Public Safety Pensions – Reduce Now or Slash Later

“Once people get the facts, they do not support slashing people’s pensions.”
- Dave Low, chairman, Californians for Retirement Security (Washington Post, February 25, 2014)

Really?

Making sure “people get the facts” is difficult when most “facts” the public sees are promulgated to the media by pension fund PR departments eager to preserve the torrent of taxpayers money flowing into their favored investment firms, along with PR firms representing taxpayer-funded public sector unions whose primary reason to exist is to increase the wages and benefits of their members.

According to the most recent data available from the California State Controller – over $600 billion of taxpayer’s money is privately invested by public employee pension funds (Public Retirement Systems Annual Report, FYE 6-30-2011, released 5-22-2013, page xv, Figure 2), and every year, taxpayers pour another (woefully inadequate) $27 billion into these financially troubled funds (same report, page xxii, Figure 12).

As for the California’s public sector unions? It’s hard to get facts on these massive institutions whose operations – despite being 100% funded by taxpayers – are largely defined by their opacity. But just in California, their collective revenues per year from dues and agency fees can be reliably estimated at over $1.0 billion per year.

Those are two pretty big elephants in this room we call California, Mr. Low.

Chairman Low’s comment was quoted in an article entitled “In San Jose, generous pensions for city workers come at expense of nearly all else.” The focus of the article was the exodus of public safety personnel from San Jose, since their pensions have been “slashed” as the result of a reform initiative passed by nearly 70% of voters.

So what are the facts about public safety pensions in San Jose?

Getting these facts are also difficult, but earlier this week, the California Public Policy Center released a study entitled “Evaluating Public Safety Pensions in California,” with San Jose’s independent pension system one of those selected for analysis. The other two were the independent pension system serving public safety retirees from Los Angeles, and public safety retirees who participate in CalPERS.

As documented in this study, the average retired public safety employee in San Jose collects a pension considerably better than the average public safety retiree from Los Angeles, or the average public safety retiree who is part of the massive CalPERS system. Factoring in the length of service, and the year of retirement, take a look at these pensions:

City of San Jose Public Safety Retirees
Average Base Pension by 
Years of Service and Year of Retirement

20140404_Ring-Fellner_SJ-by-Svc-and-Ret

It is very important to note that these averages are just for “base pension.” In general, based on the data received from other pension systems who supplied the additional data, public safety retirees collect at least $10,000 per year in health benefits that are not considered part of their base pension, and San Jose is no exception (ref. SJ safety retiree health benefits). This means the average public safety retiree in San Jose, if they retired in the last ten years and worked 25 years or more, collects a pension and benefit package that averages over $110,000 per year.

These are the “facts,” Mr. Low. This is what voters decided to “slash,” although if you read Measure B, “slash” is not exactly the first thing that comes to mind. “Sanity” may be more appropriate.

The reader looking for additional “facts” may wish to click on this link, which points directly at individual pension amounts for the most recent fiscal year for which data is available: “San Jose Police and Fire Retirement Plan (2012).” For that matter, perhaps the factually minded reader may wish to click on this link, which points to how much individual public servants currently working for the City of San Jose made according to the most recent data: “All salaries for San Jose (2012).”

The observant viewer of these links to San Jose’s city employee pay and pension data will note, factually, that the vast majority of highly compensated individuals work in public safety. But what about the averages? What is the average total pay and employer-paid benefits for San Jose’s public servants? For that, refer to the next chart, taken from another California Policy Center study entitled “San Jose, California – City Employee Total Compensation Analysis,” using 2011 payroll data provided by the city itself:

20140415_RingUW_SJ-city-pay-2011

Lest anyone suspect that “averages” for pay – and the pensions whose value is calculated based on final rates of pay – are misleading because of a handful of overpaid executives, please note that median pay for San Jose’s public safety employees exceeds their average pay.

No reasonable person questions the need to pay public safety personnel a premium for the work they do. But to preserve defined benefits, not to mention the financial survival of our cities and counties, we must make tough decisions now, to avoid having to “slash” later.

(Ed Ring is the executive director of the California Policy Center. Originally published on Union Watch.)

Gore: Global Warming Doubters ‘Immoral, Unethical”

Whenever you read about Al Gore, keep in mind that he frolics in a compound in Montecito valued in 2010 at $8.875 million. Now it’s probably worth at least $12 million. Reported the Huffington Post at the time:

“Records show that the approximately 6,500 sq. foot home boasts 6 bedrooms, 9 bathrooms, a large pool house, 6 fireplaces, wood framed french doors, and carved stone detailing throughout.”

And that was his fourth luxury home.

Gore’s “carbon footprint,” how much energy he uses and how much CO2 he spews into the atmosphere, must be larger than entire provinces of Bangladesh.

Yet after he recently jetted to Hawaii, the Honolulu Civil Beat reported:

“The ‘barriers’ to doing something about climate change are business and political interests that profit off of fossil fuels — ‘dirty energy that causes dirty weather.’ He compared fake science from polluters stating that humans are not to blame for the climate to tobacco companies that used to hire actors to play doctors who denied cigarettes were dangerous.

