Will City Voters Roll Back Minimum-Wage Hike?

Minimum wage fight for 15California voters apparently aren’t the only ones who believe that wealth can be created by government edict and income inequality fixed by approving ever-higher minimum-wage rates.

In the 72,000-population northern Arizona city of Flagstaff, voters in November 2016 approved a measure that raises the minimum wage to $12.50 an hour this year — and to $15 an hour by 2021. The City Council slowed implementation, but boosted the wage to $15.50 by 2022. That the local economy might not sustain such raises isn’t much of a concern to supporters.

Fortunately, a recent court ruling will allow local voters in the November 2018 election to consider a repeal of the wage hikes. But the fracas gained national attention shortly after the law was passed because, in the words of one resident quoted by the Associated Press, it had set the community “at each other’s throats.” Tensions are still high as the matter continues to dominate local politics. That’s what happens when economic opportunity is viewed as a zero-sum game, and when government decides what private businesses must pay their employees.

“We’ve already seen prices of goods and services increase and entry level positions being eliminated,” explained a fact sheet from the Greater Flagstaff Chamber of Commerce, which helped place the Sustainable Wages Act on the coming ballot. If that rollback measure passes, Flagstaff’s minimum wage will top out at $12.50 an hour.

That’s 50 cents higher than what the statewide minimum wage will reach (which was increased by voters in November 2016, also) but $3 lower than it would be under the current Flagstaff wage schedule, so the initiative will mitigate the worst problems. The “sustainable wages” initiative, which qualified for the ballot after its backers secured 9,000 local signatures, would also eliminate a particularly obnoxious aspect of 2016’s local initiative — a provision that requires a vastly higher minimum wage for employees who receive tips.

Typically, waiters, hairdressers and other tipped employees receive a significantly lower minimum wage based on the obvious fact that much of their income comes from gratuities. Eventually requiring the full minimum wage for these workers will wreak havoc on a college and tourist city where restaurants and other services are the backbone of the economy.

A recent survey of the chamber’s members confirmed the predictable ways that many businesses are dealing with these higher mandated costs: reductions of other employee benefits, cutbacks in hours, higher prices, and delays in expansion plans. Members also report pressure for higher wages for other employees who now earn above the minimum wage. And the full brunt of the city wage increase still is three years away, unless voters turn back the tide.

Flagstaff’s wage-hike law also is unnecessarily punitive. “The most egregious part of the new law is the new Office of Labor and Standards, which allows a city employee access to the books of any business, any time,” the Chamber explains. The law empowers the Arizona Industrial Commission to conduct myriad audits and impose penalties on businesses accused of underpaying workers. The law even allows employees to keep their names confidential “as long as possible” as any complaint they file winds its way through the adjudication process. The rollback measure would address this problem, too.

For insight into the thinking behind the wage mandate, consider the views of the activist group, Flagstaff Needs a Raise. The group’s website is filled with the usual hysteria about right-wing boogeymen: “After Flagstaff voters approved Proposition 414, the Greater Flagstaff Chamber of Commerce and a Phoenix-based ‘dark-money’ group … financed a petition campaign using paid out-of-town circulators to gather signatures to ‘amend’ Flagstaff’s Minimum Wage Act with a title misleadingly named ‘the Sustainable Wages Act.’”

The “need a raise” folks also display their economic illiteracy by claiming that “higher wages lead to more money circulating in the local economy which means more revenue for businesses.” The minimum-wage hike also will mean “less stress for families, better health, and less domestic violence among other positive social outcomes,” according to the group.

Well, higher real incomes do create better social outcomes — but higher minimum wages only end up impoverishing more people by destroying job opportunities and raising prices. This is no surprise to Spectator readers, but higher minimum wages hurt the poor in other ways. The idea that higher mandated wages result in more money percolating in the economy is similar to the idea that moving water from a pool’s deep end will help raise the shallow end.

In a column last month in the Flagstaff Business News, Mayor Coral Evans noted the futility of raising minimum wages without adjusting federal poverty guidelines, which was a refreshing dose of common sense in that city government. “A 50-cent raise does little for someone who loses his or her rent voucher,” she argued. Furthermore, she wrote that the wage hikes are depleting resources for social-service providers and the school system, which also must pay the higher wages. That also creates pressure for tax increases, of course.

