The Credibility of Public Service

California’s government unions are nothing like private sector unions. Their bosses are selected via elections where these unions are the dominant campaign contributors. They get their money through compulsory taxes and therefore don’t have to run efficient operations. They run the machinery of government which lets them intimidate their opponents and act as gatekeeper to business interests. Their agenda – more government workers and more pay and benefits for government workers – is intrinsically at odds with the public interest, which must focus on achieving an optimal government, not bigger government for its own sake.

For these reasons, government unions are not only drivers of government inefficiencies and financial challenges, they discredit government itself. In three parts – local, state, and federal – here are ways that government unions have taken away much of the credibility once enjoyed by government agencies, and the good people who staff these agencies.

Part One – Local Government Credibility

A friend of mine just got a ticket for making a right turn on a red light. They weren’t pulled over and given the ticket. They had no idea they’d committed a traffic violation. The ticket arrived in the mail – complete with photos and payment instructions. Apparently this driver, who had even come to a complete stop before turning, encountered one of the rare intersections in California where it is illegal to turn right at a red light.

The fine? $546 before the cost of traffic school, which itself represents nearly a full day of what is basically incarceration.

Another California friend just added on to their house. It was a straightforward bit of construction that involved converting a basement to livable space by adding plumbing, electricity, insulation and flooring. Getting permits, however, was anything but straightforward. The rules were almost impossible to understand, and even the clerks and inspectors provided contradictory instructions. Getting the permits took several months, and cost nearly $20,000. Just the permits.

Stories of excessive fines and fees abound. Yet another California friend wanted to build a granny flat, or “Casita” on his property, which occupies several acres in a rural area. Once he realized that acquiring the permits would add as much as $50,000 in costs, literally doubling the price to do the work, he changed his mind.

Wealthy people are indifferent to these inconveniences. It is the law abiding middle class that bears the burden of excessive traffic fines and excessive fees for building permits.

Is any of this in the public interest? Or is some other motive at work?

Just for the sake of argument, let’s suppose we could be just as safe in our homes and neighborhoods, and could deter just as much poor driving, with much lower fees and fines. What’s going on?

The Real Reason Taxes and Fees Are Always Increasing

A few weeks ago, in a post entitled “For Nov. 8th: $32B in Local Borrowing, $2.9B in Local Tax Increases,” we reported on just how much more revenue California’s local cities and counties are asking their residents to approve in this election. In that same article, we presented data that explains the insatiable desire for revenue: Underfunded retirement pensions for government workers. California’s state and local governments are underfunding their pension systems by at least $15 billion each year. Here is the relevant table from that post:

California State/Local Pension Funds Consolidated
2014 – Est. Funding Status and Required Contributions at Various ROI ($=B)

20160516-CPC-Ring-pension-liabilities

Now if public employee pensions were the “modest” benefits that spokespersons for the government employee unions and the pension systems say they are, then taxpayers ought to willingly pay more to fund them. But they aren’t. In California, the average retirement benefit package for a retiring state or local government worker with 30 years of service is worth over $70,000 per year. The average Social Security benefit for private sector retirees with 45 years in the workforce is under $20,000.

How Generous Pensions Alienate Public Servants from the People They Serve

It is difficult to overstate the ramifications of this disparity. Government workers do not have to save money for retirement. If they’ve worked a full-term career, their pension will be enough for them to even continue to pay a mortgage when they’re retired. If they are at all responsible with their budget, their pension will be enough for them to actually save money during their retirement.

Conversely, private sector workers have to prepare for retirement by saving money in a 401K plan, where if the investment earnings fall short in a market downturn, they can go broke, because Social Security will barely pay enough to cover medicare premiums and property taxes. Meanwhile, public sector pension funds claim they can earn 7.5% per year “risk free,” because whenever the funds earn less than that, they increase taxes and cut public services to make up the difference.

