The long-awaited report on the activities of the state commission formerly led by actor/director Rob Reiner is out. And while it raises several questions about the process used to spend millions in taxpayer dollars, including possible violations of state law, it also seems to reject the most explosive charge-- that the TV ads Reiner's commission ran in support of universal preschool might have violated legal restrictions on political activities.

The full 88 page report from State Auditor Elaine Howle is here. In it, she and her team of investigators describe a system in place at the California Children and Families Commission devoid of sufficient checks and balances.

Howle's report identifies $623,000 in payments to a media agency that went beyond the scope of the formal contract, including payments that the agency allegedly claimed were for subcontractors... when, in fact, the auditor says the three individuals getting the cash were actually employees of the media agency. As a result, the commission-- chaired at the time by Reiner--allowed the media agency to "circumvent" the contract, according to the auditor's report.

And Howle's report finds evidence that some of the work done was in support of Proposition 82, the universal preschool initiative championed by Reiner in 2006. "Although these activities were permissible using public funds," the report says, "these types of payments were not allowable under the terms of the contract."

Howle's report uncovers some documentation that suggests there were people who knew the payments were a bad idea. In one instance, she details an email sent by media agency GMMB that said, in part: "Running your expenses through our contract is a favor [our agency] is doing for Rob [Reiner]."

Other oddities... a $3.1 million invoice with a public broadcasting station that didn't include documentation to support "any of the charges"... some $47.7 million in contracts that may have been awarded without receiving the minimum number of competitive bids... and contracts totaling $90 million that the auditor says were not properly advertised before being awarded.

But the most explosive charge leveled against Reiner was that the state commission he chaired might have used taxpayer dollars on TV ads that helped promote the ballot initiative, Prop 82, his political team was promoting.

The auditor's report largely finds these charges as unsubstantiated, and that "the content of these advertisements and the timing of their broadcast were consistent with applicable legal restrictions related to the use of public funds for political purposes."

No word on what the audit will lead to in terms of further investigations. And while it effectively ends the story as far as Reiner is concerned, the controversy is likely to surface all over again should the Hollywood star consider new forays into the world of politics.

There are 100 seats in the California Legislature on the November 7 ballot. But thanks to a lot districts drawn safely for incumbents of both parties, there are very few truly competitive races to watch.

How few? Well, using what might be called a 'Money Index' based on campaign finance statements for the first 27 days of October, there are only five that are truly competitive right now.

Yep, only 5% of the legislative races seem to be truly up for grabs.

Money, of course, is not the only marker to measure competitiveness. But the political parties and their wealthy benefactors don't intentionally throw money at a losing horse, especially in the final weeks of a campaign. So in inverse order, here are the five big races...

#5: Assembly District 30
This Central Valley district has always been a tough race for two-term Democratic incumbent Nicole Parra. This year, she faces GOP challenger Danny Gilmore. As of today, Parra has raised about $775,000 in October, compared to about $350,000 by Gilmore. That's still a lot of cash, but not compared to the others on this list.

#4: Assembly District 80
This Palm Springs-area district also features an often-targeted incumbent, Republican Bonnie Garcia. This year, she faces a rematch with Democrat Steve Clute. This is the first of two lopsided cash contests in the month of October, as Democrats must once again smell blood. In the last 27 days, they've given Clute $1.28 million... compared to Garcia's October fundraising of about $461,000. One wonders what role in all of that was played by Garcia's recent controversial comments about the governor, which sparked a pretty provocative mailer from Democrats (see Bob Salladay's LA Times blog for a good overview of the fracas).

#3: Assembly District 78
This San Diego district features yet another incumbent who often faces tight races, GOP incumbent Shirley Horton. This time, she faces Democratic challenger Maxine Sherard. But this race wins the 'Something Must Be Cooking Here' Award. That's because as of September 30, Sherard's campaign had only raised about $112,000 this year. But as of today, her October contributions total $1,299,460.28.

Yowza. That means the Democrat has raised in October more than 10 times what she had raised the entire nine months before. Horton's campaign statements show October receipts just shy of $377,000. This, by the way, is another legislative district with a very large number of nonpartisan ("decline to state") voters.

