Big money readies for fight over tax extension

A hospital association just pumped $12.5 million into an effort to extend a tax on top earners — a tax that’s provided billions of dollars in education funding since 2012.

In fact, the California Association of Hospitals and Health Systems quadrupled its investment from four years ago when Prop. 30 passed. So why do hospitals care so much about education funding?

Because there’s billions of dollars per year in health care funding at stake.

bettermoneypuzzle

Health care funding

Since Prop. 30 passed — during an economic downturn when the state was confronted with sharp budget cuts — it has largely funded education with some money bolstering the general fund, which includes some health care programs.

But the 12-year extension vying for a spot on the November ballot — two years prior to the expiration date — would add up to $2 billion in funding per year for Medi-Cal, the state’s Medicaid program. The contributions to Medi-Cal would come once other funding requirements have been met (the Prop. 2 rainy-day fund requirement and the Prop. 98 minimum education funding requirement).

Prop. 30

Prop. 30 imposed a “temporary,” seven-year personal income tax increase on earnings of more than $250,000, and a quarter cent sales tax increase for four years.

Some of the revenue went to help balance the state budget, but most went to education funding — 89 percent to K-12 and 11 percent to community colleges.

The extension

The proposed extension allows the quarter cent sales tax to expire, but extends the income tax increase until 2030, securing funding far enough into the future “to provide long-term stability for our schools,” said Jennifer Wonnacott, spokeswoman for the “Yes” campaign.

“We still need this investment,” said Wonnacott. “This is about asking those who can afford to pay a little bit more to keep doing so for a little while longer.”

Big money

With the heavy early investment from the California Association of Hospitals and Health Systems — which only spent $2 million to help Prop. 30 pass in 2012 — this is shaping up to be one of the costliest battles this cycle.

Prop. 30 was a $135 million issue, one largely supported by the California Teachers Association ($11.4 million), Service Employees International Union ($10.7 million), Democratic State Central Committee of California ($5 million) and the American Federation of Teachers ($4.1 million).

In total, proponents spent $65.6 million to pass the measure. It has generated $13.1 billion in education funding since its passage, according to the state controller’s office.

The extension measure is again supported by the California Teachers Association and Service Employees International Union, which — along with the hospitals — forms a formidable alliance. The California Teachers Association and Service Employees International Union has already given $1.2 million on the effort.

While it won’t take a formal position unless the measure qualifies for the ballot, the Howard Jarvis Taxpayers Association will make this a top target if it does qualify — the measure has reached the 25 percent mark for required signatures as of Sunday.

Many political donors will also fight this measure. In 2012, Charles Munger Jr. contributed $35 million to the “No on 30” campaign in opposition to Prop. 30, according to Ballotpedia.

Timing

Instead of waiting until the next cycle when the Prop. 30 income tax provision expires, proponents are banking on a favorable turnout, as Democrats vote in larger percentages in presidential cycles than they do in midterms.

There had been competing Prop 30 extension proposals, but the efforts consolidated around this measure, said Wonnacott.

About the Author: Matt Fleming is a writer for CalWatchdog, an independent Sacramento-based journalism venture providing original investigative reports and news stories covering California state government. The site is focused on reporting on the state Capitol, state agencies and on significant government-related stories from across California that are of statewide importance.

Public Unions and Special Interests Postpone Undermining Proposition 13

The late songwriter Jim Croce listed a number of imprudent actions in his “You Don’t Mess Around With Jim.” Along with staying out of Jim’s way, he included the admonition not to tug on Superman’s cape or spit into the wind. Croce might have added to his list the foolishness of taking on Proposition 13.

Promoters of an initiative to impose a $6 billion annual surcharge on both business and residential, property, for the stated purposed of fighting poverty, have abandoned the effort. A measure sponsored by former Board of Equalization member Conway Collis and funded largely by an order of the Catholic Church, the Daughters of Charity, will not appear on the November ballot, as was expected.

It is unclear to Prop 13 defenders why the effort was halted. Some suggested that the governor intervened, convincing backers that too many measures on the ballot would risk rejection of propositions he favored. Others suggest the all-powerful teachers union threatened to oppose the measure because Collis failed to include a payout to education. But it cannot be overlooked that initiative backers may have become discouraged because Proposition 13 remains extremely popular with the general public and voters are very wary of any effort – no matter how benevolent it may sound – to undermine Prop 13’s protections. Californians like the safeguards it provides by limiting annual property tax increases, allowing local voters to decide tax issues and requiring a two-thirds vote of the Legislature to increase state taxes, a threshold that has not proven to be insurmountable.

don'traisetaxes

Still, dismantling Proposition 13 will continue as a major industry in political circles. The special interests looking to pry more money from taxpayers, whose burden already ranks the sixth highest in all 50 states, will say and do almost anything to disable or eliminate Proposition 13’s taxpayer protections.

To undermine support for the tax limiting measure, tax raisers try to persuade voters that Proposition 13 is unfair. The “evil rich” and businesses do not deserve these protections, they say. Or, as is the case with the Collis initiative, they appeal to voters’ compassion by pointing to a sympathetic population like “widows and orphans” that will benefit from the proceeds of breaking down Proposition 13.

These special interests, including the unions representing government employees — that the Department of Labor says are the highest paid in all 50 states — will continue to use misinformation and disinformation to try to convince voters to turn their wallets inside out because they know if they are candid about their goal to raise taxes, their efforts will be as productive as tugging on Superman’s cape.

Taxpayers will need to remain vigilant because as long as the tax raisers believe there is the possibility they can put their hands on more taxpayer money, their deceptive efforts to destroy Proposition 13 are certain to continue.

About the Author: Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights. 

Big Labor’s Rollercoaster of Emotions

The unfortunate and untimely passing of Supreme Court Justice Antonin Scalia has Big Labor bosses and their liberal political allies cheering. Scalia would have been the decisive vote in a major Supreme Court decision affecting labor unions scheduled for this June (see Why Antonin Scalia was a jurist of colossal consequence). Justice Scalia’s influence would have impacted government union bosses, as he most likely would have voted in favor of union members in Friedrichs v. California Teachers Association. The case involves a California teacher who claims her First Amendment rights have been violated by having to pay union dues, even though she isn’t a member of the union. This matter was further chronicled in a previous blog, Will the Supreme Court undo the damage done to the rights of millions of government workers?

Such a defeat could have been a death spiral for Public Sector Unions. Without a replacement for Scalia, the vote could end up in a tie, considering the Supreme Court is now divided evenly — four liberal justices and four conservative justices. In the event of a tie, the decision of the lower court continues to stand. In this case, the Court of Appeals ruled in favor of the labor unions.

Supreme Court Justice, Antonin Scalia, passed away February 13, 2016

Despite the fact President Obama will push for a quick replacement for Scalia, likely a liberal candidate, which would tilt the Supreme Court to the left, and unions don’t technically even need this appointment, as they are currently in position to Win by Default. This could also be a setback to Christian businesses in America. Without Scalia’s vote, cases involving Religious Beliefs and Christian Values may swing against such businesses due to a likely liberal selection by the President.

Big Labor’s cheering will be somewhat dampened by the news that West Virginia just voted to become the 26th Right-To-Work (RTW) State, effective July 1, 2016. West Virginia makes the fourth state to pass RTW legislation in the last 4 years –along with Indiana, Michigan and Wisconsin. It is obvious that the country is moving in a new direction and that there is actually a movement for National RTW Legislation. This recent development, combined with the fact that Democrats may lose the 2016 Presidential Election and continue to be the congressional minority, has the big labor bosses concerned. Undoubtedly, they will be a Major Presence in the 2016 Elections, as they may possibly face extinction if they lose this Election.

I often experience flashbacks of the SEIU attacks made against my company when watching Hillary Clinton, Bernie Sanders and President Obama speak. They are using the same misguided promises, false information, lies, rhetoric and intimidation tactics the SEIU utilized when attempting to force unionize my employees. It is imperative that a Supreme Court decision is not made in favor of big labor as a result of Scalia’s death.

There is no doubt Scalia’s Death Throws a Wrench in the Bench. However, it is time for Americans from both sides of the aisle to band together, absent political persuasion, to assure that Scalia’s replacement will be one that does not represent progressive ideology, but rather someone who Defends the Constitution of the United States of America and the future of this great country — as Antonin Scalia notably did for so many years.

About the Author: David A. Bego is the President and CEO of EMS, an industry leader in the field of environmental workplace maintenance, employing nearly 5000 workers in thirty-three states. Bego is the author of “The Devil at My Doorstep,” as well as the just released sequel, “The Devil at Our Doorstep,” based on his experiences fighting back against one of the most powerful unions in existence today.

In Search of a Legitimate Labor Movement

Sarah has worked for a major grocery store chain for the past 25 years. Adjusting for inflation, she makes less now than she did over a decade ago, especially since her hours were cut in order for her employer to avoid being required to offer her health insurance. Even more difficult, she is “on call” most of the week, without a reliable schedule, which makes it impossible for her to take on a 2nd part time job to help make ends meet. Including benefits, Sarah is lucky to make $30,000 per year. Now in her early fifties, she will need to work for as long as there is strength left in her body to do the job.

George works for a fire department serving an affluent suburb on the California coast. Taking into account the vacation time he earns as a 25 year veteran, he works less than two 24 hour shifts per week before qualifying for overtime. Since five day weekends are overkill, he often works one or two extra shifts a week, doubling his pay. When he goes on calls, 98% of the time they are medical emergencies, not fires. Including moderate amounts of overtime and the employer’s payments for his benefits, George makes about $250,000 per year. Now in his early fifties, he will retire in a year or two and collect a pension and health benefits package worth well over $100,000 per year.

Both of these individuals are hard working, honest and conscientious. Both of them perform jobs that have a vital role to play in our society. Both of them deserve to be treated with dignity and respect. Neither of them wrote the rules. And both of them are represented by unions.

While these individuals and the work they do is beyond reproach, the unions that represent them leave much to be desired. In Sarah’s case, typical of tens of millions of private sector workers, the unions who represent her have ignored economic reality in pursuit of ideological fantasies. Almost universally, to cite a particularly wounding example, these private sector unions have supported immigration policies that increase the supply of semi-skilled workers who compete with Sarah for work hours. Also common are the pragmatic alliances these unions form with extreme environmentalist organizations who have bottled up development of land and energy, driving the cost of living beyond the reach of an ordinary worker. One may cogitate endlessly over what constitutes optimal and humane policies with respect to immigration and the environment. But to agitate for higher wages and benefits in a society awash in cheap labor and artificially inflated costs for basic necessities is a fool’s errand.

In George’s case, which is equally typical, at least in California, the unions that represent him should not even be permitted to exist. Associations of government workers who engage in collective bargaining are not unions in any traditional sense of the word. They elect their own bosses, they take money from taxpayers instead of competing for consumer spending, and they operate the machinery of government which lets them intimidate or co-opt any special interest that might oppose them. They have priced normal government services beyond the capacity of ordinary taxpayers, and bred cynicism about government into the heart of any financially literate American. And government unions have even less interest than private unions in acknowledging the complexity of issues such as immigration or environmentalist overreach. In both cases, policies that harm the aspirations of private workers have the opposite effect on them, enhancing their job security.

A legitimate labor movement is easy to justify in the abstract. If not unions, what sort of movement will speak for ordinary workers in an era when jobs are being relentlessly automated, global competition is tougher than ever, and the cost of living is punitive? What sort of movement can speak for ordinary workers if, along with these challenges, the nation is gripped by a deep recession brought on because interest rates can’t go any lower and stimulative debt can’t go any higher?

The reality today is that much of America’s labor movement has gone astray. Private sector unions often put ideological goals ahead of the economic interests of their members. And public sector unions, which are not unions in any traditional sense of the word, and which represent the economic interests of their members all too well, are an abomination. They have corrupted our democracy, they are a corrupting influence on government workers because they have exempted them from the economic challenges facing private American workers, they are driving our governments at all levels towards authoritarianism, they are bankrupting our cities and counties and states, and the pension funds they control epitomize the most corrupt elements of America’s grotesquely overbuilt financial sector. Maybe what would remain after abolition, still very powerful voluntary associations, could start fighting for CEQA reform, for example, to benefit all workers instead of just themselves. Before unions infested our governments, that’s what public service meant.

Envisioning exactly how the labor movement might best operate in the interests of the American worker is difficult but necessary. It requires balancing libertarian and mixed-capitalist economic world views. But two reforms would be a very good start. First, outlaw collective bargaining in the public sector. Second, the leaders of the private sector labor movement need to starting caring more about American workers, and less about their elitist ideological fantasies.

 *  *  *

Ed Ring is the executive director of the California Policy Center.

The Alliance Between Wall Street and Public Unions

“It’s [private equity investments] generating real returns for our members, which is exactly what it’s supposed to do,” said Joe DeAnda, a CalPERS spokesman. “It’s real value that we don’t feel there’s another way to achieve.”
–  “Are private equity investments worth the risk?,” Los Angeles Times, November 14, 2015

The alliance between government unions and America’s overbuilt financial sector is one of the most unreported stories of our time. It is a story saturated in greed, drowning in delusion, smothered and marginalized by an avalanche of taxpayer funded propaganda. If this story were known and appreciated by the people most victimized by its effects, it would fundamentally shift the political landscape of the nation. The most obvious example of this alliance are the government worker pension systems, Wall Street’s biggest players, controlled by union operatives.

The problem with public sector defined benefit pensions can be boiled down to two cold facts: They are too generous, and they rely on rate-of-return assumptions that are too optimistic. The first is the result of greed, the second of delusion. To indulge these vices requires corruption, and it is a rot that joins public sector unions with the most questionable elements of that Wall Street machine they so readily demonize.

In an attempt to earn in excess of 7.0% per year, government pension systems have increasingly turned to hedge funds, whose charter, essentially, is to earn over-market returns. To do this, they do all the things that public sector unions are supposedly opposed to – opaque private equity deals, currency speculation, high-frequency trading – all those manipulative tools used by the super-wealthy, super empowered Wall Street players to siphon billions out of the economy. Except now they’re using tax dollars, channeled to them via government pension systems. And if it goes south? Taxpayers pay for the bailout.

Which brings us to sheer abuse of power. Hypocrisy aside – and how much more hypocritical can it be for union leaders to rhetorically demonize “profits,” yet ignore the fact that only profits can permit pension funds to appreciate at rates of 7.0% per year or more – it is raw power, sheer financial and legal might, that enables pension systems, with unions cheering them on every step of the way, to sue city after faltering city to ensure their “contracts” are inviolable, that relentlessly escalating pension contributions keep pouring in, even if it means raising taxes via court order, then selling the parks, selling the libraries, closing government offices and “furloughing” public servants, and giving raw deals to their new hires.

The alliance between Wall Street and public sector unions isn’t restricted to the over $4.0 trillion in government pension assets that they’ve wagered in a volatile investment market with taxpayers on the hook to guarantee perpetual winnings. The alliance extends to bond underwriters, who join with government unions to sell overpriced, often unnecessary projects to taxpayers, collecting billions in fees. It even extends to auctions of government permits to emit CO2, which when fully implemented will guarantee Wall Street firms a cut on virtually every energy transaction in America, while quietly pouring a huge portion of the proceeds into funding public sector jobs – redefined to meet “mitigation” criteria: code inspectors enforcing energy retrofits, entire cities who zone ultra-high density which presumably lowers transportation related emissions, bus drivers and other mass transit workers, police and fire agencies who confront higher crime rates and more wildfires during hot weather. And, of course, the bullet train.

Whether it’s financially unsustainable government pension systems, who are the biggest players on Wall Street, or financing overpriced public construction projects of dubious value, or imposing billions in hidden taxes on energy users to supposedly save the planet, public sector unions receive formidable political, legal and financial support from their partners in the financial sector, corrupt, crony capitalists who indeed give capitalism a bad name.

*   *   *

Ed Ring is the executive director of the California Public Policy Center.

How Project Labor Agreements Elevate Costs to Taxpayers

When considering the labor movement in the United States, there is a huge distinction between government unions and private sector unions. Government unions elect their own bosses, they operate within agencies that collect taxes instead of having to make a profit by enticing consumers to buy their products, and they operate the machinery of government which means their more zealous members have the ability to intimidate their political opponents. Private sector unions have none of these advantages. They negotiate with managers hired by CEOs who report to shareholders. They negotiate with companies that will go out of business if they over-compensate their workers. And with rare exceptions, workers in private companies are not approving our business permit applications, inspecting our workplaces, or auditing our tax returns.

So where does this put construction unions who compete for government contracts?

This question matters a lot to reformers, because private sector unions, properly regulated, not only have a vital role to play in American society, but their members have the potential to lobby effectively against many of the special interests who are killing American jobs. Unfortunately, one of the biggest obstacles to political collaboration between construction unions and groups representing business interests is the use of Project Labor Agreements.

20151117-UW-Hoover-Bridge1
The majestic Pat Tillman Memorial Bridge, opened in 2010, seen from Hoover Dam.
Far too few necessary civil engineering projects are completed nowadays.

Like many political issues, the details of project labor agreements aren’t generally known to the average voter. Here is the Wikipedia definition (condensed) of a project labor agreement:

“A Project Labor Agreement is a pre-hire collective bargaining agreement with one or more labor organizations that establishes the terms and conditions of employment for a specific construction project. Before any workers are hired on the project, construction unions have bargaining rights to determine the wage rates and benefits of all employees working on the particular project and to agree to the provisions of the agreement. The terms of the agreement apply to all contractors and subcontractors who successfully bid on the project, and supersedes any existing collective bargaining agreements.  PLAs typically require that employees hired for the project are referred through union hiring halls, that nonunion workers pay union dues for the length of the project, and that the contractor follow union rules on pensions, work conditions and dispute resolution.”

Unions tout the benefits of project labor agreements as guaranteeing greater quality workmanship from a better trained workforce, along with guaranteeing more jobs for local workers. But they produce no evidence to support either of these claims.

Here are the main objections typically raised to PLAs by representatives of non-union construction firms:

1 – They force construction firms to hire people who aren’t their own employees to operate their equipment.

2 – Even if the union permits them to use their own employees to do the work, they have to pay into the union’s retirement fund, even though they are already paying into their own employees’ retirement fund.

3 – If a non-union construction firm works on a project under a PLA, making contributions to the union’s retirement pension fund, and that pension fund goes broke and requires additional funding, to the extent they paid into that fund, the non-union construction firm must also pay a share of the amount required to bailout the fund.

Because PLAs discourage non-union construction companies from bidding for jobs, the lack of competition inevitably raises the price of the construction. But the reason unions try to lock out non-union companies from competing for public works projects isn’t because the non-union firms pay their workers less. Prevailing wage agreements – which can be completely independent of PLAs – prevent that. The reason unionized firms drive costs up in projects is because of their work rules, which prohibit skilled workers from doing anything that is outside of their skill set, even if it is far more convenient for them to do so.

To make this clear, take a look at this list of the various construction trades. This is a partial list. It isn’t unusual for a construction project to require workers from over twenty different unions, each of which is negotiating for the maximum amount of work for their members.

The added cost of PLAs to taxpayers is not merely from less competition for jobs and inefficient union work rules. Often in order to force local agencies to accept PLAs, unions file lawsuits based on alleged violations of CEQA or other environmental laws. This so-called “greenmail” delays projects and incurs legal fees. Construction unions ought to be fighting environmentalist restrictions on construction, to help all workers and help the economy, instead of using them as a negotiating weapon.

The problems with PLAs are well known to many policymakers, but while construction unions can’t elect their company’s management team, they can definitely fund campaigns to elect politicians who will vote for PLAs, and they do. Kevin Dayton, a frequent contributor to UnionWatch, has written several reports on how construction unions pressure local elected officials to approve PLAs.

It’s unclear how construction unions might be willing to compromise on PLAs and consent to open competition for public works projects. But if they did, the prospects for cooperation are tantalizing. Because as it is, California’s investment in civil infrastructure is behind both in terms of maintenance and in terms of potentially spectacular upgrades. If construction unions were to join with business and community activists to oppose the extreme environmentalist forces that make infrastructure development cost-prohibitive, it could create more construction jobs than they’d ever dreamed of, building amenities that would lower the cost of living and improve the quality of life for everyone.