” ‘That’s immoral, unethical and despicable,’ he said of both.”

That’s funny. Because in his political campaigns, Gore used to profit from both tobacco and being anti-tobacco. As Joan Beck reported in 1996, after Gore told a heart-wrenching story at the Democratic National Conventiion of his sister dying of lung cancer:

“He and his family made money by raising tobacco on their Tennessee farm for years — profiting from a product that killed lots of other people’s sisters and husbands and parents and brothers and friends in a particularly vicious and cruel way.

“They didn’t stop when the surgeon general issued his sharp warning linking tobacco with illness and death in 1964, not until Nancy’s tragic battle with lung cancer.

As late as 1988, Al Gore was bragging in a speech to tobacco farmers in North Carolina, ”Throughout most of my life, I raised tobacco. I want you to know that with my own hands, all of my life, I put it in the plant beds and transferred it. I’ve hoed it. I’ve dug in it. I’ve sprayed it, I’ve chopped it, I’ve shredded it, spiked it, put it in the barn and stripped it and sold it.” And made money growing a carcinogen that killed other people’s loved ones. Gore made this speech, remember, four years after his sister’s death. And 24 years after the surgeon general’s report.

Now, of course, Gore has become vastly wealthier trading in on the global warming/climate change political fad, even as he enjoys the lifestyles of the rich and famous and high carbon-footprinted and hypocritical.

(John Seiler is the managing editor of CalWatchdog. Originally published on CalWatchdog.)

Boeing Provides a Spark to the Economy

A job is like a fire, providing energy, light, heat and sustenance to the life of the person who holds the flame. It illuminates the vision ahead to see a brighter future of caring for oneself and our families. Last week, the Los Angeles region received the promise of many more lights with The Boeing Co.’s announcement that it would soon be moving 1,000 high paying skilled engineering jobs to our communities.

“The Company’s announcement … indicates that much of the work on next-generation aircraft will transition from Washington state to California by the end of 2015,” stated the Los Angeles Times. This could be the start of reversing the trend we have seen over the last 20-plus years in the aerospace industry in California.

Boeing’s investment in our region is a spark that could lead to a roaring fire of job creation. For that, we send a big thank you note to Seattle. Credit is also due to the leadership in the communities in which the company is choosing to expand because they have supported their existing Boeing operations and worked to improve their business environment to encourage expansion decisions like this one.

This announcement by Boeing is a welcome reminder to all elected officials and business leaders that if we build a solid infrastructure, educate a strong workforce and resist the urge to overregulate growing industries, 1,000 new jobs in the aerospace industry can be just the beginning. The same attitude can lead to tens of thousands of new jobs in the entertainment industry, manufacturing, energy, construction, trade and other industry clusters that have seen far too many job declines in the recent past.

Thank you to Boeing for your investment in Southern California. Our pledge to you is to nurture the spark you have provided and use it to grow a better economy for all of us.

(Gary Toebben is the President & CEO of the Los Angeles Area Chamber of Commerce. Originally published on Fox and Hounds.)

Big Labor Escalates Tactics as Mid-terms Approach

Activity by the National Labor Relations Board (NLRB), Department of Labor (DOL) and Occupational Safety and Health Administration (OSHA), as well as several of the largest labor unions, over the past two weeks evidences the Obama Administration’s growing anxiety as the mid-term election approaches. The Administration, facing loss of the Senate and ultimate control in both houses, continues to direct its agencies to pass union-friendly regulations and to impose its interpretation of current law to favor accelerated forced unionism. The Administration and Democratic Party represent a typical symbiotic relationship where they are co-dependent upon each other for future survival. The Administration needs union contributions and union foot soldiers to have any chance of maintaining a senate majority and making gains in the house during the 2014 mid-term elections (see Union Money in Elections). Conversely, Big Labor is finally recognizing and admitting that their declining membership is a major problem and they need the Administration’s help (see AFL-CIO admits declining membership a major problem).

In order to get the ball rolling, several pro-labor steps have been taken by OSHA, the NLRB and the Department of Labor (DOL). First, OSHA has reaffirmed its position that union officials may accompany OSHA inspectors on safety inspections in non-union facilities. This issue was reported in a previous blog, OSHA Opens New Door For Big Labor, and was more recently presented by the CEO of PJS on the Greta Van Susteren Show this past week, in CEO: How union organizers are targeting my non-union company. The union involved – the SEIU – used such tactics as part of its ongoing Corporate Campaigns to force a cleaning company in Houston to sign a Neutrality Agreement and achieve forced unionization through Card Check, as described in SEIU Uses Federal Inspections to Target Houston Small Business. As if that wasn’t bad enough, the SEIU is buying votes in polls and gaining naive media attention, from media groups like the Los Angeles Times, to support its attack on fast food companies as chronicled in Beware SEIU, Especially Bearing “Polls”.