#2: Assembly District 17
The Stockton-to-Merced district, where the Democratic incumbent is termed out, has been a slugfest between Democrat Cathleen Galgiani and Republican Gerry Machado. And the Dems have outspent the GOP this month, funneling $1.74 million into Galgiani's campaign since October 1. But Republicans haven't given up; just today (Friday) the party wrote Machado a check for $531,000. That single contribution represents more than half of his October fundraising total ($890, 400).

And the 'Money Index' winner...

#1: Senate District 34 This Orange County contest is very tight in terms of party registration, with Dems slightly outpacing Republicans. And as with other races, the large number of independent voters here could play a big role. The district, home to a termed-out Democrat, is being battled for by Democrat Lou Correa and Republican Lynn Daucher. Both served previous stints in the Assembly, and word is that both are getting help from platoons of party volunteers who are heading to the OC to pitch in. Both campaigns are also attracting a lot of cash. The combined fundraising for this Senate seat in the first 27 days of October: about $2.76 million. Of that, Correa ($1.69 million) has raised more than Daucher ($1.07 million).

Two things are clear about these races. First, Democrats are being forced to defend three of the five seats. But they also have outpaced the GOP in fundraising in each of the five this month, presumably in hopes of running the table and increasing their majorities in both legislative chambers.

As the week ends, a couple of interesting items to mention in the race for governor from the campaigns of Arnold Schwarzenegger and Phil Angelides.

First, Team Arnold... and a new TV ad called "33"-- as in the 33 newspapers around the state that have endorsed a second term for the governor. The commercial feels for all the world like what can best be called, in baseball parlance, a "closer." The ad still uses the warm and fuzzy music and images of almost every Schwarzenegger ad this season. But added to that are flashing quotes from various editorial endorsements, calling Schwarzenegger everything from "bipartisan" to full of "optimism." You can watch the ad here.

Given both the public polling... and the governor's continuing stealth re-election campaign (today, another "official state" event talking up increased access to broadband tech)... it's hard to see this commercial as anything but the campaign's closing statement.

That being said, the campaign of Phil Angelides is not giving up. In fact, staffers continue to ramp up the visibility of the candidate, by linking him with more and more stars on the national Democratic scene. After a speech this morning in Oakland at the national convention of the NAACP, Angelides is scheduled to appear in Los Angeles with U.S. Sen. Barrack Obama (D-Illinois).

The campaign stop by Obama couldn't come at a better time, with the junior senator getting an awful lot of media attention in the last 10 days for his comments about an exploratory bid for the White House in 2008. The Angelides camp clearly knows it needs to fire up its base voters, and Obama is the current hot commodity.

There's a fair amount of grumbling out there about whether reporters spend enough time... or way too much... reporting on campaign fundraising by candidates and interest groups. Some think it's extremely important to know who's donating, and how much is being spent. Others say it's part of the horse race mentality that political reporters favor, instead of substantive coverage of the issues.

So, as a possible middle ground, here's a brief snapshot of data from the campaign bank accounts most watched this season, data that is complete through October 21:

Arnold Schwarzenegger: $6.9 million raised in the first 20 days of October, $38.2 million for the year, and about $1.1 million left in the bank.

Phil Angelides: $2.3 million raised in the first 20 days of this month, $18.45 million for the year, spent about $36 million so far in 2006, about $1 million left in the bank

Proposition 86: Supporters have raised $13.1 million for the year through October 21 and spent about $13.5 million. Opponents have raised (through two committees) about $58.6 million, and spent about $58 million in the same time period.

Proposition 87: Supporters have raised about $47 million and spent about $47.3 million since January 1, and had about $1 million in the bank as of October 21. Opponents have raised $74.6 million, and spent about $66 million in the same time period, with $9.2 million left in the bank.

Expect the following three themes today to come out of the world of California politics today: messaging, money, and momentum.

First, messaging... as the campaign of Phil Angelides releases a new statewide TV spot, which you can see here. The commercial features Angelides walking through a grouping of life-size Arnold Schwarzenegger cutouts, with the Democrat rattling off things that he says Schwarzenegger promised to handle one way... but then changed course, including interest group fundraising and cuts (actually scaling back, truth be told) in K-12 education funding.

