The Financial Power of California’s Government Unions

There is no special interest in California that wields more influence over state and local politics than public sector unions. At every level of government, from the office of the governor to a school board managing a district with only a few hundred students, public sector unions are omnipresent. With rare exceptions, to defy their agenda is certain political suicide.

The reason for this power is money. Lots of money. Every two-year election cycle, not millions, but hundreds of millions of dollars are spent by California’s public sector unions to support or oppose candidates, campaign for ballot measures, lobby the legislature, and pay for public relations campaigns. While wealthy individuals or powerful corporations may at times challenge these unions, their concerns are narrow in focus. Nothing matches the perennial torrent of public sector union money; the opposition may stir up a flash flood, but these unions are the Amazon.

Twice in the past five years the California Policy Center has attempted to estimate just how much money public sector unions collect and spend each year. In 2015, a rough top-down estimate that used US Census Bureau data on union membership and general assumptions on the average union dues payment came up with $1.0 billion per year. In 2018, exercising an abundance of caution, referring to the 990 forms that unions file with the IRS, as well as researching membership information that is often provided by the unions on their websites, the total public sector union spending estimate was $800 million per year.

This time, using the same methods as 2018, but going into somewhat more detail, the new estimate is $921 million. It should be noted that available information online is usually about 18-24 months behind. For example, our 2018 report referenced Form 990s that were filed for 2015. This 2020 report used Form 990 data for the year 2018, the most recent currently available.

The fact that data presented here represents 2018 numbers raises an important question: Has the Janus decision, which found that the application of public sector union fees to non-members is a violation of the First Amendment, had any effect on public sector union revenue and membership? Because Janus took effect in mid-2018, the results shown here may only serve as a baseline. Form 990s for 2019 will not be available to the public for another year.

Moreover, unless the trends in total revenue estimates show truly dramatic changes, which is unlikely, there are too many variables at work to know what may be generating the variance. If the numbers are up, would they have been up higher without the Janus decision? Will any downward results in 2019 merely be the impact of unions losing non-members who still had to pay agency fees, or would some of the downturn be the result of losing members? How will the bureaucratic obstacles put up by the unions delay individuals from exercising their new rights under Janus? And how would one account for new bargaining units, such as the 45,000 child care providers who in July 2020 voted to become new AFSCME members?

Much of this discussion, however vital, falls outside the scope of this analysis. Here then is an assessment of just how much public sector unions collected in 2018.

PUBLIC EDUCATION UNIONS

The biggest public sector union in California, by far, is the California Teachers Association. From their website’s “About Us” page, the CTA’s declared membership is 310,000, down from the “Fact Sheet” they’d posted two years ago (since removed) which declared a membership of 325,000. On the surface, this may suggest the CTA has lost members, but in reality what was the CTA’s loss was another union’s gain.

As reported by EdSource in August 2019, the faculty associations representing 19,000 staff working in the Cal State University System voted to “disaffiliate” from the CTA. The CTA, for its part, claims new recruits have made up for this. Whatever the net effect will be, during 2018 these Cal State workers were still part of the CTA, so 325,000 remains a valid membership estimate for that year.

Using an average annual dues estimate of $1,040 per member, which is based on an analysis published in June 2018 in LA School Report, the CTA and all of its local affiliates had an estimated total dues revenue in 2018 of $338 million. The CTA also had “other income” in 2018 of $18 million, which brings their total revenue estimate up to $356 million.

A distant second to the CTA, but still one of the biggest public sector unions in California, is the California Federation of Teachers. Like the CTA, the CFT is comprised of separate local and regional affiliates, making the challenge of estimating their consolidated revenue best approached by multiplying their average dues by their stated membership. According to their “About Us” page, their membership is 120,000, and their average member dues, reputedly somewhat lower than the CTA at $900 per year, puts their total revenue at $108 million.

The California School Employees Association, which according to their “About Us” page has a massive membership of 250,000 school support staff, reported on their 2018 Form 990 total revenue of $81 million. This implies an average annual dues of only $327 per member, which seems low. Without reviewing the 990s for all of the CSEA affiliates, and accounting for the net effect of all internal transfers of funds, it is impossible to discern a more accurate number for CSEA. It may be that the number of CSEA members is a relatively low percentage of the number of people represented in their bargaining units.

PUBLIC SAFETY UNIONS

The decentralized nature of most of the major public sector unions in California makes any reasonably accurate but rough estimate dependent on two variables – total membership and average dues per member. To arrive at the number of members of police unions in California, we relied on an October 2018 Public Policy Institute of California study “Law Enforcement Staffing in California.” Quoting from the study:

“In 2017 there were more than 119,500 full-time law enforcement employees in California; roughly 78,500 were sworn law enforcement officers (with full arrest powers) and 41,000 were civilian staff.” We are assuming that 100 percent of the sworn law enforcement officers are unionized. If this is incorrect we would appreciate the opportunity to know the accurate percentage.

To arrive at the average union dues paid by California’s police officers, we reviewed the Form 990s for the unions representing sworn police officers in California’s ten largest cities. On these forms the “revenue from dues” is a separate line item. We then collected, for each city, the number of police officers on the force. In most cases, this information was available from the city websites, in a few cases, we had to rely on news reports, and in two cases, we called the police dept. in those cities and asked them. Using this method, the weighted average annual union dues we calculated was $1,340.

The product of average police union dues of $1,340 and 78,500 sworn law enforcement officers yields an estimated total revenue for all police unions in California of $105 million per year.

