Valley lawmakers dip into earmarks well again...MICHAEL DOYLE, Sun-Star Washington Bureau
WASHINGTON -- Two San Joaquin Valley Democratic lawmakers are asking for more than one-third of a billion dollars in earmarked spending, newly public filings show.
The money could pay for everything from California State University, Fresno, agricultural research to a UC Merced solar program.
And even as budget reformers decry the continuing use of earmarked spending, the Valley Democrats justify every request.
"Federal appropriations are a valuable tool for funding infrastructure projects in our community," declared Rep. Dennis Cardoza, D-Merced. "Unfortunately, 'earmarks' have become synonymous with wasteful government spending in recent years."
The political uproar over budget earmarks, particularly over projects like Alaska's multimillion-dollar "Bridge to Nowhere," have pushed members of Congress in several directions. Some, including Reps. George Radanovich, R-Mariposa, and Devin Nunes, R-Visalia, say they will forego seeking budget earmarks for the time being.
Other House members face new transparency rules, requiring them to make public on their congressional Web pages specific funding requests and justifications.
Cardoza, for one, has posted earmark requests totaling more than $179 million. They include $4.9 million for Stanislaus County emergency communications, $300,000 for a study of San Joaquin Valley rail service and $3 million for a solar program initiative at UC Merced.
"It will forecast short-term solar power availability and will enable new technologies in the quest to increase renewable energy sources to the power grid," Cardoza stated in the written justification.
Other Cardoza requests include $1.9 million for a sewer line extension in the city of Ceres, $6 million for a Madera County groundwater recharge project and $10 million for a San Joaquin Valley air pollution control program.
The Madera County groundwater project marks one of the ironies of earmark reform. The legislation authorizing the county's groundwater project was championed by Radanovich, who has since taken a vow not to request earmarks like the kind that could get the project started.
"I will do everything I can to get it funded, outside of an earmark," Radanovich told The Fresno Bee earlier this year.
Rep. Jim Costa, D-Fresno, is asking for more than $183 million worth of earmarks. They range from $7 million for a Fresno State agricultural research initiative to $3 million for a Kings County emergency communications system and $35 million for a Boston-based effort called the Center for Civic Education.
The latter provides civics texts and teacher training nationwide and is not limited to the San Joaquin Valley. It has a local angle, though, as former Fresno Unified School District board member Ruth Gadebusch is on the center's board of directors.
"The projects we've requested are all meritorious," Costa's spokesman Bret Rumbeck said Thursday. "They all will help the Valley one way or another."
The biggest-ticket requests for both Cardoza and Costa are for nationwide literacy and writing programs, and are not solely targeted at their own congressional districts.
Other Costa requests include $3.5 million for a Fresno County emergency communications system, $35 million for work related to San Joaquin River restoration and $4 million for an assortment of California pest control efforts.
The earmark requests were supposed to be published by last Friday. As of Wednesday, more than 50 House members still had not made the required notification, a Taxpayers for Common Sense survey found.
Our View: Good to be small; much room to grow
While other UC campuses are limiting freshmen, UC Merced goes full steam ahead.
There are certain benefits to being small.
While the rest of the 10-campus University of California system is cutting back on freshman admissions for the fall, UC Merced is expanding.
The reductions are due to the cutbacks forced by the state budget crisis. In January, UC regents voted to reduce freshman enrollment because of the drop in state funding.
Hardest hit by the admission rate decline were UC Santa Cruz, which dropped from 74.3 percent last year to 63.7 percent; UC Davis, which fell from 52.4 percent to 46.2 percent; and UC Irvine, which went from 49 percent to 42.8 percent.
Only UC Merced, the system's newest school, and UC Riverside showed any growth in freshman admissions. UC Merced has the second-highest admissions rate at 79.1 percent after UC Riverside at 79.8 percent. UCLA, by comparison, only accepted 21.4 percent.
What this means in actual numbers at UC Merced is 1,200 freshmen for next year. That will increase the student population to 3,200 from 2,700 this year.
UC officials say they won't know how many applicants will accept enrollment offers until next month.
On top of the growing enrollment, "We're more diverse than ever before -- while growing," Kevin Browne, assistant vice chancellor for enrollment management, told the Sun-Star on Tuesday.
In ethnic categories, the numbers systemwide showed slight changes from the year before. The percentage of Latinos among the overall pool of accepted applicants rose to 22.2 percent from 20.7 percent; African Americans to 4 percent from 3.8 percent; and Asian Americans to 34.9 percent from 33.6 percent. Whites dropped slightly from 34.4 percent to 33.1 percent, the Los Angeles Times reported.
