Penalty Assessment Fees Report

Investigating the relationship between stressed public finances and rising misdemeanor fines and penalties

By Reiss Becker, David Vasquez, Zane Zovak

 

BACKGROUND

California Policy Center analysts have documented the state’s collapsing public finances over the past few decades – not just the rising level of public debt, but the subsequent effects of crumbling infrastructure, slashed government services, and rising taxes. 

More recently we’ve noted the transformation of law-enforcement into state debt-collectors seeking a source of revenue for cash-strapped state and county governments. 

This is more significant than the unethical incentivizes quota systems encourage as they motivate police to issue a greater number of traffic tickets. What we’ve identified is more troubling: throughout California, local officials as well as legislators in Sacramento have been continuously  expanding the number of programs funded through traffic tickets with little public accountability or knowledge. 

As the table below illustrates, between 1980 (when the state allowed itself to add penalties to fines) and 2000, just two penalty assessments were added to traffic tickets. But in the first 10 years of the 2000s, eight penalty assessments were added. That rapid expansion tracks with the tsunami of pension hikes granted between 1999 and 2002. As California’s government unions continue to boost the costs associated with state and local employee pay and benefits, penalty assessments will likely become the default method of funding for various programs.

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 (source: California State Auditor Report 2017-126)

 

Though only the state and county governments may apply these fees, cities are getting into the act in a new and innovative way. The city of Huntington Beach, for instance, has made skateboarding a crime and has crafted new laws to prohibit “drinking in public” – even where “public” is the front yard of one’s home. Last year the city created a new role for an assistant city attorney. His sole job: to speed collections of these fines and to prosecute those who fail to pay.

“A significant number of misdemeanors go unprosecuted,” City Attorney Michael Gates explained, adding that deploying his new prosecutor will “add a lot of teeth to our laws. There will be a whole class of crimes that will now be prosecuted where the (county) DA may not have gotten to them. We will prosecute every one of them until conviction.”

This problem is everywhere in California. In Amador, a county in the Sierra Nevada Mountains just east of Sacramento, the superior court notes that its practice is to hit misdemeanor violators with a surcharge it calls a “penalty assessment” – an additional $26 “for every $10 of the base fine amount or portion thereof as set forth by the California State Legislature.” (If you doubt its authority to do so, the Amador court helpfully directs citizens to Penal Code 1464 and Government Codes 76000, 70372, 76104.6, 76104.7 and 76000.5.)

State lawmakers have their hands out, too. The state’s surcharges on local misdemeanors are remarkable for their randomness. There’s money for the DNA Identification Fund and the State General Fund. The state also gets money for its “Penalty Fund,” a “State Court Facilities Fund” and money for “Building/Maintenance for Courts.” Some of the penalty money pays for court security and a big chunk goes to court automation and general city funds. There’s even money for the Department of Motor Vehicles. The Amador court shows you how, through the magic of the state legislature, your $25 jaywalking ticket becomes a $193 fine. (A sample traffic citation is shown below at the end of the section).

The Orange County Superior Court follows the same formula, but adds bonus penalties for lawbreakers. In addition to the state menu, Orange County adds fees to fund Emergency Medical Air Transport, Emergency Medical Services, and a fee “to fund Night Court operations.” That, Orange County says, is how a $35 speeding ticket becomes a $238 fine.

We believe these fines will lead to increasing mistrust of government in general and of law-enforcement in particular; we are certain they have allowed government officials to largely ignore the real problem in California’s local governments: the high and always-rising cost of government employee pay and benefits, particular public-safety employees.

That problem began with the rise of government unions in the late 1970s. But it accelerated with the passage of SB 400 in 1999: the state law that drove the cost of post-employment benefits for public safety employees up 50%.

Driven by demands to fund these unsustainable benefits, state and local governments are now operating on an entirely new legal principal – the principal that government can, and without limitation, take citizens’ property (in the form of fines) or liberty (by jailing those who will not or cannot pay) for even misdemeanors and traffic citations. 

This dramatic expansion of government power pits the public against the police tasked with protecting them. It immiserates the already vulnerable. It undermines the economy, and by extension all California communities. It is a bipartisan problem: conservatives are as likely as liberal public officials to mask this cash and power grab as evidence they are tough on crime and to raise government revenue without raising taxes.

The U.S. Department of Justice found that a similar public-finance strategy contributed to the rioting and strained relations with law enforcement that followed the police shooting of Michael Brown in Ferguson on August 9, 2014. Rarely has it been so obvious that our own government has, in the words of the Declaration of Independence, “erected a multitude of New Offices, and sent hither swarms of Officers to harass our people, and eat out their substance.”

But in the past few years, we’ve also seen reasons for optimism. Raising misdemeanor fines and fees doesn’t necessarily translate into additional revenue because, as the old saying goes, you can’t squeeze blood from a turnip: where the poor are concerned, boosting the costs of a misdemeanor violations simply means adding additional debt to the ticketed party. Uncollected fines were key in prompting former-Gov. Jerry Brown to ban the suspension of driver’s licenses as a punitive measure. More recently, SB 144, or the Families of Fees Act, seeks to eliminate many of these egregious fines. 

But there’s work to be done at the local level, too. To local elected officials interested in rolling back these unconscionable fines, CPC has drafted a model ordinance and resolution to spread public awareness of penalty assessments and to bolster support for reform at the city and county level. 

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(source: LCCR 2015 report: Not Just a Ferguson Problem)

 

 

WHAT’S THE PROBLEM?

Using the police to raise revenue for state and local government generates multiple problems throughout our communities:

Distorts the role of the police and undermines public confidence 

Using penalties as a revenue source establishes the police force as a revenue-generating agency rather than as a peacekeeping force and creates an unhealthy relationship between officers and citizens. This phenomenon helped fuel tensions in Ferguson, Missouri – frustration that contributed to the death of Michael Brown – offering a grave warning to California of what consequences may arise out of this unethical practice. 

Questionable relationship between fees and violations

As is shown in the chart below, only four of the 17 penalty assessments are directly related to the crime; the remaining 13 fees are imposed as funding mechanisms rather than punishments for the crime and the cost they impose on society. Currently, a small fee is added to traffic infractions to support the Fish and Game Preservation Fund – helping fund a worthwhile department but with no connection to any of the misdemeanors committed. The DNA Identification Fund might reasonably expect reimbursement when a DNA test is conducted, but as it currently stands, it is added to all traffic tickets regardless of whether a DNA test was carried out. 

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(source: California State Auditor Report 2017-126)

 

Even our courts are incentivized to support these fees

As they currently exist, courts have a perverse incentive to maximize the total amount that can be charged for a fine or penalty assessment. The court that processes the violations for all traffic infractions also determines the civil assessment fee, a fee that goes directly into their court’s budget. The civil assessment fee is charged when violators fail to pay on time and is supposed to be calculated in relation to the individual’s ability to pay. Under state law, the court can charge as much as $300 for the civil assessment fee; because the fee returns directly to the courts, it’s inarguable that courts are incentivized to maximize fees.

Debtor’s Prison

A 2018 Federal Reserve survey found that 44% of Americans would struggle to cover a $400 emergency. These fines have left millions of California taxpayers trapped in an endless spiral of debt. Inability to pay promptly has led to additional late fees (typically labelled the “civil assessment fee”), trapping people in court dates, missed work, and additional childcare expenses. 

They are an unreliable source of public funding

Many of the government programs funded through penalty assessments depend heavily on those assessments. But revenue from traffic violations is highly variable. Multiple studies highlight the year-to-year rise and fall of penalty revenue, with some years jurisdictions showing a fluctuation of more than 40% in sequential years. 

 

 

OUR RECOMMENDATIONS

Most penalty assessments are dictated by state lawmakers in Sacramento. But local officials in cities and counties can act directly to limit penalties. 

Our model county ordinance (Appendix I) stipulates that the county will not levy optional penalty assessments for night court and the Maddy Emergency Medical Services Fund. Additionally, it calls for an end to penalty assessments for programs and funds unrelated to the infraction committed. 

Cities aren’t able to block state or county penalty assessment collections – that’s the province of state and county officials. But our model resolution for cities (Appendix II) allows local governments to express their opposition to penalty assessments. In bigger numbers, cities and counties may encourage state lawmakers to make necessary reforms to the system. 

 

 

COMMON CONCERNS ABOUT REFORM

If you can’t do the time . . . .

Some self-described conservatives have claimed that our concern for misdemeanor violators is misplaced – even on multiple occasions offering the old adage that “if you can’t do the time, don’t do the crime.” We note that there’s a more important adage, the one embodied in our Constitution’s 8th Amendment: “Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.” The government’s responsibility for maintaining the peace is not an unlimited grant of power.

Funded programs provide valuable services

The biggest objection to our proposal comes from county, city and other local officials who observe that these fees support important government programs. We recognize that often these programs provide a valuable service to the community. But programs with real value should easily count upon voluntary public support rather than coercion. In fact, public officials opposed to raising taxes – or even afraid of raising the possibility of raising taxes – rely on these assessments to appear tough on crime while avoiding the controversy around tax hikes. 

Moving away from penalty assessments and shifting the funding to a more public source allows for debate on the merits of these programs. Additionally, it ensures the burden of these programs is shared by all of the community that enjoys the benefits rather than disproportionately falling on traffic violators. 

Ultimately, we would like to see the elimination of penalty assessments but recognize that the transition will require time to find suitable alternatives for funding.

Rigid payment methods

Recognizing the growing debt from uncollected penalty fees (shown in table below), we propose that courts make more of an effort to consider and publicize alternative methods for payment of legitimate fines.

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(source: LAO 2016 report – Improving California’s Criminal Fine and Fee System)

 

APPENDIX I: 

Fairness in Fines Ordinance

WHEREAS § 42006(a) of the state vehicle code gives the right of the county to levy fines and penalties regarding night court in addition to the base fine excluding vehicle infractions.

WHEREAS § 76000.5(a) of the state penal code gives the right of the county board of supervisors to levy and additional two dollars for every ten dollars of the base fine for vehicle infractions.

WHEREAS the use of a base fine is to discourage illegal behavior and to seek justice. Such purpose of the base fine is not to provide necessary funding to government administrative agencies. 

WHEREAS the judicial council has levied extraneous fines beyond the purview of justice. 

WHEREAS administrative agencies have become dependent on the levying of such extraneous fines. 

 

Fairness in Fines Ordinance Requirements: A Moratorium On Present and Future Miscellaneous Charges and Fees on County, City and Municipality Citations

Purpose: The elimination of the use of regressive fees and assessments that disproportionately harm citizens as a means to raise revenue for government programs that should be funded through allocations from the municipality’s general fund. 

  1. Pursuant of this ordinance, the County of Merced shall adopt a fairness in fines practice beginning no later than eight weeks after passing this ordinance. 
    1. Beginning on that date, the county in question shall prohibit levying all penalties, fees, surcharges, and penalty assessments that are not directly and clearly related to the cost of enforcing the traffic violation. Current fines beyond those directly and clearly related to enforcement of the specific violation should no longer be applied to criminal and public offenses, including any and all violations of the vehicle code. 
    2. Any and all penalty assessment fees previously applicable but considered miscellaneous outside of the base penalty amount are hereby void. By eliminating additional fees, this ordinance will ensure the fine will serve as a penalty for the violation rather than a source of revenue to fund government operations. 
      1. 1.2.1.An extension period of 12 weeks may be requested before such additional fines are voided to allow the county board of supervisors sufficient time to identify alternative measures for any and all programs that will face a funding shortfall as a consequence of the prohibition of these penalties. The total time from the date of passage miscellaneous fees are void will not exceed 20 weeks. 
    3. Definitions: 
      1. 1.3.1.Base fine – A monetary sanction imposed in criminal cases as set forth in state law. The maximum base fine varies from violation to violation. 
      2. 1.3.2.Penalty or Surcharge – An amount added to the base fine and imposed as part of the monetary punishment for a crime. 
      3. 1.3.3.Fee or Assessment – An amount added to the base fine that is imposed for cost recovery purposes such as covering the cost for court operations in processing a case. Fees are intended to be used for specific purposes.  
    4. The following fees or charges should be considered exempt from this ordinance: 
      1. 1.4.1.Base fine – A monetary sanction imposed in criminal cases as set forth in state law. The maximum base fine varies from violation to violation. 
      2. 1.4.2.Penalty or Surcharge – An amount added to the base fine and imposed as part of the monetary punishment for a crime. 

