Unions’ Assault on Reason Continues

Last month, San Jose’s Democrat mayor Chuck Reed filed paperwork for a statewide ballot measure that would bring some sense and fairness to California’s crazy public employee pension disaster-in-the-making. His idea, co-endorsed by a half dozen other mayors of large California cities (five of them Democrats), is a simple one: Treat public employee unions like private employee unions.

Cities on the brinkSpecifically, his measure, if approved, would lock in benefits already received but would open the door to negotiate changes moving forward. What we’re stuck with may be enough to sink us – about a half trillion dollars of unfunded liability by some accounts – but Reed’s measure could keep us from heaping more and more debt onto our state’s perilous financial condition.

In a bit of diplomacy, Reed asked the unions to meet to discuss the measure. Maybe he thought they would spare California voters the trouble of petition signing and the pain of listening to millions of dollars worth of distorted union commercials opposing the measure. If he thought for a moment public employee unions were ready to start acting responsibly, he couldn’t have been more wrong. In response to his offer, a letter signed by representatives of 17 public employee unions said:

Meaningful dialog can only occur in an environment of trust and sincerity. Your choice, to first introduce this draconian and flawed measure and then invite dialogue, shows a lack of both.

In other words, “Drop dead, Reed!”

What is so flawed about the measure? Well, let’s see what the unions have to say:

As you are well aware, there is a retirement crisis in California.

Yes, we knew that. Over-generous public pensions and benefits are indeed a crisis. A big,  hairy, no-end-in-sight crisis. But that’s not the crisis the unions see.

A study released just this week noted that 42 percent of Americans say that saving money for retirement and paying their bills is not possible; 37 percent say they will never be able to retire, continuing to work until they are sick and die.

Rest assured that not one of those respondents had a CalPERS or CalSTERS pension coming his or her way. No, our public servants masters will be able to retire at 55 or 60 (younger if they’re cops or fire fighters) with a pension that averages over $60,000 a year. The rest of us may work until we get sick and die, but not public employees. Nearly all of them will work until the day they’re fully vested and not a day more.

The unions’ response to reasonable and much-needed curtailment of their gold-plated gravy train is to say they’d like to see all society as loony as they are. They have no plan for attaining this goal, and they are not likely to present a plan anytime soon. they figure all they need, given their history of being able to dupe California’s millions of low-information voters, is a mere flimsy puff of smokescreen just thick enough to divert attention from their greed.

Hopefully even low-information voters are getting smart enough to understand destructive self-interest when they see it. If you know any who aren’t, please send them a copy of Crazifornia.

 

The GASB Shoe Falls on California Pension Plans

Pension Crisis StatesFor years, pension hawks like Orange County supervisor John Moorlach have been warning that California’s already toxic public employee pension plan deficits will get much worse once Government Accounting Standards Board (GASB) rules take effect. Among other things, the rules will require the big pension plans like CalPERS and the teachers’ plan CalSTERS to use more realistic projections for the returns they will earn on their investments. Now we know how much more toxic:

New government accounting rules will more than double the pension debt reported by CalSTRS, boosting an “unfunded liability” that is now about $71 billion to a newly calculated “Net Pension Liability” of $166.9 billion.

The CalSTRS board was told last week that it’s unclear whether the new liability figure will be reported by the state or spread among school districts, where more than doubling current debt might lower credit ratings and drive up borrowing costs.

If the “Net Pension Liability” is distributed among employers, the reported total debt of a typical small-enrollment school district might jump from $21 million to $49 million and the debt of a typical large district from $280 million to $728 million.

Neither the state nor the school districts have been including CalSTRS debt in their financial statements. The new accounting rules call for pension debt to be added to employer balance sheets. [CalPensions]

GASB exists to end of the sort of accounting shenanigans described here, including projecting investment returns well above those earned by Warren Buffett and this: “Neither the state  nor the school districts have been including CalSTRS debt in their financial statements.” This practice is, to use an accounting term, insane. The state and the school districts know they will be hit with hugely higher pension costs unless the current pension debt isn’t zeroed out by either (1) most retirees dying tomorrow or (2) the market routinely returning more than 8 percent on all investments, all the time.