And more good news: UC Merced will continue offering admission to students who are UC-eligible but didn't get into their first choice. There are about 10,000 students in that referral pool, who applied to an average of 3.5 UC campuses.
However the freshmen get to UC Merced, they will be welcomed by the community.
We are proud to have a UC campus and want to see it grow every year.
Calif. exports shrink 20 percent since last year...last updated: April 09, 2009 04:47:01 PM
SACRAMENTO -- California exports were 20 percent lower in February than during the same month a year ago, a further sign of how the recession has hammered the state's economy.
The University of California Center in Sacramento says it was the fourth straight month that exports shrank significantly.
The state shipped $9.1 billion worth of food and merchandise to other countries in February. That was down from $11.3 billion in February 2008.
Imports dropped nearly 37 percent in February from the previous year.
The UC center says it calculated the state's trade data from figures released Thursday by the U.S. Commerce Department.
Jock O'Connell, the center's international trade and economics adviser, says there are few signs exports will rebound soon.
Nevada asks feds to put brakes on Yucca rail plan...The Associated Press
LAS VEGAS -- Nevada wants federal authorities to put the brakes on planning what the state calls "a rail line to nowhere" at Yucca Mountain.
In documents filed this week, the state asks the three-member Surface Transportation Board to suspend consideration of an Energy Department application to build a 319-mile rail line from Caliente across the state to the repository site.
State lawyers point to Obama administration plans to pull the plug on the proposed national nuclear waste dump, 90 miles northwest of Las Vegas.
An Energy Department spokesman in Las Vegas declined comment Friday on the state motion.
Nevada and California also filed notices with the 9th U.S. Circuit Court of Appeals in San Francisco, saying they intend to file lawsuits against the Yucca rail plan.
Add salmon to the long list of issues the state must solve in water crisis...Editorial
Gov. Arnold Schwarzenegger wants to leave office having achieved what he calls "comprehensive water reform." That must include increased water storage and conservation, and improved water conveyance and habitat restoration in the Sacramento-San Joaquin Delta.
And Schwarzenegger needs to add salmon to the list. Otherwise, the governor could leave office with the state's prized salmon fisheries sinking into oblivion. To this point, his administration hasn't done enough to improve conditions for salmon. These magnificent fish confront a range of perils.
The giant pumps in the Delta, which kill fish directly and also alter the flows of the estuary, are among these perils.
Extremely warm, polluted water from the San Joaquin River hurts salmon in that part of the Delta. Upstream on the Sacramento River, irregular flows in dammed tributaries such as the American River harm salmon trying to spawn.
And federal officials have just shut down commercial salmon fishing off the California coast for the second straight year.
To be sure, conditions in the ocean have much to do with recent salmon declines. Scientists have documented a reduction in the usual "upwelling" of nutrient-rich currents that generate food for salmon while they are in the ocean.
Yet as biologists have pointed out, the decline of chinook salmon has been ongoing for 150 years, even during periods when ocean conditions were favorable. As UC Davis biologist Peter Moyle points out, blaming ocean conditions for salmon declines is like blaming an iceberg for sinking the Titanic. Such a view, he says, "ignores the many human errors that put the ship on course for the fatal collision."
There's an opportunity for California and the Obama administration to pursue the goals of salmon recovery. The 1992 Central Valley Project Improvement Act, viewed with hostility by the second Bush administration, calls for at least a doubling of salmon populations on a "long-term sustainable basis." We're not sure if that's possible.
But the goal can't stay on the back burner any longer. With the state's fishing industry on the ropes, Schwarzenegger's agenda for comprehensive water reform must include salmon.
Home Front: Fewer empty new homes means supply, demand in balance...Jim Wasserman
The first quarterly report on new-home sales in the Sacramento area during 2009 is in – and there's one good sign amid a new low of 699 sales in January, February and March.
Excess supply – houses built or almost built without buyers – are back to lows last seen in mid-2004 and early 2005, the height of the buying frenzy.
The tally as March ended was 1,159 empty houses in El Dorado, Placer, Sacramento, Sutter, Yolo and Yuba counties, says the report being released today by the Folsom-based Gregory Group.
That's far less than 3,226 the same time last year – and a peak of 4,598 in the third quarter of 2006.
It's evidence that builders and their bare-bones construction and sales staffs are finally getting supply and demand back in balance.
"That's not very much inventory," said Gregory Group President Greg Paquin. "If there's any uptick in sales the second quarter and certainly, the third, it's going to put more stress on what's available in the marketplace."
That would mean competition and higher prices. But builders aren't there yet.
Their $336,683 median sales price – where half the homes sold for more and half for less – fell for a 12th straight quarter to a six-year low.
The average new home price: $380,786.
The region's excesses, soft prices and abundance of buyers choosing bank repos gave ample negotiating power to early 2009 buyer Jay Cook.