Not to be outdone, the General Counsel of the National Labor Relations Board is looking to limit the ability of business owners to relocate their businesses without approval of the union (see NLRB will limit ability of unionized business to relocate). This move is an obvious attempt to preserve union membership heading into the midterms while taking away the fundamental right of a free market society. On a bright note, House, Senate Leaders Introduce Legislative Response to NLRB Ambush Election Rule, which was approved by the House Education and Workforce Committee this past week

In a surprising move, the NLRB complains Walmart Black Friday protesters broke rules, went too far and must Cease and Desist! This decision was made by a local NLRB Region and is not expected to survive the pro-labor board in Washington D.C. Finally, the DOL, under the Administration’s direction, limited the reporting responsibilities of unions during the President’s first term. Labor unions, particularly the United Food and Commercial Workers continue to take full advantage of it by funding OUR Walmart, a “Worker Center” operation utilized to advance its Corporate Campaigns against Wal-Mart in an attempt to force Card Check and force unionize Wal-Mart’s workforce.

The UAW appears to be attempting to force Volkswagen into Card Check. This past week, an anti-union group said Volkswagen may ignore the election results and bring in the union, basically agreeing to Card Check. Additionally,Unable To Sell Unionization On Its Merits, The UAW Turns To Race, Rappers And An Actor For Aid, and the UAW Bosses Turn To Bovine Excrement Manufacturing. Despite the fact these tactics continue not to work for the UAW, the union has decided to continue to press the issue and to replace outgoing President Bob King with UAW Secretary Treasurer Dennis Williams who supports King’s tactics. Once again The United Auto Workers Promote Failure. Isn’t the definition of “insanity” to repeat the same things over and over again, with the same failed results?

Finally, the question must be asked, is the unionization of college sports spreading? The answer appears to be both yes and no. Recent reports indicate that the University of Notre Dame could be next (see Notre Dame could be next front in union battle). However, it appears any progress on this movement will take a long time as Northwestern University has filed an appeal on the decision made by the NLRB administrative law judge finding college athletes to be “employees” (see Northwestern University Appeals NLRB Ruling on Athletes as Employees). Contrary to the judge’s finding, an Ohio bill says college athletes aren’t employees.

Unions and the Democratic Party desperately need money as mid-term elections approach as discussed in It’s All About the Dues Money! Desperation is setting in despite the fact the Administration has aligned the federal labor agencies in big labor’s favor. The American people are beginning to wake up, and businessmen across the country are standing up to big labor’s Death by a Thousand Cuts Corporate Campaigns and saying “no” as chronicled by the PJS CEO and this Hilarious Car Dealership Outwitting Labor Union Tactics — And This Video May Just Be the Victory Lap where a Wichita auto dealership beat a union at its own tactics.

Desperation is setting in and it is only going to get uglier as the mid-term elections approach.

(David A. Bego is the President and CEO of EMS, an industry leader in the field of environmental workplace maintenance, employing nearly 5000 workers in thirty-three states. Bego is the author of “The Devil at My Doorstep,” as well as the just released sequel, “The Devil at Our Doorstep,” based on his experiences fighting back against one of the most powerful unions in existence today. Originally published on Union Watch.)

Tax Bill Strikes at Prop. 13

Almost every year in the California Legislature Proposition 13 becomes a target for those seeking higher taxes. The 1978 tax-limitation measure, among other things, requires a two-thirds vote for local tax increases.

As budget maneuvers heat up in the Legislature, state Sen. Lois Wolk, D-Davis, last week pushed Senate Bill 1021 through her State Governance and Finance Committee on a 5 to 2 vote. It was a strict party-line tally, with Democrats in favor and Republicans against.

It would allow “split-roll” parcel taxes to fund schools. The bill is complicated, as even the Senate analysis pointed out. But the analysis gets the gist of the bill:

“According to the opposition, this bill overturns the Borikas decision on a prospective basis by allowing more than 1,000 school districts to impose nonuniform parcel taxes. In other words, this bill allows school districts to use property classifications commercial, industrial, single-family residential and multifamily residential to impose different tax rates.”

In the 2012 decision Borikas vs. Alameda Unified School District, the California Courts of Appeal cited Government Code Section 50079, which reads that the code allows only “taxes that apply uniformly to all taxpayers or all real property within the school district.” In the court’s words, the code prohibits “differential tax burdens,” which sometimes are called split-roll taxes.

SB1021 would change the state code to get around Section 50079.

Prop. 13

This is where Prop. 13 comes in. It already authorized school districts to impose a flat tax on each parcel of land in their district with 2/3-voter approval.  What SB1021 does is authorize school districts to apply the tax on the basis of the square foot of the land or the building to a combined category of commercial, industrial and multifamily residential properties, and at a lower rate for unimproved land.

In testimony against the bill before the committee, CalTax Vice President of State Tax Policy Gina Rodriquez said:

“The bill … allows school districts to impose layered parcel taxes. A school district could impose a parcel tax based upon square footage, and based upon the classification – for the same parcel. Of critical importance, however, is that if parcel taxes are split, homeowners would lose their parcel tax deduction, and face higher state and federal income taxes. To be deductible, real property taxes must be levied for the general public welfare ‘at a like rate against all property’ in the taxing authority’s jurisdiction.”

