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What would Lanhee Chen do as California controller?

Lanhee Chen, a Republican political adviser and Stanford University program director, talks to CalMatters about what he would do if he's elected California's next state controller

Is California all that it can be?

Lanhee Chen, the sole Republican in the race for state controller, doesn’t think so.

Among the biggest shortcomings: Californians aren’t getting the benefits they should from the billions the state is spending. Chen cites fraud in the Employment Development Department, and how money is being used within public schools, prisons and Medi-Cal.

But the fundamental problem, as he sees it, is a lack of transparency. Voters have no way to track the state’s line-by-line spending: “There are a lot of people I talk to every day, Democrats, Republicans, Independents alike, who don’t have faith that state government is for them anymore.”That’s why the 43-year old Bay Area resident and rising Republican star has set his sights on the position.

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The controller is the state’s top fiscal officer, responsible for accountability and disbursement of its funds. Current controller Betty Yee was elected in 2014 and is no longer eligible for reelection after serving two terms.

While Chen has never held an elected position, he’s no stranger to political campaigns, having advised Republican Mitt Romney’s 2008 and 2012 presidential campaigns, as well as Steve Poizner in the 2010 gubernatorial race. He was also appointed by then-President Barack Obama, a Democrat, in 2014 to the Social Security Advisory Board.

That’s one instance Chen points to of working across the aisle — which he knows he’ll need to convince voters he can do in California, where Republicans make up only 24% of registered voters.

But he also sees his Republican background as a selling point: He vows to be an independent watchdog on the Democratic power structure.

“I think my experience as someone who does come in as a relative political outsider is frankly a good thing in the political environment that we’re in right now,” he said in a sit-down in April with CalMatters.

Here are five other takeaways from the interview:

A balancing act

For any Republican running for statewide office in California, there’s a delicate balancing act: Appeal to the base, or take a more centrist position that might draw some independents and Democrats, but risks a “Republican in Name Only” label.

Chen is trying to walk that tightrope: He says he doesn’t always agree with his party, and it “should be better in terms of welcoming people,” but he does firmly identify as a Republican.

His fiscal views are traditionally conservative. He opposes any kind of wealth tax, for example, and short-term economic relief measures such as stimulus payments — “sugar highs,” he calls them.

And while he refuses to publicly say whether he voted for Donald Trump for president in 2016 or 2020, he doesn’t hesitate to say he believes that President Joe Biden was legitimately elected – and that the Jan. 6, 2021, attack on the Capitol in Washington D.C., was an abomination.

“It was an attack on democracy and it shouldn’t stand,” he said. “Those who were involved should be prosecuted to the full extent of the law.”

Chen says that the controller should be an independent thinker and that the position, itself, should be nonpartisan. If elected, he foresees occasional conflict with Democrats, who control the Legislature and will likely win most other statewide offices this year. He sees that as healthy in a system of checks and balances.

“I don’t shy away from conflict, but I also don’t chase after it,” he said. “I don’t see the job of the controller as being to make angry every single other statewide elected official or member of the Legislature. But I do think it’s the controller’s job to ask the tough questions and to demand answers. And when those answers aren’t being provided, to make sure the public understands those answers aren’t being provided in an appropriate and timely fashion.”

Hit the brakes on gas tax relief?

One role of the controller is to make policy recommendations. As gas prices surge to record highs, Newsom and Democratic lawmakers are working on proposals such as a direct payment to car owners, while Republicans are calling for a full pause on the state gas tax.

But Chen said he’s wary of any quick fixes.

“My concern with one-time type solutions is precisely that they are one-time type solutions, that if the conditions persist we will be talking about six months from now another one-time solution, which doesn’t get at the fundamental question of: Where’s the flow of funds in the taxes and fees we charge on a gallon of gas right now?”

Of the plan put forward by fellow Republicans for a gas tax holiday, he said: “It’s not entirely clear to me that would have the desired impact. Obviously, it provides short-term relief, but it creates a longer-term shortfall problem that I don’t believe is necessarily fiscally responsible.”

Chen also said there should be more accountability on whether revenue from the gas tax is going towards better roads. And repeating a theme, he calls for more transparency: At the pump, a listing of exactly how much in taxes and fees are paid on each gallon of gas.

An overhaul of taxes?

While Chen isn’t a fan of short-term tax changes, he says it’s time for a serious look at changing the entire tax structure, though he concedes that “it’s very hard to take a tax system and redesign it when it’s been in place for as long as California’s has.”

As many others have pointed out over the years, including Yee in an exhaustive 2016 report, California relies heavily on taxes paid by higher-income individuals, especially on capital gains. That leads to big swings in tax collections, and to these taxpayers leaving the state. Chen also points out that sales taxes aren’t levied on many services, even as the economy shifts, and that the state’s corporate tax hasn’t been revised in years.

“I think we need to take a hard look at all of those things, working together to determine what an ideal tax system is for the state,” he said.

On climate, an open mind

Asked whether there was an issue he had changed his mind about in his career, Chen said his views on climate change had “developed and matured.”

“The more that I have looked at the issue, the more that I have read about it, the more that I have understood the issue, the more I see we do have a role to play in this state,” he said. “While I don’t agree with 100% of what the state has done over the years, I do think that that’s an area where I have become, in my view, much more of the perspective that we can and should move the needle where we can.”

Still, Chen added, he believes in a balanced approach: “As we see now from the high gas prices and the challenges that places on so many California families, a quick transition is going to be a challenging one.”

His vision for the job

At the California Republican Party convention in Anaheim last weekend, Chen, who earned the party’s endorsement, vowed an “audit a day.”

Chen told CalMatters he hopes to see the state improve its technological capabilities for more budget transparency. The state’s financial reporting tool, Fi$Cal, which includes some of that information, is behind schedule and over budget.

He also wants to have more information available beyond what the Legislative Analyst’s Office and the Department of Finance offer, including broader economic outlooks to make more informed policy recommendations.

“I think the controller can play a lot of different roles, but really the root of the job is around giving people in California a sense of what state government is and is not doing and providing them with information,” he said.

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