A similar method was used to estimate the total dues collected by California’s many firefighter unions, mostly local affiliates of California Professional Firefighters. On its “About CPF” page, the California Professional Firefighters claim membership of 30,000. Applying the same average annual dues assumption we used with members of police unions, $1,340 per year, we estimate the total dues collected by firefighter unions from their members at $40 million per year.

California’s prison guards are represented by the California Correctional Peace Officers Association (CCPOA), a centralized union which reported on its Form 990 total revenue in 2018 of $30 million. This is consistent with a membership of around 31,000, implying average dues of $983 per year.

OTHER PUBLIC SECTOR UNIONS

Two very large public sector unions that belong in any analysis of public sector union revenue in California are the California affiliates of the American Federation of State, County, and Municipal Employees (AFSCME), and the California State Employees Association which includes the massive SEIU Local 1000.

AFSCME California includes a diverse group of “Councils” that represent an impressive variety of professions. This can be quickly appreciated by reviewing their “Who is AFSCME California” webpage. From the information on these pages, along with phone calls to some of the actual Local offices, the total number of AFSCME members in California is estimated at 220,000 people. If anything, this estimate is low, insofar as some large agencies were unable to provide membership numbers.

Because the AFSCME dues assessment varies roughly between 1.25 and 1.5 percent, because a high percentage of AFSCME’s job descriptions involve skilled professionals, and based on conversations with experts on public sector unions, we believe an average annual dues collections estimate of $600 per year is reasonable, since even at the lower withholding percentage this implies an average member income of $48,000 per year. Based on these assumptions, we estimate AFSCME California’s consolidated dues revenue at $132 million per year.

Last but not least is the California State Employee Association, which includes three major unions of active state and local government employees. The Cal State University Employees Union, which declared revenue of $7 million in 2018, the massive SEIU 1000, representing 96,000 employees with revenue of $56 million in 2018, and the smallest of the three, the Association of California State Supervisors, representing 6,500 members with an estimated 2018 revenue of $4 million.

When it comes to the possible impact of the Janus decision, the 2017 and 2018 Form 990s for SEIU 1000 offer intriguing data. In 2017, SEIU had service revenue considerably higher, at $67 million. Understanding the reason for this drop, and watching the revenue trends over the coming years for all of California’s public sector unions, should make for interesting future analysis.

CONCLUSION

As shown on the following summary chart, California’s public sector unions collect and spend well over $900 million per year, or $1.8 billion per two-year election cycle. While only about one-third of this money is spent on explicitly political purposes such as campaign contributions and lobbying, this is still a staggering amount of money. What other special interest in California is willing and able to spend $600 million every two years on political advocacy, year after year, for decades on end?

And where the spending is not declared as political, it may still have a political impact. As the plaintiffs argued in the Janus case before the U.S. Supreme Court, and in the deadlocked Friedrichs case before that, all public sector union spending is inherently political. Public education campaigns, for example, are not considered “political,” but unions rarely embark on these efforts, often at levels where they saturate California’s expensive media markets, without at least an indirectly political motivation. And what about negotiations for compensation and work rules? Aren’t these political decisions?

When considering the total spending estimate here, it is worth emphasizing that in most cases these estimates understate the ultimate total. In every case, the average dues we assumed for our calculations of total dues revenue were lower than what virtually all anecdotal evidence suggests. And in only one case, the state branch of the CTA, did we include “other income” apart from dues revenue. How many of these unions and their many affiliates, most of them flush with cash and other invested assets, had additional revenue beyond just what they collected from their members?

Moreover, what about the many unions we didn’t identify here, but which are active in California and, cumulatively, add significant numbers to the estimates of total members and dues collections? What about the Council of UC Faculty Associations, an amorphous group that represents potentially tens of thousands of professors, associate professors, post-docs, etc.? Under what umbrella do these bargaining units fall? Were they excluded from this analysis? Probably.

To get another glimpse of just how Sisyphean the task of identifying and tracking all of California’s public sector unions is, have a look at this website, put up by the Freedom Foundation. Scroll down this page and consider the following: Were all of these various Locals included in this analysis? Here’s your answer: No. They weren’t. There’s simply too many of them. Some years ago, a professor at Pepperdine University who was considered an expert on public sector unions in California was asked if there was an accurate compilation, anywhere, ever, showing how much, collectively, these unions rake in every year. His answer, emphatically to the negative, was too obscene to be repeated here.

If anyone wishes to undertake a comprehensive analysis of every single public sector union in California, every state headquarters, every regional council, every Local, they’re welcome to it. The reporting requirements are almost nil. Unlike private sector unions, which are somewhat more accountable due to having to file the more detailed Form LM-2 with the U.S. Dept. of Labor, the only public disclosure required of public sector unions is the Form 990, mostly used for tracking nonprofits. The diligent analyst, using Form 990s, will have fun attempting to net out the thousands of cases where funds are transferred between affiliates – dues trickling upwards to regional, state and national offices, as well as sometimes horizontally between Locals, and sometimes from the top down. Have at it.

California’s public sector unions are not only the most powerful political special interest in the state, but most of them are nakedly partisan. To have all this power, and merely use it to push for more staff, more restrictive work rules (which equates to more staff), more pay, and more benefits, that would be bad enough. Not because workers shouldn’t want to optimize their opportunities to work and live with security and dignity, but because public sector unions simply do not have to deal with the natural checks on their demands that create more balance between management and private sector unions. But with only a few exceptions – primarily among the law enforcement unions – the websites of these public sector unions read like a pamphlet describing the agenda of the Democratic party. Is this appropriate? Does this represent the membership? And even if so, shouldn’t public sector unions, with all the power they wield, be politically neutral?