The idea that 7.5% annual investment returns are “risk free” is an insulting travesty to anyone actually trying to build their own retirement fund. A “risk free” treasury bill pays about one-third that rate. For a private sector worker to collect an inflation-hedged income of $70,000 per year they would have to save at least $1.5 million in their 401K – and they would still be subject to the vagaries of the investment markets and the economy.

When public sector agencies and the unions that represent their workers pass laws that elevate fines to punitive levels, when they make the process to engage in home improvement an expensive nightmare, and when they raise taxes, they claim they are acting in the public interest. But they’re not. They are acting to preserve their status as an economically privileged elite, one that has less and less in common with the average citizen they supposedly serve.

And when these facts are obvious – that government workers are granted a degree of retirement security that is out of reach to all but the wealthiest private citizens – the credibility of public service is undermined. Suddenly there is a new filter, a compelling filter, through which all public sector proposals must be evaluated: Is this tax just to pay more money to the pension funds? Because if every state and local tax increase that is on the ballot this November is passed, it will barely, barely cover the annual shortfall of California’s state and local pension funds under the best set of assumptions.

Part Two – State Government Credibility

Oppressive taxes, excessive fines, and punitive fees are all the direct result of unsustainable pension costs. But something much bigger is at work – because these pensions were “negotiated” by government unions who, just in California, collect and spend over $1.0 billion per year. That kind of money buys a lot of politicians, who support not only unsustainable pensions, but bigger government at all levels, because that suits the agenda of government unions.

In this context, consider these policies that are driving middle class families and businesses small and large out of California:

(1) Land use restrictions elevate the price of 1,200 square foot homes to over a million dollars – resulting in more property tax revenue, and more asset inflation to buttress the real estate portfolios of the pension funds.

(2) Electricity rates soar to $.40 per kilowatt-hour or more despite a global energy glut – resulting in higher absolute profits (the percent is fixed by law) for the public utilities, funding the unionized utility worker pensions which are nearly as generous as public sector pensions.

(3) Decrees and ordinances restrict urban water use, causing dying trees, dead lawns, and short showers – so the tax revenue that might have been spent on upgrading water infrastructure can instead be used to over-hire and over-compensate state and local government workers.

(4) Drivers contend with the most pitted, congested roads in the nation, where road improvements are deliberately neglected so people will ride trains that take three times as long to get them places – so the tax revenue that might have been spent on upgrading our roads is instead used to over-hire and over-compensate state and local government workers.

The Environmentalist Twist

To justify all of the above, the union propagandists, abetted by their allies in the Silicon Valley (who push laws to mandate all major appliances are internet enabled and connected to smart meters so users can be punitively billed if they use them at the “wrong” times) and on Wall Street (where the government pension funds are the biggest players), invoke environmentalist values.

So come to California, where the unionized public sector has redefined their jobs to incorporate “global warming mitigation” so they can get their hands on the carbon auction emission proceeds. Transit workers qualify – they take cars off the road. Teachers qualify – they educate students to conserve, etc. Police and firefighters qualify – they contend with more crime and more fires in hot weather. Code inspectors qualify – they enforce new environmentalist inspired mandates. And planning commissions qualify their entire agencies by zoning ultra high density. In California, this cabal of government unions, Silicon Valley “entrepreneurs,” and powerful financial interests have conned an entire population into not only submitting to this nonsense, but militantly opposing anyone who questions it.

And while ordinary Californians dig deep to pay for these supposedly beneficial policies, genuine, tragic, urgent environmentalist challenges across the world are unanswered. Orangutans are incinerated in Borneo to pay for “carbon neutral” biofuel plantations on an immolated landscape. Asian trawlers strip-mine the ocean for protein. Terrorist gangs finance their weapons purchases with elephant and rhino ivory. Women spend their lives stripping the hillsides to burn wood in smoke-filled kitchens because natural gas development is taboo.

