LA Unified can’t top its high-performing charter schools, so it’s tormenting them to death with bureaucratic rules

Why can’t California lawmakers stop sexual harassment in the capitol?

Assemblywoman Melissa Melendez, R-Lake Elsinore, sits at the Capitol. For four years, Melendez has authored a bill to enshrine whistleblower protections into law for those legislative staff members who come forward with allegations of sexual assault and harassment, only to have the bills killed in the Senate Appropriations Committee. (AP Photo/Rich Pedroncelli, file)

You know who doesn’t look so weird anymore? Vice President Mike Pence. When Pence told the Washington Post that he doesn’t dine alone with women, and never, ever attends an event solo if alcohol will be served, many gasped. He seemed like a too-tightly wrapped antihero from Margaret Atwood’s The Handmaid’s Tale.

But that was in ancient America, in March of 2017. Today, in the age of what a Reason magazine reporter calls “Weinsteining,” we know more.

We have pretty good reason to believe that film producer Harvey Weinstein is a sexual predator – a kind of horny zombie in a bathrobe, a powerful creature that eats not your brain but maybe your soul. But now, writes Cathy Young, we’re obliterating distinctions, in a #MeToo movement that “tends to lump together a wide range of male wrongdoing from rape to ‘creepy’ or boorish behavior.” That broad brush “raises a basic question about human relations in the working world,” she wrote in the Los Angeles Times this week: “Can work and sexuality or romance ever mix? For many supporters of this campaign, the answer seems to be no.”

Among those who said no before it became hip was Mike Pence. But when his perspective was published in the Post, he was ridiculed as a Victorian or worse. For her part, Young concludes “sexual interaction will happen unless the workplace is regulated to a dehumanizing degree and realistically, some unwanted sexual attention will happen as well. As we grapple with these issues, we desperately need nuance.”

Remember nuance? You’ll need some right now – as you read this – to understand why our state lawmakers can’t pass a bill to protect their staff members from sexual harassment of any kind.

Since last month, more than 300 women who have worked in the state capitol have said they too were victims of some sort of sexual harassment. You’d think our state legislature – dominated as it is by a liberal super-majority – would be eager to address the epidemic.

You’d be wrong.

“For four years, Republican Assemblywoman Melissa Melendez of Lake Elsinore has introduced a bill to extend whistleblower protection to legislative employees. And for four years, the bill has been buried by the Senate appropriations committee,” CalMatters’ Laurel Rosenthal wrote in September.

“It’s ironic to me that the Legislature passes laws that are very specific to what employers can and can’t do, but doesn’t want to impose the same rules on itself,” Melendez told Rosenthal in a separate story. “What is that?”

What is that, indeed? Why would a Democratic super-majority annually kill a bill to protect victims of sexual harassment? One explanation might be Reason writer Cathy Young’s – that Democrats in the appropriations subcommittee recognize that government over-regulation of the workplace is its own kind of harassment.

But that’s not how our Democratic majority ultimately explained it. Imagine a world in which Democrats demanded less regulation. Delightful.

Another obvious explanation for the failure to pass Melendez’s measure is that government officials delight in regulating others but generally see themselves as above the law. That’s a nonpartisan, human impulse. Understanding that impulse is behind the genius of democracy – and Lord Acton’s adage that power corrupts.

But acknowledging their own corruption on this issue would be impossible for the state legislature’s super-majority. So instead they have argued – in a state Senate subcommittee – that they cannot extend whistleblower protections to their staff because their staff members are not unionized. Their staff members are hired at will, the state Senate subcommittee said. And where employees are hired at will, they may be fired at will – they cannot be protected. Democratic translation: Where there are no unions, there can be no justice.

It’s an evil response, but (admit it!) somewhat clever for people who owe their political careers to the powerful government unions that keep California corrupt – and broke. Until their staff become union members, the Democrats will offer no protection.

You and I can call that what it is: the government unions’ war on women.

Will Swaim is president of the California Policy Center.

How California skims federal Medicaid payments to fund a powerful union

CONNECTED: Democratic presidential candidate Hillary Clinton and Service Employees International Union (SEIU) president Mary Kay Henry (left). The politically powerful union has worked a deal with several states, including California, to skim dues from Medicaid-paid workers. (AP Photo / Carlos Osorio)

By Sam Han and Will Swaim

Home caregivers serving Medicaid patients in California are being shortchanged and, chances are they don’t even know it.

Medicaid pays for elderly and disabled individuals who need support with activities of daily living to receive support at home from a caregiver. But California and 10 other states deduct union dues from caregivers’ Medicaid payments, in many cases without the knowledge or approval of patients and their caregivers. Given the fact that many caregivers work in their own homes caring for loved ones and relatives, unions typically have little role to play in exchange for the dues they collect.

In this way, unions skim an estimated $200 million each year in dues from Medicaid payments before those checks ever reach the patients they were intended to help. In short, dues skimming takes funds meant to provide care for our country’s most vulnerable people — the elderly, sick, poor, and disabled — and sends it to a politically favored special interest group that provides no services to the needy.

Federal reports filed by SEIU 2015, one of the two unions representing Medicaid caregivers in California, indicate that nearly 60 percent of the funds it collects in dues are spent on political work and other activity unrelated to representing caregivers.

Some caregivers — often parents looking after their disabled children or family members taking care of other relatives — have challenged the legality of forcing in-home providers to pay union dues just so they can care for a loved one. Illinois caregiver Pam Harris took her case all the way to the U.S. Supreme Court. Ruling in Harris’ favor, the Court called dues skimming a “scheme” and said unions couldn’t force caregivers to pay dues.