 

APPENDIX II: 

Fairness in Fines Resolution

Whereas penalty assessments are being used as revenue collection strategy for counties and the state establishing the police force as a revenue collection agency rather than a peacekeeping force and creating an unhealthy dynamic between officer and citizen;

Whereas penalties are an ineffective revenue collection strategy because many citizens simply cannot afford the financial burden resulting in over $10 billion in unpaid debt;

Whereas civil assessment fees are supposed to be based on an individual’s ability to pay and offer alternatives such as community service for indigent citizens to repay their debt; and  

Whereas penalty assessments are frequently used to fund various state and county programs that often have little to no relationship to the violation; now, therefore, be it

Resolved, that the City of Torrance:

  1. urges the California State Legislature to amend §1464 of the State Penal Code to eliminate the state’s requirement for counties and cities to levy additional penalty assessments on violators of various traffic infractions; 
  2. encourages agencies receiving funds from penalty assessments to seek alternative sources of revenue to support their programs and eliminate reliance on highly unreliable penalty assessment funds;
  3. recommends redirecting civil assessment fee funds so that the courts aren’t directly receiving benefits from the cases they rule putting revenue incentives at odds with the requirement to consider a violator’s financial circumstances when assessing the civil assessment fee; and 
  4. advises state and counties to stop using revenue from penalty assessments to fund programs that aren’t clearly and directly related to the offense committed.

America’s Homeless Industrial Complex – Causes & Solutions

The Financial Context of the Imminent California Supreme Court Decision on the “California Rule”

Any day now, the California Supreme Court will rule on what may be one of the most significant cases affecting pension reform in California history. The case, CalFire Local 2881 vs. CalPERS, challenges one of the provisions of PEPRA (Public Employee Pension Reform Act) Governor Brown’s 2013 pension reform legislation. The plaintiffs argue that PEPRA’s abolition of purchases of “air-time,” where employees who are about to retire can make a payment in exchange for more years of service applied to their pensions, is illegal. They cite the “California Rule,” an interpretation of California contract law that requires any reduction in pension benefits to be offset by providing some new benefit of equal value.

The stakes couldn’t be higher. Even though pension benefit formulas have been changed for new employees, and are now somewhat more financially sustainable, the California Rule prevents any significant pension reform for existing employees, even for work not yet performed. Changing pension benefit formulas for new employees, while helpful, are not enough. If the California Supreme Court overturns the California Rule, it will not affect the pension benefits that existing employees have earned to-date, but will allow changes going forward. For example, if a public employee has worked 15 years, and earns 3 percent per year towards their pension, if they retired tomorrow their pension would be 15 (years) times 3 percent = 45 percent times their final salary. This would not change. But if they worked another 15 years, and their pension benefit was reduced going forward, they might only earn 2 percent per year for the second half of their career.

The impact of such a change would be dramatic, since less than 20 percent of California’s public sector workforce was hired after the PEPRA reforms took effect for new employees. Reforming the rate of pension benefit accrual for future work for 80 percent of California’s workforce would have a decisive impact on the financial sustainability of the pension systems.

There are many possible ways to further reform California’s public employee pensions, and they cannot come too soon. California’s public sector employers will contribute an estimated $31 billion to the pension systems this year. Extrapolating from officially announced pension rate hikes from CalPERS, California’s largest pension system, by 2024 those payments are projected to increase to $59 billion. According to the State Controller’s office, the unfunded liability for California’s state and local public employee pension systems totaled over $250 billion in 2016. That number could be grossly understated, because one of the biggest variables affecting the amount by which a pension system is unfunded is how much a pension fund’s invested assets will earn. If pension fund earnings don’t meet projections, annual contributions have to rise to make up the difference.

Pension systems have made well publicized reductions to the amount they claim they will earn, touting these reductions as proof of their commitment to cautious, prudent management of their funds. But as reported recently by Andrew Biggs, writing for Forbes, these pension funds have quietly lowered their inflation assumption at the same time, meaning they are still claiming their investments will achieve nearly the same real rate of return. As anyone saving for retirement – or funding a pension – knows without any doubt, the real rate of return is all that matters.

California’s pension systems currently rely on a real rates of return, i.e., the nominal return less the rate of inflation, of approximately 4.5 percent. They have not substantially altered that target, despite the hoopla surrounding the reduction they made in their nominal rate of return projections. The aggressive increases the pension systems are requiring to the contribution rate are a reflection more of their crackdown on the terms of the “catch up” payments employers must make to reduce the unfunded liability than on a genuine reduction to their expected real rate of return. But can pension systems continue to earn real rates of return in excess of 4 percent per year?

For over ten years, pension systems have been the beneficiaries of the longest sustained bull market in U.S. stocks in history. From its nadir in 7,063 in February 2009, to its high of 26,743 in September 2018, the Dow Jones Industrial Average more than tripled. The compounded annual increase was 15.9 percent, while at the same time the rate of inflation averaged 1.8 percent. But trough to peak is a misleading trend. The last peak for the Dow was September 2007, when it had risen to 13,895. This more appropriate peak to peak evaluation has the Dow increasing by 90 percent over 11 years, for an annual average rate of return of 6.1 percent; adjusted for inflation, the return was 4.3 percent. Since September 2018, of course, the Dow has given up 11 percent, and who knows where it’s headed.

Because the Dow Jones Industrial Average generates returns that are nearly always in synch with the other major indexes, these results matter. In the coming years, will inflation adjusted returns on equity investments remain around 4 percent? More important, why is it that after the longest bull run in stock market history, California’s pension systems are underfunded by several hundred billion dollars? Healthy, well managed pension systems should be overfunded at a time like this.

This is the context in which California’s Supreme Court Justices will make a huge decision. The boom in investment returns could well be over, with the pension funds now facing several years of doldrums. The PEPRA reforms weren’t enough to restore financial sustainability in an economic downturn. The required pension contribution rates are already set to double, and California’s cities and counties are unlikely to all be able to handle the stress of pouring additional billions into pension systems. During the last era of pension fund surpluses, pension benefits were increased retroactively. It seems hardly unfair that contract law might also permit them to be reduced, but only from now on.

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The Varieties and the Potential Impact of Post-Janus Litigation

The landmark ruling by the US Supreme Court in the Janus vs AFSCME case has given government workers the right to not only refuse union membership, but to refuse to pay any dues or fees to that union. In the wake of this ruling, new lawsuits have been filed on behalf of plaintiffs who allege the unions are attempting to circumvent the Janus ruling.

Enforcing Provisions of the Janus Ruling

A notable example of such a case is Few vs UTLA, In this case, the plaintiff, Thomas Few, is a special education teacher in Los Angeles. Few was told that he could end his membership in the United Teachers of Los Angeles union. But even as a nonmember, the union told him that he would still have to pay an annual “service fee” equivalent to his union membership dues. Few’s position, which is likely to be upheld, is that he cannot be compelled to pay anything to a union he does not choose to join, regardless of what the payment is called.

This lawsuit and others are likely to ensure that the Janus ruling is enforced. The practical result will be that government unions lose some of their members, and some of their revenue. But how many? After all, there is a valid economic incentive for public employees to belong to their unions. In California, unionized state and local workers earn pay and benefits that average twice what private sector workers earn.

For this reason, most people refusing union membership will be doing so for ideological reasons. They will find their objections to the political agenda of these unions to be more compelling than the economic reasons to support them. But there are additional ways the unions compel public employees to remain members.

For example, in some cases, within the same bargaining unit, unions will negotiate pay and benefit packages for their members that are more favorable than the pay and benefit packages they negotiate for the non-members. In some cases in academia, only union members are permitted to sit on faculty committees that determine curricula and hiring decisions.

Challenging Exclusive Representation

This right to exclusive representation is the next major target of public sector union reformers. They argue that it is unconstitutional for public sector unions – whose activity the Janus ruling verified is inherently political – to advocate on behalf of non-members, or to represent non-members, or to exclude non-members from participating in votes or discussions on policy, or to deny non-members the same negotiated rates of pay and benefits as members, or, possibly, all of the above.

Just filed this week in the US Supreme Court is the case Uradnik vs IFO, which worked its way through the lower courts in under a year. It is possible it will be heard in the 2019 session. This case calls for an immediate end to laws that force public-sector employees to accept a union’s exclusive representation.

Kathleen Uradnik, a professor of political science at St. Cloud State University in Minnesota, alleges that her union (“IFO” or Inter Faculty Organization) “created a system that discriminates against non-union faculty members by barring them from serving on any faculty search, service, or governance committee, and even bars them from joining the Faculty Senate. This second-class treatment of non-union faculty members impairs the ability of non-members to obtain tenure, to advance in their careers, and to participate in the academic life and governance of their institutions.”

There is a strong possibility that within a few years, if not much sooner, this case will be heard and ruled on by the US Supreme Court in favor of the plaintiff. If so, the future of public sector unions will be altered in ways even more significant than Janus. Unions will be prohibited from discriminating in any way against non-members who are part of their bargaining unit. They also will be powerless to stop public employees from withdrawing completely from their bargaining unit to – gasp – represent themselves in salary and benefit negotiations, something that professionals in the private sector have always done.

The Impact of Non-Exclusive Representation

An impact of a favorable Uradnik vs IFO ruling that would have even greater consequences would be if it enabled the emergence of competing unions. What if two or more unions represented a bargaining group? What if a super-union emerged whose membership welcomed government workers from an entire state, or entire profession, or the entire nation. What if these super-unions embraced a political agenda that ran counter to the left-wing agenda that has dominated public sector unions for decades?

The possibilities are tantalizing.

What if faculty members in America’s colleges and universities had the option to join a conservative union with a national membership that advocated a return to pro-Western college instruction, an end to reverse discrimination, a restoration of academic merit as the sole criteria for admission and graduation, and the abolition of divisive courses of study that offer no useful skills? What if conservative faculty members who have been silent all these years had the power of a national union to protect them from the Left?

What if K-12 teachers across America had a national union to protect them when they objected to curricula designed to turn immigrant children against the people and traditions of their host culture? What if police and firefighters across America had a national union that advocated unequivocally for a merit-based system of immigration? What if civil engineers across America had a national union that was implacably opposed to the environmentalist extremism that has doubled the cost of infrastructure projects and quadrupled the time it takes to complete them?

Enforcing Janus will begin to undermine public sector union power, which is deployed almost exclusively in the service of the Left. Enforcing Uradnik may actually create a balance of power between public sector unions that lean Left vs Right, and that, in turn, would represent a seismic shift in the political landscape of America. At the least, it would neutralize the tremendous boost that public sector unions have given the political Left in America. At most, it might create a hitherto unthinkable consensus in America that public sector unions are indeed inherently political, and have far too much political influence, and must be subject to draconian restrictions including losing the right to collectively bargain, if not complete abolition.

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Towards a Grand Bargain on California Water Policy

When it comes to water policy in California, perhaps the people are more savvy than the special interests. Because the people, or more precisely, the voters, by huge majorities, have approved nine water bonds in the past 25 years, totaling $27.1 billion. It is likely they’re going to approve another one this November for another $8.9 billion.

The message from the people is clear. We want a reliable supply of water, and we’re willing to pay for it. But the special interests – or whatever you want to call the collection of politicians, unelected bureaucrats with immense power, and other stakeholders who actually decide how all this money is going to be spent – cannot agree on policy. A recent article in the Sacramento Bee entitled “Why San Francisco is joining Valley farmers in a fight over precious California water,” says it all. “Precious California water.” But what if water were so abundant in California, it would no longer be necessary to fight over it?

As it is, despite what by this time next year is likely to be $36 billion in water bonds approved by voters for water investments since 1996, the state is nowhere close to solving the challenge of water scarcity. As explained in the Sacramento Bee, at the same time as California’s legislature has just passed long overdue restrictions on unsustainable groundwater withdrawals, the political appointees on the State Water Resources Control Board are about to enact sweeping new restrictions on how much water agricultural and municipal consumers can withdraw from the Sacramento and San Joaquin rivers.

This is a perfect storm, and every conservation, recycling and storage project currently funded or proposed will not make up the shortfall. In 2002, well before these new restrictions were being contemplated, the California Dept. of Water Resources issued an authoritative study, “Averting a California Water Crisis,” that estimated the difference between demand and supply at between two and six million acre feet per year by 2020. An impressive response from the public during the most recent drought, combined with some investment in water infrastructure has narrowed that gap. But the squeeze is ongoing, with tougher challenges and tradeoffs ahead.

Abundance vs Scarcity

When thinking about solutions to California’s water challenges, there is a philosophical question that has to be addressed. Is it necessary to persistently emphasize conservation over more supplies of water? Is it necessary to always perceive investments in more supplies of water as environmentally unacceptable, or is it possible to decouple, or mostly decouple, environmental harm from investment in more water supplies? Is it possible that the most urgent environmental priorities can be addressed by increasing the supply of water, even if investing in more water supplies also creates new, but lessor, environmental problems?

This philosophical question takes on urgent relevance when considering not only the new restrictions on water withdrawals that face Californians, but also in the context of another great philosophical choice that California’s policy makers have made, which is to welcome millions of new immigrants from across the world. What sort of state are we inviting these new residents to live in? How will we ensure that California’s residents, eventually to number not 40 million, but 50 million, will have enough water?

It is this reality – a growing population, a burgeoning agricultural economy, and compelling demands to release more water to threatened ecosystems – that makes a grand political water bargain necessary for California. A bargain that offers a great deal for everyone – more water for ecosystems, more water for farmers, more water for urban consumers – because new infrastructure will be constructed that provides not incremental increases, but millions and millions of acre feet of new water supplies.

The good news? Voters are willing to pay for it.

