Posts

Pensions and Taxes Increase While Labor Unions go Unchallenged

In January 2015, the Manhattan Institute’s Steve Malanga, writing in the Wall Street Journal about public pension costs gulping down tax raises, quoted me saying that no matter what local politicians tell voters, when you see tax increases, think pensions.

To paraphrase Ronald Reagan: Here I go again!

Recent accounts indicated that the California Public Employees’ Retirement System (CalPERS) unfunded pension liabilities have increased because CalPERS investment revenue has dropped. Yesterday on this site, David Kersten cited the dramatic increase of CalPERS unfunded liabilities rising from $93 billion two years ago to $150 billion today.

More to the point, Sacramento Bee columnist Dan Walters wrote, “CalPERS has been demanding hundreds of millions of dollars in additional contributions from state and local governments – hitting cities particularly hard…”

 

Despite a 42% growth in California’s general fund budget compared to 2011, the state continues to propose new tax increases and extensions.

 

With the obligation for more local taxes going to cover pension costs is it just a coincidence that so many tax increase measures are popping up on local ballots?

I don’t think so.

Sure, there will be specific reasons that local governments say they need more tax revenue. More for police or transportation or the homeless, they will say. The governments would have more revenue for those services if they did not have greater obligations for underfunded pensions.

It’s not like revenues have declined recently in government coffers. The state general fund budget is up 42% since Jerry Brown came into office in 2011. Local governments also are enjoying revenue increases, but the call for more taxes keep coming.

Take San Francisco, which could see 8 different tax increases on the November ballot. We just learned that property tax collections in the City by the Bay dramatically increased 9%. And, the city government still needs all that revenue from 8 new tax increases?

Money in government budgets is fungible to some extent. If you cover specific agency costs with a targeted tax increase, that frees up general fund money for other items, including pensions.

 

Nathan Brostrom, Chief Financial Officer for the University of California, told the Sacramento Bee that tuition hikes could be avoided if the state would assist in funding its retiree costs. He explained that the school believed it was not getting what was promised from the Prop. 30 tax hikes.

 

When the University of California declared a shortage of money a couple of years ago much angst surrounded the need to raise already high tuitions. What was the money needed for? As I wrote at the time, the UC’s chief financial officer told the Sacramento Bee that tuition hikes could be avoided if the state helped with retirement costs.

It wasn’t only the university system that saw money diverted for retirement costs. The aforementioned article by Steve Malanga in the Wall Street Journal was subtitled: Remember that ‘temporary’ tax hike for California schools? Most is now going to public worker retirements.

Ironic that the extension of those temporary taxes, Proposition 55, is on the ballot while the retirement system sputters—or is it?

As David Kersten pointed out in his column, “California Democratic politicians are too tied to their base which is the public employee unions, and are unable to make decisions that will benefit the state’s future and prevent financial catastrophe.”

That’s consistent with what I heard from one prominent Democrat who wondered with a state budget increase of more than a third over five years why so many state agencies say they don’t have enough money. The politician answered the question by saying it was because of pension and health care costs and that the majority Democrats would not take on the unions over that issue.

Too bad. That means it falls to the taxpayers. Either they pay up or reform the system on their own.

About the Author: Joel Fox is Editor of Fox & Hounds and President of the Small Business Action Committee. This article originally appeared in Fox & Hounds and appears here with permission.

Split Roll and the Bottomless Hole

A union-led initiative wants to eliminate Prop. 13 benefits for businesses.

California’s Prop. 13, wildly popular on both sides of the political aisle, is under siege by unions. Using the Orwellian name “Make It Fair,” a coalition led by the California Teachers Association, California Federation of Teachers, SEIU and their friends has decided that they can milk businesses to the tune of $9 billion a year via a new ballot initiative.

As Dan Walters explains, “Proposition 13 limits property taxes on all forms of property to 1 percent of value, plus what’s needed to retire bonds and other debts, and limits increases in value to no more than 2 percent a year, except when properties change hands. Newly constructed homes and commercial buildings are placed on the tax roll at their initial values, but are protected by the limits thereafter.”

