Every two years in November, California’s local agencies ask the voters to approve hundreds of new taxes and bonds. California’s primary ballot every other June also features dozens, if not hundreds of new requests for local tax increases and borrowing. And in times of dire urgency, special elections are called. For example, this Tuesday, June 4th, Los Angelenos will vote on a new parcel tax that, if passed, will raise a half-billion dollars per year to help bail out LA Unified School District’s pension and retirement health benefits.
Oops. Apparently that characterization of the reason for this proposed tax increase is incorrect. Measure EE’s ballot question is as follows:
To retain/attract quality teachers; reduce class sizes; provide counseling/nursing/library services, arts, music, science, math, preschool, vocational/career education, safe/well-maintained schools, adequate instructional materials/supplies; support disadvantaged/homeless students; shall Los Angeles Unified School District levy $0.16 per square foot of building improvements annually, exempting seniors/certain disability recipients, providing approximately $500,000,000 annually for 12 years, requiring annual audits, oversight, and funding local schools?
Never mind the fact that LAUSD’s cost of employee benefits increased from $1.54 billion in 2015-16 to $1.92 billion in 2016-17, an increase of 25 percent, when the total employee headcount only increased by six-tenths of one percent. This has created a shortfall of $380 million.
LAUSD says ignore the cost of our pension and retirement health benefits. This tax is “to retain/attract quality teachers.”
The district now carries an unfunded pension liability of $6.8 billion. Just paying down that debt over twenty years should be costing LAUSD over $600 million per year, not including the normal contribution they have to pay each year as their active employees earn additional pension benefits. As it is, including the normal contribution, in 2018 LAUSD “only” paid $584 million to CalSTRS and CalPERS.
Pay no attention to this fact: that just the “catch up” payments on LAUSD’s unfunded pension liability should be $600 million per year. This new tax is to “reduce class sizes; provide counseling/nursing/library services, arts, music, science, math, preschool.”
CalSTRS, the pension system that collects and funds pension benefits for LAUSD teachers, as of June 30, 2017, was only 62 percent funded. Sixty-two percent. CalPERS, the pension system that collects and funds pension benefits for LAUSD support personnel, is only slightly better off financially than CalSTRS. It has already announced it will roughly double the required employer contributions between now and 2025. CalSTRS, if it wants to survive, will likely follow suit.
The teachers unions and district want voters to deny the reality that CalSTRS and CalPERS require massive increases to their required annual payments. This is why they are saying that the tax will “provide vocational/career education, safe/well-maintained schools, adequate instructional materials/supplies.”
The financial challenges surrounding LAUSD’s other primary retirement obligation, retiree health benefits, are even more daunting. LAUSD’s OPEB unfunded liability (OPEB stands for “other post employment benefits,” primarily retirement health insurance) has now reached a staggering $14.9 billion. In 2018, retiree healthcare cost the district nearly $400 million. A 2016 study prepared for LAUSD estimated that cost to double in the next ten years, and to nearly quadruple within the next twenty years.
But forget about all this financial gobbledegook. This new tax is to “support disadvantaged / homeless students.”
Given the low turnout in off-year special elections, combined with the ballot harvesting machine that was perfected in 2018, it is likely that Los Angeles residents are about to be paying another half-billion in taxes. That sum of money only begins to cover the out-of-control costs for retirement benefits. It is fair to wonder why, instead of a new tax, retirement benefits reform isn’t on the ballot in this special election?
Is it even legal for a ballot to describe a new tax in the way Measure EE is written?
Maybe not. AB 195, a law passed in 2017 by the California State Assembly in 2017 and signed into law by then Governor Jerry Brown, fine tunes California’s election code. Among other things, it includes this: “The statement of the measure shall be a true and impartial synopsis of the purpose of the proposed measure, and shall be in language that is neither argumentative nor likely to create prejudice for or against the measure.”
How exactly is it “impartial” to characterize this tax as necessary to reduce class sizes, maintain school programs, safe schools, etc. when the money is going to pay down unfunded pension liabilities? Yes, money is fungible, so the language is technically accurate.