Unfortunately, unions have found ways to get around the decision and keep home caregivers paying dues. Often, they impose onerous hoops caregivers must jump through to resign, or they enact confusing and arbitrary rules intended to keep the dues money flowing. For instance, Oregon caregivers who belong to SEIU 503 may leave the union only during a 15-day annual period that varies by member. California caregivers are subjected to a half-hour-long union membership pitch before they’re allowed to work. Caregivers in Minnesota have alleged the union forged signatures on membership cards.

This piecemeal approach isn’t working for caregivers, and it’s time for Washington to finally put a stop to dues skimming so caregivers can focus on serving their patients, not overcoming hurdles to get out of the union. The U.S. Department of Health and Human Services could fix the issue by clarifying administrative rules to prevent states from diverting Medicaid dollars to unions. Congress could also act to stop this abuse.

Getting states out of the union dues collecting business would help protect the integrity of Medicaid for current and future patients while also upholding the rights of caregivers who don’t want to join a union. Most importantly, it would ensure the funds are spent on providing services to the needy, as originally intended. At the same time, nothing would prevent caregivers who desire to remain union members from paying union dues on their own.

California has an estimated 300,000 or more in-home caregivers serving Medicaid clients. Many, if not most, of these people are unaware they belong to a union and are having hundreds of dollars per year skimmed off their Medicaid payments for union dues, but that doesn’t make dues skimming right.

Medicaid patients are among the most vulnerable around us. Let’s not allow them to continue to be victimized by unions.

Samuel Han is the California Director of the national Freedom Foundation. Will Swaim is president of the California Policy Center. Both organizations work to advance free-market and limited-government principles. This commentary appeared first in the Orange County Register.

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/

 

Did CalPERS Fail to Disclose Costs of Historic Bump in Pension Benefits?

How would you feel if someone told you they’d just increased your retirement benefit by 50%, took five years off the age you’d have to be when you could retire and collect this benefit, and then told you there would be almost no additional cost because the stock market was roaring? In California, that’s what happened in December 1999. “You” were “ALL PUBLIC AGENCIES,” and their countless thousands of public employees, and “someone” was the biggest public employee retirement system in the state, CalPERS. Click here to read the agency’s 12/23/1999 analysis.

Then how would you like it, two years later, after the market had “corrected,” you were told, via a CalPERS board resolution, that an “exception” had been made to generally accepted actuarial accounting standards, and you could choose to value your savings that had been set aside to pay for your retirement benefits at a value 10% greater than the actual market value of those assets at the time? That’s what happened in June 2001. Click here to read that 6/06/2001 letter.

Did CalPERS comply with the law when they did this?

Today, we’re left to wonder whether those actions violated state law. California Government Code Section 7507 requires that an enrolled actuary notify elected officials of the actual costs of any benefit increase.

Here is an excerpt from Section 7507:

The Legislature and local legislative bodies shall secure the services of an enrolled actuary to provide a statement of the actuarial impact upon future annual costs before authorizing increases in public retirement plan benefits. An “enrolled actuary” means an actuary enrolled under subtitle C of Title III of the federal Employee Retirement Income Security Act of 1974 and “future annual costs” shall include, but not be limited to, annual dollar increases or the total dollar increases involved when available.

The California Policy Center recently re-released a policy brief entitled “Did Your Agency Comply with the Law When Increasing Pension Formulas?” That policy brief provides clear instructions to any local elected official or local activist who would like to gather and view for themselves possible evidence of 7507 violations in their city or county.

The stakes are high. Senate Bill 400, enacted in 1999, increased pension benefit formulas by roughly 50 percent for California Highway Patrol officers. Over the next five years or so, nearly every state agency, city, and county in California followed suit, not only for their police and firefighters, but for all public employees regardless of their job description. The ongoing financial impact of this on civic budgets has been severe, and there is no end in sight.

Back in 1999, pension expenses as a percent of total operating budgets in California averaged around 3 percent. Today they average over 11 percent. Depending on how fast agencies are required to pay down the unfunded liabilities on their pension obligations, and depending on how pension investments perform over the next several years, pension expenses as a percent of total operating budgets in California could rise to over 30 percent.

With rare and incremental exceptions, all attempts so far to reform pensions – and so restore financial sustainability and robust services to California’s public agencies – have been thwarted. Reformers continue to challenge these special interests in court, but progress has been slow and expensive, with no rulings of any significance.

Did CalPERS comply with the law when they offered their agency clients the option to greatly increase pension benefits? Did they comply with California Government Code Section 7507?

Using Pacific Grove as an example of CalPERS’ followup, here’s the “Contract Amendment Cost Analysis – Valuation Basis: June 30, 2000,” in which a CalPERS actuary presented to Pacific Grove’s elected officials three distinct values for the assets they had invested with CalPERS, and gave them the liberty to choose which one they’d like to use. The higher the value they chose for their existing assets, the lower the cost from CalPERS to pay for the benefit enhancements they were contemplating.

Option 1: “No increase in actuarial value of pension fund assets.”

Option 2: “Actuarial value of assets increased by twice the increase in the present value of benefits due to this amendment, limited to 100% of market value of assets.”

Option 3: “Actuarial value of assets increased by twice the increase in the present value of benefits due to the amendment, limited to 110% of market value of assets.”

In plain English, the CalPERS actuary is inviting the elected officials to pick from three differing calculations of how much money they’ve already set aside to cover future retirement payments. The difference between “actuarial value of assets” and “market value of assets” is what creates this wiggle room. While the pension fund investments may have a well-defined market value at any point in time, in order to avoid having to continually adjust how much needs to be contributed into the fund by the employers each year, a “smoothing” calculation is applied that takes into account the market values in previous years.