The big public employee pension plans are required to switch to GASB rules in this year’s financial reporting, and employers whose employees are covered by the plans – your city, your county, your school district – must make the switch in their 2014 reports.

Look for two things: First, the unions will blame it all on “just a change in accounting rules,” even if those rules exist to create more accurate reports, and second, government at all levels will be coming at you with tax  hike proposals.

The “California Miracle” Media Frenzy

Rolling Stone BomberRolling Stone, the music magazine with a longstanding hard-left view of politics (infamously evidenced by the accompanying cover), has gone mainstream.

Like dozens of mainstream media before it, it is hero-worshiping Jerry Brown, praising him for the “miraculous” economic rebound California is enjoying. Before we question how miraculous it may be, let’s let Tim Dickenson, the author of “Jerry’ Brown’s Tough-Love Miracle” in the current issue of Rolling Stone, explain just what Jerry’s pulled off:

America’s shrewdest elder statesmen blazed a best-worst way out of California’s economic morass. With a stiff cocktail of budget cuts and hard-won new taxes, Brown has not only zeroed out the deficit, he’s also begun paying down the debt. “Jerry Brown’s leadership is a rebuttal to the failed policies of Republicans in Washington,” says Neera Tanden, president of the Center for American Progress. “California is proving you can have sane tax systems, raise revenues, eliminate structural deficits and have economic growth.”

Fed up with the state’s own obstructionist Republicans, California voters have even given Brown a Democratic supermajority in the state legislature. As a result, the Golden State is now reasserting itself as a proving ground for the kind of bold ideas that Republicans have roadblocked in Washington – including a cap-and-trade carbon market, high-speed rail and education-funding reform.

Nobody moveAs an obstructionist Republican myself, I understand the courage it takes – and ridicule it engenders – to stand in front of a run-away train like California, hold up your measly skin-and-bone hand against the juggernaut, and scream “Halt!” I get the motivation behind trying to stop giving the state more money to spend when it has such a robust history of blowing through every penny it’s got and having less to show for it than a sailor waking up with a crippling hangover and a budding case of the clap.

Be that as it may, Dickenson is right. California voters did give the Democrats a super-majority, which in turn gives Brown everything he needs to create his legacy. Republican-weary journalists around the nation responded joyfully to last November’s election results, heralding a turn-around in California with stories that, like Dickenson’s are designed to mute small government, anti-tax Republicans everywhere.

I’m not grumbling about a better California economy – far from it. When the unemployment rate falls from 12.5 percent to 8.7 percent, as California’s has, it means formerly desperate people are getting by again, children are eating better, and businesses are getting back customers they lost. (It also means a lot of Californians gave up on the state and left for more job-friendly places, of course, but why bother pointing that out?) What I’m grumbling about is how rose-tinted Dickenson’s glasses are.

He praises Brown on the environment while ignoring how California’s toughest-in-the-nation environmental regulations, along with its Progressive tax structure, drive businesses out of state.

He loves how California is leading the way to Obamacare, while ignoring the fact that major insurers are bailing from the state’s plan, raising questions about its viability.

He gives Brown good marks on education because spending is up, but ignores the fact that California’s schools continue to slide. Eighty-six percent of schools in the state fell short of No Child Left Behind goals this year.

And worst in the world of objective reporting, he fails to mention any of the many troubles that threaten California’s future economic vitality.  The voter-approved 2012 tax hike Brown championed isn’t permanent, so the current bump in revenues will drop in just over three years when the sales tax increase ends, and peter out the following year when the sales tax increase ends.