For example, someone with a home business could have the home declared a “commercial” property,  thus eliminating the federal and other tax deductions.

Opposition

The written opposition to the bill was massive, with opponents including the California Chamber of Commerce, the California Apartment Association and the California Association of Realtors. (Full list at the bottom of the bill wording here).

Chartered property appraiser Charles Warren of Pleasant Hill told CalWatchdog.com that a split-roll parcel tax could end up encouraging property demolition for marginal properties. He asked, “How much property value will be raised if a lot of buildings gets bulldozed? Or will it be a land tax?  If a land tax, it will encourage higher density development that could be blocked by growth controls in local communities.”

Thus, small commercial building owners could be hit by a school parcel tax with no way to develop their properties to a higher use to offset the higher taxation.  Warren warned, “Given 5 percent capitalization rates, for every $1 per square foot of tax a property would take a $20 per square foot hit on property value.”

In general, the number of business establishments in a community only comprises about 5 percent of all the residential households. Moreover, 97 percent of commercial property owners are comprised of small businesses, residential duplexes, Mom and Pop restaurants, and even some elderly homeowners with old houses on land that has been upzoned for commercial use.

There are no special waivers in SB1021 for any of these commercial property categories because they comprise the bulk of properties on which the tax would be imposed. And small, older commercial building stock is likely to be mostly found in Hispanic-populated areas of Southern California such as Huntington Park.

Large investment-grade commercial and multi-family properties would probably feel the pain of a new parcel tax less because the tax can be passed through to wealthier tenants.

By contrast, small businesses, residential duplex properties, and homeowners on commercial-zoned land have no one to whom they can pass along the tax.

Prospects

The real problem for the bill could come from Gov. Jerry Brown. Running for re-election this year, so far he has come out against any new taxes.

Brown well remembers the strong support for Prop. 13, which was passed in 1978 during his first term as governor. His Proposition 30 tax increase of 2012 was not passed by the Legislature, but by voters, giving Brown the cover of voter support.

Brown also just called for a special session of the Legislature to change the wording of an initiative on the fall ballot to strengthen the state’s “rainy day” fund by putting wording in the California Constitution.

But whatever happens with SB1021, it will not be the last attack on the redoubts of Prop. 13.

(Wayne Lusvardi is a contributor to CalWatchdog. Originally posted on CalWatchdog.)

UTLA, LAUSD and ACLU Fiddle While Children Don’t Learn

In 2010, the American Civil Liberties Union filed a lawsuit which claimed that seniority-based layoffs take a disproportionate toll on poor and minority schools. The ACLU won the case and the settlement protected students in up to 45 schools from the pernicious effects of the last in/first out (LIFO) regimen.

But shortly thereafter, the United Teachers of Los Angeles successfully appealed the decision, and the case was remanded back to state court. And after 20 months of dithering and dickering, we now have a new settlement. As reported by EdSource’s John Fensterwald,

The deal in the Reed v. the State of California lawsuit will provide about $25 million annually for three years for additional administrators, mentor teachers and teacher training in 37 middle and high schools where there had been low student performance and high turnover of inexperienced teachers.

There are a few other minor considerations like a special education coordinator being placed at each school and principals will be offered a “retention package” to stay on the job longer. But the problem at hand? Ignore it, throw some money around it and hope the victims will be appeased. There is no mention at all about better ways to choose which teachers stay and which teachers go should layoffs become necessary. It ignores the reality that the union-enforced LIFO system regularly cheats thousands of children out of a decent education. And the self-congratulatory palavering over the decision strikes a dissonant chord.

The usually sensible Los Angeles Unified School District superintendent John Deasy crooned,

The youth in greatest peril at these schools will benefit tremendously. These are invaluable investments, aligned with the goals of the Local Control Funding Formula, which will make a difference in transforming these schools and bring justice to our youth.

Huh? What Dr. Deasy is saying here is that we can right things by simply throwing more money at the problem. Gee, maybe we can become like Washington, D.C.! It spends $30,000 yearly per student yet has one of the most dysfunctional school systems in the country.

Joan Sullivan, CEO of the Partnership schools rhapsodized,

Our mission is about equity. Today, thanks to ongoing collaboration, we have all parties coming together around a landmark settlement that promises to bring students across Los Angeles closer to the educational opportunity they deserve.

Landmark? The only landmark that this case conjures up is the Alamo. But while the Alamo massacre is a distant memory, inner city school carnage is still with us.

Jesus E. Quinonez, an attorney for UTLA, claimed victory, warbling,

… any attempts to extinguish the rights of teachers—here, the right to a neutral and fair hearing process—will not serve the needs of kids or lead to justice in our schools.

Fair hearing process? Is he kidding?! With LIFO in place, no one gets any kind of hearing. Decisions are made according to a brain-dead set-up that doesn’t recognize the importance of teacher quality. In fact, LIFO discriminates not only against children, but also against good and great teachers.

Dale Larson, attorney with Morrison & Foerster, which partnered with the ACLU in the lawsuit, intoned:

By providing resources to attract and retain teachers in the 37 low-performing, high-turnover middle and high schools, the settlement renders the legal question raised in Reed “academic.”