Cook, an account executive with CitiMortgage, moved from Chicago to Sacramento, and last week into a Natomas house built by New Jersey-based K. Hovnanian Homes.
"What prompted us off the fence was the $10,000 (state) tax credit," he said. It gives new homebuyers like him up to $3,333 off taxes each of the next three years. Builders are hoping $100 million in state tax credits that went into effect for escrows closed after March 1 will help sell 10,000 excess houses statewide.
California's Franchise Tax Board counts Cook among 2,624 applicants statewide so far for $25.6 million in the credits after buying new homes.
Paquin said January and February sales were dismal, but builders reported many more visitors in March.
Overall, Sacramento and Placer counties accounted for 76 percent of first-quarter sales, he said. Which city sold the most? Roseville, with 22 percent of the region's sales.
More feel homes affordable
The crash in housing prices has hugely changed public sentiment on whether it's a problem finding a house they can afford in Sacramento.
An estimated 23 percent of area residents say it's a big problem. Just three years ago with home prices at their peak, 51 percent felt that way.
"Always, it's been a big problem, complaining for years and years. This is the first time it's been so low," said Amy Liu, director of the sociology graduate program at California State University, Sacramento. "It's because the prices have dropped so much."
The findings are in the eighth annual Sacramento State Annual Survey of the Region being released today.
In the past, the survey has shown how one-third of Sacramento-area residents considered leaving to find less-expensive housing. But with median prices down more than 50 percent from 2005 highs in Sacramento and Yolo counties and down 40 percent in Placer and El Dorado counties, almost six in 10 believe buying this year would be a good investment.
Only 30 percent believe buying stocks in 2009 would be a good investment.
As always, affordability depended on the respondent's vantage point. Seventy percent of area residents earning less than $30,000 a year say affordable housing remains a problem for them.
"A big segment of the population in our region can't afford a house even with these reduced prices," said Liu.
The telephone survey of 1,353 adults from Feb. 14 to March 4 in El Dorado, Placer, Sacramento and Yolo counties has a margin of error of three percentage points. To see the full survey, go to www.csus.edu/ssis/. Click on the link to the Sacramento State Annual Survey of the Region.
House winner to get keys
Readers may remember Jennifer Draa, the state worker from Citrus Heights who won a free house in Lincoln last October.
Today, she gets her keys. Arizona-based home builder Taylor Morrison has scheduled an 11 a.m. media event to show off the $250,000 house, which features lots of new technology and free furnishings.
Draa beat out 638,000 entrants in a Taylor Morrison contest promoting its Innoventions Dream House at Disneyland last summer.
Lodi planning commission denies permit for Wal-Mart Supercenter...The Record
LODI – The city of Lodi planning commission has denied a Lodi developer's application for a land use permit for a proposed Wal-Mart Supercenter on Kettleman Lane and Lower Sacramento Road.
With a 3-3 tie between the six voting commissioners Wednesday night, the use permit was denied, City spokesman Jeff Hood said.
The seventh commissioner, Tim Mattheis, recused himself because his wife is an attorney for a group opposing Wal-Mart.
Developer Darryl Browman is expected to appeal the decision, which would take the matter to the Lodi City Council.
The use permit denial extends a decade-long effort by Browman to build the West Lodi shopping center that would be anchored by Wal-Mart.
Some community members in Lodi have opposed the plan because the city already has a Wal-Mart and they fear the upgraded store would push smaller businesses, specifically grocery stores, to close.
Hood said the developer and Wal-Mart have 14 days to file an appeal. The council would then hold a public hearing, likely at a special meeting in May.
Research shows well contaminants are not uncommon...The Record
STOCKTON - One out of five private drinking-water wells in the United States contains at least one contaminant that exceeds public health standards, and wells in the San Joaquin Valley are no exception, according to new research from the U.S. Geological Survey.
Private wells that typically provide water for homes in rural areas are not regulated as strictly as public water systems, leaving the responsibility for clean water to the property owner.
The far-reaching study, which included sampling of 2,100 wells over a period of 13 years, shows that “a large number of people may be unknowingly affected” by contamination, said Matt Larsen, USGS associate director for water.
“Certainly if you have a private well … you should be concerned about the quality of the water from your well and you should have it tested,” added Leslie DeSimone, who headed the study. “Contaminants can occur even if your well is in an area that doesn’t seem vulnerable” to pollution.
San Francisco Chronicle
Water monitor eyes farm runoff in Gulf of Mexico...GARRY MITCHELL, Associated Press Writer
Mobile, Ala. (AP) -- A clean water expert at Auburn University hopes a new project that enlists middle and high school students will help reduce farm runoff that is a growing pollution threat to the Gulf of Mexico.