I typically write about California’s approach to politics, which is why the Flagstaff initiative grabbed my attention. It’s always disturbing to see the ideas that fester here gain traction in other, presumably more sensible parts of the nation. California has the highest poverty rate in the nation, based on the Census Bureau’s cost-of-living-adjusted metric. Driving up the cost of living, and shuttering small businesses, is a recipe for failure wherever it’s tried.

The Flagstaff minimum-wage hike is part of a union-backed national campaign, so don’t be surprised if you see ballot initiatives coming to a city near you. Conservatives need to do a better job combating such economic foolishness and explaining why less government intrusion and freer markets are the only way to help the working poor — before it’s too late.

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

This article was originally published by the American Spectator

City services slashed to fund pensions, but your taxes are still going up

PensionsIn the coming months and years, California voters can expect to see a variety of tax increases pop up on their local election ballots. They will be called “public safety” taxes to hire more police or firefighters or “parks” or “library” taxes to pay for those popular public services. But don’t be fooled. Any new tax proposal is in reality a “pension tax” designed to help the California Public Employees’ Retirement System make up for shortfalls in its investment strategy.

In fact, liberal interest groups are getting ready to circulate a statewide ballot initiative that will gut Proposition 13 – the 1978 initiative that has limited property tax increases to 1 percent of a property’s sales price. It also limits property tax increases to 2 percent a year. The new initiative would remove those protections from many commercial property owners, thus raising taxes by another $11 billion a year. Money is fungible, so this is partly about paying for pensions, too.

California has an enormous problem with pension costs. Many observers see it as a crisis that threatens the economic health of the state. A recent study from the well-respected Stanford Institute for Economic Policy Research, run by former Democratic Assemblyman Joe Nation, details how pension costs already are “crowding out” public services, especially at the local level. Cities pay so much for retired employees that they are cutting spending on everything else.

“California public pension plans are funded on the basis of policies and assumptions that can delay recognition of their true cost,” according to the report. Yet pension costs still are rising and “are certain to continue their rise over the next one to two decades, even under assumptions that critics regard as optimistic.” So they are cutting “core services, including higher education, social services, public assistance, welfare, recreation and libraries, health, public works, and in some cases, public safety.”

Aside from cutting public services and running up and hiding debt levels, there’s only one other way that localities can come up with the cash to pay for these overly generous pensions, especially as pension costs consume 15 percent or more of their general-fund revenue. They will raise taxes. Meanwhile, the state government has to backfill pension costs as well, which leads to constant pressure for legislators to promote additional state-level tax increases. It’s a “heads they win, tails you lose” situation, as Californians pay more to get less.

Much of the problem goes back to 1999, when the Legislature rammed through a law to provide 50-percent pension increases to the California Highway Patrol. Backers knew that once CHP received these overly generous deals (including retroactivity, which is a pure giveaway that hikes pensions back to each employee’s starting date), pension increases would spread across the state. Indeed, they did. CalPERS said it wouldn’t cost taxpayers a “dime” because of stock-market growth, but then the market crashed.

Under the current defined-benefit system, public employees are promised an irrevocable level of pension benefits based on a formula. For instance, most California “public safety” workers (police, fire, billboard inspectors, prison guards, etc.) receive “3 percent at 50.” If they work 30 years, they get 90 percent of their final three years’ pay (often higher, because of pension-spiking gimmicks) until they die. They can retire with full benefits at age 50. Non-safety workers often receive a pension formula that lets them retire with 81 percent of their final pay beginning at age 57. These are very generous benefits given their typically high final salaries.

CalPERS invests the money in the stock market. It calculates the “unfunded pension liabilities” (i.e., debt) based on a projected rate of return for their investments. Higher expectations enable the pension funds and cities to go along their merry way, not worrying about their ability to pay for all the promises and avoiding pressure to pare back pay levels. CalPERS just lowered its rate of return from 7.5 percent to 7 percent, which is still overly optimistic.

But the lowered assumed rates mean that cities have to pay the pension fund additional fees to cover the difference. This is cutting into their operating budgets. In fact, cities have faced four rate increases in the past five years and are expecting a fifth one. A recent article tells the stories of El Segundo and Arcadia, two Los Angeles County cities that are considering hiking their sales taxes to maintain their current level of service.