Part Three – Federal Government Credibility

At the national level, the big government agenda of government unions aligns perfectly with the interests of monopolistic corporations. The American taxpayer doesn’t just pay for a bloated, overpaid, inefficient and totally self-interested unionized public sector. They pay for global military security, medical and pharmaceutical research and development, and bleeding edge environmental mitigation and clean energy technologies. As a percentage of GDP, no other nation imposes nearly such a burden onto their citizens in these three areas.

If government policies – local, state and federal – are going to ask so much of private citizens, then public servants should have to follow the same rules and work under the same set of incentives. Otherwise public service is an oxymoron, and public servants have no credibility. There are clear solutions, but they aren’t easy. First, abolish government unions, because civil service law already provides them adequate protection as employees. Next, enroll every government employee in Social Security instead of defined benefit pensions. Only then will government employees and private sector workers face the same economic issues, and search for better answers together.

 *   *   *

Ed Ring is the VP of Policy Research for the California Policy Center.

20 replies
  1. S Moderation Douglas
    S Moderation Douglas says:

    In 1972 I applied for an entry level state job. I scored high ninties on the written test, which put me at 80 something on the eligibility list. What kind of brainiacs are taking this test? They told me other people scored higher because they had veterans preference.

    I got that! I filled out the form because I was a Vietnam vet (AKA “baby killer”)

    https://s-media-cache-ak0.pinimg.com/236x/5a/3f/d2/5a3fd20aa280fe622f43d434c929c447.jpg

    Two months later I was dodging traffic, setting a lane closure on foot, on the infamous Embarcadero freeway in San Francisco,

    http://blogs.iadb.org/wp-content/blogs.dir/69/files/2014/05/Picture2.png

    Now, apparently, I am singlehandedly responsible for the immolation of orangutans in Borneo.

    https://c1.staticflickr.com/7/6104/6347100164_1b532cc1d1_b.jpg

    You have outdone yourself, EdRing.

    Reply
    • S Moderation Douglas
      S Moderation Douglas says:

      Well, perhaps. If it agrees with your preconceived perspective.

      I propose that it is an emotional rant, poorly substantiated.

      E.g.

      “In California, the average retirement benefit package for a retiring state or local government worker with 30 years of service is worth over $70,000 per year.”

      Actually, the average annual allowance for those between 25 and 30 years is $60,312.

      For those with 31 years …and over… the average is $64,440 (plus benefits, of course.) How many retirees have 31 years or over? Thousands, literally. There are more than a hundred with over 50 years.

      E.g.

      “Oppressive taxes, excessive fines, and punitive fees are all the direct result of unsustainable pension costs.”

      May be.

      Tax Foundation ranks California as the 6th highest Stat-local tax burden as a percent of income, at 11 percent of income.

      And…

      “State-local tax burdens are very close to one another and slight changes in taxes or income can translate to seemingly dramatic shifts in rank.”

      The median state-local tax burden is 9.4 percent. If you make the average salary in California ($55,000), you can theoretically save 1.6 percent ($880 annually by moving to the median state (Idaho, number 26.)

      Before you move, though, consider; since California has one of the most progressive state tax systems, If you are in the middle 20 percent of income groups ($38,000 – $61,000), you already pay a lower share of income in state and local taxes (8.2%) than the national average.(9.4%.)

      According to the Institute on Taxation & Economic Policy…

      “The bottom line is that many so-called “low-tax” states are high-tax states for the poor, and most do not offer a good deal to middle-income families either. Only the wealthy in such states pay relatively little.”

      It’s complicated.

      Reply
  2. S Moderation Douglas
    S Moderation Douglas says:

    Ed, would it be acceptable without the pictures?
    It loses something, in my opinion, but it is your board…

    In 1972 I applied for an entry level state job. I scored high ninties on the written test, which put me at 80 something on the eligibility list. What kind of brainiacs are taking this test? They told me other people scored over one hundred percent because they had ten points veterans preference.

    I got that! I filled out the form because I was a Vietnam veteran (AKA “Baby killer” in the 70s.)

    (delete pic.)

