End of Brown Era – Pat & Jerry

Photo courtesy Steve Rhodes, flickr

Photo courtesy Steve Rhodes, flickr

At the Pat Brown Institute for Public Affairs post election conference yesterday at Cal State L.A., political consultant Mike Madrid declared that the Brown era of politics focused on building and infrastructure is over with the end of Jerry Brown’s fourth term as governor. He wasn’t referring to just the current governor but to his father, Pat Brown, as well. Both Browns focused on building from water works and highways to the bullet train.

Darry Sragow, editor of the California Target Book echoed that thought, calling Jerry Brown brilliant, but as governor, he “replicated” his father as a builder of things and didn’t move too far on social programs. Sragow predicted that would change under new governor, Gavin Newsom.

Sragow argued that Newsom would have to do something positive to establish his governorship and create a vision for the future. Making a statement by blowing up the high-speed rail is not the way for Newsom to begin his new administration, Sragow suggested.

Madrid concurred saying Newsom will need to do something big and bold. “That takes money,” Madrid said, “and he’s got it.”

A newly released report from the Legislative Analyst’s Office declared that California’s budget is flush.

Politico California Playbook’s Carla Marinucci, the third panelists, argued that Newsom must be concerned with the jobs picture that would change dramatically as technology and automation advances.

Madrid said the new governor would be defined by how he deals with social problems. He noted that the state’s problems with poverty, income inequality, and housing all happened with Democrats in charge. However, he gave credit to Newsom for raising these issues in the campaign and said he believed Newsom is prepared to address them.

Long time Los Angeles journalist and moderator of the popular “To the Point” radio program, Warren Olney, moderated the panel.

Whatever course Newsom lays out, he will have to navigate the legislature that despite having a supermajority of his own party will have their own ideas how to spend the state’s surplus dollars. Sragow predicted the legislative would be “headstrong” in dealing with the new governor.

When challenged that the supermajority Democrats could splinter into ideological camps and even break apart, Sragow pushed back on the idea saying that the Democratic coalition, despite a wide range of views, would hold.

Republicans, however, are a different story according to the panel.

In reviewing the election results, Marinucci talked of two important groups that deserted Republicans: suburban women and college educated women and men.

Republican consultant Madrid was tougher on his party. He said Republican prospects in California were “nil!” He said conservatism was designed to lift people up through economic policy but that the GOP, which complains about Democratic identity politics, is now a party of white identity politics. He emphasized the point claiming that anyone who is against the boondoggle high speed rail because it would hurt the economy but is for building a wall which would also hurt the economy does so for one reason—unspoken was the issue of race. He predicted the collapse of the GOP coalition of coastal white color Republicans and inland blue collar workers.

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Los Angeles Mayor, Eric Garcetti, delivered the program’s keynote address. In a post speech Q&A, the Pat Brown Institute’s executive director Raphael Sonenshein asked Garcetti, what criteria he would use in deciding whether or not to run for president. Garcetti’s travels to other states and support for Democratic candidates in the recent election have been interpreted as laying the groundwork for a presidential run.

Garcetti said mayors should consider running for the presidency because as chief executives they deal with major issues that a president would face such as security and trade but also gain unique perspectives from local, hands-on issues. He said the key decision point is whether he feels he can add something that is different than other candidates, including new ideas.

If he decides to run he will have lots of company.

ditor and co-publisher of Fox and Hounds Daily.

Teachers Unions Not Yet Hobbled by Supreme Court Ruling

Charter schoolThe U.S. Supreme Court’s June decision in the Janus v. AFSCME case that public employees couldn’t be compelled to pay union dues was widely seen as a game-changing moment in U.S. politics.

The coverage on The Atlantic website was typical. It called the decision, which stemmed from a lawsuit brought by Illinois state employee Mark Janus, a “huge blow” to public sector unions and suggested the decision had the potential to “end” such unions in America.

But five months later, the experience of the most powerful public employee union in the nation’s largest state undercuts the assumption that Janus would take a quick toll on unions’ clout. In supporting Assemblyman Tony Thurmond, D-Richmond, for state superintendent of public education against Marshall Tuck, the California Teachers Association spent $16 million as of Oct. 31 – $5 million more than it did in the entire 2014 superintendent election, where the union supported incumbent Tom Torlakson over Tuck, a former Los Angeles school executive with deep support from charter school advocates and a loose coalition of tech billionaires.