Obviously, based on the above three choices, how assets get “smoothed” is a subjective exercise. Otherwise there would only be one option. So guess which option was chosen by the City of Pacific Grove? Evaluating the table on page 4 of the 6/30/2000 CalPERS cost analysis provides hints.

Option 1: Employer contribution will be 25.1% of payroll.

Option 2: Employer contribution will be 20.0% of payroll.

Option 3: Employer contribution will be 6.2% of payroll.

Pacific Grove selected option 3. Is that any surprise? Consider this absurdity: CalPERS left it up to these elected officials to enact their benefit enhancement, and then told them the cost to do so could vary by over 400 percent. Of course they picked the low payment option.

Did this disclosure comply with California Government Code Section 7507? Despite the presence of disclaimers dutifully included by CalPERS, arguably it did not. CalPERS offered Pacific Grove three alternative valuations for their pension fund investments, and then presented three very different payment requirements depending on which option they chose. The diligent reader will investigate these documents in vain for additional evidence that CalPERS offered Pacific Grove – or any of its other participating agencies – a usable “statement of the actuarial impact upon future annual costs.”

Even the actuary who wrote the analysis for Pacific Grove hedged his bets. In the “Certification” section on page 5, the actuary wrote, “The valuation has been prepared in accordance with generally accepted actuarial practice except that [italics added], under a CalPERS Board resolution, an increased actuarial value of assets may be substituted for the actuarial value of assets that would have been produced by the current and generally accepted actuarial asset smoothing method described in the annual report.”

What CalPERS did was to offer public agencies the option to “smooth” upwards the value of the assets they’d set aside to cover those enhanced retirement benefits they’d awarded during the stock market bubble. They persisted in these tactics to enable agencies that had not yet enhanced their benefits to do so, in order to “compete” with other agencies and retain employees.

Not only were these asset values smoothed, of course. The payments demanded each year by CalPERS were also smoothly increased. Smoothly and inexorably, with no end in sight.

REFERENCES

CalPERS notice to All Public Agencies, 12-23-1999 – “New 3% @ 55 and 3% @ 50 Formulas, and Change in Benefits Cap for Safety Members”
http://calocalelectedofficials.org/wp-content/uploads/CalPERS-December-23-1999-Letter-Regarding-3-at-50-to-Agencies.pdf

CalPERS notice to All Public Agencies, 6/06/2001 – “New CalPERS Board Resolution Concerning Value of Assets Used in Calculation of Cost of Contract Amendments”
http://calocalelectedofficials.org/wp-content/uploads/CalPERS-July-6-2001-Letter-to-Agencies.pdf

CalPERS analysis for City of Pacific Grove – “Contract Amendment Cost Analysis – Valuation Basis: June 30, 2000
http://calocalelectedofficials.org/wp-content/uploads/Pacific-Grove-CalPERS-3-at-50-Cost-Estimate.pdf

CLEO Policy Brief – “Did Your Agency Comply with the Law When Increasing Pension Formulas?”
https://calocalelectedofficials.org/determine-city-county-complied-law-increasing-pension-formulas/

California Senate Bill 400, enacted 1999
http://www.leginfo.ca.gov/pub/99-00/bill/sen/sb_0351-0400/sb_400_bill_19990929_chaptered.html

CLEO Policy Brief – “Coping With the Pension Albatross” – provides links to sources for historical and projected escalation of pension costs as a percent of operating budgets
https://calocalelectedofficials.org/coping-pension-albatross/

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

Why are California Democrats so hard on our working poor?

CLASS WARRIOR: Gov. Brown lobbied state Senate Democrats to approve a $5-billion-a-year boost in gas and vehicle taxes to pay for major road repairs. (AP Photo/Rich Pedroncelli)

 

When Governor Edmund G. “Jerry” Brown enters his sixteenth year as governor of California this January, he will likely ask his magic mirror which is the bluest state of them all. The mirror will reply “California. It’s so obvious, why do you even ask, you silly governor?”

Democrats in Sacramento hold more than two-thirds of the seats in both houses of the legislature, and no Republican has won a statewide office since 2006. Although Jerry Brown governed in split terms (1974-1982 and 2010-2018), the legislature was majority Democrat long before Brown took office. Since then, Republicans have held a majority of the Assembly for only two years, and they never controlled the Senate. That’s one-party dominance.

To prove their power, Democrats recently adopted a $5 billion gas tax increase, declared California a “sanctuary state” in defiance of the Republican president, and extended the unique cap-and-trade law, which requires California business to pay billions more in taxes. They did it, they acknowledged, in order to display California’s leadership, as a lesson to other states in how to control the global climate.

And they did all this after making permanent the formerly “temporary” highest personal income tax rate in the nation.

The mirror does not lie; California is the bluest state of them all. Jerry Brown should be proud.

Why, then, in this bluest of states does the little guy suffer so much? The Democrats’ narrative is, and has always been, that they are the champions for the underprivileged. Yet California has the highest poverty rate, the highest homeless rate, the worst schools for underprivileged kids, the worst conditions for working-class commuters, and the least opportunity for the working class of any state in the nation. What gives?

