The Credibility of Public Service

By Ed Ring
November 1, 2016

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.

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

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