A long overdue reckoning with public sector unions faces California’s electorate. It might start with the public schools, which labor under a public sector union monopoly that has nearly destroyed accountability. The CTA, for example, has endorsed the absurd goal to “defund the police.” Perhaps defunding the CTA itself might be a more appropriate way to rescue California’s disadvantaged.

But between the political reality of public sector union power, and the necessary reforms that Californians desperately deserve, are nearly one billion dollars per year of cold hard cash.

Edward Ring is a contributing editor and senior fellow with the California Policy Center, which he co-founded in 2013 and served as its first president. The California Policy Center is an educational non-profit focused on public policies that aim to improve California’s democracy and economy. He is also a senior fellow of the Center for American Greatness.

This article was originally published by the California Globe.

Mandated Diversity: California Bill Would Ban All-White Corporate Boards

Photo by Benjamin Child on Unsplash

All-white corporate boards would be prohibited in California under a bill in the Legislature that follows in the footsteps of a controversial law that mandated women in corporate boardrooms.

More than 600 publicly held companies with California headquarters would be required to have at least one person of color serving on their corporate boards by the end of 2021 under the legislation introduced by Assembly members Chris Holden, a Pasadena Democrat, and Cristina Garcia, a Bell Gardens Democrat. 

Holden said many corporations need to be prodded into racially diversifying their boards. 

“This is the time to do something bold,” he said. People of color “need to have the same access as those who have benefitted for so long, and the time is now.”  

Nationally, 19.5% of board members of Fortune 100 companies are people of color, according to a 2018 report by the Alliance for Diversity.

In California, many large corporations — including Disney, Apple, Intel, Tesla, Oracle, Chevron, Facebook, Wells Fargo, Cisco Systems and Alphabet Inc., the parent company of Google — already have at least one person of color on their boards. But some, like Monster Beverage Corporation and Chegg, Inc., have all-white board members.

The law, if enacted, would be the first in the nation to mandate the racial makeup of corporate boards. Last year, Illinois considered a bill that would have required companies based there to have a woman, Latino and a Black person on their boards, but instead only required them to report the gender, race and ethnicity of the members.

California’s bill, AB 979, faces its next hurdle on Aug. 13 in the Senate Banking and Financial Institutions committee. The Legislature has until Aug. 31 to pass bills unless Gov. Gavin Newsom calls lawmakers back for a special session

The California Chamber of Commerce and the California Manufacturers & Technology Association declined to comment on the bill. Both opposed California’s 2018 gender diversity bill, SB 826.

Opponents say the diversity bill will trigger legal challenges, just as the law mandating female corporate directors did. 

“The Legislature seems intent to make the same mistake again,” said Michael Bekesha, a senior attorney with Judicial Watch. 

Judicial Watch challenged the gender diversity law as unconstitutional on behalf of three California taxpayers. The California Secretary of State aimed to have the lawsuit thrown out but a court ruled in favor of Judicial Watch and the case will go to trial sometime next year, Bekesha said. 

When Gov. Jerry Brown signed the bill into law that required corporations to include women on boards, “he was aware that there would be concerns that the law was unconstitutional and I think you’ll see similar statements playing out as this new bill progresses,” Bekesha said. 

Some opponents say such laws are patronizing. 

Anastasia Boden, senior attorney at the Pacific Legal Foundation, which also challenged the gender diversity law in court, said that race and sex-based laws “very often can harm the very people they intend to help.”

“It relegates women to quota hires,” Boden said. “Women will now be seen as being hired simply because of the government mandate rather than because of their qualifications and achievements when they may have even been hired without the quota.” 

The diversity bill defines underrepresented communities as people who self-identify as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, Native Hawaiian or Alaska Native. 

The requirements would ramp up in 2022. For corporations with nine or more directors, at least three directors must be people of color by the end of 2022, and corporations with between five and eight directors must have at least two. Companies would be fined $100,000 if they don’t comply. 

Supporters say the new diversity bill is sorely needed because racism is widespread.

“What COVID has revealed is systemic racism and the impact on different ethnic groups or racial groups,” said Maeve Richard, a former assistant dean at Stanford’s Graduate School of Business. “And so the post COVID answer is we need to do something about it.” 

Richard said some companies rely heavily on their social network, which often leads to a predominantly white board of directors. Companies, she said, should use objective criteria to ensure their boards have qualified and diverse members, adding that government can play a role in creating a more equal system.   

Others emphasize how little has changed over the years. Maria Contreras-Sweet, administrator of the Small Business Administration from 2014 to 2017, served on the  U. S. Department of Labor’s Glass Ceiling Commission, which was formed in 1991. She said she sees some of the same problems still persisting now. While she sees progress, she recognizes how slow it’s been. 

“I definitely think that these times have brought a greater awareness and more conversations in boardrooms about maybe unconscious bias that may exist,” she said. “People are having hard conversations. It’s a journey, it’s not like you turn on a switch and all of a sudden people are enlightened.” 

The Latino Corporate Directors Association reported that 86% of California-based public companies have no Latinos on their boards even though Latinos represent 39% of the state. The organization has not taken a formal position on the bill.

“This moment feels a lot different from other moments, that’s why I’m going to say I’m hopeful,” said Linda Akutagawa, the CEO of LEAP, a nonprofit which aims to cultivate Asian and Pacific Islander leadership. “But despite the kind of change that we’re going through right now, I don’t think this is going to change as quickly as maybe advocates and activists want to see.”