"He really hasn't changed," says Angelides in the ad.

The ad comes just 12 days before the election, and as Angelides finds himself in an 18-point hole behind the governor in the newest public poll. In a news conference in Los Angeles this morning, Angelides media strategist Bill Carrick said the ad points out the fact that Schwarzenegger, in Carrick's words, is a "fraud" who's trying to hide from his record (more on the poll in a moment).

Second, money... today marks a filing deadline for candidates and campaigns to disclose how much money they've raised and spent on the 2006 election, through last week. As most political watchers will tell you, the money that's raised from here on out largely comes from independent expenditure groups and political parties-- the only two ways under current campaign finance laws that large sums of cash can be raised and spent in a short amount of time, with the hope of influencing a race. That means when we get a look at candidate accounts later today, it'll pretty much be the final word on their success (or failure) at attracting donors.

And third, momentum... today's Public Policy Institute of California poll reinforces the conventional wisdom about the race for governor. Maybe that's why Angelides strategist Carrick took shots at the poll's accuracy this morning. Calling it "weird" and a poll that reminds him of the movie Groundhog Day (when every day was exactly the same), Carrick said the poll's methodology and conclusions are "fundamentally wrong." He argued that PPIC's sample of voters was too conservative and too white, compared to who will actually turn out on election day. He argued the Schwarzenegger lead is actually only in single digits, and that Democrats in California are just as angry-- and motivated to vote-- as Democrats across the country. "We are working very hard to get out the Democratic vote, and inject some energy into the closing days of the campaign," he said.

Meantime, the governor continued his stealth campaign... stumping for the infrastructure bonds in front of a bipartisan group of officials in Fresno this morning. That was the only event... campaign-related or otherwise... on his schedule today, other than a private fundraiser in Sacramento. That certainly doesn't sound like a candidate who senses any chance of a momentum swing, does it?

The latest public poll, just out tonight, is chock full of issues and items to consider.

The headline from the Public Policy Institute of California poll only reinforces the conventional wisdom about the gubernatorial contest: Arnold Schwarzenegger is handily beating Phil Angelides... in this poll, by a commanding 48% to 30%.

But there's oh so much more...

Grumpy Dems
More evidence that Democrats aren't so happy about their nominee for governor, nor the issues he's discussing. The poll shows just 57% of Dems would vote for Angelides as of now, with 21% casting their vote for Schwarzenegger. A full 50% of the Dems surveyed say they are "not satisfied" with the choices of candidates in the race. Want more? PPIC finds a whopping 67% of the Democrats said they are dissatisfied with the amount of attention the candidates are spending on issues that matter to them. That certainly sounds like a repudiation of the recent Angelides strategy to focus on items like linking the governor and President Bush, and the war in Iraq.

Et Tu, Bay Area?
Playing the role of Gaius Julius Caesar... Phil Angelides. The PPIC survey's most damaging data for the Democrat may be that the Bay Area favors Schwarzenegger, 40% to 34%. Yep, the Bay Area... the bluest of 'blue' California. Granted, the region also has the largest percentage of undecided voters in this poll (17%), but it's awfully late in the game to try to secure your base if you're a Democratic candidate. In fact, of the four regions in the PPIC survey-- Bay Area, Central Valley, Los Angeles, Other Southern CA (hello North State??)-- the only region choosing Angelides over Schwarzenegger is LA... and that's only by two points (40% Angelides, 38% Schwarzenegger).

Chicken Or The Egg?
Check out the strong correlation in Schwarzenegger's job approval ratings and likely voters' perception of whether the state is headed in the right direction... or the wrong direction:

PPIC-- October 2005
33% approve of guv on the job, 30% say state is headed in right direction
58% disapprove, 60% say state is headed in wrong direction

PPIC-- October 2006
47% approve of guv on the job, 44% say state is headed in right direction
46% disapprove, 45% say state is headed in wrong direction

It would be interesting to know which feeling drives the other one...

The Ethnic Divide
There's some pretty compelling data in this survey about the split between Latino voters and non-Latino whites in California.