While it is true that there are a few loopholes which probably should be addressed on the commercial side of Prop. 13, the promoters of the so-called split roll initiative are using that as an excuse to essentially gut the tax protections for businesses. It is tantamount to owning a smooth-running automobile with an oil leak and being told you should ditch the car. To that end, Jon Coupal and Robert Lapsley joined together in 2014 to sponsor a reform bill that would have eliminated the loopholes. They explain,

AB 2371 was authored by the chair of the Assembly Revenue and Taxation Committee, Raul Bocanegra, and San Francisco-area Assemblyman Tom Ammiano and supported by a broad coalition of business and taxpayer organizations. Most importantly, we also had the support of the California Tax Reform Association (who is pursuing the split roll initiative) as it passed overwhelmingly off the Assembly floor.

But then a strange thing happened on the way to the Senate. The California Tax Reform Association suddenly flip-flopped and withdrew its support in the Senate, saying that AB 2371 was not real reform after all. Why? Because they realized that taking care of a potential problem would actually create a bigger problem for their political agenda to pass a split roll initiative next year. The California Tax Reform Association and other groups want to preserve the ‘loophole’ issue as one of their key messages in the 2016 campaign.

The unions would have us think that the state of California doesn’t receive its fair share of taxes. Of course nothing could be further from the truth, and most of us who pay them as residents and property owners in Taxifornia know it. As San Diego tax fighter Richard Rider informs us:

CA now has by far the nation’s highest state income tax rate. We are 21% higher than 2nd place Hawaii, 34% higher than Oregon, and a heck of a lot higher than all the rest – including 7 states with zero state income tax – and 2 more that tax only dividends and interest income.

CA is so bad, we also have the 2nd highest state income tax bracket. AND the 3rd.  Plus the 5th and 8th.

CA has the highest state sales tax rate in the nation. 7.5% (does not include local sales taxes). Two new 2015 bills seek a combined $10 billion++ CA state and local sales tax increase. At least one will likely pass.                          

CA has the nation’s 2nd highest gas tax at 63.8 cents/gallon (Jan., 2015). Add in the new 10-15 cent CA “cap and trade” cost and CA is easily #1. National average is 48.3 cents. Yet CA has the 6th worst highways.

CA in 2014 ranked 17th highest in per capita property taxes (including commercial) – the only major tax where we are not in the worst ten states. But the median CA property tax per owner-occupied home was the 10th highest in the nation in 2009 (latest year available).

That the teachers unions are promoting another tax raise at this time is especially galling. Due at least in part to the union-orchestrated Prop. 30 in 2012, Governor Jerry Brown has just announced a revised budget which will see billions headed for schools over the next few years, including $3.1 billion for the current year and $2.7 billion for next year. K-12 education funding will increase $3,000 per pupil – a 45 percent boost – over 2011-12 levels.

But is it possible that the unions will be affected by their own proposition? As Mike Antonucci points out, it isn’t clear if they will be exempt from the provisions in the initiative. CTA’s building in Burlingame is assessed at $22 million and its 2014 tax liability was $265,000 or about the same 1.2 percent rate my wife and I pay for our home in Los Angeles. CTA’s and other unions’ tax bills could increase considerably if the prop flies. So it would hardly be a surprise if they tried to carve out an exemption for themselves. (Please keep in mind that that at the same time CTA is trying to stick it to tax-weary Californians, it brings in about $185 million a year in forced dues and pays not a penny in state and federal income tax.)

However, even if CTA and other public employee unions are not exempted, they may figure that they will still make out because that extra $9 billion will enable the state to hire busloads of new employees, all of whom will be forced to pay the unions if they want to work. In short, it will be an investment with a great ROI.

