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California's Emerging Good Government Coalition

The 2014 mid-term elections will be remembered for many things – pioneering use of information technology to comprehensively profile and micro-target voters, escalating use of polarizing rhetoric, historically low levels of voter turnout, and historic records in total spending. In California, in spite of all this money and technology – or perhaps because of it – the political landscape is probably not going to change very much this time around. But appearances can be deceiving. While Democrats will still control California’s state legislature and nearly all of California’s large cities and urban counties, new fault lines are forming within California’s electorate that defy conventional definitions of Republican and Democrat, or conservative and liberal.

Because as it is, California’s schools are failing, businesses and middle-income residents are fleeing, and the cost of living is the highest in America. Three powerful groups benefit from and perpetuate this arrangement with their money and their votes:  Wealthy individuals and crony capitalists, unionized public sector workers, and low-income residents who have become entirely dependent on government and are susceptible to their rhetoric. The terms of this alliance are financially unsustainable and even now, they harm low income residents more than they help them. It will crack as soon as a viable opposition coalesces. And that is happening.

Here are examples of how coalitions are forming that defy conventional definitions of Republican or Democrat, conservative or liberal:

(1)  Financial sustainability is a bipartisan issue.

California’s cities and counties, despite revenues from an unsustainable asset bubble that has bought them time, are on a collision course with financial insolvency. This reality has already confronted every big city mayor in California. Some, including Democrats like San Jose’s courageous mayor Chuck Reed, are trying to enact reforms to save their cities. Over 80% of the non-federal government spending in California is at the local level, and sooner or later, liberals and conservatives are going to join together to demand realistic financial reforms to restore financial health to California’s public institutions.

(2)  Quality public schools is a bipartisan issue.

California’s public schools will not be improved by spending more money, they will be improved by making fundamental reforms to how schools and school districts are managed. The Vergara lawsuit, funded almost entirely by conscientious Democrats, proves how committed everyone is to restoring accountability to public education. The success of charter schools proves that superior educational outcomes can be had for less money than is currently made available to public schools.

(3)  The mission of public sector unions is inherently in conflict with the public interest.

Both of the examples just mentioned – quality education and financial health – are the priority of any civic minded private citizen, but are not the priority of the public sector unions who control California politics. The reason California’s schools are failing is because of union work rules that prevent innovation and accountability. The reason California’s government finances are perennially challenged is because for decades, public sector unions have pressured politicians to grant pay and benefit increases that have become unfair and unaffordable.

(4)  Private sector unions are fundamentally different from public sector unions.

The growing rift within Democrats, and the growing consensus among all California voters, is based on a fundamental fact: Criticizing, or even abolishing, public sector unions does NOT represent an attempt at a broader war on labor, working people, or private sector unions. There are serious issues relating to the role and optimal regulations for private sector unions, but they play a legitimate, vital part in American society. Public sector unions, on the other hand, should be abolished.

(5)  No party, platform, or person has all the answers.

This is not a new reality, but today in California it is being increasingly recognized by reformers across the political spectrum. And there is a new, unifying theme – the need for public sector union reform, fostered through education reform and fiscal reform. While politicians and citizens may disagree over the size of government and the role of government, they are agreeing, more than ever, that government unions have skewed this debate and taken options away. Can we improve and enhance government services, or invest in ambitious new infrastructure projects? No, because tax revenue must pay over-market compensation to government workers. Can we streamline and modernize a government agency or effectively manage a school? No, because of union work rules.

New coalitions are forming that will not accept failing schools, or cities and counties in a perpetual state of financial crisis. They will fight together for educational excellence and fiscal health. And because nothing matters more than our children and our ability to earn a living, they will recognize the unpleasant truth – to restore public education and public finance requires fighting public sector unions.

In California, the outcome of the 2014 election is sadly predictable. But change is coming.

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

The Looming Bipartisan Backlash Against Unionized Government

Whenever discussing politically viable policy proposals to improve the quality of life in California, the imperative is to come up with ideas that strongly appeal to moderate centrists, since that is how most Californians would describe themselves. And there are two compelling issues that offer that appeal: making California’s system of K-12 education the best in the world, and restoring financial sustainability to California’s state and local governments.

While these two objectives have broad conceptual appeal, there is a clear choice between two very different sets of policies that claim to accomplish them. The first choice, promoted by public sector unions, is to spend more money. And to do that, their solution is to raise taxes, especially on corporations and wealthy individuals. The problem with that option, of course, is that California already has the highest taxes and most inhospitable business climate in the U.S.

The alternative to throwing more money at California’s troubled system of K-12 education and financially precarious cities and counties is to enact fundamental reforms. And these reforms, despite the fact that each of them arouses relentless, heavily funded opposition from government worker unions, are utterly bipartisan in character. They are practical, they are fair, and they are not ideologically driven.

Education Reforms:

  • Faithfully implement the Vergara Ruling – abolish the union work rules that (1) grant teacher tenure well before new teachers can be properly trained and evaluated, (2) protect incompetent teachers from dismissal, and (3) favor seniority over merit when implementing workforce reductions.
  • Streamline permitting for charter schools. These independent enterprises allow far greater flexibility to teachers and principals, creating laboratories where new best practices can rapidly evolve. Poorly performing charter schools can be shut down, successful ones can be emulated.
  • Enable school choice, so parents can move their students out of bad schools. Start by aggressively promoting and supporting California’s 2010 Open Enrollment Act, that empowers any parent whose child attends one of the state’s 1,000 lowest performing schools to move them to the school of their choice.