Example #1: Non-Latino whites prefer Schwarzenegger to Angelides 56%-23%, but Latinos prefer Angelides to Schwarzenegger 52%-25%. The two groups also hold almost mirror image opinions about the governor's record on the job. Something else to think about: non-Latino whtes are far more likely to vote. As PPIC's Mark Baldassare pointed out a few weeks ago in a study called California's Exclusive Electorate, while the adult population in California is 32% Latino, only 14% of likely voters are Latino. A whopping 72% of likely voters are... you guessed it... non-Latino whites.

Bonds: Yes, But Maybe No?
Do voters want to use general obligation bonds for infrastructure needs? Yes, says the PPIC survey. Do they support Propositions 1B-1E? Not necessarily. Take Prop 1B, the $19.9 billion transportation bond measure. 80% of likely voters say it's either very or somewhat important to spend government cash on transportation needs in their region, yet only 51% plan to vote yes on 1B, just about the bare minimum needed for passage. A similar split can be found in the survey's findings about affordable housing (1C), schools (1D), and levees (1E). So what's the problem?

Bonds: Too Darn Much!
Well, maybe the problem is the price tag. Almost six of every 10 voters surveyed say the $43 billion package is is too big (that includes the water bond, Proposition 84, which is actually losing in the poll).

Bonds: GOP Out of Step?
One of the most contentious legislative battles over the infrastructure bonds this year was whether to include affordable housing in the package. Republicans at the Capitol weren't keen on $2.85 billion in bonds for housing (Prop 1C). Neither was the state GOP, whose leadership voted to officially oppose the measure. So, which of the bond measures is most popular? Yep. Prop 1C. 56% of likely voters support it, with support from Democrats and nonpartisan voters, as well as voters in the Bay Area, LA... and the Republican-friendly Central Valley... all clearly supporting the proposal (the rest of SoCal, FYI, is at 50% on the measure).

Down With DC
And finally... Californians sure don't like what's going on back east. The PPIC survey says "trust in the federal government is at a new low." Only one in four trust the feds to do what is right always, or most, of the time. And two in three believe the federal government "wastes a lot of the money we pay in taxes."

Election Day is now two weeks away, and not only are there very few headlines being made in the race for governor, but the incumbent is running what amounts to a stealth campaign.

The lack of headlines is certainly not for a lack of trying by challenger Phil Angelides. The Democrat made an early morning campaign stop here in Sacramento today, ostensibly to criticize Governor Schwarzenegger's record on gun control issues. Afterwards, Angelides made a half-hour appearance on KQED's public affairs talk show, Forum (you can hear the audio of that interview here, or download the program by clicking here). It should be noted that the program also featured some of the third party candidates; the governor did not accept the invite.

In fact, Schwarzenegger continued his recent string of appearances that are designed to appear completely outside of election year politics. He stopped by a charter school in Oakland-- an event billed as an official "state" event (although the principal of the school recently recorded a radio commercial endorsing the governor's re-election).

The lack of traditional campaigning is worth noting. The governor has only spent 3.5 days out of the last 12 participating in actual campaign events; and one of those events-- this past weekend-- wasn't really even a campaign event. Rather, it was a charity event for a nonprofit that supports U.S. soldiers.

A review of the scheduling notices distributed by Schwarzenegger's state office also seems to indicate that he's even taken some time off... something very few candidates do in the final days of a campaign.

Of course, this doesn't mean his campaign team isn't busy; today, staffers released a "web video" criticizing Angelides for negative campaigning. But the stealth campaign is indicative of the perception among political watchers that Schwarzenegger has a sizeable lead, and that the race is his to lose. Team Angelides will no doubt dispute that, pointing out recent polls that suggest the gap is narrowing.

Regardless, the public side of this race has become a one-sided argument... with Angelides trying to land the perfect sound bite, and Schwarzenegger content for a good photo op.

the state's budget deficit?

Voters head to the polls in 15 days, while many others are already voting by absentee. And yet, there is very little discussion about one of the biggest tasks any governor has to tackle upon taking the oath of office in January: California's chronically unbalanced budget.

