Your eyes on California Government

SEPT. 8, 2011

By KATY GRIMES

A red flag goes up whenever a piece of legislation contains obscure and unrelated amendments or provisions. Such is the case with SB 790 by Sen. Mark Leno, D-San Francisco. The bill has been amended seven times,  most recently on August 30. But it was in May when a strange provision was added to the bill, having nothing to do with the bill’s subject of community choice aggregation for electric power.

The problem is that within SB 790, one obscure section reads, “SEC. 11. Part 5 (commencing with Section 3260) is added to Division 1 of the Public Utilities Code, to read: PART 5.  GENERAL PROVISIONS 3260. Nothing in this division prohibits payments pursuant to an agreement authorized by the National Labor Relations Act (29 U.S.C. Sec. 151 et seq.), or payments permitted by the federal Labor Management Cooperation Act of 1978 (29 U.S.C. Secs. 173, 175a, and 186). Nothing in this division restricts any use permitted by federal law of money paid pursuant to these acts.”

What all of that legal jargon means is that there is language within the bill which authorizes unknown parties to make payments to certain classifications of trust funds, administered in whole or in part by labor unions.

Some people call these special trust funds, “slush funds.”

Associated Builders and Contractors of California (ABC) has been fighting SB 790 because of the seemingly unrelated provision. ABC is a non-union association of building contractors. And according to the ABC, less than 20 percent of all California contractors are members of unions.

The provision applies to a significant amount of language in the Public Utilities Code. “As written, the language seems to give privately-owned and publicly-owned public utilities unlimited license to make unreported payments of unlimited size and number to certain classifications of trust funds administered in whole or in part by labor unions, for any reason,” said Kevin Dayton, State Government Affairs Director for the ABC.

However, the language does not establish reporting requirements for these payments, nor does it restrict how trust funds can use these payments. This is why Assemblywoman Shannon Grove, R-Bakersfield, referred to it as a “slush fund” on the Assembly floor Thursday, and said that it’s nothing more than extortion by labor unions, for political campaign contributions.

For example, this provision would allow a municipal utility to make an unreported payment of $90,000 in ratepayer money to one of these trust funds, which then in turn could contribute that money as a campaign committee to a political campaign, or against a ballot initiative.

In fact, this is exactly what has happened. According to Dayton, the following story is just one example of what has been going on for some time in the building trades.

Union Contributions

Dayton explained that California construction unions have made political campaign contributions of $50,000. “Specifically, in one case, a union trust fund that made such a contribution in California, received funding from ratepayers of a publicly-owned utility through a mandated payoff included in a Project Labor Agreement,” said Dayton.

On November 2, 2009, according to The Truth About PLAs, a project of Associated Builders and Contractors, the 20 commissioners of the Northern California Power Agency in Roseville, near Sacramento, voted 9-2, with four abstentions and five absences, to approve a Project Labor Agreement and Maintenance Labor Agreement for the proposed Lodi Energy Center power plant.

The commissioners approved this Project Labor Agreement with a provision (Section 13.1) that mandated a $90,000 direct payment from the NCPA (ratepayers) to a union trust fund called the California Construction Industry Labor-Management Cooperation Trust, headed up by Robert Balgenorth.  “This mysterious and unaccountable trust fund is controlled by the State Building and Construction Trades Council of California, an umbrella group for the state’s construction unions,” said Dayton.  “Under the terms of the Project Labor Agreement, NCPA was to make this $90,000 payment within 10 business days of the first hour of work on the Lodi Energy Center.”  Dayton said that because construction work has started at the power plant, the NCPA has presumably paid the $90,000 by now.

Dayton provided a copy of the check and correspondence, along with the relevant sections of the Project Labor Agreement, sent from the Northern California Power Agency to the State Building and Construction Trades Council of California. Most of the documents were signed by Balgenorth.

And it was this information together with the Lodi Energy Center project PLA that Grove sought to provide on the Assembly floor Thursday, during the debate on SB 790.