 *   *   *

Ed Ring is the executive director of the California Policy Center.

REFERENCES

Project Labor Agreement, Wikipedia

What is a Project Labor Agreement and how does it affect workers?, National Right to Work

Get the Truth, The Truth About PLAs

Project Labor Agreement Basics, The Truth About PLAs

Say NO to Project Labor Agreement Mandates, Associated Builders and Contractors

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Non-proficient Teachers Unions

California students are not learning and teacher union leaders blame tests.

Every two years selected students across the nation take the National Assessment of Education Progress (NAEP), a test known as the nation’s report card. This year our kids didn’t do well. Actually they never do well, but this year the scores were even worse than two years ago. Just 36 percent of fourth graders are proficient in reading, and 33 percent of eighth graders are proficient in math.

Some blame the new Common Core curriculum for the downturn – and there may be something to this – but even if you add a few sympathy points to the scores, they still stink. And when national news stories started rolling out about our poorly educated students, like night follows day, teacher union honchos put on their Sunday-best spin outfits and trotted out damage control sound bites. American Federation of Teachers president Randi Weingarten stated “slipping NAEP scores are evidence that the nation’s focus on using standardized tests to judge teachers and schools has failed….”

Sure. Let’s see – teachers teach kids. Kids do poorly on tests that are based on what teachers teach. And that’s proof that teachers shouldn’t be judged by how poorly their kids do on tests that measure what they are teaching. Okaaaaaayyyy.

National Education Association president Lily Eskelsen García, also playing defense offered, “The recent release of the NAEP scores once again demonstrates what educators have said all along. The effectiveness of a system cannot be judged by a single test score.” (Trust me, if the scores were good, there’d be none of this “single test score” blather.)

Here in California, our NAEP scores are in the toilet. Average fourth-grade math scores place the state at the bottom of the nation, just one point on above New Mexico, Alabama and Washington, D.C. In fourth-grade reading, only New Mexico and Washington, D.C. fared worse than the Golden State.

For those who think a “single test score” is meaningless, let’s look at another metric. The Early Assessment Program is a collaborative effort of the State Board of Education, California Department of Education and California State University, and measures readiness in college-level English and math for all high school juniors. The 2014 assessment showed that one-half of all students in the state did not demonstrate college readiness in math. In English, more than six out of ten didn’t. And of course some districts don’t live up to the average. In Los Angeles, 70 percent of the juniors are not college ready in English and 64 percent are not ready in math. In Fresno, it’s even worse: more than three out of four do not demonstrate readiness in reading and two out of three in math. (While the tests are given in grade 11, not many appreciably improve in grade 12.)

Last week – one week after the NAEP scores were released – the National Council on Teacher Quality (NCTQ) released a report which reveals that 42 states and the District of Columbia require student growth and achievement be a consideration in teacher evaluations. (Just six years ago only 15 states did so.) Regrettably, California is one of the eight that does not, despite the fact that it has been the law (the Stull Act) to do so since 1971. In 1999, the state legislature amended the ghost law, requiring that the governing board of each school district “shall evaluate and assess certificated employee performance as it reasonably relates to: the progress of pupils toward the standards established pursuant to subdivision (a) and, if applicable, the state adopted academic content standards as measured by state adopted criterion referenced assessments.” In other words, a teacher’s evaluation must be based at least in part on how well her students perform on state tests. But school districts still turned a blind eye to the law.

Then in 2012, per a suit brought by Sacramento-based nonprofit EdVoice, a judge ordered the inclusion of test scores to be part of a teacher’s evaluation. However, in a report released earlier this year that sampled 26 districts’ compliance with the decision, EdVoice found that half of them were ignoring that court-ordered requirement to use the test scores. (Yet another lawsuit has been filed against the 13 districts not following the law.) And until districts start to live up to the law, California will continue to flail away, having no objective method of measuring teacher effectiveness and therefore no accountability.

Pointing to the importance of evaluating teachers on student performance, Sandi Jacobs, NCTQ Senior Vice-President of state and district policy, put it very succinctly. “The bottom line of teaching is whether or not students are learning. If you stand up in front of a classroom every day and deliver great lesson after great lesson but no one in the class is gaining anything, then something is off.”

AFT’s Weingarten, pulling the misdirect string, retorted, “Rather than test-and-punish systems, we need teacher evaluations that will help support and improve teaching and learning.” Of course teachers need support, and it’s important to note that no state relies solely on student test scores, but rather uses test results along with a variety of other metrics to assess a teacher’s effectiveness in the classroom.

So as most of the country moves on, California wallows in low test scores and unaccountable teachers. And then there is Fresno, the city in the Central Valley where a great majority of kids are way behind in reading and math. The Fresno Teachers Association has refused a 7 percent salary increase and is threatening to strike. This past Friday, the union issued a statement suggesting that the school districts refusal to continue negotiations “indicates students and educators in this district are not the priority.”

I am speechless.

Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

CalPERS "Myths vs. Facts" Propaganda Will Not Change Reality

California’s largest state/local government employee pension system, CalPERS, has posted a page on their website called “Myths vs. Facts.” Included among their many rather debatable “facts” is the following assertion, “Pension costs represent about 3.4 percent of total state spending.”

This depends, of course, on what year you’re considering, and what you consider to be direct cost overhead for the state as opposed to pass-throughs from the state to cities and counties. But CalPERS overlooks the fact that most of California’s government workers who collect pensions do not work for the state, they work for cities and counties and school districts. As can be seen on the “view CalPERS employers” page on Transparent California, there are 3,329 distinct employer retirement pension plans administered by CalPERS, and the vast majority of these are not state agencies paid from the state budget, but local agencies.

In a study earlier this year, “California City Pension Burdens,” the California Policy Center calculated 2015 employer pension contributions as a percent of total revenue for California’s cities to be 6.85%, more than double the amount CalPERS implies is the average pension burden. But this hardly tells the whole story, because CalPERS is systematically increasing the amounts that their clients will have to contribute as a percent of payroll, and hence, as a percent of total revenue.

UnionWatch has obtained budget documents from Costa Mesa showing how the pension contributions as a percent of payroll will grow between their 2014/15 fiscal year and 2020/21. Over the next six years, as the chart below shows, Costa Mesa’s total payroll is projected to grow from $50.1 million to $54.6 million. Their pension contribution, on the other hand, will grow from $23.2 million to $33.0 million. That is, their pension contribution as a percent of total payroll will increase from 46.3% of payroll today, to 60.4% of payroll in 2020.

20151103-UW-Costa-Mesa

Costa Mesa’s pension burden as a percent of payroll is a bit higher than average, but not much. And in terms of the percentage increases to pension contributions announced by CalPERS, they are typical. California’s cities, based on CalPERS announced pension increases, can expect to add another 15% of payroll to whatever amount they are already sending to CalPERS each year.

For every dollar they pay their employees in salary, should California’s cities be sending, year after year, $.50 cents or more to CalPERS? That’s the best case. It assumes that CalPERS will continue to be able to realize annual returns on investment of 7.5%, on average over the next several decades. It also assumes they’ve got the demographic projections correct this time, and won’t have to contend with the otherwise happy eventuality of people living longer than their current projection of approximately 80 years. These are big assumptions.

And how much of this fifty cents (or more) on the dollar do the employees themselves pay as a percent of withholding? In many cases, up until recently, they paid nothing. Or if they did pay via withholding, at the same time as they became subject to that requirement, they received a raise to their overall salary of an equivalent amount. But under California’s 2012 Public Employee Pension Reform Act, employees will gradually be required to pay more for their pensions – with a ceiling of 8% for regular employees, and 12% for public safety employees.

If they paid the maximum via withholding, for a miscellaneous employee in Costa Mesa, that 8% equates to a 4-to-1 employer match today, rising to a 5-to-1 matching in 2020. Similar employer matching ratios will apply for public safety employees. How many companies, anywhere, provide 1-to-1 matching, much less 2-to-1, or more? 5-to-1 matching? It is unheard of. For good reason – it is absolutely impossible for a private company to afford this in a competitive economy.

Returning to the Myths vs. Facts page posted by CalPERS, they also assert that “The average CalPERS pension is about $31,500 per year.” This is profoundly misleading. It is based on the assumption that every CalPERS retiree worked a full career in government. Returning to the CalPERS Employers page on Transparent California, one can see a more accurate estimate of the “average pension,” because it is limited to the average for retirees who put in at least 30 years of work. Take a look. For Costa Mesa, the average 2014 pension for a full career retiree was $91,805.

If our cities could afford this, nobody would care, but they cannot. If Social Security, which withholds benefits until a participant, typically, has worked 45 years, could afford to be equally generous, nobody would care. But the average Social Security benefit is around $15,000 per year and even at that pittance, without major restructuring it will go broke.

One can debate forever regarding how much of a premium public employees should receive over private sector workers because they’re, on average, more educated, or take more risks in their jobs. But as it is, taxes are going up to pay pensions and benefits to government workers that are by any objective standard many times greater than what private citizens can ever hope to achieve. No premium, however much deserved on principle, should be this big.

The insatiable demand by CalPERS and other government pension systems for more money to keep these pensions intact does more than create financial stress to our cities and counties. It exempts public employees from the economic challenges that face everyone else. It takes away the sense of shared fate between private citizens and public servants. It undermines the social contract. It exposes a self-dealing, hidden agenda behind all new regulations. It erodes the credibility of laws, ordinances, codes, because perhaps they are merely there to generate revenue.

CalPERS and California’s other government pension systems have the financial wherewithal to lobby and run PR campaigns that dwarf that of reformers. But myths and facts are not defined in press releases. They are defined by reality. The reality is that California’s pension funds have increased their required contributions as a percent of municipal budgets by an order of magnitude in just the last 15-20 years, and there is no end in sight. If and when they can no longer seize public assets to force payment, bully compliant judges to overturn reforms, or find enough money from new taxes to save their financially shattered systems, they are going to have a lot of explaining to do – not only to the beleaguered taxpayers, but to their own members.

*   *   *

Ed Ring is the executive director of the California Policy Center.

Teachers Unions Spend $700 Million per Year Explicitly on Political Advocacy

As readers know by now, Dropout Nation determined in research released last October that National Education Association and American Federation of Teachers spend roughly $700 million per year on advocacy. This report undermined the unions’ preferred narrative that they are scrappy underdogs fighting for public schools. As you would expect, especially on Twitter, NEA’s and AFT’s highly-paid spokespeople were none too happy about this inconvenient fact. One such executive, AFT’s Kombiz Lavasany, asserted that the report was “sadly dishonest [because the] vast majority of union dues support things universally supported,” such as “work to represent and work for better pay, work conditions, professionalism.”

20151022-UW-Biddle
NEA President Randi Weingarten, who is paid over $500,000 per year and wields
an annual advocacy budget of over $500 million, is looking out for working families.

Since these claims were repeated and rebroadcast by other union officials and their allies, they deserve a brief fact-based review. Unfortunately, they fail to hold up under even light quantitative scrutiny.

Yes, the teachers’ unions’ really spend $2.2 billion per year overall: Some critics looked at the revenues of the main unions’ national operations, and saw budgets in the hundreds of millions (not billions). NEA, for example, only reported revenue of $385 million to the U.S. Department of Labor; since the NEA represents two thirds of the nation’s teachers, looking only at national IRS filings would imply a revenue total of less than $600 million.

This math, however, excludes most of the unions’ budgets, which formally stay at the level of states and localities. A teacher in Chicago, for instance, pays dues averaging $1,000 per year, but 60 percent of those dues go to the local Chicago Teachers Union. The remaining 40 percent is split between the national AFT and the statewide Illinois Federation of Teachers. These local dues to CTU give it a formally independent budget of roughly $30 million. New York is another example; the UFT spends $100 million per year.

Any national analysis of union financial clout must therefore consider the dues collected by state and local affiliates and the filings they make with the Department of Labor and the Internal Revenue Service. Altogether, this adds up to $2.2 billion.

This number seems shockingly high. But you must look at this in context. The $2.2 billion number implies that the national unions represent about 30 percent of the total unions’ revenues. This makes sense given that the national unions play a quarterbacking role for organizations primarily working at the state and local levels. The number also suggests that annual dues amount to roughly $660 per teacher, which is just around one percent of the U.S. average teacher salary of $56,000.

As with other matters when it comes to the Big Two, the $2.2 billion union budget is only surprising for those who have not yet reviewed the basic math of American public education.

Yes, the unions really spend a third of their resources on advocacy: Lavasany and other union spokespeople argue that unions spend less than $700 million in advocacy because “most” of their money is spent in member services. Unpacking this claim requires a detour into union dues, how they are collected, and how they are classified.

The starting point is 1977, when the U.S. Supreme Court ruled in Abood v. Detroit Board of Education that union officials could compel all teachers to pay union dues as a condition of employment. The Court held that such “compulsory dues” harm teachers’ First Amendment rights, as they compel teachers to pay for political speech. So long as the compulsory dues are used only for advocacy related to collective bargaining, however, the Court held them to be permissible.

As an outgrowth of the Abood decision, most teachers around the country have union dues deducted automatically from their paychecks. Union officials calculate which portion of those dues are related to collective bargaining (so-called “chargeable” expenses), and which dues are unrelated (so-called “non-chargeable” expenses which teachers may opt out of paying).

As the Supreme Court itself noted last year — and as Dropout Nation has noted — the decades since 1977 have revealed two practical problems with the Abood framework. First, the question of chargeable vs. non-chargeable is notoriously thorny, and remains the subject of ongoing litigation to this day. Many kinds of laws can be called related to teachers’ collective bargaining, including parent choice rules, teacher evaluation frameworks, and even a state’s overall levels of taxation and spending.

Second, the classification system is rife with conflicts of interest. The union officials who benefit directly from these revenue allocations have day-to-day responsibility for deciding which expenses are chargeable vs. non-chargeable. Every year, union staffers and their paid accountants make thousands of individual determinations about how to classify their time and expenses. From these classifications, the unions can essentially create as much revenue as they think they need. Even if every union staffer is a saint, their belief in their cause gives them a constant incentive to err on the side of higher compulsory dues.

This framework allows the accounting results to exactly match the public relations claims. Consider the response to last year’s Dropout Nation report from the AFT spokesman Lavasany that “vast majority of that money is spent on supporting members, not on politics.” Sure enough, this matches up with the 2013 audit report signed by the AFT’s accountants, which duly allocated 71.5 percent of the AFT’s revenues to “chargeable” expenses related to collective bargaining. Those overseeing the audit included AFT’s Secretary-Treasurer Loretta Johnson, a longtime AFT negotiator and officer, and Calibre, a certified public accountancy that specializes in serving the interests of labor unions.

A 2014 audit report AFT filed in California, writing to reflect an arbitrator’s decision between objecting teachers and the union’s United Teachers Los Angeles unit, made a slightly more conservative estimate of 66 percent of the revenues going toward “chargeable” expenses. Either way, the unions admit that between 25 percent and 33 percent of dues are allocated to political activities unrelated to collective bargaining and workplace issues.

Here’s the funny thing: Even if you take the union officials’ numbers at face value, the result actually confirms the thrust of Dropout Nation’s analysis. The pro bono consultants who went through the unions’ published national, state, and local tax returns estimated based on their research, interviews, and sampling that roughly one third of the unions’ efforts went toward political advocacy. This is what drove the $700 million estimate: one third of $2.2 billion is slightly more than $700 million. If the 2014 auditor’s report is correct, and that result applies to union spending allocations across the country, then it serves as independent confirmation, rather than rebuttal, of what Dropout Nation turned up.

Indeed, if even the unions’ auditing numbers say that one third of their expenses are not chargeable, the reality is probably a much higher number. This has been borne out by Dropout Nation in five years of reports on NEA and AFT spending: Often times, the two unions and their affiliates list what often turns out to be political spending under the category of “representational activities”. If anything, the $700 million estimate probably underestimates the amount of money NEA and AFT and their units spend on politics.

 

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

Government Union's New Taxes on Working Californians Stopped in Legislature – For Now

It’s been a long year in the Capitol for those of us who advocate against higher taxes, crushing regulations and wasteful government spending. The good news is that California taxpayers have prevailed in virtually all the major tax fights this year. The bad news is that, because the legislature convenes for two-year sessions, this is only halftime. On January 4, 2016 – less than 4 months from now – the same cast of characters will reconvene and we will have to fight many of the same battles yet again. Still, it is helpful to assess how homeowners and working Californians fared in the legislative process this year.

For Howard Jarvis Taxpayers Association, there is no higher priority than defending Proposition 13 against attacks. As a constitutional amendment, Prop 13 cannot be amended by the Legislature directly. But that doesn’t mean the politicians can’t inflict harm. Indeed, with a two-thirds vote of each house, the California Legislature can place proposed constitutional amendments on the ballot. And if an anti-Prop 13 measure is sufficiently enticing or deceptive, voters might unwittingly take away some of their own rights as taxpayers.

This past year, there were three such proposals. Two were efforts to lower the two-thirds vote requirement at the local level as a condition for higher taxes. This is an important part of Prop 13 because the higher vote threshold was put in place to prevent local governments from taking away the benefits of Prop 13’s reduced property tax burden by simply imposing new or higher levels of other local taxes. The third attack on Prop 13 was an effort to take away the provision that limits annual increases in the taxable value of property to two percent. Although not affecting all property owners, this dangerous bill was simply “Step 1” for the complete repeal of Prop 13.

As noted above, the good news is that all three proposals were vigorously opposed by HJTA and each was stopped. But the bad news is that these proposals to repeal or weaken Prop 13 will be back come January.

Over and above our Prop 13 victories, taxpayers also stopped a myriad of other taxes including one proposal that would have slammed every California family that relies on their car for work, errands or pleasure. That proposal would have imposed big increases in the gas tax, the cost of getting a license and the annual vehicle registration fee. Stopping that awful tax hike was a very high priority for the more than 200,000 members of HJTA.

An equally dreadful proposal to extend the sales tax to services – a bill which would slam taxpayers with over $100 billion in higher consumer costs every year – was also derailed, at least for now.

Wars are not fought alone and taxpayers should be very grateful to those legislators who stood on the right side. Because taxes imposed by the Legislature require a two-thirds vote, our allies had the votes to stop the attacks even though a large majority in both the Assembly and Senate never met a tax they didn’t like.

A huge vote of thanks is due to the Republicans and their leaders who stood united against the assault. But we should also note that several moderate Democrats withstood the withering criticism of their colleagues and the left-leaning media to actually represent the interests of their taxpaying constituents. That sort of courage is a rare thing in politics.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

San Jose City Council Capitulates to Police Union Power

“He told the class to take advantage of the academy, and then find jobs elsewhere. The police union tries to get us to leave the department.”
–  Anonymous source to NBC Bay Area, television report “Another San Jose Police Recruit Says Union Tried to Get Cadets to ‘Find Jobs Elsewhere’,” Oct. 28, 2014 (excerpt begins at 1:38 in report).

A precedent setting new development in San Jose last week provides abundant evidence of just how powerful local government unions really are in California. As reported today in San Jose Inside and elsewhere, an embattled city council has tentatively approved a new contract with San Jose’s police union that awards them “a 5 percent ‘retention’ bonus and an 8 percent raise over the next 16 months. In addition, former officers who return to the force in the next year can claim a 5 percent signing bonus.”

More significantly, at the same time, the San Jose City Council has tentatively agreed to drop their appeal of a court ruling that overturned a key part of a San Jose pension reform, a reexamination of the so-called “California Rule.” As pension expert Ed Mendel reported yesterday in PublicCEO, “The “California rule” is a series of state court decisions widely believed to mean that the pension offered on the date of hire becomes a vested right, protected by contract law, that can only be cut if offset by a new benefit of comparable value.

In practical terms, this means that pension benefit formulas, according to the California Rule, cannot even be trimmed for future work performed by existing employees. San Jose’s pension reform Measure B, passed by 70% of voters in 2012, presented city employees with a choice – they could either contribute an additional 16% towards their pension benefits via payroll withholding, or they could accept lower pension benefit accruals from then on. Nothing they had earned to-date would have been taken away from them.