Current estimates peg the imbalance for the 2007-08 fiscal year at around $4.5 billion. But a lot of things could impact that number. The economy is always a major factor in determining the amount of tax revenues that come in. But next year, other issues could also widen the gap. A federal judge's intervention in the state's prisons could cost as much as another $600 million; and if the state loses a court battle over its plan to sell bonds to pay pension obligations, that's another $900 million.

Getting specifics on the campaign trail about how to fix the state's problems isn't easy. This year, one major party candidate is offering details-- but perhaps not enough to fully answer the question-- while the other candidate pretty much refuses to address the question at all.

On this morning's edition of The California Report, we took a look at the budgeting plans of both Phil Angelides and Arnold Schwarzenegger. In particular, the goal was to examine what the spending priorities of either man might be if they win on November 7.

For Angelides, the task was trying to determine whether his proposals add up. The Democrat has advocated new spending that appears to total around $2.7 billion (using numbers provided by his campaign in some instances, and by the nonpartisan Legislative Analyst's Office in others). How he would pay for that is a little harder to calculate. Angelides offers up ideas that might get to the magic number of about $7.2 billion (adding his new spending to $4.5 billion for the currently projected deficit). But some long-time budget analysts wonder whether things like "$1 billion in government efficiencies" will ever happen, given Governor Schwarzenegger made those same promises, and failed to achieve them.

Plus, might some of the new tax revenues (from raising taxes on the most affluent) be automatically diverted directly into K-12 education, rather than some of his proposed programs? "The interaction between what he's proposing and the [voter approved] Proposition 98 guarantee has not been very clear," says Fred Silva of the Public Policy Institute of California and the New California Network.

On the other side, Governor Schwarzenegger seems to have made a point to avoid discussions of budget plans at all costs. When asked about the budget and a possible economic slowdown during the gubernatorial debate, he said: "This is not my style to talk about hypotheticals."

And in a recent campaign event, I asked him whether his aversion to tax increases and any new budget borrowing (given his promise to "tear up" the state's credit card) means that future deficits can only be erased by either a strong economy... or spending cuts.

But the governor, staying on the message of his event, never answered the question.

If the governor sticks to his campaign promises, Silva says, the "flexibility about dealing with a given fiscal problem obviously narrows."

And Silva sums up the two candidates this way.

"One says, 'I'm going to raise taxes so I don't have to reduce spending.' And the other says, 'I'm going to continue to try to keep the spending base flat and do the best I can without raising taxes.'"

You can hear this morning's story here.

So what did Phil Angelides talk about in his visit this morning to the wacky world of morning radio?

Well, a little bit of policy... interspersed with the rantings of talk show host Adam Carolla about taxes (he thinks they're too high), solar energy (he couldn't get money from the state subsidy program for home solar programs), immigration (Carolla thinks American culture is being "hijacked"), and a quicker way to Las Vegas (Carolla wants a monorail from Los Angeles).

In a chit chat that easily lasted almost an hour, Angelides carefully dodged some of the host's more outrageous comments, especially on immigration issues.

But he seemed to loosen up when the talk turned to Arnold Schwarzenegger. "Schwarzenegger is a bit of a blowhard," said Carolla. "He's like the Santa Ana winds of blowhards," replied Angelides. And it didn't end there, with Angelides describing the governor as "a guy whose hair looked like it was dipped in Tang."

Yowza.

For my money, though, the best moment was when the gubernatorial candidate joked around that one of his aides would like two tickets to Carolla's upcoming event at the Playboy Mansion. "I wanna be very clear," Angelides said. "They're not for me."

The folks at the conservative-leaning Cato Institute have published their annual report card on the fiscal policy of the nation's governors. And they've dropped Arnold Schwarzenegger's budget score from an 'A' to a 'D.'

The Cato report is here. It uses about two dozen different measures of fiscal performance, generally grading spending cuts and tax cuts as better, and spending and tax hikes as worse.

So why did they drop his grade? "After one year of of aggressive budget cutting, " the report says, "he has let the big spenders in Sacramento get to him." The Cato report says California's state government is now 12% bigger in "real per capita terms" than after the governor's first few budget decisions.

13 of the nation's governors were given a 'D' rating, so Schwarzenegger isn't alone. Only one, Missouri Governor Matt Blunt, was given an 'A.'