It’s election season, so every California Democrat politician is out there on the campaign trail, precinct walking with their “friends” in labor, and speaking to labor organizations and anyone else who will listen. They are speaking with one voice–that ” we are proud to stand up for working families.”
This may sound like a great tag line, and is surely based on recommendations by campaign consultants, polling and focus groups, and perhaps most importantly resonates strongly with their organized-labor base, who is primarily responsible for funding all California Democrat campaigns.
But the truth is that California Democrat politicians and the California Democratic Party is the “party of organized labor” not of “working families.” This distinction may not be all together clear, or even relevant, at first glance to someone not familiar with the inner workings of California politics and campaigns.
There is a big difference between a “pro-labor agenda,” and a “truly progressive” agenda that seeks to bolster the middle-class and truly lift up “working families,” not just those on welfare. If you look at everything California Democrats politicians are advocating for, and what they consider to be major policy successes, it becomes painfully clear that California Democrat politicians are primarily out to benefit “organized labor,” which comes at the expense of almost everyone else. Of course there are some exceptions with the moderate and pro-business Democrats, but here we are primarily talking about the California Democratic leadership and solidly “pro-labor” state Democrat politicians.
By and large, California Democrat state politicians are preoccupied with pursuing a narrow, pro-labor agenda that is focused on providing the greatest amount of public subsidies, wage and benefit enhancements, and welfare benefits to a very narrow class of people–the poor, organized labor, and public employees–which represents their “core constituencies.” Everyone else suffers as a result, including “working families” who are not on welfare, lower and middle-class families above the poverty line, small business, and big business. California’s biggest policy problems such as pensions, housing costs, taxes, and lack of infrastructure spending do not even appear to be on Sacramento’s radar.
In other words, the California Democrat “pro-labor agenda” is neglecting the state’s middle-class and the state’s business climate, and making it much harder for the “true working families” who do not collect state welfare checks to prosper. Moreover, this “pro-labor agenda” conflicts with a “truly progressive agenda,” but most Democrats and progressives have no idea exactly how. Robert Reich, the state’s most prominent left-leaning economist is right–the system and its policies are “rigged” in California–but not in the way that most people think.
CA Democrat Agenda Primarily Involves Spending as Much Taxpayer Dollars as Possible, Not Spending Reform
If you look at the priorities of the California Democratic leadership they talk about being proud to stand up for “working families” and a desire to “alleviate poverty,” and improve education. Many of their stated goals are noble, but their means of achieving them and the policies they utilize to advance these goals only serve to benefit their “core constituencies” listed above, not the rest of us and California as a whole.
Their primary policy instrument is spending as much taxpayer dollars as possible on government programs, primarily welfare, health care, and education. But the problem is that they do so almost indiscriminately and do not try to spending taxpayer dollars wiser or more effectively. California Democrat politicians have all but given up on asking California state agencies to spend tax dollars more effectively, and rarely consider any program changes that would upset the state’s hugely inefficient and unwieldy bureaucracy.
Spending taxpayer dollars on welfare programs helps the poor but not anyone else, and does little to actually lift the poor out of poverty over the long-term–welfare spending begets more welfare spending. Spending more money on education in itself, does not improve education. As a Dan Walters Sacramento Bee column reported earlier this year, the state is spending billions of dollars more on education now compared to a few years ago, with little or no noticeable improvement in the actual quality of education.
In short, most California Democrat policy priorities boil down to one simple end–indiscriminately increasing the size, cost and scope of California government as much as possible–to the primary benefit of the poor and state’s public sector unions. Their policy toward government spending and public employee compensation is essentially giving them as much money as is available in the government budget, no questions asked.
What is most telling about the “pro-labor agenda” and perhaps its greatest departure from the public interest and a “truly progressive agenda” is what California Democrat politicians are not doing. California Democrats and the Democratic leadership have all but given up on trying to solve the biggest problems that ail California, particularly working families, the middle-class and California businesses. But before we get to that, let’s take a quick look at the recent “crowning achievements” of California Democrat politicians.
A Brief Look at the “Crowning Achievements” of CA Democrats
The centerpiece of the “pro-labor” agenda is environmental regulation, and the “crown jewel” is AB 32. California Democrats love to tout their desire to enact never ending layers of increased “environmental protections” and “environmental regulations.” Environmental policy is extremely important to California voters and does represent a “truly progressive” policy stance–perhaps the last remaining shred of integrity the California Democratic Party and its candidates have left in support of a “truly progressive” policy agenda. But even here they are taking environmental regulation too far, to the primary detriment of “working families” and the middle classes, who will bear the brunt of the excessive regulatory burden in increased costs of goods and services that are regulated, particularly energy costs.
AB 32 was a legitimate policy victory for the state and should be celebrated as such. But how much further should the state take environmental regulation before the rest of the state and the world show at least some willingness to follow. California is responsible for emitting less than 0.5% of the world’s total carbon emissions, yes less than half of a single a percentage point. So even if California totally eliminated its consumption and production of CO2 emissions, that would represent but a blip in the grand scheme of things worldwide.
We do get benefits from improved air quality and health considerations, particularly around stationary pollution sources. But California alone cannot save the world from “climate change” even if we totally eliminated CO2 emissions within our borders. So why are California Democrats in a race to enact the strongest and most costly environmental regulations when there is little indication that the rest of the world and nation will follow anytime soon? My view is that it is because this represents action on their strongest policy position, however, beyond a certain point, further regulation will only serve to undercut our global competitiveness, while providing marginal benefits to California residents. “Working families” will be hit the hardest because they pay the greatest portion of their discretionary income in energy costs.
The biggest recent success that California Democratic leaders are pointing to this campaign season is their “victory” in increasing the statewide minimum wage in California from $10 to $15 dollars per hour–a 50% increase. Economists say that increases in the minimum wage do modestly raise the take home pay of low-wage workers, but in return lead to about a 10% reduction in employment, according recent discussions with economists. So is this really the great policy victory that it is being billed as by Democratic politicians? Effectively, trading a very modest increase in wages for those who keep their jobs, while putting other workers out of work. Touting this increase as genuine social progress may work on the campaign trail, where few people question the results, but the reality is that this was not the great policy victory that it is being billed as. After all, shouldn’t the end goal be to lift workers out of poverty entirely, not have them making more in their existing minimum wage jobs.
Another recent “success” touted by California Democrats as a victory for “working families” is the expansion of the state’s paid family leave program. Prior to the expansion, California law already allowed workers to take up to six weeks off from work to bond with anew child or care for sick family members and receive 55% of their wages. The new measure increases the pay to 60% of wages, starting in 2018, and creates a new classification for low-income workers who make about $20,000 or less annually to receive 70% of their regular pay, according to a Wall Street Journal Report.
The program is funded by worker contributions and estimated to cost about $350 million in 2018, and $587 million annually by 2021, according to a legislative analysis obtained by the Wall Street Journal. This policy does represent an improvement for primarily low-wage workers but its paid for by higher wage workers. It is a marginal improvement at best, and will surely be followed up with future legislation to increase length of time allowed and percentages claimed by workers.