Bill Deutsch said colleagues in Veracruz, Mexico, are partners in the three-year effort to monitor water flowing into the Gulf.
Deutsch said his federally funded, $300,000 project will also help livestock producers in Alabama and in Veracruz develop management practices that can limit Gulf pollution, such as buffer zones and other methods of keeping livestock contaminants away from streams.
"You have got to start with some level of awareness," said Deutsch, a researcher in Auburn's Department of Fisheries and Allied Aquacultures.
Deutsch co-founded and manages the Alabama Water Watch program and is director of Auburn-based Global Water Watch, which coordinates a worldwide network of community-based water monitoring groups.
Deutsch said at least 20 middle and high school students and community groups in both Alabama and Veracruz will become certified in water monitoring to participate in the project. He said they will take water samples on a regular basis from streams feeding the Gulf, using portable test kits.
Deutsch said researchers will look at bacteria counts and other elements to determine whether a stream is getting better or worse. If a stream is polluted, they will attempt to trace that pollution back to its source.
He said the project, funded by the U.S. Environmental Protection Agency, is also "trying to get 'uplanders,' including livestock farmers, teachers and citizen water monitors, more aware of how nutrients come to the Gulf from great distances, and that land-use management makes a big difference."
Their target is agricultural runoff that drains from Gulf states and as far away as the U.S. Midwest, where the vast Mississippi River Basin is home to about half the nation's farms. Nitrogen and phosphorus pollutants from the farms end up on a huge scale in the Gulf, where one result is an 8,000-square-mile aquatic "dead zone" that forms annually off the Louisiana and Texas coasts.
U.S. Geological Survey research hydrologist Dale M. Robertson of Middleton, Wis., said agriculture isn't the only cause. Flooding and sewage treatment plants in urban areas also contribute to the dead zone.
"You can't just go after agriculture. It's a full suite of things," he said.
But there's mounting evidence that the mandated push to increase corn production — one of the most fertilizer-intensive crops for making ethanol — worsens water-quality problems within the states and in the Gulf, according to environmentalists.
Matt Rota, water resources director for the New Orleans-based Gulf Restoration Network, describes the dead zone as a "major national environmental problem" that will require more federal dollars for conservation programs.
Livestock farms already use federally approved techniques to prevent runoff because when manure is applied to farm fields as fertilizer, there is a potential for the waste to contaminate nearby waters.
Deutsch recommends a well-maintained streamside buffer zone of vegetation in pastures and near other livestock-holding facilities as a primary way to catch nutrients, sediment and pathogens before they get to the stream.
Other recommendations include use of alternative watering sites, fencing in key areas, and choosing the right kinds and mixes of pasture grass and other vegetation to reduce fertilizer use and guard against erosion.
Among Gulf states, Alabama alone has about 1 million head of cattle and produces more than a billion broiler chickens — all generating waste. Veracruz has an estimated 5 million head of cattle, 1.2 million hogs and 600,000 goats as well as a large number of trout farms using fertilizer.
Workshops and site visits will be held in both Alabama and Veracruz to emphasize the use of best management practices for water quality and on-farm water monitoring.
Deutsch's pollution project is part of the Gulf of Mexico Alliance of all five U.S. gulf states. Each of the five has a priority area: Alabama is focused on education and outreach; Florida on water quality for beaches and shellfish beds; Louisiana on wetland and coastal conservation and restoration, Texas on identifying and characterizing Gulf habitats; and Mississippi on reductions in nutrient inputs to coastal ecosystems. Mississippi and Louisiana also share the assignment of coastal community resilience.
Deutsch said Auburn has worked with colleagues in Veracruz for four years. His colleagues are primarily biologists and community educators from various governmental and non-governmental organizations.
"We share the same goals of protecting water quality and will be fostering exchanges of information and people to get the word out about protecting the Gulf," he said.
On the Net:
EPA Gulf program: http://gulfofmexicoalliance.org
Alabama Water Watch: www.aces.edu/dept/fisheries/aww/aww/index.php
USGA on Dead Zone: water.usgs.gov/nawqa/sparrow/nutrient_yields/index.html
Los Angeles Times
D.A. investigates Brown Act violations
Dozens of L.A. County agencies have been warned that they must conduct the public's business in open meetings...Jack Leonard
Dozens of local government agencies across Los Angeles County have silenced critics at public meetings, held secret conferences to hash out important business or taken other actions that violated the state's open meetings law, according to a Times review of the district attorney's records.
Responding to complaints from the public, prosecutors have sent more than 50 letters since 2001 warning government officials that they acted illegally. District attorney's officials frequently threatened civil court action or criminal charges if the violations continued.