How to Have it All – A Water Infrastructure Wish List

When considering what it would take to actually have water abundance again in California, the first step is to try to determine the investment costs, imagining a best case scenario where every good idea got funded. Here’s a stab at that list, not differentiating between local, state and federal projects. These are very approximate numbers, rounded upwards to the nearest billion:

Projects to Increase Supplies of Water

(1) Build the Sites Reservoir (annual yield 0.5 MAF) – $5.0 billion.

(2) Build the Temperance Flat Reservoir (annual yield 0.25 MAF) – $3.0 billion.

(3) Raise the height of the Shasta Dam (increased annual yield 0.5 MAF) – $2.0 billion.

(4) So Cal water recycling plants to potable standards with 1.0 MAF capacity – $7.5 billion.

(5) So Cal desalination plants with 1.0 MAF capacity – $15.0 billion.

(6) Desalination plants on Central and North coasts with 0.5 MAF capacity – 7.5 billion

(7) Central and Northern California water recycling plants to potable standards with 1.0 MAF capacity – $7.5 billion.

(8) Facilities to capture runoff for aquifer recharge (annual yield 0.75 MAF) – $5.0 billion.

Total – $52.5 billion. Increased supply – 5.5 MAF.

Projects to Increase Resiliency of Water Distribution Infrastructure

(9) Retrofit every dam in California to modern standards, including Oroville and San Luis – $5.0 billion.

(10) Aquifer mitigation to eliminate toxins with focus on Los Angeles Basin – $7.5 billion.

(11) Retrofit of existing aqueducts – $5 billion.

(12) Seismic retrofits to levees statewide, with a focus on the Delta – $7 billion.

Total – $24.5 billion.

The total of all these projects, $77 billion, is not accidental. That happens to be the latest best case, low-ball estimate for California’s completed high speed rail project. Without belaboring the case against high speed rail, two comparisons are noteworthy.

First, an ambitious program to create water abundance in California and water infrastructure resiliency in California based on this hypothetical budget is achievable. These numbers are deliberately rounded up, and the final costs might actually be lower, whereas it is extremely unlikely that California’s high speed rail project can be completed for $77 billion.

Second, because people will actually consume these new quantities of water that are being supplied and delivered, private financing will be attracted to significantly reduce the taxpayer’s share.

The Impact of a $77 billion Investment on Water Supply, Resiliency, and Ecosystems

As itemized above, at a capital cost of $52.5 billion, the total amount of water that might be added to the California’s statewide annual water budget is 5.5 million acre feet.

This amount of water would have a staggering impact on the demand vs. supply equilibrium for water. It is nearly equal to the total water consumed per year by all of California’s urban centers. Implementing this plan would mean that nearly all of the water that is currently diverted to urban areas could be instead used to ensure a cool, swift flow in California’s rivers, while preserving current allocations for agriculture. The options for environmentalists would be almost unbelievable. Restore wetlands. Revive the Delta. Refill the shrinking Salton Sea.

The environmentalist arguments against the three dams are weak. Shasta Dam is already built. The impact of expanding the Shasta Dam is purportedly the worst on McCloud creek, where it will affect “nearly a mile” of what was “once a prolific Chinook salmon stream,” (italics added). That negative impact, which seems fairly trivial, has to be balanced against the profound benefit of having another 500,000 acre feet of water available every summer to generate pulses of swift, cool water in the Sacramento River. The proposed Temperance Flat Reservoir is proposed on a stretch of the San Joaquin River that already has a smaller dam. The Sites Reservoir is an offstream reservoir that will not interfere with the Sacramento River.

The environmental benefits of these dams are not limited to their ability to ensure supplies of fresh water for California’s aquatic ecosystems. They can also be used to store renewable electricity, by pumping water from a forebay at the foot of the dam into the reservoir during the day, when solar energy already brings the spot price of electricity down to just a few cents per kilowatt-hour, then generating hydro-electric power later in the evening when peak electrical demand hits the grid. This well established technology has already been implemented on dams throughout California, and remains one of the most cost-effective ways to store clean, but intermittent, renewable energy. It will also be a profit center for these dams.

The environmentalist arguments against desalination are also weak. The energy required to desalinate seawater is comparable to the energy necessary to pump it from Northern California to the Los Angeles Basin. The outfall can be discharged under pressure a few miles from shore, where it is instantly disbursed in the California current. The impact from the intakes is grossly overstated by environmentalists, when considering that even if all of these contemplated desalination plants were built, the water they would intake is only a fraction of the amount of water taken in for decades by California’s power plants that are sited on the coast and use seawater for cooling.

As for the Delta, the primary environmental threat to that ecosystem is the chance that an earthquake destroys the hundreds of miles of levees, causing the agricultural areas behind those levees to be flooded. Not only would agricultural contaminants enter the water of the Delta, but the rush of water flooding into the areas behind the levees would cause salt water from the San Francisco Bay to rush in right behind, creating conditions of salinity that would take years to remove, if ever.

This is why investing in levee upgrades and a Delta Smelt hatchery is a preferable solution to the Delta tunnels. The tunnels would ensure a resilient supply of water from north to south, but the Delta would still be vulnerable to levee collapse. Levee upgrades and a Delta Smelt hatchery would accomplish both goals – resiliency of the water supply and of the Delta ecosystem. Moreover, the presence of massive water recycling and desalination facilities in Southern California would take a great deal of pressure off how much water would need to be transported through the Delta from north to south.

How to Finance $77 Billion for Water Infrastructure

Funding capital projects depends on three possible sources: operating budgets, general obligation bonds, or revenue bonds. Operating budgets, which used to help pay for capital projects, and which ought to help pay for capital projects, will never be balanced until real pension reform occurs. So for the most part, operating budgets are not a source of funds.

A useful way to differentiate between general obligation bonds and revenue bonds are that the general obligation bonds impose a progressive tax on Californians, since wealthy individuals pay about 60% of all tax revenues in California. Revenue bonds, on the other hand, because they are serviced through sales of, for example, water produced by a desalination plant, are regressive. This is because all consumers see these costs included in their utility rates, and utility bills constitute a far greater proportion of the budget for a low income household.

The Grand Bargain – Creating Water Abundance in California
(MAF = million acre feet)

By financing water infrastructure through a combination of revenue bonds and general obligation bonds, instead of solely through revenue bonds, water can remain affordable for ordinary Californians. The $24.5 billion portion of the $77.0 billion wish list, the funds for dam, aqueduct, and levee retrofits, along with aquifer mitigation, are not easily serviced through revenue bonds. A 30 year general obligation bond for $24.5 billion with an interest rate of 5% would cost California’s taxpayers $1.6 billion per year. Some of these projects, to the extent they are improving water delivery to specific urban and agricultural consumers, might be funded by bond issuances that would be serviced by the agencies most directly benefiting.

To claim that 100% of the revenue producing water projects can be financed through revenue bonds is more than theoretical. The Carlsbad Desalination Plant financing costs, principle and interest payments a nearly $1.0 billion for the plant’s construction, are paid by the contractor that built and operates the plant, with those payments in-turn funded through the rates charged to the consumers of the water. The contractor also retains an equity stake in the project, meaning that additional capital costs incurred privately are also funded via a portion of the rates charged to consumers.

Some of the revenue producing assets on the grand bargain wish list may also have a portion of them paid for by general obligation bonds. Determining that mix depends on the consumer. For example, a revenue bond for the reservoir projects may be applied to agricultural consumers who are willing to pay well above historical rates to have a guaranteed source of water for their orchards, which have to survive through dry years.

For urban consumers in particular, making the more expensive projects financially palatable may require general obligation bonds to cover part of the costs, so the remaining costs are affordable for ratepayers. For example, desalination is a relatively expensive way to produce water, making it harder to finance 100% with revenue bonds. But without desalination, wastewater recycling and runoff capture are not sufficient local sources of water in places like Los Angeles. The overall benefit to Californians of adding another 1.5 million acre feet per year to the state’s water supply, using desalination which is impervious to droughts, may be worth having some of its cost financed with general obligation bonds.

To fund roughly 50% of the revenue producing water supply infrastructure ($26.2 billion) and 100% of the water resiliency and distribution infrastructure ($24.5 billion) on this list would cost taxpayers about $3.0 billion per year. While this might strike some as an unthinkable amount to even consider, these projects meet all the criteria for so-called “good debt.” Constructing them all would solve California’s challenge of water scarcity, possibly forever. All of the projects are assets yielding ongoing and long-term benefits that will outlast the term of the financing. At the same time, water would become so abundant in California that prioritizing water allocations to revive ecosystems would no longer provoke bitter opposition. And California’s residents would live again in a state where taking a long shower, planting a lawn, and doing other water-intensive activities that are considered normal in a developed nation, would once again become affordable and normal.

Other Ways to Help Pay for Water Abundance in California

Enable and Expand Water Markets

Even if a grand bargain is struck between environmentalists, farmers, and water districts, and massive investments are made to increase the supply of water, enabling and expanding water markets will help optimize the distribution of available water resources. Similarly, reforming California’s labyrinthine system of water rights might also help, by making it easier for owners of water rights to sell their allocations. Fostering water markets while protecting water rights have interrelated impacts, and ideally can result in more equitable, appropriate water pricing across the state. It might also help make it unnecessary to impose punitive tiered rates or rationing on household consumers.

Reform Environmentalist Barriers to Development

CEQA, or the California Environmental Quality Act, is a “statute that requires state and local agencies to identify the significant environmental impacts of their actions and to avoid or mitigate those impacts, if feasible.” While the intent behind CEQA is entirely justifiable, in practice it has added time and expense to infrastructure projects in California, often with little if any actual environmental benefit. An excellent summary of how to reform CEQA appeared in the Los Angeles Times in Sept. 2017, written by Byron De Arakal, vice chairman of the Costa Mesa Planning Commission. It mirrors other summaries offered by other informed advocates for reform and can be summarized as follows:

  • End duplicative lawsuits: Put an end to the interminable, costly legal process by disallowing serial, duplicative lawsuits challenging projects that have completed the CEQA process, have been previously litigated and have fulfilled any mitigation orders.
  • Full disclosure of identity of litigants: Require all entities that file CEQA lawsuits to fully disclose their identities and their environmental or, increasingly, non-environmental interest.
  • Outlaw legal delaying tactics: California law already sets goals of wrapping up CEQA lawsuits — including appeals — in nine months, but other court rules still leave room for procedural gamesmanship that push CEQA proceedings past a year and beyond. Without harming the ability of all sides to prepare their cases, those delaying tactics could be outlawed.
  • Prohibit rulings that stop entire project on single issue: Judges can currently toss out an entire project based on a few deficiencies in environmental impact report. Restraints can be added to the law to make “fix-it ticket” remedies the norm, not the exception.
  • Loser pays legal fees: Currently, the losing party in most California civil actions pays the tab for court costs and attorney’s fees, but that’s not always the case with CEQA lawsuits. Those who bring CEQA actions shouldn’t be allowed to skip out of court if they lose without having to pick up the tab of the prevailing party.

Find Other Ways to Reduce Construction Costs

The Sorek desalination plant, commissioned in Israel in 2015, cost $500 million to build and desalinates 185,000 acre feet of water per year. Compared to Carlsbad, which also began operations in 2015, Sorek came online for an astonishing one-sixth the capital cost per unit of capacity. Imagine if the prices Israelis pay to construct desalination plants could be achieved in California. Instead of spending $15 billion to build 1.0 million acre feet of desalination capacity, we would spend less than $3.0 billion. How did they do this?

The bidding process itself adds unnecessary costs to public infrastructure projects. Moving to a design-build process could significantly reduce duplicative work during the plant’s engineering phase. Project labor agreements are another practice that at the very least deserve serious reconsideration. Would it be possible objectively evaluate the impact of project labor agreements, and determine to what extent those mandates increase costs?

What about economies of scale? If ten desalination plants were commissioned all at once, wouldn’t there be an opportunity for tremendous unit savings? What about creativity? Elon Musk, who has disrupted the aerospace industry by building rockets at a fraction of historical prices, said “the construction industry is one of the only sectors in our economy that has not improved its productivity in the last 50 years.” Is he even partly correct? Is that worth looking into?

Shift Government Spending Priorities

Cancel High Speed Rail: The most obvious case of how to redirect funds away from something of marginal value into water infrastructure, which is something with huge public benefit, is to cancel the bullet train. The project is doomed anyway, because it will never attract private capital. But what if Californians were offered the opportunity to preserve the planned bond issuances for high speed rail, tens of billions of capital, but with a new twist? If voters were asked to redirect these funds away from high speed rail and instead towards creating water abundance through massive investment in water infrastructure, there’s a good chance they’d vote yes.

Cancel the Delta Tunnels: By investing in levee hardening, the Delta’s ecosystems can be fortified against a severe earthquake. Reducing the possibility of levee failure protects the Delta ecosystems from their worst environmental threat at the same time as it protects the ability to transfer water from north to south. Investing in hatcheries to increase the population of the threatened Smelt is a far more cost-effective way of safeguarding the survival of that species. And investing in infrastructure on the Southern California coast to make that region water independent greatly reduces the downside of a disruption to water deliveries through the Delta. Canceling the Delta Tunnels would save $20 billion, money that would go a long way towards paying for other vital water infrastructure.

