Two different solutions to California housing crisis – which will work?

house-constructionSACRAMENTO – Before the recent legislative recess, California Democratic leaders and Gov. Jerry Brown announced their intention to tackle one of the state’s biggest crises: housing affordability. It’s the rare instance where virtually everyone in the Capitol at least is in agreement about the scope of the problem, even though there’s far less agreement on solutions.

Real-estate prices have gotten so high that they stretch family budgets and are a root cause of California’s highest-in-the-nation poverty rates, based on the Census Bureau’s new cost-of-living-adjusted poverty measure.

The situation is so acute it’s drawn the attention of the national media. “A full-fledged housing crisis has gripped California, marked by a severe lack of affordable homes and apartments for middle-class families,” according to a recent New York Times article. Median home prices have hit a “staggering $500,000, twice the national cost.”

The problem is particularly bad in the state’s major metropolitan areas. The median single-family home price in the nine-county San Francisco Bay Area, for instance, has topped $750,000. Public-opinion surveys suggest soaring home prices – rather than job opportunities or the state’s business climate – are the key reason many people are moving to other states.

But while there’s broad agreement that housing affordability is in crisis, there are two schools of thought on how to address it. Democrats are primarily trying to raise taxes and fees to pay for more government-subsidized affordable housing, whereas Republicans want the state to chip away at local governmental barriers to home construction.

Legislators and the governor have made little progress in crafting a detailed housing plan for this legislative session. But there are a handful of bills moving their way through the Capitol that encapsulate their approach. Their high-priority measure, when legislators return to the Capitol late next month, is Senate Bill 2, which would impose fees of $75 to $225 on every real-estate transaction to provide $225 million in annual funding to subsidize developers of low-income housing.

“With a sustainable source of funding in place, more affordable housing developers will take on the risk that comes with development and, in the process, create a reliable pipeline of well-paying construction jobs,” according to the Senate bill analysis.

Senate Bill 3 also takes a similar approach toward building affordable housing. The measure authorizes $3 billion in general-obligation bonds to pay for low-income and transit-oriented housing. It would need to be approved by voters in the November 2018 election. There’s also talk about using proceeds from the cap-and-trade auctions to fund such programs.

One major bill embraces some of the concerns expressed by those who want to encourage market-oriented solutions to the problem. Senate Bill 35, by Sen. Scott Wiener, D-San Francisco, “creates a streamlined, ministerial approval process for development proponents of multi-family housing if the development meets specified requirements and the local government in which the development is located has not produced enough housing units to meet its regional housing needs assessment,” according to the bill summary. The streamlined process would apply where a project meets “objective zoning, affordability, and environmental criteria, and if the projects meet rigorous labor standards,” according to Wiener.

The bill circumvents local planning decisions, but New Urbanists and others say such pre-emption is needed because “not in my back yard” (NIMBY) sentiments among residents and city officials have impeded developers’ ability to add high-density housing in urban areas. The latter point – the requirement that workers receive union wage rates – has been a major sticking point for some conservatives, who believe the mandate could drive up the cost of home construction.

The building industry has neutralized another measure, Assembly Bill 199, which could have required such above-market wage rates for a wide range of privately funded housing projects. AB199 originally would have required “prevailing wage” for any project that involved an agreement with a “state or a political subdivision.”

The building industry argued that “the language was purposely ambiguous and could mean simple tasks, like a new porch, would require union labor,” according to a San Diego Union-Tribune report. The amended version removes that language and now applies only to projects that receive public subsidies.

There’s wide disagreement about whether additional mandates for affordable housing will substantially boost the supply of lower-priced homes. Even if the new subsidies pass, those dollars are a drop in the bucket, given the overall size of the state’s housing market, critics say. And government mandates that builders provide a set number of affordable units as part of their new subdivisions may ramp up the overall costs for market-based units.

The Union-Tribune’s Dan McSwain compared the process to something out of a Kafka novel: “Raise the overall price of market units, thus ensuring that fewer get built, in order to subsidize a handful of poor families … who win a lottery administered by local government agencies, with staffs funded by housing fees that inflate prices.” McSwain blamed high costs partially on city-imposed fees that inflate housing prices by 20 percent or more.

The Legislature isn’t about to tackle that broader problem. Legislators have yet to reform the California Environmental Quality Act and other environmental rules that drag out the approval process for major new developments. For instance, Southern California Public Radio recently reported that the Newhall Ranch development in Los Angeles County finally “is moving forward after recently winning key approvals.”

That Santa Clarita Valley project, which will house 60,000 people, has been in the works since the 1980s and still is a long way from a ground-breaking. It’s been delayed by environmental lawsuits and legal challenges related to its possible impact on climate change.

Southern California Public Radio quoted real-estate experts who say the project will only make a small dent in the region’s housing shortage. But is that the fault of the developer or of policymakers who have ignored the problem so long that adding tens of thousands of new housing units only amounts to adding a few drops in the housing bucket?

The good news is the Legislature and governor are paying attention to a serious problem that has been percolating for years. The question, as always, is whether state officials can craft legislation that will make a real dent in the problem.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

State Assembly defies new transparency law

Photo courtesy Franco Folini, flickr

Photo courtesy Franco Folini, flickr

SACRAMENTO – California voters in November overwhelmingly passed Proposition 54, a constitutional amendment to promote transparency by requiring all bills in their “final form” to be published online for 72 hours before legislators vote on them. It’s designed to stop last-minute gut-and-amend bills where the leadership pushes through substantive measures that haven’t been vetted – or even read by most members who vote on them.

It’s no secret that many legislative leaders dislike the proposal. For years, reform-minded lawmakers have proposed similar measures – but they never made it before the voters. Opponents of the rule say they are all for transparency, but that requiring such a long period of time for the public and critics to review all bills makes it difficult to get complicated and important measures put together as the legislative deadline approaches.

One would think that Prop. 54’s passage would have settled the argument, but a fracas last week in the Assembly suggests that core debates over the measure are far from settled and might soon find themselves hammered out in court.

The Legislature adjourned Friday following the deadline for bills to pass out of their house of origin. Senate President Pro Tempore Kevin de Leon, D-Los Angeles, assured that bills coming from the Senate waited 72 hours before a final vote. But Assembly Speaker Anthony Rendon, D-Paramount, is accused by Proposition 54’s backers of allowing more than 90 bills to be voted on without having been published for a full 72 hours before the vote.

There’s a question over terminology in the proposition’s language: “No bill may be passed or ultimately become a statute unless the bill with any amendments has been printed, distributed to the members, and published on the internet, in its final form, for at least 72 hours before the vote, except that this notice period may be waived if the governor has submitted to the Legislature a written statement that dispensing with this notice period for that bill is necessary to address a state of emergency … .” The issue involves the term “final form.”