El Segundo’s mayor pro tem said that in five years “the payment to CalPERS is expected to be $18 million and 25 percent of general fund revenue as the employer rate for safety employees increases from 50 percent of pay to 80 percent of pay,” reported Calpensions’ Ed Mendel. He noted that cities face a statewide cap on the size of their sales tax, but that Gov. Jerry Brown in October signed a law that allows some localities to bust through that cap.

You can see what’s coming: A push by unions to eliminate the sales-tax cap across the state, and a torrent of sales tax increases to pay for soaring pension costs. The other thing to expect: Continuing efforts to hide the size of the pension debt.

“The nation’s largest pension system is expected to adopt a funding plan … that anticipates shortfalls during the next decade and then banks on exceptional investment returns over the following half century to make up the difference,” wrote Contra Costa Times columnist Dan Borenstein this week. “It’s an absurd strategy designed to placate labor unions, who want more public money available now for raises, and local government officials who are struggling to make annual installment payments on past debt CalPERS has rung up.”

The only other hope beyond debt and taxes is if the California Supreme Court guts the so-called California Rule, which forbids governments from reducing pension benefits even going forward unless they are provided with something of equal or greater value. That “rule” has made it nearly impossible to reduce costs for current employees. But there’s no guarantee the court will roll back the rule in a case it will soon consider –  or that the state and localities will bother to cut back benefit levels even if they are allowed to do so given union political power.

In the meantime, expect not only more of the same of hidden debt and reduced government services – but tax increases at every turn.

Steven Greenhut is a contributing editor for the California Policy Center. He is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This article was originally published by the California Policy Center

Realtors’ ballot initiative could limit property taxes

property taxSACRAMENTO – Property-tax-limiting Proposition 13 has long been viewed as the “third rail” of California politics given its continued popularity among the home-owning electorate. Public-sector unions occasionally talk about sponsoring an initiative to eliminate its tax limits for commercial properties, but the latest Prop. 13-related proposal would actually expand its scope.

The influential California Association of Realtors is launching a signature drive for a November 2018 ballot measure that would greatly expand the ability of Californians who are at least 55 years old and disabled people to maintain their low-tax assessments even if they move to other counties or purchase more expensive new homes.

Prop. 13 requires counties to tax properties at 1 percent of their value (plus bonds and other special assessments), which is established at the time of sale. The owners maintain that assessment even if values increase, as they typically do in California. The proposition limits tax hikes to no more than 2 percent a year. Prop. 13 passed overwhelmingly because many people – especially seniors – were being taxed out of their homes as assessments soared during a real-estate boom.

Under current rules, people 55 and older may keep their low assessments if they move within the same county or within one of 11 counties that accept these transfers. They may do so only once in a lifetime. It enables retired people, for instance, to downsize from a big family house to a condominium without paying a stiff tax penalty.

For example, if one purchased a home in 2008 for $350,000 and that home is now worth $750,000, they may continue paying taxes at the lower assessed value even after they sell the home and purchase a smaller one. The valuation goes with them. But the newly purchased property must have a market value the same or lower than the house that has been sold.

The Realtors’ proposal would, for seniors and the disabled, tie the assessed value of any newly purchased home to the assessed value of the old home. They would be free to take that assessment with them to any of the state’s 58 counties. They could carry it with them as many times as they choose. The reduced assessments would apply even for people who purchase home with market values above the ones that they sold.

As the nonpartisan Legislative Analyst’s Office explains, if the new and prior homes have the same market values (based on sales and purchase prices), the new tax valuation would be the same as the old one. A fairly complex formula would determine the tax rate for purchases that were either higher or lower than the sales price of the prior home.

The initiative addresses a problem faced by many empty-nesters. They are living in large homes where they raised their families and would like to downsize – but to do so would mean a huge tax hit given that their new tax rate would be tied to the purchase price of the new property. In the preponderance of situations, the new purchase price for even a smaller house would be far higher than the price that the seniors paid for the homes where they currently live.

The Orange County Register reports that, if passed, the initiative could spur an additional 40,000 home sales a year. Supporters say that could ease up tight housing markets, but foes argue that the Realtors have an interest in spurring more home sales. County governments – backed by LAO projections – say that it eventually will cost them as much as much as $1 billion a year.