Reform Pensions: The biggest out of control budget item, by far among California’s state and local agencies, is the cost of public sector pensions. A California Policy Center analysis released earlier this year, based on public announcements from CalPERS, estimated that the total employer payments for pensions for California’s state and local government employees is set to nearly double, from $31 billion in 2018 to $59 billion by 2024. And that is a best case baseline. If there is a severe market correction, those required contributions will go up further. No discussion of how to find money for other government operations can take place without understanding the role of pension costs in creating budget constraints.

Reduce State Spending: Other ways to shift spending priorities in California, while worth a discussion, are mostly controversial. Returning the administrator to faculty ratio in California’s UC and CalState systems to its historical level of 1:2 instead of the current 1:1 would also save $2.0 billion per year. Outsourcing CalTrans work and eliminating redundant positions could save $2.5 billion per year. Reducing just state agency headcount and pay/benefits by 20% would save $6.5 billion per year. Just enacting part of that, incremental pension reform for state workers, could stop the runaway cost increases that are otherwise inevitable.

California’s state budget this year has broken $200 billion for the first time. Of that, general fund spending is at $139 billion, also a record. Revenues, however, have set records as well. The rainy day fund is full, and an extra deposit of $2.6 billion has it overflowing. Why not spend that $2.6 billion on water infrastructure? For that matter, why not spend all of the $1.4 billion of cap and trade revenue on water infrastructure?

Financing more water infrastructure will more likely come via public and private debt financing. But redirecting intended future borrowings, in particular for high speed rail and for the Delta Tunnels, could cover most if not all of the infrastructure investments necessary to deliver water abundance to Californians. And at the least, redirecting funds from government operating budgets can defray some of the operating costs, if not some of the capital costs.

Work to Build a Consensus

How many more times will California’s voters approve multi-billion dollar water bonds? The two passed in the last four years, plus the current one set for the November ballot, raise $20 billion, but only $2.5 billion of that goes to reservoir storage. Only another $3.3 billion more goes to any type of supply enhancements – mostly to develop aquifer storage or fund water recycling. Meanwhile, consumers are being required to submit to permanent water rationing, and dubious projects are being funded to save water. Artificial turf is a good example. There isn’t a coach in California who wants their athletes to compete on these dangerous surfaces. On a hot day in Sacramento, the temperature on these “fields” can reach 150 degrees. They are actually keeping sprinkler systems operating on these horrendous boondoggles, just to reduce the deadly heat buildup.

Credibility with voters remains intact to-date, but cannot be taken for granted. If a grand bargain on California’s water future is struck, it will need to promise, then deliver, water abundance to California’s residents.

Change the Conventional Wisdom

California’s current policies have stifled innovation and created artificial scarcity of literally every primary necessity – not just water, but housing, energy and transportation. Each year, to comply with legislative mandates, California’s taxpayers are turning over billions of dollars to attorneys, consultants and bureaucrats, instead of paying engineers and heavy equipment operators to actually build things. The innovation that persists despite California’s unwelcoming policy environment is inspiring.

California’s policymakers have adhered increasingly to a philosophy of limits. Less water consumption. Less energy use. Urban containment. Densification. Fewer cars and more mass transit. But it isn’t working. It isn’t working because California has the highest cost of living in the nation. Using less water and energy never rewards consumers, because the water and energy never were the primary cost within their utility bills – the cost of the infrastructure and overhead was the primary cost.

Changing the conventional wisdom applies to much more than water. It is a vision of abundance instead of scarcity that encompasses every vital area of resource consumption. A completely different approach that could cost less than what it might cost to fully implement scarcity mandates. An approach that would improve the quality of life for all Californians. Without abandoning but merely scaling back the ambition of new conservation and efficiency mandates, embrace supply oriented solutions as well. Build wastewater recycling and desalination plants on the Pacific coast, enough of them to supply California’s massive coastal cities with fresh water. Instead of mandating water rationing for households, put the money that would have been necessary to retrofit all those homes into new ways to reuse water and capture storm runoff.

Paying for all of this wouldn’t have to rely exclusively on public funds. Private sector investment could fund a large percentage of the costs for new water infrastructure. Water supplies could be even more easily balanced by permitting water markets where farmers could sell their water allotments without losing their grandfathered water rights. If the bidding process and litigation burdens were reduced, massive water supply infrastructure could be constructed at far more affordable prices.

The Grand Bargain

Water abundance in California is achievable. The people of California would welcome and support a determined effort to make it a reality. But compromise on a grand scale is necessary to negotiate a grand bargain. Environmentalists would have to accept a few more reservoirs and desalination plants in exchange for plentiful water allocations to threatened ecosystems. Farmers would have to pay more for water in exchange for undiminished quantities. While private financing and revenue bonds could cover much of the expense, taxpayers would bear the burden of some new debt – but in exchange for permanent access to affordable, secure, and most abundant water.

 *  *  *

This is the third and final part of an investigation into California’s water future. Part one is “How Much California Water Bond Money is for Storage?,” and part two is “How to Make California’s Southland Water Independent for $30 Billion.” Edward Ring is a co-founder of the California Policy Center and served as its first president.

 

California’s Transportation Future, Part Four – The Common Road

With light rail, high speed rail, and possibly passenger drones and hyperloop pods just around the corner, it’s easy to forget that the most versatile mode of transportation remains the common road. Able to accommodate anything with wheels, from bicycles and wheelchairs to articulated buses and 80 ton trucks, and ranging from dirt tracks to super highways, roads still deliver the vast majority of passenger miles.

As vehicles continue to evolve, roads will need to evolve apace. Roads of the future will need to be able to accommodate high speed autonomous vehicles. They will also need to be smart, interacting with individual vehicles to safely enable higher traffic densities at higher speeds. But can California build roads competitively? How expensive are road construction and maintenance costs in California compared with other states in the U.S.? How can California make the most efficient use of its public transportation funds?

PHYSICAL VARIABLES AFFECTING CONSTRUCTION COSTS

The Federal Highway Administration maintains a cost/benefit model called “HERS” (Highway Economic Requirements System) which they use to evaluate highway construction and highway improvement projects. One of the products of HERS is the FHWA’s most recent summary of road construction costs, updated in 2015. Its findings reveal both the complexity facing any cost analysis as well as the wide range of results for similar projects.

For example, on the FHWA website’s HERS summary page, Exhibit A-1 “Typical Costs per Lane Mile Assumed in HERS by Type of Improvement” data is presented in nine columns, each representing a typical project category for which the FHWA analyzes costs. They are: “Reconstruct and Widen Lane,” “Reconstruct Existing Lane,” “Resurface and Widen Lane,” “Resurface Existing Lane,” “Improve Shoulder,” “Add Lane, Normal Cost,” “Add Lane, Equivalent High Cost,” New Alignment, Normal,” “New Alignment, High.”

The FHWA then break their results in each of the nine project categories into two broad groups; rural and urban. Within each of those two groups, they offer the subgroups; “Interstate,” “Other Principal Arterial” (these two are combined in the “Rural” group), “Minor Arterial,” and “Major Collector.” This creates seven cost groups, each of which are then further split. For “Rural” categories, they split into “Flat,” “Rolling,” and “Mountainous.” For “Urban” categories, they split into “Small Urban,” “Small Urbanized,” “Large Urbanized,” and “Major Urbanized.”

To make a long story short, and to state the obvious, “cost per lane mile” is never one number. The FHWA’s HERS table, which itself is a reductive, arguably arbitrary summary, there are 252 distinct cost per lane mile estimates, 24 per project category. And within these nine categories, the range of costs is dramatic.

According to the HERS analysis, adding a new lane to an interstate on flat terrain in a rural area costs $2.7 million per lane mile. To do the same thing in a major urbanized area costs $62.4 million per lane mile, more than twenty times as much. Even minor projects display wide ranges in cost. Resurfacing an existing lane of a principal arterial in a flat, rural area costs $279,000 per lane mile. To do the same in a major urbanized area costs $825,000 per lane mile, three times as much.

The fact that topography, existing usage and population density affect road construction costs isn’t news. But the wide variation in costs that result from these physical variables compounds the other major factor affecting road construction costs, which is the political and economic environment of the states where projects occur. As will be seen, the FHWA compiles state by state data on road construction. This data, however, is apparently not sufficient to allow the FHWA to produce a HERS summary showing costs per lane mile by state.

EXAMINING FEDERAL DATA ON ROAD EXPENDITURES BY STATE

The FHWA Office of Highway Policy Administration does issue a highway statistics report, updated annually, that provides valuable per state data on highway mileage and transportation budgets. Their 2016 report is available but incomplete (still missing key tables such as “Disbursements by States for Highways”) so the 2015 report is still the most current. These tables are uniformly formatted and downloadable.

California’s Spending per Mile vs. Condition of Roads

An excellent analysis of FHWA data is produced every year by the Reason Foundation. Earlier this year they released “23rd Annual Highway Report,”ranking each state’s highway system in 11 categories, including highway spending, pavement and bridge conditions, traffic congestion, and fatality rates.” Highlights from this study can offer insights into how efficiently California is spending its highway dollars compared to other states through using the following logic: How does California rank in terms of how much it spends per mile, compared to how California ranks in terms of the condition of its roads.

Overall California is ranked 43 among the 50 states “Total Disbursements per mile.” California is ranked 41 in “Capital & Bridge Disbursements per mile,” 47 in “Maintenance Disbursements per mile, and 46 in “Administrative Disbursements per mile.” In terms of road condition, California is ranked 33 in “Rural Interstate Pavement Condition,” 45 in “Urban Interstate Pavement Condition,” and 46 in “Rural Arterial Pavement Condition.”

There’s not too much you can conclude from that in terms of efficient use of funds. Among the 50 states, California appears to be at or near the bottom 10% in spending per mile of road, and also in pavement condition.

In terms of cost-efficiency, among all states, this data suggests California is in the middle of the pack.

How Centralized Are California’s Road and Highway Agencies?

Within the FHWA data an interesting finding is the great variation between states in road mileage under state administration vs. road mileage under other administration – mostly cities and counties, but also federal. Only a few states, mostly the larger western states, have any significant mileage administered directly by the federal government – Alaska 14%, Arizona 22%, Idaho 16%, Montana 16%, New Mexico 16%, Oregon 28% and Washington 11%, and Wyoming 13%. Most all other states have low single digit percentages of roads administered by the federal government. The national average is 3%. California, only 6%.

State administration of road construction is higher, but still relatively low. The national average is 19% of road mileage administered by state agencies. California’s is significantly lower than average, at only 8%. Altogether, nationally, 78% of road mileage is administered by local agencies, mostly cities and counties. In California, 87% of road mileage is administered locally.

Before inferring too much from this fact, that road construction and administration is overwhelmingly ran by local agencies, FHWA funding data is useful. The data shows that total funding for roads in California in 2015 was $19.0 billion. Of that, 44% ($8.3 billion) was for “Capital Outlay,” which refers to new roads, new lanes on existing roads, new bridges, and bridge upgrades. The national average is 47% of all road spending on capital.

More to the point, the CalTrans budget in 2015 was $10.5 billion. According to the California Office of Legislative Analyst, that “includes $3.9 billion for capital outlay, $2 billion for local assistance, 1.8 billion for highway maintenance and operations, and $1.7 billion to provide the support necessary to deliver capital highway projects. How much of that was reported to the FHWA as part of the total $8.3 billion spent on capital? Certainly the $3.9 billion “for capital outlay.” Probably the “$1.7 billion to provide the support necessary to deliver capital highway projects”? What about the $2.0 billion of local assistance? For capital projects, it appears that between $5.6 billion and $7.6 billion of the total spending of $8.3 billion came from CalTrans.

The State of California’s role in total spending on road transportation is also reflected in the budget allocations in that year for the California Highway Patrol, $2.4 billion, which is included in the FHWA’s total for California, under “Law Enforcement” ($3.4 billion). It is possible, if not likely, that the state’s $1.1 billion for the Dept. of Motor Vehicles is included either in the Law Enforcement or Administration categories in the FHWA data, or allocated between them. Finally, the finance charges – interest payments and debt retirement totaling $1.5 billion – are not coming out of the budgets for the state’s transportation agencies, but some percentage of that total is paid by the state. Altogether it is likely that the State of California directly funded about $12 billion, roughly 63% of the $19 billion spent on road construction and administration in 2015.

Based on funding data, state agencies clearly play a central role in constructing and maintaining California’s roads.

California’s Spending per Lane Mile vs. Percentage of Lane Miles in Urban Areas

An interesting alternative way to get at how efficiently California uses its public transportation funds is to evaluate based on the expanded variables of total lane-miles instead of state administered road mileage, and total spending on roads by all public transportation agencies instead of just Caltrans. The rationale for using lane-miles relies on the assumption that it is more costly to build a mile of six lane highway (three lanes in each direction) than a mile of two lane road, meaning that lane miles provides a more meaningful denominator, if the numerator is total public spending on roads. The rationale for examining spending by all public transportation agencies relies on the assumption that many, if not most of the political and economic factors that govern road construction costs in California are common throughout the state, having the same effect on construction costs regardless of the funding source.

