State says no to $1.4 billion loan for Fire Victim Trust this year, but talks continue, lobbyist says

A $1.4 billion loan request to bridge a funding gap in the trust established to compensate wildfire victims is stalled at least until next year.

The trust’s original administrator and his successor both say the loan offers the best chance for getting more wildfire victims the money they are owed while Pacific Gas and Electric Co.’s stock price recovers.

The $13.5 billion Fire Victim Trust, designed to compensate victims of wildfires caused by faulty PG&E equipment and maintenance, is funded half in cash and half in company stock.

The fund’s value on paper has shrunk significantly as the company’s stock has declined.

While the loan request failed to win the backing of Gov. Gavin Newsom during the most recent legislative session, a lobbyist for the fund says discussions with his administration will continue into next year.

“I can’t say they support or oppose the loan,” trust lobbyist Darby Kernan said of the Newsom administration, “but they are interested in what the Fire Victim Trust is trying to do.”

With the loan deal dead in the water this year, Kernan, whose lobbying firm, Mosaic, is being paid $20,000 a month out of the victim trust fund, said she worked on three other bills that became law.

Among them were two successful measures to shield fire victims from paying taxes on settlement payments. The third bill was Senate Majority Leader Mike McGuire’s bill seeking to hold PG&E to the utility leaders’ promise to bury 10,000 miles of power lines in 10 years into state law.

The trust supported that bill, Kernan said, in hopes it could boost the utility’s share price.

Last week, Newsom signed that bill over the objections of PG&E watchdog group the Utility Reform Network and other advocacy organizations who worried it would cause sharp increases in electricity bills and wed the state to an overly expensive wildfire mitigation strategy.

But the chief goal of the trust’s lobbying campaign, as laid out in a bankruptcy court filing, was the cash loan.

An influx of $1.4 billion would allow the trust to continue making payments to victims while waiting for the stock price to improve. Holding more cash eases the pressure on trust administrators to sell shares at a lower value in order to get dollars to victims, some of whom have waited up to seven years since the Butte Fire for their money after seeing homes, properties and livelihoods go up in flames.

Trust officials propose to pay the state back when the stock reaches an appropriate level.

The fund covers damages for such deadly wildfires including the North Bay firestorms that killed 40 people in 2017; and the Camp Fire, which devastated the town of Paradise and killed 85 people in 2018.

Tubbs Fire victims are also covered by the fund, though Cal Fire investigators said that fire did not start from PG&E equipment.

In a statement issued by his press office, Newsom did not address a question from The Press Democrat about his position on the loan. His administration instead touted past efforts to aid victims.

“PG&E filed for federal bankruptcy protection just days after Governor Newsom took office,” the statement read. It went on to say that Newsom’s primary focus during the bankruptcy process was making sure “PG&E could not exit bankruptcy without first entering into a settlement agreement with these fire victims.”

The legislation in question was 2019’s Assembly Bill 1054, which some wildfire victims and attorneys say added considerable pressure on victims to accept a deal even as alarm bells rang about the utility’s stock price.

Newsom’s press office emphasized victims approved the settlement.

“That settlement had to be approved by both the bankruptcy court and by a vote of the fire victims themselves, with the help of their lawyers and financial advisors,” the statement read.

Newsom’s rejection of the loan came despite a $97 billion surplus. The governor in September warned lawmakers that state revenues are slowing as he vetoed some spending measures.

Kernan had to begin her work on the loan proposal well into the year, after the trust’s first choice in lobbyist was fired amid an unrelated sexual harassment scandal.

Former trust administrator John Trotter hired Patrick McCallum, the husband of former Sonoma State University President Judy Sakaki, to lobby for the loan in March.

McCallum was a career higher education lobbyist. As a Tubbs Fire victim himself, he was the face and lead lobbyist of fire victim group Up From the Ashes, which successfully advocated for sprawling wildfire legislation in the years after the fires.

Representing that group, he led victims to push for passage of AB 1054 in 2019.

McCallum was fired from his role with the trust after only five weeks, when he became the center of a scandal over the handling of sexual misconduct allegations at Sonoma State.

Like McCallum, Kernan, at the time a lobbyist for the California State Association of Counties, lobbied in favor of AB 1054 in 2019. Her conversations with Newsom’s representatives have not focused on how that bill affected the deal fire survivors continue to struggle with.

“We’re more focused on the future versus how we got here,” she said.

The loan proposal could surface again next year, she said, if Newsom or enough lawmakers back it. The governor does his next budget in January, and the Legislature reconvenes in December.

Newsom vetoed one bill related to the Fire Victim Trust this year. Brought by Minority Leader James Gallagher, R-Yuba City, whose district includes Paradise, the bill called on the California Public Utilities Commission to conduct a review of PG&E actions that sank the stock price after the deal was formed.

“It is not clear this bill would help the wildfire victims,” Newsom wrote in his veto letter, though he also wrote that “the victims of wildfires whose claims for compensation were caught up in PG&E' s bankruptcy deserve protection and support.”

Victims have challenged Newsom to back those sentiments with action on the loan.

James Finn, a Tubbs Fire victim who lost his house, was satisfied by the proposed settlement offer from the trust but has received only 45% of his settlement. Uncertainty remains.

“It definitely helped me to partially move on,” he wrote in an email to The Press Democrat. “However, I haven't been able to fully move on because of the funding issues with the (trust) due to PG&E's deficient stock price, and the fact that I still haven't received what the Fire Victim Trust agreed I deserved from the bankruptcy settlement.”

Finn called on state officials to back the loan.

“It's frustrating that the California state government, with a nearly $98 billion surplus, has yet to aid the (trust) with its request of a loan to help it expedite payments to the fire victim claimants,” he wrote.

You can reach Staff Writer Andrew Graham at 707-526-8667 or andrew.graham@pressdemocrat.com. On Twitter @AndrewGraham88

You can reach “In Your Corner” Columnist Marisa Endicott at 707-521-5470 or marisa.endicott@pressdemocrat.com. On Twitter @InYourCornerTPD and Facebook @InYourCornerTPD.