Despite legal opinions that claim the California Rule is not well established law, and despite that the California Rule is contrary to the law governing public sector pensions in most states, and contrary to all law governing private sector pensions everywhere, San Jose’s local elected officials have capitulated.

THE INHERENT HYPOCRISY OF THE ‘CALIFORNIA RULE’

It is difficult to overstate just how hypocritical the union’s position is on the issue of modifying pension benefit formulas. Because the problems with pensions began back in 1999, when SB 400 raised pension benefit accruals per year for the California Highway Patrol. Within a few years, most every agency in California followed suit. And these pension benefit enhancements were applied retroactively to the date of the employees’ hire.

That is, starting in 1999, agencies changed the pension benefit formula so that, for example, police and fire pension accruals were not just increasing from 2% to 3% per year from then on, but retroactively to the day each employee was hired. So someone who would have earned a pension equivalent to 2% of their final salary times the years they worked would now earn a pension equivalent to 3% of their salary times the years they worked, even if they were going to retire within the next year or two.

What San Jose Measure B tried to do was not roll back pension benefits from 3% per year to 2% per year for years already worked. It only tried to reduce the benefit accrual, prospectively, for years still to be worked. And even that was too much for these unions.

THE DEVASTATING COSTS OF SAN JOSE’S POLICE/FIRE RETIREMENT BENEFITS

If taxpayers could afford to pay these pension benefits, there might be a stronger argument to preserve them. But San Jose’s independent Police and Fire Department Retirement Plan, according to their most recent financial report, is not in great shape financially. Keeping it afloat requires staggering sums of money from taxpayers that are only going to increase each year. Here are highlights:

(1) The plan as of 6-30-2014 (most recent data available) was 77.5% funded (page 114). This means that instead of earning their officially projected annual return on investment of 7.125% per year, just to avoid becoming more underfunded, they will have to earn 9.2% per year. Just to stay even. That is their so-called “risk free” rate of return.

(2) The fund truly is “risk free” to participants, because the taxpayers pay most of the expense and cover the losses when the market fails. In FYE 6-30-2014, police and fire employees contributed $21.1 million into their retirement fund, and taxpayers (the City of San Jose) contributed $123.6 million (page 69), nearly six times as much. How many “six to one” matching contributions are out there for corporate 401K plans?

(3) The unfunded liability for the SJ Police and Fire Retirement Plan was $806 million (page 114) as of 6-30-2013 (most recent actuarial data), equal to 436% of payroll. Or looking at this another way, the city’s pension contribution was $123.6 million, whereas their “covered payroll” was $184.6 million. That is, for every dollar San Jose pays to put police and firefighters on the street, they have to pay 67 cents to the pension fund.

(4) It’s not just pensions. The SJ Police and Fire Retirement Plan includes city funded retirement health insurance benefits. How’s that fund doing? As of 6-30-2013 (most recent data), that plan was 11% (eleven percent) funded, with an unfunded liability of $625.5 million (page 65).

(5) If you consolidate the financial data for San Jose’s Police and Fire Retirement Plan’s pension and healthcare (OPEB) plans, the most recent statements indicate they are 67% funded, with a total unfunded liability of $1.4 billion. If San Jose were to responsibly reduce their total unfunded liability for public safety retirement benefits, they would be paying far more than 67 cents for every dollar of payroll.

THE MISLEADING EMPHASIS ON AN EXODUS OF OFFICERS

Throughout this battle between fiscal realists and the police union in San Jose, the police have maintained that officers were leaving the city to work elsewhere or to retire. There’s no question that their ranks have thinned, perhaps alarmingly. According to SJ Inside, “the agency [currently has] 943 sworn officers out of a budgeted 1,109 positions.” And historically San Jose’s police department has had as many as 1,400 officers. But is the union thwarting efforts to fill the ranks?

Several news reports suggest that could be the case – starting with the local NBC television affiliate’s report quoted earlier. That anonymous source corroborated what another person stated publicly. According to the San Jose Mercury guest column entitled “San Jose police recruit: Union told class to quit right away for good of the department,” former police academy cadet Elyse Rivas writes:

“On the first day of the academy, our orientation included the opportunity to meet Jim Unland, the Police Officers Association’s president. In no uncertain terms, he blamed Measure B for the departure of hundreds of officers — and he told us that it would be better for the department and for us if we would just quit, right then and there. He said that our employment with the department did not help the POA’s cause in proving Measure B was killing the department’s recruitment capabilities. He urged us to find jobs elsewhere.”

Reached for comment earlier today regarding developments in San Jose, former Mayor Chuck Reed agreed with the substance of these allegations. Not only did he confirm reports of union representatives discouraging academy recruits from taking jobs with the department, but he also described other ways they thwarted recruitment:

There were reports of recruiting events held in the San Jose police union offices where they invited police recruiters in from other cities to encourage active San Jose police officers to take these jobs in other cities.

Reed also said “when we were trying to hire officers, we wanted to bring in retired police officers in to do the background checks so we could keep our active officers on the beat – but the union urged retirees to refuse to accept the work.”

In any case, Reed pointed out that the city had determined to reduce the size of the police force back in 2010, well before voters approved Measure B, saying “the police department headcount went down from 1,400 to 1,100 before there was any pension reform.” Reed believes that an ideal headcount for the San Jose police department would not require returning to 1,400, and that getting to the budgeted 1,109 positions would be a good first step.

SO HOW MUCH DO SAN JOSE’S ‘UNDERPAID’ POLICE OFFICERS MAKE?

Getting timely and accurate information on public pay is difficult because financial reports from public entities take a long time to produce and often omit important data. The most recent payroll records publicly available for the city of San Jose are for 2013. According to a search on Transparent California of San Jose city employees with “Police” in their job title, in 2013 there were 260 of them who made over $250,000 in pay and benefits, and an astonishing 806 who made over $200,000 in pay and benefits. Here’s the link:  San Jose city employees, 2013, with “Police” in their job title.

Pension information for San Jose’s retired police officers is complicated by the fact that the data includes firefighters along with police officers. Moreover, the average full-career pension estimates are understated because a significant percentage of the current participants retired before pension benefits were enhanced in San Jose – a process of “continual enhancement” that continued up until 2008. Using 2014 data acquired by Transparent California, the estimated average full career pension for a San Jose police/fire retiree is $99,116 – with guaranteed 3% per year cost-of-living increases. The number for recent, post-2008, full-career retirees is undoubtedly much higher. Here is a 2014 roster of all of San Jose’s police/fire retirees – note that individual retirement health benefits (unfunded liability of $625 million) were not provided – certainly adding a value of at least another $10,000 per year.

Are San Jose’s police officers underpaid? The average veteran officer makes pay and benefits worth well over $200,000 per year. Add to that the likely 5% “retention bonus, and the 8% raise over the next sixteen months per the tentative new agreement. You decide.

The personal attacks and confrontational tactics employed by the San Jose police officers union against their political opponents do not reflect well on the fine men and women who staff that department, who perform work of vital importance to society. Whether or not they intentionally urged officers to quit (or never join) the San Jose police force is almost irrelevant, despite abundant evidence that suggests they did. Because their real transgression against the people of San Jose, the taxpayers, the elected officials, and public safety itself, is to insist on levels of pay and benefits for their officers that are far more than the city can afford.

*   *   *

Ed Ring is the executive director of the California Policy Center.

RELATED POSTS

Why Pension Reform is Inevitable, and How Reforms Can Benefit the Economy, July 21, 2015

Retiree with $183,690 Annual Pension Attacks Pension Critics, June 9, 2015

Pension Reform is Bad for Wall Street, and Good for California, April 14, 2015

Is Deficient Recruiting the Real Reason for Police Understaffing in San Diego?, January 20, 2015

Conservatives, Police Unions, and the Future of Law Enforcement, January 6, 2015

Police Unions in America, December 9, 2014

Government Employee Unions – The Root Cause of California’s Challenges, June 3, 2014

Conservative Politicians and Public Safety Unions, May 13, 2014

How Much Does Professionalism Cost?, March 11, 2014  (The Kelly Thomas Story)

How Public Sector Unions Skew America’s Public Safety and National Security Agenda, June 18, 2013

CALIFORNIA POLICY CENTER PENSION STUDIES

California City Pension Burdens, February 2015

Estimating America’s Total Unfunded State and Local Government Pension Liability, September 2014

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

Evaluating Public Safety Pensions in California, April 25, 2014

How Much Do CalSTRS Retirees Really Make?, March 2014

Comparing CalSTRS Pensions to Social Security Retirement Benefits, February 27, 2014

How Much Do CalPERS Retirees Really Make?, February 2014

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

Are Annual Contributions Into CalSTRS Adequate?, November 2013

Are Annual Contributions Into Orange County’s Employee Pension Plan Adequate?, August 2013

A Method to Estimate the Pension Contribution and Pension Liability for Your City or County, July 2013

Moody’s Final Adopted Adjustments of Government Pension Data, June 2013

How Lower Earnings Will Impact California’s Total Unfunded Pension Liability, February 2013

The Impact of Moody’s Proposed Changes in Analyzing Government Pension Data, January 2013

A Pension Analysis Tool for Everyone, April 2012

 

 

 

California's Official Antipathy to Educational Innovation and Accountability

“With a hearing now scheduled for Aug. 21, LA Unified’s teachers union, UTLA, will have the chance to argue before a neutral party that Alliance College-Ready Public Charter Schools, violated state education law by blocking the union’s efforts to bring Alliance teachers into its membership.”
– Mike Szymanski, “UTLA outlines accusations against Alliance for anti-union efforts,” LA School Report, August 6, 2015

The “neutral party” to which Szymanski refers is California’s Public Employee Relations Board (PERB), “a quasi-judicial administrative agency charged with administering the eight collective bargaining statutes covering employees of California’s public schools, colleges, and universities, employees of the State of California, employees of California local public agencies,” etc.

“Neutral.” Really?

A quick look at the directors of PERB provides yet another example of just how stacked the deck has gotten in favor of public employee unions. Following their names are excerpts from their official biographies:

  • Anita I. Martinez, Chair, “has been employed with PERB since 1976 and was recently appointed Member and Chair. Prior to that she has served as the PERB San Francisco Regional Director since 1982.”
  • A. Eugene Huguenin, “Before relocating to Sacramento in 2000, Huguenin practiced labor and education law in Los Angeles and Burlingame for more than 20 years, advising and representing the California Teachers Association and it’s locals throughout the state.”
  • Priscilla Winslow‘s “career in public sector labor law spans over 30 years, during which time she served for 15 years as Assistant Chief Counsel for the California Teachers Association where she litigated and advised on a variety of labor, education, and constitutional law issues.”
  • Eric Banks, “served in multiple positions at the Service Employees International Union, Local 221 from 2001 to 2013, including Advisor to the President, President, and Director of Government and Community Relations.”
  • Mark C. Gregersen‘s. career in public sector labor relations spans over 35 years. Prior to his appointment to the California Public Employment Relations Board, he has served as director of labor and work force strategy for the City of Sacramento and director of human resources for a number of California cities and counties.

Just a quick scan of these biographical excerpts suggests that government unions have at least three advocates – Huguenin and Winslow, who were long-time CTA professionals, and Banks, who worked for over a decade for the SEIU. What about the chairperson, Martinez? Here’s an excerpt from Gov. Brown’s announcement of her appointment – Martinez is a long-time Democrat public employee who has spent her entire career in labor bureaucracies:

“She has worked for the Board since 1976, where she currently serves as a regional director. Previously, Martinez was a board agent for the Agricultural Labor Relations Board from 1975 to 1976. She was an intern at the National Labor Relations Board from 1973 to 1976. Martinez is a Democrat.”

What about Gregersen? Do reformers have one voice out of five on PERB? Maybe, maybe not. Here’s are excerpts from Gov. Brown’s 2015 announcement of Gregerson’s appointment to PERB – Gregersen is a long-time Democrat public employee who, among other things, presided as city manager for Vallejo throughout the 1990’s:

“He served as director of labor and workforce strategy for the City of Sacramento from 2011 to 2012 and was director of human resources for Napa County from 2005 to 2009, for El Dorado County from 2004 to 2005 and for the City of Sunnyvale from 2001 to 2004. Gregersen was  director of human resources for the City of Vallejo from 1990 to 1999. Gregersen is a Democrat.”

Not convinced yet? On another hot-button topic for government unions, pension reform, read the ultra-liberal San Jose Mercury’s take on PERB, in an article entitled “State employee panel seems stacked against San Jose pension reformers.” The title says it all.

“Neutral.” Really?

The stakes couldn’t be higher.

The fight to unionize the Alliance charter school network, the largest charter school operator within Los Angeles Unified School District and one of the largest in California, comes at a time when the growth of charter schools is reaching critical mass and constitutes a material threat to union power. As reported today in the Los Angeles Times “Major charter school expansion in the works for L.A. Unified students,” billionaire Democrat and education reformer Eli Broad is behind an effort to greatly increase the charter school enrollment in LAUSD, currently at 16% of all students.” As reported in the Times, “there was discussion of an option that involved enrolling 50% of students currently at schools with low test scores. A source said the cost was estimated to be $450 million; another said hundreds of millions of dollars are needed.”

Most charter schools are not unionized. In non union schools, the process of innovation is unhindered by union work rules, and principals and teachers alike are held accountable for the academic performance of their students. A recent “Urban Charter School Study” published by Stanford University’s nonpartisan Center for Research on Education Outcomes (CREDO) “shows that many urban charter schools are providing superior academic learning for their students, in many cases quite dramatically better.”

These findings are corroborated by a recent California Policy Center study on charter school performance, far more limited in scope, that focused on the non-union Alliance charter schools within LAUSD, comparing the performance of their students to those in traditional LAUSD high-schools in the same neighborhoods. Here is a summary of the findings:

“Comparing LAUSD Alliance charter high schools to LAUSD traditional high schools located in the same communities, we found the Alliance schools to have decisively higher API scores, 762 vs. 701, and measurably higher graduation rates, 91.5% vs. 84.1%. With respect to SAT scores, when we normalized the comparison between the LAUSD Alliance and LAUSD traditional schools under consideration to equalize the rate of participation, we found that the LAUSD Alliance students outperformed the LAUSD traditional students with average scores of 1417 vs. 1299.”

Both CREDO and the CPC found unambiguous evidence that urban charter schools academically outperform traditional public schools. The CPC study also estimated per pupil costs for Alliance charter high school students to be $10,649 per year, compared to $15,372 per year for students at traditional public high schools within LAUSD.

Facing a growing bipartisan consensus that charter schools are working and should be expanded, California’s teachers unions are fighting to unionize them. Alliance management is in for a hard fight. They face not only the might of California’s teachers unions, who collect and spend dues totaling well over $300 million every year, but the power of the state itself, in the form of a Public Employee Relations Board whose management is “stacked” overwhelmingly with pro-union directors.

*   *   *

Ed Ring is the executive director of the California Policy Center.

Social Justice Warriors at Work

With the election season in full swing, expect a tide of union-led anti-reform, anti-choice and anti-Republican politicking in our kids’ classrooms.

I watched the GOP presidential debate because my students are counting on me” is the title of a piece posted on the National Education Association website by “guest writer” Tom McLaughlin, a high school drama teacher from Council Bluffs, IA. He claims that “…in addition to this debate, I had an obligation to watch future debates, take notes, and share the truth. I have a responsibility to do that for my students.” (Hmm – just why is a drama teacher delving into politics with his students? Brought back memories of a Che Guevara poster prominently displayed in the music teacher’s class at my former middle school.)

So in any event, I’m thinking this will be a commentary about Common Core, since it garnered the only discussion of education at the first Republican debate in Cleveland last Thursday. In reality, that issue provoked a brief back-and-forth between Jeb Bush and Marco Rubio which really didn’t shed much light on the subject. But the words “Common Core” never appear in the piece by McLaughlin. Instead, the drama teacher’s “truth sharing” includes comments like,

Many of the candidates on last night’s stage have clear records of draining critical funding away from public schools to give to private schools, supporting charter schools that are unaccountable to students, parents, and taxpayers, and slashing education funding and those programs that serve students and help them in the classroom.

As educators and trusted messengers in our communities, we must make sure the public is informed and not fooled by presidential candidates who say they believe in a world-class education system but have a history of starving our public schools of critical funding and supporting flawed so-called reforms that don’t work.

Obviously McLaughlin never intended to report on the debate, but rather to deliver a diatribe infused with standard teacher union talking points against any and all who favor reform and dare have an “R” after their names. (Curiously, Chris Christie, Scott Walker and Jeb Bush all took shots at the teachers unions during the debate and there was no mention of them in McLaughlin’s critique.)

Over at the “NEA Votes” Facebook page, the union faithful were having a field day with McLaughlin’s post and the debate. With one or two exceptions, the comments were posted by pro-union mouthpieces using the same tired talking points that the union elite use. Perhaps the loopiest of all was a post that equated conservatism with Fascism:

The scary part of all this is that these teachers, who don’t seem to have an objective bone in their collective bodies – and are proud of it – have a captive audience of children, many of whom will be the recipients of their teachers’ anti-reform, anti-school choice and anti-Republican rhetoric leading up to the presidential election in 2016.

If you are a Republican parent (or just a fair-minded one of any political persuasion), please be ready for the political onslaught supporting the Big Government-Big Union complex (aka the Blob) your kids may be in for. When the indoctrination starts, don’t be shy about speaking up. Please mention to anyone who is spouting the union party line (and your kids) that in Jeb Bush’s Florida, there are more than 40,000 teachers who do not work for school districts and 14,000 of them have chosen to work in charter schools. They’ve made these choices for the same reason parents do – because charters offer a better fit for their individual needs.

Tell them that despite McLaughlin’s absurd comment, charter and private schools are indeed accountable…to parents. If parents aren’t happy with those schools, they close, unlike traditional public schools which are accountable to no one and typically get more money thrown their way if they are failing.

Tell them that we have tripled our public education funding nationally – in constant dollars – over the last 40 years and have nothing to show for it.

Tell them that Wisconsin’s test scores have risen since the teachers unions’ favorite Republican punching bag Scott Walker has been governor.

Tell them that homeschooling is advancing across the country – especially in big cities – because parents of all political stripes are tired of a one-size-fits-all Blob education.

Tell them that in California, the Blob is under attack and that the effort is bipartisan. The Stull, Reed and Vergara lawsuits, all of which have successfully challenged Blob work rules like tenure and seniority and fought to get a realistic teacher evaluation system in place, have seen Republicans and Democrats working together to undo the mess that McLaughlin and his ilk have helped to create.

Perhaps most importantly explain that when it comes to education policy reform, the battle is not typically between Democrats and Republicans or liberals and conservatives, but rather between those who defend the status quo and those who are demanding reasonable reforms to an outsized, outdated, outmoded and out-of-touch educational system.

When I was growing up, I never had a clue what my teachers’ politics were. They understood they were not there to indoctrinate me. Accordingly, I followed suit when I taught public school for 28 years. But there are many now who have decided not to check their politics at the classroom door, instead bringing it to their students with a religious zeal that makes Elmer Gantry look like a wallflower. Many teachers now take their cue from the likes of National Education Association Executive Director John Stocks who, at the recent NEA convention, told his flock that teachers need to become “social justice warriors.”

Silly me, all along I thought teachers were there to teach.

Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

Another Consequence of Unionized Education: Diversity Politics Supplants Academics

Social justice, climate change, racial inequality, immigration and world hunger have replaced the classics as the focus of the curriculum in America’s schools and colleges. The goal of public education has shifted from academics to cultural indoctrination. The problem, which has come to Orange County’s Foothill High School, one of the state’s most elite high schools, deserves public scrutiny.

Foothill High School’s 2,494 students represent a cross-section of America. 49% of student enrollment is non-White, with students bussed from distant minority neighborhoods to accommodate the federally-mandated diversity. A percentage of White and Asian students come from middle- and upper-middle class families. The school ranks 66th in the state, has an 878 Academic Performance Index, 77% proficiency in reading, 76% proficiency in math and 3.30-3.85 GPA. Merit scholars number among its graduates.