McKinsey & Company researchers found that companies with ethnically diverse executive teams are 33% more likely to outperform companies with less diverse teams on profitability, according to 2017 data. 

Even though diversifying a company can improve the bottom line, Akutagawa explained why change has been slow:

“People with power do not give up power that easily,” she said. “And corporate boards have power.”

Elizabeth Castillo is a reporter for CalMatters.

This article was originally published by Fox and Hounds Daily.

Democrats Use Coronavirus To Push ‘Medicare-For-All’

Stethoscope on a printed sheet of paper

More than 5 million Americans have lost their employer-sponsored health insurance due to coronavirus-related unemployment, according to a new study from FamiliesUSA. In response, Democrats are renewing their push for “Medicare-for-all”.

Just this week, 360 Democratic delegates promised to vote against any party platform that doesn’t endorse single-payer health care. In their formal petition, they cite insurance losses from the pandemic as a chief reason why they consider “Medicare-for-all” non-negotiable.

But this political ploy is based on bad information. While the pandemic has cost millions of workers their jobs, many of them still have access to affordable coverage. Citing the coronavirus-fueled economic crisis as a reason to scrap private insurance is deeply irresponsible — and would leave the vast majority of Americans worse off.

For starters, it’s far from clear that the turmoil in the labor market has led to droves of people ending up uninsured. According to an analysis by the Galen Institute, nearly 98 percent of Americans who had employer-based coverage before the pandemic have maintained employer coverage.

Further, more than half of workers who have been furloughed during the pandemic still have their employer-sponsored insurance, according to a recent survey from the Commonwealth Fund.

Those who lost employer-sponsored coverage because they lost their jobs have the option of staying on their health plan through a federal program known as COBRA. Such coverage can be pricey since patients must pick up the entire premium. But for Americans who enjoy their job-based coverage and can afford it, these high premiums can be worth the expense.

Those subsidies are often necessary to make exchange coverage affordable, as ObamaCare’s onerous insurance-market regulations have caused premiums to surge. As of 2017, average premiums for individual plans on the federally run HealthCare.gov exchange had more than doubled from where they were in 2013, before the marketplaces opened for business in January 2014.

Short-term, limited-duration health plans are another option for the uninsured. According to research from eHealth, an online insurance broker, average premiums for an individual short-term plan are $113 a month — about one-fourth those for a traditional plan.

A study from the Manhattan Institute found that premiums for short-term plans were lower than — and in some cases, almost half the cost of — premiums on the exchange for similar levels of coverage.

Short-term plans are cheaper because they’re exempt from many of ObamaCare’s cost-inflating mandates. They’re expressly designed to fill gaps in coverage for people who are between jobs.

In 2018, the Trump administration boosted the utility of short-term plans by extending their maximum duration from three months, as it was under President Obama, to 364 days. The administration’s rule has been challenged twice — and upheld by the courts twice, most recently in a 2-1 ruling in July by a panel of the U.S. District Court of Appeals for the District of Columbia.

Unfortunately, some states — including New York, New Jersey, and California — have outright banned the plans. But for patients who haven’t been deliberately denied affordable coverage in this way, short-term plans remain a workable tool for staying insured during the coronavirus downturn.

Finally, enrolling in Medicaid is an option for those with no savings to fall back on. So the idea that Americans rendered jobless by the pandemic are without coverage options is plainly false.

Yet much of Democrats’ case for “Medicare-for-all” relies on scaring Americans into thinking that they’re one misstep away from ruin — and thus need the government to take care of them.

But as we see in other countries with socialized medicine, single-payer would consign Americans to long waits and rationed care. They wouldn’t have access to the latest drugs and medical technology. And they’d have fewer choices in where and how to receive care. Doctors are likely to respond to Medicare for All’s lower payment rates by reducing the supply of care they’re willing to provide — or leaving the profession altogether.

It makes little sense to cancel the coverage of the more than 150 million people who get it through work to address the needs of a mere fraction who are currently uninsured because of the worst economic crisis in a century. But that’s what Democrats bent on “Medicare-for-all” are aiming to do.

Sally C. Pipes is President, CEO, and Thomas W. Smith Fellow in Health Care Policy at the Pacific Research Institute. Her latest book is False Premise, False Promise: The Disastrous Reality of Medicare for All (Encounter 2020). Follow her on Twitter @sallypipes.

This article was originally published by the Pacific Research Institute.

Attorney General Becerra Can’t Be Trusted When Naming Ballot Propositions

Last week, the Howard Jarvis Taxpayers Association filed a lawsuit against California Attorney General Xavier Becerra for his abject failure to produce impartial ballot material related to Proposition 15, the “split roll” attack that seeks the partial repeal of Proposition 13.

What Proposition 15 does can be described simply: It raises property taxes on commercial and industrial real estate. And yet, how does Becerra describe it in the ballot title? Like this: “Increases funding sources for public schools, community colleges, and local governments by changing assessment of commercial and industrial property.”

What is missing, of course, are the words “tax increase” or “increases property taxes” or any other word or phrase that fairly characterizes what the measure does. Even the description of how the money will be spent is misleading. In fact, most of the money goes to local governments, not education. But, of course, “education” polls better than “local governments” so Becerra, in his never-ending quest to serve the interests of public-sector labor groups, dutifully gave them the title they wanted for their effort to pass a huge tax increase.

