The Government Union War on Meritocracy

How can you persuasively counter arguments for diversity quotas, when implacable fanatics purporting to represent every identifiable group whose aggregate achievements fall short of the mean will argue it is discrimination, not merit, that determine outcomes? Expect no help from government unions. Resentment gives them passion, restitution gives them power. Undermining the meritocracy is key to their survival.

Imagine a public school system where the excellence of teachers was the only institutional criteria for their job security and prospects for career advancement. Imagine government bureaucracies where innovative, more effective practices were adopted even if it meant smaller budgets and fewer employees. Imagine law enforcement agencies that had zero tolerance for officers that abused their authority. Are we there yet? Not if government unions have anything to say about it.

But the government union war on the meritocracy goes well beyond protecting bad employees. Government unions representing K-12 teachers and college faculty have been overran by “social justice warriors” who preach identity politics as the new religious gospel and the new academic canon. They have taken their war on the meritocracy into the classrooms and lecture halls, saturating the curricula from kindergarten to graduate school. Their message? Unless you are a heterosexual white male, you are a victim of discrimination by heterosexual white males. You live in an unjust society. Merit, according to this doctrine, is a smokescreen. It is discrimination in disguise.

What do you do if you believe in meritocracy? What do you do about this?

Math SAT Scoring Distribution by Ethnicity – 2015

If you want to earn more money in a merit-based, productive market economy, quantitative reasoning skills are required. The more of these skills you’ve got, the more money you’ll earn. So what happens when you have far, far higher percentages of highly qualified individuals in some groups than in other groups?

When it comes to college admissions and college curricula, the solution of the social justice warriors, and the faculty unions who nurture them, is many faceted. Here are some of their mitigating strategies:

  • Invent “holistic” admission criteria that diminishes the importance of quantitative aptitude.
  • Concoct theories of cognition that claim math itself is an arbitrary and subjective expression of white power (yes, this really happened).
  • Create entire college departments that are academically weak but instead offer separatist political indoctrination.
  • Blame most if not all of the gap in aptitude on systemic discrimination by the “white patriarchy.”
  • Demand race-driven quotas of ever-expanding scope; in hiring, promotions, housing, wealth, political office, whatever.

The problem with these solutions, if you want to call them that, are their actual consequences. In pursuit of quota driven diversity, colleges are turning away qualified applicants at the same time as colleges are failing to produce anywhere near the number of STEM graduates that American industry demands. Meanwhile, the students that are waved in despite being marginally qualified to pursue higher education are being trained to ascribe any failures they may encounter to racism, and any successes they may encounter to fortuitous state intervention. And not least, there is the consequence of bitterness and cynicism being bred into the psyche of all those more qualified students and future employees who are passed over in favor of meeting diversity quotas.

How does one challenge the doctrine of equality over merit? How do you challenge allegations of systemic racism? How do you do it persuasively, with hard facts, but also with compassion and empathy? It’s not easy. College youth need passion, they need a cause, they need clarifying polarities. The teachers unions offer them a good one: A rich and wealthy white patriarchy that has exploited people of color for centuries, one that must be resisted, uprooted, and replaced.

Tough love arguments should be part of any campaign of persuasion. Reality therapy. Why are people with lower test scores admitted to college if they’re being discriminated against? That’s ridiculous. And why do they think taking classes that replace difficult coursework with political indoctrination – fomenting resentment and advocating separatism – are going to give them marketable skills? Do they really believe they need on-campus “cultural safe spaces”? Aren’t those just a 21st century version of Jim Crow laws? Where does this end? And why do Asians perform so well on college aptitude tests? Why are Asians so successful economically? Aren’t they also “people of color”? Could it be because they study so diligently, and that a meritocracy is colorblind?

Along with tough love, opponents of quotas should offer understanding. It is our individuality that defines our abilities and challenges much more than the groups we’re a part of. All ethnic groups are collections of individuals with infinite diversity; short and tall, thin and obese, weak and strong, plain and beautiful, slow and smart, timid and assertive, surly and charming, lucky and unlucky, good and bad. As individuals we succeed and we fail. We endure crushing disappointments and spectacular success. Life is not always easy or fair – for anyone. We are joined by our common humanity, no matter what color we are. And nothing overcomes prejudice, should it ever exist, better than a smile.

Despite occasional rhetorical acknowledgments, government unions don’t like the message of individual accountability. But that is the message that must prevail, if we are to avoid the tyranny of quota-driven equality of outcome.