Though no one has been prosecuted, some agencies have been required to publicly reverse decisions made in secret. Several elected bodies, including the city councils of El Segundo and, more recently, Lancaster, have received repeated warnings to clean up their act.
Among the actions prosecutors have faulted are the shutting off of a critic's microphone during a meeting and the hiring of a "facilitator" to poll council members about an issue so that they would not have to formally meet on it.
Some city attorneys say they feel they have been unfairly treated like criminals and complain that prosecutors sometimes see violations where none exist. But activists for open government say the warnings help improve compliance and will show that too many local agencies embrace a culture of secrecy.
"It's arrogance and a feeling that they know best and they can do whatever they want," said Richard McKee, an advocate for open government who has filed more than a dozen lawsuits against government agencies. The suits allege violations of the state's open meetings law.
Agencies that act in secret deprive the public of the opportunity to weigh in on important issues, such as development proposals and officials' salaries. Prosecutors say it also prevents the sort of scrutiny that deters officials from benefiting themselves or their friends and supporters at public expense.
For more than 50 years, California's open meetings law, the Brown Act, has required members of city councils, school boards and a host of other local government agencies to conduct business in public. Every state gives the public the right to attend government meetings and limits what officials can decide in secret, experts said. But California's law goes further than some, giving the public the right to speak at agency meetings, they added.
Introduced by the late Assemblyman Ralph M. Brown, a Modesto Democrat, the legislation, enacted in 1953, was inspired by a 10-part series written by San Francisco Chronicle reporter Mike Harris that exposed many local agencies making decisions in secret. Brown then led a legislative committee investigation that confirmed the practice.
The Los Angeles County district attorney's warning letters offer a unique window into local compliance with the state's open meetings law. Activists for open government said few prosecutors, if any, are as thorough or consistent as L.A. County's in following up on complaints from the public about secrecy or censorship.
Juli Potter, an El Segundo resident, was addressing her City Council in 2003 when she was interrupted as she began to question why then-Mayor Mike Gordon was not spending his campaign funds on events in the city.
Gordon, who was running for a seat on the state Assembly, accused Potter of campaigning and told her to stop, according to district attorney's records.
"We'll take you out every time," he warned her.
But Potter continued. Gordon interrupted her again.
"We're done," he finally told her. "Microphone's off."
A videotape of the meeting showed a uniformed officer escorting Potter out of the council chamber, according to district attorney's records.
Susan Chasworth, a Los Angeles County prosecutor, sent a letter telling the council that state law protects the public from censorship of criticism during meetings.
El Segundo public officials are servants of the people -- all of the people -- whether they hold conflicting opinions or not," Chasworth wrote.
The prosecutor's scolding drew cheers from some regulars at the council's meetings. But Mark Hensley, El Segundo's city attorney, said he believed the district attorney's office was wrong.
The law, he said, protects only comments involving issues that the council has authority over. That would not include how a state Assembly candidate spends his campaign cash, Hensley said. He faulted prosecutors for sometimes reacting too quickly to complaints, adding that they could fix minor problems with a phone call.
"They send that letter and . . . it means they're going to embarrass you," Hensley said. "You feel like they're treating you like a criminal."
Los Angeles County prosecutors began scrutinizing complaints about Brown Act violations soon after Steve Cooley took office as district attorney in December 2000.
Within a month, prosecutors concluded that the Los Angeles Unified School District's board had violated the law by voting in secret to allow the superintendent to explore whether to sell or finish construction of the controversial Belmont Learning Complex. The board's attorneys denied wrongdoing. But the board later rescinded the vote, marking a victory for the district attorney's office.
"One of the best ways to deter public corruption is to have transparency in government," Cooley said recently. "That injects honesty."
Some elected officials said they support open government but believe the law sometimes imposes limits that stifle free discussion among officials.
"They're so afraid of stepping on the Brown Act that no one talks to each other," said Lancaster Mayor R. Rex Parris.
Last year, prosecutors faulted Parris and two other council members for attending a barbecue at the newly elected mayor's home, where they hobnobbed with prospective city commissioners. The law prohibits a majority of a government body from meeting privately to discuss issues within its jurisdiction.
Parris said no city business was discussed and called the event "purely social." But the district attorney's office disagreed and described the event as an illegal meeting. A prosecutor noted in a letter to council members that the city had been warned five months earlier, before Parris was elected to the council as mayor, that it had already violated the law.
At that time, a prosecutor complained that the council appeared to have hired a "facilitator" to meet with each member and develop a plan to remove the city manager. The law prohibits public officials from using intermediaries to help a majority come to an agreement outside of public view.
Parris said he disagreed with the findings about his barbecue but has sought to make the city as open as possible.
