely.

MACDONALD: Yes, of course. That's a huge fight that's not yet been decided. It'll be interesting to see what and how effective UCAN seems to be in that.

SAUER: And the time suggest pretty awful from a consumer standpoint.

SMOLLENS: Absolutely, that's about as big of a thing they have had in a long time, and tremendously controversial. So it's another big issue for UCAN to face. And they have been pretty adept at dealing with obviously big rate payer issues like this in the past. But certainly they haven't had any kind of distraction like the one they're facing.

SAUER: Would it seem from an objective standpoint that, I don't know if honorable is the right word, for Mr. Shames to set aside, let the dust clear, and let the work continue aside from him?

SMOLLENS: Well, I haven't been as close to this as Dave or Jeff, but it seems to me that he believes, they did their internal investigation, had their independent people look at that and saw there was no wrong doing, I would find it hard to believe knowing Michael Shames a little bit, or of him, that he would step down. And a lot of people would ask, why would you do that? If you think you have done nothing wrong, there's always the for the good of the organization. But that's a tough argument to make at this stage.

SAUER: He conceded already he had not been a member of the bar for some time.

MACDONALD: Well, he's a member of the bar, and that hasn't changed. He was just inactive.

SAUER: Okay.

ROLLAND: And there's some question. He got a favorable review from the public utilities commission saying that, no, he didn't do anything wrong in his advocacy for UCAN. The UPC said no, as far as we're concerned, he's cool and hasn't done anything wrong.

MACDONALD: There are some other issues outside the scope of the PUC. According to the state bar, you can't practice law without an active license. You can't hold yourself out as an attorney as an active membership, and there's some questions whether he did that.

SAUER: And there's no way to know what the grand jury is probing. That's a secret investigation at this point. Who decides who brings that to the grand jury? Who says this is at this level now and we're going to make a federal case out of it?

MACDONALD: Presumably, the Department of Justice. The FBI has investigated it. There's an FBI agent's name on the subpoena I reviewed. So they brought it to the US attorney and are proceeding at least in the information gathering stage. Just because there's an a subpoena issued and records requested doesn't mean there'll be a criminal case filed.

ROLLAND: The proof is going to be in the pudding on this. Of it's serious whenever the FBI and the feds get involved. Maybe they've got something explosive. I don't know. And the proof will be in the pudding there. So far what I've seen in terms of the allegations that have been made in public, they all kind of don't really add up to me, if you gauge -- if you weigh them against UCAN's good work on behalf of ratepayers. To me, it's not adding up to that much.

SMOLLENS: Well, on that point, let's say I agree with you. I haven't done that kind of balancing look as you have. But if you're making the argument that the wrong that they may have done isn't as big as the good they've done, the law doesn't work that way if indeed those allegations prove true. I question where you're going with that.

ROLLAND: Well, practicing without a license?

SMOLLENS: Isn't that, like, the most minor thing we're talking about here of all the allegations?

ROLLAND: Right, so what is the most major thing we're talking about?

SAUER: We're going to have to leave it there. And I appreciate that's a lively discussion. I wish we had more time on that. We've got a couple other things to go. Coming up, San Diego schools face a budget deficit that could exceed $120†million. We'll discuss the tough choices facing school district leaders.

[[[NEW SEGMENT]]].

SAUER: You're listening to the Roundtable. I'm Mark Sauer filling in for Maureen Cavanaugh. Dave, the dire drum beat continues for the San Diego unified school district. They're talking about massive layoffs, sale of real estate, possible declaration of insolvency. How big is the budget hole? Is it real this time? We've been hearing this for years.

ROLLAND: Well, we won't know, really, until summer time. In June what the final verdict is going to be on that. Right now what the school district has to go on is the governor's January basically interim proposed budget. Here's where we think we're going with the state budget.

SAUER: And it wasn't good news.

ROLLAND: Right. And here's how much money I'm going to give to education this year, which was also not good news. Basically said he was going to keep it flat from last year. And prices as you know, prices rise, and so the revenue is not keeping up with costs from the district's point of view. And what they're seeing right now is about $122†million budget problem, which is about 18% of their discretionary spending. What they're proposing to do as you say is a lot of layoffs. It would be around -- somewhere between 111,200 employees, I believe. They're talking about selling off $21†million of real estate assets. That's 1-time money. That's not when you talk about a structural budget deficit, that's not the proper way to handle a structural budget deficit. But right now, the district believes it is absolutely in crisis mode.

