Brown’s latest budget belies his fiscally conservative rhetoric

At last week’s budget press conference, Governor Jerry Brown warned of the threat of a recession and the risk to California’s budget from federal health care legislation, but the details of his 2017-18 budget plans failed to mirror his cautionary rhetoric.

Forget fiscal responsibility: Jerry Brown embraces pension shell game

The Brown administration decided to (kind of, sort of) tackle the state’s massive and growing level of unfunded liabilities – i.e., the hundreds of billions of dollars in taxpayer-backed debt to fund retirement promises made to the state’s government employees. It’s best to curb our enthusiasm, however. The governor didn’t have much of a choice.

$100,000 Club: 86 Lifeguards Earn Over $100K Per Year

Nice Retirement! All L.A. County lifeguards earned total compensation of more than $100,000 last year.

Nice Benefits! Add in health and retirement, and 128 L.A. County lifeguards earned total compensation of over $100,000 last year.

Los Angeles County boasts the world’s largest professional lifeguard association. But most of the association’s 850 guards work seasonally. The incomes of the 150 year-round lifeguards can seem surprisingly rich to anyone raised on the hit 1990s TV show, Baywatch – or anyone who worked as a summer lifeguard at the local pool.  

Getting the exact number of Los Angeles County lifeguards was a bit of a challenge. We called up the Los Angeles County Fire Department. They transferred us to the Lifeguard Division in Manhattan Beach. That’s where we learned there are about 850 lifeguards but just 150 full-time lifeguards. The state controller’s website shows about 750 seasonal workers and about 120 full-timers. Transparent California shows over a thousand total lifeguards in 2015.

Here’s the list of the 10 highest paid lifeguards in LA County, which includes total pay and benefits. This list was pulled from the State Controller’s Office and Transparent California:

Name Job Title Total Pay and Benefits
Adam Uehara Captain $314,899.69
Daniel Douglas Captain $297,355.93
Fernando Boiteuz Assistant Chief $287,064.96
Steve Moseley Chief $278,033.31
Terry Yamamoto Section Chief $265,972.43
Kenichi Ballew-Haskett Captain $239,342.29
Remy Smith Captain $225,417.38
Jeffrey Horn Captain $225,211.22
Erik Albertson Section Chief $223,103.25
Michael McIlory Captain $220,720.37

There are 93 “Lifeguard Specialists” who earn an average total compensation of $148,000. At least 86 lifeguards earn salaries in excess of $100,000. Add in other benefits, and 128 lifeguards earn total compensation above $100,000. While we don’t know the details about lump pay and “other pay”, some individuals make excessive amounts in those categories.  You can see each lifeguard’s pay here.

The cost between the full-time and seasonal lifeguards is massive. The average total wages for a full-time lifeguard is $115,995, while a seasonal lifeguard is $14,092. The average full-time lifeguard has a benefit package of $47,281. A seasonal lifeguard has a benefits package of $2,046.

Though there is not much accumulated overtime in the group, one captain earned base pay of $114,204 – and clocked $125,864 in overtime.

American Federation of Teachers Costly Staff Spending

Dropout Nation recently reported on the American Federation of Teachers’ 2015-2016 financial disclosure to the U.S. Department of Labor. As you would expect, the nation’s second-largest teachers’ union spent big on influencing Democratic presidential nominee Hillary Clinton and her apparatchiks, as well as pouring heavily into what should be like-minded advocacy and nonprofit groups.

But AFT’s big spending doesn’t just end with political campaigns and co-opting minority as well as hardcore progressive groups. The union even spends big on its own staff and operations.

Start with AFT President Rhonda (Randi) Weingarten, whose paychecks put her in the top five percent of the nation’s income earners even as she engages in class warfare rhetoric. The union paid Weingarten $497,311 in 2015-2016, just a couple hundred dollars more than she pulled down in the previous year.

Also well-paid by the union is Loretta Johnson, who serves as its secretary-treasurer; her $358,225 in 2015-2016 was a grand or so higher than in the previous year. Meanwhile Mary Catherine Ricker, the former Saint Paul Federation of Teachers boss who now serves as the union’s number two (and in the process, serving as an obstacle to United Federation of Teachers boss Michael Mulgrew’s ambitions to succeed Weingarten as head of the national union), was paid $311,311, a 5.4 percent increase over her pay in 2014-2015.