If successful, what are the ramifications of this initiative for California? The Orange County Register points to a March 2012 study from the Pepperdine University School of Public Policy’s Davenport Institute. It found that “adopting such a ‘split-roll’ property tax would result in a loss of nearly 400,000 jobs and $72 billion in economic activity in the first five years.”

Grim news for Californians. However, Texans are grinning ear-to-ear, baking cookies and ordering evermore welcome mats.

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.

Justice Belied

California’s AB375 would do precious little to protect school children from pedophiles.

The impulse to take action to remove pedophiles from California’s classrooms came about as a result of Miramonte Elementary School teacher Mark Berndt having slid through the cracks after committing lewd acts against untold numbers of young children.

After Berndt’s arrest in Los Angeles in February 2012, Democrat state senator Alex Padilla wrote SB1530, a bill which would have streamlined the labyrinthine “dismissal statutes” that require districts to navigate a seemingly endless maze of hearings and appeals. Narrow in scope, the bill dealt only with claims deemed credible that a teacher abused a child sexually or with drugs or violence.

Existing law lets local school boards immediately suspend a teacher under “specified conditions, including immoral conduct.” Padilla’s bill simply would have added language allowing a school board to suspend an employee for “serious or egregious unprofessional conduct.”

But early in the summer of 2012, the California State Assembly Education Committee voted down the proposed law, dutifully satisfying the teachers unions, which had lobbied fiercely to kill it. United Teachers of Los Angeles president Warren Fletcher claimed that SB1530 “solves nothing, places teachers at unfair risk, and diverts attention from the real accountability issues at LAUSD.” (What “real accountability issues” are more important?)

The bill’s death caused a great furor in the California press, with the unions and the education committee’s nay-voters and gutless abstainers bearing the brunt of the criticism. The San Francisco Chronicle wrote that “the influence of the California Teachers Association was rarely more apparent – or more sickening – than in the defeat of SB1530.” (Emphasis added.)

Then, in an attempt to “do something” in February of this year, one of the two legislators who voted no on Padilla’s bill, Assembly Education Committee chairwoman Joan Buchanan, submitted AB375, a similar but watered down version of SB1530. Ominously, it had the backing of the teachers unions and looked poised to pass in July, but it too failed to garner enough votes. However, Senate Education Committee Chair Carol Liu who had supplied the deciding vote then granted a “reconsideration” of the bill, meaning that it could come back to life in a different form.

So earlier this month the bill reemerged, was quickly passed by both legislative houses and now awaits Governor Jerry Brown’s signature. Summing up the teachers unions’ take on this latest iteration, California Teachers Association president Dean Vogel said, “Passage of AB375 addresses our concerns of keeping students safe, safeguarding the integrity of the profession, and protecting the rights of educators.”

But AB375 doesn’t come close to fulfilling its promise to keep children safe.

While there are admittedly a couple of good things about the bill – most agree that AB375 has two important adjustments: eliminating a summer break moratorium on teacher suspensions and ending the statute of limitations on serious allegations – it is seriously flawed, and may give kids even less protection from predatory teachers than they have now.

Former state senator Gloria Romero, who has written extensively against the bill (starting with its earliest version), says,

AB375 mandates a fixed timeline of seven months for any discipline case to be concluded. That sounds nice on paper, but AB375 opponents testified to Liu’s committee, that the time limit becomes tantamount to a “get out of jail free card,” giving teachers facing firing every incentive to delay their case past seven months. (Emphasis added.)

In other words, limiting the investigation and possible legal action to a window of seven months sounds like it would expedite matters, but creates bigger problems in doing so. What happens if it looks like a decision can’t be reached during that time? Could a teacher force the district to settle?

As the California School Board Association (CSBA) points out,

AB375 would enable a certificated employee to challenge a suspension while he or she awaits the dismissal hearing. This new procedure would add time and costs to the hearing process … and make it more difficult to meet the 7-month deadline for completion. (Emphasis added.)