REFERENCES

Race gaps in SAT math scores are as big as ever – Brookings Institution (source for chart)
https://www.brookings.edu/blog/brown-center-chalkboard/2017/02/01/race-gaps-in-sat-math-scores-are-as-big-as-ever/

Without Government Unions, there Would be No Gas Tax Increase

Nobody argues that California’s roads need huge upgrades. But the solution didn’t require the $0.12 per gallon tax hike that goes into effect today. The root cause of these neglected roads – and the reason even more taxes will never be enough to fix them – is the power of public sector unions, whose agenda is consistently at odds with the public interest. Let us count the ways.

1 – CalTrans mismanagement:

CalTrans could have done a much better job of maintaining California’s roads. One of the most diligent critics (and auditors) of CalTrans is state Senator John Moorlach (R, Costa Mesa), the only CPA in California’s state legislature. Last year, Moorlach released a report on CalTrans which he summarized in “7-Step Fix for ‘Mismanaged’ Caltrans,” an article on his official website. Just a few highlights include the following:

  • In May 2014 the Legislative Analyst Office determined that CalTrans was overstaffed by 3,500 architects and engineers, costing over $500 million per year.
  • While to an average state transportation agency outsources over 50% of its work, CalTrans outsources only 10% of its work. Arizona and Florida outsource more than 80%.
  • 54% of CalTrans staff is at or near retirement age, so a hiring freeze would reduce staff merely through attrition, without requiring layoffs.

But Moorlach didn’t make explicit the reason CalTrans is mismanaged. It’s because the unions that run Sacramento don’t want to outsource CalTrans work. The unions don’t want to reduce CalTrans headcount, or hold CalTrans management accountable. Those actions might help Californians, but they would undermine union power.

2 – Bullet train boondoggle:

Money that could have been allocated to maintain and improve California’s roads is being squandered on a train that will do nothing to ameliorate California’s transportation challenges. A LOT of money. According to the American Road and Transportation Builders Association, California’s freeways can be resurfaced and have a lane added in each direction at a cost of roughly $5.0 million per mile in rural areas, about twice that in urban areas.

Meanwhile, the latest estimate for California’s “bullet train,” is $98 billion (that’s $245 million per mile), thanks to construction delays, and design challenges including nearly 50 miles of tunnels through seismically active mountains to the north and south. And hardly anyone is going to ride it. Ridership won’t even pay operating costs. But Sacramento pushes ahead with this monstrous waste when that same money could (at the urban price of $10 million per mile) resurface and add a lane in each direction to 10,000 miles of California’s freeways. Imagine smooth, unclogged roads. It’s not impossible. It’s just policy priorities.

But while bad roads destroy the chassis of millions of cars and trucks, and commuters endure stop-and-go traffic year after year, the California High Speed Rail Authority dutifully pushes on. Why?

Because that’s what the government employee unions want. They don’t want roads, with all the flexibility and autonomy that roads offer. They want to create a gigantic high-speed rail empire, with tens of thousands of new public employees to drive the trains, maintain the trains, maintain the tracks, and provide security, running up staggering annual deficits. But all of them will be members of public sector unions.

3 – All rapid transit boondoggles:

In a handful of very dense urban areas around the U.S., fast intercity trains make economic sense. But most light rail schemes, along with laughably absurd “streetcar” schemes that actually block urban lanes sorely needed by vehicles, do not achieve levels of ridership that even begin to justify their construction when the alternative is using that money for better, wider connector roads and freeways. The impact of ride sharing apps, the advent of non-polluting cars, and the option of using buses to accomplish mass transit goals all speak to the superior versatility of roads over rail for urban transportation.

So why do California’s cities continue to poor billions into light rail and streetcars, when that money could be used to unclog the roads?

To reiterate: The public sector unions that run California want tens of thousands of new public employees to operate the trains and streetcars, maintain them, maintain the tracks, and provide security, running up staggering annual deficits. But doing this means that public sector union membership – hence public sector union power – will increase.

4 – CEQA reform so people can live closer to the jobs:

The median home value in the United States today is $202,700. The median home value in California today is $509,600, 2.5 times as much! There is no shortage of land in California, and the alleged shortages of energy and water are self-inflicted as the result of policies enacted by California’s state legislature. But instead of reforming California’s Environmental Quality Act, SB 375, AB 32, and countless other laws that have made building homes in California nearly impossible, California’s legislature is doubling down on more government solutions – primarily to subsidize either extremely high density housing, or subsidized housing for the economically disadvantaged, or both.