"Maybe it's because my first action was to have a barbecue and I got my hand slapped, I'm hypersensitive to it," Parris said. "I certainly don't fault the D.A."
Some complainants, however, fault the district attorney for not doing more. Genevieve Clavreul, a nurse and regular critic of the Board of Supervisors, said some elected officials deserve prosecution for violating the Brown Act.
"I'm glad there has been progress, but I don't think they are aggressive enough," she said.
But criminal charges are nearly impossible to bring, said Terry Francke, a lawyer and author of a guide to the state's open meetings law. Prosecutors must show that an official intentionally violated the law, a difficult standard to meet in court, he said.
"The idea of a letter, firing a shot across the offender's bow, is a very good one," Francke said.
From her office on the seventh floor of the downtown Hall of Records, Jennifer Lentz Snyder pores over meeting agendas, watches videos and reviews other documents to investigate complaints. Snyder, a 20-year veteran prosecutor who has tried more than two dozen gang murders, receives roughly 40 complaints a year.
The number of complaints involving serious violations has decreased in recent years, she said. Snyder attributed the change to the office's written legal warnings -- or "knock-it-off letters," as she calls them -- which she said educate public officials about the law. The goal, she said, is compliance.
"I don't think that most of these people go out there trying to subvert the law," said Snyder, the assistant head of the office's Public Integrity Division. "But the road to hell is paved with good intentions."
Among recent warnings was one Snyder sent to the city of Avalon. The council, she said, violated the law by creating a citizens' advisory board that was not complying with the Brown Act. In response, the council disbanded the board.
In other cases, Snyder has raised the threat of legal action.
In August, Walnut City Council members held a meeting behind closed doors during which Mayor Joaquin Lim was said to have led a council discussion and polled his colleagues about opposing construction of an NFL stadium in the neighboring city of Industry.
Lim said the council did nothing wrong and heeded the advice of the city's attorney during the meeting.
But in her letter to the council in September, Snyder said she was prepared to take agencies to court if they flout the law.
"Such closed door 'secret meetings,' " she wrote, "are precisely the kind of backdoor politics that the Brown Act prohibits."
Ethanol demand may raise food costs for needy, report says
Increased use of the corn-based fuel may mean the government pays more for food stamps and other assistance programs, the Congressional Budget Office says...Associated Press
Washington — The increased use of ethanol could cost the government up to $900 million for food stamps and child nutrition programs, a congressional report says.
Higher use of the corn-based fuel additive accounted for about 10% to 15% of the rise in food prices from April 2007 to April 2008, according to the nonpartisan Congressional Budget Office. That translates into higher costs for food programs for the needy.
The CBO said other factors, such as skyrocketing energy costs, had an even greater effect than ethanol on food prices during that period.
Economists at the agency estimate that higher food prices will increase costs for food programs overall to about $5.3 billion in the current budget year.
Ethanol's effect on future food prices is uncertain, the report says, because an increased supply of corn would have the potential to lower food prices.
Roughly one quarter of corn grown in the United States is used to produce ethanol, and overall consumption of ethanol in the country hit a record high last year, exceeding 9 billion gallons, according to the CBO. Nearly 3 billion bushels of corn were used to produce ethanol in the United States last year -- an increase of almost a billion bushels over 2007.
The demand for ethanol was one factor that increased corn prices, leading to higher animal feed and ingredient costs for farmers, ranchers and food manufacturers.
Some of that cost is eventually passed onto consumers, since corn is used in so many food products.
Several of those affected groups have banded together to oppose tax breaks and federal mandates for the fuel. They said Thursday that the report showed the unintended consequences of ethanol.
"As startling as these figures are, they do not even tell the story of the toll higher food prices have taken on working families, nor the impact higher feed prices have had on farmers in animal agriculture who have seen staggering losses and job cuts and liquidation of livestock herds," the Grocery Manufacturers Assn., American Meat Institute, National Turkey Federation and National Council of Chain Restaurants said in a statement.
Supporters of ethanol disagreed, saying the report was good news.
Independent ethanol producers face a tough future
As big oil companies and other players snap up struggling mills at bargain prices, small firms risk being priced out of the market. Heavy debt and rising corn prices add to the squeeze...Joshua Boak
Gibson City, Ill — . -- A smooth road curves toward the hulking ethanol mill that One Earth Energy will open in June. But the path to profitability might be rocky, as the fledgling company could face much larger rivals that have snapped up bankrupt mills at steep discounts.
Valero Energy Corp., the country's largest oil refiner, broke into the farm-grown business last month, buying seven ethanol mills and a development site from bankrupt VeraSun Energy Corp. at a 70% markdown.