    Two months later I was dodging traffic, setting a lane closure, on foot, on the infamous Embarcadero freeway in San Francisco. ($750 per month.)

    (delete pic.)

    Now, apparently, I am singlehandedly responsible for the immolation of orangutans in Borneo.

    (delete pic.)

    You have outdone yourself, EdRing.

    Reply
    • Ed Ring
      Ed Ring says:

      S Moderation Douglas – thank you for your comment. No, you are not singlehandedly responsible for the immolation of orangutans in Borneo. But the opportunistic obsession of our elites with reducing “carbon pollution” has taken attention away from genuine environmental crises. Among the saddest is our relative neglect of truly endangered wildlife populations in Africa and Asia. Most ironic is the fact that “carbon offsets,” i.e., the projects that carbon emissions auction proceeds are funding, include massive new plantations to grow cane ethanol and palm oil diesel. We are talking about literally hundreds of thousands of square miles that have now been allocated to these crops.

      In California, carbon emissions auction proceeds probably haven’t found their way to Borneo. But as they ramp up, thanks to the creativity of your unions who have engineered “global warming mitigation” into countless public sector job descriptions, they will be paying for your pensions. Californians may think about that the next time they pay $.40 for a kilowatt-hour of electricity because they turned their dryer on at the “wrong” time of day, or have to wait ten minutes for hot water to arrive at their kitchen sink through the new 1/4″ diameter mandated “low-flow” feeder pipe.

      Reply
    • Rex the Wonder Dog!
      Rex the Wonder Dog! says:

      Now, apparently, I am singlehandedly responsible for the immolation of orangutans in Borneo.

      Dougie, that was a GREAT comment! I usually have to discount your comments based on your rose colored glasses, but this one was pretty good.

      Reply
  3. Kerry
    Kerry says:

    AND WHO gets even 20K a year in Social Security? I’m helping to support two siblings who are receiving less than $1400 per month in their SS benefits. The disparity between those who’ve worked in the private sector and public sector is literally breath-taking!

    Reply
  4. S Moderation Douglas
    S Moderation Douglas says:

    Ed Ring…
    “Their agenda – more government workers and more pay and benefits for government workers…”

    ???

    And yet, last I heard, California had fewer state and local government employees per capita than all but about three other states. That ratio is probably fluid, though, since there are now about half a million fewer local/state government workers in the US than there were in 2008.

    Ironically, there seem to be more government workers per capita in the red states, according to Government.com.
    ……………………………..
    Ed Ring…

    “A friend of mine just got a ticket for making a right turn on a red light.”
    “Another California friend just added on to their house.”
    “Yet another California friend wanted to build a granny flat, or “Casita” on his property, …”

    ???

    Ed has a lot of friends. Some of whom I suspect may be apocryphal.
    …………………………….
    Ed Ring…

    “Government workers do not have to save money for retirement. If they’ve worked a full-term career, their pension will be enough for them to even continue to pay a mortgage when they’re retired.

    Conversely, private sector workers have to prepare for retirement by saving money in a 401K plan, …”

    ???

    Most government workers don’t work a “full-term career”, and many of those who do, don’t continue to pay a mortgage, because they don’t own a home. They continue to pay rent, which is often higher than a mortgage, after tax deductions.

    Obviously, private sector workers do not “have” to prepare for retirement by saving money in a 401K plan, … They “should”, perhaps, but they don’t.

     45 percent of working age households do not own any retirement account assets, whether in an employer-sponsored 401(k) type plan or an IRA.  Two-thirds of working households age 55-64 with at least one earner have retirement savings less than one times their annual income.
    …………………..
    Ed Ring…
    “But something much bigger is at work – because these pensions were “negotiated” by government unions who, just in California, collect and spend over $1.0 billion per year.”

    ???