“By further reducing the increase in property taxes that typically accompanies home purchases by older homeowners, the measure would reduce property tax revenues for local governments,” according to that LAO analysis. “Additional property taxes created by an increase in home sales would partially offset those losses, but on net property taxes would decrease.”

The Howard Jarvis Taxpayers Association, which defends the legacy of Prop. 13, disputes the idea of large tax losses, given that younger couples would move in to the homes that older people sell, and they would pay property taxes based on the new market value. In other words, an older couple will sell a house and keep their lower tax rate.

“We believe upward portability makes a lot of sense especially as property values across California continue to rebound,” said HJTA president Jon Coupal in a statement. The statement says he believes the measure would “help California alleviate its current housing crisis by removing a financial barrier that keeps many older homeowners from selling their homes, and many millennials from entering the housing market.”

The Realtors’ association had submitted three different potential measures, including one that would expand portability for people of all ages. But the final measure applies only to seniors and disabled persons. As the saying goes, the best defense is a good offense. Supporters of Prop. 13 have learned that the best way to protect it might be by trying to expand it.

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

This article was originally published by CalWatchdog.com

Cities reeling under the burden of growing pension debt

pension-2The California Public Employees’ Retirement System’s union defenders feign shock whenever pension reformers accuse it of “kicking the can down the road” in dealing with the state’s mounting pension debt. It’s like the scene from Casablanca, when Captain Louis Renault is absolutely shocked to find gambling going on in a gambling house.

CalPERS is never going to state the obvious: “We know these massive, underfunded pensions are not sustainable, but we’re going to do everything possible to push the problem into the future and blame everyone else for the problem.” But the pension fund’s board might as well have said as much after two actions it took at last week’s Sacramento meeting.

In one case, it decided to seek a legislative sponsor for a bill that would enable it to shift the blame to local agencies whenever such agencies decide to stop making their payments to the fund and retiree pensions are cut as a result. In the second case, at the urging of cities CalPERS decided to delay a vote on a more actuarially sound means of paying off pension debt – rather than risk a fifth rate hike to local governments, and risk a mutiny among hard-pressed local governments.

Both of these actions maintain the status quo and – you got it – kick the can down the road.

The first action involved the fate of two local agencies that have exited the pension fund because they couldn’t afford to keep making their payments. As California Policy Center previously reported, the tiny Sierra Nevada town of Loyalton in 2013 decided to exit the plan, but then was hammered with a $1.66 million termination fee that it couldn’t possibly afford. The town’s entire annual budget is $1 million and it couldn’t even make its $3,500 month payments to the fund.

Furthermore, the East San Gabriel Valley Human Resources Consortium, known as LA Works, shut its doors in 2014, but was likewise penalized by CalPERS for stopping its payments. The end result: Loyalton’s four retirees have their pension benefits sliced by 60 percent, and LA Works’ retirees lost as much as 63 percent of their pension checks.

In making an example of these small agencies, CalPERS revealed an ugly truth. The pension fund assumes a rate of return of 7 percent to 7.5 percent on its investments. The higher the assumed rate, of course, the less debt on its books. It’s in the union-controlled fund’s interests to assume the highest-possible rates and maintain the status quo – even if that means that taxpayers ultimately will have to pick up any slack.

When agencies decide to leave the fund, however, CalPERS puts them in a Terminated Agency Pool, where CalPERS assumes a rate of return of a measly 2 percent. Upon departure, these agencies can no longer expect future earnings or taxpayers to pick up the shortfall, so the 2 percent rate is the actual risk-free rate that CalPERS expects from its investments.

The legislation the fund seeks, facetiously referred to as the Anti-Loyalton Bill, would “require a terminating agency to notify past and present employees of its intention to terminate,” according to the language approved by the full CalPERS board last Wednesday. Bottom line: CalPERS wants local agencies to provide the bad news to employees and retirees so that they, rather than the massive pension fund, receive the brickbats.

The proposed bill is not a big deal per se, but it’s yet another example of how CalPERS is more interested in hiding – rather than dealing with – its pension debt. Basically, this is a public-relations strategy designed to discourage agencies from leaving the fund. It’s a way to tighten the golden handcuffs and punish agencies that want to exit the fund.