As one can see, the recent list of true policy victories for “working families” is pretty short. And as will be seen is clearly outweighed by all the negative aspects of the “pro-labor agenda,” which is perhaps better defined by the policy solutions that it does not include–namely the state’s most pressing policy problems. Or put another way, the “pro-labor agenda” comes with a great cost to California, and that cost is a long list of policy problems that are off limits and not subject to negotiation, or even substantive discussion.
“Pro-Labor” Politicians Silent on Mounting Pension Problem
The best example of one such issue is the refusal of the California Democratic Party and California Democrat politicians to even acknowledge the magnitude and implications of the state’s pension crisis. The public position of almost every California Democrat lawmaker is to first not even discuss the “problem,” let alone any solutions. Yet every financial expert I have talked to, including a consensus of top economists and government professors at Stanford University, say this is the biggest public policy problem in the state.
The pension problem is eating state, and particularly local balance sheets alive, and leaving no additional money to pay for other pressing spending priorities such as infrastructure, roads and education. Total statewide pension and retiree health care debt is estimated to top $1.3 trillion, according to the Stanford Institute for Economic Policy Research (SIEPR). Would a “truly progressive” politician allow all government revenues to go to pensions, as opposed to policy programs and priorities that truly benefit California and its citizens?
To further illustrate, the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) lost a combined $25 billion in 2015, the deficit between what they said they will earn and what they actually earned. Both funds are on pace to lose another $25 billion in 2016, potentially more according to early return estimates analyzed by the Bond Buyer. That’s roughly $50 billion of taxpayer dollars lost in just two years, or almost half of total annual California General Fund spending. To be clear, this is $50 billion debt that will grow at 7.5% annually and need to be funded by future tax revenues. This represents a growing expenditure of public dollars that is not available to be spent on truly progressive priorities at both the state and local levels of government. Perhaps worse, California state and local taxpayers, including “working families,” are on the hook for all loses incurred by both funds. Why even bother running a 6-month budget process at the Capitol if nobody will so much as lift a finger to stop the state’s pension funds from driving state and local governments off a fiscal cliff?
Of course, these same politicians have likely already come up with some internal justification for not doing anything about this issue, such as “o’well” that is what the unions want, their members apparently know more about what is good for the State of California than every other independent expert who has examined the issue.
California Democrats Refuse to Address the True Causes of CA Housing Crisis
Another major departure from a “truly progressive” agenda, is the unwillingness of California Democrat politicians to address the California housing crisis. This was clearly demonstrated last week when California Assembly leaders, including Assembly Speaker Anthony Rendon, touted a package of $1.3 billion in new government spending that was intended to address the housing crisis–but it all involved new government subsidies and spending on existing programs for California Democrat “core constituencies” that have clearly failed to address the problem to begin with.
California’s housing crisis holds the greatest potential to further reduce the standard of living of the poor and middle-classes in California–perhaps more than any other policy area except the pension issue. As has been discussed in a previous column, the state’s housing crisis is market-driven. It was created over a number of years, decades even, where the state’s heavily regulated and fee-burdened housing market has failed to build new housing units to meet surging demand, particularly in coastal areas, the Bay Area and Los Angeles.
California Democrats are silent on the causes of what is driving the crisis, appear to have no intention of investigating the true causes of the state’s housing problem, and have given no indication that they are willing to consider any policy changes that would actually address the root causes of state’s housing crisis–beyond providing more taxpayer dollars to the poor to pay for “unsustainable” increases in market-based rents.
Government has essentially created the problem, and the private sector is the only force that can generate the 100,000 units that need to be built on an annual basis to build our way out of the problem. But no California Democrat, or very few, are talking about the need to address onerous government regulation, crushing development fees, and generally about what the building industry needs to “jump start” the California housing market.
CA Democrats Don’t Support Enough Infrastructure Spending
Perhaps the only kind of spending a California Democrat politician does not like is infrastructure spending. This is largely because the state’s public employee unions shun infrastructure spending because the vast majority of these dollars do not end up in their pockets.
Yet infrastructure spending is critical to building and sustaining a thriving economy and business climate. All business leaders will tell you that infrastructure spending is needed to improve the state’s business climate. This is why Silicon Valley leaders are backing transportation sales taxes to pay for roads, which business needs to transport goods. But infrastructure does not stop there, we need state highways, water storage, state parks, schools, universities, waste water plants, and maintenance of existing facilities that state and local governments all but neglect every year.
What most people don’t realize, and even fewer will admit, is that the state’s infrastructure problem is closely related to the state’s pension problem and public employee compensation issues. Public employee compensation costs are consuming all new tax dollars and preventing state and local governments from funding infrastructure projects. And local sales tax measures to increase infrastructure funding hurt “working families,” assuming they can pass with the “albatross” of the pension issue hanging over them.
Governor Jerry Brown’s January budget proposal only allocated $500 million for the most critical infrastructure maintenance costs (less than 0.5% of General Fund spending), noting that the state needs to start funding massive mounting public employee compensation debts. Sonoma, Marin, and Mendocino counties have some of the worst road conditions in the state, but are all hamstrung by unsustainable increases in public employee compensation costs and mounting debt from these same issues.
Infrastructure benefits all Californians. It truly is a public good. Apart from support for some school bonds, why doesn’t increased infrastructure spending fit into the “pro-labor” agenda? Simple, it does not benefit the state’s public employee unions, as much as salary and benefits which consume 80% of state and local government spending. And these same governments can’t afford to pay for it, given unsustainable spending in these same budget categories.
CA Democrats Fail to Address Tax Reform
Tax reform is perhaps the toughest issue of all, but holds the greatest potential to lift up the California working families and the middle-classes. California Forward released a series of reports on the issue and Controller Betty Yee’s Council is scheduled to release a report on tax reform soon. But you don’t see many California Democrats, or the Democratic leadership out there discussing the need to tackle tax reform. One exception is Sen. Hertzberg, who has introduced a major tax reform bill to expand the state’s sales tax to services, but again this expands the state’s most regressive tax and would be passed onto consumers.
California Democrats are just as guilty as Republicans in proposing a series of new tax expenditures and exemptions every year that help a select special interest (i.e. the movie industry), but are paid for by everyone else.
The state’s tax system holds the greatest potential to transfer wealth from the rich to the lower classes–which is perhaps the single greatest defining policy of what I thought it meant to be a “progressive.” But nearly all Democrats shy away from this issue because it upsets business, and is not seen as fitting into their long-term career path of climbing up the ladder in state and/or local politics. It’s too tough of an issue to attract the Democratic mainstream, and holds little potential for a short-term political payoff, beyond very narrow proposals that benefit special interests.
What needs to be done on tax reform? Simple, you broaden the base and lower the rates, as any expert on tax policy will tell you. California has the highest tax rates in the county on the sales tax and the income tax, up to 9.5% for the sales tax and 13.3% for the income tax. The sales tax is regressive and hits the poor the hardest, particularly working families who don’t collect any state welfare payments. The income tax also hits the lower and middle-classes the hardest, as well as small business, in terms of proportion of income and they don’t have the same exemptions and deductions afforded to the rich.
