Vernon, California is so famous for its history of corruption that it was the municipal star of season two of HBO’s “True Detective” series. Now the tiny L.A. County city can claim another achievement: Vernon is the only California city with more public employees than residents.
Vernon’s 210 residents are served by 271 city employees, according to data on the California state controller’s website.
No. 2 Irwindale is a distant second – though just a 30-minute drive (could be hours – depends on traffic in L.A.’s tortuous downtown) from Vernon. In that East Los Angeles County city, there’s one government employee for every one of Irwindale’s 1,415 residents. San Francisco is the only major city on the Top 10, with one government employee for every 22.7 residents.
Here’s the Top 10:
Public employees in Vernon earn an average of $107,848 (plus benefits of $37,571). That’s much higher than nearby hegemon, Los Angeles, where public employees average $83,356 (plus benefits of $12,620).
Several top Vernon officials earn salaries in excess of $300,000:
Mark Whitworth (City Administrator): $402,335
Daniel Calleros (Police Chief): $361,644
Michael Wilson (Fire Chief): $361,359
Carlos Fandino Jr. (Director of Gas and Electric): $324,354
Andrew Guth (Fire Battalion Chief): $304,243
While many of Vernon’s city employees continue earn six-figure salaries, the average city resident earns far less. Per capita income in 2010 was $19,973. Median household income in 2010 was $38,500 – down dramatically from 2000, when it was over $60,000. According to the 2010 U.S. Census, 5% of the population lived below the federal poverty line. In 2000, it was 0%.
How does the city fund that dramatic gap in income? By taxing utilities for industry in the city. But because Vernon’s utility rates are among the highest in California, many businesses are moving out. That’s going to put pressure on city officials to trim public services – or to capitulate to the logic of history and become part of a neighboring city. How about Bell?
Conor McGarry is a fall Journalism Fellow at California Policy Center. Andrew Heritage contributed data analysis. Source: California state Controller’s Office.
The business community is in a very tough position in California. The California Legislature is completely controlled by the Democratic Party and its pro-labor base.
The California Republican Party and Republicans candidates are their most natural allies but Republicans are only viable in a relatively small minority of legislative races.
The result is that the California business community must build alliances with the pro-labor Democrats and foster good relationships with the Democratic leadership and their power base—the state’s public employee unions.
The rise of the so-called “moderate Democrat” is perhaps the best manifestation, which is essentially a Democrat that tends to vote pro-business on some select issues, and pro-labor on many other issues, particularly those that relate to public employee compensation.
But the real danger here is that the California Business Community finds itself in the precarious position of actually enabling “high cost government,” characterized by higher taxes and a deteriorating business climate.
Big business will almost always oppose a tax increase that impacts them directly, but they tend to stay neutral or even support tax increases on other taxpayer classes such as small businesses and individuals.
Prop. 30 from 2012 is a perfect example. The measure temporarily increased income taxes on individuals and businesses earning over $250,000 per year, and also included a ¼ sales tax hike with the $6-8 billion in annual revenues going to education.
The business community did not like it but they tolerated it because the state was in a difficult financial position, and the tax was supposed to be temporary. Certain segments of the business community, particularly small business, still strongly opposed Prop. 30 (and oppose Prop. 55 as well) because their members are directly impacted and less able to shoulder the brunt of the tax increase.
Prop. 55 on the November 2016 ballot seeks to extend the Prop. 30 tax increases for another 12 years, and is projected to raise nearly double the revenue, $8-11 billion annually.
Big business in California has not mobilized a campaign to defeat Prop. 55 despite the fact that it represents a “broken promise” and is essentially a permanent tax increase.
The California Chamber of Commerce and Cal-Tax have voted to oppose the measure, but have not committed significant resources because Prop. 55 primarily impacts small business and individual taxpayers.
The California Business Roundtable continues to be neutral but is scheduled to reconsider its position in mid-September. Many local chambers of commerce have also stayed off Prop. 55 because they have a large number of representatives of the education community on their boards.
Another consideration is that the business community may not see a path to victory, short of spending in excess of $10 million or more, and they still may not win. Prop. 55 is supposedly polling above 60%, but still likely vulnerable if a major opposition campaign is mounted given that Prop. 30 only passed with a 55% Yes vote.