The initiative’s proponents say final form means the final form before a vote in each house of the Legislature. But the Assembly argues that final form “does not pertain to a vote to move a bill to the opposite house and instead applies to legislation presented on the floor of the second house,” according to a Sacramento Bee explanation.

The chief clerk of the Assembly issued a statement explaining that “Assembly bills will not be in final form until they are presented on the floor of the Senate.” Proponents of Prop. 54, including former state Sen. Sam Blakeslee, R-San Luis Obispo, and moderate Republican financier Charles Munger Jr., strongly disagree with that interpretation and say they might go to court to defend what they say is the clear intent of the initiative.

One element of Prop. 54 that’s not in contention: The section finding that bills in violation of the 72-hour waiting period could be invalidated by the courts. That’s where the latest fracas resembles a game of chicken. De Leon clearly wasn’t taking any chances with his house’s interpretation of the proposition’s meaning. Rendon could have, say, passed a minor bill on a shorter notice as a test case to see how the courts would rule. Instead, if it’s true that he didn’t wait the full 72 hours for the votes, he may have put dozens of bills in jeopardy if the courts side with initiative drafters.

Supporters of the rule applying to both houses argue that it would be incomprehensible to give members of one legislative body (and their constituents) 72 hours to review a bill and deprive the same thing of members of the other legislative body.

Critics of the “both houses” interpretation suggest that Prop. 54’s drafters could simply have included the language “in each house” following the words “final form.” But the initiative’s drafters believe the plain reading of the initiative means that every bill must be in print 72 hours before each vote. Including the “in each house” language could have been interpreted to mean 72 hours in each house (for a possible total of six days), something proponents clearly didn’t intend.

It’s increasingly likely this dispute ends up at the state Supreme Court, with the stakes higher than ever. It will pit the intent of an initiative that passed by a nearly two-to-one margin and in all of California’s 58 counties against more than 90 recently passed bills, which could possibly be tossed aside even if the governor signs them.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This piece was originally published by CalWatchdog.com

Teachers Unions Losing Long War Over Parental Choice

LAUSD school busSupporters of charter schools, homeschooling and other forms of school choice are so used to fighting in the trenches against the state’s muscular teachers unions that they often forget how much progress they’ve made in the last decade or so. Recent events have shown the degree of progress, even if they still face an uphill — and increasingly costly — battle.

The big news came from a local school-district race, although it wasn’t just any school district but the second-largest one in the nation. Charter-school supporters won two school board seats (there’s still some vote counting in one of them) in the massive Los Angeles Unified School District, and handily disposed of the union-allied board president. The race was followed nationally, and set the record for the most money spent on a school-board race in the United States, ever.

The total cost was estimated at $15 million, with charter supporters spending $9.7 million, according to estimates from the Los Angeles Times. Typically, choice supporters get eaten alive by the teachers’-union spending juggernaut. It’s usually good news if our side can at least raise enough money to get the message out, but it’s a shocker — in a pleasant way — to find the charter folks nearly doubled the spending of the union candidates.

Various reformers, including Netflix cofounder and Democrat Reed Hastings, invested serious money in the race. He donated $7 million to one charter group, the Times reported. Another top donor was former Los Angeles Mayor Richard Riordan, a moderate Republican, who spent more than $2 million. Once again, we saw that this was not some right-wing attack on unions. Victory didn’t come cheap, but it’s hard to understate the importance, from a reform perspective, of having a major school board run by a pro-charter majority.

LAUSD’s school Board President Steve Zimmer led the board in March to make a controversial — and largely symbolic — vote in favor of one of the more noxious school-union-backed bills to get a hearing in the state Capitol. Some charter supporters say Senate Bill 808 could be the death knell for most of the state’s charter schools, yet Zimmer’s support for it appears to have badly damaged his re-election chances. That’s another good-news event.

SB 808 is a brazen attempt to bring charter schools under the total control of local school districts, many of which are hostile to their very existence. According to the Senate bill analysis, “This bill requires all charter school petitions to be approved by the governing board of the school district in which the charter school is located, prohibits a charter school from locating outside its authorizer’s boundaries, and limits the current charter appeal process to claims of procedural violations.”

If educators wanted to create a charter school within any district in California and that district is run by a union-controlled school board that hates charters, then there would no longer will be any real workaround if the bill passes. That’s because the bill would wipe out appeals to the county and state level, except for some minor procedural matters.

Furthermore, the bill would let school boards decommission or reject charter schools if they are a financial burden. As the 74 Million blog reports, “that argument could be made about any charter, as state funds follow students as they leave school districts.” The bill allows the board to revoke a school’s charter upon a variety of broad findings, including any improper use of funds or “sustained departure” from “measurably successful practices,” or “failure to improve pupil outcomes across multiple state and school priorities…”

So, one instance of improper use of funds could shut down a school. Imagine if that standard were applied to the LAUSD itself, given its scandals. Charters succeed because they have the freedom to have a “sustained departure” from the failed union-controlled teaching policies. Under this bill, the core of their success could be cause for their shut down. And no school can always improve pupil outcomes in every category. These things take time, and measurements can be subject to interpretation.

In other words, the bill would place the fate of California’s charter schools in the hands of those most committed to their destruction. Given that the makeup of school boards can change every election, it would destroy any security parents could have in these schools: one successful union board election could mean the beginning of the end for the school, as union-backed boards use these new “tools” to dismantle the competition.

But there is good news. The bill was recently shelved, turned into one of those two-year bills that is technically alive but going nowhere fast. The Democrats control the state Capitol and the California Teachers’ Association arguably is the most powerful force under the dome, but many Democrats representing low-income districts aren’t about to mess with successful charters.

In other words, charter schools have come into their own, and we’re probably well past the point that the unions could so directly stomp them. They’ll do what they can to harass and hobble them, but such frontal attacks remain symbolic. And the courts continue to have their say, and frequently end up siding with the charter-school movement.

For instance, in late April the California Fourth District Court of Appeal ruled in favor of Anaheim parents who want to use the state’s parent-trigger law to turn a traditional public elementary school into a charter school. Under the trigger law, a vote by 50-percent of the student body’s parents can force low-performing schools to change the administration or staff, or revamp themselves into a publicly funded charter with more teaching flexibility.

The school district was adamantly against the change and made various challenges to a 2015 court decision approving the trigger. This is another victory for charter schools in California, although it has to be dispiriting to parents who have to continually fight in the courtroom while their kids get older. It’s been two years since the court approved changes at the school, which already has delayed improved education for two more class years.

But the court’s decision is still encouraging news, as the cultural sands shift in favor of educational alternatives, especially for low-income kids.