By failing to address the state’s unsustainable spending issues, California Democrats are essentially advocating for future tax increases, that will hit working families and the middle-classes the hardest. They should be working to ease the tax burden on “working families,” not increase it–that would be “truly progressive.” Local governments are constantly enacting a series of local fees, mitigations and exactions that negatively impact “working families” and the business community.
To be fair, most California Democrats are hoping for the Prop. 30 extensions to pass which raise $7.5 billion annually, primarily from the wealthy and small business (about $5.5 bil.), but this also includes a 1/4 sales tax increase that will hit the poor and working families (about $1.7 bil.).
This is not tax reform, it’s a general tax increase that lets big business off the hook and hits the average taxpayer and small business the hardest (Note: data from The Economist shows that U.S. corporations are generating the lion’s share of business profits, record profits in fact, higher than any other nation, but not necessarily passing them through to workers). The reason is that many small businesses (S Corps and sole proprietors) pay taxes through the state’s income tax, while corporations pay through the state’s corporation tax which is so littered with special loopholes and exemptions that some experts say it is “voluntary.”
In short, California’s current tax system contains some progressive elements, namely the income tax, but as a whole the state’s tax system is is not “truly progressive.” It is loophole-ridden and serves to primarily benefit the rich and big corporations who can take advantage of all its loopholes to the detriment of everyone else (i.e. working families, small business) who pays full boat. It is largely in conformity with the federal tax code which is even worse as is being discussed at length on the national campaign trail.
Significant Policy Change is Difficult But Not Impossible
As one can see, the California Legislature has clearly been marginalized to proposing small, almost insignificant solutions, to address big problems. And as for the biggest policy problem in California, the state’s unsustainable pension system, California politicians are remarkably silent because any discussion of this issue offends their “friends” in labor. This is completely ridiculous, and unconscionable to any one who understands the facts of this policy issue, which almost certainly includes Gov. Jerry Brown.
A review of major policy changes enacted over the past 40 years beginning with Prop. 13, shows that significant policy change does happen but it requires bold leadership and a willingness to commit to taking on tough issues over the long-haul, according to a study published by the Kersten Institute. Most major policy changes do not happen overnight, but the important thing is to at least try.
The critical ingredients of policy changes enacted in the California Legislature are strong leadership from both Legislative leaders and the Governor. Unfortunately the California Democratic leadership is silent on many of the major policy issues facing California. Gov. Jerry Brown has perhaps the greatest capacity to take on the tough issues, but even he has recently shirked from his initial willingness to think and act big on the tough issues. Gov. Brown has since decided to just follow the lead of the California Legislature on all but a few pet “legacy issues.”
Gov. Brown did make public employee compensation debt issues the major focus of his January State of the Union Address and is likely to drive a hard bargain in the budget process for increased state payments for retiree health care. But that’s about it. The Governor has tried to get CalPER’s to accept some reasonable reforms, but they have refused and he has not made a major issue out of it.
Gov. Brown has been mostly focused on his criminal justice initiative and his two “legacy infrastructure projects,” the delta tunnels and high-speed rail. The sad reality is that the State of California cannot even pay for its most basic infrastructure needs, particularly in the absence of additional pension and retiree health care reform. Who needs the delta tunnels and high-speed rail if the infrastructure we have is currently falling into disrepair?
The Governor made road spending a key issue last year, in response to requests by California business leaders and the counties, but has not chosen to connect this to the pension problem, which is the real cause of the “roads crisis.” The Governor can, and should do more to address these major issues.
So what we really have in California politics is a leadership crisis. A leadership crisis characterized by the unwillingness of California leaders to address the state’s most pressing policy problems in a substantive way. Discussion of such issues, if even raised at all, is largely confined to a cursory review, and often followed by proposing a narrow or very piecemeal solution, which may not even represent a step in the right direction. Other major problems such as pension reform, infrastructure, and tax reform are hardly discussed at all, it’s almost as if they are not even on the radar of Sacramento politicians, even though they loom large in almost every other venue in California, particularly with local governments, the business community and the average citizen.
Another problem is that California has become a “one party state” for all practical purposes which prevents many of their policy positions from being challenged in a competitive election. The state would benefit by returning to a true two party state as reported by a recent Kersten Institute report.
It’s Fine to Be “Progressive,” But Please Be “Truly Progressive”
So the next time you hear a California Democrat politician say “I’m proud to stand with organized labor for working families.” Please question what that actually means, and clarify if that is for the “working families” that are paying California’s taxes, or just those who are partially or fully subsidized from state taxpayers because they are a “core Democrat constituency”?
California has a series of major public policy issues that are going unaddressed and undiscussed in the circles of power in California, all of which have huge implications for “working families” and California’s future as a state.
It is time for California Democrat politicians to start standing up for the “public’s interest,” which includes the lower and middle-classes and what is going to help the state as a whole, not just organized labor. There is a big difference. It’s fine to be “progressive,” but please be “truly progressive,” not just “pro-labor.”
And next time you hear a California Democrat politician say they are “fighting organized labor” in Sacramento, take my word for it, “organized labor” already has the keys to the kingdom–so there is really no need to fight for them in Sacramento–it’s really just an exercise of preaching to the choir.
About the Author: David Kersten is an expert in public policy research and analysis, particularly budget, tax, labor, and fiscal issues. He currently serves as the president of the Kersten Institute for Governance and Public Policy – a moderate non-partisan policy think tank and public policy consulting organization. The institute specializes in providing knowledge, evidence, and training to public agencies, elected officials, policy advocates, organization, and citizens who desire to enact public policy change
Jerry Brown, who as a candidate for governor in 2010 repeatedly pledged he wouldn’t raise taxes without a popular vote, has called for a special session of the Legislature for the purpose of raising taxes. This despite the fact that general fund revenues have outstripped estimates by almost $6 billion. So now we have the very real possibility of higher gas taxes, higher registration and vehicle license fees with proceeds promised for roads – all without a vote of the people.
That a politician would change his views on adding to the public’s tax burden is hardly a surprise. Those of a certain age will clearly remember presidential candidate George H.W. Bush proclaiming, “Read my lips, no new taxes,” before his later, as president, breaking his pledge.
In his effort to increase the tax burden on motorists, Brown is receiving support from the usual suspects including Democrats in the Legislature who have become the party of the public employee unions favoring more revenue for higher pay, and radical environmentalists for whom the price of fossil fuels can never be high enough. Even some in the business community are signaling that they, too, could support higher levies on California drivers if the result is improved roads. (By now you would think that these otherwise astute political players would realize that Faustian bargains with the tax-hikers always end badly).
The impediment to the grand scheme of those who want ever higher taxes is, of course, Proposition 13 which requires a two-thirds vote of each house of the Legislature. Deprived of their supermajorities in the last election cycle, Democrats would need help from Republicans. So the big question is will the Democrats be able to pick off a handful of Republican votes.
We sure hope not. Not only would this be bad policy but the California Republican Party has, in recent years, made progress in establishing a reputation as the only party to represent average working folks against multi-billion dollar tax increases. And voting for tax hikes as a Republican is a surefire way to end a political career.