Past criticism of Becerra’s bias has been vocal but there has been little recourse. In 2018, taxpayers won a case in the trial court over the description of the gas tax repeal, only to have that victory reversed by the appeals court. However, things may be different now because Becerra’s irresponsible behavior has even caught the attention of mainstream media. Within the last few weeks, editorial boards and columnists have lambasted Becerra.

To read the entire column, please click here.

California’s Woke Hypocrisy

No state wears its multicultural veneer more ostentatiously than California. The Golden State’s leaders believe that they lead a progressive paradise, ushering in what theorists Laura Tyson and Lenny Mendonca call “a new progressive era.” Others see California as deserving of nationhood; it reflects, as a New York Times columnist put it, “the shared values of our increasingly tolerant and pluralistic society.”

In response to the brutal killing of George Floyd in Minneapolis, Los Angeles mayor Eric Garcetti announced plans to defund the police—a move applauded by Senator Kamala Harris, a prospective Democratic vice presidential candidate, despite the city’s steep rise in homicides. San Francisco mayor London Breed wants to do the same in her increasingly crime-ridden, disordered city. This follows state attorney general Xavier Becerra’s numerous immigration-related lawsuits against the Trump administration, even as his state has become a sanctuary for illegal immigrants—complete with driver’s licenses for some 1 million and free health care.

Despite these progressive intentions, Hispanics and African-Americans—some 45 percent of California’s total population—fare worse in the state than almost anywhere nationwide. Based on cost-of-living estimates from the U.S. Census Bureau, 28 percent of California’s African-Americans live in poverty, compared with 22 percent nationally. Fully one-third of Latinos, now the state’s largest ethnic group, live in poverty, compared with 21 percent outside the state. “For Latinos,” notes longtime political consultant Mike Madrid, “the California Dream is becoming an unattainable fantasy.”

Since 1990, Los Angeles’s black share of the population has dropped in half. In San Francisco, blacks constitute barely 5 percent of the population, down from 13 percent four decades ago. As a recent University of California at Berkeley poll indicates, 58 percent of African-Americans express interest in leaving the state—more than any ethnic group—while 45 percent of Asians and Latinos are also considering moving out. These residents may appreciate California’s celebration of diversity, but they find the state increasingly inhospitable to their needs and those of their families.

More than 30 years ago, the Population Reference Bureau predicted that California was creating a two-tier economy, with a more affluent white and Asian population and a largely poor Latino and African-American class. Rather than find ways to increase opportunity for blue-collar workers, the state imposed strict business regulations that drove an exodus of the industries—notably, manufacturing and middle-management service jobs—that historically provided gateways to the middle class for minorities. As a recent Chapman University study reveals, California is the worst state in the U.S. when it comes to creating middle-class jobs; it tops the nation in creating below-average and low-paying jobs.

Following Floyd’s death, even environmental groups like the Sierra Club issued bold proclamations against racism, but they still push policies that, in the name of fighting climate change, only lead to higher energy and housing costs, which hurt the aspirational poor. Many businesses, including small firms, must convert from cheap natural gas to expensive, green-generated electricity, a policy adamantly opposed by the state’s African-American, Latino, and Asian-Pacific chambers of commerce.

Meantime, California’s strict Covid-19 lockdown policies, imposed by a well-compensated (and still-employed) public sector, have imperiled small firms. “There’s a sense that there was major discrimination against local small businesses,” said Armen Ross, who runs the 200-member Crenshaw Chamber of Commerce in South Los Angeles. “They allowed Target and Costco to stay open while they were closed. Many mom-and-pops may never come back.” Many restaurants — roughly 60 percent are minority-owned — may never recover, notes the California Restaurant Association.

In the past, poor Californians, whether from the Deep South, Mexico, or the Dust Bowl, could look to the education system to help them advance. But California now ranks 49th nationally in the performance of poor, largely minority, students. San Francisco, the epicenter of California’s woke culture, has the worst scores for black students of any county statewide. Yet educators, particularly in minority districts, often seem more interested in political indoctrination than in improving scholastic results. Half of California’s high school students can barely read, but the educational establishment has implemented ethnic-studies courses designed to promote a progressive, even anticapitalist, and race-centered agenda. Unless the education system changes, California’s black and Hispanic students face an uncertain future. A woke consciousness or deeper ethnic identification won’t lead to successful careers. One can’t operate a high-tech lathe, manage logistics, or engineer space programs with ideology.

California’s failure to improve conditions for Latinos and blacks was evident even before the lockdowns and recent unrest. What the state’s minorities need is not less policing, or systematic looting of upscale neighborhoods, or steps to reimpose affirmative action, or kneeling politicians; they require policies that empower working-class citizens of all races to ascend into the middle class.

The state’s leaders should prioritize improving middle-class jobs and opportunities, replacing indoctrination with skills acquisition, and encouraging local businesses. Considering the nature of California politics, this can happen only if minority Californians demand something different. That could happen if enough of these residents realize that the state’s ruling progressive class is interested in their votes — but apparently not in improving their lives.

Joel Kotkin is the presidential fellow in urban futures at Chapman University, executive director of the Center for Opportunity Urbanism. His new book is The Coming of Neo-Feudalism: A Warning to the Global Middle Class

This article was originally published by City Journal Online.

CalPERS, Corruption And Cronyism

The California Public Employees’ Retirement System, which has a history of making poor choices, plans to become a lending institution. A healthy pension fund wouldn’t be making such a risky decision. 

Still hurting from $100 billion in losses from the Great Recession, CalPERS was bruised again by the coronavirus pandemic. Now, funded at only 71%, it’s scrambling to recover. 