Also problematic is the bill’s retention of the “Commission on Professional Competence.” This panel is made up of an administrative law judge and two teachers, giving the teachers unions a large role in CPC decisions. SB1530 would have eliminated the CPC and given school boards the final say. This was an important reform that the unions could not live with.

The CSBA adds,

AB375 would allow any party to object to the qualifications of members of the Commission on Professional Competence (CPC). Permitting the parties to object to the qualifications of a panel member at the time of selection adds cost and delay to the process without a benefit. At the time of selection, neither party is familiar with the qualifications of the panel members. Filing motions will simply result in delays that will make it harder to meet the 7-month time limit for completion of the hearing.

AB375 has other, even bigger problems. For example, it allows a district to provide testimony of only four abused children. Why this arbitrarily low number? What about the voices of the 5th, 6th and 7th children? Why in good conscience could anyone disallow their testimony? (There were 23 counts against Mark Berndt.)

Also, as education writer RiShawn Biddle points out, the bill stifles districts by preventing them from amending a dismissal complaint to include new charges and evidence of abuse that often come out after a teacher’s acts become publicly known.

This means that a district that learns of even more-heinous criminal behavior during the period the teacher had served cannot bring up information that is relevant to the case itself.

EdVoice’s Bill Lucia, who has been a staunch foe of AB375, identifies yet another flaw in the new bill – that unlike SB1530, which only dealt with teacher abuse via “sex, drugs or violence,” this is a catch-all bill. “… teachers who commit egregious moral violations are lumped into the same dismissal process as lousy teachers who fail to teach students to read.” Instead, Lucia supports a two-tiered system that streamlines the process to remove criminal teachers from the classroom.

StudentsFirst’s Jessica Ng puts the troubling bill into perspective:

It’s disappointing that, by Assemblywoman Buchanan’s own admission, AB375 isn’t designed to protect California’s kids … California’s kids don’t need a teacher dismissal bill; they need a child safety and protection bill.

With the bill heavily favoring teachers at the expense of kids, it is no wonder that the California Teachers Association and the California Federation of Teachers – California’s duopoly – are backing AB375. It is a bleak reminder of who really pulls the strings in the Golden State. The pointed headline of a recent editorial in U-T San Diego said it all: “Fixing California: Teachers unions demonstrate again who controls Sacramento.”

The Sacramento Bee’s Dan Walters echoed this sentiment, writing, “If the unions can have their way on child abuse, they can have their way on anything in the current Legislature.”

One final and almost comical point. As a sop to the unions, there is a tiny piece of AB 375 that has flown under the radar. (H/T Hillel Aron) It states that, “knowing membership of the Communist Party” shall be removed “from the list of reasons a permanent school employee can be dismissed or suspended.”

Yeah, damn the kids, let’s protect pedophiles and Communists!

This crass and immoral politicking is truly vile. The governor must kill this abominable bill.

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 with reliable and balanced information about professional affiliations and positions on educational issues.

California’s Looming Fiscal Disaster: Sunlight and an Informed Public are the Best Disinfectants

With the state and various cities on the brink of insolvency, it’s imperative that the electorate become more informed and demand that school districts and teachers unions do their negotiating in public.

This past Sunday’s Los Angeles Times above-the-fold headline screamed “Voters back tax hikes for schools.” It was déja-vu all over again. As I wrote in September,

“… a poll which is biased and does not take into account the knowledge of the people being polled is misleading and dangerous. The public is led to believe that the responders are perceptive and knowledgeable, when in reality so many are not.”

(And I could have added that a poll that misleads or misinforms its respondents is the most dangerous of all; I’ll address that shortly.)

The Times article reported that a USC Dornsife College of Letters, Arts and Sciences/Los Angeles Times Frequency Questionnaire released last week showed that 61 percent of those surveyed said they would pay higher taxes to boost school funding.