I believe that it is in the California business community’s interest to strongly oppose any major tax increase because proponents of higher taxation in California will keep coming back for more, albeit with a bigger war chest and more determination.
The reality is that the cost California government is growing at an unsustainable pace due to the inability of the California Democrat Legislature, as well as most locally elected officials, to adequately control public employee benefit costs, particularly pension and health care.
For example, state and local debt is already at all-time highs despite record revenues, with total debt for public employee compensation costs estimated to be in excess of $1.3 trillion as of 2013, and likely is closer to $2 trillion in 2016. Calpers debt has increased by more than 50% since 2014, jumping to an estimated $150 billion in 2016 due to heavy investment losses and things are not projected to get any better.
Something is very wrong here—the state has amassed record revenues, but public spending and debt is still climbing at unsustainable rates of 10-25% per year. And next to nothing is being reinvested in California in the form of roads and improved infrastructure.
These facts may not be altogether clear to anyone who has not studied the fiscal condition of state and local governments in California, and who has intimate knowledge of the state’s public employee unions.
I would encourage the California business community to become more serious about controlling the cost of government because even if the immediate tax increase at hand (Prop. 55 and others) does not directly impact your members this time around, next time it will, particularly once the more favorable revenue options are exhausted.
Over the long-term, California’s approach to taxation has been to max out every tax revenue source available to it, and that’s why we have the highest income taxes (13.3%), the highest sales taxes (9.5%), the highest gas taxes, and the list goes on and on.
The most important fact to recognize is that there will literally be no end to the amount of tax increases, and their negative economic impacts, that the public employee unions and hospitals interest will “need” to fund public sector costs that are rising far in excess of the ability of taxpayers and the state’s economy to pay for them.
To stem this trend, a strong public case will need to be presented to voters about the accelerated decline of the business climate in California, and its consequences for the state’s future.
The only alternative to fighting an ever increasing state tax burden is to continue to raise taxes higher and higher on a shrinking economic base, something the Democrats appear to be completely at peace with, but something that is disastrous for the future of the state’s economy and its residents.
At some point in the not so distant future, the only choice the California business community will have is to flee California for greener pastures as the more than 10,000 businesses have done in recent years.
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.
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
Back in the early 2000’s, in the aftermath of the internet bubble’s collapse, California’s state and local governments endured a period of austerity that resulted in “furloughs,” where, typically, employees would take Friday’s off in exchange for a 20% cut in their pay. That is, they worked 20% less, and made 20% less in pay – but their rate of pay was not cut.
This display of “sacrifice” was an eye opener for private sector workers, especially salaried employees of small businesses, who endured cuts to their rates of pay at the same time as their hours of work increased. Most people in the private sector back in the early 2000’s felt lucky to have a job, even if it meant working harder and making less.
There’s a lesson to be learned from the period of state and local government “furloughs” in California: California’s government functioned just fine with 20% fewer hours spent at the job, overall, and California’s government workers got by, overall, making 20% less money. So since we know these cuts are feasible, it is interesting to estimate just how much money Californians would save, if there were a 20% reduction to California’s state and local government workforce, and then there were a 20% reduction to the pay and benefits collected by those state and local government workers who remained employed.
Getting information on just how much California’s state and local workers make is notoriously difficult. California’s state controller’s Public Pay database collects the data, but presents “averages” that include part-time employees in the denominator, and do not consolidate the data. Transparent California, a public information project jointly produced by the California Policy Center and the Nevada Policy Research Institute, provides very good information on individual pay and benefits, but also does not consolidate the information.
A California Policy Center study, “How Much Do California’s State, City and County Workers Really Make?,” uses 2012 raw data from the state controller that screens out part-time workers to develop averages for city, county and state workers.
California’s State and Local Government Employees
Average Compensation by Entity – 2012
A recent UnionWatch analysis of Los Angeles Unified School District provided a baseline estimate for total teacher compensation – although in variance to the table, please note the same analysis adds an estimated value of $4,033 per teacher to take into account the state’s direct contribution to CalSTRS. As a representative example of total teacher pay, LAUSD is pretty good; the California Dept. of Education reports the Statewide Average Teacher base salary averaged $69,324 during 2014, nearly identical to the LAUSD analysis.