What sounds like an enviable institution has been charged as having a “racist, classist history” in an online blogpost following an incident at a basketball game. The incident in January involved Tustin High School, Foothill’s blue-collar crosstown rival. What should have been ignored or treated as a minor incident escalated into an ugly example of political correctness run amok.

One of the Foothill Students held up a sign with a word that could have been construed as a racial slur. The word was #CHUNTI, slang for chuntaro which is the Spanish equivalent of redneck or White trash. The incident triggered a scathing post in a weekly online magazine that led to a written public letter of apology by the school’s principal, a hasty meeting of the Diversity Committee and the school wide assignment of Enrique’s Journey by Sonia Nazario.

The young adult version of the book is written for 7th graders and “reluctant” high school readers, not the demographic at Foothill. Enrique’s Journey describes the experiences of an adolescent illegal migrant, abandoned by his mother when he was 4 years old, who makes the long trek across Mexico on the infamous Train of Death from his home in Honduras to find his mother. She lives with her boyfriend and a new daughter North Carolina. The narrative details the violence and depravity he encounters.

Man’s inhumanity to man is described in brutal and graphic terms. Neither the story nor the writing is scholarly or ennobling as this sample illustrates:

One afternoon migra agents come to the camp. They ask Enrique where he is from [and tell him he] can’t fish here [and has to] leave. “Get out of here.” He leaves, only to be arrested in town- twice, both times for loitering… They call him a street bum and lock him up with three drunks who are singing. The toilet is running over. The drunks have smeared some of the contents on the wall and the stench is overpowering. Both times Enrique wins his release by sweeping and mopping. [1]

Among the thousands of other migrants who make the illegal journey into the United States, only one woman pauses to reflect on the morality of her actions. She struggles with her conscience and acknowledges what they are all doing is very wrong. They are breaking the law. Enrique never confronts his conscience, nor do Nazario’s young readers.

The declared purpose of the assignment was to foster greater empathy in the Foothill student body. It should be noted adolescents developmentally have a limited capacity for empathy, a finding that was corroborated in a recent study by Sara Konrath (Changes in Dispositional Empathy in American College Students) that documents a progressive decline of empathy among young adults over the past five decades. [2]

If fostering empathy was the actual goal, a far better choice would have To Kill a Mockingbird by Harper Lee, Grapes of Wrath by John Steinbeck or any of the hundreds of titles among the great classics.

The actual purpose of the Foothill assignment was cultural remediation. This is the latest example of the coercive practice known as political indoctrination. This practice is typically called brainwashing. It belongs in Nazi Germany or Communist China and Russia, not Southern California or the USA.

The ramifications of the mandatory reading assignment extend far beyond the classroom walls at Foothill. It is symptomatic of a dangerous psychology that threatens the survival of our free and democratic Republic. The need to reverse the trend needs to start at the Foothill schoolhouse door. NOW!

Foothill’s students are not a group of spoiled, rich White kids as the OC Weekly blog charges. They are hard-working, serious youngsters who are dedicated to getting good grades, graduating from college and making something of themselves. They are to be applauded, not humiliated and shamed as Gustavo Arrellano has done.

That their parents are not up in arms with visceral outrage at the assignment of Enrique’s Journey is deeply troubling to this psychiatrist. Their silent, passive acceptance bespeaks an attitude of cowed defeatism, indifference or hopelessness that mirrors the lack of response by the citizenry to President Obama’s strident attacks against the so-called “1%” for their allegedly undeserved wealth. Foothill parents should by saying “No mas! Education, not political indoctrination.”

If Dr. Stephany, Foothill’s principal, wants to give the sign-carrying student 15 hours of community service, we think that might be appropriate. His knee-jerk, anguished over-reaction is unwarranted and ill-advised. There was no need to have done anything.

The parents should demand the mandatory assignment, which was supposed to be read in every class including AP calculus and Phys Ed, be rescinded immediately. A list of alternate titles can be found in the library stacks under Great Works of Western Literature.

If all else fails, a school wide sick out and a visit to the local library would be therapeutically-indicated and educational. Feel free to contact me for a prescription.

About the Author: R. Claire Friend, MD, is the Assistant Professor, Department of Psychiatry and Human Behavior, UC Irvine Medical Center, and the editor of the UC Irvine Quarterly Journal of Psychiatry. She is a retired psychiatrist and frequent commentator on the psychological dimensions of education and social welfare policies.

FOOTNOTES

(1)  Sonia Nazario, Enrique’s Journey: The Story of a Boy’s Dangerous Odyssey to Reunite with his Mother (New York: Random House, 2006), 153.

(2)  http://faculty.chicagobooth.edu/eob/edobrien_empathyPSPR.pdf

OTHER NOTES

The article by university president John Agresto is an excellent discussion of the destruction of liberal education by progressivism.
http://www.wsj.com/articles/the-suicide-of-the-liberal-arts-1438987258

The students at Arnold Beckman High School in Irvine chose David and Goliath by Malcolm Gladwell as their summer reading assignment. The author examines the biblical parable to illustrate how much of what is beautiful and important in the world arises from appears to be suffering and adversity. Viewing adversity through a different prism, he offers a new interpretation on the meaning of the struggle of the underdog.

Unions in the News – Weekly Highlights

Union bills proliferate in California Capitol
By Dan Walters, July 21, 2015, Sacramento Bee
Only a sixth of California’s wage earners are members of labor unions, but they carry a very big stick in politics. Unions are the largest single source of legislative campaign funds, a recent Sacramento Bee compilation revealed, and among Democrats, their hegemony is even more pronounced. Not surprisingly, therefore, a Legislature dominated by labor-backed Democrats sees a large number of union-sponsored bills. This year is no exception, and when legislators return to Sacramento in August for the final month of their 2015 session, they will find dozens of union bills awaiting disposition. A small sample: Assembly Bill 219, by Assemblyman Tom Daly, D-Anaheim, would redefine public works projects to include delivery of ready-mixed concrete by outside suppliers. Thus, it would require payment of “prevailing wages” – essentially union scale – to delivery truck drivers. (read article)

Teachable moment on union politics
Editorial, July 20, 2015, San Bernardino Press-Enterprise
A petition on Change.org urges the American Federation of Teachers to withdraw its recent endorsement of Hillary Clinton for the Democratic presidential nomination. The online petition recently boasted more than 4,500 signatures; most by members of the teachers’ union who complain they had no say in the matter. AFT President Randi Weingarten said she was shocked, shocked by the blowback the union’s Clinton endorsement elicited from the rank and file. There was nothing undemocratic about the decision of AFT’s executive council, she argued. It simply was the culmination of a process that included multiple surveys, several telephone town halls and AFT’s “You Decide” website. Well, we might just be willing to give Ms. Weingarten the benefit of the doubt if she hadn’t a dog in the fight. But it’s no secret that she’s a longtime crony of Mrs. Clinton. Indeed, our friends at Politico reported that the president of the 1.6-million-member AFT has donated to the independent super PAC Ready for Clinton and is a board member for the pro-Clinton super PAC Priorities USA Action. Ms. Weingarten also has given money to Mrs. Clinton’s previous political campaigns. And, on her watch, AFT has been a Clinton Foundation donor. (read article)

Immigrants Help Lead a New Silicon Valley Labor Movement
By Beth Willon, July 21, 2015, KQED San Francisco
Jesus Solorio’s stubbornness serves him well. Instead of winding up a victim of the surging income inequality in Silicon Valley, he has become a tireless labor activist, refusing to let go of the American Dream. “I like being a champion of raising the minimum wage,” said Solorio in Spanish. “I like being around other people, helping them so they can have better salaries and live a better life.” Solorio, 30, is a janitor at San Jose-based eBay. He left Mexico when he was a teenager and he’s now a single father, raising his 7-year-old daughter in a hard-scrabble neighborhood 13 miles from the sparkling eBay campus. (read article)

It’s Time To Rethink Our Labor Laws
By John C. Goodman, July 21, 2015, Forbes
Jeb Bush is a fan. Ditto for Rand Paul and Marco Rubio. Hillary Clinton isn’t so sure. Martin O’Malley says it exposes the need to update our labor laws. Everyone is talking about Uber these days. The topic has even become part of the presidential election. Full disclosure: I’m also a fan. I travel a lot. When I am away from home I typically use Uber cars if they are available. When I do, I often ask the drivers how they like working with Uber. I have never had one complain. The most common comment from Uber drivers: they like the flexibility of the arrangement. They can work whenever they want to work. They can work as many hours as they want to work. If they need more income, they can work more. If they don’t, they are free to work less. What’s not to like? (read article)

Rules govern union access to farms for ‘heat sweeps’
By Bryan Little and Carl Borden, July 21, 2015, AgAlert for CA Agriculture
The United Farm Workers labor union has recently engaged in a flurry of activity. UFW public communications call these actions “heat sweeps during harvest,” meaning they may continue throughout the summer and fall. Key to this activity is taking access to California farms. How, you may wonder, can UFW gain access to farms? It can do so under a regulation adopted by the state Agricultural Labor Relations Board promptly after its creation in 1975. The California Supreme Court upheld the access regulation in 1976. Under the regulation, UFW is allowed worksite access to farm employees by providing their employer with a copy of a Notice of Intent to Take Access, or an NA form, and then filing with the ALRB two copies of the NA, along with proof that the copy was provided to the employer. The access regulation was created on the premise that it would protect the organizational rights of employees and labor unions, but the regulation does not limit its application to situations where a union’s purpose is to try to organize employees or otherwise seek their support. Its operative language merely says, in effect, that a union may take access to “meet and talk with employees.” Indeed, the ALRB NA form does not require a union to declare any purpose for seeking access. (read article)

Bills would hike school-construction tab
By Steven Greenhut, July 20, 2015, San Diego Union-Tribune
Many far-reaching bills proposed in the state Capitol grab headline coverage, such as ones involving global-warming, physician-assisted suicide and immigration. It’s hard for Californians to miss those high-profile debates. But many significant legislative changes take place under the radar, with little public discussion or debate. One of those issues involves the construction of school facilities and other public-works projects. Through a variety of bills — most of which are still alive, and one which has made its way to the governor — the state’s construction unions are trying to prod local agencies to use what are known as project labor agreements, or PLAs. These are union-only agreements. If, say, a school district enters into one of them for the construction of a new high school, the bid-winning contractor must hire most of his or her labor in the union hiring hall, pay into the union health and retirement system (even if he already pays benefits for his workers), pay union dues and train workers in apprenticeship programs. Most studies suggest these agreements hike constructions costs by as much as 25 percent because they reduce the number of contractors — and especially lower-cost nonunion contractors — who bid for these projects. (read article)

Ironworkers union leader, 73, gets 19 years in prison
By Jeremy Roebuck, July 20, 2015, Philadelphia Inquirer
Joseph Dougherty, the one-time head of Philadelphia’s largest ironworkers union, was sentenced to 19 years and 2 months in federal prison Monday for overseeing a years-long campaign of sabotage and intimidation of nonunion contractors. U.S. District Judge Michael Baylson said he had considered the 73-year-old Dougherty’s advanced age but insisted he had to impose a sentence that matched the seriousness of the crimes committed by members of Dougherty’s union, Ironworker’s Local 401. “His leadership led to a lot of damage. It led to a lot of crimes and it continued the bad reputation Philadelphia has for tolerating union violence,” Baylson said. Dougherty declined to address the judge during his hearing. A number of supporters rallied outside the courthouse before Dougherty learned his fate. The sentence imposed, which also included an order that he pay more than a half-million dollars in restitution, was just more than four years over the 15-year mandatory minimum sentence the union leader aced in the case. Prosecutors had pushed for a sentence of just under 23 years. In all, 12 members of Ironworkers Local 401 were convicted of using sabotage, arson, threats and intimidation – including the 2012 torching of a Quaker Meetinghouse in Chesnut Hill – to coerce contractors into hiring union labor. (read article)

Cynical labor bill seeks to keep public in dark about negotiations
By Dan Borenstein, July 17, 2015, Contra Costa Times
Organized labor has lined up behind legislation purporting to promote government contract transparency. It’s a sham. The bill actually aims to keep the public in the dark about public-employee negotiations, ensuring taxpayers never learn the costs of collective bargaining agreements until they’re done deals. Deceptively labeled the “Civic Reporting Openness in Negotiations Efficiency Act,” SB 331, by state Sen. Tony Mendoza, D-Artesia, would also penalize cities, counties and special districts that require responsible analysis of their salary and benefit expenses. “To punish local government for disclosing labor costs is an amazingly cynical statement on the role of the people in democracy,” said attorney Jon Holtzman, an employment law and labor relations expert who represents cities. “Does labor really believe the only way to address the dramatic increase in the cost of benefits is to hide them?” (read article)

Union fight shifts from campaign trail to high court
By Dan Morain, July 19, 2015, Bayou Buzz
For decades, organized labor, particularly the union that represents public school teachers, has been checking off boxes in California. Pass an initiative guaranteeing school funding? Yes. Kill an initiative to allow tax-funded vouchers for private schools? Easy. Crush ballot measures to bar public employee unions from using dues for political campaigns? Check, check and recheck. The union and its allies eviscerated that notion on three different ballots. Labor dominates politics in California, helping to elect this governor and other Democratic statewide officeholders and a majority of the legislators. But 2016 could be very different. (read article)

How workers are winning in Scott Walker’s Wisconsin
By Deroy Murdock, July 17, 2015, New York Post
Hillary Rodham Clinton shed her usual sunny demeanor on Monday and snarled at Republicans in general and one presidential candidate in particular. “Republican governors like Scott Walker have made their names stomping on workers’ rights, and practically all Republican candidates would do the same as president,” Clinton growled at Manhattan’s New School. “I will fight back against these mean-spirited, misguided attacks. Evidence shows that the decline of unions may be responsible for a third of the increase of inequality among men. So, if we want to get serious about raising income, we have to get serious about supporting union workers.” Later that day, AFL-CIO president Richard Trumka snapped, “Scott Walker is a national disgrace.” Liberals like Clinton and Trumka have it all wrong. Workers have been waxing, not waning, under Walker. And they can thank his free-market reforms for improving their lives. If there’s one thing workers value, it’s work. And on this score, Wisconsin’s Republican governor has delivered. The Badger State’s seasonally adjusted unemployment rate fell from 7.4 percent in January 2011 (the month of Walker’s inauguration) to 4.6 percent in May 2015 (the latest available figure). US joblessness dropped from 9.0 percent to 5.5 percent over that period. Wisconsin’s unemployment, thus, stands well below America’s. (read article)

Oakland’s largest city union asking members for strike authorization
By Mike Blasky, July 16, 2015, Contra Costa Times
The city’s largest municipal employees union is asking members to authorize a strike as contract negotiations drag on, but that doesn’t mean a work stoppage is imminent or even likely. Powerful union SEIU Local 1021, which represents about 2,500 full-time and part-time city workers, asked members to vote to authorize a strike on Tuesday and Wednesday. “We are calling for this vote now because the City has failed to bargain meaningfully over many issues,” a handout distributed to workers said. “We must be prepared to take action if the City refuses to bargain in good faith.” But that hasn’t happened — yet. City Hall sources said the package being offered to workers is generous, and doubts the unions would actually strike after members analyze the city’s offer. And even union sources downplayed the likelihood of a strike. The two sides continued to bargain — on Wednesday negotiators were holed up at the Oakland Marriott after working until midnight on Tuesday — and were set to continue talks next week. A strike authorization is a useful bargaining chip to put pressure on the city’s administration, and it allows the union the flexibility to act quickly if talks stall. (read article)

Labor Department Joins War Against The Sharing Economy
By Connor D. Wolf, June 16, 2015, Daily Caller
The U.S. Department of Labor joined opponents of the “sharing economy” Wednesday in condemning the new use of contracting as a way to avoid paying employee benefits. “Misclassification of employees as independent contractors is found in an increasing number of workplaces,” the agency claimed in a report. “When employers improperly classify employees as independent contractors, the employees may not receive important workplace protections.” Advances in digital technologies have allowed companies like Lyft, Uber, FedEx and Airbnb to use contracting in unique ways. Known as the sharing economy, companies make digital platforms in which individuals can create their own business ventures. Opponents, however, argue these individuals should be classified as employees of the company instead of contractors. (read article)

Unions seethe over early Clinton endorsement
By Annie Karni, July 16, 2015, Politico
There was never any question that the powerful American Federation of Teachers — a union representing 1.6 million educators across the country — would endorse Hillary Clinton for president. But on Saturday, when the AFT became the first international labor union to make an endorsement in the contest by announcing its support of Clinton, it drew sharp criticism from teachers as well as other labor leaders, who questioned the timing amid Vermont Sen. Bernie Sanders’ surge in popularity. Labor leaders said there was a clear understanding that before July 30 — when all of the Democratic candidates have an hourlong interview at AFL-CIO headquarters and could be grilled on their positions on controversial issues like trade — no national unions (the AFT is one of the 56 national and international unions that make up the AFL-CIO) would make an endorsement. In 2007, the AFT didn’t endorse Clinton until October. “A request was made, and there was an expectation that people were going to at least allow the AFL-CIO process to proceed,” said one labor operative. “When the AFL-CIO was asking people not to make endorsements, why did they feel the need to do it in such a hurried fashion?” Other labor leaders described the move as “an insult” to endorse now, when so many labor leaders harbor lingering concerns over trade and plan to press their issues in two weeks. (read article)

Hillary Clinton Faces Unrest Among Organized Labor
By Sam Frizell, July 16, 2015, Time
Hillary Clinton had good reason to celebrate Saturday. The American Federation of Teachers, a 1.6-million strong union of teachers, nurses and higher education faculty endorsed her, adding a key working-class voice to a campaign that has so far lacked much overt support from organized labor. “I’m honored to have the support of AFT’s members and leaders, and proud to stand with them to unleash the potential of every American,” Clinton said in response. “Their voices and the voices of all workers are essential to this country.” But almost immediately, there was a backlash among teachers in far-flung locals across the states. The AFT’s Facebook page lit up with angry comments from those who favored Vermont Sen. Bernie Sanders instead. Teachers took to Twitter to condemn the endorsement and at least two petitions were circulated online in opposition. Widely read teachers’ blogs published screeds against the decision, calling it rigged in favor of Clinton, a longtime friend of AFT president Randi Weingarten. (read article)

Labor unions employing politics of envy
By Scott Reeder, July 16, 2015, Journal-Standard
Occasionally, when I was growing up, my brother and I were allowed to split a bottle of pop. I’d pour the soda into identical glasses while peering intently at each glass to make sure that they were exactly at the same level. I couldn’t bear the thought that my brother, Danny, might get an ounce more than me. It was silly, childish behavior.
Unfortunately, I see a lot of adults behaving that way too. At age, 24, I took a job at another newspaper. No sooner had I sat down at my desk on my first day on the job when another reporter sidled up to me and wanted to know how much an hour I was earning. It wasn’t much, so I told him. He huffed and puffed and stormed into the editor’s office. It turns out I was making $60 more per week than he was. Later, I was chewed out by the city editor for stirring up trouble. It wasn’t exactly an auspicious way to start a new job. In the workplace, the only paycheck I’ve ever concerned myself with is the one with my name on it. If you are happy with what you’re paid, why worry whether someone else is earning more? And if you are unhappy with your pay, ask your boss what you can do to better your situation. If satisfaction isn’t reached, it’s time for you to look elsewhere. (read article)

Table A-3 Details of Bond Indebtedness Waiver Requests from California School Districts to State Board of Education 2002 through March 2015

See the complete California Policy Center report For the Kids: California Voters Must Become Wary of Borrowing Billions More from Wealthy Investors for Educational Construction (complete, printable PDF Version, 4 MB, 361 pages)

Links to all sections of this study readable online:
Executive Summary: “For the Kids” – Comprehensive Review of California School Bonds (1 of 9)
More Borrowing for California Educational Construction in 2016 (2 of 9)
Quantifying and Explaining California’s Educational Construction Debt (3 of 9)
How California School and College Districts Acquire and Manage Debt (4 of 9)
Capital Appreciation Bonds: Disturbing Repayment Terms (5 of 9)
Tricks of the Trade: Questionable Behavior with Bonds (6 of 9)
The System Is Skewed to Pass Bond Measures (7 of 9)
More Trouble with Bond Finance for Educational Construction (8 of 9)
Improving Oversight, Accountability, and Fiscal Responsibility (9 of 9)
You are in this section: Guide to all Tables and Appendices – Comprehensive Reference for Researchers