According to the United States Census, when the actual cost of living here is taken into account, California has the highest poverty in the nation—20.6% in 2016.[1] California leads the nation in homelessness with 118,142, according to HUD’s 2016 Annual Homelessness Assessment Report. Although New York is a close second at 86,352, the next three in line are far behind those two—Florida (33,559), Washington (20,827) and Massachusetts (19,608).[2] With all this poverty, it should be no surprise that California has the highest number of people on welfare, but according to the San Diego Union Tribune, some may be surprised to learn that 34% of the nation’s welfare recipients live in California, while only 12% of the U.S. population lives here.[3]

Not only are there more poor people in California, but life is harder on the poor and working class here than in other states. Several have pointed out that energy costs in California are much higher than in any other state, and the burden of these high costs falls disproportionately on the poor and working class.[4] Energy for transportation is more expensive than other states not only because of environmental policies handed down by Sacramento but also because of heavy taxation on gasoline. After adopting a $5 billion gas tax increase this year, Sacramento renewed cap-and-trade, which will impose its heavy taxes on business and will be passed on to consumers of a variety of products, including gasoline. These increasing costs have not yet been fully felt at the pump, but when they are, they will be regressive—disproportionally impactful on the poor and working class. This is because this demographic is compelled to commute longer distances by reason of policies that have made housing in California among the most expensive in the nation. Since the wealthy may choose where they live, they may commute less, costing them less at the pump.

There are other ways that high-energy costs brought on by California’s blue state policies hurt the poor. For example, the poor tend to use energy less efficiently than the wealthy, and they use a larger percentage of their incomes for energy, often causing what is called “energy poverty,” where a family must choose between heating their home and eating a nourishing meal.[5]

In a groundbreaking 2015 study,[6] Jonathan Lesser of the Manhattan Institute demonstrated that California is exacerbating this problem through poor choices in its energy, environmental and housing policies.

First, as others have pointed out, energy prices in California are the highest in the nation and continue to rise due to single-focus policies that can be reversed if Sacramento chooses to change them. Second, this rise in energy cost has a disproportionate impact on certain counties such as California’s inland and Central Valley regions because summer electricity consumption is highest there. The impact of this energy tax is regressive, Lesser says, because household incomes in those regions are the lowest; in other words, the poor people live in the most unpleasant places, where air conditioning is needed the most. The more pleasant places, along California’s coast, are reserved for the wealthy through housing policies that keep prices sky high. Sacramento could change those policies if they wished, but very few new homes, relatively speaking, have been built in the most desired areas since Jerry Brown first became governor. Third, according to Lesser, as a consequence of these policies, “[i]n 2012, nearly 1 million California households faced ‘energy poverty’,” and this figure will most certainly go up unless something is done to change the upward trend in energy pricing crossing with the upward trend in energy use by the poor. Lesser provides specific suggestions for policy changes, but none were implemented by Sacramento.

Public education is another area that the poor and working class depend upon more than other segments of the population. In California, you are stuck with the school in your zip code, but for people of means, there is always private school. A recent report ranked California tenth worst in the nation overall in public school performance.[7] When we focus on the schools most likely to be charged with educating California’s poor and working class, however, we quickly learn that the achievement gap remains a living misery for our state’s poor. The recently released Assessment of Student Performance and Progress provides only two performance scores of substance, English and language arts (which means knowing how to read) and math. Scores are divided into four categories, two that meet or exceed acceptable standards and two that do not. In the inner cities where public schools are operated by the Oakland, Los Angeles and Santa Ana Unified School Districts, the following percentage of students met or exceeded the standard for language arts, respectively: 31.86%, 38.55% and 27.80%. In that same order, students meeting or exceeding the standard for math were 25.50%, 29.86% and 22.41%. So our bluest state does not care enough to teach even 60% of our poorest kids how to read or 70% to do math.

So do Republicans have the right to be smug? No way. Republicans have let down the poor just as much as Democrats in Sacramento because they have done nothing to save them. It is not too late for the GOP, however. It is time to step up and become champions of the poor and working class.

Where has the GOP been? Instead of stepping up as champions for the poor, who have been miserable under blue state policies for a very long time, Republicans spend all their time fighting among themselves about any issue they disagree about. A key requirement for admission to the GOP seems to be that one must have a talent for being distracted by issues that divide the party at the expense of issues that could unite it. In this case, the misery of the poor and working class has essentially been ignored by Republicans even though free market policies are ideally suited as the best solution to the oppressive policies that have been in place for so long.[8] Not only would this issue unite the party, but it would provide the GOP an opportunity to do something good in the process.

Here is my solution for Republicans: forget about the rich. They can take care of themselves. And stop fighting. If you have a serious disagreement, table the issue, and campaign on something you agree on. Unfurl a banner that says, “I AM THE CHAMPION OF THE POOR AND WORKING CLASS.” Then get to work to prove it because no one will believe you at first. The poor and working class need a champion; Democrats so far have not been able to reverse course. Come on, GOP, find your heart.

Robert Loewen is chairman of the board of the California Policy Center. 

 

[1] http://capitolweekly.net/california-poverty-high-costs/

[2] https://www.hudexchange.info/resources/documents/2016-AHAR-Part-1.pdf

[3] http://www.sandiegouniontribune.com/news/politics/sdut-welfare-capital-of-the-us-2012jul28-htmlstory.html

[4] E.g. http://www.ocregister.com/2017/07/13/energy-costs-making-california-unaffordable-for-too-many/ ; http://www.nationalreview.com/article/421869/californias-energy-policies-poor-are-hit-hardest-robert-bryce ; http://capitolweekly.net/california-poverty-high-costs/ ;

[5] E.g. http://www.reimaginerpe.org/node/965 ; https://www.theatlantic.com/business/archive/2016/06/energy-poverty-low-income-households/486197/ ;

[6] https://www.manhattan-institute.org/html/less-carbon-higher-prices-how-californias-climate-policies-affect-lower-income-residents-6363

[7] http://www.mercurynews.com/2017/01/05/california-schools-earn-c-in-national-ranking/

[8] Arthur C. Brooks, The Conservative Heart, How to Build a Fairer, Happier, and More Prosperous America. According to Brooks, conservatives are natural champions of the poor when they advocate free market principles; he does not believe that conservatives need to become “center-left” in order to advocate for the poor and working class.