SAUER: Cushions are gone, rainy day funds are gone.

ROLLAND: That's what they say. They say right now we've got to lay off a lot of people. And the repercussions of that would be increased class sizes to a point I don't believe we've ever seen in San Diego. Maybe 30 students per class in elementary school, maybe 40 students per class in middle school, maybe up to 50 students in some high school classes. So the quality of education would definitely be degraded. Now, the big elephant in the room here are the unions. And they negotiated a contract with the School Board two years ago.

SAUER: And the officials came this week and said, folk, we gotta come back and reopen. What are they saying?

ROLLAND: Well, they're saying here's one way you can avoid hundreds and hundreds of those layoffs. Maybe not all of them, but they're asking for about $90†million in concessions from the unions saying basically we'd like to trash that agreement that we came to two years ago. The deal was that for the current year and the year before that, there would be no raises, and they would reduce the school year by one week each year, which would be a reduction in pay of about 2.7%. And then in exchange for that, the following two years, there would be a total of about a 7% raise over the next two years. This upcoming year, and the one that follows.

SAUER: We want to talk about Def con 4, insolvency. Jeff McDonald, your article today about increases in San Diego Unified's healthcare costs, tell us about that story. Why was a change proposed? What happened to it?

MACDONALD: Well, my colleague found out some weeks ago that San Diego unified pays -- they're a membership of a trust that manages the healthcare services for about 30 districts around San Diego County. San Diego unified, of course, is the biggest player in that group and therefore contributes the most money. It's about half of a $350†million revenue stream. So what some folks at San Diego unified are saying we should put out that expense to competitive bid and see if we can do better on the open market. Maureen came up with a document from a company about 15, 16 months ago that offered to do just that and provide the same level of services for a savings of about $48†million over five years.

SAUER: And who claimed they were going to get that savings?

MACDONALD: Keenan and associates. They're a well-known healthcare provider for a number of employers. They approached San Diego unified, and basically offered what appears to be an unsolicited proposal to assume this service on behalf of San Diego unified. That was discussed in closed session at the board level and went nowhere. So that's all we reported today.

SAUER: And I think your story pointed out good, standard business operation practices is look at bids every 3-5 years, put these out there, see what the market is. And that has not been done.

MACDONALD: Not since San Diego unified joined Viva as a member, which is what some of the trustees are saying, let's test the market and see what we could do on the open market.

SAUER: And the union isn't keen on that idea.

MACDONALD: They are not keen on it at all. They live the volunteer employee benefits association which is a nonprofit trust. They like the service they get, they like the benefits they enjoy. They don't see a problem. They don't want to even find out if there could be real savings.

SAUER: That certainly raises questions about things that could perhaps be saving. Let's get back to -- we've talked about the possible sale of real estate, the concessions that they want from the unions. What about insolvency? We've done stories, a lot of you folks have done stories on just this place no one wants to go. I think Oakland did it, mixed results at best. What would it mean for us?

ROLLAND: Well, it would basically be the School Board throwing up its hands and waving the white flag and saying we've failed to balance the budget. We can't do it. We have run out of money. So I think at that point -- and there's a lot I don't know about what would occur with insolvency, but essentially the state would appoint a trustee to come in and take over the show. The School Board would maybe hang around in an advisory role but would be sort of stripped of their decision making power. I don't know what would happen to the superintendent, Scott Barnett, a member of the School Board said the superintendent would lose his job. I'm not sure. So Scott Barnett basically said, what's worse? If we can't get the unions to come back to the table? What would be worse? Admitting failure and letting a trustee come in, maybe getting a big loan from the state to keep the operation running or doing what we we've already talked about here today? And that is raise class sizes up to these levels that would really degrade the quality of education. He's saying -- he hadn't made up his mind yet, but in the next few weeks, he may decide that he doesn't want to vote to send out a bunch of pink slips to teachers telling them that they might be laid off. Instead he might just say, all right, we'll force the unions' hand by saying no, I'm going to give up, basically.

SAUER: And you wonder if this is at this point a negotiating ploy to get these folks to come back to the table or if it's a real thing. It sounds like with the dire possibilities they're facing that it does seem real.