Using FHWA data on lane miles and total spending by state to calculate spending per lane-mile, California was found to average $43,999 in total spending per lane-mile. This ranks California 42 among all states. The national average is $25,474 in transportation spending per lane-mile. Put another way, for every dollar that, on average, is spent to build and maintain a lane-mile in the nation as a whole, California spends $1.73. This suggests that California is not spending its transportation funds nearly as efficiently as the most other states, but without considering other variables this is a misleading statistic.

One of the largest factors determining cost per lane-mile is urbanization. This is clearly evident in the previously mentioned FHWA website’s HERS summary page, Exhibit A-1 “Typical Costs per Lane Mile Assumed in HERS by Type of Improvement,” where costs per lane-mile are uniformly higher in urban areas, and in some cases far higher. As noted earlier, “According to the HERS analysis, adding a new lane to an interstate on flat terrain in a rural area costs $2.7 million per lane mile. To do the same thing in a major urbanized area costs $62.4 million per lane mile, more than twenty times as much.”

The idea that road construction costs more in urban areas can be attributed to several interrelated factors: Land values are typically greater in densely populated areas. Construction challenges are greater in urban areas where it is more likely that existing structures may have to be acquired and demolished to permit road construction or widening. Labor costs are typically higher in urban areas. Urbanized regions also are likely to have more local restrictions on development, leading to more costly permitting processes and higher fees. There are other key factors influencing road construction costs – for example, climate and topography – but urbanization is easily quantifiable and likely the most significant of them.

For this reason, the following chart includes not only spending per lane-mile by state, but also includes the percentage of lane-miles, by state, that are in urban areas. Here, California distinguishes itself as one of the most urbanized states, having 59% of its lane-miles within urban areas. The national average, by contrast, is almost half that; only 31% of the nation’s lane miles are located in urban areas. Tracking these two rankings, spending per lane-mile and percentage of urban lane miles, permits an illuminating comparison. If one assumes there is a correlation between cost per lane mile and percentage of lane miles in urban areas, then how a state ranks in one should be similar to the how it ranks in the other.

Six states conform exactly to this assumption. Utah, for example, is the 24th most expensive state to construct roads per lane-mile, and it has the 24th most rural percentage of roads. Similarly, Illinois has a $/mile rank of 34, and it has a rural road % rank of 34. Texas, Pennsylvania, New Jersey, and the District of Colombia all have $/mile rankings exactly equal to their rural road % ranking. Five more states have a deviation between their $/mile rank and their rural road % rank of only one. California’s is only two – it is ranked 42 in its cost per lane mile, making it quite expensive relative to most states, but it is ranked 44th in its percentage of lane-miles in rural areas, meaning it is one of the most urbanized states.

The final set of columns on the chart, on the right, show a score for each state based on the rural road percent ranking less the $/mile ranking. If the score is negative, that means the state spending on lane miles ranks better (less per mile) than its rank based on its percentage of rural lane-miles. In other words if the score is negative, that means the state is spending less per lane mile than one might expect based on their level of urbanization, and if the score is positive, the state is spending more per lane mile than one might expect based on their level of urbanization.

Once again, California is in the middle of the pack.

Spending per Lane-Mile by State; Percentage of Urban Lane-Miles by State
(Source: Federal Highway Administration, 2015)

If one assigns any credence to these rankings, it presents interesting questions. Why is it that states like Georgia and Tennessee, which are relatively urbanized, are among the top performers in terms of being able to cost-effectively construct and maintain their roads? In the case of Tennessee, it isn’t as if they’ve neglected their roads, they are in the top ten in all three FHWA measurements of pavement condition. Georgia’s scores on pavement condition put them in the middle among states.

In some of the poorly ranked states, topography and climate may be factors. Alaska, the one of the least urbanized states nonetheless is one of the most expensive states to build and maintain roads, which should come as no surprise. Most of the states with low scores have harsh climates.

A final note regarding California – while it shows a high correlation between its cost per lane-mile and its level of urbanization, it does not score well in the three pavement condition indexes; 33 out of 50 for rural interstates, 45 out of 50 for urban interstates, and 46 out of 50 for rural arterial roads.

California can do better.

OBSERVATIONS AND RECOMMENDATIONS

Federal data indicates that while California scores poorly compared to other states in terms of road conditions, California also spends less than other states in terms of expenditures per lane mile. Considered in isolation, those two facts only suggest that California is using its transportation funds no more and no less efficiently than the average state. While federal data also indicates that California, overall, spends nearly twice as much per lane-mile as the national average, California is also more heavily urbanized, and normalizing for that reveals again that California is being roughly as cost effective in its use of transportation dollars as the average state.

When factoring in the condition of California’s roads, however, which are near the bottom in pavement condition indexes, California is not using its transportation dollars as well as it could.

Anecdotally, literally everyone surveyed – and we talked with representatives from dozens of agencies, research firms, and transportation agencies – agreed that per mile road construction costs are higher in California than most other states. But the federal data we had access to does not offer documentary proof of that, and Caltrans, despite numerous attempts, could not produce data on per mile construction costs that could be compared to national averages.

The lack of transparency, the complexity, and the subjective nature of any resulting analysis makes it difficult to assert with any certainty where California falls relative to other states – it is either somewhat below average, or far below average, but making that call requires a level of evidence and clarity that is simply not available. Ultimately it does not matter where California falls in that continuum, because regardless of how efficiently California spends their public transportation funds per lane mile of new or upgraded roads, there are ways to improve. The following recommendations were heard repeatedly, from contractors, trade associations, and researchers familiar with the topic. The first two in particular:

(1) Reform CEQA

CEQA, or the California Environmental Quality Act, is a “statute that requires state and local agencies to identify the significant environmental impacts of their actions and to avoid or mitigate those impacts, if feasible.” While the intent behind CEQA is entirely justifiable, in practice it has added time and expense to infrastructure projects in California, often with little if any actual environmental benefit. An excellent summary of how to reform CEQA appeared in the Los Angeles Times in Sept. 2017, written by Byron De Arakal, vice chairman of the Costa Mesa Planning Commission. It mirrors other summaries offered by other informed advocates for reform and can be summarized as follows:

  • End duplicative lawsuits: Put an end to the interminable, costly legal process by disallowing serial, duplicative lawsuits challenging projects that have completed the CEQA process, have been previously litigated and have fulfilled any mitigation orders.
  • Full disclosure of identity of litigants: Require all entities that file CEQA lawsuits to fully disclose their identities and their environmental or, increasingly, non-environmental interest.
  • Outlaw legal delaying tactics: California law already sets goals of wrapping up CEQA lawsuits — including appeals — in nine months, but other court rules still leave room for procedural gamesmanship that push CEQA proceedings past a year and beyond. Without harming the ability of all sides to prepare their cases, those delaying tactics could be outlawed.
  • Prohibit rulings that stop entire project on single issue: Judges can currently toss out an entire project based on a few deficiencies in environmental impact report. Restraints can be added to the law to make “fix-it ticket” remedies the norm, not the exception.
  • Loser pays legal fees: Currently, the losing party in most California civil actions pays the tab for court costs and attorney’s fees, but that’s not always the case with CEQA lawsuits. Those who bring CEQA actions shouldn’t be allowed to skip out of court if they lose without having to pick up the tab of the prevailing party.

(2) Restructure Caltrans

Caltrans currently outsources only about 10% of its work. Despite repeated attempts to legislate changes that would require Caltrans to use contractors to lower costs, no action has been taken. In a report prepared in 2015 by state senator Moorlach, the failure of California’s legislature to implement reforms is described: “In previous administrations, Governor Schwarzenegger pushed for an 89/11 ratio and could not achieve it. Even Governor Brown proposed a reduced ratio that was rejected by the Legislature.”

By maintaining permanent engineering staff instead of contracting, whenever projects are concluded these engineers are often idle until another project comes along. The Legislative Analyst’s Office in 2015 reported that there were 3,500 of these positions created for programs that have expired, requiring an extra $500 million each year.

The advantage of contracting out engineering work isn’t merely based on more efficiently allocating personnel to projects to avoid down time. When Caltrans does the designing, then puts the project out for bids, the contracting companies have to conduct redundant design analysis in order to prepare their bids. This also contributes to increased costs which are passed on to the taxpayer as well as extra time. In moving to a system where Caltrans just specifies the project goals and lets the contractors prepare competitive bids based on in-house designs, the taxpayer saves time and money. Ways to restructure Caltrans might include:

  • Immediately increase the ratio of contracted work from 10% to 20%.
  • Permit the headcount of in-house engineers at Caltrans to reduce through retirements and voluntary departures, systematically increasing the ratio of contracted work as the number of Caltrans in-house engineers decreases. Set a goal of at least 50% contracted work within five years.
  • Abolish the current requirement that the state legislature has to approve any projects that are contracted by Caltrans instead of designed in-house.

(3) Decentralize and Innovate

On the FAQ page for Elon Musk’s Boring Company, the following innovations are proposed to lower the cost of tunneling by a factor of between 4 and 10: (1) Triple the power output of the tunnel boring machine’s cutting unit, (2) Continuously tunnel instead of alternating between boring and installing supporting walls, (3) Automate the tunnel boring machine, eliminating most human operators, (4) Go electric, and (5) Engage in tunneling R&D. More generally, on that FAQ page the following provocative assertion is made: “the construction industry is one of the only sectors in our economy that has not improved its productivity in the last 50 years.”

How can California use public transportation dollars to nurture innovation that will deliver more people to more places, faster, safely, for less money? One way would be to nurture competition by nearly eliminating Caltrans. Why should one state agency control nearly two-thirds of the funds for road construction and maintenance in California? Why not reduce Caltrans to a couple dozen administrators to handle federal regulations and direct federal funds and move all road work, expansion and maintenance to the counties? The counties can conform to a general state plan, but there’s no reason to have a state bureaucracy any more when the counties can be challenged to be more efficient, effective and non-duplicative in their work.

Imagine the innovation that might come out of Santa Clara County, where stretches of roadway could be immediately prioritized to add smart lanes where autonomous cars – including mini-buses and share cars – can operate safely at much higher densities and speeds. Imagine the innovation that might come out of Los Angeles County, where entire transit corridors could have congestion greatly relieved because thousands of cars are being swiftly and safely transported from point to point in underground tunnels. Imagine the innovation that might come out of San Francisco, where congestion pricing completely eliminates their chronic gridlock, or out of Orange County, where private investors team up with public agencies to use roboticized equipment to perform heavy road construction at a fraction of the cost for conventional processes?

Why not decentralize transportation management in California and turn the counties into laboratories of innovation?

(4) Expand Into the Vastness of California

It is an accident of history that California is so densely urbanized. Most metropolitan regions on the east coast, developed gradually over three centuries or more, have thousands of square miles of spacious suburbs, and tens of thousands of even more spacious expanses of moderately settled lands on the edges of remaining wilderness areas. California, in stark contrast, has nearly 18 million people residing in greater Los Angeles and over 7 million people residing in the greater San Francisco Bay Area. If you add residents of the San Diego region and Sacramento regions, you account for 32 million out of a population of 39 million. And yet all of California’s urban areas, the most densely urbanized in the nation, only constitute five percent of its 163,696 square miles! The math is compelling – you could settle ten million people in four person households on half-acre lots and it would only consume 1,953 miles. Double that for roads, parks, commercial and industrial space, and you are still only talking about urbanizing another 2.4% of California’s land. The idea that we cannot do this is preposterous.

The cost of infrastructure, roads in particular, is much higher in urban areas. So why not expand along the nearly empty Interstate 5 corridor, creating new towns and cities that are spacious and zoned to never become congested? Why not upgrade I-5 to accommodate high speed smart vehicles that provide nearly the speed of high-speed rail, while preserving the point-to-point convenience that only a car can offer? Why not expand along the entire fringe of California’s great Central Valley, where currently thousands of square miles of cattle rangeland are being taken out of production anyway? Why not build more roads on this raw land, bringing down the cost both for roads and the homes that will be built around them?

(5) Change the Conventional Wisdom

California’s policymakers have adhered increasingly to a philosophy of limits. Urban containment. Densification. Less energy use. Less water consumption. Fewer cars and more mass transit. But it isn’t working. It isn’t working because California has the highest cost of living in the nation. Using less energy and water never rewards consumers, because the water and energy never were the primary cost within their utility bills – the cost of the infrastructure and overhead was the primary cost, and those costs only go up with renewables. Cramming home construction into limited areas not only destroys the ambiance of existing neighborhoods, but simply cannot increase the supply of homes enough to lower the cost.

There is a completely different approach that would cost less and improve the quality of life for all Californians. Without abandoning but merely scaling back the ambition of new conservation and efficiency mandates, free up funds to build safe, generation III+ advanced nuclear reactors. At the same time, construct desalination plants on the Southern California coast, enough of them to supply the entire Los Angeles basin with fresh water. Instead of mandating water rationing for households, put the money that would have been necessary to retrofit all those homes into new ways to reuse water and capture storm runoff.