 

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/#

The Big Appall

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/

How Fraudulently Low “Normal Contributions” Wreak Havoc on Civic Finances

Back in 2013 the City of Irvine had an unfunded pension liability of $91 million and cash reserves of $61 million. The unfunded pension liability was being paid off over 30 years with interest charged on the unpaid balance at a rate of 7.5% per year. Irvine’s cash reserves were conservatively invested and earned interest at an annual rate of around 1%. With that much money in reserve, earning almost no interest, the city council decided use some of that money to pay off their unfunded pension liability.

As reported in Governing magazine, starting in 2013, Irvine increased the amount they would pay CalPERS each year by $5M over the required payment, which at the time was about $7.7M. With 100% of that $5M reducing the principal amount owed on their unfunded liability, they expected to have the unfunded liability reduced to nearly zero within ten years, instead of taking thirty years. Here’s a simplified schedule showing how that would have played out:

CITY OF IRVINE, 2013  –  PAY $5.0 MILLION EXTRA PER YEAR
ELIMINATING UNFUNDED PENSION LIABILITY IN TEN YEARS

This plan wasn’t without risk. Taking $5 million out of their reserve fund for ten years would have depleted those reserves by $50 million, leaving only $11 million. But Irvine’s city managers bet on the assumption that incoming revenues over the coming years would include enough surpluses to replenish the fund. In the meantime, after ten years they would no longer have to make any payments on their unfunded pension liability, since it would be virtually eliminated. Referring to the above chart, the total payments over ten years are $127 million, meaning that over ten years, in addition to paying off the $91 million principal, they would pay $36 million in interest. If the City of Irvine had made only their required $7.7 million annual payments for the next thirty years, they would have ended paying up an astonishing $140 million in interest! By doing this, Irvine was going to save over $100 million.

Four years have passed since Irvine took this step. How has it turned out so far?

Not so good.

Referring to CalPERS Actuarial Valuation Report for Irvine’s Miscellaneous and Safety employees, at the end of 2016 the city’s unfunded pension liability was $156 million.

Irvine was doing everything right. But despite pumping $5M extra per year into CalPERS to pay down the unfunded liability which back in 2013 was $91M (and would have been down to around $64M by the end of 2016 if nothing else had changed), the unfunded liability as of 12/31/2016 is – that’s right – $156 million.

Welcome to pension finance.

The first thing to recognize is that an unfunded pension liability is a fluid balance. Each year the actuarial projections are renewed, taking into account actual mortality and retirement statistics for the participants as well as updated projections regarding future retirements and mortality. Each year as well the financial status of the pension fund is updated, taking into account how well the invested assets in the fund performed, and taking into account any changes to the future earnings expectations.

For example, CalPERS since 2013 has begun phasing in a new, lower rate of return. They are lowering the long-term annual rate of return they project for their invested assets from 7.5% to 7.0%, and may lower it further in the coming years. Whenever a pension system’s rate of return projection is lowered, at least three things happen:

(1) The unfunded liability goes up, because the amount of money in the fund is no longer expected to earn as much as it had previously been expected to earn,

(2) The payments on the unfunded liability – if the amount of that liability were to stay the same – actually go down, since the opportunity cost of not having that money in the fund is not as great if the amount it can earn is assumed to be lower than previously, and,

(3) the so-called “normal contribution,” which is the payment that is still necessary each year even when a fund is 100% funded and has no unfunded liability, goes up, because that money is being invested at lower assumed rates of return than previously.

That third major variable, the “normal contribution,” is the problem.

Because as actuarial projections are renewed – revealing that people are living longer, and as investment returns fail to meet expectations – the “normal contribution” is supposed to increase. For a pension system to remain 100% funded, or just to allow an underfunded system not to get more underfunded, you have to put in enough money each year to eventually pay for the additional pension benefits that active workers earned in that year. That is what’s called the “normal contribution.”

By now, nearly everyone’s eyes glaze over, which is really too bad, because here’s where it gets interesting.

The reason the normal contribution has been kept artificially low is because the normal contribution is the only payment to CalPERS that public employees have to help fund themselves via payroll withholding. The taxpayers are responsible for 100% of the “unfunded contribution.” CalPERS has a conflict of interest here, because their board of directors is heavily influenced, if not completely controlled, by public employee unions. They want to make sure their members pay as little as possible for these pensions, so they have scant incentive to increase these normal contributions.

When the normal contribution is too low – and it has remained ridiculously low, in Irvine and everywhere else – the unfunded liability goes up. Way up. And the taxpayer pays for all of it.

Returning to Irvine, where the city council has recently decided to increase their extra payment on their unfunded pension liability from $5 million to $7 million per year, depicted on the chart below is their new ten year outlook. As can be seen (col. 4), just the 2017 interest charge on this new $156 million unfunded pension liability is nearly $12 million. And by paying $7 million extra, that is, by paying $20.2 million per year, ten years from now they will still be carrying over $35 million in unfunded pension debt.

CITY OF IRVINE, 2017  –  PAY $7.0 MILLION EXTRA PER YEAR
REDUCTION OF UNFUNDED PENSION LIABILITY IN TEN YEARS

This debacle isn’t restricted to Irvine. It’s everywhere. It’s happening in every agency that participates in CalPERS, and it’s happening in nearly every other public employee pension system in California. The normal cost of funding pensions, which employees have to help pay for, is understated so these employees do not actually have to pay a fair portion of the true cost of these pensions. If this isn’t fraud, I don’t know what is.