California candidates already are lining up for the 2018 gubernatorial race to replace Jerry Brown, who has been friendly to charters. One of the candidates is Delaine Eastin. She’s a close ally of the teachers’ unions. In the early 2000s, when she served as the superintendent of public instruction, Eastin tried to essentially outlaw homeschooling throughout the state.

California’s education code doesn’t directly mention homeschooling. The state’s compulsory education law mentions only an exemption for “children who are being instructed in a private full-time day school by persons capable of teaching … .” Homeschooling parents have long embraced a state-approved work around: They register as small private schools with their respective county boards of education.

Under Eastin’s leadership, however, those homeschools were required to file with the state Department of Education rather than the counties. And then Eastin sent a letter to district officials explaining that homeschooling as it is generally understood (parents without a teaching credential who teach their kids at home) “is not authorized in California, and children receiving homeschooling of this kind are in violation of the state’s truancy laws.”

Yet I talked to Eastin recently and she said she recanted her position long ago after getting quite an education from homeschooling parents. She even described herself as a supporter of charter schools. As with everything, we must follow Ronald Reagan’s advice for dealing with the Soviet Union (“trust, but verify”). But what does it say when one of the most dogged allies of unionized public schools now takes a position acknowledging the importance of parental choice?

It says that we’re making progress. It’s frustrating, plodding and expensive. But such progress should keep charter supporters encouraged as they head into the next round of battles.

This column was first published by the California Policy Center.

Jerry Brown Embraces Pension Shell Game

Jerry Brown budgetLOOMING PENSION PAIN–The Jerry Brown administration last week released its revised May budget and, lo and behold, it has finally decided to (kind of, sort of) tackle the state’s massive and growing level of unfunded liabilities – i.e., the hundreds of billions of dollars in taxpayer-backed debt to fund retirement promises made to the state’s government employees.

It’s best to curb our enthusiasm, however. The governor didn’t have much of a choice. This was the first state budget that is compliant with new accounting standards established by the Governmental Accounting Standards Board that requires states to more properly account for retiree medical and benefits beyond pensions.

Because of those new standards and low investment returns, the state’s unfunded liabilities (including the University of California retirement system) soared by an astounding 22 percent since last year. But even this new estimate of $279 billion in liabilities is on the optimistic side. Some credible estimates pin California state and local governments’ pension liabilities at nearly $1 trillion, based on more realistic rate-of-return predictions.

The pension system invites eyes-glazing-over debates about the size of the liability. That’s because debts are calculated on guesswork about future investment earnings. The California Public Employees’ Retirement System (CalPERS) recently voted to lower its predicted rates from 7.5 percent a year to 7 percent. The lower the predicted rate, the higher the liabilities, which is why CalPERS and the state’s unions are so bullish on Wall Street.

CalPERS’ latest investment returns were below 1 percent, but the agency insists there’s nothing to worry about and no need to do the unthinkable (reduce future benefit accruals for current employees.) That’s the same CalPERS, of course, that in 1999 assured the Legislature that a 50-percent retroactive pension increase wouldn’t cost taxpayers a dime.  I suppose CalPERS was right. It didn’t cost a dime, although it did cost many billions of dollars. Their returns were then yielding 13.5 percent a year, and CalPERS figured the heyday would go on forever.

The other reason to be skeptical of the Brown administration’s commitment to solving the problem can be found in the May revise itself. The budget “includes a one‑time $6 billion supplemental payment” to CalPERS, according to the Finance Department. “This action effectively doubles the state’s annual payment and will mitigate the impact of increasing pension contributions due to the state’s large unfunded liabilities.”

Where is the extra $6 billion coming from in a budget that supposedly is so pinched that the governor recently signed a law raising annual transportation taxes by $5.2 billion?

Simple. The state is borrowing the money to pre-pay some of its debt. “The additional $6 billion pension payment will be funded through a loan from the Surplus Money Investment Fund,” according to the budget summary. “Although the loan will incur interest costs (approximately $1 billion over the life of the loan,) actuarial calculations indicate that the additional pension payment will yield net savings of $11 billion over the next 20 years.”

In other words, the state will be borrowing the money at fairly low interest rates and then investing the money and earning, it hopes, higher rates. The difference will help pay down some of those retirement debts. Even the well-known pension reformer, Sen. John Moorlach, R-Costa Mesa, lauded the administration for embracing that idea.

But it’s something of a shell game. It should work out well, provided the markets do as well as the state expects. In doing this, however, the state is taking out new debt that will need to be repaid. There’s no free money here. A number of localities have embraced a similar strategy with pension-obligation bonds, which are a form of arbitrage, in which the government is borrowing money and betting on future market returns.

This gimmick is similar to the one people will embrace in their personal lives. Are those credit-card debts crushing the family budget? Then borrow money from the home-equity line of credit at 5 percent and use it to pay down the 10-percent credit card loans. It makes sense, but it doesn’t deal with the real problem of excessive consumer spending.

“This is the Band-Aid,” said Dan Pellissier, a former aide to Gov. Arnold Schwarzenegger and well-known state pension reformer. “The surgery everyone is trying to avoid is on the California Rule – changing the benefits public employees receive in the future.”

When it comes to pensions, everything comes back to that “rule,” which isn’t a rule but a series of court precedents going back to the 1950s. In the private sector, companies may reduce pension benefits for their employees in the future. An employee can be told that, starting tomorrow, she will accrue pension benefits at a lower rate. The California Rule mandates that public employees, by contrast, can never have their benefit levels reduced.

That limits options for reform. In 2012, Gov. Brown signed into a law the Public Employees’ Pension Reform Act (PEPRA), which promised to address the pension-debt problem by primarily reducing benefits for newly hired employees. A reform that affects new hires will reduce contribution rates but won’t make an enormous difference until they start retiring.

“Gov. Jerry Brown’s attempt at pension reform has failed,” opined Dan Borenstein, in a recent East Bay Times column. The reason: the rapidly growing pension debt. “The shortfall for California’s three statewide retirement systems has increased about 36 percent. Add in local pension systems and the total debt has reached at least $374 billion. That works out to about $29,000 per household.”

CalPERS rebutted Borenstein by arguing that he “greatly oversimplifies and needlessly discounts the real impact that Governor Brown’s pension reform has had since it took effect in January 2013.” The pension fund insists, “PEPRA already is bending the pension cost curve – and will keep doing so with greater impact every year going forward.”

Yet the growing liabilities and the administration’s latest budget plan suggest that whatever minimal cost savings PEPRA is achieving aren’t nearly enough. Of course, union-controlled CalPERS’ goal isn’t protecting taxpayers or the state general fund – it is to enhance the benefits of the state workers whose pensions it manages.