Moreover, to their credit, Republicans have proposed credible transportation plans of their own to provide needed funding for road construction and maintenance, but without raising taxes.
Nonetheless, we’re hearing rumors that a couple of Republicans might acquiesce to a tax increase. They should know better as California already ranks second in the nation in gas tax rates, even without counting the hidden carbon tax. The new tax would make the state an outright number one and would add to the already highest gasoline prices.
Expect Republican legislators to be wined and dined and invited to dance by those lobbing for higher taxes. These favor seekers will be wearing their most benign looking sheep costumes but legislative Republicans should be aware that these are actually wolves who, once they have gotten the votes they want, will turn on them without provocation if it suits their interests.
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.
“What a salesman,” he said, mockingly. “I guess that’s what you learned … selling that stock that went south.”
– California Governor Brown, to challenger Kashkari, during televised debate Sept. 4th, 2014 (ref. SF Gate)
If anyone wants to know what the theme of Governor Brown’s attacks on GOP candidate Neel Kashkari is going to be over the coming weeks preceding the November 4th, election, his remarks in their debate last week would probably provide accurate clues. At least a half-dozen times, Governor Brown smeared Kashkari with accusations of being beholden to his banker friends on Wall Street. You know, those guys who shorted the investments of millions of small investors and turned America into a debtors prison? The sharks at Goldman Sachs? The banker bullies who took taxpayer funded bailouts and then collected billions in personal bonus checks? It will play well.
But Governor Brown is the king of taxpayer bailouts. Because pension funds, the biggest players on Wall Street, are getting bailed out by taxpayers. And over the corrupt courts who deny activists their chance to get pension reforms onto the ballot, or deny voters who have passed pension reforms the chance to enforce them, Gov. Brown presides. Over California’s obscure but powerful Public Employee Relations Board, an entity that consistently overrules common sense details of proposed pension reform and compensation reform, Gov. Brown presides. And before the billions in taxpayer sourced public sector union dues that deluge every policy debate, every press briefing, every lobbyist’s bank account, or politician’s war chest, Brown bows down, beholden, and says – “your wish is my command.”
California’s state and local governments owe an estimated $1.0 trillion dollars (ref. CPC Study), about half of it in the form of unfunded retirement healthcare and pension liabilities for government workers, the other half for bonds and short-term borrowing to finance projects whose costs were inflated by unions, or deficits whose root cause is government union greed. Every dime of that debt benefit a public sector union agenda; every dime of it was facilitated by bankers. Unions and the bankers worked together to con voters into approving the myriad measures that lead to this fiasco, or, even more likely, pressured beholden politicians behind closed doors into enacting them without voter approval.
And Governor Brown presides over this entire, gigantic, exploitative joint venture between government unions and financial firms. Who will bail out California’s state and local governments from a trillion dollars of debt?
Who does Brown think will pay for the bailout, when government worker pension funds report too many of their investments were comprised of “that stock that went south?”
Who does Brown think benefits from obscenely inflated asset prices that make life unaffordable except to the super rich? Pension funds benefit, of course! Without asset bubbles, the pension funds would collapse overnight, just like subprime mortgage derivatives did back in 2008. The same corruption. And the same victims.
What a salesman. What a hypocrite. Governor Brown, the taxpayer bailout king.
Across California this November, voters will decide on local tax measures promoted as necessary to “keep teachers in classrooms,” and to “protect public safety,” when invariably the amounts being raised are roughly equivalent to the amounts by which pension funds are planning to raise contributions. CalPERS intends to increase their required annual contributions by 50% over the next five years. CalSTRS needs an additional $5.0 billion per year, or more. Jerry Brown is no dummy. He can connect the dots, but he’d better make sure the voters don’t.
The pension bankers and their union allies hide behind rhetoric that is transparent in its falsity, with a press that is either too innumerate, too busy, too biased, or too scared to challenge any of it. CalPERS claims their investments help California’s economy, when 90% of their investments are made out of state, and 16% of their retirees live out of state. Union officials claim their pensions are “modest,” citing “averages” of $25,000 or less, but not revealing how those averages include millions of people who only worked a few years for state or local government and barely vested a pension. The truth: For recent retirees who benefit from the “enhancements” of the past few years, the average non-safety pension plus benefits in California is over $60,000 per year; for safety retirees it is about $100,000 per year.
And Brown leads this chorus of deceit with abandon, claiming last week that thanks to his pension reform (AB 340), “government employees will pay 50% of the normal contribution,” conveniently neglecting to explain the “normal contribution” is deliberately underestimated via using hyper-optimistic rates of return when making the calculation, and ignoring the fact that the unfunded liability (caused by years of insufficient “normal” contributions) requires a much larger “unfunded contribution,” for which public employees, their unions, and the politicians like Brown who are controlled by the pension bankers and the unions, expect taxpayers to bear 100% of the cost.
Bond issuers earn billions on fees to enable California’s state and local governments to accumulate unsustainable debt. Pension funds pay billions each year to financial firms to speculate on global markets in a desperate attempt to prolong the nominal solvency of unsustainable government pensions. And when these bills come due, and when the investment returns fail to meet expectations, taxpayers fund the bailout.
Neel Kashkari may or may not have some explaining to do. But Governor Brown, the bailout king, has no business calling anybody, anywhere, a tool of bankers.
* * *
Even close observers of the California High-Speed Rail Authority have struggled to track developments for the state’s planned bullet train. The debacle began in November 2008, when 52.7% of California voters approved Proposition 1A and triggered serious planning for what could be the most expensive construction project in human history. With that kind of money at stake, unions were obviously inspired to be part of this boondoggle.
The California High-Speed Rail Authority has become justly notorious for backroom deals, secretive administrative actions, and lack of transparency. But most Californians are at least vaguely aware that the project has been mismanaged and misrepresented.
Proposition 1A – placed on the ballot by the California State Legislature – authorized the State of California to borrow $9.95 billion to begin design and construction of a $45 billion complete high-speed rail system linking San Francisco, Los Angeles, San Diego, and Sacramento. Including interest payments, the Proposition 1A commitment was estimated to be $19.4 billion to $23.2 billion for bonds to be paid back over 30 years. According to Proposition 1A, that money borrowed by the state was supposed to be supplemented with significant funding from the federal government, private investors, and municipal governments.
Proposition 1A also promised that the bullet train would be able to travel non-stop from San Francisco to Los Angeles in 2 hours, 40 minutes. Presumably many Californians who voted for it – including the 78.4% of San Francisco voters who approved it – imagined a fast train speeding between two world-class cities along the median of Interstate 5. They were wrong.
Here’s the current appalling status of California High-Speed Rail:
1. The California High-Speed Rail Authority has spent $587 million on consultants as of September 30, 2013. The California State Treasurer has sold at least $703 million worth of bonds (Buy America Bonds and perhaps others) for California High-Speed Rail as of May 13, 2013.
2. The estimated cost has been dramatically revised. Instead of being $45 billion for the entire system, it is now $68 billion just for the line between San Francisco and Los Angeles, and the high-speed rail will be “blended” with other commuter rail lines at the beginning and end of the route. One group has estimated that the entire system may exceed $200 billion if bond interest is included and the federal government does not provide additional grants.