SMOLLENS: Well, the unified district is in just a world of hurt. The interesting thing about insolvency, it came up in October. Superintendent Kowba, and some of the School Board members started talking about it, and it really seemed like their goal was to alarm the state to helping them out and other school districts. In the next breath they were talking about going up there, they got to raise taxes. And frankly it did have sort of a political overtone. Certainly the real threat is there of the district's problems, and potentially going insolvent. What I find interesting is that they racheted back and stopped talking about that after a short while because they didn't realize the repercussions. That jolted a lot of people in the community, and not only about the school district, but suddenly people are talking about property values, businesses not coming here because we know schools how that plays on your neighborhood, if you're going to buy a house, is there a good school?

SAUER: No question.

SMOLLENS: So suddenly it got a lot larger. I think they ratcheted back a little bit. So it's interesting that Scott Barnett is coming up with this now, not that there's anything -- that the situation has changed. Actually I think it's gotten worse since October in terms of the amount of deficit they're looking at. But putting that back on the table at the times of the negotiation, is the message now more toward the union than the state? Before it seemed more toward the state. But the reality of the matter is, be the district has a lot of problems, and either way it goes is going to be really tough.

ROLLAND: It's important to note that they don't have to go insolvent. They don't have to do this. This is just a strategy that Scott Barnett was talking about. And as Mike mentioned, other people have been talking about for a couple months. The district does have a plan to balance the budget. And that plan, if they can't get the unions to come back to the table, is to lay off a whole lot of people. So they do have a proposed budget that they're going to be sending to the county office of education. And what's I don't know how much time we have here, but another key element is the deadline for districts to send out pink slips. By state law, they have to send out pink slips to anybody that they might lay off in June by March 15th.

SAUER: And Marty block is trying to change that because it's a bit of a hamstring, isn't it?

ROLLAND: Both the union and the district as the way Marty tells it came to him and said can you provide some relief? Can you extend this deadline to June?

SAUER: This would be state legislator Marty block.

ROLLAND: Right. And he said okay, sure. Let's do that. So he introduced a bill last week that would extend the deadline to send off pink slips to June, which would give the district some breathing room to negotiate with the unions.

SAUER: The other wild card here it would appear would be governor brown's push to get some enhanced revenue.

SMOLLENS: Dave talked about, it's just such a dysfunctional budget process. They have to make staffing decisions months before they have any real clues to what they're going to have. Every year we go through this dance, where they issue layoff notices, and then they pull them back. People realize it's very real now. Of adding to that, that's the norm, by May 15th, the state gets a better picture. Its revenue, the so-called may revise where they have a good fixture on what the tax revenue is going to be. But further, the governor has put forth almost two budgets. A dire budget, and a budget if the voters approve a tax increase he plans to put on the ballot in November. So districts have another layer of this weird uncertainty, and right now, they all are planning for the worst case scenario, which arguably, you'd have to. In the past, they've budgeted on more optimistic scenarios only to get burned. As one education expert said, if you tried to imagine a budget process, you probably couldn't have come up with one worse than the one we have, having to make staffing decisions literally before the spring starts and not knowing the revenue until June.

SAUER: Is it too early on that campaign with governor brown's proposal to get poll something do we know which way the wind is blowing?

SMOLLENS: The poling has been pretty positive on a number -- they're all worried will this fall apart because there's too much there. Some polling has shown that voters do support there. But I do think it's a little early. Tax increases bay and large are very hard to do. The governor has a sales tax and an upper income tax increase, a millionaire's tax, and then a broader tax increase. So there's a ways to go before we have a good people on public opinion.

SAUER: We've got a caller. Frank in San Diego.

NEW SPEAKER: I just wanted to bring up a point, we're hearing constantly with the escalating costs of healthcare. And then it always seems to go back to the employer said it's gotten so high, we need you guys to give up whether it's on your salary or benefits. When are they going to turn around and look at these insurance companies that are posting record profits? Some of them are doing two or three increases a year. Of and instead of going after them, which is essentially a group of 1% millionaires, we continue to beat down whether it's the teachers or anyone else? I think we need to start focusing on these insurance companies and tell them you can make a profit but you can't take everybody to the cleaners.

SAUER: Thanks for that comment.