 School DistrictLegal LimitRequestRate Recommended by Department of EducationConditions Recommended by Department of EducationFinal ActionDate ApprovedAgenda Item with Links to Staff ReportsWaiver ID
-Stockton Unified School District2.50%Board approved unanimously March 24, 2015 for General Obligation Bonds. Submitted March 2015.PendingN/A
-Stockton Unified School District2.50%Board approved unanimously March 24, 2015 for E-Tech Bonds. Submitted March 2015.PendingN/A
-Robla School District1.25%Board hearing February 26, 2015.Not yet submittedN/A
-Oak Grove School District1.25%Discussion item on February 12, 2015 board agenda: “State of California Bonding Capacity Waiver - Debt Waiver Process.”No action yet taken by boardN/A
-Greenfield Union School District1.25%Submitted February 2015.PendingN/A
-El Monte City School District1.25%Submitted January 2015.PendingN/A
-Wiseburn Unified School District2.50%Submitted January 2015.WithdrawnN/A
1Planada Elementary School District1.25%2.25%1.96% then 2.01%That the bonded indebtedness limits be waived with the following conditions: (1) the period of request does not exceed the recommended period on Attachment 1, (2) the total bonded indebtedness limit does not exceed the recommended new maximum shown on Attachment 1, (3) the district does not exceed the statutory tax rate, (4) the waiver is limited to the sale of bonds approved by the voters on the measure, (5) the citizens’ oversight committee is established and supports the waiver and intended expenditures prior to the sale of the bonds, and (6) the district complies with the statutory requirements of Assembly Bill 182 related to school bonds which became effective January 1, 2014.Approved by Consent2014-11-13Item W-14
and
Item W-14 Addendum
5-9-2014
2Larkspur-Corte Madera School District1.25%1.50%1.50%That the bonded indebtedness limits be waived with the following conditions: (1) the period of request does not exceed the recommended period on Attachment 1, (2) the total bonded indebtedness limit does not exceed the recommended new maximum shown on Attachment 1, (3) the district does not exceed the statutory tax rate, (4) the waiver is limited to the sale of bonds approved by the voters on the measure, and (5) the district complies with the statutory requirements of Assembly Bill 182 related to school bonds which became effective January 1, 2014.Approved by Consent2014-09-03Item W-0925-6-2014
3Dehesa School District1.25%1.58%1.58%That the bonded indebtedness limits be waived with the following conditions: (1) the period of request does not exceed the recommended period on Attachment 1, (2) the total bonded indebtedness limit does not exceed the recommended new maximum shown on Attachment 1, (3) the district does not exceed the statutory tax rate, (4) the waiver is limited to the sale of bonds approved by the voters on the measure, and (5) the district complies with the statutory requirements of Assembly Bill 182 related to school bonds which became effective January 1, 2014.Approved by Consent2014-05-07Item W-0984-2-2014
4Alvord Unified School District2.50%3.67%3.67%That the bonded indebtedness limits be waived with the following conditions: (1) the period of request does not exceed the recommended period on Attachment 1, (2) the total bonded indebtedness limit does not exceed the recommended new maximum shown on Attachment 1, (3) the district does not exceed the statutory tax rate, and (4) the waiver is limited to the sale of bonds approved by the voters on the measure noted on Attachment 1.Approved by Consent2013-11-06Item W-082-8-2013
5Weaver Union School District1.25%2.26%2.26%That the bonded indebtedness limits be waived with the following conditions: (1) the period of request does not exceed the recommended period on Attachment 1, (2) the total bonded indebtedness limit does not exceed the recommended new maximum shown on Attachment 1, (3) the district does not exceed the statutory tax rate, (4) the waiver is limited to the sale of bonds approved by the voters on the measure noted on Attachment 1, (5) the district obtain approval from the Citizens’ Oversight Committee before issuing any bonds, and (6) Capital Appreciation Bonds (CABs) are not issued subsequent to approval of the waiver if the debt ratio goes above the statutory tax rate limit.Approved by 9-0 vote2013-09-04Item W-0923-5-2013
6Centinela Valley Union High School District1.25%1.65%1.55%That the total bonded indebtedness limits be waived for each district with the following conditions: (1) the period of request does not exceed the recommended period shown on Attachment 1, (2) the total bonded indebtedness limit does not exceed the recommended new maximum shown on Attachment 1, (3) the district does not exceed the statutory tax rate limits, (4) the waiver is limited to the sale of bonds approved by the voters on the measure shown on Attachment 1, and (5) Capital Appreciation Bonds (CABs) are not issued subsequent to approval of these waivers if the debt ratio goes above the statutory tax rate limit.Approved by 9-0 vote after amendment to strike condition (5) of staff recommendation2013-05-08Item W-2927-1-2013
7Jefferson Elementary School District1.25%2.25%1.92%That the bonded indebtedness limits be waived with the following conditions: (1) the period of request does not exceed the recommended period on Attachment 1, (2) the total bonded indebtedness limit does not exceed the recommended new maximum shown on Attachment 1, (3) the district does not exceed the statutory tax rate, (4) the waiver is limited to the sale of bonds approved by the voters on the measure noted on Attachment 1, and (5) Capital Appreciation Bonds (CABs) are not issued subsequent to approval of this waiver if the debt ratio goes above 1.25 percent.Approved by 9-0 vote after amendment to strike condition (5) of staff recommendation2013-05-08 (Held over from 2013-03-13)Item W-3056-10-2012
8Lindsay Unified School District2.50%3.50%3.50%That the total bonded indebtedness limits be waived for each district with the following conditions: (1) the period of request does not exceed the recommended period shown on Attachment 1, (2) the total bonded indebtedness limit does not exceed the recommended new maximum shown on Attachment 1, (3) the district does not exceed the statutory tax rate limits, (4) the waiver is limited to the sale of bonds approved by the voters on the measure shown on Attachment 1, and (5) Capital Appreciation Bonds (CABs) are not issued subsequent to approval of these waivers if the debt ratio goes above the statutory tax rate limit.Approved by 9-0 vote after amendment to strike condition (5) of staff recommendation2013-05-08Item W-2938-2-2013
9Oxnard School District1.25%1.50%1.50%That the total bonded indebtedness limits be waived for each district with the following conditions: (1) the period of request does not exceed the recommended period shown on Attachment 1, (2) the total bonded indebtedness limit does not exceed the recommended new maximum shown on Attachment 1, (3) the district does not exceed the statutory tax rate limits, (4) the waiver is limited to the sale of bonds approved by the voters on the measure shown on Attachment 1, and (5) Capital Appreciation Bonds (CABs) are not issued subsequent to approval of these waivers if the debt ratio goes above the statutory tax rate limit.Approved by 9-0 vote after amendment to strike condition (5) of staff recommendation2013-05-08Item W-2951-1-2013
10Stockton Unified School District2.50%4.23%4.23%That the total bonded indebtedness limits be waived for each district with the following conditions: (1) the period of request does not exceed the recommended period shown on Attachment 1, (2) the total bonded indebtedness limit does not exceed the recommended new maximum shown on Attachment 1, (3) the district does not exceed the statutory tax rate limits, (4) the waiver is limited to the sale of bonds approved by the voters on the measure shown on Attachment 1, and (5) Capital Appreciation Bonds (CABs) are not issued subsequent to approval of these waivers if the debt ratio goes above the statutory tax rate limit.Approved by 9-0 vote after amendment to strike condition (5) of staff recommendation2013-05-08Item W-292-3-13
11West Contra Costa Unified School District2.50%5.00%5.00%That the total bonded indebtedness limits be waived for each district with the following conditions: (1) the period of request does not exceed the recommended period shown on Attachment 1, (2) the total bonded indebtedness limit does not exceed the recommended new maximum shown on Attachment 1, (3) the district does not exceed the statutory tax rate limits, (4) the waiver is limited to the sale of bonds approved by the voters on the measure shown on Attachment 1, and (5) Capital Appreciation Bonds (CABs) are not issued subsequent to approval of these waivers if the debt ratio goes above the statutory tax rate limit.Approved by 9-0 vote after amendment to strike condition (5) of staff recommendation2013-05-08Item W-2957-1-2013
12Westside Union School District1.25%1.33%1.33%The California Department of Education (CDE) recommends that the total bonded indebtedness limits be waived for each district with the following conditions: (1) the period of request does not exceed the recommended period shown on Attachment 1, (2) the total bonded indebtedness limit does not exceed the recommended new maximum shown on Attachment 1, (3) the district does not exceed the statutory tax rate limits, (4) the waiver is limited to the sale of bonds approved by the voters on the measure shown on Attachment 1, and (5) Capital Appreciation Bonds (CABs) are not issued subsequent to approval of these waivers if the debt ratio goes above the statutory tax rate limit.Approved by 9-0 vote after amendment to strike condition (5) of staff recommendation2013-05-08Item W-2935-2-2013
13Alum Rock Union Elementary School District1.25%1.95%1.75%That the bonded indebtedness limits be waived with the following conditions:1) the district’s total bonded indebtedness, as a percent of assessed valuation, does not exceed 1.75 percent, 2) the waiver is limited to the sale of bonds approved by the voters in the November 2012 election, 3) the tax rate levied at the time of bond issuance does not exceed the amount authorized by the voters to secure the bonds, 4) the waiver is limited to two years less one day, and 5) Capital Appreciation Bonds (CABs) are not issued subsequent to approval of this waiver if the debt ratio goes above 1.25 percent. Approved by 9-0 vote after amendment to strike condition (5) of staff recommendation2013-03-13Item W-0763-10-2012
14Pittsburg Unified School District3.58% (based on previous waiver)5.00%5.00%The bonded indebtedness limits be waived with the condition that each district’s total bonded indebtedness as a percent of assessed valuation, does not exceed the percent shown on Attachment 1 and that the tax rate levied at the time of bond issuance does not exceed the amount shown on Attachment 1. Approved by Consent2012-07-18Item W-14168-2-2012
15Savanna Elementary School District1.25%2.50%2.50%That the bonded indebtedness limits be waived with the condition that each district’s total bonded indebtedness as a percent of assessed valuation, does not exceed the percent shown on Attachment 1 and that the tax rate levied at the time of bond issuance does not exceed the amount shown on Attachment 1. Approved by Consent2012-07-18Item W-14132-2-2012
-Folsom-Cordova Unified School District (Measure M)2.50%10.20%10.20%That the bonded indebtedness limits be waived with the condition that each district’s total bonded indebtedness as a percent of assessed valuation, does not exceed the percent shown on Attachment 1 and that the tax rate levied at the time of bond issuance does not exceed the amount shown on Attachment 1.Withdrawn2012-03-07Item W-14 and
Item W-14 Attachment 1 and
Item W-14 Attachment 3
79-12-2011
16Folsom-Cordova Unified School District (Measure N)2.50%3.40%3.40%That the bonded indebtedness limits be waived with the condition that each district’s total bonded indebtedness as a percent of assessed valuation, does not exceed the percent shown on Attachment 1 and that the tax rate levied at the time of bond issuance does not exceed the amount shown on Attachment 1. Approved by Consent2012-03-07Item W-14 and
Item W-14 Attachment 1 and Item W-14 Attachment 4
80-12-2011
17Hawthorne Elementary School District1.25%1.55%1.55%The California Department of Education recommends that the bonded indebtedness limits be waived with the condition that each district’s total bonded indebtedness as a percent of assessed valuation, does not exceed the percent shown on Attachment 1 and that the tax rate levied at the time of bond issuance does not exceed the amount shown on Attachment 1. Approved by Consent2012-03-07Item W-14 and
Item W-14 Attachment 1
and Item W-14 Attachment 2
29-10-2011
18San Ysidro School District1.25%3.00%3.00%That the bonded indebtedness limits be waived with the condition that each district’s total bonded indebtedness as a percent of assessed valuation, does not exceed the percent shown on Attachment 1 and that the tax rate levied at the time of bond issuance does not exceed the amount shown on Attachment 1. Approved by Consent2012-03-07Item W-14 and
Item W-14 Attachment 1 and Item W-14 Attachment 5
62-12-2012
19Twin Rivers Unified School District1.25%2.50%2.50%That the board approve the district’s request with the following conditions: The waiver is limited to the sale of bonds approved by the voters in the June 2006 election and the bonded indebtedness will not exceed 2.5 percent of assessed valuation. In addition, at no time before issuance of any additional authorized bonds will the tax levy exceed $30 per $100,000 of taxable property. Approved by Consent2011-11-09Item W-11 and
Item W-11 Attachment 1
14-5-2011
20Moreland School District1.25%1.57%1.57%That the board approve the district’s request with the following conditions: The waiver is limited to the sale of bonds approved by the voters in the November 2010 election and the bonded indebtedness will not exceed 1.57 percent of assessed valuation. In addition, at no time before issuance of any additional authorized bonds will the tax levy exceed the $30 per $100,000 of taxable property authorized by the voters to secure the bonds.Approved by Consent2011-07-13Item WC-8 General and
Item WC-8 Attachment 1
5-4-2011
21El Monte Union High School District1.25%2.00%2.00%That the bonded indebtedness limit of El Monte Union High School District (UHSD) be waived provided it does not exceed 2.0 percent of the assessed valuation of taxable property of the district and that the waiver is limited to the sale of bonds approved by the voters in the November 2008 election. In addition, at no time is the tax levy to exceed the $30 per $100,000 of taxable property estimated by the voters to secure the bonds.Approved by Consent2011-03-09Item W-5 General and
Item W-5 Attachment 1
174-12-2012
22West Contra Costa Unified School District2.50%5.00%5.00%That the bonded indebtedness limit of West Contra Costa Unified School District be waived provided it does not exceed 5.0 percent of the assessed valuation of taxable property of the district and that the waiver is limited to the sale of bonds approved by the voters in the June 2010 election. In addition, at no time is the tax levy to exceed the $60 per $100,000 of taxable property authorized by the voters to secure the bonds. Approved by Consent2011-03-09Item W-6 General and
Item W-6 Attachment 1
200-12-2010
23Wiseburn Unified School District1.25%2.20%2.20%That the bonded indebtedness limit of Wiseburn Elementary School District be waived provided it does not exceed 2.20 percent of the assessed valuation of taxable property of the district and that the waiver is limited to the sale of bonds approved by the voters in the November 2010 election. In addition, at no time is the tax levy to exceed the amount authorized by the voters to secure the bonds.Approved by Consent2011-03-09Item WC-4 General and
Item WC-4 Attachment 1
46-12-2010
24Alvord Unified School District2.50%2.60%2.60%That the bonded indebtedness limit of Alvord Unified School District be waived provided it does not exceed 2.6 percent of the assessed valuation of taxable property of the district, and that the waiver is limited to the sale of bonds approved by the voters in the November 2007 election. In addition, at no time is the tax levy to exceed the amount authorized by the voters to secure the bonds.Approved by Consent2011-01-12Item W-12 General and
Item W-12 Attachment 1
67-10-2010
25Pittsburg Unified School District2.50%3.58%3.58%That the bonded indebtedness limit of Pittsburg Unified School District be waived provided it does not exceed 3.58 percent of the assessed valuation of taxable property of the district, and that the waiver is limited to the sale of bonds approved by the voters in the November 2006 and November 2010 elections. In addition, at no time is the tax levy to exceed the amount authorized by the voters to secure the bonds.Approved by Consent2011-01-12Item W-13 General and
Item W-13 Attachment 1
48-10-2010
26Stockton Unified School District2.50%3.28%3.28%That the bonded indebtedness limit of Stockton Unified School District be waived provided it does not exceed 3.28 percent of the assessed valuation of taxable property of the district, and that the waiver is limited to the sale of bonds approved by the voters in the February 2008 election. In addition, at no time is the tax levy to exceed the amount authorized by the voters to secure the bonds.Approved by Consent2011-01-12Item W-14 General and
Item W-14 Attachment 1
69-10-2010
27Piedmont Unified School District2.50%2.80%2.79%That the bonded indebtedness limit of Piedmont Unified School District be waived provided it does not exceed 2.79 percent of the assessed valuation of taxable property of the district and that the waiver is limited to the sale of bonds approved by the voters in the March 2006 election. In addition, at no time is the tax levy to exceed the amount authorized by the voters to secure the bonds.Approved by Consent2010-05-05Item WC-17 and
Item WC-17 Attachment 1
21-3-2010
28Delano Joint Union High School District1.25%2.91%2.25%That the bonded indebtedness of Delano Joint Union High School District not exceed 2.25 percent of the assessed valuation of taxable property of the district and that the waiver is limited to the sale of bonds approved by the voters in the November 2005 election. In addition, at no time is the tax levy to exceed the amount authorized by the voters to secure the bonds.Approved by Consent2009-09-16Item W-6 and
W-6 Attachment 1
1-9-2009
29Richland School District1.25%1.90%1.90%That the bonded indebtedness of Richland Union Elementary School District (UESD) not exceed 1.90 percent of the assessed valuation of taxable property of the district and that the waiver is limited to the sale of bonds approved by the voters in the November 2008 election. In addition, at no time is the tax levy to exceed the amount authorized by the voters to secure the bonds.Approved by Consent2009-07-08Item W-9
and Item W-9 Attachment 1
39-5-2009
30El Monte City School District1.25%1.72%1.73%That the bonded indebtedness of El Monte City Elementary School District not exceed 1.73 percent of the assessed valuation of taxable property of the district and that the waiver is limited to the sale of bonds approved by the voters in the November 2008 election. In addition, at no time is the tax levy to exceed the amount authorized by the voters to secure the bonds. Approved by Consent2009-05-06Item W-38 and
Item W-38 Attachment 1
9-5-2009
31Ross School District1.25%1.43%1.43%That the district’s bonded indebtedness does not exceed 1.43 percent of the assessed value of the district’s taxable property, the waiver is limited to the sale of bonds approved by the voters in the June 2008 election, and the tax levy does not exceed the amount authorized by the voters.Approved by Consent2009-05-06Item WC-78-3-2009
32West Contra Costa Unified School District2.50%3.50%3.13%That the district’s bonded indebtedness does not exceed 3.13 percent of the assessed valuation of taxable property of the district, the waiver is limited to the sale of bonds approved by the voters in the November 2005 election, and the tax levy does not exceed the amount authorized by the voters. Approved by 8-0 vote2009-03-11Item W-1577-2-2009
33Planada Elementary School District1.25%1.55%2.55%That the bonded indebtedness of Planada Elementary School District not exceed 2.55 percent of the assessed valuation of taxable property of the district and that the waiver is limited to the sale of bonds approved by the voters in the November 2008 election.Approved by Consent2008-11-05Item W-1441-12-2008
34Alisal Union School District1.25%1.68%1.68%That the bonded indebtedness of Alisal Union Elementary School District not exceed 1.68 percent of the assessed valuation of taxable property of the district and that the waiver is limited to the sale of bonds approved by the voters in the November 2006 election. In addition, at no time is the tax levy to exceed the amount authorized by the voters to secure the bonds.Approved by 8-0 vote.2008-11-05Item W-128-8-2008
35Lindsay Unified School District2.50%2.81%2.81%That the bonded indebtedness of Lindsay Unified School District not exceed 2.81 percent of the assessed valuation of taxable property of the district and that the waiver is limited to the sale of bonds approved by the voters in the February 2008 election. In addition, at no time is the tax levy to exceed the amount authorized by the voters to secure the bonds. Approved by 8-0 vote.2008-09-10Item W-139-8-2008
36El Monte City School District1.25%1.43%1.43%That the bonded indebtedness of El Monte City Elementary School District not exceed 1.43 percent of the assessed valuation of taxable property of the district and that the waiver is limited to the sale of bonds approved by the voters in the November 2004 election. In addition, at no time is the tax levy to exceed the amount authorized by the voters to secure the bonds.Approved by Consent2008-07-09Item W-1817-6-2008
37Edison School District1.25%1.50%1.50%That the bonded indebtedness of Edison Elementary School District not exceed 1.50 percent of the assessed valuation of taxable property of the district and that the waiver is limited to the sale of bonds approved by the voters in the May 2004 election.Approved by Consent2008-01-09Item W-235-4-2008
38Garvey Elementary School District1.25%1.46%1.46%That the bonded indebtedness of Garvey Elementary School District not exceed 1.46 percent of the assessed valuation of taxable property of the district and that the waiver is limited to the sale of bonds approved by the voters in the November 2004 election.Approved by Consent2007-07-11Item W-313-10-2007
39Bassett Unified School District2.50%2.84%2.84%That the bonded indebtedness of Bassett Unified School District not exceed 2.84 percent of the assessed valuation of taxable property of the district and that the waiver is limited to the sale of the bonds approved by the voters in the November 2006 election, the waiver is effective until July 2012.Approved by Consent2007-03-07Item W-448-4-2007
40Los Gatos Union School District1.25%1.26%1.26%Approve with the condition that the bonded indebtedness of Los Gatos School District not exceed 1.26 percent of the assessed valuation of taxable property of the district and that the waiver is limited to the sale of the bonds approved by the voters in the June 2001 election.Approved by Consent2007-01-10Item W-217-1-2007
41Golden Valley Unified School District2.50%4.71%4.71%Approve with the conditions that the: (1) bonded indebtedness of Golden Valley Unified School District not exceed 4.71 percent of the assessed valuation of taxable property of the district; (2) waiver is limited to the sale of the bonds approved by the voters in the June 1999 and 2006 elections; (3) bond repayment from property taxes not exceed the tax rate promised to the voters for the June 1999 and 2006 elections ($100 per $100,000 of assessed value and $60 per $100,000 of assessed value, respectively); and (4) waiver is effective until August 1, 2014.Approved by Consent2006-01-12Item W-24-9-2006
42Alisal Union School District1.25%1.40%1.40%That the condition that the bonded indebtedness of Alisal Union School District not exceed 1.40 percent of the assessed valuation of taxable property of the district and that the waiver is limited to the sale of the bonds approved by the voters in the November 1999 election.Approved by Consent2005-01-13Item W-11-11-2005
43Greenfield Union School District1.25%1.31%1.31%On the condition that the bonded indebtedness of Greenfield Union School District not exceed 1.31 percent of the assessed valuation of taxable property of the district and that the waiver is limited to the sale of the bonds approved by the voters in the March 1999 election.Approved by 10-0 vote2004-09-09Item W-32-11-2004
44Moreland School District1.25%1.76%1.76%On the condition that the bonded indebtedness of Moreland Elementary School District not exceed 1.76% of the assessed valuation of taxable property of the district and that the waiver is limited to the sale of the bonds approved by the voters in the March 2002 election.Approved by 9-0 vote2004-09-09Item W-212-7-2004
45San Ysidro School District1.25%2.15%2.15%On the condition that the bonded indebtedness of San Ysidro School District not exceed 2.15% of the assessed valuation of taxable property of the district and that the waiver is limited to the sale of the bonds approved by the voters in the March 1997 election.Approved by 10-0 vote2002-11-13Item W-319-7-2004
46West Contra Costa Unified School District2.50%3.00%3.00%On the condition that the bonded indebtedness of West Contra Costa Unified School District not exceed 3.0% of the assessed valuation of taxable property of the district and that the waiver is limited to the sale of the bonds approved by the voters in the June 1998, November 2000, and March 2002 elections.Approved unanimously.2009-09-16Item W-37-0-2002
47Union Elementary School District1.25%1.69%1.69%For sale of the bonds approved by the voters in the June 1999 election.Approved2001-11-07Item W-19-9-2001
48San Ysidro School District1.25%1.56%1.56%For sale of the bonds approved by the voters in the March 1997 election.Approved2001-03-07Item W-1019-1-2001
-Oxnard School District1.25%1.59%N/AN/AWithdrawnN/A
-Reef-Sunset Unified School District2.50%2.75%N/AN/AWithdrawnN/A