3. The California State Treasurer cannot sell the Proposition 1A state bonds because a judge determined in November 2013 that the California High-Speed Rail Authority failed to comply with the law. While the California High-Speed Rail Authority has already obtained $2,942,000,000 from the federal government, possibly under false pretenses of a commitment to matching funds, the Republican majority in the U.S. House of Representatives is intent on stopping further grants until the Authority gets its act together. No private investors have emerged – corporations want to GET money from the Authority through contracts, not give it money to be squandered. Cities in the San Joaquin Valley where the line will be built first have no money to invest in it – Fresno is nearly bankrupt.
4. Governor Jerry Brown desperately included $250 million in his 2014-15 budget for California High-Speed Rail to be obtained from “Cap and Trade” allowances paid by emitters of greenhouse gases as part of the California Global Warming Solutions Act of 2006 (Assembly Bill 32 or AB 32). But the project is expected to increase greenhouse gas emissions during four years of initial construction. The Authority claims it will earn the Cap and Trade funds because offsets from its tree planting program (as well as other activities such as “cleaner school buses and water pumps in Central Valley communities”) will allow it to produce “zero net emissions.”
5. With the “blended” plan, there are serious challenges to achieving the 2 hour 40 minute travel time required in law. An analysis claiming that the time can be met includes the train going over the Tehachapi mountain range (north of Los Angeles) at 150+ miles per hour. There is idle talk about digging a long tunnel for the bullet train through the seismically-active San Gabriel Mountains from Palmdale to Los Angeles, but this is probably to lull citizens of Santa Clarita into believing the rail won’t go through their town.
6. To the surprise and confusion of hipster high-speed rail supporters in San Francisco and Los Angeles, this bullet train will be a local, with stops at least in Merced, Fresno, Hanford or Visalia, Bakersfield, and Palmdale. In June 2013, the Authority awarded a $970 million contract (with provisions for an additional $55 million) to Tutor Perini/Zachry/Parsons (a joint venture) to design and build the first 29-miles of the high-speed rail between Madera and Fresno by February 2018. People are supposed to be able to ride the high-speed rail between Merced and Palmdale by 2022.
7. The California High-Speed Rail Authority erred by awarding the first design-build contract for a 29-mile stretch that includes 25 miles in one segment assigned for environmental review (Merced to Fresno) and four miles in another segment assigned for a different environmental review (Fresno to Bakersfield). While it received full environmental clearance for the 25-mile stretch, it has not received clearance for the 4-mile stretch. In December 2013, the federal Surface Transportation Board rejected a secretive request from the Authority for an exemption to environmental review. If it can’t get the federal exemption, the Authority’s design-build contract is in jeopardy.
8. Owners of 370 parcels that the California High-Speed Rail Authority needs for the first 29-mile stretch are apparently resisting or holding out on selling their property. At last report in mid-December, the Authority had allegedly closed escrow on five parcels. The Authority has now received authorization from the California Public Works Board to possess two parcels through eminent domain.
Based on these eight points alone, who would still be eager to proceed with this project besides Governor Jerry Brown, the corporations seeking contracts, and a scattering of citizens committed to various leftist causes related to urban planning and environmentalism? Unions.
In a backroom deal, without any public deliberation or vote, the board of the California High-Speed Rail Authority negotiated and executed a Project Labor Agreement (called a “Community Benefit Agreement”) with the State Building and Construction Trades Council of California. This agreement gives unions a monopoly on construction trade work and certain construction-related professional services.
In a January 16, 2013 email about the Project Labor Agreement to the former chairman of Fresno County Economic Opportunities Commission, the Small Business Advocate of the California High Speed Rail Authority stated the following:
The Community Benefits Agreemeent (CBA) is an internal administrative document that was not necessarily intended to be circulated for public comment, however, that doesn’t mean you cannot provide me your input. The document was added to Construction Package #1 and Addendum 8 and I’ve attached it herein for your convenience. It includes regulatory compliance and is being reviewed by the Federal Rail (sic) Administration.
There is no evidence available to show that the Federal Railroad Administration approved the Project Labor Agreement, as required by law. But the final version of the agreement was signed in August 2013. No board member or administrator of the California High-Speed Rail Authority has commented in a public meeting about the agreement that will give unions control of most of the claimed 100,000 job-years of employment over a five-year period.
When State Senator Andy Vidak, with Congressman David Valadao, held a press conference critical of California High-Speed Rail on January 17, 2014 at the site of the eventually-to-be-demolished Fresno Rescue Mission, there were protesters: construction union leaders, lobbyists, public relations officials, and activists. The Fresno Bee reported this about the press conference:
In a news release prior to the announcement, Vidak indicated that his goal is to kill the bullet train. He tempered his in-person remarks, however, as he faced a crowd that included both high-speed rail critics from his home area in Kings County and a couple dozen representatives of labor unions who support the project…Rail supporters, some clad in hard hats and safety vests, booed Vidak as they wielded their own signs proclaiming high-speed rail as “good for the local economy, good for air quality and good for jobs.”
The Fresno Business Journal reported this about the press conference:
Dillon Savory, an advocate representing several local unions, commented after the event that high-speed rail would not only provide needed jobs, but it would help improve the Valley’s air, which has been heavily polluted this winter. Also, the cost of roadwork in the area is about double the cost of high-speed rail, making road construction less cost effective, Savory said. Savory criticized the anti-high-speed rail forced for trying to pit rail against water. He said the greater issue is putting people back to work with decent paying jobs. He said many union workers are only finding temporary work for about two weeks at a time. That is not putting food on the table, he said.
In 2013, Savory was the manager for the successful union-backed campaign to defeat a ballot measure (Measure G) supported by the Mayor of Fresno that would have allowed the city to outsource garbage collection. The political professionals are getting involved.
When the groundbreaking ceremony occurs for California High-Speed Rail, perhaps in an abandoned Madera County cornfield seized through eminent domain by the Authority, expect thousands of construction union workers to be bused in to block and neutralize any protesters. Governor Brown cannot suffer any more embarrassment over this boondoggle and debacle.
California Streets and Highway Code Section 2704.09 (implemented by California voters in November 2008 as Proposition 1A, as authorized by Assembly Bill 3034 (Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century)
Top-40 Donors to Campaign to Convince California Voters to Borrow $10 Billion to Start Building High-Speed Rail
Election Results by County: Proposition 1A (2008)
May 7, 2008 Senate Appropriations Committee legislative analysis for Assembly Bill 3034 (source of estimated costs of bonds, including interest payments)
July 2012 – California’s High-Speed Rail Realities: Briefly Assessing the Project’s Construction Cost, Debt Prospects, and Funding (“The Realistic – No Additional Federal Funding scenario results in a total debt burden of $203 billion between 201 3 and 2058.”)