Meanwhile, Brown is not attending to the state’s fundamental fiscal instability. He isn’t proposing changes to the state’s over-reliance on income taxes on the wealthy. His lifelong fondness of public employee unions is keeping him from addressing the unfunded liabilities the state, its counties and cities carry in their employee pension plans. And his long-running, red-hot love affair with Mother Nature doesn’t bode well for any meaningful effort to make the state less regulated and therefore more business-friendly. In fact, the state’s renewable energy goals and carbon taxes are going to drive up energy costs (we’re already $3.90/kilowatt hour more expensive than the national average) and make electricity less reliable. That will force even more businesses to leave.

Rolling Stone can have its fun and write happily about all the cool stuff that happens when Republicans are minimized to irrelevance. Let’s see how well they cover the impending, inevitable consequences of having too many Democrats in the wheelhouse.

California’s Mullet Budget

It’s all hoopla in Sacramento today as Jerry Brown and the Legislative leaders sign the 2013-2014 California state budget into law. Jerry calls the balanced budget a sign that things are rosy in California again.

I say rose is just another shade of red.

The budget keeps the state employee pension gravy train intact, along with its $500 billion dollar hit on future generations. It doesn’t do nearly enough to address our debt, which is now pegged at $100,000 per California household. And it keeps the multi-billion-dollar boondoggle known as California High Speed Rail on track.

But wait, it gets even worse than that.

mulletThe guy with the best line about this dangerously expensive sham of a budget is Republican Assemblyman Jeff Gorell of Camarillo who called it “the mullet budget” – Conservative in front, very liberal in back.

He pointed to how the budget defers the restart of several expensive social welfare programs that were cut during the recession until the 11th month of the fiscal year. If those very expensive, very ongoing programs were implemented at the start of the budget year, or even  half way through the budget year, the budget would not be balanced. So … conservative up front, liberal in the back. Brilliant!

Of course, the next California budget will have to start with the assumption those programs will be in effect for all 12 months, so a new trick will be needed to balance the books. Maybe a new tax on millionaires ….

For more on what’s wrong with the budget Brown and the Democrat super-majority are pretending to be so happy about, read this post by Katy Grimes at CalWatchdog.

 

Jerry Brown’s Zombie Budget

Gov. Brown presentation of the annual May revise of the state budget this morning wasn’t the duck-and-shuffle we’ve grown used to, in which our gov du jour confesses that revenues weren’t nearly as good as “projected” (read: in our wildest dreams) when the budget was first released in January, then launches into a long list of proposed cuts.

PlagueZombiesNope, the Prop 30 tax increase and an improved California economy have the state economy up and walking again … if a bit zombie-like. Brown led the zombies with a dreary but true warning that the economy is still under threat, with lots of stuff at the federal level (sequestration key among them) trickling down to hurt the state.

There’s also plenty wrong in California, as it trudges along dead-eyed and scary with a burden of up to $1.1 trillion of combined state and local government debt, and an over-sized, over-paid, over-coddled and under-performing quarter million state employees. We’re also waiting to see if the recent tax hikes and California’s ongoing regulatory zealotry will increase the exodus of business owners and the wealthy from the state, taking their tax payments with them.

Dem Response: Polite Hostility

The Democrat super-majority knows it has to say it’s dedicated to not squandering the current cash flow, but look at their reactions and you see some between-the-lines and not so between-the-lines clues that they are cued up and ready to spend, baby, spend. All quotes are from the SacBee.