Los Angeles Unified School District
Average Compensation by Job Class – 2013
Armed with this information, and cross-referencing with the U.S. Census Bureau’s estimate of current numbers of full time state and local government employees in California (ref. Government Employment & Payroll, and select “state” and “local,” in each case selecting “California”), we can make a reasonable estimate of how much our full time state/local workforce is currently costing taxpayers. We can also estimate how much a 20% reduction in workforce combined with a 20% reduction in total compensation would save taxpayers each year:
California State and Local Government Employees, Est. Total Cost per Year
Projected Annual Savings via 20% Reduction to Headcount and to Compensation
While this thought exercise may seem to be an exercise in futility, the fact is, we’ve tried it once already, and it worked. That is, during the furloughs of the early 2000’s, California’s state and local government workers got by just fine with a 20% reduction in pay, and California’s state and local government services functioned adequately even though 20% of the workforce was absent (i.e., they were all taking Friday’s off).
It is fair to ask why the focus must always be on austerity. Why not pay everyone more in the private sector? That’s a good question and the answer is simple: It’s impossible. The average total compensation in California’s private sector is roughly half what public employees make. There isn’t enough money in the world to pay everyone this much money, and it is grossly unfair to taxpayers and private workers to treat public sector workers as a privileged class, exempt from the economic challenges facing everyone else.
The problem is even deeper than just one of inequity and insolvency. The problem with creating a privileged class of government workers is that they no longer make common cause with the people they serve. This consequence should trouble social liberals at least as much as it troubles fiscal conservatives, because the most powerful bloc of voters in California, unionized, politically active government workers, are putting their personal financial interests ahead of other worthy government projects. Imagine what $52.7 billion could buy.
The solution is to combine cutbacks in government employee compensation with investments in infrastructure and reductions in regulatory hurdles in order to reduce prices for goods and services. Government created artificial scarcity has raised the price of housing, energy, water and transportation to levels that only the elite can easily afford. If government workers were compelled to make common cause with other workers, instead of this elite, maybe they would finally support reforms to lower the cost of living.
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Ed Ring is the executive director of the California Policy Center.
The town of Corte Madera, CA, makes up for what it lacks in size and population, roughly 4 square miles with 9,425 residents, in its exorbitant government compensation packages. City government has approximately 43 full time employees with the average compensation package coming in at over $170,000.
That means every man, woman and child in Corte Madera pays $778.41 to fund just 43 positions.
A disproportionate number of these employees are firefighters. Amazingly, it’s routine for fire chiefs in California to earn well over $275,000 in total compensation. For instance, the fire chief in nearby San Rafael, population 57,713, earned $294,119.45 in 2012 total compensation, but it is quite surprising to see that such a small town employs three Battalion Chiefs with compensation packages around $294,000, $293,000, and $275,000. Then there’s the Director of Emergency Services who raked in over $313,000 in compensation in 2012.
This is just some of the information that is now available on TransparentCalifornia.com, a database of over 2 million public employee records that is searchable by name, job title and jurisdiction. Transparent California is provided by the California Public Policy Center as a public service and allows citizens to find out what public employees actual make, not what they or others claim they make.
Inflated compensation packages in Corte Madera don’t just come from high salaries, but from tens of thousands of dollars in benefits that are often hidden from the public eye. In Corte Madera, several city employees received health insurance policies that cost the government $20,894 a piece. This is hardly an isolated incident. In the Contra Costa Community College School District, over 150 employees are receiving medical plans that cost over $25,000 a year. The school district’s highest priced plans top out at over $29,000 a year!
This hurts taxpayers in two ways. The first is obvious — funding for $20,000+ premiums are ultimately paid for by taxpayers, some of whom don’t even have any healthcare of their own.
The second effect is more subtle, but well worth noting. The government’s systemic overpaying for health insurance, for a conservative estimate of well over 1 million California employees, results in raising the price of health insurance higher than it would have been otherwise.