Torlakson narrowly defeated Tuck. This election, Tuck and Thurmond have been trading the lead in recent days. With millions of votes yet to be counted, no journalism organization has called the race.

The CTA does not issue regular updates on its membership status. But a recent Sacramento Bee analysis suggested that the union, as in previous years, had 90 percent membership among the 325,000 teachers it represented. So while it’s lost dues from the 10 percent of teachers who reject union membership, the CTA still collects more than $150 million in dues annually – making it the most powerful force in the California Democratic Party.

Union clout to be tested in coming fight over funding

The extent of the CTA’s clout is likely to be tested soon – whether Thurmond or Tuck is elected. That’s because both have said they oppose one of Torlakson’s most controversial, union-favoring decisions: His 2015 announcement that the extra funding going to schools with disproportionate numbers of English learners, foster children and impoverished students could be spent on general needs, such as raises for teachers.

Torlakson’s decision, which overrode a directive from a lower-ranking official in the state Department of Education, spurred outrage in education reform circles. The Local Control Funding Formula – the 2013 state law changing how districts were allocated state dollars – had been pitched as creating a lock-box of dollars that would be spent only on helping underachieving students.

But Torlakson’s decision had the effect of turning the local-control funding into a de facto block grant. Many districts have used the funds for employee raises.

If Thurmond or Tuck revive the lock-box theory of how the funds can be spent, that’s likely to create huge headaches for most school districts, which have received an average of $8 billion a year in local-control dollars since the law took effect.

Newsom close with both teachers unions and reformers

A key factor in the coming fight over funding is the position taken by Gov.-elect Gavin Newsom, who was strongly backed by the CTA but is also friends with the tech tycoons who want education reform. The governor’s control over parts of the Department of Education’s budget gives him a powerful lever to use on the state superintendent.

On the campaign trail, Newsom said teachers are underpaid and schools are underfunded. But he’s also rejected Gov. Jerry Brown’s claim that education reform is a “siren song” in which trends come and go but schools never get better. In interviews, Newsom has noted the success of education reform in union states like Massachusetts and New Jersey.

It’s unclear when the count of the Thurmond-Tuck vote will be complete. But the recent statewide election with the most parallels to the race offers encouragement for Thurmond, a former social worker.

In the 2010 attorney general’s race, Los Angeles District Attorney Steve Cooley, a Republican, took such a substantial early lead over San Francisco District Attorney Kamala Harris that the San Francisco Chronicle pronounced him the winner on election night. But as millions of provisional and late ballots were counted, the tide turned steadily toward the union-backed Democrat. Three weeks later, Cooley conceded when Harris’ lead topped 50,000 votes. Harris ended up winning by more than 74,000 votes – about 1 percent of total voters.

This article was originally published by CalWatchdog.com

Why America’s “Minority Majority” Will Never Happen

WhiteIn America today, the phrase “It’s ok to be White” is considered “hate speech.” Last week, in trend setting California, that was the clear message coming from Sacramento’s leading local television news network, KCRA. Watching this top story on November 3rd, you would think co-anchors Gulstan Dart and Kellie DeMarco were reporting on another synagogue massacre, instead of an incident at a local college where some anonymous “racist” had taped a few pieces of 8.5″ x 11″ copy paper to campus bulletin boards that read “It’s ok to be White.”

What happened in Sacramento wasn’t an isolated incident. “It’s ok to be White” flyers have been printed and posted elsewhere in the U.S. You can even buy “It’s ok to be White” t-shirts on Amazon Prime. The posters have appeared at Duke UniversityTufts University, the University of Delaware, the University of Denver the University of St. Thomas, and elsewhere.

The reporter on the scene in Sacramento, Walter Makaula, dutifully pointed out that “messages of inclusion and diversity” were posted “everywhere” on the Sacramento’s American River community college campus. “Black Minds Matter.” “Womyn & Femmes Circle.” But posting “It’s ok to be White” was apparently hateful. As Dean of Student Services Joshua Moon Johnson reassuringly stated for the camera: “Quickly we addressed the situation and made sure campus police were called and made sure we had those removed.”

Good job, Mr. Moon-Johnson. Such bravery. Such resolute action.

The common sense questions to this typical response are many. Why is this offensive? Why is this rather bland affirmation of white personhood considered a threat? Why is it called “hate speech?” And what is it that might inspire someone, presumably a white student, to print a few of these signs and post them around their campus?