As Calpensions explained, that $6 billion of borrowed money doubles the amount of general-fund dollars that the state is paying to deal with pension obligations. Meanwhile, as the state borrows money to pay that tab, it raises taxes to fund transportation. If Brown and the Legislature had trimmed pension costs, it would not have needed to raise gas taxes and the vehicle license fee. And the problem reverberates for local governments, too.

The May revise also showcased the same old issue with the administration’s priorities. Los Angeles Times columnist George Skelton noted that “Brown’s entertaining rhetoric itself made him sound, as usual, like a skinflint, a penny-pinching scold. But the introductory document could have been written by Bernie Sanders, if not Depression-era Socialist Upton Sinclair, the losing 1934 Democratic candidate for governor who ran on the slogan ‘End Poverty in California.’”

The budget championed myriad big-spending programs, including higher pay for public employees. So the state has been spending like crazy, but can’t manage to deal with its pension problem – at least not without borrowing money to temporarily paper over its growing debt.

All these games are about avoiding dealing with the obvious fact that California’s public-employee pensions are absurdly generous, filled with costly and anger-inducing features (spiking, double-dipping, liberal disability retirements, etc.) and unsustainable.

In 2011, the state’s official watchdog agency, the Little Hoover Commission, argued to the governor that “Public agencies must have the flexibility and authority to freeze accrued pension benefits for current workers, and make changes to pension formulas going forward to protect state and local public employees and the public good.” Six years later, the governor is still just chipping away at the edges by embracing gimmicks.

Steven Greenhut is a contributing editor to the California Policy Center, on whose website this piece originally appeared. He is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

Prepped for CityWatch by Linda Abrams.

Large Loophole to Government Transparency Overturned by California Court

transparencySACRAMENTO – Earlier this month, the California Supreme Court unanimously overturned an appeals court decision that had provided a large loophole in the state’s public-records act.

The case, City of San Jose v. Superior Court of Santa Clara County, revolves around one question: “Are writings concerning the conduct of public business beyond (the California Public Records Act’s) reach merely because they were sent or received using a nongovernmental account?”

The superior court ruled that records concerning the public’s business should be turned over to the public upon request; the appeals court, however, found that agencies do not have “an affirmative duty to produce messages stored on personal electronic devices and accounts that are inaccessible to the agency,” or to even search for them.

The case goes back to 2009, when a local citizen, Ted Smith, sought records regarding the activities of the city of San Jose’s redevelopment agency, its executive director and some elected officials including the mayor and two City Council members, as the court explained. The city produced the requested documents from official phone numbers and email accounts – but would not provide information stored on the officials’ personal accounts.

The city offered a simplistic defense. Messages created on personal accounts are not public records because they are not within the control of the city. If the city had prevailed, the ramifications would be immense. Elected officials and governmental staff working for California’s numerous government agencies could legally shield sensitive information from the public merely by conducting such business on their personal email account or cellphone.

The appeals court exempted “huge swaths” of information based on where the information was located, not based on content, explained Jim Ewert, general counsel for the California Newspaper Publishers’ Association, which filed an amicus brief in the case. “If the Supreme Court had not decided (this way), it would have eviscerated the California Public Records Act,” he added.

A Los Angeles Times editorial captured the likely effect had the appeals-court decision stood: “As soon as a public official realizes that his constituents have no right to look at anything he says on his personal cellphone or laptop, he’ll simply do all of his sensitive or secret communications on those devices. With a flick of the wrist, public officials will exempt themselves from accountability.”

The state high court recognized the new reality of email and other electronic communications, even though the state Constitution and the public-records act were crafted in a time before such communications were envisioned. “It requires recognition,” the Supreme Court found, “that, in today’s environment, not all employment-related activity occurs during a conventional workday, or in an employer-maintained workplace.”

The appeals court was concerned about the problems inherent in capturing and turning over records that were out of an agency’s control. But the state high court, while not mandating any particular policy in dealing with such matters, offered some possible scenarios in dealing with a public records request.

For instance, as a Lexology article explains, an agency could require employees to search their own emails for relevant records or develop a policy requiring “all emails involving agency business, sent by an employee through a private account, to be copied to the employee’s agency email account.” The main point is the court upheld the idea that the public has a right to access a public record, even if the details of obtaining it are up for debate.

In fact, the court explained that because the city did not try to search for any particular documents in its employees’ personal accounts, “the legality of a specific kind of search is not before us.” But it found that agencies are obliged to at least try to locate and disclose any such public documents on private servers “with reasonable effort.”

The decision, however, does not change the complex balancing act that exists between public access and privacy rights. Some documents are protected from public exposure, but the court’s ruling finds that the location of those documents – on a public or private server – has nothing to do with whether or not those documents are legitimate public records.

The high court quoted from the state’s public records act, which defines a public record as “any writing containing information relating to the conduct of the public’s business prepared, owned, used or retained by any state or local agency regardless of physical form or characteristics.” Not everything produced by a public employee is public, of course, and it might take hair-splitting to determine where to draw the line.

Here, the court used an example to illustrate the point: An employee’s email to a spouse complaining that “my coworker is an idiot,” is unlikely to be considered public, whereas “an email to a superior reporting the coworker’s mismanagement of an agency project might well be.” The court agreed that public employees do not “forfeit all rights to privacy.” But the city of San Jose claimed an exemption for all communications from personal accounts, which was an open invitation for employees to evade the clear intent of open-records laws.

The high court was not persuaded by the city’s argument that the Legislature required public access only to records “accessible to the agency as a whole.” Many genuinely public documents, it explained, are stored in “filing cabinets and ledgers” that would not be accessible to all of an agency’s employees.

The question, of course, is whether the document was produced by employees who are conducting business on behalf of the agency. It’s not a matter of where the document is stored that determines whether the public should have access to it. If, for instance, an agency contracted with a consultant to produce a report, then the agency – and therefore the public – has a right to that document even if the consultant is retaining that document, according to the court.

The recent presidential election reinforces the significance of these distinctions. “Our concerns are not fanciful,” the newspaper association’s brief explained. “For example, former Secretary of State and … presidential candidate Hillary Rodham Clinton turned over 50,000 pages of government-related emails that she had kept on a private account, although federal regulations, since 2009, have required that all emails be preserved as part of an agency’s record-keeping system.” Many other states consider public records on private servers to be accessible to the public.

While local and state government agencies still need to come up with policies that detail exactly how such records must be maintained and disclosed, the court resolved the fundamental principle: A public document is a public document, even if it was created and stored in a private email account.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This piece was originally published by CalWatchdog.com

Warnings About Oroville Dam Ignored 12 Years Ago

Oroville Dam 2SACRAMENTO – A Sacramento Bee story published Monday succinctly described the disaster unfolding at the nation’s tallest dam, where flaws in the Oroville Dam’s concrete spillway are forcing water onto the earthen emergency spillway. Threats of a spillway collapse led to mandatory evacuations throughout Butte, Yuba and Sutter counties Sunday.

