Calif. governor’s race: John Chiang interview

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Democrat John Chiang has been state treasurer since 2015. Before that he was the state controller for two terms. He’s now running to be the next governor of California. He sat down with Press Play’s Madeleine Brand to talk about why he’s running and how he hopes to tackle some of the state’s biggest challenges.

KCRW: Introduce yourself to our listeners. Who are you?

JC: I am John Chiang. We all have our individual narratives. So mine is, I’m the oldest child of immigrants who came to this country in the 1950s – came without much in regards to financial resources. My dad – three shirts, two pairs of pants, less than a hundred dollars in his pocket. But they came to America because they knew America was the best place on earth. Education was the key and so I’m the oldest child and want to provide for the next generation, my eight god children, the California that matches the America that my parents dreamed of.

KCRW: So what is it that we don’t have now that you want to provide?

JC: We don’t have a great educational system in every community. We have extraordinary wealth inequality in California. So with that wealth inequality comes opportunity inequality. One in every five Californians lives in poverty when you adjust for housing costs. So we have to address the teacher shortage, making sure that we get great instruction, great resources. So when you see these bright children, as I did this morning with our state’s scholarship program, we give them every opportunity to succeed.

KCRW: Does that mean more money in the classroom, more money for public education? Does it mean hiring more teachers what does that mean concretely?

JC: Yes and yes. So money isn’t everything but money is an important start. I gave some money up in Sacramento and that particular school is just trying to get money so that they could upgrade their curriculum designed to comply with the state and national standards. So when the schools don’t even have enough money to upgrade their curriculum to match what’s required of them, that is incredibly problematic.

KCRW: And where would that money come from?

JC: We have to make education a priority. We just saw the governor’s numbers in regard to the state budget. Billions of dollars additionally that was not anticipated when the governor designed the January budget. And so we have to go back and make sure that education gets what it needs, that we tackle the homelessness. California has 24 percent of the homeless people in the United States of America: 134,000. So let’s go back and build the housing, let’s provide the mental health services, the workforce training so that individuals in California can rebuild their lives so that they can get into the middle class.

KCRW : When you talk about housing I mean that is obviously a huge issue here in California. Housing is unaffordable for many, many state residents. What is the key to changing that? What do we need to do? Do we need to provide more government-subsidized housing? Do we need to incentivize developers to build more housing more quickly. Do we need to streamline bureaucracy, get rid of SEQUA as your Republican opponent John Cox wants to do? What’s the best method to create more affordable housing.

JC: Yes, yes, yes and no. No on eliminating SEQUA. That doesn’t make any sense. California’s magnificent because of our environmental quality. It doesn’t mean we can’t do some tweaks to improve SEQUA, but to get rid of local community participation as the development of projects, I think is irresponsible. But we do want to expedite the timeframe we want to get the voices heard appropriately. As the state treasurer I made it a priority to invest in housing so I worked with interested housing partners nonprofits, for-profits, the builders, the workers came up with major reforms and by my second year in office I increased the financing of new and rehabilitated affordable housing by 80 percent. It’s leaders who think about what needs to be done – building the private-public sector partnership that can move California forward.

KCRW: But most of that was rehabilitated housing not new housing.

JC: Yes a lot of rehabilitated housing, but it’s both right. We increased it by over 80 percent.

KCRW: But that’s not building more units that’s just rehabbing?

JC: Part of it is you have a lot of these housing units the affordable housing units that would go out of stock. So it’s making sure that you bring participants to keep it and the affordable housing space right, because a lot of them want to take it to market.

KCRW: But are you in favor of rent control?

JC: I’m open to looking at it. I want to make sure that we put in the incentives so that you don’t have people abusing the process with these excessive rents that were charged when you saw those Napa fires. But I also wanted to make sure that you create the proper incentives so that you will have the developers continue to build new housing.

KCRW: So there’s a measure on the ballot that would get rid of Costa Hawkins, which is the rent control law. And would you favor that?

JC: I want to look at all the details. So I will make that decision as we go forward.

KCRW: You haven’t decided whether or not you’re in favor of that?

JC: No.

KCRW: OK. Well what do you think about the argument that rent control actually hampers development – economists make that argument.

JC: Yeah we see a lot of those facts. So part of this is you know rent control is a part of the solution but we want to make sure that we understand, as you raise, it’s a larger portion of a larger affordable housing question that we need to do. So it is part of the solution. But for those who are all in, understand that we only have a certain amount of units so it doesn’t solve everything.

KCRW: You live in Torrance, correct?

JC: I do.

KCRW: So Toyota recently relocated its North American headquarters from Torrance to Texas and in part it did that because of high housing costs for its workers in Torrance. So the local government there is seems a little loath to create or approve more new housing. As governor would you override local concern and local control and mandate that localities create more housing.

JC: So I supported SB35. So if you had local jurisdictions that were not following their housing plan and unwilling to do it. If they accomplished certain things – environmental quality use of certain labor then we would build more that housing. And if you look at my housing plan, I want to create carrots and sticks. There’s a disincentive to creating housing because we know it costs more money to bring in and service a new resident, people rather build to some of those retail shops where they’re going get those sales tax dollars. We have to change that. That’s absolutely wrong. So we ought to tie infrastructure funding, transportation funding, other types of funding to building more housing.