Other mills could soon be up for auction, after Aventine Renewable Energy Holdings Inc. in Pekin, Ill., filed for bankruptcy protection Wednesday and the recent disclosure that Pacific Ethanol Inc. in Sacramento is struggling to repay lenders after its $147-million loss last year.
By acquiring ethanol mills on the cheap, big oil and other players could undercut firms such as One Earth Energy, which spent $166 million to build a plant for distilling corn into fuel.
"The challenge to compete with those new ownerships is they have a lower cost of production because they have less debt," said Steve Kelly, president of One Earth Energy.
Heavy debt loads and historically high corn prices have been lethal to independent ethanol firms. "The growth in ethanol is mandated, but most U.S. independent ethanol producers have failed or are struggling to survive as stand-alone entities," wrote Chi Chow, an energy industry analyst for Tristone Capital.
Chow predicts a wave of consolidation among the country's 170 ethanol mills. Agricultural processors such as Archer Daniels Midland Co. and Cargill Inc. also are expected to expand their ethanol holdings.
Brent King, who has restructured bankrupt biofuel plants, said ADM and Cargill were "waiting for it to get bleak enough so they can buy plants at cents on the dollar." A spokesman for ADM, which was outbid for the VeraSun mills, said the company was looking for strategic acquisitions. Cargill declined to comment.
The $552-million Valero deal gives the Texas-based refiner access to 780 million gallons of ethanol a year, so it would no longer have to buy the fuel additive from outside companies.
"This will be a small part of Valero, but big for the ethanol industry," said Valero spokesman Bill Day, adding that the refiner intended to run the plants at full capacity.
As a result of the deal, ethanol producers counting on purchases by Valero will have to scramble for new customers, further depressing ethanol prices that have sunk to $1.58 a gallon from last summer's peak of about $2.80 a gallon, said Tom Elam, founder of FarmEcon LLC and an industry critic. Lower prices could drive additional mills into bankruptcy.
"In a market like this, farmer co-ops won't do well," Elam said.
At the dawn of the ethanol boom, farmer co-ops embraced an integration strategy similar to what Valero is now pursing. Corn growers banded together to start mills that would create new demand for an age-old crop.
Before launching One Earth Energy, Steve Kelly worked down the road for the Alliance Grain Co. He estimates that the co-op stored about 3 million bushels of corn when he joined it in 1988. The figure reached almost 30 million bushels in 2005, so Alliance needed an outlet for its corn, and One Earth Energy was born.
"It always made sense to me to have the vertical integration, be part of that consumption chain after it leaves the farmer and the storage point," said Kelly, noting that Alliance will supply One Earth Energy with corn.
Kelly is optimistic about ethanol because it is a fraction of the fuel used by the country, so there could be room for additional production from mills in the years ahead. U.S. motorists will use 138 billion gallons of gasoline this year, but the federal mandate is for 10.5 billion gallons of biofuels.
"What gives us hope," Kelly said, "is you still have growing populations around the world."
Global warming reports: poor prospects for corn ethanol...Geoff Mohan, Greenspace
Global warming could scorch the corn economy to the tune of about $1.4 billion a year, according to a report that compiles data from academia and government. The damage would come in the expected places: the Midwest and South, according to the Environment America study released Thursday.
The report contradicts assurances from climate-change skeptics that warming would have a net benefit on agriculture by increasing growing seasons and crop yields.
“Not all the effects of global warming will be bad for agriculture; growing seasons will be longer, and increased carbon dioxide levels encourage plant growth,” the report states. “But global warming will make some of the challenges that agriculture faces significantly worse, including increasing temperatures, more damaging storms, ozone pollution, and spreading pests, weeds and diseases.”
That's more bad news for advocates of corn ethanol as an alternative to fossil fuels. And it comes on top of a Congressional Budget Office study that blames corn-based ethanol for about 10% to 15% of the recent rise in food prices, by increasing demand for the crop and the land on which it's grown.
"CBO estimates that from April 2007 to April 2008, the rise in the price of corn resulting from expanded production of ethanol contributed between 0.5 and 0.8 percentage points of the 5.1 percent increase in food prices measured by the consumer price index (CPI). Over the same period, certain other factors — for example, higher energy costs — had a greater effect on food prices than did the use of ethanol as a motor fuel."
Corn ethanol use has been helping trim greenhouse gases, according to Argonne National Laboratory, which has calculated the well-to-wheels impact of transportation fuels. But the report notes that those calculations show the savings wane as more land gets cleared to grow corn, eliminating important carbon "sinks" that absorb carbon dioxide:
"If increases in the production of ethanol led to a large amount of forests or grasslands being converted into new cropland, those changes in land use could more than offset any reduction in greenhouse-gas emissions — because forests and grasslands naturally absorb more carbon from the atmosphere than cropland absorbs. In the future, the use of cellulosic ethanol, which is made from wood, grasses and agricultural plant wastes rather than corn, might reduce greenhouse-gas emissions more substantially, but current technologies for producing cellulosic ethanol are not commercially viable."