“Oroville Dam contains a flaw, some critics assert, one that could damage the structure during a major flood and threaten downstream communities,” according to the Bee. “That flaw is the dam’s emergency spillway, which empties onto a bare dirt hillside adjacent to the earthen-fill dam.” The torrent of water could erode the unprotected hillside, undermine the emergency spillway’s foundation and lead to a catastrophic failure.

The amazing thing is that the news report was first published Nov. 27, 2005. The Bee’s Monday publication was a reprint, given the relevance of the report nearly a dozen years later. It provides necessary context after another news organization revealed that three environmental groups at the time had urged state and federal officials to line the emergency spillway with concrete to avoid the kind of problems on display this week.

A dozen years ago, the dam was going through a 50-year relicensing process with the Federal Energy Regulatory Commission. The Friends of the River, the Sierra Club and the South Yuba Citizens League argued in their filings that the 1960s-era dam “did not meet modern safety standards because in the event of extreme rain and flooding, fast-rising water would overwhelm the main concrete spillway” and threaten flooding in communities down river, according to the Mercury News, which broke the story this week.

State and federal officials brushed off the suggestion at the time, arguing that the likelihood of such an event was slim and that it would be too costly to complete those improvements. The dam received its relicensing and the matter faded away. State water officials have been consumed more by drought issues than flood possibilities in the ensuing dozen years. But given the accuracy of the environmental groups’ predictions, it’s worth taking a deeper look at what happened.

At a news conference near Lake Oroville Monday, “the state’s top water officials brushed aside questions” about that old report and didn’t address assurances from a top state water official in 2005 that “(o)ur facilities, including the spillway, are safe during any conceivable flood event,” according to the latest Bee report.

The news story revealed another troubling piece of the puzzle: Congress had authorized the construction of a smaller dam on the Yuba River near Marysville, which is down river from Oroville. The Oroville Dam’s operating plan was predicated, in part, on the construction of this other dam, which would take pressure off the larger facility. But it was never built. In the view of critics, this serves as a touchstone for much that is wrong with California’s water policy.

Former Assemblyman Tim Donnelly, a Republican from San Bernardino County, criticized Gov. Jerry Brown for spending so much time defying the new Trump administration “that it forgot to do the things government is supposed to do, like maintain infrastructure.” The seven years of drought that preceded this rainy season, he added, would have been an ideal time to fix decrepit levees and dams but the Brown administration was more focused on building a $68-billion high-speed rail line, dealing with immigration issues and boosting public-employee compensation.

That’s a harsh assessment, but there’s much evidence to support the theory of ongoing state neglect. There are available water-bond funds, yet the state government has been lackadaisical at best about spending them. Many of its priorities are about environmental restoration rather than dam protection and there’s been little appetite in the Capitol to build new storage facilities.

Indeed, the governor has been more focused on removing dams on the Klamath River near the Oregon border than on shoring up the linchpin of the State Water Project – the system of levees and dams that directs water from the Sacramento Valley southward.

The Brown administration, which had vowed to fight against Donald Trump on his climate, immigration and other policies, nevertheless asked the president Friday to declare parts of California a disaster area, thus opening up a floodgate of federal aid. But there are other federal policies that the Trump administration could consider that would help protect residents living within the shadow of Oroville and other California dams.

For instance, current mortgage rules regarding flood insurance discourage people who live in the shadow of large dams from purchasing flood insurance policies. Federal lending rules require such insurance for owners of property in flood plains, but flood-protection systems such as dams and levees usually remove the floodplain designation from those areas. Without pressure from mortgage companies, owners typically avoid the insurance, figuring there’s little chance of a dam failure.

“Properties that would be designated as located within a flood plain but for a flood protection system like dams and levees – residual risk areas – should be subject to the mandatory purchase requirement,” argues the SmarterSafer Coalition, which includes the R Street Institute, in a recent study analyzing the federal flood insurance program. Those areas would, of course, have rates that “clearly reflect the decreased risk the properties face as a result of the dam or levee.”

Such an insurance system wouldn’t ensure that state and federal authorities repair their dams and levees in a timely manner, but it would offer a level of economic protection for people who are now sitting in motel rooms, watching the news and wondering whether they’ll have anything left if the Oroville Dam spillway gives way. Furthermore, it would protect taxpayers, who typically pay for the aid after a natural disaster strikes.

For now, watching and waiting is all that most Northern California residents can do. Once the crisis passes, there will be intense pressure on the state government to make repairs to Oroville Dam and others across the state. But news reports make clear that state officials were warned about the very problems now unfolding.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This piece was originally published by CalWatchdog.com

898 New California Laws Passed in 2016 – Most Start Jan. 1

jerry-brown-signs-lawsSACRAMENTO – California Gov. Jerry Brown signed 898 bills into law last year. Most start on Jan. 1, but others going into effect in coming years. The majority of new laws deal with minutiae that’s unlikely to affect most residents, but a number of them will have real-world consequences for broad numbers of people – on issues ranging from new driving rules to patients’ access to experimental medications.

Here’s a sampling of some of the significant new laws from last session:

Register your ammo purchases: Californian gun owners will need to deal with a variety of new gun-control limitations after the governor signed a broad package of bills – and voters approved Lt. Gov. Gavin Newsom’s gun-control initiative on Nov. 8. The most potentially far reaching effects will come from the state’s approval of Proposition 63, which has various restrictions and a roll-out of implementation dates over a few years.

Beginning July 1, 2017, the state will implement a ban on high-capacity magazines and will require owners to report any lost or stolen weapons. The much-publicized requirement that ammo buyers pass background checks won’t go into effect until Jan. 1, 2018.

Higher minimum wages and more unpaid leave: “The statewide minimum wage goes from $10 to $10.50 an hour for businesses with 26 or more employees — a rate that will rise to $15 by 2022,” as the Mercury-News explained. That wage hike comes from Senate Bill 3. “Assembly Bill 2393 gives up to 12 weeks of paid parental leave to all K-12 and community college employees, including classified workers and community college faculty,” the newspaper reported.

Restrictions on police use of asset forfeiture: Senate Bill 443 was one of the last bills from last session that the governor signed, but it is widely viewed as one of the most significant changes in state law. Before the new law went into effect, police agencies had the ability to take the cash, cars and even homes from people even if they weren’t convicted of any crime. The authorities needed simply to claim the property was used in the commission of a drug crime. California had fairly tough restrictions in place, but local and state police agencies would partner with federal authorities under the “equitable sharing” program and then they would operate under looser federal law.

