High Costs of Pro-Union Agreements & Policies Negates Transportation Tax

According to my father, in the 1950s and ’60s, California had the best transportation agency in the entire world. But all that changed with the election of a new, anti-growth, small-is-beautiful governor by the name of Jerry Brown.

Now, fast forward 40 years. Governor Brown, version 2.0, proposes a budget that assumes a big increase in transportation taxes and fees. The California Legislature shouldn’t just say no, it should say hell no.

Where to start? First, let’s take judicial notice of the fact that California is already a high tax state with the highest income tax rate and the highest state sales tax in America. But more relevant for the issue at hand, we also have the highest fuel costs in the nation. This is because of both the 4th highest excise tax on fuel and the fact that refineries are burdened with additional costs to comply with California’s environmental regulations.


Despite analysis findings that Caltrans is overstaffed by 3,500 employees,  the California State Auditor & Senator John Moorlach conclude that the agency is both incompetent and inefficient in the maintenance of California’s roads and highways.


The high cost to drive in California might be understandable if we were getting value for our tax dollars. But we aren’t. A big problem is that Caltrans is dysfunctional, plain and simple. It has never fully recovered from the days when the agency was effectively destroyed by Gianturco. A report by the California State Auditor just a couple of months ago concluded that a primary responsibility of Caltrans – maintenance of our highways – is not being executed in a manner that is even close to being efficient or competent. Senator John Moorlach, the only CPA currently serving in the California legislature, reacted saying that “This audit reinforces the fact that our bad roads are not a result of a lack of funding. They’re a result of a lack of competence at Caltrans.” Moreover, a report by the Legislative Analyst concluded that Caltrans is overstaffed by 3,500 employees costing California taxpayers over a half billion dollars a year. All this compels the obvious question: Why, for goodness sake, do we want to give these people even more money?

Another unneeded and costly practice consists of project labor agreements for transportation construction projects. These pro-union policies shut out otherwise competent companies from bidding on projects resulting in California taxpayers shelling out as high as 25% more than they should for building highways and bridges.

Finally, California’s environmental requirements are legendary for their inefficiency while also doing little for the environment. Exhibit A in this foolishness is Governor Brown’s incomprehensible pursuit of the ill-fated high speed rail project. Not only has the project failed to live up to any of the promises made to voters, it is currently being kept alive only by virtue of the state’s diversion of “cap and trade” funds which are supposed to be expended on projects that reduce greenhouse gas emissions. But in the Kafkaesque world of California transportation policies, the LAO has concluded that the construction of the HSR project actually produces a net increase in emissions, at least for the foreseeable future.

No one disputes the dire need for improvements in California’s transportation infrastructure. But imposing draconian taxes and higher registration fees that serve only to punish the middle class while wasting billions on projects that don’t help getting Californians get to work or school cannot and should not be tolerated. Legislators who present themselves to voters as fiscally responsible need to understand that a vote for higher transportation taxes will engender a very angry response from their constituents.

About the Author: 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.

Five Key Measures of California's Fiscal Health

Editor’s Note:  The recent election of John Moorlach as a state senator is one of the best things that has ever happened to California’s legislature. Not because of his party affiliation, or his ideology, but because he has a skill in short supply in Sacramento – he is a Certified Public Accountant. Moorlach is the only CPA currently serving in California’s state legislature. Earlier this month Senator Moorlach took his evaluation of the State’s fiscal health to the Senate floor, where he argued that California must focus on fixing the unfunded liabilities. Moorlach also released 5 key indicators of California’s fiscal health. In his own words:

We must remember that overspending from past legislatures, combined with growing unfunded liabilities and the lingering effects of the Great Recession, have left California in a weakened fiscal condition,” said Senator Moorlach.  “Even though this budget brings a measure of spending restraint to California, we still need a long-term budget framework that focuses on restoring our state’s fiscal health.

Five Key Measures of California’s Fiscal Health

1.  Tax Rates:  The state has the nation’s highest income, sales and gas taxes, when cap and trade is included. California also has the highest corporate tax in the western United States and the fourteenth highest property tax. According to the Tax Foundation’s 2015 Facts and Figures, that puts California fourth in overall tax burden on a per capita basis.

2.  Unfunded Pension Obligations:  The Legislative Analyst’s Office estimates current CalPERS, CalSTRS and UC Pension unfunded liabilities at approximately $140 billion.  As expressed on the graph below, the Pew Charitable Foundation found that, according to 2012 data, California is ranked highest in the nation for unfunded public employee pension obligations at $131.3 billion (Pew Charitable Foundation, most recent comparable data between states from 2012).


3.  Unfunded Retiree Medical Obligations:  Data from 2013 showed California ranked second in the nation with $66.0 billion in unfunded retiree medical costs. New York was number-one at $67.7 billion (2013 data by National Association of State Retirement Administrators).  However, the State Controller’s Office 2014 data suggests that California has since surpassed New York and now has $71.8 billion in unfunded retiree medical liability.

4.  Deferred Infrastructure Maintenance: California has 31,827 miles of major roads and at least 34 percent of these are rated in ‘poor’ condition.  The Reason Foundation’s Adrian Moore recently pegged the unfunded road maintenance number at $59 billion (OC Register, January 16, 2015).

5.  Unrestricted Net Assets/Deficits:  California’s most recent Comprehensive Annual Financial Report (CAFR) shows an unrestricted net deficit of $117 billion.  The unrestricted net asset (or deficit) is a summary of the state’s available assets after removing from the balance sheet fixed assets (buildings, parks, roads, etc.) minus outstanding debt obligations for these fixed assets.  This commonly used fiscal health indicator should be positive for healthy organizations.  Here’s a recent history of the net unrestricted assets for California.


About Senator John Moorlach: State Senator John Moorlach gained national attention 20 years ago when he was appointed Orange County Treasurer-Tax Collector and helped the County recover from its bankruptcy filing – at the time the largest municipal bankruptcy in U.S. History.