It gets worse. Think about what happened between 2013 and 2017 in the stock market. The Wall Street recovery was in full swing by 2013 and by 2016 was entering so-called bubble territory. As the chart below shows, on 1/01/2013 the value of the Dow Jones stock index was 13,190. Four years later, on 12/31/2017, the value of the Dow Jones stock index was up 51%, to 19,963.

Yet over those same four years, while the Dow climbed by 51%, the City of Irvine’s unfunded pension liability grew by 71%. And this happened even though the City of Irvine paid $12.7 million each year against that unfunded liability instead of the CalPERS’s specified $7.7 million per year. Does that scare you? It should. Sooner or later the market will correct.

DOW JONES INDUSTRIAL AVERAGE
PERFORMANCE FOR THE PAST FIVE YEARS, 2013-2017

While the stock market roared, and while Irvine massively overpaid on their unfunded liability, that unfunded liability still managed to increase by 51%. Perhaps that normal contribution was a bit lower than it should have been?

Irvine did the right thing back in 2013. CalPERS let them down. Because CalPERS was, and is, understating the normal contribution in order to shield public sector workers from the true cost of their pensions. The taxpayer is the victim, as always when we let labor unions control our governments and the agencies that serve them.

REFERENCES

CalPensions Article discussing CalPERS recent polices regarding pension debt repayments:
https://calpensions.com/2017/09/25/calpers-considers-paying-down-new-debt-faster/

Irvine 2017-18 Budget – discussion of faster paydown plan on UAAL
http://legacy.cityofirvine.org/civica/filebank/blobdload.asp?BlobID=29623

Irvine Consolidated Annual Financial Report FYE 6/30/2016
http://legacy.cityofirvine.org/civica/filebank/blobdload.asp?BlobID=28697

Irvine – links to all Consolidated Annual Financial Reports
http://www.cityofirvine.org/administrative-services-department/financial-reports

CalPERS search page to find all participating agency Actuarial Valuation Reports
https://www.calpers.ca.gov/page/employers/actuarial-services/employer-contributions/public-agency-actuarial-valuation-reports

CalPERS Actuarial Valuation Report – Irvine, Miscellaneous
https://www.calpers.ca.gov/docs/actuarial-reports/2016/irvine-city-miscellaneous-2016.pdf

CalPERS Actuarial Valuation Report – Irvine, Safety
https://www.calpers.ca.gov/docs/actuarial-reports/2016/irvine-city-safety-2016.pdf

Governing Magazine report on Irvine
http://www.governing.com/columns/public-finance/col-irvine-california-plans-prepay-pension-bill.html

Steps to Improve Police Training and Accountability

“We’re not anti-cop. We’re anti bad cop. Bad cops have to be fired, just like bad politicians”
– Leader of Black Lives Matter counter-protest, who was spontaneously invited to speak at a pro-Trump rally (watch video).

There aren’t too many things that are easier to agree on than this sentiment. Even those of us who offer nearly unequivocal support for law enforcement can agree that bad cops have to be fired. But progress in the form of better training and more accountability will be incremental, despite the fact that social media now makes every tragic incident – no matter how statistically insignificant – visceral and immediate.

Last year the City of Sacramento enacted incremental improvements to their local ordinances governing police department officer training and police accountability. The impetus for this came after a homeless, mentally ill man was shot 14 times by police for walking around with a knife in North Sacramento. As the Sacramento Bee editorialized, the incident “cried out for a new approach to police abuse, one that would set a statewide or even a national standard. Instead, hamstrung by local and state laws that over the years have made police accountability much too hard in California, the City Council had to settle for doing what it could around the margins, revamping civilian review, pushing for better training and slightly improving transparency in officer-involved killings.”

What the City of Sacramento did was not necessarily enough, but it is a good place to start. It represents a savvy mix of steps that accomplish as much as can be hoped for in the face of existing laws, most of them enacted by California’s legislature.

Here are key features of the City of Sacramento’s reform:

1 – De-escalation: Greater police training to emphasize de-escalation and other nonlethal tactics when confronting suspects.

2 – Body Cameras: Police also will have to wear body cams, which tend to make interactions between officers and the public more transparent and civil.

3 – Transparency: Dashcam video of police shootings will be made public after 30 days unless the department can prove it will compromise an investigation, and victims’ families will get a first look, which will shine a light on cases that too often get complicated by emotion and hearsay.

4 – Accountable to City Council: The Office of Public Safety Accountability will at last get some money and staffing, and will report to the City Council, not the city manager, who also oversees the Police Department.

5 – Civilian Oversight: A new oversight commission, made up entirely of civilians, will get broader powers to review complaints filed with the accountability office. This will include the ability to subpoena information when needed.

SAMPLE LANGUAGE – “OFFICER NEXT DOOR” FRAMEWORK

RESOLUTION NO. 2016-Adopted by the Sacramento City Council

ADOPTING THE OFFICER NEXT DOOR FRAMEWORK

BACKGROUND:

A. During the State of the City address on January 30, 2015, Mayor Kevin Johnson announced the Officer Next Door Program (OND).

B. The vision of the OND is that Sacramento will become the safest big city in California and a model of community policing practices.

C. The goals of implementing the OND program are a measurable decrease in crime and a measurable increase in community trust and engagement.

D. The OND framework consists of four pillars: Training, Diversity, Engagement, and Accountability. Implementation of these four pillars is in the best interest of the City of Sacramento to achieve the OND vision and goals:

1. Training: The police officers of the City of Sacramento will receive training that is nationally recognized as the best practices in community policing.
2. Diversity: The City’s police department (at all levels) will reflect the diversity of our City’s residents.
3. Engagement: The OND police force is actively engaged in the community that he or she is sworn to protect.
4. Accountability: Our police department is held accountable to the highest professional standards and embraces transparency.