As the Drug Policy Alliance explains, “Starting on January 1, 2017, California law will require a conviction prior to forfeiture in any state case where the items seized are cash under $40,000 or other property such as homes and vehicles regardless of value.” If local or state agencies work with the feds, they could only share in the proceeds if an underlying conviction were obtained. The final compromise still allows law enforcement to keep proceeds of more than $40,000 in cash only – a provision which caused major law enforcement groups to drop their opposition.

Higher fees from the DMV … and more: Two new laws boost the fees for DMV registrations by $10 and for an environmental license plate by the same amount. Another DMV-related law requires drivers to restrain children 2 years or under in a rear-facing car seat unless they weigh 40 pounds or more. Drivers will need to pay attention to a new law dealing with hand-held devices. “Driving a motor vehicle while holding and operating a handheld wireless telephone or a wireless electronic communications device will be prohibited, unless the device is mounted on a vehicle’s windshield or is mounted/affixed to a vehicle’s dashboard or center console in a manner that does not hinder the driver’s view of the road,” according to the agency.

Gaining the ‘right to try’: California became the 32nd state to pass so-called “right to try” legislation, which allows terminally ill people to try experimental drugs that have yet to pass the federal Food and Drug Administration’s full battery of tests. Supporters argued that many people die while waiting for drugs to clear that long and cumbersome process. After Senate amendments, Assembly Bill 1668 includes the caveat that “a health benefit plan, except to the extent the plan provided coverage, is not liable for any outstanding debt related to the treatment or lack of insurance for the treatment.”

Beer and wine at barbershops: Assembly Bill 1322 passed overwhelmingly in both houses of the Legislature. This bill allows beauty salons and barber shops to serve their clients limited quantities of beer or wine at no extra charge without obtaining a license or permit from the Department of Alcoholic Beverage Control,” according to the Assembly analysis. The new law still allows local governments to impose restrictions on this practice.

Rescuing Fido from a hot car: Assembly Bill 797 reduces liability for citizens who break a car window to save an animal that is closed in a hot car – provided they first try calling the authorities and the authorities haven’t responded quickly enough.

Legalizing lane-splitting: Anyone who drives on California’s vast network of freeways has noticed motorcyclists’ habit of “lane-splitting,” as they drive between the cars that occupy the lanes. The law had required motorcyclists to ride “as nearly as practical entirely within a single lane,” even though the practice has been widely accepted. Motorcyclists have long argued that this is safer than remaining in one lane and risk being hit from behind. Assembly Bill 51 “would authorize the Department of the California Highway Patrol to develop educational guidelines relating to lane splitting in a manner that would ensure the safety of the motorcyclist, drivers, and passengers, as specified,” according to the state Legislative Counsel.

Ignore those juvenile convictions: Assembly Bill 1843 “Prohibits employers from asking an applicant for employment to disclose information concerning or related to an arrest, detention, processing, diversion, supervision, adjudication, or court disposition that occurred while the person was subject to the process and jurisdiction of juvenile court law, or seek or utilize any such information as a factor in determining any condition of employment,” according to the Assembly analysis. This was a contentious issue that passed on largely partisan lines (Democrats supported; Republicans opposed) given business-community concerns about their ability to screen job applicants.

You must be 21 to smoke or vape: Earlier in the year, the governor signed a package of smoking bills that, most significantly, raises the smoking age to 21. It also raised the age for vaping to 21. That last provision was particularly controversial because some argue e-cigarettes are a safer way for smokers to break their dangerous habit. Those laws went into effect in June.

Offering showers for the homeless: Assembly Bill 1995 would require community colleges that have shower facilities to allow enrolled homeless students to use those showers.

More bathroom choices for the transgendered: California passed a law, Assembly Bill 1772, that requires all businesses and public agencies with single-toilet bathrooms to make them available to people of all genders – a bill viewed more as a symbolic measure offered in the thick of the national debate over bathrooms for transgendered people.

The new Legislature will be back in full swing after the new year.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This piece as originally published by CalWatchdog.com

Sacramento and S.F. Push for Police Reform at Local Level

Police tapeSACRAMENTO – The presidential campaign focused some attention on the long-simmering debate over policing and the appropriate uses of force, but as is typical with national campaigns, the nuances got lost amid ideologically charged soundbites such as “law and order” and “Black Lives Matter.”

Some advocates for police reform worry about what a new Trump administration will mean for these discussions given the president-elect’s expectedly different approach toward the matter than President Obama’s Department of Justice. But others argue the election will send reform back to where it really belongs: at the local level.

Two northern California cities, Sacramento and San Francisco, are good examples of the latter. They are currently plowing ahead with major oversight and accountability proposals for their police departments – the result of local policing scandals that have little to do with national political changes. Sacramento takes up the matter at a City Council meeting on Tuesday.

The Sacramento reforms were prompted by a video of two police officers in pursuit of a mentally ill homeless man, Joseph Mann, who was armed with a knife and acting erratically. As the Sacramento Bee reported, the video sequence shows “the officers gunned their vehicle toward Mann, backed up, turned and then drove toward him again, based on dash-cam video released by police. They stopped the car, ran toward Mann on foot and shot him 14 times.” One officer is recorded saying “f— this guy” shortly before they shot him.

The killing raised questions not only about the appropriate use of force in such situations, but about the city’s willingness to provide the public information about what transpired. Top city officials – the police chief, city attorney and city manager – didn’t release the video of the event until after the Bee acquired the footage from a private citizen. The shooting led to community protests and has been a source of strife – and council debate – ever since.

In September, the newspaper’s Editorial Board published this pointed editorial: “The city could have been upfront with Mann’s family about how many times he was shot and how long the investigation into the shooting would take. Instead, his brother, backed by enough activists to fill City Hall, had go before the City Council to beg for information. The city could have been clear about what training officers receive to handle people who are mentally ill. Instead, police still haven’t responded to a Public Records Act request for a copy of the department’s policy.”

Reformers argue that the proposed policy doesn’t go far enough, although backers argue that it is about as far as it can go given state law. Specifically, the measure would transfer power of the civilian oversight committee from the city manager’s office to the mayor and City Council – thus providing a more independent level of oversight given that the city manager also oversees the police department. Council members are at least beholden to voters.

The city’s proposal also does the following: “This resolution requires the city manager to ensure that all police officers of the Sacramento Police Department abide by council specified guidelines with regards to use of force. Key components of the resolution include the timely release of video after an officer involved incident occurs and the immediate notification of family members after an officer involved shooting.” That attempts to deal with the public-records issue.