None of this is necessary. Outside of California’s major urban centers, there is no reason homes cannot be profitably built and sold at a median price of $202,700, and there is no reason the people living in those homes cannot drive or ride share to work on fast, unclogged freeways.

But California’s public sector unions want more regulations on home building, and they want more subsidized public housing. Because those solutions, even though inadequate and coercive, enable them to hire vast new bureaucracies to enforce the many regulations and administer the public assets. Unleashing the private sector to build affordable homes in a competitive market would rob these unions of their opportunity to acquire more power. It’s that simple.

5 – Insatiable appetite for pension fund contributions:

According to a California Policy Center study, taking barely adequate annual employer pension contributions into account, the average unionized state/local government worker in California makes over $120,000 per year in pay and benefits. But to adequately fund their promised pension benefits, employers will need to pay at least another $20,000 per employee to the pension funds. This funding gap, which equates to over $20 billion per year, is the additional amount that is required to cover the difference between how much California’s public employee pension funds currently collect from taxpayers, and how much they need to collect to keep the promises that union controlled politicians have made to the government unions they “negotiate” with. That is a best-case scenario.

It could be much worse. A 2016 California Policy Center analysis (ref. table 2-C) estimated that under a worst-case scenario, the annual costs to fund California’s public employee pension funds could cost taxpayers nearly $70 billion more per year than they are currently paying.

And by the way, California’s pension funds are themselves almost entirely under the control of public sector unions – research the background of CalPERS and CalSTRS board directors to verify the degree of influence they have. Absent significant reform, funding California’s public employee pensions is going to continue to consume every dollar in new taxes for the next several decades. The cumulative financial impact of funding these pensions is easily triple that of the bullet train’s $100 billion fiasco, probably much more.

Let’s be perfectly clear. Government unions control California. They collect and spend over $1.0 billion every year, and spend most of that money on either explicit political campaigning and lobbying, or soft advocacy via expensive public relations campaigns and sponsored academic studies. Their presence is felt everywhere, from local transit districts to the governor’s office. They make or break politicians at will, by outspending or outlasting their opponents. At best, California’s most powerful corporate players do not cross these unions, often they collude with them.

California’s public sector unions operate as senior partners in a coalition that includes left-wing oligarchs especially in the Silicon Valley, extreme environmentalists and their powerful trial lawyer cohorts, and the Latino Legislative Caucus – usurped by leftist radicals – and their many allies in the social justice/identity politics industry. The power of this government union led coalition is nearly absolute, and the consequences to California’s private sector working class have been nothing short of devastating.

Government unions force California’s agencies to over-hire, overpay, and mismanage, because that benefits their members even as it harms the public. These unions enforce absurd policy priorities that further harm the public in order to increase their power. They are the reason California has increased its gas tax.

REFERENCES

Pump bump: California drivers to pay 12 cents more per gallon starting Wednesday – San Jose Mercury, Oct. 31, 2017
http://www.mercurynews.com/2017/10/31/pump-bump-california-drivers-to-pay-12-cents-more-per-gallon-starting-wednesday/

California’s gas tax increases Wednesday – Los Angeles Times, October 31, 2017
http://www.latimes.com/politics/la-pol-ca-gas-tax-increase-political-battle-20171031-story.html

How much you’ll REALLY pay in gasoline tax in California – San Diego Union Tribune, Apr. 23, 2017
http://www.sandiegouniontribune.com/business/energy-green/sd-fi-california-gastax-20170413-story.html

What Californians Could Build Using the $64 Billion Bullet Train Budget – California Policy Center, Mar. 21, 2017
http://californiapolicycenter.org/what-californians-could-build-using-the-64-billion-bullet-train-budget/

American Road and Transportation Builders Association – FAQs, ref. “How much does it cost to build a mile of road?
https://www.artba.org/about/faq/

High-Speed Rail Delay More than Triples Planned Cost to San Jose – San Jose Inside, Oct. 2, 2017
http://www.sanjoseinside.com/2017/10/02/high-speed-rail-delay-more-than-triples-planned-cost-to-san-jose/

A 13.5-mile tunnel will make or break California’s bullet train – Los Angeles Times, Oct. 21, 2017
http://www.latimes.com/local/california/la-me-bullet-train-tunnel-20171021-story.html