In reality, if 2 percent is the earning rate that CalPERS can safely expect on its long-term investments, then that should be the rate that it assumes for all of its investments. But lowering the assumed earnings to such a realistic number would cause mass panic, as municipalities would need to come up with dramatically increased payments. They already are struggling with their current payments.

Under that scenario, the state’s pension debt would be around $1.3 trillion, according to some estimates – and it would become implausible to push the problem down the road. Even with the current high assumption rates and even after a great year of earnings of 11.2 percent, CalPERS is only funded at a troubling 68 percent. (The California State Teachers’ Retirement System had even better returns last year, but is funded only at 64 percent.)

In its second major action last week, “CalPERS delayed action … on the chief actuary’s proposal to shorten the period for paying off new pension debt from 30 years to 20 years, a cost-cutting reform that would end the current policy not recommended by professional groups,” explained Ed Mendel, on his respected Calpensions blog.

Localities already have faced four major rate increases since 2012. CalPERS assesses the increases to make up for the unfunded liabilities, and recent studies suggest that local governments are slashing public services to come up with the cash. Had CalPERS decided to pay off new debt in a shorter time frame, it would have meant a fifth increase, according to Mendel. He quoted the League of California Cities’ official Dane Hutchings with these words of warning: “The well is running dry.”

It’s a mess. If CalPERS does the right thing, it exacerbates local governments’ current problems. But maintaining the status quo will make them worse down the road. As Mendel explained, under CalPERS’ current payment approach, “the debt continues to grow for the first nine years” with the payment not even covering the interest. “(T)he payments do not begin reducing the original debt until year 18, more than halfway through the period.”

In other words, I have a great 30-year plan for paying off your credit-card debt: You make minimum payments for the next 18 years and then worry about it then. Isn’t that the very definition of kicking the can down the road?

It’s hard to feel too sorry for these struggling cities. Do you remember when they warned about the impending disaster if the state Legislature passed a 1999 bill, promoted by the California Public Employees’ Retirement System, that would retroactively raised pensions across the state by 50 percent? Do you remember when city managers angrily resisted union-backed efforts to raise pensions at their city councils? Neither do I.

Unfortunately, their efforts to avoid another rate hike only helps CalPERS do what it likes to do most – remind us that all is well and that the stock market will pay for all the pension promises. It might, but then again it might not. If the market slows, there will be a lot of California officials shocked to find a dead end up ahead.

Steven Greenhut is contributing editor for the California Policy Center. He is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This article was originally published by the California Policy Center

Study confirms the California pension crisis is hitting now

Debates about California’s pension crisis almost always focus on the big numbers – the hundreds of billions of dollars (and, by some estimates, more than $1 trillion) in unfunded liabilities that plague the public-pension funds. For instance, the California Public Employees’ Retirement System is only 68 percent funded – meaning it only has about two-thirds of the money needed to pay for the pension promises made to current and future retirees.

Calpers headquarters is seen in Sacramento, California, October 21, 2009. REUTERS/Max Whittaker

CalPERS and its union backers insist that there’s nothing to worry about, that future bull markets will provide enough returns to cover this taxpayer-backed debt. Pension reformers warn that cities will go bankrupt as pension payments consume larger chunks of municipal budgets. They also warn that pensioners are at risk if the shortfalls become too great. The fears are serious, but they mainly involve predictions about what will happen a decade or more into the future.

What about the here and now? California municipalities and school districts are facing larger bills from CalPERS and from the California State Teachers’ Retirement System (CalSTRS) to pay for sharply rising retirement costs. Most of them can come up with the money right now, but that money is coming directly out of their operating budgets. That means that California taxpayers are paying more to fund the pension system, and getting fewer services in return.

The “bankruptcy” word garners attention. This column recently reported on Oroville, where the city’s finance director warned about possible bankruptcy during a recent hearing in Sacramento. The Salinas mayor also has been waving the bankruptcy flag. The b-word understandably gets news headlines, especially after the cities of Stockton, Vallejo and San Bernardino emerged from bankruptcies caused in large part by their pension situation.

But there’s a huge, current problem even for the bulk of California cities that are unlikely to face actual insolvency. They are instead facing something called “service insolvency.” It means they have enough money to pay their bills, but are not able to provide an adequate level of public service. Even the most financially fit cities are dealing with service cutbacks, layoffs and reductions in salaries to make up for the growing costs for retirees.