MACDONALD: I think President Obama tried to address some of that when he was pushing the affordable care act. And he backed down on the public option. So I've heard that complaint from a number of people we interviewed for the story that was published today that this is just indicative of a national healthcare crisis really that's forcing people who are elected officials to make decisions that have no good outcome.

SAUER: Keith wants to join us from Rancho Bernardo.

NEW SPEAKER: My question is where is all the lottery money going?

SMOLLENS: Well, a lot of people look to the lottery. It's about a billion dollars that goes to education out of -- compared to 40-something billion dollars in general funds. So the lottery was sold as a big solution. It's helpful, but it's just not enough to cover it. It's in reality a very small percentage of education funding in California.

MAUREEN SAUER: Didn't I see it's approaching $100 million here? You might want to get off before the drawing. Dave?

ROLLAND: Well, when we were talking about Governor Brown's tax increase, it's important to note that if it's successful, and as Mike was noting, there are three of them out there that voters might have to choose between, which might kill them all. But if Brown's tax measure survives, the district is looking to get $40 million, which would be about a third of the problem. But the thing is, it wouldn't arrive until midway through this upcoming fiscal year. So the district has to budget long before then. And so what they would do if the district does get that $40 million is it would roll it over until the next year.

SAUER: We've got Fran in La Jolla. Go ahead, Fran.

NEW SPEAKER: I'm actually with a group called educateourstate.org. It's a statewide organization. And we'll be launching a campaign called this budget blows, mainly to education parents on what you're talking about. And it's the fact that this initiative won't bring in the money till November. But every single district has to budget now, and the fact which I haven't heard you mention, if this initiative does pass, it's still table funding. There is no savior of our schools here. Schools haven't been a priority for our government in a long time. And parents need to start standing up and speaking up. We're going to start a campaign with kids blowing bubbles on March 15th to start a letter writing campaign for parents to voice their opinion to make education a priority again in our state.

SAUER: Thanks for sharing that with us. Speaking of Governor Brown's proposal, is this one place where the union and the school leaders can agree and they'll be on the campaign lines passing out literature together?

SMOLLENS: They would if they can come together on one aspect of it. But I think you've got the California teachers' association supporting the Brown initiative, some folks supporting this broader tax. So ultimately, they're all on the same side, whether you agree with the tax increase or not, their point of view is that you need it. But there are even people who say it would be difficult if they don't want come together in one push.

SAUER: William from Clairemont. Go ahead.

NEW SPEAKER: I'm a worker with the school district. And we made a deal last year with the school district that they'd give us furlough days and cut our wages 2.5% in exchange for them not laying off workers. But they went ahead and laid off workers anyway. And this year, they're coming back with the same deal if we only decrease our wages, they won't lay off workers. And we want to know how come we can trust them to follow through on that deal? They didn't last year.

SAUER: Okay. Thank you. That's a very good point. Dave?

ROLLAND: I think -- I don't want to speak for the School Board, but I think the School Board at the time -- Richard Barrera told me that was a good way to save I think $20†million over the life of the deal. And they took it. They did rescind a lot of the pink slips that they sent out last year. And the School Board was probably just kind of hoping, it's not the smartest way to handle a budget, but they were hoping maybe beyond hope that the economy would improve, that there would be more tax revenues coming in, and that the governor would give districts more money. Right now, they're just looking at a much bigger problem.

SAUER: We're going to have plenty more on this, and we'll all be doing many more stories on this to come. Next, San Diego voters will be faced with something new when they go to the polls in June. California's open primary system.

[[[NEW SEGMENT]]].

SAUER: This is KPBS Roundtable. I'm Mark Sauer filling in for Maureen Cavanaugh. My guests today, Jeff McDonald, Michael Smollens from UT San Diego, and Dave Rolland, editor of CityBeat. Trying to explain California's new primary election system can be frustrating, but trying to figure out what the result will be from the new so-called open primary is even more difficult. We'd like to invite our listeners to get involved. Michael Smollens, do you think you can explain some of the changers voters are going to see on the June ballot?