California Environmental Quality Act – Wikipedia
https://en.wikipedia.org/wiki/California_Environmental_Quality_Act

State Senate bills aim to make homes more affordable, but they won’t spur nearly enough construction – Los Angeles Times, Aug. 11, 2017
http://www.latimes.com/politics/la-pol-ca-state-housing-deal-effects-20170811-htmlstory.html

California’s Public Sector Compensation Trends – California Policy Center, Jan. 2017
http://californiapolicycenter.org/californias-public-sector-compensation-trends/

What is the Average Pension for a Retired Government Worker in California? – California Policy Center, Mar. 2017
http://californiapolicycenter.org/what-is-the-average-pension-for-a-retired-government-worker-in-california/

The Coming Public Pension Apocalypse, and What to Do About It – California Policy Center, May 2016
http://californiapolicycenter.org/the-coming-public-pension-apocalypse/

 

Napa fires highlight huge disparities between wealthy firefighters and ‘slave laborers’

How Can Local Officials Prepare for the Upcoming Janus vs AFSCME Ruling?

“A public employer shall provide all public employees an orientation and shall permit the exclusive representative, if applicable, to participate.”
– Excerpt from California State Assembly Bill AB 52, December 2016

In plain English, AB 52 requires every local government agency in California to bring union representatives into contact with every new hire, to “allow workers the opportunity to hear from their union about their contractual rights and benefits.” What’s this all about?

As explained by Adam Ashton, writing for the Sacramento Bee, “New California government workers will hear from union representatives almost as soon as they start their jobs under a state budget provision bolstering labor groups as they prepare for court decisions that may cut into their membership and revenue.”

Ashton is referring to the case set to be heard by the U.S. Supreme Court early next year, Janus v. American Federation of State, County, and Municipal Employees. A ruling is expected by mid-year. It is possible, if not likely, that the ruling will change the rules governing public sector union membership. In pro-union states like California, public sector workers are required to pay “agency fees,” which constitute the vast majority of union revenue, even if they laboriously opt-out of paying that portion of union dues that are used explicitly for political campaigning and lobbying.

Needless to say, this law is designed to allow union representatives to get to newly hired public employees as soon as they walk in the door, in order to convince them to join the union and pay those dues. But can anyone argue against union membership?

The short answer is no. To deter such shenanigans, SB 285, thoughtfully introduced by Senator Atkins (D-San Diego), adds the following section to the Government Code: “A public employer shall not deter or discourage public employees from becoming or remaining members of an employee organization.” Governor Brown signed this legislation on October 9th. So much for equal time.

So what can local elected officials do, those among them who actually want to do their part to attenuate the torrent of taxpayer funded dues pouring into the coffers of public employee unions in California? Can they provide the contact information for public employees to outside groups who may be able to provide equal time?

Once again, the answer is no. To deter access even to the agency emails of public employees, a new law bans public agencies from releasing the personal email addresses of government workers, creating a new exemption in the California Public Records Act. Those email addresses could be used by union reformers to provide the facts to public employees. How this all became law provides another example of just how powerful public sector unions are in Sacramento.

In order to quickly get the primary provision of AB 52 enacted, which allows union representatives into new public employee orientations, along with a provision to deny public access to public employee emails, both were added at the last minute to the California Legislature’s 2017-2018 budget trailer bill, AB 119. The union access to new employee orientations is Article 1. The denial of email access is Article 2.

So how are the unions preparing for the Janus ruling? By (1) making sure the union operatives get to new employees as soon as they begin working, (2) by preventing agency employers from saying anything to deter new employees from joining the unions, and (3) by preventing anyone else from getting the official agency emails for new employees in order to inform them of their rights to not join a union. That’s a lot.

So what can you do, if union reformers control a majority on your agency board or city council, and you in a position to try to oppose these unions?

First, examine the legal opinions surrounding the wording of SB 285, “A public employer shall not deter or discourage public employees from becoming or remaining members of an employee organization.” The words “deter” and “discourage” do not in any way preclude providing facts. Consider this preliminary opinion posted on the website of the union-controlled Public Employee Relations Board:

“One major concern I have is that the terms “deter” and “discourage” are not defined. What if an employee comes to an employer with questions about what it means to be a member of the union, and the employer provides truthful responses. For example, assume that the employer confirms that being a member will mean paying dues. What if that has the effect of deterring or discouraging the employee from joining the union?”