KCRW: So where are you going to get the money to do that?

JC: It has to be a sense of priorities. Part of this was the state hasn’t made a commitment. So I would bring back redevelopment agencies so that local governments get to finance and make their contribution to affordable housing. I pushed aggressively last year. I was looking at a $6 to $9 billion bond. I brought together builders and others to try to push a $6 to $9 billion bond bond this year, the governor and legislature came up with the $4 billion bond.

As the governor I would bring back another bond to make sure that we could get towards the goal. Additionally the state has to be consistent. And so if given the opportunity be governor we need to make sure that we have money out of the general fund every year so that we can create the tax credits, so that you can use those dollars for housing.

And then we’re going to have to push upon part of this is leadership and understanding the state’s finances. I’m the only person who served in all three financial offices in California. So when the House passed their tax plan, they wanted to eliminate the tax deduction for private activity bonds. Most Californians don’t know that we finance 66 percent of the affordable housing through private activity bonds. If that had passed through the Senate, if President Trump had signed that, we would have had a housing crisis for the future that would have been even more challenging, perhaps out of reach in many, many respects. And so I was the person who was not only of the candidates but the state leader who’s pushing back on this because I understood that if that succeeded, our housing crisis would be far worse.

KCRW: Speaking of crises there is an unfunded pension liability crisis right now in the state of California. I know it’s not a sexy topic and the candidates haven’t really talked a lot about pensions but $333 billion state and local pension liabilities combined. That’s a lot of money and a lot of money that’s going to be eaten up for that for paying people’s pensions, rather than going to create new housing or to education. What would you do about that would you start to cut back on pensions?

JC: Well we’re going to have to continue to make progress as we have. Part of this. I was leading the efforts at CalPERS and CalSTRS to make sure that we overcome the ethics issues. I was pressing to bring the various parties to understand that you know we had sustainability issues especially after the significant hit to our portfolio during that global financial crisis and what happened to the stock market in 2008 -2009.

Part of this is there is no one big fix. It’s going to take a lot of thoughtful ideas. Last year the governor and I came up with the idea of moving some of the money from our short-term investment pool and putting it into CalPERS giving them advancements if we hit our normal rate of return. And I know this gets technical, but people have to understand finances, over a 20 year period of time that would be an additional $12 billion that we don’t have to take from taxpayers or others to try to shore up our system. Now that is some of it – obviously is going to take a lot more work, but I will continue to press forward to bring people to the table to come up with the solutions that we need.

KCRW: I mean it might come down to cutting pensions right? Well we are at least cutting promises to future retirees?

JC: Yes that’s what some of the action that was taken with our Pension Reform Act of 2012. So we took those steps.

KCRW: And also health care obligations?

JC: I was the one who pushed upon that in 2007. I was the state elected official, who identified that issue for California and it was very unpopular in Sacramento. I did that first study when I was the former controller, the state’s chief fiscal officer. I said we have to look at retiree health care obligations. When I did that study that obligation was $32 billion because we were paying minimum on the credit card it was $47.88 billion. And it’s just not for the states health healthcare. It is for everybody’s credit card. And I said we need to start paying this down. And today that obligation is that $91 billion.

KCRW: part of the California Dream as envisioned by Jerry Brown’s father, Pat Brown, was to provide every Californian, every high school graduate who wanted to go to college and affordable good college education. Be it at a community college state college, or UC. Now for many high school students that is out of reach financially what would you do to reinstate that?

JC: Education is my top priority. And so I have a higher education plan out there. This is what it consists of: Number one, we have to re prioritize California students first, because of the financial challenges we’ve let a lot of people come internationally and it’s great to have students from elsewhere, but California students and their parents who have been the taxpayers of California ought to get the top priority. And I want to make that perfectly clear.

Number two, I believe in two years of free community college. We need to dramatically increase the number of students who have acquired greater skill sets to compete in the global economy. I want to be able to refinance student loans. We have graduates who have good credit. But the financial institutions won’t refinance their student loans because they’re concerned. So as the state’s banker, I wanted to put up a backstop and you know help students perhaps renegotiate those student loan rates from 8 percent to 6.5 percent. You know, help save them thousands of dollars to get them out of debt put a down payment on a house. Whatever their dreams are

KCRW: Those are federal loans right.

JC: No these are private loans.

KCRW: But what about the federal loans?

JC: Federal loans we’ll have to talk about right. I will deal with what we can immediately address and with the federal loans we’ll see what we can do.

KCRW: So what about more money for the UC system?

JC: Oh absolutely. What I want to do is I want to drop the tuition and fees back to the 2008-2009 school year. So for the UC system, it’s it’s about a 44 percent drop in tuition and fees, for the CSU students it’s a 47 percent drop in tuition and fees. The state’s support for higher education has dropped dramatically over the past few decades. It’s down to 12 to 13 percent.

KCRW: And you want to get it up to what?

JC: 40 plus percent.

KCRW: And you’d pay for that, how?