    May be. But if one is implying that all, or even most of that billion is spent on campaigning, lobbying, or even influencing politicians, one is exaggerating.
    …………………….
    Ed Ring…
    “The Environmentalist Twist”

    In 1970, I visited a friend (an actual person, not made up. Jim Fitzgerald*, if you want to check.) outside Los Angeles. We stood on a hillside overlooking a strange, toxic looking brown/orange muck covering the city. If my public sector union had anything to do with cleaning that up, I consider all my dues well spent.

    OK, actually more of a former fellow service member from the Vietnam days. I haven’t seen him since that day on the hill. Some friend?

    To paraphrase Mitt Romney, following the 2010 Citizen’s United decision…

    “Unions are people, my friend.”

    Reply
  5. S and P 500
    S and P 500 says:

    Great article. Don’t forget to include the colossal cost of going to college. I assume our public workers don’t mind paying $100K for their kid’s tuition at UCLA. UC has a huge pension liability, too. In spite of everything discussed in your piece, I think that from now on the burden of pension underfunding will be borne equally by taxpayers and public workers. That mess in Loyalton CA where 4 public workers may see their pensions cut by more than half is unprecedented. For the first time, CalPERS says it’s not paying what it owes some retirees, because the city didn’t pay its pension bill. Apparently it’s not going after the small city because the unincorporated municipality simply doesn’t have $1.6 million to pay CalPERS. It’s probably a good idea for all public employees to do some due diligence and find out how well their pensions are funded, because now it’s their problem, too. BTW do you have any info on the status of Janet Napolitano’s pension reform efforts at UC?

    Reply
    • S Moderation Douglas
      S Moderation Douglas says:

      According to their web site, tuition at UCLA is $12,918 a year.

      With room, board, and (mandatory) health insurance, it’s $30 -$34 a year, most of which has absolutely nothing to do with teacher or administrators pensions.

      “Most families pay less than the full price of attending UC. In fact, more than half of our undergraduate students pay no tuition at all. Over two-thirds of UC undergraduates receive grants and scholarships, with an average award of around $16,300.”

      Reply
    • S Moderation Douglas
      S Moderation Douglas says:

      “That mess in Loyalton CA where 4 public workers may see their pensions cut by more than half is unprecedented.”

      CalPERS is just an agent. The city has a contract to pay the agreed pensions. If CalPERS pays only half, the city is still legally obligated to pay the balance.

      Think of the financial responsibility form you signed with your dentist. If, for whatever, your dental insurance doesn’t pay the full portion expected, you are personally responsible to pay the balance. Ask me how I know.

      Reply
  6. Tough Love
    Tough Love says:

    Quoting S Moderation Douglas ……….

    ““In California, the average retirement benefit package for a retiring state or local government worker with 30 years of service is worth over $70,000 per year.””

    OK, if that is correct, to make an APPLES-to-APPLES comparison with a comparably paid Private Sector worker, we need to make 2 adjustments if comparing to a Private Sector worker with a $70,000 pension:

    (1) Because PUBLIC Sector worker pensions are COLA-increased while Private Sector pensions are not, the PUBLIC Sector worker’s $70,00 pension is equal to an otherwise identical pension but without COLA-increases of just about $90,000/yr.

    (2) Because that PUBLIC Sector worker can assuredly get the $70,000 WITHOUT reduction at age 60 (likely even lower), but the Private Sector worker, who retires at the SAME age 60 but whose pension likely has a “Normal Retirement age” of 65 will have his pension REDUCED by about 5% for each of the 5 years (from age 60 to 65) that he begins collecting his pension. The result …… the Private Sector won’t actually COLLECT $70,000 annually, but $70,000 x [1-5%(65-60)] = $52,500/yr.

    Bottom line …….. even IF the Private Sector worker had a DB pension Plan with formula-factors as generous as those of this PUBLIC Sector workers (a VERY unlikely happenstance indeed) under a PROPER comparison the Public Sector worker’s pensions is greater in value upon retirement at age 60 to the tune of $90,000/$52,500 or 1.71 or 71% GREATER.
    ———————————————

    And, is is VERY likely that the PUBLIC Sector worker will get free or heavily subsidized retiree healthcare benefits while the PRIVATE Sector worker will ….in MOST cases…. get absolutely NOTHING from is last employer.