It is possible for employers to present facts regarding union membership without violating the new law. Find out what disclosures remain permissible, and make sure new employees get the information.

Another step that can be taken, although probably not by local elected officials, is to challenge the new law that exempts public agency emails from public information act requests. And apart from accessing their work emails, there are other ways that outside groups can communicate with public employees to make sure they are aware of their rights.

California’s public employee unions collect and spend over $1.0 billion per year. If the Janus vs AFSCME ruling takes away the ability of government unions to compel payment of agency fees, and imposes annual opt-in requirements for both agency fees and political dues, these unions will collect less money. How much less will depend on courage and innovative thinking on the part of reformers who want to rescue California from unionized government.

REFERENCES

Get a state job and meet your labor rep: How state budget protects California unions, Sacramento Bee, June 21, 2017
http://www.sacbee.com/news/politics-government/the-state-worker/article156146364.html

AB 52, Public employees: orientation and informational programs: exclusive representatives, California Legislature
https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180AB52

Janus v. American Federation of State, County, and Municipal Employees, Supreme Court of the United States Blog
http://www.scotusblog.com/case-files/cases/janus-v-american-federation-state-county-municipal-employees-council-31/

SB 285, Atkins. Public employers: union organizing, California Legislature
https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180SB285

2017-2018 budget trailer bill, AB 119, California Legislature
https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180AB119

California Public Records Act, Office of the Attorney General
http://ag.ca.gov/publications/summary_public_records_act.pdf

Fact Sheet – AB 52 (Cooper) & SB 285 (Atkins), California Labor Federation
http://calaborfed.org/wp-content/uploads/2017/04/2-AB-52-Cooper-and-SB-285-Atkinsweb.pdf

Legislative Bulletin – California School Employees Association
http://www.csea.com/web/portals/0/csea_pdf/leg_rpt.pdf

SB 285: Public Employers Cannot Discourage Union Membership, Public Employee Relations Board
http://www.caperb.com/2017/04/04/sb-285-public-employers-cannot-discourage-union-membership/

Public employee unions wield hefty Atkins stick [SB 285], San Diego Reader
https://www.sandiegoreader.com/news/2017/aug/28/ticker-public-employee-unions-wield-atkins-stick/#

Coping With the Pension Albatross

Instead of the cross, the albatross
About my neck was hung.
–  Samuel Taylor Coleridge, The Rime of the Ancient Mariner, 1798

In Coleridge’s famous poem, a sailor who killed an albatross has it hung around his neck as punishment. Since then, the albatross, which sailors used to consider good luck, has come to symbolize an oppressive burden. When it comes to ensuring the financial sustainability of California’s cities and counties, few burdens have become more oppressive than funding employee pensions.

A study issued earlier this month entitled “Pension Math: Public Pension Spending and Service Crowd Out in California, 2003-2030,” by the Stanford Institute for Economic Policy Research, offers comprehensive and visceral proof of just how big the pension albatross has become around the fiscal necks of California’s cities and counties, and how much bigger it’s likely to grow. Recent articles by pension expert Ed Mendel and political watchdog Steve Greenhut provide excellent summaries. To distill the “Pension Math” study to a few ominous and definitive quotations, here are two that describe how dramatically pension costs have eaten into California’s civic budgets:

“Employer pension contributions from 2002-03 to 2017-18 have increased at a much faster rate than operating expenditures. As noted, pension contributions increased an average of 400%; operating expenditures grew 46%. As a result, pension contributions now consume on average 11.4% of all operating expenditures, more than three times their 3.9% share in 2002-03.”

And the fun is just beginning:

“The pension share of operating expenditures is projected to increase further by 2029-30: to 14.0% under the baseline projection—that is, even if all system assumptions, including assumed investment rates of return, are met—or to 17.5% under the alternative projection.”

Back in 2016, the California Policy Center produced a study entitled “The Coming Public Pension Apocalypse, and What to Do About It.” In that study (ref. Table 2-C), the implications of adopting responsible paydowns of the unfunded liability (20 year straight-line amortization which CalPERS is now recommending), are explored, along with various rate-of-return assumptions. Quote:

“A city that pays 10% of their total revenues into the pension funds, and there are plenty of them, at an ROI of 7.5% and an honest repayment plan for the unfunded liability, should be paying 17% of their revenues into the pension systems. At a ROI of 6.5%, these cities would pay 24% of their revenue to pensions. At 5.5%, 32%.”