SMOLLENS: Well, it has the catchy title of a top-two primary. It's an open primary. Basically all candidates will be on the same ballot, and all voters can vote for whoever they want, unlike the system we're familiar with, where Republicans can only vote in Republican primary, Democrats and so forth. The two top vote getters regardless of what part will end up in November. In some rare cases, you could have members of the same party facing off in the June primary and going against each other in a runoff in November. That's one potential outcome. But I think in a lot of cases, the usual political dynamic will there where you've got the Republican Democrat dynamic. So the idea I think was just to open it up to allow people to vote for whoever they wanted to, not be hemmed in, and to get independent candidates more into the mix in the primary.

SAUER: Now, again, make that distinction. It's not for all races throughout the --

SMOLLENS: Well, it doesn't involve presidential races, and ole races that are nonpartisan.

SAUER: As in Michigan the other day, Democrats could go in and vote in the Republican primary.

SMOLLENS: Some parties have that ability to crossover. And for a while, California did as well. But that was ruled unconstitutional. It was a different system back in the 90s. But the theory is, among some, that this opens it up, it will increase participation because people have been increasingly getting frustrated, or the people that framed Prop 14 that brought us this, it's become so partisan that the extremes of the party dominate their primaries, and therefore they get the most liberal and conservative people running. And this has the ability in theory to generate moderate candidates and get them in the mix a little bit more because of that dynamic.

SAUER: When you tell people they could have to choose between two Democrats or two Republicans in the general election seems to confuse everybody. Even if they like the idea to get rid of the polarization.

SMOLLENS: Well, again, I think that's going to be pretty rare in the long shot. In Los Angeles, you've got Howard Berman, and Brad Sherman, in an LA based district, two powerful, liberal members of Congress. It's a very democratic district. They're spending a lot of money. And the likelihood is that no Republican is going to be strong enough to match them. But deny one of them -- to keep both of them from going to November. We have a similar dynamic here in with Juan Vargas and Denise Ducheny in a heavy democratic district. It's the district Bob Filner would represent but he's running for mayor. There didn't seem to be any Republican competition. But even a Republican of some note, if they get in, I don't know what the voter registration is there, it's heavily democratic. But that person would likely get most of the Republican votes and have the potential for a Republican and democratic November election. But there is that potential there for Ducheny and Vargas to advance out of the primary and that would be the selection. And I think the idea is that it would require them to politically appeal more to the center of the political spectrum. And then if you carry that down the line in terms of the theory that that might potentially send more moderates to Sacramento, and everything of course would be wonderful.
[ LAUGHTER ]

SAUER: And if somebody gets more than 50% of the vote?

SMOLLENS: There's going to be a November election, it's not like a City Council election. It is still that primary, even if it's 75-25 split, the top two vote getters go to the November election.

SAUER: Okay. Dave?

ROLLAND: I was just going to make a joke about how in Sacramento you still wouldn't be able to raise taxes without a 2/3 vote. So if anybody says they know how this is really -- the law of unintended consequences has got to play a part. We just don't know what that's going to be. We don't know how it's going to play out until it plays out, which makes it kind of fun, actually.

SMOLLENS: And I think primarily most of the races are going to have the kind of dynamic where you will have a Republican, a democratic in the runoff. Can an independent get in and advance to the general election against just one of the others or will they chance the dynamic and somehow what might have been in the past election system the favorite Democrat or Republican somehow change that dynamic?

SAUER: Let's talk for a minute with these new rules. Is that perhaps a factor here in California or in San Diego with big money coming in and buying something out of a primary?

SMOLLENS: I don't know about buying out of it. It is constitutional for people to spend their money under the Supreme Court ruling. I think the question will be -- we've been seeing a lot of discussion about the super pacs and their impact on the Republican presidential primary. There's a lot of discussion that we will see that in the congressional races, at least, if not the legislative races. People are looking at the Brian Bilbray race in the 52nd district where the two marquee Democrats are Lori SaldaÒa and Scott Peters. We've always seen independent expenditures in some way. But just the rules and the ruling really blew the lid off, and the amount of money is somewhat startling. It is amazing that a Las Vegas casino magnet can literally keep a presidential campaign Alive through the early months of this year as Sheldon -- somebody help me out here.

MACDONALD: Addle son?

SMOLLENS: Thank you very much. And Newt Gingrich.

SAUER: Yeah, that has been quite the specter in those races as the races heat up. What about independent candidates? Is there any likely impact?