Could asserting that “It’s ok to be White” be a perfectly understandable reaction to an educational culture where literally anyone who is not “White” is obsessively celebrated? A reaction to institutional discrimination where anyone who is not “White” is granted preferential treatment in admissions, scholarship awards, and future hiring decisions? And wouldn’t knowing these flyers would trigger a hysterical overreaction, despite containing content that is trivial by any objective standard, motivate an irreverent and spirited student to post them?

While the origin of the phrase “It’s ok to be White” is allegedly linked to “white nationalists,” that shouldn’t alter its meaning. You can’t outlaw a reasonable phrase merely because unreasonable people uttered it. When you do, and make an overwrought fuss every time the phrase is encountered, you are inviting millions to also utter it.

The term “White” is inclusive, not exclusive, and cultural, not racial

But what is “White”? Could it be that the term “White” is destined to become perceived as inclusive instead of exclusive? Eric Kaufmann, writing for UnHerd, has coined the phrase “Whiteshift,” which he defines as “the voluntary assimilation of minorities into the majority though intermarriage.” Kaufmann goes on to explain how this voluntary assimilation can occur, characterizing it as “a process which will need active telegraphing as mixing won’t be strong enough on its own to make much difference to social cohesion until the end of the century.”

While Kaufmann is writing about the United Kingdom, his prescriptions for assimilation apply in America as well. He writes: “The Left needs to back away from excessive accusations of racism and dreams of radical social transformation. Conservatives should worry less about Muslims, Hispanics or the behavior of other minority groups and focus instead on defending the interests of those who seek slower cultural change. This is not just about immigration levels, but should involve ethnic majority citizens inducting mixed-race children into myths of British [American] ancestry.”

In this context, American “multiculturalism” is clearly the wrong approach. An entire collection of industries have been built in America to capitalize on a divisive obsession with race and ethnicity, and the elaborate scaffolding of ranked victims based on their race and ethnicity. From campus “Chief Diversity Officers” to corporate human resources departments, to the plaintiff’s bar, to pandering politicians, to the Academy Awards and the like, American culture has acquired an unhealthy obsession with race.

In a society where actual racism is universally condemned and utterly marginalized, new offenses have been invented: microaggression, unconscious racism, white privilege. And with the new offenses, new solutions: trigger warnings, safe spaces, speech codes. The new goal? To create a utopian society where equality of outcome across all races is achieved. That is impossible, which is perhaps the point. No industry wants to solve its reason for existing.

Demographics favor an inclusive definition of “White.”

The good news, however, is this entire paradigm of race and ethnicity as the defining issue of the left-of-center establishment is about to collapse, for a reason the race careerists are not expecting and will not be able to counter. Quite simply put, the “White” race is assimilating “people of color” at breathtaking speed. Not just culturally, but genetically.

In 2015, over 17 percent of marriages in America were across “racial” lines. It is the reality of ethnic intermarriage that will add critical weight to the conservative argument for cultural assimilation, just as intermarriage in America between immigrants of various European ethnicities propelled cultural assimilation ala the “melting pot” in previous centuries.

Earlier this year, the Washington Post published a fascinating article entitled “The Demise of the White Majority is a Myth.” They write: “Under a more expansive definition that counts as white anyone who so identifies (even if they also identify with another race or ethnicity), the white population is not declining; it’s flourishing. The Census Bureau’s inclusive projections show a white population in excess of 70 percent of the total for the foreseeable future.”

This observation, backed up by demographic data, provides abundant reasons for optimism. As the Washington Post author puts it: “Projections of racial demographics should reflect the great changes in the meaning of race in America. But stories about the impending demise of white America are rooted in outmoded notions of racial exclusivity. These stories of white decline obscure the ongoing changes to America’s color line, and they serve only to divide.”

Watch out, professional race hustlers. Your entire livelihood is “rooted in outmoded notions of racial exclusivity.”

The next great American era of assimilation could be just around the corner

Based on demographic data as cited by the Washington Post, when one uses the inclusive definition of white, America is destined to remain around 75% white for decades to come. Using any other definition renders unsustainable the Leftist strategy of identity politics. How can they continue to carve out preferential treatment for “people of color,” if nearly everyone is mostly “White,” yet qualifies? And if they use a more exclusive definition of White, where will they draw the line? What would stop Elizabeth Warren copycats from litigiously demanding they too receive preferential treatment? The current system of racial redress via racial quotas across all aspects of American life is going to collapse of its own weight.