“We need every arrow in the quiver we can get, and private debt is one of the critical ones,” explains Dan Bienvenue, CalPERS’ deputy chief investment officer. “There isn’t a no-risk choice.” 

The plan, approved last month by the board, allows “CalPERS to put up to 5% of its total value into ‘opportunistic’ investments, which includes private debt. That works out to about $20 billion,” CalMatters reports. The Financial Times says leverage could reach “as high as 20% of the value of the fund, or nearly $80 billion based on current assets.” 

State Treasurer Fiona Ma, also an ex-officio member of the pension fund’s board, believes that “allocating more of CalPERS’ nearly $400 billion portfolio into private equity and private debt, thereby investing in ‘better assets,’ is a reasonable” plan. 

“This approach is specifically designed to overcome the challenges of low interest rates, high asset valuations and low economic growth that are pervasive in the investment markets today,” Ma wrote in Pensions & Investments

Only a single board member dissented. Margaret Brown said she didn’t “agree with leveraging the fund up to $80 billion.”

“It is way too risky,” she told the Financial Times

“It reminds me what CalPERS did back in 2008 when we used leverage and lost close to $100 billion,” Brown said.

“Red flags about the growing riskiness of CalPERS’ portfolio” were visible but nonetheless ignored, even as the fund was making “ever riskier bets,” and struggling with risk management, Reuters reported in 2009.

According to David Crane, a longtime and level-headed CalPERS critic, the assumed return of 7% from the direct loans will not close the gap – the “unfunded liability” – between the assets managed by CalPERS and the “pension liabilities owed by the employers for whom CalPERS administers pension obligations.”

“In fact,” the Stanford lecturer and president of Govern For California notes in Medium post, “CalPERS has to earn much more than 7% for the unfunded liability not to grow.”

CalPERS management has to know this. And in fact does. Chief Investment Officer Ben Meng has acknowledged that the 7% threshold is not enough. That being the case, the pension fund will have little choice but to make riskier, and therefore more volatile, loans. While doing so will increase the fund’s potential to meet its return targets, it also sets it up for a “greater chance of catastrophe,” says Don Boyd, a researcher at the Rockefeller College for Public Affairs and Policy at the University of Albany.

Taking injudicious risk is by no means a break with the past for CalPERS. It has a history of making lousy choices. Along with CalSTRS, the California State Teachers’ Retirement System, CalPERS has adopted an investment strategy based not on returns but politics, and when that is a greater concern than fiduciary duty, the outcome is usually substandard. Investments made in companies judged by the left to be “responsible” or “woke” simply cannot match the returns that a broad-based index fund produces.

Last year, an American Council for Capital Formation paper reported that CalPERS prioritized politically driven investments at the expense of returns. Particularly egregious were the investments made in green energy ventures. Even as Suntech, a Chinese solar panel maker in China, was going through a Chapter 15 bankruptcy in the U.S., CalPERS increased its position in the company by 40.4%. It also sunk retirement dollars into other “clean energy” losers simply because the companies’ operations were consistent with a political agenda. 

CalPERS has a history, as well, of steering “billions of dollars into politically connected firms,” City Journal’s Steven Malanga wrote some years ago. Will it follow that precedent and loan to companies favored by board members or even lawmakers in Sacramento? The latter is by no means unimaginable. A former director once complained lawmakers “wanted us to invest in government buildings.” Will there be safeguards to prevent an elected official from pressuring the fund to make a dicey loan to a business owned by his or her brother-in-law, or maybe a campaign donor? 

If not, CalPERS might want to redefine itself as a credit union for political cronies.

Kerry Jackson is a senior fellow with the Center for California Reform at the Pacific Research Institute.

This article was originally published by Fox and Hounds Daily.

California Cancels School – Puts Teachers’ Union Interests Over Those of Children and Families

On July 8, the California Teachers Association (CTA), the most powerful public-sector union in the Golden State, issued a statement asserting that, due to coronavirus concerns, state schools should not open this fall. The following day, the United Teachers of Los Angeles (UTLA) released a 17-page “research paper” in which concerns about coronavirus were secondary to sweeping political demands — including Medicare for All, guaranteed housing, a wealth tax, a millionaire’s tax, defunding the police, financial support for illegal immigrants, and a moratorium on charter schools. The UTLA ended its manifesto by asserting, without evidence, “the only people guaranteed to benefit from the premature physical reopening of schools amidst a rapidly accelerating pandemic are billionaires and the politicians they’ve purchased.”

The Los Angeles Unified School District fell into line on July 13, announcing that students will not return to the classroom in the fall because of the virus. The circle was completed on July 17, when Governor Gavin Newsom shut down in-person education in 33 of the Golden State’s 58 most densely populated counties, which account for over 80 percent of the state’s school-age population. But in a confusing twist — the details buried in a press-release footnote — individual counties can apply for a waiver for elementary school students, exempting them from the shutdown.

The notice explains that “a waiver may only be granted if one is requested by the superintendent (or equivalent for charter or private schools), in consultation with labor, parent and community organizations. Local health officers must review local community epidemiological data, consider other public health interventions, and consult with CDPH (California Department of Public Health) when considering a waiver request.” The process for getting permission to open grade schools is thus onerous and opaque. As EdSource’s John Fensterwald points out, thestate “does not elaborate on which conditions must be met before a county health officer could allow in-person instruction.”