I agree we must aggressively pay down our state’s debt and set aside money for a reserve, but there’s a disappointing aspect to this proposal. It’s important that we also begin making up for some of the damage done to tens of thousands of Californians. – Sen. Pres. Pro Tem  Darryl Steinberg

Our economy is showing signs of recovery but our budget is sending us mixed signals. The modest surplus we now possess took a lot of sacrifice to obtain and we cannot squander it. With many Californians still out of work, this budget is not just about paying down debt and saving money for a rainy day. It is also about growing our economy and broadening opportunities for Californians to succeed through education and a better environment for small business. – Assembly Budget Committee chair Bob Blumenfield

The May Revise continues to shortchange the most vulnerable in our state–such as those who need health care, child care, access to justice, or essential support services to escape poverty. – Dem Assemblyman Robert Dickinson

Mr. Dickinson, have you not heard that California spends three times more per capita on social welfare programs than it should, based on national per capita averages? We need to shortchange many welfare recipients more, not pay them more.

California’s fundamentals are still wrong. We are too dependent on taxing the wealthy, we are a long way from getting control over burgeoning pension and benefit costs, far too much education funding is wasted on fulfilling unnecessary reporting mandates from Sacramento and paying under-performing teachers, and, as mentioned above, our social welfare programs need to be brought in line with other states’.

But at least the budget’s in the black for a change.

 

Pension Oblivion

NBFD FerrariMy friend Shawn Dewayne, a financial planner who often includes tax-free municipal bonds in his customers’ portfolios, is concerned about the impact of out-of-control city/state pension costs is having on munis. When he saw this car recently near his Newport Beach office, it pretty much summed up the whole pension mess for him, as it does for me.

The plate translates as “Ex Newport Beach Fire Department” and it’s affixed to a 2013 Ferrari California 30, a car that retails for $208,000 before all the VERY costly extras and options Ferrari offers.  Shawn tells me that a week earlier he saw another very expensive car – a Shelby Cobra 427 – with the license plate “I (heart) STERS,” as in CalSTERS, the California teachers’ retirement fund. And keeping up the car/pension theme, he told me of a retired water district general manager who recently spent $200,000 on a professional rebuild of his 60′s supercar, an Olds 442. (Oh, how I lusted after that car in my youth!)

Sure, these three well off ex-public servants could have had lucrative side businesses, but more likely they’ve just got great retirement benefits. A retired fire chief, for example, can relax and buy a Ferrari on the $200,000+ annual pension benefit that’s common for that job, along with Cadillac (or Ferrari) medical coverage.

The Death of CalPERS?

There’s one thing – and only one thing – I like about California’s out-of-control retirement pension and benefit programs:  I get to throw back on the Left the word they love to over-use so much: Unsustainable!

The programs are so unsustainable that CalPERS just announced its going to hike the amounts municipalities who are enrolled with them must pay by … get this … 50 percent. Sure, they’re going to phase it in, but a 50 percent hike is still a 50 percent hike – and when you multiply it by 1.6 million, the number of California government workers covered by it, you’re looking at some very serious bucks.

Canyon LakeTo see how this hits home, look at the small town of Canyon Lake, a party town of a place in Riverside County. CalPERS already has increased the town’s contribution rate from 12.8 percent of an employee’s salary to 17.9 percent over the last three years, and the City Council was looking it going to 26.8 percent this summer – before the 50 percent rate hike starts to kick in. So they did what any logical person would do.

They decided to quit CalPERS. According to news reports, it’s going to cost Canyon Lake $660,000 to say farewell. That’s the amount of unfunded liability CalPERS is carrying on Canyon Lake’s small employee base, and the city figures the cost of financing the payment will be less than the cost of putting up with CalPERS jacking up rates instead of paring down benefits. Cities with more employees, especially those who have been shorting CalPERS because of their own financial unsustainabilities, will be looking at much bigger divorce settlements.

But they’re looking, nonetheless. I know of one special district that is trying to figure out how to raise the money needed to divorce itself from the system and I’m sure the upcoming rate hike will swell the numbers. If American business ingenuity kicks in as I suspect it will, you’ll see new financing tools to fund CalPERS split-ups. When that happens, the move toward sustainable pensions could become a stampede, leaving the nation’s biggest and baddest pension plan crushed in the dust.

That’s just the sort of “rebuilding California one catastrophe at a time” I predicted in Crazifornia, so don’t be surprised if it happens.