JC: How we have to prioritize. We just heard the governor’s numbers this morning. Eight billion dollars additionally in taxes collected versus estimates in January of this year. If you look at 10 years ago and where we are today, tax revenues are up by $30 billion. So my priorities would be first to make sure that money goes into education. But I have a record of finding money. You know whether it’s local governments using that money correctly. I was the state controller who audited Bell – – they passed phony taxes, they didn’t handle their bonds properly, they put their bond money into non-interest bearing accounts. What a waste of taxpayer money. I’m the most successful auditor in California history. As a state controller I did $9.5 billion of audit findings. I audited colleges who were misusing dollars. In fact I audited the construction program of Los Angeles Community College District. And today they have improved practices.

I’ve been able to refinance the state’s borrowing. Think of your student loans. Think of your credit card. Think of your mortgage. Wouldn’t you rather have that at lower interest rates for the next few decades. I’ve saved Californians over $7 billion. Smart money thinking that people do on a daily basis. The state needs to do so that we can have additional money to pay for education and health care and infrastructure.

KCRW: But isn’t this all contingent upon a good economy. And these fat years that we’re experiencing now when we’ve got these companies and these high net worth individuals paying a lot in income taxes and then in the lean years like we saw in 2008-2009, when we had to make these cuts, the state income tax was a lot lower. So isn’t this dependent on the cyclical nature of the economy and then when there is another recession you’re going to face the same problem you have to make cutbacks?

JC: The good thing is that we do multi-year budgeted planning. Part of that is to make sure we have financial discipline. Part of this ought to be, and I want to do as governor, is what we’re going to try to achieve with the University of California, what we’re going to achieve the California State University system, and what we’re going to do with the community colleges. So yes here’s some money that we’re going to save for the rainy day. But this is what we’re planning for a few years out and we’re going to have that money available to them as we plan for the future.

KCRW: Do you support the bullet train?

JC: I strongly support the high speed well. California as I mentioned is the world’s fifth largest economy. If you look at the others. United States number one. China is number two. They have high speed rail. Japan’s number three. They have high speed rail. Germany is number four. They have high speed rail. We want to make sure that we have the best goods and services and people movement in California, but we have to be smart. I will be the governor who is the high energy governor who is going to go and work throughout the globe to try to make a financial plan to make high speed rail work. Part of this might have to be contemplation of a redesign and what it looks like.

KCRW: Well, right now, it looks like it’s dead because it can’t get federal funding at all. Yes.

JC: But we also have part of the bonds, we will do everything humanly possible to see how we can go forward with this.

KCRW: What’s the biggest mistake Jerry Brown has made ?

JC: I wouldn’t call it a mistake – he’s moved through challenges. But one of the things you know, housing and homelessness issue is a big issue. It’s a matter of priorities. So an area of higher focus that I think is very important is addressing our housing and homelessness issue.

KCRW: So a lot of Democrats say that why are you different from the other Democratic candidates?

JC: Because, as I pointed out earlier I’m actually doing it right. Look at the housing crisis we have in Los Angeles. Look at San Francisco, one bedroom, $3400 a month. Despite what Gavin said during the debate, you know, as the newspaper reported, homelessness increased during his service. So I’m the one who’s not onstage just talking about it. I actually have a record of doing it.

KCRW: Why do you suppose you are now fifth in the polls?

JC: Well if you look at the various polls, we’re between 2nd and fifth. And a couple of those polls done by the same survey, you know looked at the various polling groups and stated they undercounted Asians, which is part of our base. But part of this is now you’re going to have tens of millions of dollars that are going to be spent. That’s going to change the dynamics very dramatically. In fact some of Gavin Newsom’s special interest groups have started to hit me. They opened their committee on Monday because my polling numbers are increasing. We just went on TV about a week ago.

KCRW: Well according to the latest poll this is of June 5th in Real Clear Politics you are polling at 9 percent overall, Newsom at 21 percent. Do you dispute that?

JC: I don’t. There’s a lot of polls out there.

KCRW: So OK. But you’re confident that you will be in the top two.

JC: Yeah we’re very excited. We’re going to make great progress if you look at the last election cycle and as we remind voters I was the second leading vote getter behind Governor Brown last election cycle- had more votes than Gavin had more votes than Kamala Harris. So we think we have a very great strong base. We offer a strong contrast.

KCRW: Well so how do you excite younger voters and minority voters?

JC: For a lot of the people of color and others, the issues that I’m talking about, taking on offshore oil drilling. Fighting for our climate. Who’s the one taking on student loans, as we just discussed, paying for higher education? One of my opponents has sat on the UC Board of Regents, hasn’t come up with funding ideas to pay for those schools.

KCRW: You’re talking about Newsom?

JC: Yes, Gavin has sat on there, this his eighth year. What has he done to try to find additional monies for the UC system? I’m the one who has brought in additional monies to the state of California. As I identified earlier, my top priority is education so that new money, whether I’m going after the underground economy, whether it’s the use of audits, whether it’s health care companies or others a lot of that money is going to be directed towards education.

KCRW: Well I want to thank you so much for coming in today.

JC: My great honor. Thank you so much.

(Photo: John Chiang at KCRW, by Amy Ta)