While California is canceling school for millions of kids in the name of science-based public health, many child-health experts are urging schools to reopen with in-person classes this fall. The venerable American Academy of Pediatrics, having weighed the pros and cons, maintains that schools should reopen for in-person learning for children’s overall well-being. The AAP strongly advocates that all policy considerations for the coming school year “should start with a goal of having students physically present in school. The importance of in-person learning is well-documented, and there is already evidence of the negative impacts on children because of school closures in the spring of 2020.” A new report by the National Academies of Sciences, Engineering and Medicine reports similar conclusions.

Opposing the shutdown, the Center for American Liberty will sue the state on the grounds that its constitution promises children a basic education and that online learning is insufficient to this guarantee. Harmeet Dhillon, the group’s head, argues that Governor Newsom has gone too far. “This issue affects not just the kids,” she says, “but their parents, and their parents who have jobs, and all the workplaces that are impacted. This is actually a catastrophe for California, and we are intending to challenge it legally.”

The best way out of this mess: fund students, not the education bureaucracy. If a school district or the state decides not to hold classes, parents should be able to use education dollars to pay for their child’s education elsewhere. As Corey DeAngelis, director of school choice at the Reason Foundation, wrote recently, “If a Walmart doesn’t reopen, families can take their food stamps elsewhere. If a school doesn’t reopen, families should similarly be able to take their education dollars elsewhere.”

Though private and religious schools are included under Newsom’s shutdown order, direct funding of students in the form of vouchers would still be a blessing for many families, who could use the money to help defray the costs of educating their kids via a homeschool co-op, for example. After Newsom’s announcement to shutter schools, California assemblyman Kevin Kiley stated, “today’s decision elevates the appearance of safety over actual student safety. A growing body of evidence suggests school closures do little to flatten the epidemic curve, while an abundance of evidence shows they are a calamity for kids.” Kiley added: “By giving himself political cover, Governor Newsom has exposed millions of kids to untold trauma and loss. The impacts of school closures will be devastating for working parents, academic equity, and mental health.”

For too long, the interests of schoolchildren and their parents have taken a backseat to those of education bureaucrats, teachers’ unions, and politicians. The situation is long overdue for a radical change.

Larry Sand, a retired teacher, is president of the California Teachers Empowerment Network.

This article was originally published by City Journal Online.

Massive New CA Tax Increase Proposed

Gutting-and-amending a bill originally related to local governments in the Public Resources Code, Assembly Bill 1253 now proposes a massive tax increase on thousands of sole proprietors and high-income Californians. AB 1253 was amended on July 27, the Legislature’s first day back from its extended summer recess.

Originally authored by Assemblyman Robert Rivas when it dealt with the Strategic Growth Council, the bill is now jointly authored by eight Assembly Members: Santiago, Bonta, Carrillo, Chiu, Gonzales, Kalra, Stone, and Wicks. Assembly Members Chu, Jones-Sawyer and Ting are coauthors, while Senators Skinner, Durazo, Gonzalez, and Wiener are also coauthors.

AB 1253 would add Revenue and Taxation Code Section 17044 to create three new tax rates for amounts of income above specified thresholds. As a tax levy, it would take effect immediately upon the Governor’s signature and chaptering by the Secretary of State. The bill would apply retroactively to tax years beginning on or after January 1, 2020. As a tax increase measure, it would require a 2/3 vote of both houses of the Legislature pursuant to Article XIIIA, Section 3 of the California Constitution.

Specifically, AB 1253 would add a new section to the Revenue and Taxation Code to provide the following three higher tax rates (in addition to the existing ones):

  • A 1% tax on income above $1 million, but not over $2 million
  • A 3% tax on income over $2 million, but not over $5 million
  • A 3.5% tax on income over $5 million

These thresholds would have to be recomputed for each tax year beginning on or after January 1, 2021 based upon the California CPI.

Under existing law, the highest base rate for individuals and sole proprietors is 9.3%. There is also the “millionaire’s tax” of an additional 1% for income in excess of $1 million.

Due to a statewide ballot measure, there are four additional tax rates (above 9.3%) ending at 13.3% for incomes above specified amounts. They are 10.3% for incomes between $269,000 – $322,000; 11.3% for incomes between $322,000 – $537,000; 12.3% for incomes between $537,000 – $1 million; and, 13.3% for incomes above $1 million.

If AB 1253 were enacted, the 13.3% rate would rise to 14.3% for incomes above $1 million and the state’s highest rate would be raised to 16.8% for incomes above $5 million.

California already has the highest tax rate in the nation of 13.3 percent, while the lowest is 1 percent in Tennessee, according to the Tax Foundation. Hawaii is the second highest at 11%. The Foundation also notes that nine states have single-rate levies on individuals’ income, while 32 states have graduated-rate income taxes. Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming do not impose an income tax.

AB 1253 is pending a hearing in the Senate Governance and Finance Committee.

Chris Micheli is a lobbyist with Aprea & Micheli, as well as an Adjunct Professor of Law at the University of the Pacific McGeorge School of Law.

This article was originally published by California Globe.

Nine California Statues Vandalized or Removed

There have been countless times when I’ve walked by a shapeless, twisting sculpture on public property and shuddered at the thought of how much it cost taxpayers.  But it never occurred to me to take a sledgehammer and “cancel” the object d’art.  Last time I checked, it was against the law, not to mention disrespectful to the artist and the community that placed it there.  This simple bit of self-restraint, practiced by almost everyone, has its roots on the founding principles on which America was built – equality, free expression, and the rule of law.

Over the last few weeks, nine statues have been vandalized or removed across the state, according to a list compiled by Virginia Allen of the Daily Signal.  When these monuments were erected, the city residents intended to memorialize these leaders for their extraordinary contributions to California and to the nation, not because they were perfect.