As Dr. Thomas E. Woods documented in his book, Rollback, the artificially inflated cost of a good not only makes consumers, on the margin, less likely to purchase as much health-care coverage as they otherwise would have, but the less-price conscientious government purchaser acts like a de facto subsidy for insurance companies. This reduces the need for the producer to compete in normal market-based ways — improving the quality of the product offered and/or lowering the price. This means that the quality of health insurance that presently exists is of a lower quality than it would be without Corte Madera and many other government agencies purchasing $25,000 insurance plans.
This phenomenon is similar to how increasing the demand for higher education through federal aid and student loans has precipitated a dramatic increase in tuition over the last several decades.
Just as college tuition’s dramatic increase in price would grind to a screeching halt if consumers had to bear the full cost — by eliminating federal aid and government loans — the same principle applies to health insurance.
If government workers had to pay the full or partial cost of their health insurance or could choose between a $15,000 plan and $10,000 in additional salary or a $25,000 health plan, the demand for these high-priced plans would drop, thus putting downward pressure on the industry as a whole, This would create additional incentives for insurance companies to offer more competitively priced plans, and the price of health insurance would decrease for all as governments spent less on health insurance.
What Transparent California reveals is that taxpayers pay twice — initially by paying for the public employee’s compensation and again when they or their employer goes out to buy health insurance and find that the price has been artificially inflated.
Robert Fellner is a researcher at the Nevada Policy Research Institute (NPRI) and joined the Institute in December 2013. Robert is currently working on the largest privately funded state and local government payroll and pensions records project in California history, TransparentCalifornia, a joint venture of the California Public Policy Center and NPRI. Robert has lived in Las Vegas since 2005 when he moved to Nevada to become a professional poker player. Robert has had a remarkably successfully poker career including two top 10 World Series of Poker finishes. Additionally, his economic analysis on the minimum wage law won first place in a 2011 essay contest hosted by the George Mason University.
In what may be the most embarrassing California-related headline to appear in a while, Reuters announced last month: Tony resort city mulls bankruptcy, blaming wages, pensions. That supposedly “tony” city is Desert Hot Springs, on the northern edge of the Coachella Valley near Palm Springs. Though it’s certainly true that Palm Springs and many of its suburbs are booming resort and retirement meccas, Desert Hot Springs long ago picked up the nickname “Desperate Hot Springs.” It’s a magnet for parolees and poor retirees living in low-cost tract houses and trailers.
On November 19, the Desert Hot Springs city council declared a fiscal emergency, usually a precursor to bankruptcy. The city has $20 million in annual budgeted expenses and only $14 million in revenues. As is common these days, city officials blamed outside forces: the economic downturn, the housing bust, lagging development. The downturn has eased, though, and most California cities are recovering from the housing bust. And it’s no real surprise that developers shun the city, given that a Desert Hot Springs address is practically the kiss of death in the Coachella Valley.
Desert Hot Springs, in fact, went bankrupt once before—in 2001, after the city lost a lawsuit against a developer who claimed discrimination when officials stopped him from building a neighborhood of manufactured homes. The city’s crime problem grew so severe that Riverside County officials launched a military-style invasion. “Hundreds of law enforcement officers backed by armored cars and Black Hawk helicopters swept into the city . . . in a massive show of force that stunned the gangs, parolees and street thugs who had terrorized the community for years,” the Los Angeles Times reported in 2009. Crime has since fallen, thanks to a greater police presence and expansion of community anti-gang programs. But the city still struggles with persistently high unemployment and a generally impoverished population. In short, there’s nothing “upscale” about the place.
Now things could get even worse. Officials fear that cuts in the budget—70 percent of which goes to the police department—will undermine the progress made on public safety. But one need only look at the city’s salary schedule to understand what’s really going on. The average annual wage in the police department is $119,000 a year, with the average total compensation topping $164,000. And that doesn’t include the unfunded liabilities—the unaccounted-for costs to pay for generous retirement benefits. Wages for all categories throughout the city are astoundingly high, with many officials earning total-compensation packages well above $200,000 a year. The city manager’s salary and benefits top $300,000 annually.
The plight of Desert Hot Springs has prompted concern among California’s hardy pension reformers, who see it as a sign of things to come. But the state’s legislative leaders have mostly shrugged, perhaps because Desert Hot Springs, like other cities sliding into Chapter 9—Stockton, San Bernardino, Vallejo—happens to be on the economic margins. These economically troubled cities, the thinking goes, aren’t reflective of the state as a whole. But is that correct?