 

 

Public Servants? What Public Servants?

Pension Buffet

The originator of the term “public servant” is gone and long-forgotten, but kudos to whoever came up with that very impressive bit of spin. It certainly has a better connotation than “lazy, under-ambitious paper-shuffler.”

It’s not surprising many government workers identify with the term. If they have forsaken other, higher paying jobs so they can work diligently and tirelessly for the public’s benefit, then they have earned some right to use the word. But they lose that right if they’re clinging stubbornly to benefit plans that cheat the public.

It’s hard to think “public servant” when considering the members of various public employee unions who allow their union bosses to stubbornly and dogmatically protect unsustainable public employee pensions and retirement benefits, even while driving municipalities into insolvency and forcing governments to cut services to the public. If government workers see themselves as public servants, then the majority of them need to face reality, stand up at their next union meeting and shout:

I didn’t sign up for this! I don’t want my retirement plan to harm the citizens I have pledged to serve. It’s time to admit that human decency and professional responsibility top legal precedents. It’s time to be motivated by fairness, not greed! Hey, union boss! Rewrite our contracts!

Have you heard a single public employee union member – a single public servant – say that modest trimming around the edges of their benefit programs isn’t enough? That their fixed benefit retirement plans must be converted NOW to fixed contribution plans? That they shouldn’t expect municipalities that are going broke to continue to pay more into their employees’ retirement plans than the employees themselves pay? That the life-time free medical care in their contracts isn’t free – it costs the public?

No, of course you haven’t.

Until this becomes a chorus that drives union leaders to relent and allow full-blown rewriting of existing contracts, government workers are not public servants. Rather, they are public masters, lording over the public, not serving them.

I suggest you start calling them that, and when they ask what you mean, give them an earful.

 

Enough Already!

scared-on-the-slide[1]It’s been an election roller-coaster ride lately in California.

Last June’s mid-term election: UP! Voters in both San Jose and San Diego overwhelmingly passed ballot measures to limit the cost explosions going on with public employee pensions.

Last November’s general election: DOWN! Two tax measures passed, meaningful reform died and the Democrats swept every state-wide office and seized super-majorities in both the Senate and Assembly.

Tuesday’s LA municipal elections: UP AGAIN! Sure, the GOP candidate for mayor only got 16.6 percent of the vote, missing the run-off by – yikes! – 13 points. And sure, a “cost neutral” change to police and fire pension paperwork-shuffling passed. (Time will tell if it is really cost-neutral.)

EnoughOvershadowing those votes was the dismal, high-profile failure of Proposition A, which would have imposed a permanent one-half cent sales tax increase to fund the continuation of Los Angeles’ exorbitant “business as usual” big government money-squandering.

Had it passed, LA’s sales tax would have been 9.5 percent, one of the highest in the nation.

Here’s the list of would-be recipients of A’s largess: 911 emergency response services; firefighters, paramedics, and police officers (by protecting current staffing levels); community policing; senior services; after-school gang and drug prevention programs, and pothole and sidewalk repairs. LA voters decided it wasn’t worth it, and it failed by a whopping 55/45 margin – blowout numbers! – even though big government advocates like SEIU and the police and fire unions wasted $1.3 million trying to pass it.

It’s looking increasingly like November’s Prop 30 tax  hike is being seen by voters as the last tax they want to pass. When you consider that 66% of LA voters voted for Prop 30 and 55% voted against A, the shift in opinion in just four months is impressive testimony in support of the position that in even liberal LA, voters have had enough of higher taxes.

Public Servants or Buccaneers?

Pillage and PlunderThere’s a new retirement community for California’s public employees called Treasure Island. It’s a lovely place where they can “Harrr! Harrr! Harrr!” their way through their golden  years as they live off their treasure chests piled high with the plunder they stole from the people during their working years.