BASED ON THE FACTS SET FORTH IN THE BACKGROUND, THE CITY COUNCIL RESOLVES AS FOLLOWS:

Section 1. The Officer Next Door Framework attached as Exhibit A is hereby approved.

Section 2. The City Manager or the City Manager’s designee is hereby authorized to take administrative actions and develop procedures to implement the OND Framework.

Exhibit A – Officer Next Door Framework

VISION & GOALS
To make Sacramento the safest big city in California and a model of community policing demonstrated by a measurable decrease in crime and a measurable increase in community trust and engagement

FRAMEWORK
– Training: The police officers of the City of Sacramento receive training that is nationally recognized as the best practices in community policing strategies.
– Diversity: The City’s police department (at all levels) will reflect the diversity of our city’s residents.
– Engagement: The Officer Next Door police force is actively engaged in the community he or she is sworn to protect.
– Accountability: Our police department is held accountable to the highest professional standards and embraces transparency.

TRAINING
Our Officers Receive Training That Is Nationally Recognized As The Best Practices In Community Policing Strategies

SUMMARY
We want our police officers to receive consistent, high-quality training to ensure that they are well equipped to address challenging situations that may arise as they are doing their important work in the community. Over the last decade, a myriad of training programs have been developed for public safety officials which can make them more effective when faced with difficult issues. Our police department must have the necessary resources to provide access to this type of training.

ACTION STEPS
We will continue to ensure that our officers are trained in the following:
– Cultural sensitivity
– Implicit bias and discrimination recognition
– Peaceful conflict resolution and de-escalation techniques to include less lethal options.
– Chronic and mental illness recognition training including peaceful conflict resolution and deescalation techniques.
– Problem-oriented policing

DIVERSITY
Our Police Department (At All Levels) Reflects The Diversity Of Our City’s Residents

SUMMARY
Sacramento is one of the most diverse cities in America. As such, it is critical that we put proactive and deliberate strategies in place to ensure that our police force becomes more diverse. We strongly believe that this diversity will result in stronger community relations and robust engagement with our residents.

ACTION STEPS
We will work to implement the following:
– Targeted recruitment strategies focused on increasing diversity (of race, gender, sexual orientation, etc.).
– Mentoring and professional development geared toward increasing diversity in police leadership and command structure.
– Incentive programs to encourage police officers to live in the City and hiring more officers who currently live in the city.
– Exploring the development of a public safety charter school.

ENGAGEMENT
Our Officers Are Actively Engaged In The Communities They Are Sworn To Protect

SUMMARY
Our police force is most effective when they have meaningful and trusting relationships in the communities they serve. We must work toward creating true collaboration and understanding between officers and residents, so that our work can be proactive and preventative.

ACTION STEPS
We will implement the following to increase engagement levels:
– Community activities such as youth listening sessions and education events.
– Youth development and crime prevention strategies like Summer Night Lights and the Mayor’s Gang Prevention Taskforce.
– Restoring police staffing levels to support community policing.
– Addressing underlying, systemic issues such as education and unemployment.

ACCOUNTABILITY
Our Police Department Is Held Accountable To The Highest Professional Standards And Embraces Transparency

SUMMARY
As a community, we need to have faith that our law enforcement officers are always operating in the best interests of our residents and community. We should consistently be sharing and discussing public safety data to ensure that we’re identifying where potential issues may exist and working to correct them. Equally important is the responsibility the public has to support our police department with the resources they need.

ACTION
We will implement the following to increase transparency and accountability

Increase transparency and availability of data to the public
– Release all video associated with an officer involved shooting, in-custody death, or complaint reported to OPSA within 30 days, where said video does not hamper, impede, or taint an ongoing investigation or endanger involved parties. The family of the decedent shall be offered the opportunity to review the video prior to public release. All faces will be blurred to protect the identity of those present and a warning will also be included to advise of the graphic content of the video. If the video cannot be made public by the 30th day, the Police Chief will provide the reasons and obtain a waiver from the Council.
– Work in coordination with the Coroner’s Office to notify the impacted family as soon as possible, an assign staff to the family to act as a liaison through the process.
– Adopt a use of force policy that encourages transparency and accountability.
– Respond to public records requests and other information requests in a reasonable and timely manner consistent with law.

Implement a body camera program
– Adopt a body camera video policy consistent with council policy and law.
– Ensure the program enhances transparency and availability of data to the public.

Changes to the Office of Public Safety Accountability (OPSA)
– Have OPSA Director report directly to the Council.
– Have OPSA be responsible for staffing the Sacramento Community Police Review Commission.

Changes to the Sacramento Community Police Review Commission (SCPRC)
– The Commission should be 100% civilian led.
– SCPRC to make policy recommendations to the City Council.
– SCPRC’s governance structure to be 11 members with one from each councilmember and three from the Mayor.
– The commission shall review quarterly reports prepared by the office of public safety accountability consistent with California Penal Code section 832.7(c), relating to the number, kind, and status of all citizen complaints filed against police department personnel, to determine whether there are patterns of misconduct that necessitate revisions to any police policy, practice, or procedure.

Monitor the national movement towards independent investigations

Monitoring and follow-up
– Bi-annual presentation and quarterly reports to the City Council and SCPRC on implementation of the OND Framework.
– Annual review of OND Framework implementation including activities of OPSA and SCPRC by the City Auditor.