Leading the charge to get a statewide pension initiative on the November 2014 ballot is Democrat Chuck Reed, mayor of one of California’s wealthier cities, San Jose. Recently, Reed noted that San Jose’s police costs had soared in recent years, even as the city has significantly cut the police workforce. He blames this reduction in services on San Jose’s uncontrolled pension debt (the city’s pension-reform measure, which passed overwhelmingly last year, remains in legal limbo).
As they ignore cascading budget crises in California cities, the state’s unions have been ramping up their attacks on Reed and his measure. Assembly Speaker John Perez’s former spokesman, Steve Maviglio, lambasted Reed on behalf of a union-funded think tank—though he didn’t address any of the specifics of Reed’s measure. Instead, Maviglio dismissed the idea that pension reform is a bipartisan cause, pointing out that the measure enjoyed “right wing” financial support as well as the support of this “conservative” writer. “Right out of the gate,” Maviglio wrote, “the state’s leading Democrats blasted the proposal. And aside from Reed himself, not a single big city mayor—Democrat or Republican—joined Reed’s effort. In fact, one of the Democratic mayors that Reed initially had on board is expected to renounce his support.”
While the Democratic leadership opposes a measure that takes aim at one of its vital constituencies, a few serious Democrats are backing Reed—not because of some supposed right-wing conspiracy, but because they have enough foresight to see what’s happening to municipal services. California’s roughest cities are harbingers. “All of the cities that have gone into bankruptcy have different variables that have contributed to their problems,” said Jack Dean, vice president of California Pension Reform. “The one consistent theme that all of them have is high payroll and pension costs.” Unless those costs are reined in, Desert Hot Springs won’t be the last city to find itself in desperate straits.
Steven Greenhut is the California columnist for U-T San Diego. This article originally appeared on December 5, 2013 in City Journal and is republished here with permission from the editor.
“Jennifer Muir, a spokeswoman for the Orange County Employees’ Association, which represents more than 18,000 public employees in Orange County, said the California Public Policy Center’s study was a politically motivated attack on public employees and unions. Aside from promoting the center’s anti-public employee union agenda, Muir said, the reports are misleading and shift focus away from the discussions that matter most. Union leaders have long urged for people to consider the possibility that private-industry employees are being undercompensated and should receive retirement benefits and health coverage.”
Orange County Register, April 19, 2013
The study Muir refers to, entitled “Irvine, California – City Employee Compensation Analysis,” was published on April 8th, 2013, by our parent organization, the California Public Policy Center. To call this study “a politically motivated attack on public employees and unions,” as Muir alleges, is itself a distraction. It’s easy, and necessary, to impugn the motives behind information when the information itself is so embarrassing.
As noted, Muir went on to accuse the study of “shifting focus away from the discussions that matter most… that private-industry employees are being undercompensated.”
Let’s recap some of the facts regarding Irvine’s city employee compensation, drawing both from the CPPC study (which itself used payroll data provided by the City of Irvine), as well as from the Orange County Employee Retirement Systems 2011 Annual Report:
- The average City of Irvine employee receives direct pay of $95,751 per year, and when the cost of employer paid benefits is included, this average goes up to $143,691 per year (Source: CPPC Study, Table 1).
- The average participant in the Orange County Employee Retirement system who worked 25-30 years and retired last year collects a pension of $70,920 per year. If they worked 30 years or more, like virtually every private sector worker, that average goes up to $81,192 per year (Source: OCERS Annual Report, page 109).
Now let’s suppose that private industry employees are indeed being undercompensated. What are the economic implications of paying them a proper living wage ala Irvine – and every other unionized public sector job in California? Here are some facts:
- In 2010 there were 8.3 million residents in California over the age of 55, which is the age by which a public employee may reasonably be assumed to have logged 30 years – assuming they completed their education by age 25 and entered the workforce for a full career in public service (source: U.S. Census Bureau). Also in 2010, the GDP of California – its entire economic output – was $1.9 trillion (source: LA Times). This means that if everyone over the age of 55 in California got a pension of $70,000 per year, it would cost $581 billion per year, 31% of California’s entire economic output. Ms. Muir is invited to explain exactly how we’re going to accomplish this.