June 2013 – Contribution of the High-Speed Rail Program to Reducing California’s Greenhouse Gas Emission Levels (includes “plans to plant thousands of new trees across the Central Valley” and “cleaner school buses and water pumps in Central Valley communities”)
November 15, 2013 – Project Update Report to the California State Legislature (source of report that $587 million was spent on consultants)
Vidak Rails Against Bullet-Train Plan, Met by Bipartisan Crowd at Fresno Event – Fresno Bee – January 17, 2014
Vidak Calls for High-Speed Rail Revote – Fresno Business Journal – January 17, 2014
California High-Speed Rail Scam
Past Articles in www.UnionWatch.org on Unions and California High-Speed Rail
Unions Creep Closer to Monopolizing California High-Speed Rail Construction – December 6, 2012
Watch Union Official’s Rude Antics at California High-Speed Rail Conference – January 15, 2013
Unions Await Fantastic Return on High-Speed Rail Political Investments – January 22, 2013
Kevin Dayton is the President & CEO of Labor Issues Solutions, LLC, and is the author of frequent postings about generally unreported California state and local policy issues at www.laborissuessolutions.com. Follow him on Twitter at @DaytonPubPolicy.
Thank you, Gov. Jerry Brown.
The governor on Thursday sided with California parents seeking to protect their children from sexual predators in the classroom, over the interests of the California Teachers Association and the California Federation of Teachers seeking to protect their members by circumventing and defeating the most significant lawsuit – Vergara vs. California – challenging California statutes – including teacher dismissal laws – impeding educational opportunities for children but arduously protected by CTA and CFT.
The governor vetoed Assembly Bill 375.
AB375, by Democratic Assembly Education Committee Chairwoman Joan Buchanan, intended, ostensibly, to streamline the process by which bad teachers can be dismissed. It was hastily introduced this session after a stronger bill had been killed last year at the behest of the CTA. Following a public outcry over that bill’s demise, even CTA understood the need for damage control, given sex abuse scandals involving teachers in the state’s largest school district, Los Angeles Unified. Faced with a practical inability to fire bad teachers, LAUSD officials resorted to paying them to go away – including paying millions to settle misconduct lawsuits.
From the start, AB375 was a “Rosemary’s Baby” bill: ghostwritten by the CTA, replete with protections for its members at the expense of children. It contained a “get out of jail free” card that limited the timeframe for adjudicating misconduct cases. It created new layers of protections for teachers in a process already stacked in their favor. It even limited the number of witnesses who could be deposed.
In sum, it was a phony “reform” bill. But, given the intervention of Democratic legislative leaders, it was fast-tracked to the governor’s desk with the expectation that he would simply sign it.
Then, while the bill was still pending with the governor, proponents committed a major miscalculation in assuming the governor was in their pocket. The teachers unions – supported by California Attorney General Kamala Harris and other state officials – filed motions in Los Angeles Superior Court to immediately dismiss the Vergara lawsuit. Trial is scheduled for 2014.
Shame on them, for nothing less than political malfeasance.
But this time, their chutzpah backfired, thanks to the rag tag army of parents, education reformers, administrators and school board members who called upon the governor to veto the bill. The governor – who had already signed AB484 – another flawed bill favored by the unions – refused to sign AB375.
Now what? Existing law on teacher dismissals must still be changed, but power has shifted to reformers seeking protections for children. When the Legislature reconvenes in January, it will mark a rare opportunity to see an emboldened alignment of reform forces willing to take on the fight in virtually every branch of government: a legislative strategy will be launched anew – but one that cannot be beholden to merely protecting bad teachers, as was AB375.
This legislative battle will unfold during an election cycle, when the public can clearly see the flow of money and whether legislators are looking out for kids rather than their campaign coffers.
Judicially, the Vergara case will proceed, signaling that parents are increasingly turning to this key branch of government to remedy the persistent failures of the Legislature to write bills that benefit families – rather than lawmakers’ financial benefactors.
And, finally, 2014 affords the people a chance to launch our own ballot initiative to write protections for our children, who are – as stated in our state Constitution – guaranteed safety. The simultaneous launching of an initiative can be a powerful political tool to hold legislators accountable to do the right thing.
Rarely, is there such an alignment of “the stars” in the political process.
Romero, a Los Angeles resident, served in the California Legislature from 1998 to 2008, the last seven years as Senate majority leader. This article originally appeared in the Orange County Register and is republished here with permission.
Last week UnionWatch received an email from a fairly prominent SF Bay Area journalist who shall remain anonymous. It said “Solidarity forever! You scabs can go to hell.”
The email conversation that ensued was civil, and the final email received from this journalist had a different tone entirely, concluding with this: “If you’re auditing the county budgets and are non-partisan, I owe you an apology–but the “Union Watch” heading made me think you were part of the new war on unions.”
For nearly three years, UnionWatch, along with its parent organization the California Public Policy Center, have been offering news and analysis focused on the impact of California’s public sector unions. Almost invariably, the perspective has been that public sector unions are too powerful and their demands have brought California’s state and local governments to the brink of bankruptcy. And yes, auditing local and statewide public sector budgets and compensation is the biggest reason for this conclusion.
Whether or not this perspective constitutes a “war on unions,” it is nonetheless one that puts us in the company of noted Democratic leaders, including San Jose Mayor Chuck Reed, who was quoted in Bloomberg last year as saying “There’s a difference between being liberal and progressive and being a union Democrat.”
For his courage in standing up to public sector unions, Mayor Reed has been relentlessly vilified. Yet he joins a growing number of Democrats who are criticizing public sector unions, including San Francisco public defender Jeff Adachi, former state assembly speaker Willie Brown, former state senate speaker Gloria Romero, Los Angeles Mayor Antonio Villaraigosa, and, off the record, Governor Jerry Brown. In a guest column for the Orange County Register late last year, commenting on the defeat of Prop. 32, Gloria Romero described quite well what’s starting to happen in California, and has already happened in states from Michigan to Rhode Island:
“The bright spot, even in this loss, is that, while proponents were vastly outspent by the opponents led by public sector unions, a new coalition of Republicans, Independents and Democrats has clearly begun to form. If this coalition can be solidified, it may be California’s best bet to move political reforms forward in the next decade by working across party lines in a new California political playing field.”
All Californians, whether they are right-wing, left-wing, or wingless, are going to need to confront the fact that union pay scales, union retirement benefits, and union obstruction of reforms that might streamline state and local government, are one of the primary causes of California’s economic challenges. In a recent editorial, referencing a recent CPPC study, we estimated that the true size of California’s “Wall of Debt,” is over $800 billion, more than $80,000 for every household in the state.
One of the decidedly nonpartisan perspectives of UnionWatch is to recognize that the financial sector benefits when governments spend more than they collect and have to borrow. Bond issuers collect billions in fees. Similarly, the financial sector benefits when pension benefits are enhanced, and guaranteed by taxpayers, since fund managers collect billions in fees, and invest the money with no moral hazard. The alliance between the financial sector (typically associated with the ideological right), and the public sector unions (typically associated with the ideological left), is one of the biggest unreported political dynamics of our time. And they’d like to keep it that way.
To recognize that the pecuniary interests of Wall Street Bankers and public sector union bosses are aligned complicates the entire notion of right and left. To trumpet that point of view, repeatedly, as we have endeavored to do, certainly does not endear us to the true believers on either side. So perhaps it’s time for more liberals and good government Democrats to recognize this complexity, and begin to confront the possibility that public sector unions do NOT generally operate in the public interest.