Paying for all of this wouldn’t have to rely exclusively on public funds. Private sector investment could fund most of the energy and water infrastructure. Water supplies could be even more easily balanced by permitting water markets where farmers could sell their water allotments without losing their grandfathered water rights. If the permit process and mandated design requirements were reduced, builders could carpet former cattle ranches with new homes, sold for a profit at affordable prices.

CONCLUSION

This is the final segment of a four part excursion into California’s transportation future. In each section the same themes emerged: It isn’t just what gets built to serve future Californians, it’s how cost effectively the money is spent. Innovation and regulatory reform – CEQA in particular, but also repealing SB 375, AB 32, and related anti-growth legislation – together have the potential to lower the cost of infrastructure, transportation in particular, by at least 50%.

California’s current policies have stifled innovation and created artificial scarcity of literally every primary necessity – housing, energy, water and transportation. Each year, to comply with legislative mandates, California’s taxpayers are turning over billions of dollars to attorneys, consultants and bureaucrats, instead of paying engineers and heavy equipment operators to actually build things.

The innovation that persists despite California’s unwelcoming policy environment is inspiring. Right here are the pioneering companies that will deliver flying cars, commercial access to outer space, breakthrough modes of transportation such as hyperloop and urban tunnels. Right here are the companies that will deliver self-driving cars, cars on demand, high-speed smart cars. These things will happen within a time frame that is, by the standards of human history, breathtakingly short. And with the right assortment of pro-growth policies in place, more of them will happen right here.

California’s transportation future cannot be predicted with any certainty. If the past few decades have taught us anything, it is that innovation routinely delivers products and solutions that nobody could have possibly imagined. But it is a reasonably safe bet that the common road is the most useful mode of transportation infrastructure for which public policy can risk public funds. A flat surface where wheeled conveyances of every conceivable design can all travel from point to point, clean, smart, versatile, sustainable, and fast.

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Edward Ring co-founded the California Policy Center in 2010 and served as its first president.

California’s Transportation Future, Part One – The Fatally Flawed Centerpiece

California’s Transportation Future, Part Two – The Hyperloop Option

California’s Transportation Future, Part Three – Next Generation Vehicles

REFERENCES

[1] Federal Highway Administration – Highway Economic Requirements System

[2] Office of Highway Policy Information – Highway Statistics 2015

The FHWA’s annual highway statistics report is actually a series of tables, uniformly formatted and downloadable as Excel files. For this report, the following tables were downloaded and consolidated:

[2-A] Selected measures for identifying peer states

[2-B] Disbursements by States for highways

[2-C] Length by ownership

[2-D] Estimated lane-miles

[2-E] Disbursements by States for State-administered highways

[2-F] Total disbursements for highways, all units of government

[2-G] Estimated lane-miles by functional system

[3] Reason Foundation – 23rd Annual Highway Report

[4] California Office of Legislative Analyst – The 2015-16 Budget: Transportation Proposals

[5] California Office of Legislative Analyst – The 2014-15 Budget: Capital Outlay Support Program Review

 

California’s Government Unions Collect An Estimated $800 Million Per Year

Editor’s note: This post was updated on 7/13/2018 to include the following RETRACTION: The CSEA (California Schools Employees Association) has provided clarification of actual member dues revenue. The author’s previous assumptions, now known to be erroneous, were that (1) CSEA is a decentralized union meaning that significant dues revenue is retained by local affiliates, and (2) that annual dues revenue was based on 2% of pay instead of the lower 1.5%, and (3) that the maximum allowable dues per year was higher than what is actually the case.

To rectify this, this article now states that total government union revenue in California is at least $800 million per year. That is based on the inaccurate estimate originally made for CSEA’s annual revenue, $159 million, now being reduced to the revenue disclosed by the CSEA on their 990, $67M. This lower annual figure for CSEA, $67M, has been incorporated accordingly into the revised analysis to follow. While the CSEA does have independent affiliates, their revenue is far less than what we assumed, for the reasons stated, and for this overall estimate of all union revenue we are simply leaving that amount out of our calculations.

As explained in the article, it is difficult to accurately compile estimates of total government union dues and memberships, and to do so with the information and resources available requires making reasonable assumptions. If we learn of further erroneous assumptions used to compile any of these estimates, they will be diligently corrected. We regret the error.

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In the wake of the Janus ruling, it is useful to estimate just how much money California’s government unions collect and spend each year. Because government unions publicly disclose less than what the law requires of public corporations or private sector unions, only estimates are possible.

The primary source of information comes from Form 990s that government unions must provide to the IRS each year. Copies of these 990s can usually be found on Guidestar.org; sometimes they are also available on the union websites. While these 990s are useful, to put together reasonably accurate estimates of total government union revenue they require careful analysis and supplemental information from elsewhere. With these limitations noted, here are summary estimates of how much money California’s taxpayers are providing to government unions, who withhold their dues directly from the payroll departments of public agencies.

PUBLIC EDUCATION UNIONS

According to the U.S. Census Bureau, in 2016 there were 422,248 “full time equivalent” teachers employed in California’s K-12 system of public education. In California’s UC and CSU systems of higher education, there were 30,005 faculty instructors. Support staff in the K-12 system numbered 239,726 employees, and in higher education they numbered 40,770 employees.

The largest union focused on K-12 teachers is the California Teachers Association (CTA), easily the largest and most powerful union in California. Their most recent financials, for the year 2015, show declared revenue of $190 million, with $178 million of that declared as dues from members. This, however, greatly understates the power of the CTA.

Not only is the CTA a branch of the nationally focused National Education Association, but the CTA in turn is comprised of local chapters. These local chapters retain a significant share of dues revenue, which they report on their own 990 forms. The CTA chapter United Teachers of Los Angeles (UTLA), for example, declared membership dues of $38.9 million in 2015.

Collecting exact financial data including dues revenue for all CTA chapters would be possible, but not easy. Including the behemoth UTLA, the CTA has 1,100 chapters, plus the California Faculty Association and 42 chapters in the Community College Association. But making a reasonable estimate is possible based on the CTA “Fact Sheet” where they declare a membership of 325,000, combined with the UTLA’s disclosure of their “new dues structure,” wherein full time members pay $1,014 per year.

Based on this information, one may estimate the total annual dues revenue of the CTA and its affiliates at around $330 million per year. While some members may not pay the full dues, which might lower this estimate, the CTA and affiliates have other sources of income including investment income. For example, at the end of 2015 the CTA declared net assets of over $190 million, and the UTLA declared net assets of $28.6 million.

While the CTA is huge, it is not the only union player in California’s system of public education. A much smaller but still very large and powerful teachers union active in California is the California Federation of Teachers (CFT), a branch of the American Federation of Teachers. On their “Who We Are” page, the CFT claims a membership of 120,000, spread over 145 local chapters.

Just as with the CTA, precisely calculating the total dues revenue of the CFT is nearly impossible. Moreover, some of the AFT’s claimed chapters, the UTLA in particular, are actually quasi-independent unions that are affiliated with the CTA and the CFT. But based on their membership claims, and taking into account these complicating factors, a reasonable estimate of the total dues revenue for the CFT and their direct local affiliates is probably around $100 million.

The power of the unions in California’s system of public education doesn’t stop with the CTA and CFT, however. There is also the California School Employees Association (CSEA), claiming membership of 240,000 mostly “classified” (non-instructional) support staff. The CSEA is divided into “Areas” and “Regions”  which is their equivalent of local chapters. Their 990 reports a 2015 revenue of $67.2 million.

In summary, subject to the limitations in the available data and what appear to be reasonable assumptions, California’s public education employee unions, the CTA, the CFT, and the CSEA, altogether are probably collecting around $497 million per year.

PUBLIC SAFETY UNIONS

The difficulties inherent in estimating revenue for public education unions are equally present when trying to estimate revenue for public safety unions. The firefighter unions and police unions are for the most part decentralized. The Los Angeles Police Protective League illustrates this point. With revenue in 2016 of $11.6 million. When their membership dues, $10.4 million, is divided by their 9,900 membership, their average dues can be estimated to be $1,152 per year.

Extrapolating this estimate of average dues to the total number of full-time police officers in California, 63,230, as defined by the U.S. Census Bureau as “Police Protection – Persons with Power of Arrest,” it is reasonable to estimate the California’s total police union dues revenue is around $72.8 million per year. This number could be larger, based on the Public Policy Institute’s recent analysis which states “In 2015 there were more than 118,000 full-time law enforcement employees in California; roughly 77,000 were sworn law enforcement officers (with full arrest powers) and 41,000 were civilian staff.”

Firefighter unions, also decentralized into locals, defy easy compilations of total revenue. A conservative estimate of their average dues would be to assume they are comparable to police union dues, $1,100 per year. According to the CPF website they “claim over 175 IAFF locals as CPF affiliates, serving more than 30,000 paid professional firefighters. ” This is consistent with the U.S. Census data, which estimates “Fire Protection – Firefighters” at 28,907 employees” and “Fire Protection – Other” at 4,182 employees.

Based on these variables, total annual revenue for all affiliates of the California Professional Firefighters union is estimated to be around $33 million per year.

The other public safety union, the California Correctional Peace Officers Association, appears to be a centralized organization, claiming 39,750 members. Their 990 for 2016 declares total revenue of $29.3 million, This implies an annual dues of $1,088 per year, which is consistent with other unions.

In summary, California’s public safety unions, the CPOA, the CPF, and the CCPOA, along with their local affiliates, altogether are probably collecting around $135 million per year.

OTHER PUBLIC SECTOR UNIONS

No survey of California’s government unions is complete without taking a look at three very large and influential unions – the American Federation of State, County and Municipal Employees (AFSCME), the California State Employee Association (CSEA, not to be confused with the California School Employees Association), and the California Nurses Association.

With these unions as well it is difficult to gather accurate compiled data, because in each case dozens if not hundreds of local affiliates are filing separate 990 forms. AFSCME California, for example, includes the following:

Council 36 – extending across Los Angeles to Orange County to San Diego representing more than 55 autonomous Local Unions whose members work in local government agencies and nonprofit organizations.

Council 57 – representing workers in schools and community colleges, transit agencies, public works and services, clinics and hospitals, and water and wastewater facilities throughout Northern California and the Central Valley, as well as the health and social service professionals in corrections facilities across California.

Employees Association of the Metropolitan Water District, Local 1902 – representing the workers of Southern California water districts including accountants, designers, electricians, engineers, environmental specialists, inspectors, IT, mechanics, meter technicians, pipelayers, and PR specialists.

Management and Professional Employees Association of the Metropolitan Water District, Local 1001 – representing the management and professional employees of the the Metropolitan Water District of Southern California.

United Nurses Associations of California/Union of Healthcare Professionals (UNAC/UHCP) – representing over 29,000 registered nurses and other health care professionals, including optometrists; pharmacists; physical, occupational and speech therapists; case managers; nurse midwives; social workers; clinical lab scientists; physician assistants and nurse practitioners.

United Domestic Workers of America, Local 3930 (UDW) – representing nearly 98,000 in-home support services (IHSS) workers in 21 California counties who take care of Californians with disabilities, the sick, and the elderly.

United EMS Workers, Local 4911 – representing approximately 4,000 private sector emergency medical services (EMS) workers in California whose mission is to raise standards in EMS and protect services for the public.

Union of American Physicians and Dentists, Local 206 (UAPD) – representing doctors working for the State of California, California counties, non-profit healthcare clinics, and in private practice.

University of California Employees, Local 3299 – the University of California’s largest employee union, representing more than 24,000 employees at UC’s 10 campuses, five medical centers, numerous clinics, research laboratories and UC Hastings College of the Law.

Public Employees Union, Local 1 – representing public employees in Contra Costa, West Contra Costa, Merced, Sutter/Yuba, and El Dorado counties.

Calculating the total dues revenue of AFSCME California’s ten major networks of union locals is difficult; precisely estimating their total number of members is impossible to acquire via publicly available information. Based on the information provided on the websites of these locals, total membership can be guessed at. Four of the AFSCME California networks disclose their membership (in italics, above), totaling 155,000. Examining the descriptions of the other six networks suggests a conservative estimate of an additional 45,000 members. Assuming annual dues revenue of $400 per year per member, AFSCME is collecting $80 million per year. That’s probably on the low side.

The California State Employee Association is an agglomeration of three principle unions, the California State University Employees Union with revenue in 2016 of $7.1 million, the Association of California State Supervisors, with 2016 revenue of $3.4 million, and the powerful Service Employees International Union (SEIU) Local 1000, with 96,000 members and 2016 revenue of $63.2 million. Altogether the unions that comprise the California State Employees Association in 2016 collected revenue of $73.7 million.

Including the California Nurses Association among a survey of public sector unions requires some explanation. It clearly would be inaccurate to claim that all their members work in the public sector. For the purposes of this compilation, we will assume that 25% of them work for public healthcare facilities, based, for example, on their penetration of the UC system healthcare networks and many of California’s county medical centers. The CNA claims membership of 80,000 and for 2016 their 990 declared revenue of $107.8 million.