- Using the same census data, in 2010 there were 15.8 million people between the ages of 25 and 55. Assume that two-thirds of these people work full-time, and the other one-third are unemployed spouses, stay-at-home parents, or are otherwise supported by a working partner. If every one of these 10.5 million people collected total compensation of $140,000 per year, this would cost $1.47 trillion per year, or 77% of California’s entire economic output.
So according to this utopian vision, if everyone could just receive the same compensation packages as the average full-time worker for the City of Irvine, it would consume 108% of California’s entire economic output.
There’s a bit more to this, however. In the real world, wages and salaries fluctuate between around 44% and 54% of GDP (source: TelltaleChart.org). We may argue over what share of GDP legitimately belongs to workers vs. corporations – bearing in mind that corporate profits are an absolute necessity for a public sector pension plan to have any hope of remaining solvent, and these profits are also necessary to invest in equipment and conduct R&D if we are to have any hope of remaining an economically viable nation – but let’s use an unprecedentedly generous proportion. Let’s assume that 60% of California’s GDP is comprised of wages, benefits, and pension payments.
To complete this thought, we’re now going to have to indulge in some basic algebra (T=trillion), one of those nasty tools of analysis that never plays well in a 30 second TV commercial, but nonetheless is an ideal tool to express cold quantitative reality, rather than utopian union fantasies:
[ .58T (pensions) + 1.47T (wages) ] / .6 (40% for corp. profits) = GDP of 3.48T
Isn’t that terrific? All we have to do is wave a wand and instantly, we’ll nearly double California’s GDP from $1.9 trillion per year to 3.5 trillion per year. Nobody will be “undercompensated” any more! Then we can afford to implement this compelling vision of social justice – total compensation of $140,000 per year for every full-time worker, then after 30 years, a pension of $70,000 per year. It should be easy. Perhaps new legislation is called for.
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UnionWatch is edited by Ed Ring, who can be reached at firstname.lastname@example.org
Individuals who oppose comprehensive and fundamental reform of public employee compensation can only be considered to be in denial.
Almost every government agency in the country is going broke right now. Almost all are cutting back services and reducing staff. Government is diminishing at the state and local levels before our very eyes. Our streets aren’t being fixed. Parks and libraries are closed. Schools are cutting back programs. Inmates are being released from jails and prisons. Fire protection services are being diminished.
Those who say the problem is just the stock market or the state of the economy are wrong. To be sure, the stock market and larger economic forces have their influence. But the primary reason state and local governments are going broke is because the compensation packages that elected officials have negotiated with public employee unions are far too generous.
Critics of public employee compensation reform can decry advocates of fairer contracts for public employees until they are blue in the face, but this won’t change the essential reality: As a group, public employees work fewer hours in a week, fewer weeks in a year, and fewer years in a career, while receiving exceptional salaries and other benefits, and then retire at a younger age with incomparably better pensions than private-sector employees. That’s just the way it is. That’s why there are often hundreds of applicants for each position that opens up in the public sector.
Fortunately, reform is on the way. Last year, San Diego and San Jose enacted fundamental public employee pension reform in their cities – including for existing employees – with 66 percent and 69 percent of the vote respectively.
It is time for public employee compensation reform in the county of Santa Barbara, as well. No one questions – or should question – the value of the work that public employees do. Indeed, as I have consistently pointed out, it is precisely because the work that public employees do is so vital that it is essential there is reform of public employee compensation.
Perhaps the best approach would be an initiative signed by 12,500 county registered voters to place a measure on the June 2014 ballot that would: 1) prohibit COLAs for county employees for the next four years; 2) limit vacations; 3) limit sick leave; 4) limit holidays; 5) cap the actuarial assumption for the rate of investment earnings in the county retirement system pension fund at 6.25 percent; 6) require that county employees pay half the cost of their retirement premiums, including both funded and unfunded portions of retirement funds; and 7) require that county employees pay half the cost of their health benefits following retirement and before they are covered by Medicare.
There is no reason for public employees to continue to be a protected class in our society. It is time to reform public employee compensation now.