These are staggering conclusions. Only a few years ago, opponents of pension reform disparaged reformers by repeatedly asserting that pension costs only consumed 3% of total operating expenses. Now those costs have tripled and quadrupled, and there is no end in sight. What can local elected officials do?

The short answer is not much. At least not yet. The city of Irvine provides a cautionary example of how a city did everything right, and still lost ground. In 2013, Irvine’s city council resolved to eliminate their unfunded pension liability in 10 years by making massive extra annual payments out of their reserve fund. As reported in detail last week in the article “How Fraudulently Low “Normal Contributions” Wreak Havoc on Civic Finances,” here is the upshot of what happened in Irvine between 2013 and 2017:

“While the stock market roared, and while Irvine massively overpaid on their unfunded liability, that unfunded liability still managed to increase by 51%.”

There are plenty of ways for California’s cities and counties to get the pension albatross off their fiscal necks, except for one thing. The people who receive these generous pensions (the average pension for a full-career retired public employee in California, not including benefits, was $68,673 in 2015) are the same people who, through their unions, exercise almost absolute control over California’s cities and counties.

Spokespersons for public sector unions scoff at this assertion. “Politicians are mismanaging our cities and counties,” they allege, “blame the politicians.” And of course they’re right. Politicians do run our cities and counties. But these politicians have their campaigns funded by the public sector unions. Even when a majority of city council or county supervisor seats are won by politicians willing to refuse campaign contributions from public sector unions, any reforms they enact are reversed as soon as the unions can reestablish a majority. And if reformers can stay in control of a city or county through multiple election cycles, any reforms they enact are relentlessly fought in court by the unions. Meanwhile, California’s union controlled state legislature enacts law after law designed to prohibit meaningful reform.

This is the reality we live in. Californians pay taxes in order to pay state and local government employees a wage and benefit package that averages twice what private sector workers earn.

Here’s what can be done:

(1) Convince citizens to always vote against any candidate supported by a public sector union.

(2) Convince public sector union officials that the pension crisis is real so at least they will agree to minor reforms. The recent Stanford study, along with the recently introduced CalPERS agency summaries, should provide convincing leverage.

(3) Continue to implement incremental reform either through council action, local ballot measures, or in contract negotiations. They may include:
– lower pension formulas for new employees
– lower base pay in order to lower final pension calculations
– eliminating binding arbitration
For more ideas, refer to Pension Reform – The San Jose Model, Pension Reform – The San Diego Model, and Reforming Binding Arbitration.

(4) Support policies designed to lower the cost-of-living. California’s union controlled legislature has created artificial scarcity in almost all sectors of the economy, driving prices up and providing the justification for public employees to demand wages and benefits that allow them to exempt themselves (but not the rest of us) from the consequences of those policies.

(5) Wait for resolution of two critical court cases. The first is the case Janus vs. AFSCME, challenging the right of government unions to charge “agency fees” to members who opt out of membership. That case is set to be heard by the U.S. Supreme Court in 2018. The second is the ongoing court challenges to the “California Rule.” Attorneys representing California’s government unions claim the California Rule prohibits changing the formulas governing pension benefit accruals even for work not yet performed. California’s Supreme Court is set to hear this case after an appeals court rules on three cases – from Alameda, Contra Costa, and Merced counties. Both of these cases should be resolved sometime in 2018.

The Janus case could decisively lower the amount of money public sector unions currently manage to extract from dues paying public employees, which in California alone is estimated to exceed $1.0 billion per year. A successful challenge to the California Rule would pave the way for real pension reform. Current legal interpretations of the California Constitution bar reductions to pension formulas, even for work that has not yet been performed. This is the so-called “California Rule.” If that interpretation were overturned, pension benefit accruals for future work done by existing employees could be lowered to financially sustainable levels.

All in all, today the pension albatross weighs heavy on the fiscal necks of California’s public agencies, and it’s getting worse, not better. If there were easy answers, the problem would have been solved long ago.