In summary, California’s other major public sector unions, AFSCME, the CSEA including SEIU Local 1000, and the CNA (est. public sector portion at 25%), along with their local affiliates, altogether are probably collecting around $135 million per year.

CONCLUSION

Based primarily on publicly disclosed 2016 form 990s along with information obtained from their individual websites, in aggregate, California’s major public sector unions are estimated to be collecting $800 million per year.

Because there are undoubtedly smaller and less visible public sector unions operating in California, this number may be conservative. The number is also possibly understated because when making assumptions, conservative estimates were always applied. This was the done when estimating average membership dues in nearly all cases, and also with respect to total membership.

Editor’s Note – 7/15: Notwithstanding the above, because we have learned new information that required us to revise downwards our assumptions regarding the CSEA’s total revenue (including all local affiliates), we must (1) caution any reader that these numbers are difficult to compile precisely because in California there are many hundreds, if not thousands, of individual local public sector union affiliates all filing separate 990 forms, often including financial transfers between entities that have to be offset in any thorough analysis – a nearly impossible task, and (2) upon learning of them, we will diligently correct any further wrong assumptions remaining in this analysis. 

 

California’s Public Sector Unions (including local affiliates)
Estimated Total Membership and Revenues

 

It would go beyond the scope of this analysis to speculate as to what impact the recent Janus ruling will have on government union membership and revenues, or to ponder the degree and kind of political influence of the three major blocks of unions; teachers, public safety, and public service.

It is relevant, however, to emphasize that the reach of these unions, because many of them are highly decentralized, extends to the finest details of public administration, into the smallest local jurisdictions. When recognizing the profound statewide impact of public sector union political agenda, it is easy to forget that fact, and the implications it carries for virtually every city, county, special district, or school district in California.

Ed Ring co-founded the California Policy Center and served as its first president.

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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/#

California Cities Facing Huge Pension Increases from CalPERS

In their most recent actuarial reports CalPERS for the first time provided pension cost estimates for the next 8 years, from 2015 to 2023.

How high are these costs going for California’s cities who retroactively increased their pensions at CalPERS urging over the past 15 years? To answer that question I looked at the largest city in my county, Santa Rosa and this is what I found.

Data Sources for this Report

The data used to develop the spreadsheet analysis done as part of this report are NOT numbers that I calculated. The past numbers for 2002 to 2015 are taken directly from the City of Santa Rosa’s Comprehensive Annual Financial Reports found on the City’s website (This page has the links to Santa Rosa’s CAFRs from 2001 through 2015. In each of these CAFRs, the pension information is found in the section entitled “Notes to Basic Financial Statements” under the heading “Employees Retirement Plan.”). The projected growth of certain costs – such as retiree healthcare benefits (also known as “other post employment benefits,” or OPEB), the payroll and sales and property tax revenues – use inflation rates or growth rates similar to what CalPERS uses.

The future pension costs were obtained directly from the 2013 and 2015 Actuarial Reports prepared by CalPERS and found on the CalPERS website. Since the future costs are based upon CalPERS achieving a 7.5% net rate of investment return, I believe their costs are understated, but I used them anyway. But since the pension plan has $804 million worth of assets if the pension fund returns 6.5%, in a single year it will add $8 million to the City’s pension debt and a 5% return would add $20 million.

Looking at the data going back 16 years what I found is that in 2000, Santa Rosa’s pension contribution was $1.8 million and the plan was 122% funded, meaning there were $1.22 worth of invested assets in the fund for every $1.00 worth of benefits earned.

With CalPERS wholehearted support and assistance, on August 6, 2002, the Santa Rosa City Council passed a board resolution to enact a new contract with CalPERS that changed formulas from 2% per year of service at 55 years of age for non-safety Miscellaneous employees to a 3% at 60 formula.  The new formula was provided prospectively, meaning it only applied to future years of service, not past years.

For Police and Fire employees, the new contract was adopted retroactively so it applied to past and future years of service. Their formula went from 2% per year of service at 55 years of age to 3% at 50. This represents a more than 50% increase in the benefit, since along with the “multiplier” increasing from 2% to 3%, the age of eligibility dropped from 55 to 50. But it was the retroactive granting of this benefit that caused even more significant financial liability. This is because the multiplier was increased by 50% even for years already worked and raised pensions from 60% of salary to 90% of salary for 30 years of service.

These changes ended up having a serious impact on the pension costs and the unfunded liability because CalPERS used an overly optimistic rate of investment return of 8.25% compounded per year in their cost analysis. Over the past 15 years since the increase, CalPERS has only achieved a 5% compound rate of return. Many experts believe in this current low interest rate environment returns will remain at the 5% return level for the foreseeable future.

In July of 2003 the City took on $53 million worth of new debt by selling Pension Obligation Bonds (POB) and giving the proceeds to CalPERS to pay down the unfunded liability that was created by the new formulas. With interest these bonds will divert over $100 million from government services to debt service.

CalPERS Flawed Cost Analysis and Lack of Proper Disclosure

CalPERS cost analysis provided to the City in 2002 stated the cost for the new 3% at 50 formula for Safety members would be 13.27% of salary and the cost for the 3% at 60 formula for Miscellaneous members would be 9.87% of salary. However, as previously stated, these estimates were calculated assuming that pension assets would grow at 8.25% per year into the future. Since CalPERS investments have only averaged 5% over the past 15 years the increases have created $287 million in unfunded pension liabilities for the City as of 2015.

In addition, the analysis did not provide the City with any warning or disclosure regarding what would happen if the 8.25% investment return was not achieved. CalPERS simply wrote “For many plans at CalPERS the financial soundness of the plan will not be jeopardized regardless of the new formula choice made by the employer.”

The Growth of Pension Costs Since the Increase

In 2001, the City’s pension contribution was $1.5 million and in the first 4 years following the increase it grew to $11.5 million. In addition, the funding ratio dropped from 122% in 2001 to 70% in 2005 meaning the fund, instead of $63 million in excess assets now had $128 million in unfunded liabilities.

In 2006, the annual cost grew by another $5 million hitting $16.6 million and by 2015 had grown to $21 million. However, this was a very modest growth considering CalPERS lost 29% of its assets during the Great Recession in 2008 and 2009. CalPERS lowered contributions in order to help cities and counties who saw their tax revenues during the recession drop. So CalPERS extended the amortization period on the unfunded liabilities from 9 to 20 years and smoothed their investment gains and losses from 4 to 15 years into the future. Basically, these were accounting gimmicks that resulted in severe underfunding of the pension plan and these changes exist today. The chart below shows the growth of Santa Rosa public employee retirement costs (click here to see the underlying calculations).

Santa Rosa Retirement Cost Growth

However, now CalPERS is worried that the plans are not being properly funded and pension contributions need to be doubled over the next 9 years.

Projected Future Costs

In their 2015 actuarial reports, CalPERS provided the City with their normal employer contribution as a percentage of payroll and the unfunded actuarial liability (UAL) as a total cost each year from 2015 to 2023. Using a 3% payroll growth assumption and their UAL numbers, I calculated the annual costs going forward. In addition, I added the pension obligation bond debt service each year going forward along with the cost of retiree healthcare benefits using a 5% annual cost increase assumption as CalPERS does.

My analysis indicates that during the next 8 years, the cost for retiree benefits will increase from $31.0 million or 33.7% of payroll in 2015 to $59.1 million or 48% of payroll in 2023.

The nearly doubling of pension and retiree healthcare costs means the City will need to cut salaries, benefits, services and/or increase taxes each and every year going forward by $3.2 million per year to meet their retiree benefit costs.

Pension and Healthcare Costs as a Percentage of Tax Revenues

More important than pension costs as a percentage of payroll are pension costs as a percentage of tax revenues because tax revenues are what enables the City to pay for its benefits. Once retiree benefit costs exceed the City’s ability to pay them, they will no longer be able to be fully paid and at that point either they will need to be reduced in bankruptcy or through significant pension reductions. The chart below shows the growth of pension costs relative to that of general fund property tax and sales tax revenues.

churchill-2016-10-31-chart

The results of my analysis are staggering. Over the past 15 years’ sales and property tax revenues have climbed an average of 3% per year, while employee retirement costs have increased an average of 19% per year. This has led to a growth of retiree benefit costs from 3.5% of major tax revenues in 2001 to 47% in 2015 and an estimated growth to 70% of major tax revenues by 2023 (Editor’s note:  the city receives other revenues which may also be available to finance pension costs).

Growth of the Unfunded Liability

The unfunded liability of the pension plan is calculated by taking the assets in the plan minus the present value of the benefits already earned by current employees and retirees, considered the plan’s liability. The funding ratio is determined by dividing the market value of assets in the plan by the liability.

CalPERS discounts the long term liability by assuming before the money is paid to retirees, it will earn investment income. CalPERS currently uses an assumed 7.5% rate of investment return to calculate the liability and payments to the plan. So if the assumed investment return is lowered, the unfunded liability of the plan increases along with the cost of paying off the liability. Unfunded liability costs are borne by taxpayers and are not a shared expense with the employees.

Currently, using a 7.5% assumed rate of return, the pension fund has $287 million worth of unfunded liabilities and pension bond debt and is 74% funded. However, many experts believe in this low interest rate environment a lower investment return assumption should be used. Many experts think that a 5.5% to 6.5% rate should be used. Other experts believe a 3.5% rate should be used since this is about the rate private pension plans are required to use and what CalPERS uses if a City wanted to buy their way out of the CalPERS system. I won’t guess what the future investment returns will be, but here is what happens to the unfunded liability at various rates of investment return assumptions:

  • At 6.5% the unfunded liability would increase to $426 million and $50 million per year to would be added to the City’s pension costs.
  • At 5.5% the unfunded liability would increase to $585 million and $97 million per year would be added to the City’s pension costs.
  • At 4.5% the unfunded liability would increase to $755 million and $137 million per year would be added to the City’s pension costs.
  • At 3.5% the unfunded liability would increase to $967 million and $187 million per year would be added to the City’s pension cost.

Santa Rosa Analysis of Unfunded Liability at Various Rates of Investment Return

20161028-cpc-churchill1

City Pension Plan Status Using ERISA Standards

Under the Federal ERISA rules for private pensions, a high quality bond rate of return is used to determine the assumed rate of investment return. Today that is around 3.5%. ERISA also defines the health of a pension plan as follows:

  • Less than 80% funded is considered “seriously endangered”
  • Less than 70% funded is considered “at risk”
  • Less than 65% funded is considered “critical status”

So under ERISA standards, the City of Santa Rosa’s pension plan at 45% funded when assuming a 3.5% return is 20 percentage points below what ERISA would consider “critical status”. So one could more accurately describe the pension system as being on “life support”.  Also, under ERISA rules the pension benefits each year would stop being accrued until the plan becomes 60% funded to keep the hole from going deeper.

ERISA also requires the plan sponsor pay off their unfunded liabilities over 7 years. CalPERS currently allows public agencies to pay off their liability over up to 30 years. If the City was required to pay off its unfunded liability over the next 7 years, their annual contribution to the pension fund would grow from $28 million to $146 million in 2015 alone. So under ERISA rules pension costs would increase by $120 million per year and take them to 145% of payroll.

Conclusion

The City of Santa Rosa and all cities in California who retroactively increased pensions need to restructure their pension systems. Otherwise it is increasingly unlikely they will be able to afford the benefits that have already been earned and provide taxpayers with the services they deserve for their tax dollars.

City officials can no longer pretend a crisis does not exist. They would be well advised to form a Pension Advisory Committee and bring all the stakeholders to the table to look at all the options, have an actuary determine the savings for each option and make informed decisions to save the pension plan and benefits people are counting on to fund their retirement.

 *   *   *

About the author:  Ken Churchill is the author of numerous studies on the pension crisis in California and is also the Director of New Sonoma, an organization of financial experts and citizens concerned about Sonoma County’s finances and governance.

REFERENCES AND RELATED ARTICLES

California Court Ruling Allows Pension Changes, August 26, 2016

How CalPERS has Created a Ticking Time Bomb, November 30, 2015

The Devastating Impact of Retroactive Pension Increases in California, April 27, 2015

Evaluating Total Unfunded Public Employee Retirement Liabilities in 20 California Counties, May 6, 2014

Sonoma County’s Pension Crisis – Analysis and Recommendations, January 12, 2014

The Sonoma County Retroactive Pension Increase: Gross Incompetence or Billion Dollar Scam?, April 15, 2012

How Retroactive Benefit Increases and Lower Returns Blew Up Sonoma County’s Pensions, April 5, 2012

 

California’s Misguided Water Conservation Priorities

If you’ve recently driven on most any California freeway, you’ve seen the default message on the government-owned electronic billboards, “Severe Drought Conditions – Reduce Outdoor Water Use.”

The message seems reasonable enough. Several years of lower-than-average rainfall have left the state’s reservoirs depleted, so why should households be wasting water, indoor or outdoor? And if you think that reducing residential water consumption will make a difference, the solutions seem reasonable as well:  Let your lawn die, install drip irrigation to keep your perennials alive, plant “drought tolerant” plants, buy a side-loading washer, a low flow toilet, put a flow restrictor on your shower, etc., etc., etc. But will all of this make any difference?