The hopeful reality that Donald Trump and Elizabeth Warren, in very different ways, has propelled America towards is new wave of American cultural assimilation. Trump because he was the raging bull in the china shop of political correctness. Warren because she exemplifies the absurdity of race based career opportunism.

The alternative to identity politics is unity politics. Affirmation of a trans-racial, 21st century American melting pot where conservative and libertarian values, derived from Western traditions, are overwhelmingly accepted and protected. And contrary to conventional wisdom, another great wave of American assimilation may be in the offing.

Demographics are indeed destiny, and America’s current demographic trends point to a future where White lineage is predominant in so many people who also have a lessor percentage of “non-White” heredity, that these millions of Americans will embrace their American heritage. They will reject special preferences for themselves or anyone else, and celebrate American history and traditions with the same fervor as the great waves of ethnic immigrants who arrived over a century ago from Southern and Eastern Europe.

“It’s ok to be White.” Absolutely. Because “White” is destined to become an ethnically inclusive term, devoid of divisive connotations. Chief Diversity Officers may wish to find a new line of work, along with all those minions of overpaid bureaucrats they manage.

This article originally appeared on the website American Greatness.

Did California save Ted Cruz?

ap_ted-cruz_ap-photo-3-640x426Chuck DeVore is just one of thousands of former Californians who have moved to Texas. But DeVore is unique. Not only did he serve in the California Assembly, but he remains heavily engaged in policy issues as Vice President of National Initiatives at the Texas Public Policy Foundation, a free market think tank based in Austin.

DeVore is a frequent guest on national television shows to speak on economic issues, including how progressive policies suppress economic growth. Moreover, he has firsthand experience with the movement of people and money between the two economic titans, California and Texas.

The migration of businesses from California to Texas is well-documented. Big names, like Charles Schwab, Campbell’s Soup, Burger King, Waste Management and other billion-dollar businesses severed their California connections for Lone Star liberty. In fact, it was entertaining to watch the sparring between then-Texas Governor Rick Perry — who frequented California to poach businesses from California — and the Golden State’s own Jerry Brown who tried to portray Texas as hick-country governed by a buffoon.

More than just businesses, it is people who have left California in numbers significantly larger than those coming in from other states. From 2007 to 2016, California has experienced net domestic out-migration of a million citizens, and the number-one destination? You guessed it. Texas. Of course, that doesn’t mean that California has lost population, in fact it has gained. But those gains have come from immigration – both documented and otherwise — and new births.

To read the entire column, please click here.

Gov. Brown Will Defend Public Pension Reform Dec. 5

SACRAMENTO, CA - OCTOBER 27:  California Governor Jerry Brown announces his public employee pension reform plan October 27, 2011 at the State Capitol in Sacramento, California.  Gov. Brown proposed 12 major reforms for state and local pension systems that he claims would end abuses and reduce taypayer costs by billions of dollars.  (Photo by Max Whittaker/Getty Images)

As he requested, Gov. Brown will get a chance before leaving office to defend a public employee union challenge to his pension reform that some think could result in a ruling allowing pension cuts.

The state Supreme Court yesterday announced oral arguments scheduled Dec. 5 in Los Angeles on a firefighter appeal to allow employees to continue boosting their pensions by purchasing up to five years of “airtime,” credit for years in which they did no work.

If the court finds airtime is a vested right, the court could modify the “California rule” that prevents cuts in the pensions of current workers, limiting most cost-cutting reforms to new unvested hires, which can take decades to yield significant savings.

The airtime case, Cal Fire Local 2881 vs. CalPERS, one of five similar challenges to the pension reform, was fully briefed last January. Brown’s legal office replaced the state attorney general in the defense of the airtime ban.

“As the end of Governor Brown’s term in office draws closer, we respectfully urge the Court to calendar this matter for argument as soon as possible,” the governor’s legal affairs office said in a letter to the Supreme Court last July 6.

The Supreme Court said in September that Cal Fire oral arguments might be held as soon as November. The arguments on Dec. 5 are during the last regularly scheduled week of oral arguments before Gov.-elect Gavin Newsom is sworn in Jan. 7.