REFERENCES

Pension Math: Public Pension Spending and Service Crowd Out in California, 2003-2030
https://siepr.stanford.edu/sites/default/files/publications/17-023.pdf

How pension costs reduce government services, Ed Mendel, CalPensions, 10/09/2017
https://calpensions.com/2017/10/09/how-pension-costs-reduce-government-services/

Forget the scary pension future; study confirms the crisis is hitting now, Steve Greenhut, California Policy Center, 10/10/2017
http://californiapolicycenter.org/forget-scary-pension-future-study-confirms-crisis-hitting-now/

The Coming Public Pension Apocalypse, and What to Do About It
http://californiapolicycenter.org/the-coming-public-pension-apocalypse/

How Fraudulently Low “Normal Contributions” Wreak Havoc on Civic Finances
https://calocalelectedofficials.org/fraudulently-low-normal-contributions-wreak-havoc-civic-finances/

What is the Average Pension for a Retired Government Worker in California?
http://californiapolicycenter.org/what-is-the-average-pension-for-a-retired-government-worker-in-california/

California’s Public Sector Compensation Trends
http://californiapolicycenter.org/californias-public-sector-compensation-trends/

Average Full Career Pension by City (all CalPERS employers), Transparent California
http://transparentcalifornia.com/pensions/2016/calpers/employers/?s=-average

Public Agency Actuarial Valuation Reports by CalPERS Agency
https://www.calpers.ca.gov/page/employers/actuarial-services/employer-contributions/public-agency-actuarial-valuation-reports

Pension Reform – The San Jose Model
https://calocalelectedofficials.org/pension-reform-san-jose-model/

Pension Reform – The San Diego Model
https://calocalelectedofficials.org/pension-reform-the-san-diego-model/

Reforming Binding Arbitration
https://calocalelectedofficials.org/reforming-binding-arbitration/

Marin County Discloses Debt Balances on Property Tax Bills

How would you like it if every time you received a property tax bill from your county assessor, you also received a notice that disclosed the amount of the county’s total debt, annual operating expenses, total unfunded liability for pensions, and total unfunded liability for retirement healthcare?

You might not like it, but you’d have a better understanding of what all those property taxes are paying for. And in Marin County, back in 2013, after years of effort by a local group of activists – Citizens for Sustainable Pension Plans – that’s exactly what happened.

Take a look at the copy of this “2016-2017 Property Tax Information” courtesy of Marin County, sent to one of their property owning taxpayers. Towards the bottom of the page, in the section entitled “MARIN COUNTY DEBT AND FINANCIAL DATA,” even the casual observer can quickly see that (as of 6/30/2015, the numbers are over a year behind) Marin County recognizes $549 million of debt on their balance sheet. The not so casual observer might have additional questions…

 *   *   *

QUESTIONS RAISED BY “MARIN COUNTY DEBT AND FINANCIAL DATA”

For example, why does the total “Retiree Related Debt” of $746 million exceed the “Total Liabilities per Balance Sheet” of $549 million? While the 6/30/2015 Consolidated Annual Financial Report (CAFR) for Marin County does report total liabilities of $549 million on page 9, “Condensed Statement of Net Position,” there is no schedule anywhere in the remaining document that provides the details behind that number, making reconciliation impossible. A simple keyword search on the number “549” proves this.

Elsewhere in Marin County’s 6/30/2015 CAFR, on page 61 “Note 8: Long Term Obligations,” the balance payable on pension obligation bonds is disclosed at $103 million, which matches the amount disclosed on the property tax information. Since on this same chart in Marin County’s 6/30/2015 CAFR the “Total Long Term Obligations” are reported to be $286 million, it is reasonable to assume that Marin County’s non-retirement related debt is the difference, i.e., $176 million.

So what does this all mean to the non-casual observer?

It means that Marin County’s total long-term debt as of 6/30/2015 was $922 million, and $746 million of that was for earned but currently unfunded retirement obligations to county workers. That is, 81 percent – eighty-one percent – of Marin County’s long-term debt is to fulfill promises the supervisors made to provide pensions and healthcare to their retirees, but have not paid for. At 7%, just the annual interest on this $746 million is $52 million per year. Imagine what Marin County could do with an extra $52 million per year.

There’s more. The non-casual observer will note that just the interest on Marin County’s unfunded retirement obligations, $52 million per year, equates to 11.2% of their entire reporting operating expenses in the 2014-2015 fiscal year, $464 million. But Marin County doesn’t just have to pay interest on their unfunded retirement obligations, they have to pay them off.

In the private sector, compliant with reforms for which, inexplicably, public sector agencies are exempt, pension systems have to amortize (pay off) their unfunded liabilities within seven years. At that rate, at 7%, the payment on Marin County’s unfunded retirement liabilities would be $138 million per year. That would be the financially responsible thing to do.