Actually, it’s not “academic” at all as the 17 page decision never even mentions the words “seniority” or “last in/first out.”

What the Kumbaya chorus is omitting – other than the fact that the issues in the original suit have gone completely unaddressed – is that adding administrators to a bad situation is often worse than meaningless. You see, in Los Angeles, though administrators are “at will” employees, they are treated like unionized teachers and are almost never fired for incompetence. (I know this from first-hand experience. We had a revolving door of assistant principals at the middle school where I toiled for 15 years. A few were great, some good and some were so bad they went from school to school – all too frequently mine – as “must place” employees. Also, I never met a teacher who was drawn to a school because it had a lot of administrators.)

Additional mentor teachers and teacher training are good things – assuming the mentors and the training are of value. But what happens if a teacher still isn’t doing the job after working with a mentor and getting further training? Nothing. Due to seniority (and equally noxious tenure laws), he will still be in the classroom, his students will still be failing, and a better teacher will be collecting an unemployment check.

Officially, the agreement is not a done deal. The LAUSD board needs to vote on it and it’s on the agenda for its April 22nd meeting. If it passes there, the settlement then must be approved by the court. But given the self-congratulatory outpouring by virtually all of the involved players, it’s hard to believe that there will be dissent from either entity. (Too bad the parents and kids at the involved schools don’t have a vote.)

Hence, it would appear that the only hope for burying seniority – and the foul tenure and dismissal statutes – lies with the Vergara v. California (Students Matter) case, which is set for a ruling by early July. Referring to Vergara, UTLA attorney Quinonez said the settlement in the ACLU case acknowledges that “the solution to high turnover in schools is not to take away teachers’ rights.”

What the union lawyer really meant was that the agreement doesn’t take away the more seniorteachers’ perks. And more importantly, his statement makes no mention of “children’s rights.” But then again, union songs are invariably about union solidarity. And the voices of the children and their parents who continue to be penalized are never included in the mix.

(Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers with reliable and balanced information about professional affiliations and positions on educational issues. Originally published on Union Watch.)

Keeping Our Government in the Open

On many levels, the advent of the Internet fundamentally transformed our society, giving us access to information literally at our fingertips.

Without question, it offers a lot of good. But it also exposes our personal information in ways that decades ago would have been unimaginable. Little did we know that what we would have to worry about would be our own government spying on us as we surf the net.

Like many Californians, I have been troubled by revelations over the last year of the National Security Agency’s (NSA) activities online. With a recent report now alleging that the NSA posed as Facebook in order to contaminate computers with malware, it is just one more misstep eroding confidence in our government.

The report prompted Facebook founder Mark Zuckerberg to call the President directly. In a post online, Zuckerberg wrote, “The U.S. government should be a champion for the Internet, not a threat. They need to be more transparent about what they’re doing, or otherwise people will believe the worst.” Unfortunately, Americans already are.

Yes, the federal government has owned up to several of its surveillance programs, but it still keeps many activities suspiciously close to the chest. While protecting our privacy remains a top concern, the situation also calls into question the issue of transparency and what taxpayers have a right to know about our government’s doings behind closed doors.

Here in California, Sacramento is plagued by its own transparency problems.

Too often, decisions are hidden away from public view and made in just a matter of hours despite the fact that they impact our everyday lives, from determining how much to spend on our kids’ education to how we go about fixing our roads and highways. As a matter of principle, the basic process of passing a new law should be one of our most open processes.

To make government more open and accountable, I authored Assembly Constitutional Amendment 4, which would force the Legislature to make bill information available to the public at least 72 hours before any vote. You have a right to know when a bill will be voted on and what it will do so that you can voice support or opposition.

But the Legislature is not the only government entity shying away from transparency.

In another incident, media reports exposed how our state’s health care exchange, Covered California, gave consumers’ personal contact information to third party insurance telemarketers without their permission.

Cold calls from these companies rightly made Californians uneasy and called into question just how far-reaching the agency has gone when it comes to making decisions that put your privacy on the line. By giving out this information freely, it begs the question: is other, more sensitive information at risk?

Perhaps what is most disturbing about these scenarios, however, is that we only find out about these practices when government is caught in the act. Even then, it is a mere acknowledgement, with hardly a hint of regret or remorse. This needs to change.

Our government – whether at the federal, state or local level – cannot operate in a vacuum, free from scrutiny and accountability. If its authority is allowed to go unchecked, we jeopardize the very principles that built our nation and have kept us free.

As Americans, we pride ourselves on having a government that is of, by, and for the people. If this is truly the case, then it must also be one that is transparent, upfront, and open.

(Assemblymember Kristin Olsen, R-Modesto, represents the 12th Assembly District in the California Legislature, which includes portions of Stanislaus and San Joaquin Counties in the Central Valley. Originally published on Fox and Hounds.)