“This move was animated in large part by Governor Brown’s deep concern for the fiscal integrity and solvency of public pension systems throughout the state,” said the governor’s legal office letter in July, referring to taking over defense of the reform.

“It was the same concern that motivated him to help develop the Public Employees’ Pension Reform Act of 2013, and sign it into law,” said the letter.

Brown has left a seat vacant on the seven-member Supreme Court for a record 14 months. Former Supreme Court Justice Kathryn Werdegar gave notice in March last year that she would retire in August.

If no appointment is made before Dec. 5, a key vote on pension reform could come from one of the rotating appeals court justices brought up to hear more than 100 cases so far.

The six current members of the Supreme Court are evenly split between three appointees made by Brown, a Democrat, and three appointees made by former Republican governors.

“It’s not something I want to do too quickly,” Brown said in January, one of his few publicly reported remarks about the vacancy. “It’s very important now. I have appointed three. The fourth could be very decisive. So I want to understand how that decisivness should work.”

Among the speculation is that Brown may appoint an aide he wants to retain as long as possible, wanted a four-year delay in a retention election for the new election by waiting past the September deadline for the ballot this month, or may appoint his wife Anne Gust Brown.

The California rule has been cited as courts overturned several cost-cutting pension reforms approved by voters. For example, a Pacific Grove limit on payments to CalPERS in 2010 and a San Francisco ban on supplemental pension payments in 2011.

In 2012, a superior court overturned a key part of a San Jose measure approved by 69 percent of voters that would have cut the cost of pensions that current workers earn for future work, while protecting pension amounts already earned.

The plan pushed by former San Jose Mayor Chuck Reed, a Democrat, would have given current workers the option of paying more to continue earning the same pension, up to 16 percent of pay, or choosing a less costly pension that would pay less in retirement.

A superior court overturned the option citing the California rule, a series of state court decisions believed to mean the pension promised at hire becomes a “vested right,” protected by contract law, that can only be cut if offset by a comparable new benefit, erasing cost savings.

Reed, now on the board of the bipartisan Retirement Security Initiative pension reform group, said pensions have been losing ground. CalPERS had a debt or funded liability of $90 billion in 2012, when the Brown reform legislation was approved, and $138 billion in 2016.

He said five different lawyers have filed five friend-of-the court briefs outlining five different approaches to modifying the California rule. One of the questions in the Cal Fire case is whether the Supreme Court will rule on vested rights and the California rule.

The Supreme Court summary says the Cal Fire case presents two issues: 1) Was the option to purchase airtime a vested pension benefit (2) and if so, did the legislation ending airtime purchases violate the contracts clause of the state and federal constitutions?

If the court finds that airtime is not a vested benefit, the court might also decide there is no need to rule on whether the airtime ban violates the contracts clauses and the California rule.

“This is the California State Supreme Court and this is a real big issue, and I would be very surprised if they didn’t take the opportunity to be more expansive than narrow,” Reed, a lawyer, said yesterday. “But I’m only guessing.”

Gregg Adam, a Messing Adam & Jasmine attorney for Cal Fire, said “our client is excited that oral argument is scheduled,” and the case has been extensively briefed by the parties and friends of the court.

“A narrow ruling is certainly possible,” Adam said in an email. “The Governor argues additional retirement service credit is not the type of pension benefit that the California Rule protects. If the Court agrees with him, the opinion will be short.

“We hope the Court reaches the larger issue. The benefit was integral to employees’ retirement security. It also encouraged diversity and education in state service. So we think it falls squarely within the category of benefits protected by the California Rule.

“The California Supreme Court has led on this issue and, especially at this time, we’re going to encourage it to continue to do so.

“With respect to Alameda, the Court will determine when it is ready to resolve the issues in that case, which may or may not be affected by any ruling in Cal Fire.”

Alameda County Deputy Sheriff’s Assn. v. Alameda County Employees’ Retirement Assn. was consolidated with similar Contra Costa and Merced county cases challenging a part of the reform that prevents “spiking” by boosting the final pay on which pensions are based.

The Supreme Court designated the Alameda case as the lead for three other similar cases challenging parts of the governor’s reform. The governor’s office had no comment yesterday on the pension cases.

Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune.