Union spokespersons representing firefighters, along with those representing teachers, nurses and police, frequently say that compensation for their members must be elevated in order for them to be able to “afford to live in the communities they serve.” They are missing a key point: Nobody can afford to live in these communities. And the reason nobody can afford to live in these communities is because public sector unions, along with their allies in the environmentalist lobby and on Wall Street, have pooled their political influence to pass laws and regulations that have given California an unaffordable cost of living. Critics of right-to-work laws correctly point out that wages are lower in right-to-work states. What they ignore is the fact that the costs for everything – housing, water, gasoline, electricity, and taxes – are even lower. People make less in right-to-work states, but they have more disposable income. Perhaps that is an area where the allegedly conservative leaning public safety unions should focus their legal and political energy – a political agenda aimed at lowering the cost of living for everyone, instead of raising their own pay to unaffordable levels.
Dan Borenstein, a journalist with the Bay Area News Group (Borenstein is not the one who emailed us last week), is blessed with not only the financial literacy to fully appreciate the unsustainable excess of union negotiated pay and benefits, but the courage to write about it. His perspective, however, is that of a liberal, and he has consistently explained that public sector union influence is an issue that should concern progressives.
Steve Greenhut, a journalist formerly with the Orange County Register, and author of the book “Plunder, How Public Employee Unions are Raiding Treasuries, Controlling our Lives, and Bankrupting the Nation,” leaves little doubt as to his perspective on public sector unions. But Greenhut is no Republican. He is a libertarian, who has frequently admonished good government Democrats to defer the argument over what government programs we need until after we’ve tackled the public sector unions – who have taken all the spoils of government for themselves.
When libertarians and progressive Democrats are stepping forward in growing numbers to question the power of public sector unions, and when the secret partner of public sector unions is none other than the Wall Street financial sector, something bigger than partisan politics is at work.
Residents of Kings County (in the San Joaquin Valley of California) see local opportunities for economic growth and job creation through the construction and operation of proposed solar-powered electrical generation facilities. At the same time, local residents worry about the possibility that out-of-town developers could build or partially build these solar power facilities on former farmland but then abandon them to rust if solar energy turns out not to be profitable.
This is why the Alliance for a Cleaner Tomorrow (ACT), a project of the Coalition for Fair Employment in Construction (CFEC), mailed 10,000 educational pieces this week to Kings County households informing them that construction trade unions are abusing the the California Environmental Quality Act (CEQA) to grab control of solar power construction jobs, in the process increasing costs of construction and risking the economic viability of solar energy generation in the San Joaquin Valley.
In a press release issued today (September 25, 2012), the Alliance for a Cleaner Tomorrow reported that it intended to make 10,000 Kings County households aware of the epidemic of union “greenmail” against renewable energy projects in the San Joaquin Valley – and specifically against Recurrent Energy‘s Mustang Solar Generation Project in Kings County.
Groups such as California Unions for Reliable Energy (CURE) and the International Brotherhood of Electrical Workers Union Local No. 100 in Fresno exploit the California Environmental Quality Act (CEQA) and other environmental laws to delay proposed projects. Their objective is to coerce developers to hand over monopoly control of the construction to unions through a Project Labor Agreement. The CEQA abuse racket is called “greenmail,” and it is rampant throughout California.
A San Francisco-based company, Recurrent Energy, succumbed to the union CEQA threats and signed a Project Labor Agreement for construction of the Mustang Solar Generation Project in Kings County.
Eric Christen, executive director of the Alliance for a Cleaner Tomorrow, says the following in the September 25, 2012 press release:
For too long, construction unions have claimed, with a straight face, that solar power is bad for the environment. It’s as shameless as it is absurd. The unions block or threaten to block solar power projects using the California Environmental Quality Act – commonly known as CEQA – until the developer surrenders to the unions and agrees to sign a Project Labor Agreement (PLA). This is exactly what happened on the 160 megawatt solar power plant in Lemoore called the Mustang Solar Generation Project.
The press release also outlines the details of how greenmail works.
The Kings County Planning Commission had received this letter from CURE when Recurrent (Energy) first made its plans known for a Kings County project. Like rain in springtime, these implicitly threatening letters appear like clockwork as soon as a project is announced anywhere in California…The International Brotherhood of Electrical Workers Local No. 100 has a long history of hiring the law firm of Adams, Broadwell, Joseph & Cardozo out of South San Francisco to dig up alleged environmental problems with solar projects. One of the most prominent was the Fresno Airport Parking solar project in 2007.
Adams Broadwell Joseph & Cardozo is cited in the Project Labor Agreement for the Mustang Solar Generation Project.
The press release concludes with the motivation for sending the mailers:
We’re going to make sure that Kings County residents and the people of California and the San Joaquin Valley know why solar power plants are so expensive, why they are taking so long to build, and why local workers don’t get to build them,” Christen added.
When will the California State Legislature reform CEQA to stop this? The Fresno Bee published an editorial on Sunday, August 5, 2012 calling for Governor Jerry Brown to take a leadership role in reforming CEQA so that unions can’t exploit it to coerce Project Labor Agreements from developers. See “EDITORIAL: Governor Again Moves Toward Needed CEQA Reform Steps – Changes to the State Law Should Be Vetted and Discussed by All Parties” – Fresno Bee – August 5, 2012.
The editorial states the following:
Brown recently has been dropping hints he is open to a significant reform of the law. It’s clearly needed, and we hope this isn’t another instance of him shooting off his mouth. California needs significant CEQA reform.
CEQA is being abused, and defenders of the law get defensive whenever anyone suggests it. The most pernicious abuse is known as “greenmail,” with groups threatening CEQA lawsuits to get labor concessions or other side deals.
Real Reform of CEQA to Stop Union Greenmail Will Be an Uphill Battle
Setting aside the last-minute proposed Sustainable Environmental Protection Act of 2012 (which was never formally introduced and probably would have little effect in stopping greenmail), the California State Legislature considered one bill in 2012 to significantly reform CEQA. On January 9, 2012, the Assembly Natural Resources Committee considered a bill introduced by Assemblywoman Shannon Grove (R-Bakersfield) – Assembly Bill 598 – which would have given the California Attorney General the exclusive authority to file or maintain a lawsuit alleging that an Environmental Impact Report (EIR), negative declaration, or mitigated negative declaration does not comply with CEQA.
The committee rejected the bill on a 6-3 party-line vote, with Republicans in support and Democrats opposed. The hearing was an opportunity for the committee to discuss how certain parties, particularly labor unions, exploit public participation in the CEQA process to achieve objectives unrelated to environmental protection.
Assemblywoman Grove cited four specific examples of different unions (the Teamsters, the California Nurses Association, the United Food and Commercial Workers, and the Service Employees International Union) filing CEQA lawsuits to delay projects as leverage to extract labor concessions from businesses:
- In 2011, the Teamsters union filed a CEQA lawsuit against VWR International, a distributor of laboratory supplies. The union, in an attempt to intimidate VWR International into signing a union labor agreement at a proposed new facility in Visalia, is using CEQA to allege that trucks entering and exiting the facility will harm the environment. This large facility is likely to employ more than 100 people in a county that has an unemployment rate over 15% and desperately needs jobs, yet there are truckers trying to stop the use of trucks! And this is after an EIR has already been approved for the process.