Garcetti’s Precarious Budget

In the most honest and straight forward budget presentation in the last ten years, Mayor Eric Garcetti presented his “Back to Basics” budget at a Monday morning press conference at City Hall. This $5.1 billion General Fund budget is $250 million greater than last year’s Adopted Budget, representing a 5% increase.

Garcetti’s budget focuses on four key areas: public safety; a prosperous city where the City’s bureaucracy is service oriented and not an impediment to business; an environmentally sustainable city that has better streets, sidewalks, and other amenities; and a well-run City government that is focused on customer service and results, not process.

The General Fund budget includes increases for the Police and Fire Departments of almost $40 million, the repair of more streets and sidewalks, improved code enforcement by Building and Safety, and a number of other important initiatives, including better management information and budgeting systems.

There have also been some changes in the budgets of individual departments as a result of Performance Budgeting, where the emphasis is on achieving goals and desired outcomes, not on line item budgeting.

Eric was upfront in telling us that this budget was just the beginning, that the upcoming budget year (2014-15) was one where the City closed the $242 million deficit and invested in some key initiatives, that the next year is one of stabilization, and the following year is one of growth.  To use his analogy, this is a marathon, not a sprint.

However, a quick analysis of this budget reveals that it is balanced based on one time revenues of $176 million, including a transfer of $129 million from the previous sacrosanct Reserve Fund that was needed to fund increases in pension contributions and healthcare premiums.

This budget is also very fragile.  It assumes that there will be no increases in salaries for all City workers, including the police and firefighters, and that civilian workers will contribute 10% to the cost of the premiums for their Cadillac healthcare plans.

In any case, this held-together-with-strings budget clearly demonstrates that the City cannot afford any more increases in salaries and benefits. Otherwise, the City would have to cut back on core services, not a very acceptable option for our new mayor and the City Council, and one that is sure to infuriate the voters.

The budget will now go the Budget and Finance Committee of the City Council for its review, comment, and hours and hours of hearings, with the City Administrative Officer responding to numerous requests for information and alternatives.  The City Council has until June 1 to adopt or modify the budget, at which time the Mayor has five days to approve of veto the City Council’s changes, subject to a two-thirds override vote.

(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee,  the Ratepayer Advocate for the Greater Wilshire Neighborhood Council, and a Neighborhood Council Budget Advocate. Originally published on Fox and Hounds.)

CalSTRS Unfunded Liability Hits New High

The California State Teachers’ Retirement System just announced it faces $73.7 billion in long-term liabilities. Left untouched, that would spell bankruptcy in 2043.

For critics of California’s public-employee pensions programs, the grim numbers heighten the urgency for reform. If CalSTRS wants to address its shortfall, it has to get legislative approval.

CalSTRS is the product of a contract with the state of California. Most experts say its funding is guaranteed by the California Constitution. So the state government is responsible for ensuring that CalSTRS remains solvent. CalSTRS CEO Jack Ehnes has admitted that it’s essential to raise rates, shifting pressure to the Legislature.

At least one lawmaker has developed a proposal to address the liability. State Senator Mimi Walters, R-Laguna Niguel, wants to reduce CasSTRS’ burden by $2 billion in the 2014-2015 fiscal year.

“CalSTRS has a $71 billion unfunded pension liability,” she told News 10 ABC. “Two billion is a very small number but it’s a step in the right direction and it shows the teachers we are willing to take care of them and we care about them when they retire.”

By contrast, the California Public Employees’ Retirement system has the legal authority to raise its own rates for member contributions. In February, the CalPERS board voted for a rate increase “that will cost the state treasury around $400 million beginning July 1. The increase will be phased in over three years and will ultimately cost the state an extra $1.2 billion a year. That will bring the state’s annual payout to CalPERS to around $5 billion,” reported the Sacramento Bee.

Brown’s choices

In January, Gov. Jerry Brown’s budget proposal for fiscal 2014-15, which begins on July 1, projected a surplus — or “rainy day fund” — of $1.6 billion. The surplus was produced by Proposition 30, the $7 billion tax increase voters approved in Nov. 2012.

Brown’s budget also included $10 billion in more spending for health care, prison upgrades, schools, paying down some state debt and even the high-speed rail project.

The Brown budget conceded that CalSTRS’ eventually will require $4.5 billion a year in more funding from the general fund and from teacher contributions.

CTA

The California Teachers Association wants billions in increased school funding to offset any increase in teacher contributions to the CalSTRS fund. Bigger teacher contributions, however, are essential to salvaging the CalSTRS budget.

Yet some retired teachers pull in $100,000 or more per year in retirement. That’s information CalSTRS only released when the governor’s office compelled it.

Brown’s actions indicate he’s still formulating how to proceed — especially as his own November re-election campaign picks up steam. According to the Bee story, he favors a legislative funding plan for 2015, but supports Assembly and Senate hearings on what to do.

CalSTRS has run up against its own awkward choices. As Ed Mendel just reported on CalPensions.com:

“On a split vote, the CalSTRS board last week gave members in two unusual retirement accounts, which have a guaranteed minimum return, a $300 million credit from a surplus.

“To some board members it looked like bad timing and a policy out of step with the times. CalSTRS is seeking a multi-billion dollar rate increase for the main under-funded pension system.