Table A-4 California School Construction & Finance History

See the complete California Policy Center report For the Kids: California Voters Must Become Wary of Borrowing Billions More from Wealthy Investors for Educational Construction (complete, printable PDF Version, 4 MB, 361 pages)

Links to all sections of this study readable online:
Executive Summary: “For the Kids” – Comprehensive Review of California School Bonds (1 of 9)
More Borrowing for California Educational Construction in 2016 (2 of 9)
Quantifying and Explaining California’s Educational Construction Debt (3 of 9)
How California School and College Districts Acquire and Manage Debt (4 of 9)
Capital Appreciation Bonds: Disturbing Repayment Terms (5 of 9)
Tricks of the Trade: Questionable Behavior with Bonds (6 of 9)
The System Is Skewed to Pass Bond Measures (7 of 9)
More Trouble with Bond Finance for Educational Construction (8 of 9)
Improving Oversight, Accountability, and Fiscal Responsibility (9 of 9)
You are in this section: Guide to all Tables and Appendices – Comprehensive Reference for Researchers


YearEvent
1879The California Constitution allows school districts to issue general obligation bonds subject to the approval of two–thirds of local voters.
1947The State Allocation Board (SAB) is created to provide loans for school facilities paid for by proceeds from state bond measures.
1978Proposition 13 embeds tax limitation language and a two-thirds voter threshold for tax increases in Article XIII of the California Constitution. It states that “the maximum amount of any ad valorem tax on real property shall not exceed one percent (1%) of the full cash value of such property” unless approved “by a two-thirds vote of the qualified electors of such district.” (Ad valorem means “according to value” in Latin and indicates a tax is imposed on the value of property - in other words, a property tax.) It also prohibits local governments from issuing General Obligation bonds. The state helps to fund school construction through grants.
1980California voters reject Proposition 4, which would have restored the authority of local governments to issue bonds if two-thirds of voters authorize it.
1982E.F. Hutton begins underwriting municipal Capital Appreciation Bonds, a year after the first corporate Capital Appreciation Bonds were issued.
1986In the first of two statewide ballot measures to whittle away at Proposition 13, Proposition 46 amends Proposition 13 and allows school and college districts (and other local governments) to issue general obligation bonds if approved by a two-thirds vote. Community colleges and K-12 school districts have to consider the challenging but not impossible hurdle of winning two-thirds voter approval to obtain authorization to borrow money for construction.
1993Senate Bill 872 gives K-12 school and community college districts authority to sell bonds at a public sale at face value, above face value (at a premium), or below face value (at a discount). It authorizes local governments to adopt "modern" additional and alternative methods to issue (sell) and refund (refinance) general obligation bonds secured by a general levy of ad valorem taxes, in particular zero-coupon bonds (Capital Appreciation Bonds). Supporters of the bill contend it would “let cities and counties stabilize their debt and get the best interest rates” and “likely result in improved debt structuring with correspondingly reduced costs to property taxpayers.” It would also allow local agencies to “access a wider pool of investors who are interested in a broader array of financing instruments, terms of maturity, and tender options.” No individual or organization opposes SB 872 or expresses formal concerns about it. It passes the State Senate 38-0 and passed the State Assembly 76-0, with the Senate then agreeing to minor amendments on a 37-0 vote. In 1994, school districts begin selling Capital Appreciation Bonds.
1996The California legislature and Governor Pete Wilson establish a “Class Size Reduction Program” to reduce the number of students per certificated teacher in various grades. School districts claim they lacked sufficient facilities to implement the requirement, and they blame Proposition 13 for the deficiency. In addition, some school districts “perceived sort of ad-hoc discretionary nature of decisions by the Board” in which certain school districts used connections and relationships with board members to gain an advantage in the disbursement process. Various interest groups began exploring ways to get more money for school construction.
1998The California legislature passed and Governor Pete Wilson signs Senate Bill 50, the Leroy F. Greene School Facilities Act of 1998. It establishes the current funding structure for school construction in California by incorporating both state and local funding sources for school construction. The state pays 50 percent of the cost of new school construction and 60 percent of the cost for school modernization, generally on the condition that local school districts provide matching funds. The State Allocation Board oversees and directs the Office of Public School Construction - a successor agency to the Office of Local Assistance - in the California Department of General Services to manage the grant program. The post-1998 State Allocation Board has been described as a “quasi-legislative, sometimes quasi-judicial body” with state legislators comprising a majority of the board but acting as an agency of the executive branch, as permitted in a special provision in the California Constitution.
1998Voters approve Proposition 1A, which authorizes the state to borrow $9.2 billion to support matching grants for school and college construction projects.
1999Senate Bill 1118, sponsored by the Office of the California State Treasurer, is enacted to “streamline the complex procedures governing school bond elections and issuance.” It establishes the current system for how bond measures are brought before voters and how bond proceeds are managed after approval. It outlines the purposes for which a school or college district can use bond proceeds. It authorizes the creation of various accounts to hold money for various purposes related to bond finance and construction. The legislative record does not indicate that any individual or organization opposed SB 1118 or expressed concerns about it. It passes the State Senate 40-0 but was opposed by some Republicans in the State Assembly, where it passed 50-20 with 10 members of the Assembly (including some Democrats) not voting. Bill analyses for committees about SB 1118 provided almost no context and incompletely listed the many new provisions that the bill would add to state law.
2000In March, 51% of California voters reject Proposition 26, which would have reduced the voter threshold for approval of General Obligation bond measures from two-thirds to a simple majority.
2000In November, 53% of California voters approve Proposition 39, which creates an exception to Proposition 13 by allowing school and college districts an option of proposing General Obligation bond measures that win approval with a 55% voter threshold instead of two-thirds.

In addition, the passage of Proposition 39 triggers enactment of Assembly Bill 1908, which imposes requirements on school and college districts that win approval to issue bonds under the criteria of Proposition 39:

Debt obligations resulting from the bond measure cannot exceed 2.5% of assessed value for unified districts and 1.25% for elementary and high school districts.
Tax levies resulting from the bond measure cannot exceed $60 per $100,000 of assessed value for unified districts and $30 per $100,000 of assessed value for elementary and high school districts.
An independent citizens bond oversight committee with appointed representatives from specific constituencies must be established to ensure proceeds of bond sales authorized by the bond measure are only spent on projects identified in the ballot statement provided to voters.
2002Voters approve Proposition 47, which authorizes the state to borrow $13.05 billion to support matching grants for school and college construction projects.
2004Voters approve Proposition 55, which authorizes the state to borrow $12.3 billion to support matching grants for school and college construction projects.
2006Voters approve Proposition 1D, which authorizes the state to borrow $10.4 billion to support matching grants for school and college construction projects.
2006Assembly Bill 1482 brings a bit more transparency to the process of bond sales by requiring public notice of the method of sale and other pertinent information when a district intends to issue bonds. It was introduced by Assemblyman Joe Canciamilla, and signed into law by Governor Arnold Schwarzenegger in 2006. It passed the State Senate 28-4 with eight members not voting and passed the State Assembly 68-5 with six members not voting. The revised version of the bill was supported by the California Association of County Treasurers and Tax Collectors.

As introduced, this bill required that all sales of bonds by school districts occur through a competitive bid process, with specific exceptions granted in limited circumstances that would allow for a negotiated sale, if approved by the county treasurer or the State Treasurer. Opposition was strong from groups heavily involved in promoting bond measures for school construction, including California’s Coalition for Adequate School Housing (C.A.S.H.), the California Public Securities Association, the Association of California School Administrators, the California Association of School Business Officials, and the Small School Districts' Association. The two largest school districts in the state - Los Angeles Unified School District and San Diego Unified School District - also opposed it.

The Assembly Education Committee heard the bill but did not take action. Assemblyman Canciamilla then submitted a request to the Joint Legislative Audit Committee asking for an audit to determine to what extent true cost of issuance differed between comparable school district general obligation bond issues sold through a competitive bid process versus negotiated sale. The Audit Committee did not approve the request.Ultimately, the bill directed the state to collect additional information to get better insight on whether competitive bidding (as opposed to negotiated sales) provides lower costs to the bond issuer.
2007Housing prices in some areas of the state begin a dramatic four-year drop, in some regions declining 50% from their zenith, thus reducing assessed property valuation and the tax and debt limits based on it.
2009Assembly Bill 1388 gives local governments such as counties and cities the same authority as school districts and college districts to sell bonds at a negotiated sale for a price at, above, or below par value, under criteria already in place for educational districts. It was amended in the Senate to repeal a provision from SB 872 (1993) that prohibited a bond issue from being structured so that the maximum annual debt service payment of principal and interest to amortize the bonds never exceeds the minimum annual debt service payment by more than 10 percent.

No elaboration or explanation was provided in bill analyses regarding the amendment to AB 1388. The bill text itself simply said "Section 53508.5 of the Government Code is repealed." Obviously someone knew that this restriction was hindering bond sales – especially those involving Capital Appreciation Bonds.

School and college districts were selling Capital Appreciation Bonds shortly after the passage of SB 872 in 1993, but AB 1388 apparently encouraged their use at a time when educational districts found themselves unable to sell bonds for construction projects. The bill was sponsored by the California Public Securities Association and supported by the California State Association of Counties and League of California Cities. The legislative record does not indicate that any individual or organization opposed the bill or expressed concerns about it. It passed the State Senate 39-0 and passed the State Assembly 77-0.
2010The California Association of County Treasurers and Tax Collectors supports Senate Bill 623, which would have prohibited a local agency from using a bond underwriter that also provides campaign services to pass a bond measure, and Senate Bill 1461, which would have prohibited a local agency from using a bond underwriter or a financial advisor or a legal advisor that also provides campaign services to pass a bond measure or conducts feasibility studies and polling for a potential campaign. Both of these bills failed to pass the California legislature after resistance from school and college districts and parties involved in bond finance and in campaigns to pass bond measures.
2010Momentum starts in the California legislature and grows in the next six years to place another statewide bond measure on the ballot to fund school and community college construction.
2012California political leaders find out that the Poway Unified School District sold about $100 million in non-redeemable Capital Appreciation Bonds in 2011 that will impose almost $1 billion in debt service over 40 years. Other educational districts that sold Capital Appreciation Bonds with unusually high ratios of debt service to principal are subsequently exposed.
2013Assembly Bill 182 attempts to reign in the worst excesses of Capital Appreciation Bonds while still allowing school and college districts to use them as a debt finance tool. Assemblywoman Joan Buchanan - chairwoman of the Assembly Education Committee - introduces the bill, and it was signed into law in whittled-down form by Governor Jerry Brown in 2013.

Table A-5 Arguments for Capital Appreciation Bonds

See the complete California Policy Center report For the Kids: California Voters Must Become Wary of Borrowing Billions More from Wealthy Investors for Educational Construction (complete, printable PDF Version, 4 MB, 361 pages)

See the complete California Policy Center report For the Kids: California Voters Must Become Wary of Borrowing Billions More from Wealthy Investors for Educational Construction (complete, printable PDF Version, 4 MB, 361 pages)

Links to all sections of this study readable online:
Executive Summary: “For the Kids” – Comprehensive Review of California School Bonds (1 of 9)
More Borrowing for California Educational Construction in 2016 (2 of 9)
Quantifying and Explaining California’s Educational Construction Debt (3 of 9)
How California School and College Districts Acquire and Manage Debt (4 of 9)
Capital Appreciation Bonds: Disturbing Repayment Terms (5 of 9)
Tricks of the Trade: Questionable Behavior with Bonds (6 of 9)
The System Is Skewed to Pass Bond Measures (7 of 9)
More Trouble with Bond Finance for Educational Construction (8 of 9)
Improving Oversight, Accountability, and Fiscal Responsibility (9 of 9)
You are in this section: Guide to all Tables and Appendices – Comprehensive Reference for Researchers


Table A-5 is meant to provide a resource for policymakers and the public to organize arguments about Capital Appreciation Bonds for issue briefs, letters, speeches, public comments, etc