Altogether, the AFT’s top three leaders collected $1.2 million last fiscal year, a slight increase over the $1.1 million paid to them by the union in 2014-2015.

Also making bank are AFT’s staffers, though there are slightly fewer of them this time around. Two hundred twenty-two staffers earned more than $100,000 in 2015-2016, seven fewer than the 229 in the previous year. Three out of every five staffers at AFT national headquarters earn six-figure sums. Among the union’s high-paid mandarins: Michelle Ringuette, the former Service Employees International Union staffer who is now Weingarten’s top assistant, made $230,736, while Michael Powell, who serves as Weingarten’s mouthpiece, earned $240,647. Kristor Cowan, the AFT’s chief lobbyist, earned $186,293, while Kombiz Lavasany, another operative who oversees Weingarten’s money manager enemies’ list, earned $184,158.

Supporting these high salaries is an ever-declining rank-and-file base. AFT counts 675,902 full-time rank-and-filers on its roster in 2015-2016, a 3.4 percent decline over the 699,739 members on the roster in the previous fiscal year. [Dropout Nation does not call them members because in  nearly every case, AFT and its affiliates use state laws to force teachers to join.] This marks the third straight year of declines and the fifth year of decline within the past six.

The union also experienced a 1.5 percent decrease in the number of half-time rank-and-filers (or school employees making less than $18,000 a year); a seven percent decline in one-quarter rank-and-filers (nurses and state government employees whose unions are affiliated with AFT); and a 2.7 percent decline in the number of one-eighth rank-and-filers. Seems like the union’s once-successful effort to strike affiliation deals with nursing and other government employee unions, an effort that put it in competition with the much-larger Service Employees International Union, has fallen to seed.

Even worse for AFT: Its effort to increase the number of so-called associate members who pay directly into national’s coffers, continues to be in free-fall. AFT counts just 49,984 such members on its rolls in 2015-2016, a 14.5 percent decline over the previous year. This shouldn’t be shocking. After all, AFT cannot provide associate members any real assistance in terms of negotiating teachers’ contracts or addressing work rules. Besides, the associate members can’t even vote in union elections.

As a result of these declines, AFT’s counts just 1.5 million rank-and-filers and voluntary members, a 4.3 percent decrease over the previous year.

The good news for AFT is that the death of U.S. Supreme Court Associate Justice Antonin Scalia earlier this year assured that there was a tie vote on Friedrichs vs. California Teachers Association; his vote would have likely led to the overturn of Abood v. Detroit Board of Education, the five-decade-old ruling that gives AFT the ability to compel teachers pay dues regardless of their desire for membership. As your editor noted two years ago, the end of compulsory dues laws could cost AFT 25 percent of its membership and $36 million in revenue (based on 2012-2013 numbers), a hit for which the union isn’t likely ready to address.

The other good news for AFT is that it hasn’t affected revenue. The $192 million in dues and other agency fees (in the form of a so-called per-capita tax collected from locals and affiliates) generated by the union in 2015-2016 is 21 percent higher than in the previous fiscal year. AFT’s overall revenue of $328 million (including loan proceeds) is unchanged from 2014-2015.

This time around, the union didn’t have to borrow as heavily as it has in previous years to keep operations afloat; it borrowed just $55 million in 2015-2016, half the level of borrowing in the previous year. Overall, the union has borrowed $477 million over the past five years. The union did sell more of its investments in order to make due; the union sold $29 million of its portfolio in 2015-2016, more than double the investment sales in the previous year. Without the loans and investment sales, AFT’s revenues were just $244 million, a 15 percent increase over levels in 2014-2015.

But the bad news is that AFT may still lose revenue. One reason: The abolishing of collective bargaining and forced dues collections in Wisconsin, Tennessee, and Michigan. This has resulted in AFT losing teachers who realize that they don’t have to pay into unions that don’t represent their interests.

Another problem for the union: More of its affiliates and locals are either merging with those of the National Education Association or striking affiliation agreements with it. Membership declines forcing such mergers is one reason. But as seen in California, where the AFT’s United Teachers Los Angeles has struck a joint affiliation deal with NEA, the AFT’s larger locals are realizing that such triangulation gives them stronger influence over education policy at state and local levels.