California is about to set a standard for such fuels, and that is likely to sharpen the debate on a national level. A spokesman for Pacific Ethanol already has called the Air Resources Board's blueprint "a perversion of science and a prescription for disaster."
Why such fighting words over a move away from fossil fuels? California, unlike the federal government thus far, would not require a specific amount of biofuels to be sold, which gave a big boost to distillers of corn already in the market. California's rule requires refiners to reduce the carbon intensity of their fuels by certain percentages. And California officials promise to factor in the carbon downside of corn -- fertilizer, land-use effects and more.
Forget banks, keep an eye on trucks
Transportation stocks have outperformed the broader market lately. That's a good sign as long as freight shippers say the economy is stabilizing...Paul R. La Monica
NEW YORK (CNNMoney.com) -- Earnings take center stage next week and everybody's going to be focused on how the banks will do.
Wells Fargo (WFC, Fortune 500) ignited a monstrous stock-market rally Thursday after it announced that first-quarter profits would be much stronger than expected. Now investors are hoping that other banking giants, such as JPMorgan Chase (JPM, Fortune 500) and Citigroup (C, Fortune 500), will also beat the Street.
If so, that could be a sign that the worst is finally over for the beleaguered banking sector. And that would be great news for the markets and economy, with more loans available for homes and cars or to start businesses.
But investors might be wise to take a look at another sector that's equally important and actually is a more reliable indicator of rebounds. I'm talking about the transportation sector.
Talkback: What do you need to see to convince you the economy is stabilizing?
The Dow Jones industrial average has surged about 25% in the past month. But its lesser-known transportation counterpart has done even better. The Dow Jones transportation average, which includes 20 of the nation's largest railroad, airline, trucking and marine companies, is up nearly 40% since early March.
It's easy to forget how crucial truckers, railroads and freight shippers are in this age of tweeting and downloading music. But people still need to buy lots of physical goods -- which in honor of George Carlin, I'll simply refer to as "stuff" -- for their daily lives.
And even though more and more people may order that stuff online, that stuff gets shipped from factories to warehouses and then to a retailer or your house thanks to transport companies.
If transportation companies are doing well, that should be a good sign for the rest of the markets and overall economy. In fact, some market strategists use something called the Dow Theory to try and ascertain if a broader market rally is legitimate.
The Dow Jones Indexes Web site, which includes information about all the various Dow market barometers, has a section that succinctly sums up this theory.
"The industrials make and the transports take. If the transports aren't taking what the industrials are making, it portends economic weakness and market problems."
With that in mind, the rally in transports could be encouraging -- as long as fundamentals are justifying it. If transportation companies start warning of more weak demand ahead, that may be even worse news for the markets than more bad news from the banks.
Investors won't have to wait long to find out if the transport rally is for real. Four of the companies in this group are on tap to report results in the coming week. They are: truckers J.B. Hunt Transport Services (JBHT) and Landstar System (LSTR), railroad CSX (CSX, Fortune 500), and low-cost carrier Southwest Airlines (LUV, Fortune 500).
Each of these companies are expected to report declines in sales and profits for the first quarter as demand for shipping remains anemic.
However, there are some tentative signs that the worst may be over for the transports. The American Trucking Association reported late last month that shipments, as measured by the weight of freight truckers haul, did rise in February from January. And that was the second consecutive monthly increase.
Still, shipments were down sharply from a year earlier, leading the trade group's economist to warn people to not read too much into February's gain. Bob Costello, the ATA's chief economist, said in a statement that the February increase "doesn't mean the economy is on the mend" and added that the year-over-year drop "highlights the current weakness in the freight environment."
Railroads are feeling the pain as well. The Association of American Railroads recently reported that freight traffic was down 17% in March. Bad weather in the Midwest combined with the weak economy to create what AAR senior vice president John Gray described in a statement as a "kick them when they're down element to the month, dropping already-depressed rail traffic levels even further."
So what people need to pay attention to is the guidance for the next quarter and the rest of the year.
Investors are hopeful that the housing market may be stabilizing and that consumers are slowly regaining confidence in the economy -- even though the unemployment rate is expected to rise for the foreseeable future. In other words, more and more economic "green shoots" are starting to appear.
But if the transport companies don't confirm that things are starting to look up for their businesses, those green shoots may quickly wither. Here's hoping that railroad CEOs are as optimistic about a recovery as banking CEOs seem to be and that transport stocks keep on trucking.