“A board member representing Gov. Brown’s finance department, Eraina Ortega, urged a delay until the policy adopted in 2006 during different economic conditions could be reconsidered at the next board meeting.

“’I do think we have to be conscious as well of what those perceptions might be when we are seeking a funding solution to the defined benefit (pension) program,’Ortega said.”

To help navigate such challenges, CalSTRS brought on a new consultant firm, Meketa Investment Group. With a portfolio valued at $180 billion, CalSTRS is the largest pension fund in the world set up solely for teachers.

But however influential its consultants and lobbyists may be, the fate of CalSTRS rests in the hands of the state Legislature.

(James Poulos is a contributor to CalWatchdog. Originally published on CalWatchdog.)

Initiative Would Revive Redevelopment Agencies

If it were a movie, it might be called “Revenge of the JEDI: the Redevelopment Empire Strikes Back.” It’s the California Jobs and Education Development Initiative (JEDI), which would enable the revival of the 425 redevelopment agencies eliminated in 2011 by Gov. Jerry Brown and the California Legislature.

The initiative liberalizes the definition of “blight” to include areas where the unemployment rate exceeds the national or statewide rate. That could result in 85 percent of California’s counties being declared blighted and eligible for redevelopment.

The initiative is spearheaded by Californians for Jobs and Economic Development. The group incorporated a year ago, according to corporationwiki, but it does not have a website.

Its president is Santa Ana’s mayor for the past 20 years, Miguel Pulido. He also happens to be under investigation by the state Fair Political Practices Commission for allegedly profiting $197,000 from a real estate transaction in exchange for giving an auto parts store an exclusive city contract, according to the Los Angeles Times.

Cities donate $110,000

Several California cities donated a combined $110,000 to research the initiative. They include Ontario ($50,000), San Jose ($25,000), Anaheim ($25,000) and Pittsburg ($10,000), according to public records compiled by The California Alliance to Protect Private Property Rights, which is opposed to the initiative.

Some of the contributions never appeared on a city council or redevelopment successor agency agenda, said Nick Mirman, CAPPPR grassroots coordinator.

“Californians will be shocked to learn that taxpayer dollars that would otherwise go to public safety, parks and roads are being used to qualify a statewide initiative,” he said. “What’s more, the initiative is designed to make it easier for government to seize homes and small businesses by eminent domain so that it can be given to politically connected developers on the cheap … to build luxury hotels, golf courses and strip malls.”

Pittsburg Assistant City Manager Garrett Evans said that the city’s donation was not agendized because the city manager has the discretion to spend more than that amount, and that a council subcommittee had approved it.

Redevelopment ‘an incredible tool’

“Redevelopment was an incredible tool for Pittsburg,” said Evans. “Our community used redevelopment to build school facilities, fire stations, library improvements, parks, renovate historic structures, rebuild roads and infrastructure, and build affordable housing. Pittsburg’s crime rate is at its lowest point in 50 years because redevelopment was used to eliminate blight and unsafe buildings.

“Through redevelopment, the City worked with industrial corporations to locate and expand in our community, meaning our job base and wages increased. Our downtown was vacant and empty when I began working here 17 years ago. Now it is vibrant and full with pedestrians and restaurants. Redevelopment is a local, community-based program. Local residents decide what they want to accomplish in their neighborhood through a public process and a redevelopment plan.”

Cash cows

Redevelopment agencies had been cash cows for cities, giving them an extra $5 billion from the $50 billion that Californians pay in property taxes annually, according to an LAO analysis of the initiative. Much of the $5 billion would have gone to other governmental agencies, including fire departments, libraries and schools.

Passage of the redevelopment initiative would result in “increased resources for local redevelopment activities, growing to several billion dollars more per year, resulting in decreased resources for state and other local government activities of the same amount,” the LAO study concludes.

California’s unemployment rate has dropped to 8.5 percent from the 11.3 percent it was at when redevelopment agencies began to be dissolved in February 2012. Despite that, the initiative touts job creation as one of redevelopment’s main benefits.

Initiative findings

The initiative makes the following assumptions:

  • “California has one of the highest unemployment rates in the nation and is struggling to recover from the Great Recession.
  • “High unemployment is the new blight, which quickly becomes the old blight – poverty, neighborhood deterioration and crime.
  • “High unemployment reduces tax revenue to state and local governments and negatively impacts funding for our cash-strapped schools.
  • Tax-increment financing [provided through redevelopment agencies] allows local governments to use locally generated property tax revenues to create jobs, build affordable housing and rebuild neighborhoods.
  • “Tax-increment financing originated in California more than 50 years ago, and most other states have since adopted this powerful tool for creating jobs and rebuilding neighborhoods.
  • “In 2012, California eliminated tax-increment financing for local housing and development projects, resulting in the considerable loss of 300,000 jobs, including 170,000 construction jobs, and more than $41 billion in economic activity.
  • “JEDI will allow cities throughout California to use locally generated property tax revenues to create jobs, building affordable housing, rebuild neighborhoods and fund public schools.
  • “JEDI will put thousands of Californians back to work and generate billions of dollars in new tax revenue for public schools without raising taxes or increasing state debt.”