But the gains for the big locals (who honestly don’t need AFT affiliation anyway) means both lost revenue for AFT as well as the ability to keep locals from straying away from the party line. [There’s also that pesky matter of being forced into a merger with NEA, a matter long-discussed among hard-core traditionalists.] Given the rancor from AFT rank-and-filers over strong-arm moves by national to remove wayward leaders in locals such as Detroit, expect more large locals to strike joint affiliation agreements or even break away from the national union in the near-future.

The consequences of efforts to abolish collective bargaining and joint affiliations by locals don’t just hurt AFT’s ability to use money to preserve influence. It also harms its ability to pay for the high costs of employing so many six-figure staffers.

While benefit costs have barely budged (remaining at $17 million), AFT’s general overhead costs increased by 4.8 percent within the past year. The good news for AFT is that it was able to offset some of those expenses with a 10.8 percent decrease in so-called union administration expenses. Meanwhile AFT’s post-retirement obligations increased by six percent (to $38 million) in the past year.

Luckily for the AFT, its staffers and leaders pay into definedcontribution retirement plans used by the rest of the private and nonprofit sectors. A funny thing given its opposition to efforts by school reformers and others to move away from the virtually-insolvent defined-benefit pensions championed by Weingarten and the union. Hypocrisy is like that sometimes.

About the Author: RiShawn Biddle is Editor and Publisher of Dropout Nation — the leading commentary Web site on education reform — a columnist for Rare and The American Spectator, award-winning editorialist, speechwriter, communications consultant and education policy advisor. More importantly, he is a tireless advocate for improving the quality of K-12 education for every child. The co-author of A Byte at the Apple: Rethinking Education Data for the Post-NCLB Era, Biddle combines journalism, research and advocacy to bring insight on the nation’s education crisis and rally families and others to reform American public education. This article originally appeared in Dropout Nation and is republished here with permission from the author.

Put Public Employees on Secure Choice and Social Security

“The state shall not have any liability for the payment of the retirement savings benefit earned by program participants pursuant to this title.” – California State Senator Kevin De Leon, August 7, 2016, Sacramento Bee

This quote from Senator De Leon, one of the main proponents of California’s new “Secure Choice” retirement program for private sector workers, says it all. Because De Leon’s comment reveals the breathtaking hypocrisy and stupefying innumeracy of California’s legislature.

Let’s start with hypocrisy.

De Leon is careful to protect private sector taxpayers from having to bail out their new state administered “secure choice” retirement plan, but no such safeguard has ever been seriously contemplated for the state administered pension plans for state and local government workers. These plans, using official numbers, are underfunded by about $250 billion. If you don’t assume California’s 92 state and local government worker pension systems can earn 7.5% per year, they are underfunded by much more – at least a half trillion.

Underfunded government worker pensions are the real reason why Prop. 55 is offered to voters to extend the “temporary” “millionaires tax” till 2030. That will raise about $6 billion per year. Underfunded local government worker pensions are also the reason for 224 local tax increases proposed on this November’s ballot, which if passed will collect another $3.0 billion per year. And it isn’t nearly enough.

The following table, excerpted from a recent California Policy Center study, shows how much California’s state and local government pensions systems have to collect per year based on various rates of return. At the time of the study, the most recent consolidated data available was for 2014. As can be seen – at a rate of return of 7.5% per year, state and local agencies have to put $38.1 billion into the pension funds. And at a rate of return of 6.5% per year, which CalPERS has already announced as their new “risk free” target rate, they have to turn over $52.3 billion per year. How much was actually paid in 2014? Only $30.1 billion.

20160516-cpc-ring-pension-liabilities

To summarize, in 2014 the pension funds collected $8.0 billion less than they needed if they think they can earn 7.5% per year. But following CalPERS lead, they’re lowering their projected rate of earnings to 6.5%, which means they were $22.2 billion short. There are 12.8 million households in California. That equates to at least $1,734 in additional taxes per household per year just to keep state and local pensions solvent.

And it gets worse. Because in order to ensure this new “Secure Choice” program doesn’t get into the same financial predicament that California’s government pension systems confront, the “risk free” rate of return they intend to project is not 7.5%, or 6.5%, or even 5.5%. No, they intend to initially invest the funds in Treasury Bills, which currently pay at most 2.5%. In an analysis of Secure Choice’s proposed costs and benefits performed last April, we express what using a truly “risk free” rate of return portends for California’s private sector workers vs. public sector workers. These estimates are based on all participants, public and private, contributing 10% to the fund via withholding.