SAMPLE LANGUAGE – ADOPTING A USE OF FORCE POLICY

RESOLUTION NO. 2016-Adopted by the Sacramento City Council

ADOPTING A USE OF FORCE POLICY

The sanctity of life is inviolable and every person is precious. Developing and maintaining a professional and highly trained police force is imperative. In an effort to guarantee that all lives are protected and valued in the City of Sacramento, Council is adopting the following policy that requires the City Manager to ensure the police:

A. Are authorized to use deadly force only when an officer reasonably believes that a suspect poses a threat of death or serious bodily injury to the officer or others.

B. Issue a clear and comprehensible verbal warning, when possible, before using deadly force.

C. Use the minimum amount of force necessary, under the circumstances presented to the officer, to apprehend a subject.

D. Develop and issue specific guidelines for the type of force and tools authorized for a given level of resistance.

E. Are issued and carry less-lethal weapons consistent with current best practice.

F. Do not move in front of moving vehicles.

G. Do not shoot at moving vehicles unless the person poses a threat with a weapon other than the vehicle OR has exhibited a specific intent to use the vehicle as a weapon.

H. Intervene when an officer observes another officer using force that is clearly beyond that which is objectively reasonable under the circumstances, and when in a position to do so, to prevent the use of unreasonable force and report the incident to their immediate supervisor as soon as reasonably possible.

Monitoring Method: Council Report

Frequency: Semi-Annual (March & September)

I. Receive training in de-escalating encounters with the public, to include mentally ill individuals.

J. Are trained in basic first aid and render such aid (as soon as it is safe to do so) after a deadly force incident.

K. Make death notifications to family members of a subject that has died as a result of an officer involved shooting or while in police custody.

L. Release all video associated with an officer involved shooting, in-custody death, or complaint reported to OPSA within 30 days, where said video does not hamper, impede, or taint an ongoing investigation or endanger involved parties. The family of the decedent shall be offered the opportunity to review the video prior to public release. All faces will be blurred to protect the identity of those present and a warning will also be included to advise of the graphic content of the video. If the video cannot be made public by the 30th day, the Police Chief will provide the reasons and obtain a waiver from the Council

REFERENCES

City of Sacramento City Council Report, November 29, 2016
http://sacramento.granicus.com/MetaViewer.php?view_id=22&clip_id=3900&meta_id=485761

City of Sacramento City Council, Archived Meetings
http://sacramento.granicus.com/ViewPublisher.php?view_id=22

Sacramento’s new rules are just a first step toward police reform, Sacramento Bee, December 1, 2016
http://www.sacbee.com/opinion/editorials/article118330608.html

Heavyweight Los Angeles law firm to challenge Sacramento on police practices, Sacramento Bee, November 27, 2016
http://www.sacbee.com/news/local/article117615278.html

A lost opportunity on police reform, Sacramento Bee Editorial, June 6. 2015
http://www.sacbee.com/opinion/editorials/article23220456.html

How Placer County Privatized Inmate Food Services

Introducing competition to the public sector is an essential part of delivering cost-effective services to taxpayers. What happened earlier this year in Placer County is just one example of how millions of savings can be realized by privatizing a public service. By replacing county employees with a private firm to provide inmate food services to county inmates and juvenile offenders, starting in 2018 Placer County will save over $600,000 per year. Here is how these savings can be realized:

1 – Give Agency Authority to Outsource: Ensure that your agency has the authority to contract for government services. The Placer County Charter has a provision under “general powers” that states as follows: “The Board may contract with an independent contractor to provide any services required of, or performed by, the county if it is more economical to do so.”

2 – Conduct Cost Analysis: Placer County engaged in a comprehensive analysis of the cost and benefit of continuing to use county employees to provide inmate food services vs. using outside private contractors. This process was conducted concurrently with taking bids from qualified contractors.

3 – Enact Resolution and Award Contract: On March 7, 2017 the Placer County Board of Supervisors awarded a five-year, $13.2 million contract with Aramark Correctional Services.

Making changes like this impact existing county employees, but to mitigate this, Placer County obtained an assurance from Aramark that all county employees interested in working with the contractor will be interviewed. In addition, arrangements were made for staff who do not transition to Aramark to receive assistance from the county’s Human Resources department and Business Advantage Network, to provide job training and assist county employees in identifying other job opportunities.

What Placer County has done with inmate food service they can do elsewhere. In early 2016, the county issued a request for proposals to evaluate other service delivery options. By making judicious use of the option to outsource public services to private contractors, public agencies can realize significant direct savings. But merely the deterrence value of the outsourcing option can be valuable for a public agency. When public employee unions know that their employers have the option of turning to a private contractor, they will be more reasonable in their negotiations.

REFERENCES

Charter of the County of Placer
Article III General Powers, Sec. 302 Duties, Part (h) Contracting for Services:
“The Board may contract with an independent contractor to provide any services required of, or performed by, the county if it is more economical to do so.”
http://qcode.us/codes/placercounty/view.php?topic=charter_of_the_county_of_placer-charter-iii-302&frames=on

Press Release – Placer County
“Placer opts to shift inmate food service to private contractor”
https://www.placer.ca.gov/news/2017/march/correctional_food

Meeting Agenda – Placer County Board of Supervisors
Agenda for March 7th, 2017 Board Meeting including resolution to privatize correctional food services
http://www.placer.ca.gov/upload/bos/cob/documents/sumarchv/2017/170307A/bosa170307.htm

Memorandum – Placer County Board of Supervisors
Cost analysis of privatizing correctional food services – March 7th
http://www.placer.ca.gov/upload/bos/cob/documents/sumarchv/2017/170307A/04A.pdf