A new study from Stanford University’s prestigious Institute for Economic Policy Research has detailed the depth of this ongoing problem. For instance, the institute found that over the past 15 years, employer pension contributions have increased an incredible 400 percent. Over the same time, operating expenditures have grown by only 46 percent – and pensions now consume more than 11 percent of those budgets. That’s a tripling of pension costs since 2002. Contributions are expected to continue their dramatic increases.

“As pension funding amounts have increased, governments have reduced social, welfare and educational services, as well as ‘softer’ services, including libraries, recreation and community services,” according to the study, “Pension Math: Public Pension Spending and Service Crowd Out in California, 2003-2030” by former Democratic Assemblyman Joe Nation. In addition, “governments have reduced total salaries paid, which likely includes personnel reductions.”

These are not future projections but real-world consequences. The problem is particularly pronounced because “many state and local expenditures are mandated, protected by statute, or reflect essential services,” thus “leaving few options other than reductions in services that have traditionally been considered part of government’s core mission.” Many jurisdictions have raised taxes – although they never are referred to as “pension taxes” – to help make ends meet, but localities have a limited ability to grab revenue from residents.

The report’s case studies are particularly shocking. The Democratic-controlled Legislature and Gov. Jerry Brown often talk about the need to help the state’s poorest citizens.Yet, the Stanford report makes the following point regarding Alameda County (home of Oakland): Pension costs now consume 13.4 percent of the county’s operating budget, up from 5.1 percent 15 years ago. These increases have “shifted up to $214 million in 2017-18 funds from other county expenditures to pensions,” which “has come mostly at the expense of public assistance, which declined from a 33.6 percent share of expenditures in 2002-03 to a 27 percent share in 2017-18.”

The problems are even more stark in Los Angeles County. As the study noted, pension costs have shifted approximately $1 billion from public-assistance programs including “in-home support services, cash assistance for immigrants, foster care, children and family services, workforce development and military and veterans’ affairs.”

It’s the same, basic story in all of the counties and cities analyzed by the report. For instance, “the pension share of Sacramento’s operating expenditures has increased over time, from 3.2 percent in 2002-03 to 12.5 percent in the current year.” That percentage has gone from 3 percent to 12 percent in Stockton, and from 3.1 percent to 15.2 percent in Vallejo.

These are current problems, not future projections. But the future isn’t looking any brighter. “The case studies demonstrate a marked increase in both employer pension contributions and unfunded pension liabilities over the past 15 years, and they reveal that in almost all cases that costs will continue to increase at least through 2030, even under the assumptions used by the plans’ governing bodies – assumptions that critics regard as optimistic,” Nation explained.

So, yes, the public-sector unions and pension reformers will continue to argue about when – or even if – the pension crisis will cause a wave of California bankruptcies. But overly generous pension promises are destroying public services and harming the poor right now.

Steven Greenhut is a contributing editor for the California Policy Center. He is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This piece was originally published by the California Policy Center.

San Diego mayor hopes to lead state GOP out of its morass

Kevin Faulconer 2SACRAMENTO – Even Republicans admit the state GOP is something of a rudderless ship these days. The party doesn’t control any constitutional offices. Democrats have supermajorities in both houses of the Legislature. Assembly Republican Leader Chad Mayes of Yucca Valley, is the target of a grassroots effort to force him from his leadership post after he backed a Democratic bill to expand the cap-and-trade system for 10 years.

Meanwhile, the national Republican Party has become anathema to ethnically diverse California, especially after President Donald Trump doubled down on his initial comments about Saturday’s white-supremacist march in Charlottesville, Virginia. On Tuesday, the president assured the media that there were some “very fine people on both sides” at the protests. Yes, the California party’s predicament is dismal, especially from a recruitment standpoint.

Yet Tuesday night, one prominent GOP official detailed a positive direction for the party. San Diego Mayor Kevin Faulconer says he isn’t running for governor, but gave a major speech to the Commonwealth Club in San Francisco regarding the future of the California Republican Party. He wasn’t there “to offer suggestions about what we ought to do,” he said. “I’m here to tell Republicans what we’ve already done in San Diego.”