Table A-5
Arguments for Capital Appreciation Bonds
ArgumentRebuttal
URGENCY
School facilities are desperately needed now: schools are overcrowded, deteriorating, outdated, and unsafe. These claims are rarely quantified. There needs to be an objective way to determine that need overwhelms the risk of massive tax and debt burdens for future generations.
Despite 14 years of Proposition 39, educational districts continue to increase the number of bond measures on the ballot and the total amount authorized to borrow. It seems that spending between $100-$200 billion on construction since 2000 has only increased the need for more.
It’s possible that educational districts are preparing for a population boom that may never occur. Average Daily Attendance for California K-12 school districts has dropped from 5,927,951 in 2003-04 to 5,631,709 in 2008-09 to 5,501,603 in 2013-14. Actual California population growth is lagging behind projections made in the 1990s.
When the bond measure was before voters for consideration, the educational district made promises to residents about what was going to be built and what the tax rate would be. Those promises must be fulfilled. Voters want the projects now.Anecdotally, it appears that voters aren’t necessarily keen on immediately proceeding with construction projects listed in bond measure ballot statements if it requires borrowing money under outlandish terms via sales of Capital Appreciation Bonds or other unconventional methods of debt finance. Taxpayers would rather give their money to their local educational district than to bond investors.
Who actually applies the most pressure on the educational district to proceed with borrowing money? Are educational districts selling Capital Appreciation Bonds or other unconventional methods of debt finance because parents and teachers are demanding it? Or is the political pressure coming from the various interests that contributed to the bond measure campaign and now want to reap the rewards of contracts for this construction program?
Interest rates are low. This is a good time to borrow money, perhaps with a mix of Current Interest Bonds and Capital Appreciation Bonds. Rates may not be so favorable when assessed valuation of property in the district goes up.Interest rates are low and provide an advantage for educational districts issuing Current Interest Bonds, but the outrageous nature of Capital Appreciation Bond negates the benefit of lower rates. The ratio of debt service to principal should not exceed 3 or 4 (at the most) for an individual bond issue.
Educational districts will jeopardize the quality of education for students if they don’t get funding for construction now.Is it true that new and modernized facilities significantly improve academic performance and life preparation for students? Is the impact of bond measures on test scores proportionate to the amount of tax revenue spent on debt service for those bond measures? Or are bond measures simply an easy method to get more money flowing into the district?
Ongoing construction programs would have to stop if funding isn’t obtained now, causing inconvenience, stopping momentum, and risking a higher cost of construction in the future.A realistic projection for assessed valuation of property would allow for better planning of construction-related contracts. Future generations should not have to pay for the risky borrowing practices of this generation’s leaders.
STINGY STATE LAWS COMPEL USE
Educational districts have to sell Capital Appreciation Bonds or other unconventional methods of debt finance because of unreasonably low tax and debt limits established in state law.The California legislature established these limits in state law in 2000 as part of a strategy to boost voter support for Proposition 39, a statewide measure on the November 2000 ballot to modify Proposition 46 enacted in 1986 - an initiative that modified the high-profile Proposition 13 enacted in 1978. Without limits and other additional taxpayer protections, Proposition 39 might have failed, as Proposition 26 failed in March 2000.
Educational districts have to sell Capital Appreciation Bonds or other unconventional methods of debt finance because assessed valuation of property in the districts unexpectedly declined, thus forcing districts to confront tax and debt limits.It’s important to obtain an independent projection of assessed property valuation that does not extend a current exceptional rate of growth for 40 years.
THESE BOND FINANCE DEALS ARE MISUNDERSTOOD
It’s wrong to consider Capital Appreciation Bonds in isolation. They are usually just a piece of a package of bond issues. When considered in conjunction with other bond issues, the debt to principal ratio is usually reasonable.This doesn’t eliminate the reality that bonds are issued that will need to be paid back decades later with compounded interest. Why include them at all?
Focusing on long-term debt service is misleading. Just because there is a high number for aggregate accreted interest in 40 years doesn’t necessary mean that amount will ever be paid. Many Capital Appreciation Bonds are “callable” and can be redeemed (and are being redeemed) with a new issue of refunding bonds that have lower rates and can be issued as traditional Current Interest Bonds. Because of the consistent increasing value of property in California over several generations, an amount that seems high to taxpayers now will not be so daunting decades from now. Routine inflation will reduce the “real” cost of paying back Capital Appreciation Bonds decades from now. This is public money. The decision to borrow money via Capital Appreciation Bonds assumes that assessed valuation of property and the rate of inflation will increase substantially over decades. And some districts (such as Poway Unified School District) have sold Capital Appreciation Bonds that are not callable.
Contrary to claims made after the fact, plenty of information is provided to educational district administrators and elected board members about bond sales. There isn’t an excuse for not understanding the proposal.Information is not presented in a standardized way that is easy to understand. Most school board members do not have a background in accounting, finance, or bonds. In addition, school board members may be hesitant to publicly acknowledge their lack of understanding, especially if everyone else in the room is nodding heads during the bond consultant presentation.
Critics have self-interested motivations to criticize. Traditional and consistent ideological detractors of government schools want to take advantage of yet another opportunity to undermine the system. Cynical politicians want to exploit bad news in order to build a reputation. News media wants to improve reader and viewer ratings through sensational and misleading coverage.Most people would acknowledge that criticism of at least a few bond issues by California educational districts has merit. In addition, there are self-interested motivations for people denying that Capital Appreciation Bonds and other unconventional bond financing are unusual or unwise. Community college and K-12 school district elected officials wanted to stay in office. District administrators wanted to keep their jobs. And of course professionals in the financial industry wanted to continue making a living from the transaction fees generated by bond sales.
Assembly Bill 182 (2013) wasn’t really needed, but it is now law and there are no valid arguments to impose more restrictions on this valuable tool for educational districts.Educational districts are still selling Capital Appreciation Bonds (and also Bond Anticipation Notes) under the assumption that assessed valuation will continue to rise for decades. The bond financing industry will continue to use these schemes to bloat borrowing and collect more transaction fees.
Table A-5
Arguments for Capital Appreciation Bonds
ArgumentRebuttal
URGENCY
School facilities are desperately needed now: schools are overcrowded, deteriorating, outdated, and unsafe. These claims are rarely quantified. There needs to be an objective way to determine that need overwhelms the risk of massive tax and debt burdens for future generations.
Despite 14 years of Proposition 39, educational districts continue to increase the number of bond measures on the ballot and the total amount authorized to borrow. It seems that spending between $100-$200 billion on construction since 2000 has only increased the need for more.
It’s possible that educational districts are preparing for a population boom that may never occur. Average Daily Attendance for California K-12 school districts has dropped from 5,927,951 in 2003-04 to 5,631,709 in 2008-09 to 5,501,603 in 2013-14. Actual California population growth is lagging behind projections made in the 1990s.
When the bond measure was before voters for consideration, the educational district made promises to residents about what was going to be built and what the tax rate would be. Those promises must be fulfilled. Voters want the projects now.Anecdotally, it appears that voters aren’t necessarily keen on immediately proceeding with construction projects listed in bond measure ballot statements if it requires borrowing money under outlandish terms via sales of Capital Appreciation Bonds or other unconventional methods of debt finance. Taxpayers would rather give their money to their local educational district than to bond investors.
Who actually applies the most pressure on the educational district to proceed with borrowing money? Are educational districts selling Capital Appreciation Bonds or other unconventional methods of debt finance because parents and teachers are demanding it? Or is the political pressure coming from the various interests that contributed to the bond measure campaign and now want to reap the rewards of contracts for this construction program?
Interest rates are low. This is a good time to borrow money, perhaps with a mix of Current Interest Bonds and Capital Appreciation Bonds. Rates may not be so favorable when assessed valuation of property in the district goes up.Interest rates are low and provide an advantage for educational districts issuing Current Interest Bonds, but the outrageous nature of Capital Appreciation Bond negates the benefit of lower rates. The ratio of debt service to principal should not exceed 3 or 4 (at the most) for an individual bond issue.
Educational districts will jeopardize the quality of education for students if they don’t get funding for construction now.Is it true that new and modernized facilities significantly improve academic performance and life preparation for students? Is the impact of bond measures on test scores proportionate to the amount of tax revenue spent on debt service for those bond measures? Or are bond measures simply an easy method to get more money flowing into the district?
Ongoing construction programs would have to stop if funding isn’t obtained now, causing inconvenience, stopping momentum, and risking a higher cost of construction in the future.A realistic projection for assessed valuation of property would allow for better planning of construction-related contracts. Future generations should not have to pay for the risky borrowing practices of this generation’s leaders.
STINGY STATE LAWS COMPEL USE
Educational districts have to sell Capital Appreciation Bonds or other unconventional methods of debt finance because of unreasonably low tax and debt limits established in state law.The California legislature established these limits in state law in 2000 as part of a strategy to boost voter support for Proposition 39, a statewide measure on the November 2000 ballot to modify Proposition 46 enacted in 1986 - an initiative that modified the high-profile Proposition 13 enacted in 1978. Without limits and other additional taxpayer protections, Proposition 39 might have failed, as Proposition 26 failed in March 2000.
Educational districts have to sell Capital Appreciation Bonds or other unconventional methods of debt finance because assessed valuation of property in the districts unexpectedly declined, thus forcing districts to confront tax and debt limits.It’s important to obtain an independent projection of assessed property valuation that does not extend a current exceptional rate of growth for 40 years.
THESE BOND FINANCE DEALS ARE MISUNDERSTOOD
It’s wrong to consider Capital Appreciation Bonds in isolation. They are usually just a piece of a package of bond issues. When considered in conjunction with other bond issues, the debt to principal ratio is usually reasonable.This doesn’t eliminate the reality that bonds are issued that will need to be paid back decades later with compounded interest. Why include them at all?
Focusing on long-term debt service is misleading. Just because there is a high number for aggregate accreted interest in 40 years doesn’t necessary mean that amount will ever be paid. Many Capital Appreciation Bonds are “callable” and can be redeemed (and are being redeemed) with a new issue of refunding bonds that have lower rates and can be issued as traditional Current Interest Bonds. Because of the consistent increasing value of property in California over several generations, an amount that seems high to taxpayers now will not be so daunting decades from now. Routine inflation will reduce the “real” cost of paying back Capital Appreciation Bonds decades from now. This is public money. The decision to borrow money via Capital Appreciation Bonds assumes that assessed valuation of property and the rate of inflation will increase substantially over decades. And some districts (such as Poway Unified School District) have sold Capital Appreciation Bonds that are not callable.
Contrary to claims made after the fact, plenty of information is provided to educational district administrators and elected board members about bond sales. There isn’t an excuse for not understanding the proposal.Information is not presented in a standardized way that is easy to understand. Most school board members do not have a background in accounting, finance, or bonds. In addition, school board members may be hesitant to publicly acknowledge their lack of understanding, especially if everyone else in the room is nodding heads during the bond consultant presentation.
Critics have self-interested motivations to criticize. Traditional and consistent ideological detractors of government schools want to take advantage of yet another opportunity to undermine the system. Cynical politicians want to exploit bad news in order to build a reputation. News media wants to improve reader and viewer ratings through sensational and misleading coverage.Most people would acknowledge that criticism of at least a few bond issues by California educational districts has merit. In addition, there are self-interested motivations for people denying that Capital Appreciation Bonds and other unconventional bond financing are unusual or unwise. Community college and K-12 school district elected officials wanted to stay in office. District administrators wanted to keep their jobs. And of course professionals in the financial industry wanted to continue making a living from the transaction fees generated by bond sales.
Assembly Bill 182 (2013) wasn’t really needed, but it is now law and there are no valid arguments to impose more restrictions on this valuable tool for educational districts.Educational districts are still selling Capital Appreciation Bonds (and also Bond Anticipation Notes) under the assumption that assessed valuation will continue to rise for decades. The bond financing industry will continue to use these schemes to bloat borrowing and collect more transaction fees.

Table A-6 Arguments Against Capital Appreciation Bonds

See the complete California Policy Center report For the Kids: California Voters Must Become Wary of Borrowing Billions More from Wealthy Investors for Educational Construction (complete, printable PDF Version, 4 MB, 361 pages)

Links to all sections of this study readable online:
Executive Summary: “For the Kids” – Comprehensive Review of California School Bonds (1 of 9)
More Borrowing for California Educational Construction in 2016 (2 of 9)
Quantifying and Explaining California’s Educational Construction Debt (3 of 9)
How California School and College Districts Acquire and Manage Debt (4 of 9)
Capital Appreciation Bonds: Disturbing Repayment Terms (5 of 9)
Tricks of the Trade: Questionable Behavior with Bonds (6 of 9)
The System Is Skewed to Pass Bond Measures (7 of 9)
More Trouble with Bond Finance for Educational Construction (8 of 9)
Improving Oversight, Accountability, and Fiscal Responsibility (9 of 9)
You are in this section: Guide to all Tables and Appendices – Comprehensive Reference for Researchers


Table A-6 is meant to provide a resource for policymakers and the public to organize arguments about Capital Appreciation Bonds for issue briefs, letters, speeches, public comments, etc.

Table A-6
Arguments Against Capital Appreciation Bonds
ArgumentRebuttal
THE BOND FINANCE INDUSTRY IS NOT TRUSTWORTHY
Promoters of bond deals are motivated by transaction fees and tend to advance funding proposals in their own interest but harmful to the public interest.Borrowing money for long-term investment is a well-accepted practice in the United States and a fundamental part of our economic system.
Most people involved with bond finance are ethical and enjoy being in a professional financial vocation that helps students and society.
The few bond finance professionals who are alleged to advise decisions not in the interest of their clients earn a bad reputation and can’t stay in the business.
Companies and individuals who work in the business of assisting with capital transfer and earn fees on those transactions are an easy target to malign, but they are essential to a prosperous economy.
Proving their lack of responsibility to the public, the California Public Securities Association in 2009 sponsored Assembly Bill 1388, a self-interested bill that repealed a law requiring that the maximum annual payment of principal and interest on a bond issue cannot exceed the minimum annual payment of principal and interest by more than 10 percent.Actually, this bill helped educational districts by allowing them greater opportunity to borrow money despite reaching state tax and debt limits or despite reaching tax and debt limits indicated in the bond measure.
Excessive competition in the market to win contracts from educational districts for bond finance services has compelled some companies to overstate benefits and understate risks of unconventional bond finance.Increased competition in municipal bond finance gives educational districts the opportunity to compare numerous potential contractors and chose the one that best suits its needs. Districts concerned about debt accumulated through Capital Appreciation Bonds can award contracts to professional service firms that adopt a conservative approach to bond finance.
Increased competition in municipal bond finance has encouraged the development and promotion of more creative and effective options to help educational districts in bond finance, such as Reauthorization Bonds and Ed-Tech Bonds.
Corruption is rampant in the municipal bond finance business, as proven by apparent “pay to play” practices between educational districts and bond underwriters.Many parties in the bond financial industry resent how their reputation is tainted by a few companies that make substantial contributions to bond measure campaigns and/or consult for those campaigns and then obtain no-bid contracts and/or higher transaction fees. They have asked the Municipal Securities Rulemaking Board (MSRB) to restrict parties in the financial services industry from contributing to bond campaigns. They have also collectively adopted a voluntary internal moratorium on the practice.
Some county treasurers, for example in Los Angeles County, have ended business with securities brokers that contribute to campaigns for bond measures. The problem is being addressed.
The Municipal Securities Rulemaking Board already has a regulation requiring brokers, dealers, and municipal securities deals to disclose their campaign contributions to allow public scrutiny of such political activity.
Political campaigns are expensive. Parents and students are unlikely to be major sources of contributions to a campaign to pass a bond measure. There is nothing wrong with companies contributing to a campaign and expressing their First Amendment constitutional right to free speech.
No one has ever proven this practice actually happens.
Claims about this practice come from firms that want to stifle competition from other firms that work harder for educational districts.
Educational districts are no different than victims of loan sharks, payday lenders, mortgage scammers, and other unsavory usurers.Comparisons of professional, certified financial service providers to criminals is unjust. Boards elected by the people consider and vote on proposals for bond issues at public meetings regulated by open meetings laws. The process is highly regulated by the US Securities and Exchange Commission and the Municipal Securities Rulemaking Board. The news media has the opportunity to follow and report on the issue to the public.
LACK OF PUBLIC KNOWLEDGE COMPROMISES ACCOUNTABILITY AND ALLOWS TAXPAYERS TO BE EXPLOITED
Few Californians have ever heard of Capital Appreciation Bonds. An even tinier percentage of Californians could adequately explain them. As a result, the public is currently incapable of evaluating this method of bond finance and petitioning their school or college board members about it.Government does many things that the general public does not know about or understand. Accountability is inherent in the regular elections for governing boards. Candidates run for and get elected to public office based on their individual expertise and experience. Voters can subsequently choose to end the public service of those individuals based on their performance.
Educational districts have professional in-house superintendents and often have other administrators overseeing bond deals, including business officers assigned to work on bond finance.
Educational districts hire outside experts to maximize the effectiveness of their bond measures and best serve the public. Contracts for these experts include terms and conditions that provide protection for the district and accountability to the consultant.
State and county elected and appointed officials and their agencies serve as checks and balances for educational district decisions. In particular, county treasurers can and do play a role in evaluating questionable bond financing.
In the few cases in which excessive or inappropriate bond deals may have occurred, (for example, the 2011 bond issue at the Poway USD), elected county treasurers and the news media did identify the failure and publicized it. Assembly Bill 182 (now in law) is the product of research and reporting by elected government officials and the news media. The system of checks and balances worked.
Voters are not informed in election ballot material that some of the money they authorize to borrow via “general obligation bonds” ends up borrowed via Capital Appreciation Bonds and other unconventional borrowing practices.Actually, some ballot statements are now indicating that “no capital appreciation bonds shall be issued.” Inclusion of language specifying the type of General Obligation bonds to be sold should be a decision of the district board and not mandated by the state.
It’s unfair for educational districts to be forced to speculate to voters on how it might borrow money. Financing decisions are made by elected board members based on economic conditions that cannot be known at the time the bond measure is considered.
State law already imposes numerous burdensome and costly requirements on educational districts to ensure voters have a reasonable degree of information for consideration of a bond measure.
Ballot statements already are so long that few people would see any authorizations for the district to Capital Appreciation Bonds and other unconventional borrowing practices if they were included.
COST, TAXES, AND DEBT ARE FOOLHARDY
It’s foolish to borrow money and then wait for decades to start paying off the principal and accreted interest.What’s foolish are the tax and debt limitations established by state voters as Proposition 13 in 1978 and state laws (Assembly Bill 1908) enacted in conjunction with putting Proposition 39 on the statewide ballot in 2000. If those limits were set at a higher threshold or eliminated altogether, Capital Appreciation Bonds and other unconventional financing schemes would become rare.
Property taxes may increase substantially many years in the future when the district begins paying off the debt.It’s unlikely the taxes will end up being particularly noteworthy or burdensome after decades of increased property value and inflation.
The amount to be paid back under Capital Appreciation Bonds is too high.Just because there is a high number for aggregate accreted interest in 40 years doesn’t necessary mean that amount will ever be paid. Many Capital Appreciation Bonds are “callable” and can be redeemed (and are being redeemed) with a new issue of refunding bonds that have lower rates and can be issued as traditional Current Interest Bonds.
Because of the consistent increasing value of property in California over several generations, an amount that seems high to taxpayers now will not be so daunting decades from now.
Routine inflation will reduce the “real” cost of paying back Capital Appreciation Bonds decades from now.
Focusing on the amount of debt service generated by Capital Appreciation Bonds ignores the intangible benefits of high-quality schools with environments conducive to teaching and learning
Capital Appreciation Bonds are used too often.For most educational districts, Capital Appreciation Bonds comprise a small percentage of the total amount of bonds issued. Capital Appreciation Bonds are a legitimate and beneficial option for educational districts that want to obtain a bit more of the money that voters authorized to borrow for needed school construction.
Capital Appreciation Bonds allow educational districts to fund contracts with local contractors and vendors, thus encouraging economic growth and job creation in the community. Capital Appreciation Bonds pay for themselves by generating increased economic activity.
There are no legal or commonly accepted definitions of “too often.” The authority to issue Capital Appreciation Bonds is granted to the educational district’s board of trustees, who are elected by the people. Each educational district has its own comfort for Capital Appreciation Bonds, and this comfort usually reflected in the decision of the board. Trust our representative democracy.
Capital Appreciation Bonds assume an ability to pay based on projections of increased value of taxable property that may extend as many as 40 years into the future.Granted, no one can perfectly predict the future. But California remains a desirable place to live because of its climate, natural beauty, economic prosperity, and culture. It’s reasonable to assume that people with ability and ambition will always come to California, a beacon for the world, and thus increase demand for housing.
The best way to ensure increased property values in the future is to build a foundation of high-quality schools with environments conducive to teaching and learning. Funding for new construction - sometimes obtained through Capital Appreciation Bonds - allow these schools to be provided and fulfills the expectation for increased property values.
Without any sort of representation, future generations of taxpayers (children and grandchildren) are bound to repaying debts accumulated by unconventional borrowing practices of current generations.Schools built using Capital Appreciation Bonds are for the benefit of our children and grandchildren. Shouldn’t they contribute to paying for the system that helped to make them successful?
This is an unfortunate distortion of the concept of “taxation without representation” that applies to people who are deprived of their right for full participation in their current governance. Many of the important and transformational social programs in the United States and in California were adopted before the people now benefiting and paying for them were even born. Generations work together cooperatively to advance progress.

Tables and Appendices of "For the Kids: California Voters Must Become Wary…"

See the complete California Policy Center report For the Kids: California Voters Must Become Wary of Borrowing Billions More from Wealthy Investors for Educational Construction (complete, printable PDF Version, 4 MB, 361 pages)

Links to all sections of this study readable online:
Executive Summary: “For the Kids” – Comprehensive Review of California School Bonds (1 of 9)
More Borrowing for California Educational Construction in 2016 (2 of 9)
Quantifying and Explaining California’s Educational Construction Debt (3 of 9)
How California School and College Districts Acquire and Manage Debt (4 of 9)
Capital Appreciation Bonds: Disturbing Repayment Terms (5 of 9)
Tricks of the Trade: Questionable Behavior with Bonds (6 of 9)
The System Is Skewed to Pass Bond Measures (7 of 9)
More Trouble with Bond Finance for Educational Construction (8 of 9)
Improving Oversight, Accountability, and Fiscal Responsibility (9 of 9)
You are in this section: Guide to all Tables and Appendices – Comprehensive Reference for Researchers


Tables A1 to A6

Links to Tables A-1 to A-6

Appendices A to L

Background

The Public Policy Institute of California report Fiscal Effects of Voter Approval Requirements on Local Governments pointed out in 2003 that “Although ballot measures are playing a growing role in the functioning of local governments in California, there is no single, comprehensive source of information on them.” Researchers for that report obtained their data from the California Association of Realtors, the California Debt and Investment Advisory Commission, California’s Coalition for Adequate School Housing (C.A.S.H.), local newspaper stories and websites, and county elections offices.

The availability of data has improved somewhat, but it still remains a time-consuming challenge to collect and synthesize it, identify and correct inconsistencies in the data, and present it in a useful format. There doesn’t seem to be any evidence that compilation of debt service data for California local school and college districts had ever been done, so that information had to be collected and compiled from Official Statements for bond issues posted on EMMA.

Sources for Data in the Appendices: Name of School District, Election Date, Amount Authorized, Letter Designation on Ballot, Percentage Threshold for Approval, Number of Yes Votes, Number of Total Votes

To ascertain data in these seven categories, the following sources were converted into spreadsheets, data was cross-referenced, and discrepancies were reconciled. Close results were cross-referenced with Election Results pages of county election office websites.