Parliamentary Maneuvers

However, Assistant Speaker pro Tem Assemblyman Mike Gatto, D-Burbank, silenced Grove by ruling her “out of order,” when she requested to use a prop related to the bill. Grove objected to the ruling and said that even without the prop, she could show that labor unions in the state were “extorting” money from land owners and energy developers, and stashing it away in a trust account with no reporting requirements. (Watch the video)

Grove never got to make her point, even with several other Assembly colleagues objecting on her behalf. But curiosity was certainly peaked in the Assembly. And there was a great deal of buzz about Gatto’s rulings.

Dayton said there are other issues that need to be raised with the provision. “This provision seems to establish considerable risk for circumventing openness in the use of ratepayer money and for the funding of political activity,” Dayton said. “The public should have a reasonable idea of the purpose and implications of this provision in SB 790.”

“Why doesn’t this provision get added to the Labor Code, if it is regarding payments under union agreements?” Dayton asked. “Aren’t such payments defined under Section 1773.1(a)(7-9) of the Labor Code?”

Dayton said that in the Lodi Energy Center project case, the NCPA commissioners were told that the labor management Trust would spend the $90,000 provided by NCPA “supporting the construction industry in California generally, often through the support of legislation, promoting workers and contractors in the power industry specifically, and fostering training of workers.”

According to Dayton, NCPA commissioners were told, “It is a one-time payment to the Trust that coordinates activities of multiple unions that are covered under the terms of this agreement.”

Dayton even said that a news story in the November 2, 2009 Lodi News-Sentinel newspaper quoted the president of the State Building and Construction Trades Council of California saying, “The union trust is used to finance ‘things that are beneficial to the industry’ such as training for union workers or political battles.”

While Dayton said that no one outside of the Construction labor Trust really knows how the money is spent, he and the ABC recently stumbled on a $50,000 expenditure thanks to a late campaign contribution report filed on June 8, 2010 with the City Clerk of Chula Vista. “The report shows that the California Construction Industry Labor-Management Cooperation Trust contributed $50,000 to a local political campaign to defeat a measure (Proposition G) in Chula Vista, which was placed on the June 8 ballot by Chula Vista citizens,” said Dayton.

“But this is not the first time mandatory payments in Project Labor Agreements for publicly owned power plants have been sent to a construction union political fund,” Dayton said.  ”While it’s difficult to identify and track all of the trust funds operated by the state’s construction unions, in 2006, the State Building and Construction Trades Council reported that its Labor-Management Cooperation Trust contributed $1 million to a political campaign to defeat a statewide ballot measure (Proposition 90).  It appears this was the fund receiving payments at the time from power plant owners under their PLA’s.”

Attorneys affiliated with Associated Builders and Contractors speculate that the $90,000 from the NCPA to the California Construction Industry Labor-Management Cooperation Trust is an illegal gift of public funds, according to Dayton.

Slush Funds

The Truth About PLAs reported, “SB 790 includes the obscure amendment that authorizes the payments in Project Labor Agreements to mysterious union slush funds managed by top construction union officials. The most prominent of these trust funds, the California Construction Industry Labor-Management Cooperative Trust, had $3 million in the bank last year and mailed letters dated August 5 to elected officials throughout the state promoting Project Labor Agreements.”

The California Construction Industry Labor-Management Cooperative Trust IRS form 990 for year 2009, shows that the net assets of the trust were $3,141,784.

In 2008 the net balances were reported as $2,888,603, and in 2007, were still large at $2,595,954.

But the trust was only created in 2007 with a “contribution from prior trust” in the amount of $2,725,993, according to the 990 IRS report.

According to Dayton, the contribution was just from another construction industry labor management Trust.

For once, the money trail was followed and exposed. For a Legislature which spends an inordinate amount of time talking about “transparency” and “sunshine,” it appears that some shady transactions are taking place inside of the California Construction Industry Labor-Management Cooperative Trust — and with help  from some Democratic legislators.

Tags: California, Democrats, government, Katy Grimes, labor unions, legislature, unions