Lanny Ebenstein is president of the California Center for Public Policy.
California state controller John Chiang has unveiled a website that tracks public employee pay. Unfortunately, the website provides grossly misleading information. The data compiled and summarized on this website report average wages that are literally one half to one-third the amount of total compensation actually earned by California’s state and local public servants. The impact of this will be to further obscure the reality of just how much California’s public servants really make. If you go to the state controller’s website and download the raw data spreadsheets several problems become immediately obvious:
(1) The records are not sorted by city or county, so it is impossible to look at the information – or extract the information for serious analysis – for any one city or county. Everything is mixed up.
(2) The records include columns for overtime and “other pay,” but there is ZERO data in them. Anyone who has reviewed public pay records knows that, for example, often the “other pay” is equivalent to 50% or more of the base salary, and overtime can also often equal as much as 50% or more of the base salary. The pay numbers summarized on this website are therefore grossly understated.
(3) The state controller’s reported pension contributions, on average, added up to 3.5% of city payroll and 2.9% of county payroll, which is absurdly understated. Payroll data obtained by the California Public Policy Center’s study showed that Anaheim’s pension contribution was 26% of direct pay (including overtime), and San Jose’s pension contribution was 41% of direct pay (including overtime). As a percent of total compensation, Anaheim’s pension contribution was 17%, and San Jose’s pension contribution was 26%. These amounts, far greater than what the state controller’s data suggests, are typical of California’s cities and counties, and do NOT take into account how much pension costs are going to increase once the pension funds lower their projected earnings.
(4) It is also clear from viewing the raw data that tens of thousands of part-time and temporary positions are included in the records. Including data for part-time workers dramatically distorts the averages downwards.
The casual visitor to this website will view the interactive map, click on their city or county, and see the “average wages” figure, thinking it is representative of what these employees make. But reporting wages while including part-time workers and while excluding the costs of benefits, overtime, and other pay, results in extremely understated averages. Total compensation, accounting properly for all these factors, is the only accurate way to assess how much an average worker really earns. Here is the data for three cities, comparing “average wages” as reported by the State Controller, vs. “average total compensation,” using actual payroll data obtained by the California Public Policy Center from the same three cities:
State Controller: Anaheim city worker’s “average wages” = $53,927.
Truth: Anaheim City worker’s average total compensation = $146,551.
State Controller: Costa Mesa city worker’s “average wages” = $71,379.
Truth: Costa Mesa city worker’s average total compensation = $146,863.
State Controller: San Jose city worker’s “average wages” = $61,308.
Truth: San Jose city worker’s average total compensation” = $149,907.
The California Public Policy Center’s studies on total compensation, including actual downloadable spreadsheets provided by these three cities, can be found here:
Merely averaging base wages paid, without including the costs for overtime, “other pay,” and employer paid benefits, is not an accurate measurement of how much someone makes. And the much higher total compensation figures reported by the CPPC still do not take into account what’s going to happen to required pension fund contributions when CalPERS and their counterparts finally abandon the fraudulently optimistic projection of 7.5% annual returns on the pension funds. As it is, the state controller has, for example, mislead viewers into thinking the average worker for the City of Anaheim only makes $53,927 per year, when in reality the average worker for the City of Anaheim makes $146,551 per year in total compensation. This is shameful deception.
The fact that the State Controller has gone to this much trouble to produce an overwhelming mass of data that, in fact, understates the amount our public servants make by at least a factor of 2x, undermines the credibility of the office, to put it mildly.
Before Wisconsin Gov. Scott Walker became a recall target for his efforts to reform collective bargaining in his state, I was a guest on a Madison radio show discussing the influence of public-sector unions and the significance of the state’s unfunded pension liabilities.
Instead of “Wisconsin Nice” – a euphemism for the polite, conflict-avoiding nature of Badger State culture – I faced a torrent of angry callers who accused union critics of trying to destroy the quality of life for working people. I asked one caller: What do we do about unfunded liabilities, those debts that current pension promises place on future generations?
“I won’t answer your question,” he said, refusing to dignify this perfectly reasonable question with a response.