20160817-CPC-water-quote

To answer this question it is necessary to determine just how much water is available to Californians, and how much of that water is being consumed by residential households in California. When making this analysis, we will not only estimate how much water California’s households purchase from their utility, but how much water is embodied in the food they eat.

TOTAL ANNUAL WATER SUPPLY AND USAGE IN CALIFORNIA

Here’s a rough summary of California’s annual water use. In a dry year, around 150 million acre feet (MAF) fall onto California’s watersheds in the form of rain or snow, in a wet year, we get about twice that much. [1] Most of that water either evaporates, percolates, or eventually runs into the ocean. In terms of net water withdrawals, each year around 31 MAF are diverted for the environment, such as to guarantee fresh water inflow into the delta, 27 MAF are diverted for agriculture, and 6.6 MAF are diverted for urban use. [2] Of the 6.6 MAF that is diverted for urban use, 3.7 MAF is used by residential customers, and the rest is used by industrial, commercial and government customers. [3]

Put another way, we divert 65 million acre feet of water each year in California for environmental, agricultural and urban uses, and the recommended 25% reduction in water usage by residential customers will save exactly 0.9 million acre feet – or 1.4% of our total statewide water usage. One good storm easily dumps ten times as much water onto California’s watersheds as we’ll save via a 25% reduction in annual residential water consumption.

#1 – Total Annual Water Supply and Usage in California20160817-CPC-CA-total-water-usage1

Armed with these facts, there’s a strong argument that cutting back on residential water consumption will not make a significant difference in California’s overall water use. And there are additional facts that can put this argument into an even sharper context: How much water do California’s households consume in terms of the water that was required to grow the food they eat, and how does that amount compare to the water they purchase from their utility for indoor/outdoor use?

THE “WATER FOOTPRINT” OF FOOD PER OUNCE AND PER CALORIE

While the information to determine this is readily available, it isn’t typically compiled in this context, so here goes. The best source of comprehensive data on the “water footprint” for various types of food comes from the Water Footprint Network [4], a project initially funded by UNESCO. An excellent distillation of that information was produced in April 2015 by Kyle Kim, John Schleuss, and Priya Krishnakumar, writing for the Los Angeles Times [5]. Information on calories per ounce was found on the website “fatsecret.com” [6]. That information is summarized on the following table.

#2 – Water “Footprint” per Ounce and per Calorie of Food20160817-CPC-water-footprint-per-food-category

As can be seen on the above chart, when evaluating the water efficiency of various food sources, it is misleading to rely only on gallons per ounce, since the number of calories per ounce are highly variable. But putting these two variables together to calculate a gallons per calorie measurement is quite useful. Clearly, meat products require a huge amount of water per calorie. The most efficient sources of meat protein are found in chicken, which at 0.37 gallons per calorie is around four times as water-efficient as red meat. Some sources of protein from vegetables are surprisingly efficient, including avocados at 0.20 gallons per calorie, and the almond – much maligned as a water waster – at 0.15 gallons per calorie. But we digress. How much water does it take to feed the average household in California, and how does that compare to the amount of water they buy from the utility for indoor/outdoor use?

TOTAL ANNUAL CONSUMPTION OF WATER-IN-FOOD PER HOUSEHOLD

The next table, below, provides this estimate based on a typical diet. The estimate of 2,000 calories necessary to sustain the average human (men, women, children) comes from WebMD [7]. The breakout of food consumption by category, while somewhat arbitrary, relies on data on “the average American diet” [8] compiled by researcher Mike Barrett, writing for the Natural Society website. In turn, Barrett relied on USDA and other government sources for most of his data, which is reflected here.

#3 – Total Annual Consumption of Water-in-Food per Household
20160817-CPC-water-in-food-consumption-per-capita

In one year, the average American consumes a quantity of food that required 1.3 acre feet of water to grow. In turn, at 2.91 people per household in California [9], the average household consumes a quantity of food per year that requires 3.9 acre feet of water to grow.

AVERAGE ANNUAL WATER USE PER CALIFORNIA HOUSEHOLD

Putting all of this together yields a revealing table, below, that shows that the average household purchases a relatively trivial amount of water from their utility, when compared to how much water they purchase in the form of the food they eat. By dividing the 3.7 million acre feet of water used by residences each year in California by the 12.8 million households in California [10], the average annual water consumption per household is 0.289 acre feet. By contrast, the amount of water that is eaten, so to speak, by the average California household is 3.9 acre feet, thirteen and a half times as much. By the way, it is irresistible to point out that drinking water, that quantity each human requires for their daily hydration, based on the 0.5 gallon per day recommendation from AuthorityNutrition.com [11], comes out to a paltry 0.0016 acre feet per year per household – not even a rounding error when compared to the other uses. Think about that the next time you have to ask for your water at a California restaurant.

#4 – Average Annual Water Use per California Household
20160817-CPC-average-water-use-per-household

OBSERVATIONS AND RECOMMENDATIONS

(1)  Projects that increase water supply via sewage reuse, runoff storage via reservoirs or aquifers, and desalination, are options that benefit all users, urban and agricultural.

(2)  Increasing the supply of water from diverse sources creates system resiliency which can be of critical benefit not only in the face of persistent drought, but also against catastrophes that may, for example, disable a pumping station on a major aqueduct.

(3)  The energy costs to desalinate seawater, approximately 4.0 kilowatt-hours per cubic meter, are overstated. Desalination plants can be co-located with power plants, eliminating power loss through transmission lines, whereas far-flung pumping stations consume significant amounts of electricity. Depending on transmission loss and desalination plant efficiency, the amount of lift beyond which desalination consumes less power than pumping is about 1,500 feet.

(4)  Public investment in water saving home appliances, for example via tax rebates to consumers to purchase them, by contrast, do not increase the overall supply of water.

(5)  It is nearly impossible to engage in excessive use of indoor water in a household, because 100% of the sewage is treated and released as clean outfall to the environment. Moreover, sewage is increasingly treated and reused as potable water, and eventually 100% of indoor water waste will be cycled immediately back for reuse by households.

(6)  One preferred way to reuse household sewage is referred to as “indirect potable reuse,” where the treated water is percolated into aquifers where it is eventually pumped back for household reuse. This practice has the virtue of banking the water against supply disruptions, recharging the aquifer which is especially beneficial in coastal areas where there can be salt water intrusion, and even, as water is repeatedly cycled through the aquifer, causing an ongoing improvement to the quality of the water in the aquifer as treatment progressively reduces levels of undesirable residual toxins.

(7)  While achieving 100% reuse of sewage will render indoor water conservation pointless, the virtues of outdoor water use are understated. Healthy landscaping, consisting of abundant vegetation including lawns, reduce the incidence of dust-borne pathogens, reduce the incidence of asthma, and clean and moisturize the air. Replacing grass playing fields with artificial turf introduces toxins, causes more ACL and other sports injuries, and retains heat – often to the point of making these faux fields unplayable unless they are, ironically, watered.

(8)  Simply giving up consumption of red meat would reduce the average household’s water consumption by nearly 2.0 acre feet per year. By comparison, the average Californian household’s total water consumption from the utility averages 0.29 acre feet per year. That is, just replacing consumption of red meat with an equivalent caloric intake of chicken will save the average household seven times as much water as they buy from the utility for all uses, indoor and outdoor.

Policies designed to reduce household water use are a good idea, but must be kept in perspective. Perhaps what has already been done is more than enough, and priorities might now shift towards investment in infrastructure to increase the supply of water. Nearly all water diversions in California, about 90%, are either to preserve ecosystem health or to supply agriculture. Indoor water overuse is becoming a myth, and will become entirely irrelevant as soon as 100% sewage reuse capacities are achieved. Outdoor water use should not be thoughtless, but allowing grass and perennials to die, or converting landscaping to “desert foliage,” is a cultural shift that is not necessary or desirable.

Along with investing in infrastructure to increase the supply of water, public education to help Californians adopt healthier diets would have the significant side benefit of being sound water policy. A trivial change in patterns of food consumption yields a major reduction in water required for food. For example, a public education campaign that caused a voluntary 10% reduction in red meat consumption (from 25.0% of all calories to 22.5% of all calories) would reduce California’s water consumption by 2.5 million acre feet per year. By comparison, total outdoor residential water consumption in California is estimated at only 1.8 million acre feet per year.

Perhaps, in lieu of renouncing escalating and entirely unnecessary mandates to reduce household water use, those of us who love our lawns might at least be granted a waiver if we were to present an annual affidavit to document our below-average consumption of red meat. Our smart refrigerators might actually submit the report to the utility, sparing us the paperwork.

 *   *   *

Ed Ring is the president of the California Policy Center

 

 

FOOTNOTES

(1) Total Precipitation in California during wet, average, and dry years:
California Water Supply and Demand: Technical Report
Stockholm Environment Institute
Table 2: Baseline Annual Values by Water Year Type and Climate-Scenario (MAF)
http://sei-us.org/Publications_PDF/SEI-WesternWater-CWSD-0211.pdf

(2) California water use by sector:
California Water Today
Public Policy Institute of California
Table 2.2, Average annual water use by sector, 1998–2005
http://www.ppic.org/content/pubs/report/R_211EHChapter2R.pdf

(3) California urban water use by sector:
California Dept. of Water Resources
2010 Urban Water Management Plan Data – Tables
Download spreadsheet “DOST Tables 3, 4, 5, 6, 7a, 7b, & 7c: Water Deliveries – Actual and Projected, 2005-2035”
http://www.water.ca.gov/urbanwatermanagement/2010_Urban_Water_Management_Plan_Data.cfm

(4) Water required to grow food – comprehensive resource:
The Water Footprint Network
http://waterfootprint.org/en/resources/water-footprint-statistics/
Their study explaining the data (downloadable PDF):
http://waterfootprint.org/media/downloads/Mekonnen-Hoekstra-2011-WaterFootprintCrops.pdf
The raw data (downloadable spreadsheet):
http://waterfootprint.org/media/downloads/Report47-Appendix-II.xlsx

(5) Graphic explaining water required to grow 1.0 ounces of various common types of food:
Los Angeles Times, April 2015
http://graphics.latimes.com/food-water-footprint/

(6) Tables showing calories per ounce of food:
Meat:
Lamb – https://www.fatsecret.com/calories-nutrition/generic/lamb-cooked
Pork – https://www.fatsecret.com/calories-nutrition/generic/pork-cooked-ns-as-to-fat-eaten
Beef – https://www.fatsecret.com/calories-nutrition/generic/beef-cooked-ns-as-to-fat-eaten
Chicken – https://www.fatsecret.com/calories-nutrition/generic/chicken-rotisserie-ns-as-to-skin-eaten
Starch:
Rice – https://www.fatsecret.com/calories-nutrition/generic/rice-white-cooked-regular
Pasta – https://www.fatsecret.com/calories-nutrition/generic/spaghetti-cooked
Wheat bread – http://www.fatsecret.com/calories-nutrition/usda/whole-wheat-bread
Potatoes – https://www.fatsecret.com/calories-nutrition/generic/white-potato-roasted
Vegetables & Fruit:
Broccoli – https://www.fatsecret.com/calories-nutrition/usda/broccoli
Asparagus – https://www.fatsecret.com/calories-nutrition/usda/asparagus
Cucumber – https://www.fatsecret.com/calories-nutrition/usda/cucumber-(with-peel)
Avocado – https://www.fatsecret.com/calories-nutrition/usda/avocados
Banana – https://www.fatsecret.com/calories-nutrition/generic/banana-raw
Spinach – https://www.fatsecret.com/calories-nutrition/usda/spinach
Peaches – https://www.fatsecret.com/calories-nutrition/usda/peaches
Tomatoes – https://www.fatsecret.com/calories-nutrition/generic/tomatoes-raw
Fluids:
Milk – https://www.fatsecret.com/calories-nutrition/generic/milk-cows-fluid-whole
Wine – https://www.fatsecret.com/calories-nutrition/usda/white-table-wine
Beer – https://www.fatsecret.com/calories-nutrition/generic/beer
Orange juice – https://www.fatsecret.com/calories-nutrition/usda/orange-juice
Nuts:
Almonds – http://flowingdata.com/2015/04/07/gallons-of-water-to-produce-foods/

(7) Daily calorie requirement for the average American:
WebMD
http://www.webmd.com/diet/features/estimated-calorie-requirement

(8) Average American diet by food category:
Mike Barrett, Natural Society
http://naturalsociety.com/average-american-diet-infographic/

(9) Average number of residents per household in California:
Point2Homes.com
http://www.point2homes.com/US/Neighborhood/CA-Demographics.html

(10) Total number of households in California:
Point2Homes.com
http://www.point2homes.com/US/Neighborhood/CA-Demographics.html

(11) How much water should the average human drink per day:
AuthorityNutrition.com
https://authoritynutrition.com/how-much-water-should-you-drink-per-day/