He described it as a call to action – an opportunity to rebuild the party centered on the theme of “fixing California.” Faulconer detailed five themes on which the party should unite as a way to win over new generations of voters. The first of them involves freedom. “Not only is individual liberty part of California’s heritage, it’s a classic conservative principle – one that Republicans have watered down to our own detriment,” he said. “People have stopped seeing the GOP as the party of freedom. They see it as the party of ‘no.’”

He even singled out a freedom theme that could be controversial in a socially conservative party: freedom of sexual orientation. But he contrasted his vision with that of the Democratic Party, “which has organized itself around the proposition that an individual’s most defining qualities are gender, sexuality and race.” He calls that a party based on differences, whereas he envisions a “New Republican Party” built around a set of common ideas.

“One of our biggest failures is that Republicans do not communicate our shared values to underrepresented communities,” Faulconer said. He pointed to his successful San Diego mayoral race: “Facing a Hispanic candidate in a city where just 25 percent of voters are registered Republican, I won more than 57 percent of the total vote – and close to 40 percent of the Latino vote. … Why? Because I campaigned in communities Republicans wrote off as lost – and Democrats took for granted.”

His second theme involved immigration. Faulconer said that Republicans are doing a poor job inviting new Americans to join the party of freedom and limited government. In fact, he said he wouldn’t even need to give such a speech if the GOP weren’t failing at that message. He called for welcoming immigrants, while acknowledging that the party can’t ignore the issue of illegal immigration. “We must push for efficient ports of entry and get smarter about border security,” the mayor said, while emphasizing the importance of treating nearby Mexico as “neighbors and economic partners.”

Faulconer’s third theme involved the environment, about engaging responsibly on conservation and climate-change issues with “plans that don’t plunder the middle class.” He again used his city as an example. “San Diego is now on a path to slash greenhouse gases in half and shift to 100 percent renewable energy – without a tax increase,” he said.

His fourth theme is for California leaders to focus on California issues, rather than “chasing the latest soundbite out of Washington, D.C.” He chided Sacramento Democrats, who he says “are suffering from what I like to call ‘outrage FOMO’ – a Fear Of Missing Out on the latest controversy that will allow them to score political points on social media and TV.” By contrast, Faulconer said the “New Republicans” need to focus on “the fundamentals of government service.”

That includes infrastructure. “The fact that 50 percent of California’s roadways are in poor condition is an absolute failure,” he said. “We have the nation’s second highest gas tax but some of the worst roads, with no guarantees that the taxes we pay at the pump will actually go toward fixing the problem.” But, for his fifth and final point, he focused on the overall need for “reform.” This theme involved the role of the state’s powerful unions in resisting reform.

“Too often Sacramento politicians are unwilling to say ‘no’ to entrenched special interests – at our expense,” he said. “California ranks in the bottom 20 percent of K-12 schools nationwide. Yet Democrats continue to side with unions against meaningful changes to improve student achievement.” He noted that “California falls dead-last in housing affordability in the continental United States” but “Democrats are blocking revisions to housing rules that were designed to protect the environment but that labor has hijacked for its own gain.”

He noted that California was “rated the worst state for business” because “lawmakers keep layering regulation on top of regulation until budding entrepreneurs are crushed, and only the biggest businesses survive.” He also pointed to the state’s massive pension debt and, again, used San Diego as an example, given that city’s successful voter-approved pension reform.

These reform themes echo talking points Republican leaders have traditionally made. And he was predictably pointed in his critique of Democrats, noting that their policies have resulted in “economic inequality; troubled schools; sky-high housing costs; failing infrastructure; and crippling pension debt.” Those problems have festered, he added, while Sacramento “pursues the kind of political fantasies that grip a party when it gains complete and total control.” But his approach signified a break from typical Republican efforts.

To break that one-party control, Mayor Faulconer’s blueprint focuses heavily on repackaging the party’s long-held ideas and reaching out to communities that the party hasn’t successfully appealed to in the past. He envisions a day “when San Francisco’s Republican mayor is standing before you, she isn’t talking about how California Republicans are endangered, but rather how we are ushering in a government that is uniting our people and looking out for the middle class.” It’s a bold challenge for a party that seems to be collapsing, but his ideas received a warm reception.

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

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.