The radio show was a preview of what was to come in Wisconsin – a season of angry diatribes, militant union marches, not-so-nice attacks on a governor who, after all, has done nothing more than reform a debt-laden system and has actually saved union jobs and saved unions.
Rather than engage the issues, the Left has chosen to echo the approach taken by callers to that radio show – stomp their feet, yell and scream and absolutely, positively refuse to provide an alternative path.
There’s something bizarre in all this, a reminder that the once-proud movement of working people has morphed into an upper-middle-class movement of coddled public employees who do not care about debt levels and eroded public services. They have their gold-plated pensions, and no one had better touch them or else.
Progressives used to pride themselves on their desire to help the poor, but in Wisconsin these days they’d rather throw the poor under the bus – a public bus, of course, with a union driver – to protect the relatively wealthy class of workers who administer government programs. So we’ve watched the antics – legislative Democrats heading to Illinois to deny the governor a quorum for his budget vote; truckloads of union activists and boatloads of union money pouring into the state capital; attempts to portray Walker as someone who is destroying the state.
But a funny thing happened on the way to the recall. Wisconsin’s economy is rebounding, its debt receding. The state is gaining jobs everywhere except in downtrodden Milwaukee, where Democratic gubernatorial candidate Tom Barrett serves as mayor, and where union control has its tightest grip.
At this late stage in the race, it’s purely a numbers game as both sides bring out the ground troops to get their voters to the polls.
Democrats will surely resurrect dead voters in Milwaukee, so I’m hoping that Walker’s margin of victory – poll late last week showed his lead at 5 to 7 points – is strong enough to exceed the expected margin of voter fraud.
Both sides are being careful, avoiding anything that might backfire.
For the pro-recall movement, that means desperately avoiding the central issue. For instance, the Barrett campaign website features a story on Walker’s supposed attack on hunting – yes, hunting – because of a privatization effort he is spearheading. Walker’s website isn’t too much better, as it focuses on crime problems in Milwaukee.
Many national pundits are focusing on the implications for the national presidential race, and on President Barack Obama’s chances of being re-elected. There are some clues in it, as national Democrats steadfastly avoid the state. But we all know that the Walker recall is a referendum on public-sector union reform.
One of the nation’s biggest problems involves public employees, their compensation levels and the degree to which their special privileges and demands are destroying public services and bankrupting cities, especially in California. Wisconsin is arguably an even more progressive state than California. It was the first state to allow public-sector workers to evolve into the equivalent of Teamsters.
But California has taken the matter much further than anywhere else in the nation.
California used to be the model for the nation in terms of public services. But without political competition, there has been no push-back as the unions grab more and more. No wonder the Golden State’s roads are crumbling, and our services are tarnished. The only answer from the union movement and their Democratic patrons, including Gov. Jerry Brown: higher taxes. The real question is whether Wisconsin voters want their state to turn into California but without the warm winters.
In particular, the Wisconsin governor recognized that collective bargaining is the core problem, in that it remains the key obstacle to improving public services through competition and truly progressive reform.
“The collective-bargaining component of Walker’s plan has yielded especially large financial dividends for school districts,” Christian Schneider of the Wisconsin Policy Research Institute wrote in City Journal magazine. Individual districts have saved millions of dollars because they can send their plans out to bid rather than buying from the union-monopoly health trust. That’s money they used to save teaching jobs.
Progressives should applaud; instead, they march on Madison. What phonies.
While California’s government is hopeless, we are seeing serious reforms at the municipal level, often spearheaded by progressive Democrats. San Jose Mayor Chuck Reed is promoting a pension reform initiative on Tuesday’s ballot, and he’s doing so with support from progressives in his city. Reed says there’s a big difference between union Democrats and progressive Democrats. The former are protecting one special interest group, and the latter have the public good in mind. It’s a compelling argument as we head into the final days of the Wisconsin recall.
If Walker wins, reform will spread across the country. If he loses, Wisconsin will head down the path of California or maybe even Greece, where rising debt, soaring taxes, a surly union movement and crumbling public services will be the order of the day. No wonder the recall movement wants to play on emotion rather than answer serious questions.
Steven Greenhut, based in Sacramento, is vice president of journalism at the Franklin Center for Government and Public Integrity. Write to him at email@example.com.
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