General Ulysses S. Grant, head of the Union Army and later president, played a critical role in ending slavery in America.  But a mob of 400 gathered at San Francisco’s Golden Gate Park to topple his bust because he had married into a slave-owning family and owned one slave for a year. The same mob also knocked over a statue of patriot Francis Scott Key, who penned “The Star-Spangled Banner.”

Among Californians, a bronze of John Sutter, a settler and businessman whose employee James Marshall’s discovery ushered in the Gold Rush, was removed by workers at the Sutter Medical Center in Sacramento after it was defaced with graffiti.  In Los Angeles, Sacramento, and San Francisco, statues of Saint Junipero Serra, a Catholic missionary from Spain who established missions throughout the state, had been knocked down or vandalized.

Staying on the empire theme, lawmakers removed a beautiful and moving sculpture known as “Columbus’ Last Appeal to Queen Isabella” from the rotunda of the State Capitol in Sacramento. The sculpture had been there since 1883.

Another vandal spray-painted the words “[expletive] Colonizers”on the base of a monument known as El Soldado in Sacramento.  Mexican American mothers erected the monument to honor their fallen sons and daughters who served during World War II.

Lastly, there was the statue of John Greenleaf Whittier, a 19th century Quaker poet and abolitionist.  The Whittier Daily record reported that he was a delegate to the first meeting of the American Anti-Slavery Convention. Nevertheless, the vandal or vandals, spray-painted “BLM” and “[expletive] Slave Owners” on the monument.

Nikole Hannah-Jones, architect of the New York Times’s 1619 Project, told CBS that “Destroying property, which can be replaced, is not violence.” Try explaining that to the baffled residents of Whittier, or South American Pope Francis, who canonized Father Serra; or to the thousands of small business owners across the state and the nation who lost a lifetime’s work.

Spencer Klavan of the Claremont Institute puts it starkly: “Either we believe that everyone, of every color, must be guaranteed the right to his own property both physical and spiritual, or we do not.  If we allow ourselves to be gulled by ideologues who despise us into qualifying our national creed, or apologizing for it, or declaring it with anything other than pride, then we will have abandoned our fellow man and forsaken the only remedy for tribalism and injustice known to us this side of heaven. It’s America or bust.”

Rowena Itchon is senior vice president of Pacific Research Institute.

Time to Begin Learning About Those Confusing Ballot Propositions

For voters who don’t spend their days engrossed in policy issues, the uncomfortable initiative season is upon us. How to decide on the 12 propositions on the November ballot? 

Reading through the arguments both pro and con can be confusing if the voters don’t take the time to dig deeper. That probably means getting off to an early start. One good place to begin is getting a jump reading the arguments in the ballot guide.

Secretary of State Alex Padilla has posted on the SOS website the current draft of the ballot guide for the propositions. The reason that what is posted is not a final copy is that material can be changed when a court orders alterations after a challenge to the language in the titles and summaries written by the attorney general’s office or the ballot arguments offered by proponents and opponents. 

The legal action will happen soon and must be resolved by August 10. All ballot inspired-lawsuits must be filed in the Sacramento Superior Court and there is no appeal to the superior court judge’s decision.

But with that warning, it would still be helpful to read what is in the draft guide as posted by the Secretary of State. Most of the basic back and forth arguments will undoubtedly remain about the same and voters will have a head start in doing some digging to clarify arguments in the guide

Take the first item voters will face, Proposition 14, the stem cell research bond.

The right of the state to fund stem cell medical research and create the California Institute of Regenerative Medicine (CIRM) was approved by voters along with a $3 billion bond in 2004. Now there is about $130 million left in the fund and Proposition 14 is offered to replenish the kitty to the tune of $5.5 billion to pay for stem cell and other medical research, training, medical facility construction and administrative costs.

Promises that accompanied the 2004 campaign besides medical breakthroughs were that the bond money would stimulate economic activity, create jobs, and return money to the state’s General Fund when new inventions backed by the CIRM created profits.

Those points are at issue with Proposition 14.

While those in favor of the bond say CIRM is building on successes with 92 approved FDA trials in progress and 2900 medical discoveries to date and offer success stories, those opposed argue that no federally approved therapy has resulted and the promised bonanza of jobs and windfall of money for the state did not come close to materializing.

So, what to believe? Voters will have to do more digging. 

Yes, there are rebuttal arguments against the main arguments, but contrary opinions lay there as well.

For instance, in answering the charge that no substantial economic activity and jobs were created, the proponents point to a study by the USC Shaeffer Center for Health Policy and Economics. The report titled, “The Economic Case for Public Investment in Stem Cell Research,” does claim that 56,000 jobs were created (directly and indirectly) along with adding $10 billion to the state’s economy. The report goes on to say, “if” the research develops important therapies then the return on investment will be invaluable.

So, does that back the opponents’ argument that no recognized therapies have been developed? How to know? As with many ballot measures, voters have to weigh what might happen in the future if a proposition is approved.

The promise that money would be returned to the state because of new inventions has not exactly been gangbusters so far. The Legislative Analyst reports that money started coming only recently in 2017 but has totaled just $350,000 so far. However, the Analyst notes in his Proposition 14 review, past revenue collections “might not accurately predict future revenues.”

Once again, a crystal ball to the future would help, but the voters don’t have one, so they’ll have to try to understand the strengths and weaknesses on this and other measures. 

No time like the present to start.

This article was originally published by Fox and Hounds Daily.