SMOLLENS: Well, I mentioned earlier that yes, they're all on the same ballot, a strong independent candidate could advance. Two strong independent candidates could advance. There's more and more people who deadline to state a party affiliation. San Diego has a growing percentage, and it's been one of the larger areas in the state that has that. But just to say one speculation how it could work. I mentioned the Bilbray race, which was shaping up to be a traditional primary where you had two Democrats SaldaÒa and Peters, so you figured that Bilbray would move ahead, and maybe one of those two. There are some other Republican candidates. But jack Doyle, the former mayor of Santee does not have a party registration. So he's planning at this stage of entering and going in. How does that affect the dynamic? Does it take away the moderates from Scott Peters who's trying to attract the center, figuring that you get SaldaÒa on the left, Bilbray on the right, I'm the guy for everybody. Does that change the dynamic? As my good buddy Dave here said, who knows? It's all speculation. This new system, we haven't tested it yet, and I'm sure we will see some surprises that people say, gee, I never thought that would happen.

SAUER: And the sales job was to try to get more folks in the middle and not the extremes. We had Carl Luna on recently, he said the system is the same one that got former clan leader David duke almost elected governor of Louisiana. What about with the state legislature here? We mentioned the 2/3 tax, the perennial battles there over the budget, and a refusal to considering new taxes on one side of the spectrum.

SMOLLENS: Well, unless they get a real run of the table, I don't think anybody expects both houses to become 2/3 Democrat. The state Senate potentially could. That's been a big issue, and there's a ballot measure to try and overturn the new districts which were formed by a citizens committee that everybody seemed to like until basically the Republicans didn't like the way it was broken down. And I don't know the exact numbers, but it would still take a pretty stronger than expected showing from Democrats to win the assembly or at least to get it to 2/3. If they were able to do that, that would change the dynamic tremendously, because they wouldn't have to go to the ballot to raise taxes. They could just do it themselves. Research and redistricting plays into this this year as well.

ROLLAND: That probably has more of an effect on the state legislature, at least right now than the open primary. It probably will. As Michael said, I think the redistricting process observers basically called it a little bit for the Democrats, that they might gain a little bit. But it almost doesn't matter until they have that ability to raise taxes. And with the sort of Grover Norquist pledge against voting for any tax measure on the Republican side, they still will need that 2/3 majority to -- in this economy to really do something. They did get the ability through the initiative process to approve the budget at least with a simple majority. But they still can't raise that revenue without a 2/3 majority. And that's where this sort of moderate thing comes in, I think people would hope that maybe some moderate Republicans might get elected to maybe budge a little bit on the tax increase thing.

SAUER: Now, this was passed in 2010, one of the things was again to try and excite people, get them out. This is a presidential year. Do you think the new rules will have any impact on voter turnout?

SMOLLENS: I don't think that the rules will as much as presidential election year always has stronger turnout. There's just much more interest. It'll be interesting to see because the focus so much in June will be on the Republican primary. Even if it's pretty much all said and done, that will drive a lot more turnout. But it was sort of interesting that the legislature pushed a lot of initiatives or measures that were targeted for June to the November ballot because they want to make sure that Democrats -- a stronger turnout votes. And more people vote in November whether it's a Republican or democratic trend. But they believe more Democrats will be out to vote for President Obama, certainly in California in November.

SAUER: Is California even going to be in play in June? I know they are looking at the rules set up on the Republican side to stretch this primary out. It's proved so far. But we're only in early March. And again, Romney appears to have beaten back Mr. Santorum. The latest challenger from the right wing of that party in Michigan and Arizona. And we're coming up into super Tuesday. Is California a player?

ROLLAND: That get back to what Michael was saying about the super pacs and Sheldon Adelson, and Rick Santorum has his own billionaire.

MACDONALD: It's foster freeze.

ROLLAND: Jeff only pipes in to find facts for Michael and I here.

SMOLLENS: When our memories fail. Thanks Jeff.
[ LAUGHTER ]

ROLLAND: So who knows if those people want to keep spending money into June, then we may have a much bigger Republican turnout in June.

SMOLLENS: But it's a democratic state. It's going to go for Obama unless there's just some political earthquake along a huge scandal kind of thing. And then the question is, to what degree the Republicans even try to contest it, they'll make the noise and rhetoric. But I don't think that's in the cards.

SAUER: Thanks very much. A great conversation today.