Wait! There’s much more. After all, Marin County doesn’t have to just pay off their unfunded retirement obligations, they have to make ongoing payments, as a percent of payroll, for the future pension benefits their active employees earn every year they’re working. How much is that?

Learning how much Marin County spends on payroll is tough, even though it should not be. Their CAFR discloses costs per department, in some cases, but finding a simple “Total Costs for Employees” appears to be impossible.

Rather than wade through Marin County’s entire 224 page CAFR for FYE 6/30/2015, payroll information can be found on Transparent California. Going to their Marin County page and downloading the Excel spreadsheet readily reveals that in 2016 they spent $275 million on pay and benefits, roughly 60% of their total expenditures. Payments for benefits – mostly retirement but also for current healthcare – totaled $71 million of that. Needless to say, that $71 million is not nearly enough to pay for (1)  current healthcare insurance plus (2) currently earned pension and (3) retirement healthcare benefits, along with (4) any sort of aggressive paydown of the debt for retirement benefits earned in prior years, but not funded at the time. Even if you add in the amount employees themselves contribute via withholding (Information on that? Somewhere. Good luck finding it).

If you’ve made it this far, braving this mind numbing arcana that obfuscates one of the greatest betrayals of the people by their government in American history, let’s break this down just a bit further.

Even on a 30 year repayment schedule, at 7%, Marin County’s unfunded retirement debt of $746 million would require an annual payment of $60 million. Coming out of $71 million, that leaves $11 million to work with (plus whatever employees contribute via withholding), to pay (1) current healthcare insurance AND (2) whatever new retirement healthcare benefits were earned in that year, AND (3) whatever new pension benefits were earned in that year. This amount paid to fund pension benefits earned in the current year, called the “normal contribution,” is usually expressed as a percent of payroll. According to Transparent California, Marin County’s base payroll in 2016 was $186 million. That means that if they were making just the bare minimum payments on their unfunded retirement liabilities, their total payments for currently earned benefits – normal pension contribution plus normal OPEB contribution, plus current year healthcare, plus whatever other benefits they offer – only amounted to 6% of payroll. Only six percent! There is no way that difference was made up via employee contributions.

Based on these numbers, it appears impossible that Marin County is adequately funding retirement benefits for their employees. Not even close. And it should be easy to coax these numbers from the reports available, and it should be easy for anyone with a reasonable amount of financial literacy to find these numbers and come to the same conclusion. It is not.

RECOMMENDATIONS

(1)  Make a “Debt and Financial Data” disclosure mandatory on all property tax bills, in all California counties.

(2)  Have this data include the following twelve numbers, with the expense subtotals showing the percentage of total expenses, and the debt balance subtotals showing the percentage of total debt:

  • Total county expenditures,
  • Total county expenses for payroll and benefits,
  • Amount paid towards retirement healthcare (OPEB) earned in current year,
  • Amount paid towards unfunded retirement healthcare (earned in previous years),
  • Amount paid towards retirement pensions earned in current year,
  • Amount paid towards unfunded retirement pensions (earned in previous years),
  • Amount paid on pension obligation bonds,
  • Amount paid for all other debt,
  • Total debt,
  • Total debt for healthcare,
  • Total debt for pensions (unfunded pension liability),
  • Total debt for pension obligation bonds.

(3)  Include on county CAFRs for the same year a section that contains all of the above information, with a through reconciliation to the official financial statements and schedules, so even the casual observer can verify the accuracy (or at least the consistency) of all numbers reported on the property tax schedule.

REFERENCES

Marin County Board of Supervisors, 7/30/2013 Minutes (ref. item 3, page 1)
http://marin.granicus.com/MinutesViewer.php?view_id=33&clip_id=6714&doc_id=c40ad825-4c42-1031-bc96-29b50f2ba9d1

Marin County Board of Supervisors, Meeting Archives
https://www.marincounty.org/depts/bs/meeting-archive

Marin County Citizens for Sustainable Pension Plans
http://marincountypensions.com/index.html

Marin County 2015-2016 Consolidated Annual Financial Report
https://www.calpers.ca.gov/docs/forms-publications/cafr-2016.pdf

Marin County Archive of Consolidated Annual Financial Reports
https://www.marincounty.org/depts/df/financial-reports

Transparent California, 2016 salary and benefit payments for Marin County
http://transparentcalifornia.com/salaries/2016/marin-county/