California Secretary of State – County, City, School District & Ballot Measure Election Results at http://www.sos.ca.gov/elections/county-city-school-district-ballot-measure-election-results/

California Debt and Investment Advisory Commission (CDIAC), affiliated with the California State Treasurer – State and Local Bond and Tax Ballot Measures at http://www.treasurer.ca.gov/cdiac/publications/alphabetical.asp#s

California’s Coalition for Adequate School Housing (C.A.S.H) – School District Bond Elections – Local GO Bond Election Summary (1986-2014) at http://www.cashnet.org/resource-material/bondelec.html

California Local Government Finance Almanac, produced by Michael Coleman – Summary Reports and Analyses of Elections – California Local Ballot Measures at http://www.californiacityfinance.com

Ballotpedia, an Interactive Almanac of American Politics – School Bond Elections in California at http://ballotpedia.org/School_bond_elections_in_California

Sources for Data in the Appendices: Amount of Debt Service

Official Statements posted on the Electronic Municipal Market Access (EMMA)® database of the Municipal Securities Rulemaking Board (MSRB), a self-regulatory organization overseen by the U.S. Securities and Exchange Commission, at http://emma.msrb.org

Links to Appendices A Through L

Appendix A – All California Educational Bond Measures Pass and Fail – 2001-2014 Ranked by Percentage of Voter Approval

Appendix B – All California Educational Bond Measures Approved by Voters – 2001-2014 Ranked by Amount Authorized to Borrow

Appendix C – All California Educational Bond Measures Rejected 2001-2014 – Ranked by Amount NOT Authorized to Borrow

Appendix D – All California Educational Bond Measures Approved With a Two-Thirds Threshold Since November 2000 Enactment of Proposition 39 – Listed By Election Year

Appendix E – All California Educational Bond Measures 55 Percent – 2001-2014

Appendix F – All California Educational Bond Measures Repurposed or Reauthorized Since November 2000 Enactment of Proposition 39 – Listed by Election Year

Appendix G – All California Educational Bond Measures Approved by Voters with 55 Percent Threshold Since November 2000 – Results if Prop 39 Had Not Been Law

Appendix H – All California Educational Bond Measures Approved by Voters Under 55 Percent Threshold Since November 2000 Enactment of Proposition 39 – Failures Under 2:3 Threshold

Appendix I – All California Educational Bond Measures Approved by Voters – 2001-2014 Ranked by Amount of Debt Service

Appendix J – All Educational Districts in Which Voters Authorized Borrowing Via Bond Sales Since Proposition 39 – Ratio of Current Debt Service to Amount Authorized

Appendix K – All Educational Districts in Which Voters Authorized Borrowing Via Bond Sales Since November 2000 Enactment of Prop 39 – Ratio of Current Debt Service to Total Yes Votes

Appendix L – All Educational Districts in Which Voters Authorized Borrowing Via Bond Sales Since November 2000 Enactment of Prop 39 – Ranked by Amount Authorized Per Yes Vote

###

California's Government Union Quandary – Support More Taxes Yet Claim Budget "Surpluses"

Californians know them well. They are the Proposition 13 “blamers.” They blame Proposition 13 for everything they see or even imagine as negative in the state of California.

Some years ago, a newspaper editorial asked if Proposition 13 was responsible for a measles epidemic saying it may have limited the availability of vaccine. A national publication suggested that O.J. Simpson’s acquittal of murder charges was due to the tax limiting measure because prosecuting attorneys may not have been paid enough.

Most recently, a column by a West Coast writer published in the New York Times claimed that one of the reasons that Los Angeles is becoming a “third world” city is reduced funding for education caused by the tax revolt that passed Proposition 13. As is typical, the writer ignores the fact that California now spends 30 percent more per pupil, in inflation adjusted dollars, than the amount spent just prior to the passage of Proposition 13 — a time when both liberals and conservatives agree that California schools were among the best in the nation.

Most Californians know they are overtaxed and that’s bad news for the blamers. And the latest news about California tax revenue is even worse for 13’s detractors. According to a review by the California Taxpayers Association of counties that have so far released their assessment rolls — showing the value of property as of January 1, 2015 — there is dramatic increase in values and that’s driving property tax revenue up rapidly. For example, Santa Clara County has seen an increase of 8.67 percent over the previous year.

Rapidly rising property tax revenue is not only making the Prop 13 blamers look foolish, it is adding compelling evidence to the argument that California should be considering tax reductions, not increases. News reports abound in the Golden State about the California economic recovery and a $6 billion dollar budget surplus. The two big sources for state revenue — sales taxes and income taxes — have preceded property taxes in seeing big increases. The latest news from county assessors simply completes the tax revenue trifecta.

Here’s the rub. Interests groups that want tax hikes — mostly public sector labor organizations — are running out of time to make a decision on which tax hikes to pursue for the November 2016 ballot. (To qualify an initiative takes about a year of lead time). We at HJTA hear that there are disagreements within those interests as to which tax hikes to pursue. Californians will almost certainly see a tobacco tax increase on the ballot as well as a possible tax on oil production. But what about extending the Proposition 30 tax hikes on sales and income? The flush status of the state budget renders those proposals questionable.

More importantly, the significant increase in property tax revenues raises serious questions about the viability of a so-called “split roll” proposal which would deprive business property of Prop 13 protections. Split roll proposals have been defeated before in California and, of all the tax hikes being considered by the tax-and-spend lobby, hitting commercial property with a $9 billion tax hike is going to be next to impossible to justify to California voters.

The next few months will be very revealing as to the tax raisers strategies. But whatever tax or taxes they decide to target, those paying the bill should be prepared to push back with the argument that California does not need any more tax hikes at all. And we should push back very hard.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

Successful Charter School Denied Renewal Petition

Albert Einstein Academy for Letters, Arts and Science, Huntington Beach (AEALAS) opened its doors In August, 2014 to 164 K-5 students. [1] The current enrollment is 264. For reasons of expediency, its founding charter was authorized by the Agua Dulce Unified School District, where several other schools are located.

Since its first days, the small elementary school has proven its mettle. The young scholars have already demonstrated impressive academic excellence. The projected enrollment for the 2015/2016 academic year is 375 students with more than 214 students on the wait list. An Honors Program, already in place, will be expanded to include 3rd-6th grade students in the fall.

The original charter was granted for one year. When the school submitted a new petition with local authorization to the Huntington Beach School District, it was denied. The Board felt the petitioners presented an “unsound educational program” and were “demonstrably unlikely to successfully implement the program”.

The AEALAS network operates 4 elementary and secondary schools and 2 learning centers. A seventh campus in Beverly Hills is scheduled to open in August. Each institution has implemented substantively the same program. Each school has a proven track record of success.

The founding campus, AEALAS Santa Clarita is in its fifth year of operation. The school was recently ranked Number 2 by Newsweek among the top high schools in the nation. [2] The school also garnered a Bronze rating from US News and World Report. It has a 908 API and 665 names on its 2015-2016 waiting list.

The AEALAS elementary school in Santa Clarita reported 2013-2014 CST science test scores for the 5th grade that were the highest in the Santa Clarita Valley, among the top scoring school districts in the state. The school’s math team was awarded a Bronze Medal in statewide math competition in its first year of participation.

95% of the students in the Westlake (Ohio) school passed on statewide testing in social studies, math and reading and 90% in science. The school was the first in Ohio to offer Portuguese as a world language course. [3] Apparently, however, reality never matters in politics, and certainly not to unions. Power and control do.

Union influence was undoubtedly a factor in the denial of the petition by the HBCSD. Four of the five Board members are teachers, professors or school administrators. Such a group would be expected to share a certain bias, one that is unfavorable of a petition to operate a charter school in its bailiwick.

The school attempted to address the concerns that the Board raised. This was dismissed without explanation. A revised petition has been prepared and submitted to the Orange County Board of Education, to be considered at their June meeting. We can only hope this more objective Board will give the petition a vote of approval. Stay tuned for the next installment.

*   *   *

About the Author: R. Claire Friend, MD, is the Assistant Professor, Department of Psychiatry and Human Behavior, UC Irvine Medical Center, and the editor of the UC Irvine Quarterly Journal of Psychiatry. She is a retired psychiatrist and frequent commentator on the psychological dimensions of education and social welfare policies.

 

FOOTNOTES

1.  http://ealas.org/ehb/

2.  https://charterschoolcapital.org/albert-einstein-academy-makes-top-10-high-schools-list/

3.  Other languages offered by AEALAS include Spanish, Hebrew, Arabic, Mandarin, American Sign Language and Latin.

A Challenge to Moorlach and Glazer – Build A Radical Center

On March 22, 2015, John Moorlach was officially sworn in as state senator for California’s 37th District. On May 28, 2015, Steve Glazer took the oath of office as state senator for the 7th District. Moorlach is a Republican serving mostly conservative constituents in Orange County. Steve Glazer is a Democrat serving mostly liberal constituents in Contra Costa County.

Different parties. Different constituents. You wouldn’t think these two men had much in common. But you’d be wrong.

John Moorlach and Steve Glazer have both distinguished themselves as politicians and candidates by doing something that transcends their political party identity or conventional ideologies. They challenged the agenda of government unions. As a consequence, both of them faced opponents who were members of their own party who accepted money and endorsements from government unions.

It wasn’t easy to challenge government unions. Using taxpayers money that is automatically deducted from government employee paychecks, government unions in California collect and spend over $1.0 billion per year. These unions spent heavily to attack Moorlach and Glazer, accusing – among other things – Moorlach of being soft on child molesters, and accusing – among other things – Glazer of being a puppet of “big tobacco.”

This time, however, the lavishly funded torrent of union slime didn’t stick. Voters are waking up to the fact that the agenda of government unions is inherently in conflict with the public interest. Can Moorlach and Glazer transform this rising awareness into momentum for reform in California’s state legislature?

Despite sharing in common the courage to confront California’s most powerful and most unchecked special interest, Moorlach and Glazer belong to opposing parties whose mutual enmity is only matched by their fear of these unions. With rare exceptions, California’s Democratic politicians are owned by government unions. Fewer of California’s Republican politicians are under their absolute control, but fewer still wish to stick their necks out and be especially targeted by them.

The good news is that bipartisan, centrist reform is something whose time has come. Democrats and Republicans alike have realized that California’s system of public education cannot improve until they stand up to the teachers unions. Similarly, with the financial demands of California’s government pension systems just one more market downturn away from completely crippling local governments, bipartisan support for dramatic pension reform is inevitable.

There are other issues where voters and politicians alike realize current policy solutions are inadequate at best, but consensus solutions require intense dialog and good faith negotiations. An obvious example of this is water policy, where the current political consensus is to decrease demand through misanthropic, punitive rationing, when multiple solutions make better financial and humanitarian sense. Supply oriented solutions include upgrading sewage treatment plants to reuse wastewater, building desalination plants, building more dams, increasing cloud seeding efforts, and allowing some farmers to sell their allocations to urban areas.

Imagine a centrist coalition of politicians, led by reformers such as Moorlach and Glazer, implementing policies that are decisive departures from the tepid incrementalism and creeping authoritarianism that has defined California’s politics ever since the government unions took control. How radical would that be?

Ultimately, forming a radical center in California requires more than the gathering urgency for reforms in the areas of education, government compensation and pensions, and, hopefully, infrastructure investment. Beyond recognizing the inevitable crises that will result from inaction, and beyond finding the courage to stand up to government unions, Moorlach and Glazer, and those who join them, will have to manifest and pass on to their colleagues an empathy for the beliefs and ideologies of their opponents.

Ideological polarities – environmentalism vs. pro-development, social liberal vs. social conservative, libertarian vs. progressive – generate animosity that emotionalizes and trivializes debate on unrelated topics where action might otherwise be possible. The only solution is empathy. The extremes of libertarian philosophy are as absurd as those of the progressives. The extremes of social liberalism can be as oppressive as an authoritarian theocracy. Economic development without reasonable environmentalist checks is as undesirable as the stagnant plutocracy that is the unwitting consequence of extreme environmentalism. And while government unions should be outlawed, well regulated private sector unions play a vital role in an era of automation, globalization, and financial corruption.

Despite being inundated with a torrent of slime by their opponents, John Moorlach and Steve Glazer took the high road in their campaigns. They are worthy candidates to nurture the guttering remnants of empathy that flicker yet in Sacramento, and turn them into a roaring, radical centrist fire.

*   *   *

Ed Ring is the executive director of the California Policy Center.

Union Offensive Against Prop. 13 Gains Momentum

There’s a joke about public sector union bosses making the rounds in Sacramento lately:  What happens when the California Legislature hands over a blank check to the California Teachers Association (CTA)?  It’s returned the next day marked “insufficient.”

No matter that spending on schools is up 36 percent over the last four years, the state budget has increased 25 percent over the last three and the state is running a surplus of nearly $7 billion, it is never enough.  The government employee unions are continuing to press for higher taxes and more spending from which they benefit both in terms of money and political power.

Since California already imposes the highest taxes in all 50 states in almost every category except taxes on property – where we rank 19th highest – the obvious target is Proposition 13 which limits annual increases in property taxes.  To take on Proposition 13, public unions, including the two major teachers unions and the Service Employees International Union, have joined with some rag-tag groups of Bay Area radicals to create a front group, calling itself “Make It Fair.” The stated goal is to strip Proposition 13 protections away from businesses, including small mom-and-pop stores and residential rentals, thereby creating a “split roll” in order to seize another $9 billion in tax revenue annually.

To undermine support for Proposition 13 — which remains overwhelmingly popular in public opinion polls – Make It Fair attempts to make homeowners feel unjustly burdened. Backers of higher property taxes on business say that Proposition 13 provides commercial property special advantages, but it does not. California has always taxed all real property at the same rate whether residential or business.

The facts are unimportant to the government employee unions. They accuse owners of commercial property of not paying their fair share in property taxes. This ignores studies that show that business property is actually paying a higher percentage of the total property tax than when Proposition 13 passed and that business property is generally assessed at closer to market value than is residential property. This is due to the frequent improvements businesses make to property to remain competitive and these improvements are taxed at current market value.

But if the government employee unions are really only going after owners of commercial property, why should the average homeowner be concerned?

First, those who delude themselves into believing that the appetite of unions for tax dollars will be satiated if we just give in to their demands, should know that California state and local government employees are the highest paid in the nation. They did not become this way because the union leadership were shrinking violets. Once business property is taxed at a higher rate, there is no question that residential property – homeowners – will be the next target. Already union-backed legislation has been introduced in Sacramento to make it easier to increase taxes on homeowners.

Secondly, most homeowners rely on jobs in order to pay their mortgages.  If taxes on commercial property, including those on small businesses and residential rental property, are jacked up,  so prices and rents will go up as well. Business that can’t increase their prices because of competition from firms located in other states and countries are likely to join the exodus of companies that have already left California.  And they will take those jobs with them.

A recent front page story in the Torrance Daily Breeze, “Tractor Firm Kubota Exits Torrance for Texas,” illustrates the point.  The report says the firm, a 43-year resident of the community, will be departing along with 180 jobs, and reminds readers that Toyota made a similar announcement last year.  This hemorrhaging of jobs is a direct consequence of California’s hostile business climate, and this is before any increase in the property tax.

It would be a mistake to underestimate the negative impact that changes to Proposition 13 would have on the California economy. A study from the Pepperdine University School for Public Policy reveals that a “split roll” would result in the loss of nearly 400,000 jobs and $72 billion in economic activity over five years.

If front groups were required to adhere to truth in labeling standards, the group “Make It Fair” would be compelled to call itself either “Take Our Jobs, Please” or “Make Us Poor.”

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

CalPERS and Unions Win Again – Taxpayers and Bondholders Lose

In bankruptcy, the federal courts have ruled that cities can reduce pension obligations. They can, but they don’t have to. In Detroit, bondholders were sacrificed to maintain police and fire pensions with minimal haircuts.

On Monday, U.S. Bankruptcy Judge Meredith Jury ruled against bondholders in favor of Calpers in the San Bernardino bankruptcy. She acknowledged that her decision is likely to be seen as unfair to the municipal bond market and might even discourage investors from buying pension obligation bonds in the future.

Please consider Calpers’ Pension Hammer Forces ‘Unfair’ Bond Ruling by Judge.

California’s public retirement fund holds so much power over local officials that pension-bond investors can’t expect equal treatment when a city goes bankrupt, a judge said in a ruling that she acknowledged seems “unfair.”

“What I see as unfair, and might seem unfair to the outside world, does not matter under law,” Jury said, referring in part to the powerful remedies Calpers can seek if the city doesn’t honor its contract.

Monday’s ruling sticks with a pattern seen in the bankruptcies of Stockton, California, and Detroit, said Marilyn Cohen, president of Envision Capital Management in El Segundo, California.

Up to Cities

Federal bankruptcy courts have many times ruled that cities can cut pension obligation, but nothing forces them to.

For example, in the Stockton California bankruptcy, a federal judge ruled that Stockton could have tried to reduce its obligation to Calpers. However, Stockton chose not to do so, arguing that fighting Calpers would take too long and could endanger employee pensions.

Conflict of Interest

I believe Stockton’s rationale is nonsense. Instead, I propose Stockton city officials had a conflict of interest.

City officials wanted to preserve their own pensions.

Chicago Connection

So what does this have to do with Chicago and the state of Illinois in general?

Lots, so let’s tie it all together.

As a result Tuesday’s Illinois Supreme Court Ruling that the 2013 Pension Reform Law Is Unconstitutional Moody’s cut Chicago’s bond rating two notches to junk. Moody’s specifically cited Chicago’s pension crisis.

I discussed this yesterday in Chicago Bond Rating Cut to Junk; City Faces $2.2 Billion in Various Termination Fees; Irresponsible to Tell the Truth.

In light of the San Bernardino ruling today, cities that have huge pension issues will see bond yields soar.

The Chicago Board of education is already paying 285 basis points more than other cities because of pensions. If bondholders keep getting hammered, those yields will rise further.

Pass a Bankruptcy Law, Give Taxpayers a Chance

A Chicago Tribune editorial by Henry J. Feinberg, says Pass a Bankruptcy Law, Give Taxpayers a Chance.

Under federal law, state governments can’t file for bankruptcy. Local governments can do so if their states give them permission. A bill now before the Illinois legislature would extend that permission to Illinois municipalities, most of which now can’t seek protection under bankruptcy law.

The right way is to amend House Bill 298 so people who hold Illinois bonds have a “secured first lien,” the fancy words needed in the law to make sure bondholders are first in line to get their money back. Passing this amended bill would do three things that the state’s local governments have not been able to accomplish for decades.

Three Reasons to Amend Bill 298

Feinberg cites three reasons to amend the pending bankruptcy bill.

  • First, it would bring opposing sides to the table to have meaningful discussions about how to save the borrower, in this case the local government, from financial ruin.
  • Second, the government could ask the bankruptcy court to modify labor contracts and order the parties to renegotiate the terms of collective bargaining agreements.
  • Finally, a law that puts bondholders first in line to get repaid would be a stroke of fairness that would help Illinois cities, school districts and other local governments avert a short-term solution like Detroit’s. There, some people who had lent money to the city by buying its bonds lost two-thirds of their investment. Meanwhile, members of the politically powerful police and firefighter unions took no cuts to their pensions (their cost-of-living adjustment was reduced). Other workers took a 4.5 percent base cut in pensions and the elimination of an annual cost-of-living increase, The Detroit News reported.

I agree with Feinberg on all three points. Bankruptcy is the only real solution for many of these plans and many cities as well.

Beware the Tax Man

Tax hikes cannot possibly address the shortfall. As discussed on May 4, in Beware, the Tax Man Has Eyes on You, the potential hike for Illinoisans is staggering.

Nuveen estimated 50% property tax hikes would be necessary. Those hikes were just for Chicago. They did not include money to bail out other Illinois pension plans. Nor did it address the $9 billion budget deficit for the state.

Finally, Nuveen’s estimate assumed pension plans would make their plan assumption of 7% returns or higher.

Stock Market Bubble Will Hit Pensions

I believe another serious decline in the stock market is likely. So do some of the biggest fund managers in the world.

Please check out Seven Year Negative Returns in Stocks and Bonds; Fraudulent Promises.

Pension promises were not made in good faith.

Rather, pension promises were the direct result of coercion by public unions on legislators, mayors, and other officials willing to accept bribes because they shared in the ill-gotten gains of backroom deals at taxpayer expense.

About the Author:  Mike Shedlock is the editor of the top-rated global economics blog Mish’s Global Economic Trend Analysis, offering insightful commentary every day of the week. He is also a contributing “professor” on Minyanville, a community site focused on economic and financial education, and a senior fellow with the Illinois Policy Institute.