As I read those words, I wondered,
• What do those people really know about the amount we already spend on education? For example, do they know that over 50 percent of the state’s general fund spending already goes to education?
• Do they know how much is wasted on an excessive number of administrators and useless bureaucrats?
• Do they understand that due to an archaic tenure system, it can cost hundreds of thousands of dollars to try to rid a school system of one incompetent or criminal teacher?
• Do they know the average teacher’s salary and how much more they get in additional healthcare and pension compensation?
• Do they know that teachers can pad their pay by taking useless “professional development” classes that can “earn” them an extra million dollars in their careers and retirement?
• Do they know that practically every teacher contract in the state has a provision whereby teachers who are union representatives get classroom time off each month to do union business while the taxpayers foot the bill for the rep’s substitute teacher?
• Do they know that it is the taxpayer supported school district, not the teachers unions, that collects the union dues that teachers are forced to pay in this state?
• Do they know that California already has one of the highest sales and income tax rates in the country?

There was one question where the pollsters intended to educate the people by including the following “information.” They asked,

“As you may know, California currently ranks forty-second out of the fifty states in funding per student. (Bold added.) Would you favor or oppose increasing funding for California’s public schools, even if it meant an increase in your own taxes?” 61 percent responded that they would favor raising taxes.

The problem with the pollster’s information is that it is very misleading. California is not “forty-second out of the fifty states in funding per student.”

As Sacramento Bee writer Dan Walters pointed out in a column on November 13th, doomsday statistics regarding education matters are typically provided by special interest groups like the National Education Association. What agenda-driven groups typically do is take regional costs such as standard of living into account which skews the numbers in a way that benefits them.

A more objective source like the Census Bureau,

“…surveys all forms of school spending and pegs California’s per-pupil number at $11,588, just $662 under the national average and 27th-highest in the nation….
“And it’s much higher in some big-city school systems, such as Los Angeles Unified, which has more than 600,000 students, spends $14,100 per pupil and has about a 50 percent high-school dropout rate.”

The non-partisan California Legislative Analysts Office has the state in 31st place in school spending.

The whole spending issue becomes even more convoluted, because typically school districts don’t count capital expenses, e.g. the cost of school buildings, in their per-student spending. Since students don’t take classes at the beach or in a field, these costs must be included to give the public an idea of the true cost of educating a child. Including capital costs, the dollar amount that Adam Schaeffer of the Cato Institute came up with for Los Angeles Unified is $25,208 per year.

Mike Antonucci, director of the Education Intelligence Agency, looks at the situation from another perspective. Last May, he pointed out,

“The latest Census Bureau report provides details of the 2008-09 school year, as the nation was in the midst of the recession.”

He then breaks the national numbers down state by state and in California, we find that for the years 2003-2004 to 2008-2009 school enrollment went down 87,548 or 1.4%, but at the same time we added over 3,000 teachers (1.1%) and spending went up a whopping 24.1%.

So even in a time period which included a world wide recession, we see a big increase in spending and a shrinking teacher/student ratio.

The bottom line is that we should not let special interests get away with using skewed data in an attempt to con the public. People need to become better consumers by making a concerted effort to become more informed about what we really spend on education.

One way to accomplish this would be for the public to get directly involved with teacher contract negations. As Education Action Group’s Steve Gunn wrote last week,

“Local taxpayers across the nation cough up millions of dollars every year to fund their local schools. About 75 percent of those schools’ budgets are dominated by labor costs, mostly negotiated union labor costs.” (Bold added.)

“But there’s nothing they can do to address that concern if compensation is negotiated behind their backs.”

And in fact, public scrutiny is a reality. School districts in Idaho, New Jersey, New York and elsewhere have gone public with their contract negotiations.

If Californians don’t become more informed and demand public access to teacher’s contract negotiations — and in fact all public employee contract negotiations — they will continue to let the special interests have their way while the taxpayers get to pay and pay and pay. However there is a limit to the fiscal abuse that the formerly Golden State can stand before it becomes insolvent.

About the author: 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 with reliable and balanced information about professional affiliations and positions on educational issues.