Financial Sustainability Reforms:

  • Roll back defined benefit pension formulas to restore viable funding and protect taxpayers. Adopting “triggers” that prospectively lower pension benefit accruals for existing workers and suspend COLAs for retirees, will preserve the defined benefit. One more market downturn will make this choice unavoidable – the sooner this reform is accepted, the more moderate its impact.
  • Reform public employee compensation. The average total compensation for California’s state and local government workers (taking into account all employer paid benefits including retirement benefits and annual paid vacations/holidays) is now more than twice the median compensation for private sector workers. Typically, approximately 70% (or more) of local government budgets are for personnel costs. Public sector compensation needs to be frozen – or even reduced – until the private sector can catch up.
  • Modernize and streamline public agencies. Introduce flexibility to job descriptions and eliminate unnecessary positions. Upgrade and automate information systems.
  • Improve financial management and accountability. The public sector needs to adhere to the same accounting standards that govern the private sector. If anything, public sector reporting should be more standardized, and faster, than what is required in private industry – currently the opposite applies.
  • Eliminate exploitative financing mechanisms: Outlaw capital appreciation bonds, revenue anticipation bonds, and pension obligation bonds, for starters. Nearly all of the “creative” financing instruments being foisted onto relatively unsophisticated city councils are short-term solutions that create long-term financial nightmares.

There are many other fundamental reforms that could rescue California’s K-12 educational system and rescue California’s state and local finances. But the ones listed here would be a very good start. And while there is plenty of room for debate over the particulars of each of these proposed reforms, there is only one powerful interest group that vigorously opposes all of them – public sector unions.

The reality of California’s unacceptable educational results and insolvent cities and counties will compel concerned citizens of all political persuasions to examine these issues over the next several years. And in that process, the inherent conflict between public sector unions and the public interest will become increasingly obvious. To survive, public sector unions will have to accept reforms that challenge their agenda. They will have to accept meaningful pension and compensation reform. They will have to accept smaller, more efficient workforces. They will have to embrace individual accountability and reward individual merit in public education and throughout public agencies. They will have to abandon their symbiotic relationship with financial predators that pump cash into bloated, unionized public agencies on terms that are usurious to taxpayers.

To the extent public sector unions are not willing to attenuate their power and adapt their agenda to the public interest, their recalcitrance will invite a bipartisan fury from a betrayed people. Even in California.

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

Why Not Sustainability in a Spending Limit?

Last week, Gov. Jerry Brown delivered the keynote address at a sustainability summit hosted by the Los Angeles Business Council. While the summit focused on California’s environmental, energy and water policy, we have to wonder whether the governor will exert the same effort in support of fiscal sustainability now that he has called a special session to deal with California’s spending limit.

While a rainy day fund measure has been slated for every ballot since 2010, it has been repeatedly moved back by the majority in the Legislature who fear it would prevent them from spending every last nickel when revenue to state government expands. Brown wants to tinker with the language, and to his credit, move forward to allow the voters to have the final say.

Unfortunately, most of those who push for tax and budget reform are big government advocates focused exclusively on the sustainability of government, its workforce and the vast array of special interests that thrive off taxpayers’ dollars. Those on the government team tend to look to reforms that would stabilize and even expand revenue in tough economic times, meaning they would continue to suck vast amounts from the private sector at a time when taxpayers can least afford it. Among their proposals are taxing services — placing new burdens on very small businesses — and eliminating Proposition 13 limits on property tax bills. They see that under Proposition 13, property taxes are the most reliable source of revenue in good times and bad — when values decline, because of residual value, tax payments do not — they illogically assume they can allow taxes to fluctuate with the market, and maintain the same stability in revenue.

What is needed to protect both the ability of government to provide essential services and the wellbeing of taxpayers, is a return to an effective spending limit. During the 1980s California had the Gann Spending Limit but it was weakened to a point of irrelevancy by subsequent initiatives sponsored by powerful education and transportation interests who chafed under the constitutional provisions that limited their freewheeling spending agenda.

Of course, the very notion of a spending limit grates on those who believe they have a presumptive right to the earnings of citizens and the private business sector. And this is exactly why a spending cap is such a necessity.

When talking about spending caps, we must make sure that the cap is the real deal and not just some stand-alone “rainy day” fund riddled with loopholes. A real spending limit must accomplish what the name directs: limit the growth in the rate of government spending. That rate, of course, should be adjusted for population and inflation, but what should be the metrics for each? Should population growth adjustments be dependent on raw census figures or, for school spending, should the population be enrollment? For inflation, is CPI an adequate measure, or is some hybrid warranted?

The short answer is that there is more than one way to establish a growth factor that will be effective. What must be avoided at all costs is a growth factor that ratchets only in an upward direction, effectively nullifying the structural limitation. But if we impose a hard cap, should overrides be allowed with a supermajority vote of the Legislature? In a word, no. Overrides must be temporary and voter approved. If overrides by the Legislature are permitted with a supermajority vote say, for emergencies, they should be required to be paid back.

For California taxpayers, an acceptable spending limit would, among other things, allow a portion of excess revenue to be spent on infrastructure and debt repayment in addition, of course, to rebates to the taxpayers via adjustments in the sales rate.

So let’s focus on “sustainability” for all, including taxpayers, not just those who profit from unrestricted government spending.

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.