Treasure Island appears to be located in Fresno County. Surprised? You shouldn’t be:

Fresno County’s pension costs are expected to grow in the coming year — again — continuing to tie up more than one of every four dollars at the county’s disposal.

County leaders have taken steps to address the increasing burden, but their actions are yet to turn around a retirement system in which promises far exceed cash flow.

The increase in costs, detailed in a retirement report released last week, has put county administrators on damage control — trying to absorb the hit in next year’s budget while sparing already-underfunded county programs, from unmaintained parks to short-staffed libraries to a scaled-back Sheriff’s Office.

“It’s going to be very difficult for the county over the next few years,” Supervisor Debbie Poochigian said. “As pension costs go up, it just takes more of the pie and leaves less for everything else.”

The new retirement report projects that the county will have to contribute about $7 million more during the 2013-14 fiscal year over the current year to stay on top of its pension obligations — a total of $176 million.

That’s up 50% over five years.

Including retirement debt, about $212 million of the county’s roughly $1.8 billion budget next fiscal year will go toward pensions. (Fresno Bee)

When it becomes this bad – inflated, over-promised pensions taking up one quarter of a county’s budget, with the amount growing every year! – why aren’t “public” servants rising up and saying, “Enough! This is unconscionable! We can’t steal from the public like a bunch of buccaneers sailing about plundering and raping! Re-write our contracts NOW!”

But of course, they aren’t saying that, or anything like it.

Many ask why Muslims don’t speak out against terrorist jihad. It’s even worse with public employees, because they don’t just not speak out against unsustainable pensions. No, they (or the union reps they hide behind) shout down any voice of reason that calls these pirates’ pensions what they truly are – the legalized theft of public funds.

Time to Stop Bashing California?

WoodshedCrazifornia has been taken to the woodshed by liberal columnist Froma Harrop. Her piece Thursday in Real Clear Politics, Tough Times for California Bashers, declares:

[W]hen the Golden State conspicuously succeeds, California bashers find themselves at a loss. Until recently mired in deep budget deficits, California’s general fund is set to end next year in a surplus.
Surely deeper evil lies ready to bubble up, the bashers warn. To them, California resembles the phantom Rollo Tomasi from “L.A. Confidential” — the criminal “who gets away clean.”

It must especially pain conservatives that sunnier economic news partly results from voters directly rejecting Republican politicians and their agenda. A simplification here, but California’s famously dysfunctional politics have reflected Democrats’ desire to spend on certain public goals and Republican resistance to raising revenues needed to fund them.

So what did the voters do? Last November, they approved a temporary tax hike on themselves, expected to add $6 billion annually in revenues for the next seven years. And they handed Democrats a two-thirds supermajority in the state legislature, enabling them to raise taxes without Republican support.

Cornered by good news, some conservatives need to lash out.

I confess, I do lash a bit, but no, I’m hardly at a loss. Behind the liberals’ rush to launch into a rowdy rendition of Happy Days are Here Again remains a wealth of inconvenient truths they would rather ignore. Harrop certainly does.

She passes off the flight of companies and capital (both fiscal and intellectual) from the state with a Scarlet O’Hara-esque, “Right, and they’re no longer sewing sweatshirts in Manhattan or butchering cows in Chicago.” Cute, but it doesn’t turn the moving vans around. She lampoons our concerns about the costs inherent with the shift to subsidy-needing alternative energies without admitting our power costs are the highest in the nation and no one is predicting them to drop any time soon.

And she doesn’t even mention underfunded public employee retirement and health plans which will cost hundreds of billions of dollars to make whole. That’s billions, Froma, hundreds of ‘em. Oops. Was I lashing?

I could go on, but I sense you’re probably ahead of me on this anyway. If you’re not and still believe the Jerry Brown Choir that all is now better in California, I suggest you read Wayne Lusvardi’s response to Harrop at CalWatchdog, Is CA Really Barreling Down Recovery Road?