Civilian-oversight commissions are still limited by the state Supreme Court’s Copley decision. In that 2006 case, the San Diego Union-Tribune tried to gain access to a disciplinary hearing regarding a deputy sheriff who was appealing his termination. As the newspaper reported, “The court ruled that police disciplinary hearings are closed — and the public has no right to learn about allegations of police misconduct, even when they are aired in a civil service commission.” Legislative efforts to roll back parts of the decision have repeatedly been stymied by police union lobbying.

In San Francisco, officials have been reacting to controversy following three officer-involved shootings and a scandal involving racist text messages that were allegedly sent by police officers. As the San Francisco Chronicle reported in April, “The messages are loaded with slurs and ugly stereotypes, and include one from an officer responding to a photo of a blackened Thanksgiving turkey. ‘Is that a Ferguson turkey?’ the officer asks, referring to the city in Missouri that saw widespread protests after police fatally shot an unarmed African American man in 2014.”

National politics plays a bigger role in the San Francisco case. That’s because the federal Department of Justice’s Community Oriented Policing Services department published a study last month looking at San Francisco’s police department. The mayor and former police chief had asked the department to review police practices following these scandals.

As the report’s summary explained, “Although the COPS Office found a department that is committed to making changes and working with the community, it also found a department with outdated use of force policies that fail the officers and the community and inadequate data collection that prevents leadership from understanding officer activities and ensure organizational accountability. The department lacked accountability measures to ensure that the department is being open and transparent while holding officers accountable.”

San Francisco officials have vowed to implement the 479 recommendations made in the Justice Department report. “We will continue to implement the recommendations for reform which will be built on the most current policing policies and practices, fostering an environment of trust and strong relationships with our communities,” said acting Police Chief Toney Chaplin.

In Sacramento, Mayor-elect Darrell Steinberg, who is inaugurated on Dec. 13, told the Bee “the public certainly has a right to know whether a particular officer who has been accused of misconduct continues to serve in the role of police officer. … There ought to be a clear presumption of openness and the burden ought to be on the city attorney and police to demonstrate in a compelling way why anything is not public.” There’s concern that a federal lawsuit by Mann’s relatives will allow the city to shut down public access to information about the shooting.

This much is clear: Whatever changes a new administration makes at the Department of Justice, local officials throughout California are on the front lines of the police-reform movement.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This piece was originally published by CalWatchdog.com

Bipartisan Support for Occupational Licensing Reform

occupational-licensing-2SACRAMENTO – One of the rare issues where politicians on the left and right increasingly agree involves occupational-licensing requirements – the oftentimes cumbersome government-approval processes that many workers must go through to become certified to work legally in their profession. Both sides have come to recognize that excessive rules limit employment opportunities for the poor, quash economic development and force people into the underground economy.

Advocates for reform don’t argue against training and regulations per se, but they recognize that it’s unnecessary to, say, force African-style hair braiders to spend thousands of dollars and go through hundreds of hours of traditional barbershop training when the hair treatment they provide has nothing to do with the certification they receive. There’s broad understanding that people within existing professions often impose unnecessary barriers to entry as a way to reduce competition and artificially inflate wages. Defenders of the system say the rules are needed, however, to protect health and safety.

California’s independent state oversight agency, the Little Hoover Commission, this month released a report on licensing barriers that could serve as a blueprint for the state Legislature when it returns to session in January. In his letter to the governor and Legislature, the commission’s chairman, Pedro Nava, made it clear what licensing is all about:

One out of every five Californians must receive permission from the government to work. For millions of Californians, that means contending with the hurdles of becoming licensed. Sixty years ago the number needing licenses nationally was one in 20. … What was once a tool for consumer protection, particularly in the healing arts professions, is now a vehicle to promote a multitude of other goals.”

Some of those goals are reasonable and well-intentioned: professionalizing industries, guaranteeing a level of quality and so forth. But they also “have had a larger impact of preventing Californians from working, particularly harder-to-employ groups such as former offenders and those trained or educated outside of California, including veterans, military spouses and foreign-trained workers,” Nava explained. Furthermore, the standards are not always equal. He pointed to manicurists, who need 400 hours of education, whereas tattoo artists are required to register and conform to some minimal requirements, take a single class and pay $25.

According to the report, California actually has a lower percentage of licensed people than other states. That 20 percent figure places it in 30th place. One-third of Iowans have a license and nearly 31 percent of workers in Nevada have one, also. But California’s rules are more onerous than other states “in the amount of licensing it requires for occupations traditionally entered into by people of modest means,” according to the report. For these types of professions (pest control, manicurist, etc.), the required rate of licensure is a whopping 61 percent.

The commission held hearings this year to review the state’s occupational-licensing system. The commission found the licensing requirements to be “obvious to many” when it comes to health-care professions such as nursing. But it also heard testimony from those in “seemingly less-intuitive industries to speak about health and safety considerations.” It quoted a representative from the cosmetology industry, who defended the licensing requirements because “many of the procedures cosmetologists do can result in irreparable damage.” These include skin peels and the use of strong hair chemicals. But critics “say that there is a spectrum of activities to manage health and safety risks and that licensing should be considered the nuclear option.”

One alternative would be private certification. In those situations, a private authority (think of automotive mechanic organizations) sets standards. People are free to follow them or not – but being certified by that body confers a sense of legitimacy that consumers can consider when choosing to patronize a business. The commission quoted an attorney with the reform-oriented Institute for Justice, who noted: “Outside of driving, he said, eating out is one of the most harmful activities the average consumer will do on a regular basis. But the state doesn’t license food handlers.” That certainly puts the concept in perspective.

Critics argue that licensing unnecessarily raises prices. It also quashes innovation. The commission used the example of a barber who found a need for mobile barbershops, but state regulations only allow barbers to operate out of a permanent location. “Eventually he gave up on his idea even though he had data indicating demand for that service.” More is lost there than just a job. A person had to give up his entrepreneurial dream. Furthermore, the commission noted that excessive regulations inhibit mobility, given that a person trained in one state would have to go through enormous training again to operate in another state.

“Occupational licensing regulations are made in the name of protecting the public interest,” according to the commission. “The reality, witnesses told the commission, is that occupation regulation often amounts to rent-seeking. Briefly defined, rent-seeking is an attempt to influence the political, social or other environment to achieve an economic gain for oneself without contributing to productivity.”

That’s an economic way of saying that people who already work in an industry often band together and lobby to keep new competitors out of that industry. The commission refers to it as “gatekeeping.” And it’s really tough on poorer people trying to get their foot on the economic ladder.

The commission offered a variety of recommendations for the state government: collecting more demographic data on license applications; seeking federal grants to review the current licensing requirements; requiring reciprocity for license holders from other states; seeking sunset provisions on licensing regulations; creating a research institute to study new licensing laws; improving training for veterans; and creating apprenticeship rules that would allow people to work while they address their licensing requirements.