Public sector:  Teachers/Bureaucrats, 30 years work  –  pension is 75% of final salary.

Public sector:  Public Safety, 30 years work – pension is 90% of final salary.

Private sector:  “Secure Choice,” 30 years work – pension is 27.6% of final salary.

There are two reasons for this gigantic disparity. First, public pension funds collect far more than 10% of salary. While the employee rarely pays more than 10% via withholding, the employer – that’s YOU, the taxpayer – typically kicks in another 20% to 40% or more, that is, a two-to-one up to a four-to-one employer matching contribution. Second, to justify the optimistic projections that make such generous pensions appear feasible, public pension funds have assumed a “risk free” rate of return of 7.5% per year.

Which brings us to innumeracy.

During the fiscal year ended 6/30/2015, CalPERS earned a whopping 2.4%. That stellar performance was followed in fiscal year ended 6/30/2016 by a return of 0.6%. It doesn’t take a Ph.D economist to know that California’s pension funds are going to need to greatly increase their annual collections. It only takes horse sense. But even horse sense eludes California’s innumerate lawmakers.

So here’s a modest proposal. Why not freeze the employer contributions into California’s state and local employee pension funds at 20% of salary (that’s a two-to-one match on a 10% contribution via withholding), and then, constrained by those fixed percentages, lower all benefits, for all participants, on a pro-rata basis to restore solvency. Better yet, why not enroll every state and local government employee in the Secure Choice program? Either way, “the state shall not have any liability for the payment of the retirement savings benefit earned by program participants.”

Along with this modest step towards dismantling the excessive privileges of these unionized Nomenklatura who masquerade as California’s public “servants,” why not enroll all state and local government employees in Social Security? Because California’s public servants make far more, on average, than private sector workers, and because Social Security benefits are calibrated to pay relatively less to high income participants, this step will financially stabilize the program.

Senator De Leon, are you listening? When it comes to state administered programs, all of California’s workers, public and private, should get the same deal.

 *   *   *

Ed Ring is the president of the California Policy Center.

Vernon, California: More Public Employees Than Residents

Vernon, California is so famous for its history of corruption that it was the municipal star of season two of HBO’s “True Detective” series. Now the tiny L.A. County city can claim another achievement: Vernon is the only California city with more public employees than residents.

Vernon’s 210 residents are served by 271 city employees, according to data on the California state controller’s website.

No. 2 Irwindale is a distant second – though just a 30-minute drive (could be hours – depends on traffic in L.A.’s tortuous downtown) from Vernon. In that East Los Angeles County city, there’s one government employee for every one of Irwindale’s 1,415 residents. San Francisco is the only major city on the Top 10, with one government employee for every 22.7 residents.

Here’s the Top 10:

 

top10cities Most Public Employees

 

Public employees in Vernon earn an average of $107,848 (plus benefits of $37,571). That’s much higher than nearby hegemon, Los Angeles, where public employees average $83,356 (plus benefits of $12,620).

Several top Vernon officials earn salaries in excess of $300,000:
Mark Whitworth (City Administrator): $402,335
Daniel Calleros (Police Chief): $361,644
Michael Wilson (Fire Chief): $361,359
Carlos Fandino Jr. (Director of Gas and Electric): $324,354
Andrew Guth (Fire Battalion Chief): $304,243

While many of Vernon’s city employees continue earn six-figure salaries, the average city resident earns far less. Per capita income in 2010 was $19,973. Median household income in 2010 was $38,500 – down dramatically from 2000, when it was over $60,000. According to the 2010 U.S. Census, 5% of the population lived below the federal poverty line. In 2000, it was 0%.

How does the city fund that dramatic gap in income? By taxing utilities for industry in the city. But because Vernon’s utility rates are among the highest in California, many businesses are moving out. That’s going to put pressure on city officials to trim public services – or to capitulate to the logic of history and become part of a neighboring city. How about Bell?

Conor McGarry is a fall Journalism Fellow at California Policy Center. Andrew Heritage contributed data analysis. Source: California state Controller’s Office.