Jobs claim in dispute

A study commissioned by the California Redevelopment Association concluded that redevelopment was responsible for the creation of about 304,000 jobs in 2006-07.

The LAO disputed that claim in a 2011 study titled, “Should California End Redevelopment Agencies?” (The LAO’s answer was “yes.”)

“While redevelopment leads to economic development within project areas, there is no reliable evidence that it attracts businesses to the state or increases overall regional economic development,” the study found. “[R]edevelopment may cause some geographic shifts in economic development, but does not increase the overall amount of economic activity in a region.

“The independent research we reviewed found little evidence that redevelopment increases jobs. Studies in Illinois and Texas, for example, found that their redevelopment programs did little more than displace commercial activity that would have occurred elsewhere in the region.”

The LAO said that the CRA study “vastly overstates the employment effects of redevelopment areas” due to three flaws:

  • “It assumes that redevelopment agencies participate in all project area construction – even if the redevelopment agency was not a participant. “We find implausible the report’s implicit assumption that no construction with solely private financing would have occurred within a redevelopment area in the absence of the redevelopment agency.”
  • “It assumes that private and public entities participating in redevelopment agency projects would not invest in other projects. Most redevelopment agency projects include significant financing from private investors or other public agencies. The CRA implicitly assumes that these private and public partners would not invest in other economic activities in the state.
  • “It assumes other local agencies’ use of property tax revenues would not yield economic benefits. The property tax revenues that currently support redevelopment would flow over time to schools and other local agencies in the county. The CRA implicitly assumes that these other local agencies’ use of property tax revenues would not result in any economic activity.”

Time Structures, the research firm that performed the CRA study, wrote a point-by-point rebuttal to the LAO’s contentions:

  • “The construction expenditures included in the impact analysis were limited to those that involved agency participation. The study actually includes 32 percent of the total construction activity that occurred within the project areas during the 2006-07 fiscal year. Had the LAO exercised due diligence prior to offering their conclusion on this point, they would have been obligated to take a very different position.
  • “Redevelopment projects do leverage a significant amount of private capital – in our study we found that for each public dollar invested in a project, six private dollars are invested. The LAO seems to imply that this private capital is just sitting there awaiting a project; however, construction involves a good deal of borrowed capital. Construction loans are difficult to get for what are perceived as risky projects in blighted areas.
  • “The economic benefits estimated in the study were limited to those arising from the redevelopment-assisted construction activity only. No benefits were calculated for the direct employment and income of agency employees or the multiplier effect arising from that income. We make no assumptions about any economic activity of other local agencies since we didn’t study such a transfer.”

Effect on education

There is also a debate on whether the Jobs and Education Development Initiative would help education.

The LAO analysis of the initiative states that there would be no effect on schools in the short term because the schools’ funding deficit due to shifting fund back to redevelopment would be made up from the state general fund. “Therefore, the measure likely would increase state education costs by around $1 billion per year, but would have little or no net effect on nonbasic aid districts,” according to the LAO.

Over the long term, funding for some school and community college districts “could be reduced potentially by a few hundred million dollars to a few billion dollars per year,” the LAO states.

Responded the initiative’s campaign spokesman, Stu Mollrich, “We believe that the initiative will increase funding for education by stimulating job creation, which increases revenues for the state’s general fund.”

The League of California Cities has not taken a position on the initiative, according to Executive Director Chris McKenzie. But if it passed, few organizations would be happier.

“We were big supporters of the former redevelopment program, which studies showed provided 300,000 private sector jobs and $2 billion in state and local tax revenue each year,” McKenzie said. “But it no longer exists, and most cities have had to devote countless hours and resources to the unfortunate dissolution process.”

‘Significant expansion of government power’

The Institute for Justice, a pro-property rights law firm, released an analysis that called the redevelopment initiative “one of the most significant expansions of government power in decades.”

“Redevelopment in California had nothing to do with creating jobs or improving education,” said IJ attorney Bill Maurer in a statement. “Resurrecting it would endanger private property and undermine the state’s fiscal stability. … It would divert money from schools and community colleges and give it to unelected governmental agencies and their politically connected business allies. The governor and the state legislature were right to end this system in 2011.”

State Sen. Jim Nielsen, R-Gerber, agreed. “California property owners were finally able to rest easy once the governor did away with redevelopment agencies in 2011,” he said. “Reviving this system again exposes homes, small businesses and places of worship to eminent domain abuse.”

“Prior to being dissolved in 2011, redevelopment agencies turned California into one of the worst states in the nation for eminent domain abuse,” according to the IJ. “Tens of thousands of acres of property were declared blighted and subject to condemnation. Those displaced were often poor minorities and the elderly.”

The initiative needs 504,760 valid signatures to qualify for the ballot. Supporters have until July 21, 2014 to collect the signatures.

(Dave Roberts is a political commentator and contributes to CalWatchdog. Originally posted on CalWatchdog.)