- In 2009, the California Nurses Association sued Alameda County under the pretense that the county did not comply with CEQA in approving a project to demolish the deficient Eden Medical Center Hospital and other buildings and replace them with a new state of the art hospital and medical office complex. The nurses’ union did not want Sutter Health to close the San Leandro Hospital and reduce the number of beds at the Eden Medical Center. Here we see nurses protesting against a state-of-the-art new hospital.
- The Service Employees International Union filed a CEQA lawsuit in 2007 to stop construction of Providence Holy Cross Medical Center in Mission Hills and a CEQA lawsuit in 2006 to stop construction of Sutter Medical Center in Sacramento. Both of these lawsuits occurred in the context of SEIU organizing campaigns.
- The United Food and Commercial Workers Union has been behind numerous CEQA lawsuits filed by a Davis lawyer against proposed Wal-Mart projects in Northern California. These lawsuits are related to unions concerns over non-signatory competition for grocery sales.
Testifying on behalf of my former employer (Associated Builders and Contractors of California), I discussed how certain construction trade unions abuse CEQA as a weapon to delay projects until the owner agrees to require contractors to sign a Project Labor Agreement with unions. The Western Electrical Contractors Association (WECA) and the Chambers of Commerce Alliance of Ventura & Santa Barbara were the other public supporters of the bill.
Assemblywoman Linda Halderman (R-Fresno) cited the specific example of a union using CEQA to try to force a contractor to sign a Project Labor Agreement to install solar panels at Fresno-Yosemite International Airport. Assemblyman Steve Knight (R-Palmdale) adeptly exposed the Attorney General’s double standard of opposing the additional responsibilities assigned in AB 598 while remaining silent about adopting additional responsibilities through other legislation.
Legitimate environmental organizations such as the Sierra Club and the Planning and Conservation League opposed the bill. The Teamsters and United Food and Commercial Workers (UFCW) union opposed the bill in writing but did not speak at the hearing. Democrats on the committee opposed the bill, but some of them (along with the Attorney General’s office) acknowledged that some parties abuse CEQA. Assemblyman Bill Monning (D-Santa Cruz) said nothing about how the Carpenters union used CEQA in a recent high-profile campaign to delay and ultimately derail the proposed La Bahia Hotel in Santa Cruz.
Kevin Dayton is the President & CEO of Labor Issues Solutions, LLC, and is the author of frequent postings about generally unreported California state and local policy issues at www.laborissuessolutions.com.
California, like Greece is perpetually in fiscal trouble. Overoptimistic revenue forecasts coupled with spending $2 billion more than expected has California in a deep hole. Governor Jerry Brown has the same non-solution as ever, hike taxes.
Brown wants a “temporary” (as in seven years) tax hike. Given we all know there are no such things as temporary tax hikes in California (seven years is permanent enough in the first place), and also given the California school budget needs an axe, I say let him.
Gov. Jerry Brown announced on Saturday that the state’s deficit has ballooned to $16 billion, a huge increase over his $9.2-billion estimate in January.
Lawmakers and others were hoping that a rebounding economy would help the state avoid steep cuts to social services. But revenue in April, the most important month of the year for income taxes, fell far short of expectations, leading to a shortfall of at least $3 billion in the current fiscal year.
The state has also spent $2.1 billion more than expected, according to the controller, further worsening California’s financial health.
Advocates involved in budget discussions say they expect deeper cuts to social services than Brown originally proposed in January. Union officials are also in negotiations with administration officials about ways to reduce state payroll costs, an issue that wasn’t on the table earlier this year.
Brown has said there will be even deeper cuts, mostly to public education, if voters do not improve tax hikes in November. He is seeking a quarter-cent increase in the state sales tax for four years and a seven-year hike on incomes of $250,000 or more that will range from 1 to 3 percentage points. He says the measure would raise $9 billion in the upcoming budget year.
Tax Hikes, Public Unions, and Union Sympathizers Hand-in-Hand
Whenever tax hikes are on the table, union supporters are at the front of the line demanding them.
Yahoo!News has additional details in California facing higher $16 billion shortfall
Under Brown’s tax plan, California would temporarily raise the state’s sales tax by a quarter-cent and increase the income tax on people who make $250,000 or more. Brown is projecting his tax initiative would raise as much as $9 billion, but a review by the nonpartisan analyst’s office estimates revenue of $6.8 billion in fiscal year 2012-13.
Supporters of the “Schools and Local Public Safety Protection Act of 2012” say the additional revenue would help maintain current funding levels for public schools and colleges and pay for programs that benefit seniors and low-income families. It also would provide local governments with a constitutional guarantee of funding to comply with a new state law that shifts lower-level offenders from state prisons to county jails.
A second tax hike headed for the November ballot is being promoted by Los Angeles civil rights attorney Molly Munger, whose initiative would raise income taxes on a sliding scale for nearly all wage-earners to help fund schools.
Anti-tax groups and Republican lawmakers say both tax increases will hurt California’s economic recovery. State GOP Chairman Tom Del Beccaro has embarked on a statewide campaign to discuss alternatives to Brown’s tax hikes.
The governor is expected to propose a contingency plan with a list of unpopular cuts that would kick in automatically if voters reject tax hikes this fall. In January, he said they would result in a K-12 school year shortened by up to three weeks, higher college tuition fees and reduced funding for courts.
Expect to hear Armageddon chants from public unions immediately if not sooner.
How Brown Ruined California in His First Term
Bear in mind that Governor Brown helped ruin California with public union collective bargaining rights in his first stint as governor, in the 70’s.
- The Educational Employment Relations Act of 1976, established collective bargaining in California’s public schools and community colleges
- The Ralph C. Dills Act of 1978 established collective bargaining for state government employees
- The Higher Education Employer-Employee Relations Act of 1979, extended collective bargaining to the state university system.
California schools and taxpayers are perpetually in the hole because of Brown’s idiocy decades ago.
Four Point Solution
Fixing the problem is easy to describe, but hard to implement given all the union sympathizers who want to further wreck the state.
- California needs to end collective bargaining of public unions
- California needs to claw back promised pension benefits
- California needs to end all defined benefit plans for public employees
- California needs to scrap prevailing wage laws that have crucified cities
Raising taxes will just cause the exodus of more corporations and highly salaried workers as noted in California Tax Revenues Plunge; Businesses Exit “Taxifornia” in Droves; Piecing Together the Jobs-Picture Puzzle
Taxed to Death
If Brown continues to suck up to the public unions responsible for the mess California is in, expect still more businesses to leave, expect the unemployment rate to rise, and expect a continued plunge in revenue.
About the author: Mike “Mish” Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management. His top-rated global economics blog Mish’s Global Economic Trend Analysis offers insightful commentary every day of the week. He is also a contributing “professor” on Minyanville, a community site focused on economic and financial education. Every Thursday he does a podcast on HoweStreet and on an ad hoc basis he contributes to many other websites, including UnionWatch.