As mentioned above, the commission argues that the current situation poses particular burdens on former offenders, who “typically must demonstrate that their convictions were not substantially related to the duties of the occupation.” The commission pointed to those who reported “some arbitrariness in licensing authorities’ decisions.” Military spouses face problems as they follow their partners to other states, where their licenses don’t always transfer. Veterans and foreign-trained workers often have the requisite skills, but need to go through the entire licensing process anyway. The Legislature has in the past few years passed several bills designed to help veterans and military spouses, but the problem still exists for them, too.

Reformers call for wide-ranging changes. The last real attempt at this came in 2004, when then-Gov. Arnold Schwarzenegger introduced the California Performance Review. “Facing insurmountable hurdles, Governor Schwarzenegger withdrew the plan from consideration a month later,” according to Nava. But times are different now.

There’s rarely much bipartisanship in the state Legislature, but there are occasional promising signs. This year, legislators approved – and the governor signed into law – a measure that would reform the way police departments take private property without a conviction (asset forfeiture). Legislators from both parties saw that the burden fell heavily on poor Californians and that the process seemed to violate constitutional rights.

Likewise, liberals recognize that excessive licensing regulations harm opportunities for poor people and conservatives often see the rules as an affront to a market-based economy. The time may be ripe for reform and perhaps Little Hoover’s suggestions will lead the way.

Steven Greenhut is Western region director for the R Street Institute. He is based in Sacramento. Write to him at sgreenhut@rstreet.org.

This piece was originally published by CalWatchdog.com

Will Local Officials Finally Get the Tools They Need to Prevent Pension Tsunami?

pensionSACRAMENTO – A decision by four Marin County public-employee associations to appeal a pension-related case to the California Supreme Court could ultimately determine whether localities have the tools needed to rein in escalating pension debt. At issue is how far officials can go to reduce some benefits for current employees after a state appeals court has chipped away at a legal “rule” long favored by the state’s unions.

In August, a California appeals court ruled against the Marin County Employees’ Association in its case challenging a 2012 state law reining in pension-spiking abuses – i.e., those various end-of-career enhancements (unused leave, bonuses, etc.) that public employees use to gin up their final salary and their lifetime retirement pay.

One of the few areas of widespread agreement at the Capitol on public-employee pensions involves spiking. Gov. Jerry Brown signed into law the Public Employees’ Pension Reform Act of 2013, known as PEPRA, to reduce escalating pension liabilities. Most of its provisions applied to new hires only. The governor also signed related legislation, Assembly Bill 187. Its goal was to “exclude from the definition of compensation earnable any compensation determined … to have been paid to enhance a member’s retirement benefit.”

This limitation on pension spiking was implemented by the Marin County Employees’ Retirement Association to help the county reduce its pension debt. As the court explained, “Reaction to the change in policy was almost immediate.” Five public-employee associations filed suit, claiming that a ban on these spiking conditions reduced promised levels of pay to their members. They argued this was an impairment of their “vested rights.” Vesting confers ownership rights.

Even though the dollars at issue are relatively minimal, the case has become a major flashpoint. California courts have long abided by something known as the “California Rule.” It’s not a law or even a rule, actually. It refers to a series of court rulings concluding that once a pension benefit is granted to public employees by a legislative body (board of supervisors, city council, state legislature), it can never be reduced – even going forward.

In the private sector, for instance, courts allow employers to reduce pension benefits, starting tomorrow. Employees could be paid everything promised to the point of the benefit change, but they can have certain benefits removed or reduced in the future. That’s seen as reasonable given they haven’t earned them yet. It’s different in the public sector.

In California (and a number of other states that follow a similar rule), these benefits can never be reduced. The problem, from a public-finance point of view, is that reducing benefits for new hires only won’t address the bulk of the debt problem until those employees start retiring in 25 or 30 years. Fixing the current debt problem requires dealing with current employees.

Ironically, almost all of the benefit increases public agencies have granted to union members since the 1999 passage of Senate Bill 400 have been done “retroactively.” In other words, the courts have allowed public agencies to give a boost in pensions to public employees for years they previously have worked – but they won’t allow those same agencies to reduce future benefits for years that have yet to be worked. This is politically controversial, but there’s little debate that such a rule has been followed by the courts.

“Public employees earn a vested right to their pension benefits immediately upon acceptance of employment and … such benefits cannot be reduced without a comparable advantage being provided,” according to the plaintiffs, as quoted in the appeals court decision. “A corollary of this approach is that public employees are also entitled to any increase in benefits conferred during their employment, beyond the benefit in place when they began.” In this view, compensation is a one-way ratchet.

This understanding has largely undermined every major reform proposed in California. For instance, the courts gutted the city of San Jose’s voter-approved 2012 pension-reform initiative because it rolled back future benefits for current employees. And the“California Rule” has been the obstacle that has stopped reformers from coming up with other similar approaches.

In this case, Justice James Richman ruled, “(W)hile a public employee does have a ‘vested right’ to a pension, that right is only to a ‘reasonable’ pension – not an immutable entitlement to the most optimal formula of calculating that pension. And the Legislature may, prior to the employee’s retirement, alter the formula, thereby reducing the anticipated pension. So long as the Legislature’s modifications do not deprive the employee of a ‘reasonable’ pension, there is no constitutional violation. Here, the Legislature did not forbid the employer from providing the specified items to an employee as compensation, only the purely prospective inclusion of those items in the computation of the employee’s pension.”

The judge pointed to conclusions from California’s watchdog agency, the Little Hoover Commission, pointing to uncontrollable unfunded pension liabilities. As the commission explained, “To provide immediate savings of the scope needed, state and local governments must have the flexibility to alter future, unaccrued retirement benefits for current workers.” The commission pointed to spiking as a particular problem. This report, he wrote, is part of what motivated the state Legislature and governor to implement reform.

Furthermore, the judge pointed to previous cases acknowledging that government entities have the right to “make reasonable modifications and changes in the pensions system ‘to permit adjustments in accord with changing conditions and at the same time maintain the integrity of the system and carry out its beneficent policy.’” This echoes what myriad pension reformers have argued: agencies are not stuck watching their systems go over the cliff. They have the right and duty to make adjustments to assure their future solvency.

If the California Supreme Court sides with the unions, then local governments will have fewer options left to gain control of their pension debts. If the court agrees with Judge Richman, then pension reform could be a brand new ballgame – although it’s unclear whether the court might toss the California Rule entirely or simply allow localities to change some of the benefits within the framework of that rule.

The court has 60 days to decide whether to consider the matter, according to reports. Unions and reformers will no doubt be watching the court’s decision closely.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This piece was originally published by CalWatchdog.com