    Reply
    • S Moderation Douglas
      S Moderation Douglas says:

      Juvenal451…

      “By the way, talking about retirement only, absent a discussion of total compensation, is bogus.”
      …………………………..

      Jeffrey Neal…

      “We have no idea how federal (or state/local {SMD}) pay compares to the private sector. So let’s stop acting like we do.”
      …………………………..
      Tom West…

      “So why do they stay in the public sector?”

      Following that line of reasoning, it’s tautologically impossible to *ever* be ‘screwed on pay’, in either the public or private sector.
      …………………………..
      Erasmus of Rotterdam…

      “Fertilior seges est alieno semper in arvo”

      (English translation by Richard Taverner in 1545) “The corne in an other mans ground semeth euer more fertyll and plentifull then doth oure owne”. 

      AKA… “The grass is always greener… etc., etc., etc.
      …………………………….
      Tough Love…

      1) Make some ASSUMPTIONS. (Even when actual data is available and contradictory.)

      2) Do some MATH based on those ASSUMPTIONS. Because, to paraphrase Donald J. Trump, “we have spreadsheets, why can’t we use them?”

      3) Pretend the result of MATH on ASSUMPTIONS is not GIGO, because, after all, it fits our preconceived notion.
      ……………………………
      S Moderation Douglas…

      I just don’t have enough anecdotal evidence to make a generalization. I don’t have $200,000 firemen on my street. (that I know of.) Unlike Tough Love, I am about as far from Bergen County, NJ as one can get, without a saltwater swim…

      Frank Orlich…

      “It strikes me as odd then, that N.J. has the highest paid police in the country, and my own Bergen County has the highest paid cops in the highest paid state.”

      In my 37 years with the state of California, ninety nine percent of the people I worked with made less than $50,000 a year and retired in their mid sixties, with pensions lower than the median California income. I did occasionally work with a handful of higher paid (management) types… “We’ve howdied, but we ain’t shook” (Texas colloquial)

      All I know and believe is what I read from about a half dozen econometric studies. They all concur…

      1) Lower educated/unskilled public workers, due to higher pensions and benefits, earn more than similar private sector workers.

      2) Higher educated, professional public workers earn less than equivalent private sector workers.

      What is the “average” difference in compensation? “What difference – at this point, what difference does it make?”

      1.71 ?

      Seriously… How do you compare an “assumed” public pension with a hypothetical private one  “(a VERY unlikely happenstance indeed)” and come up with an answer to two decimal places ?

      Reply
      • Tough Love
        Tough Love says:

        Responding to SMD….

        No, we make assumptions in such comparisons because such comparisons REQUIRE that assumptions be made. This is NOT a problem as long as the assumptions made are clearly identified (as I always do) for debate.

        Intelligent people often use math examples because doing so is VERY instructive in demonstrations and separates the truly knowledgeable from the BS artists. Perhaps you should have studied math instead of how to change light bulbs.

        ————————-

        And quoting ………..

        “Higher educated, professional public workers earn less than equivalent private sector workers. ”

        Do PUBLIC Sector Professionals (E.g., CPAs, attorneys, Doctors. etc.) routinely work 60 hrs/wk as IS routine for PRIVATE Sector professionals? I really doubt it. If Public Sector professionals work 40 (vs 60) hrs/wk, then they DESERVE 2/3 the wages. And when you add in the FAR FAR FAR greater Public Sector pensions it’s gonna be a LOT harder on a equals-hours-worked-basis to find many Public Sector Professionals making less than their Private Sector counterparts.

        While I’m sure there are SOME Public Sector professionals who earn less than their Private Sector counterparts even on an equal-hours-worked basis ……. but I’m sure they are a lot fewer than you claim.

        Reply

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