If a challenge to the legitimacy of Measure EE is raised based on the language of AB 195, LAUSD could find themselves on thin ice.
Somebody who has tracked local tax and bond measures for the last few years is Richard Michael, an LA resident who operates the website Big Bad Bonds. In one of his posts, entitled “Dishonest Ballots = Corrupt Government,” Michaels provides examples of ballot language that complies with AB 195 vs ballot language that does not. Here, directly from Michael’s website, is that segment:
“To demonstrate that conforming the ballot statement to the law can be done, the City of Fort Bragg (Mendocino, Measure H) placed a sales tax on the ballot using this ballot statement.
Shall the measure to enact a three-eights (3/8th) of a cent general purpose transactions and use tax to provide the City with an estimated $623,000 per year for a limited period of fifteen years be adopted?
It conforms to subsection (a). It provides the rate of the tax, its duration, and the expected annual yield as required by subsection (b). It also gives the true purpose in an impartial manner using no argumentative language or language designed to create prejudice in favor of the measure as required by subsection (c). Bravo!
Compare that to the City of Roseville (Placer, Measure B) that creates a PERMANENT sales tax by the oblique and deceptive language, ‘until ended by voters.’ Of course, the voters would need to mount a huge campaign to gather enough signatures to end it, no doubt fought every step of the way by the city. The city threw in all the hot buttons that it learned from the taxpayer-funded political survey. At the end of the list it threw in ‘unrestricted general revenue.’ That’s the key to make it a general tax (majority vote to pass) versus a special tax (two-thirds vote to pass).
Shall the measure to ensure essential City services including neighborhood police patrols, fire protection, 9-1-1 emergency response; crime suppression/investigation; street and pothole repair; libraries, parks and recreation; job creation and economic improvement programs; and unrestricted general revenue purposes by establishing a 1/2¢ Transaction and Use (“sales”) tax, providing an estimated $18.4M annually, until ended by voters, with independent citizens’ oversight, regular audits, no money for the state, and all funds spent locally, be adopted?
Will the city government use the money for any of that list of ‘essential’ services? Absolutely not! It’s going to pay for the salary increases and soaring pension costs that the city government has hung like an albatross around the necks of its taxpayers.”
Michaels is right. Money is fungible. And compliance with AB 195 does make a difference. To verify that, we don’t have to rely only on Michael’s analysis. We can turn to an analysis published by Fairbank, Maslin, Maullin, Metz and Associates. This firm, also known as FM3 Research, is an opinion research and strategy firm with a tagline on their website that reads “synthesizing public opinion to help achieve your goals.” On their list of “Ballot Measure Campaigns” an astonishing 534 local tax or bond campaigns are named, all of them with California cities, counties, special districts, and school districts as clients.
With that kind of credibility, consider this excerpt from FM3 Research’s “Guest Analysis and Commentary,” published on an analysis of the November 2018 election by the California Local Government Finance Almanac:
A COMPLICATING FACTOR: AB-195 IMPACT ON LOCAL SCHOOL BOND MEASURES
State legislation passed in 2017 (AB-195) changed California law regarding ballot label language for local bond measures (including school bonds) by required detailed disclosure of the financial and property tax implications of the bond. This increase in finance-related language was confusing for voters, and also left fewer words in the 75-word ballot label to describe the uses of funds from the measure. In FM3’s surveys, this change led to substantially lower support for many bond measures – in some cases 10-15 points [italics added]. Several agencies that had been considering General Obligation bond measures chose not to place them on the ballot this cycle because their voter opinion research showed the measures were not viable using ballot label language that complied with AB-195. However, for those that placed bond measures on the ballot, the success rate was high and consistent with opinion research.
A “complicating factor” indeed. Should citizen activists wish to challenge the legitimacy of the hundreds upon hundreds of tax increases that are almost always passed by voters, they might consider trying to enforce AB 195.
Who knows, maybe if ballot language was indisputably impartial, voters would force politicians to confront the real reason for the insatiable public appetite for more tax revenue, which is out-of-control pension costs and benefits.
* * *
Edward Ring is a co-founder of the California Policy Center and served as its first president.