This article was originally published by Fox and Hounds Daily

California’s Voters Approve New Taxes and Reject Tax Repeal

Although hundreds of election results remain to be decided across California, thanks to millions of vote-by-mail ballots still being counted, we can already project with reasonable accuracy the total amount voters approved in new taxes and borrowing. At the local level, new taxes nearly always are approved by voters. In 2016, out of 224 local tax proposals, voters approved 71 percent, adding $2.9 billion in new taxes. As shown on the table, if a similar percentage of November 6, 2018 local tax measures are approved by voters, California’s taxpayers will be providing local governments with another $1.6 billion per year.

Total Estimated New Annual Taxes Approved by California Voters, November 2018

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While these new local taxes add billions – over time, tens of billions – of additional burden on California’s already beleaguered taxpayers, state ballot measures often offer even more significant tax increases. This November, voters turned down an opportunity, via Prop. 6, to eliminate an estimated five billion in new gasoline taxes. In all, California’s voters enabled another $6.1 billion in annual taxes, in a state that already has among the highest overall tax rates in the U.S.

California’s Total New Debt

The impact of new taxes is immediate. Rates go up, revenues increase, and government budgets swell. Compared to taxes, the impact of bonds is greater in the long run, but harder to recognize. In reality, bonds are just deferred taxes. From a financial perspective, it would almost be preferable to use taxes to fund many projects that currently rely on borrowing, because at least taxpayers would only be paying principal, and not interest. For example, if you assume 3 percent inflation, the present value of the payments on a $1.0 billion bond (5% interest, 30 year term) is $1.3 billion. That is, in real dollars, using a typical example, bond financing costs taxpayers 30 percent more than paying for services using operating funds. But the seduction of borrowing is hard to resist: big money today, while mortgaging tomorrow.

Total Estimated New Borrowing (incl. Annual Payments) Approved by California Voters November 2018

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As it is, this November, voters mortgaged a lot of tomorrows. And as always, the big money in the case of new bonds was almost all local. In 2016, of the 193 new local bond measures, voters approved a whopping 94 percent of them. This added $32 billion in new debt, equating to an estimated $2.1 billion in new annual principal and interest payments. As shown on the table, if a similar percentage of November 6, 2018 local bond measures are approved by voters, California’s taxpayers will owe another $15.5 billion. The principal and interest payments on this new debt will cost taxpayers another $1.0 billion per year.

At the statewide level, despite rejecting Prop. 1, the water bond, voters approved three new major state bond measures totaling $6.5 billion. Adding that to the likely $15.5 billion in local bonds, Californians this November will have added $23.0 billion in debt, costing $1.5 billion per year in annual payments of principal and interest.

California’s Total Accumulated Debt

Who was it that said, “a billion here, and a billion there, and pretty soon we’re talking about serious money”? That would describe California’s total state and local government debt. When you look at what constitutes California’s total debt, accumulated over decades, it puts the relentless drive for higher taxes into context. The next table summarizes California’s total debt, as estimated by California Policy Center researchers Marc Joffe and William Fletcher in a 2017 study entitled “California’s Total State and Local Debt Totals $1.3 Trillion.”

Added in column two of this table is the estimated annual payments on this debt. As can be seen, the conventional debt – bonds, loans, and other contractual debt – paid back over 30 years at an interest rate of 5 percent, is costing California’s taxpayers $27.7 billion per year. Add to that, of course, annual payments of another $1.5 billion on new debt approved by voters earlier this week. But it’s in the unfunded liabilities for public employee retirement benefits where truly serious money burdens California’s taxpayers.

California’s Total Estimated State and Local Government Debt 2018

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The story of how California’s taxpayers ended up on the hook for unfunded retirement pension liabilities easily in excess of a half-trillion dollars defies glib explanations. Anyone wanting to dig deep into California’s public sector pensions is encouraged to read the California Policy Center primer “Resources for Pension Reformers” and click on the many links for in-depth analyses of this complex topic. Simply put, an unfunded pension liability is the difference between the assets being managed by a pension fund at any time, and the present value of all promised future payments to retirees and active workers that have been earned up to that same point in time.

Over nearly three decades, some critical mistakes were made in California’s public employee pension fund management. Pension benefits were increased, again and again, by politicians eager to curry favor with public employee unions, but didn’t want to blow their current year budgets by granting salary concessions. Instead, they sweetened future pension benefits which did not incur significant immediate costs. Then the required annual costs to fund pensions were underestimated. Rates of return on invested pension fund assets were overestimated. Life expectancies were underestimated. And as the assets of California’s state and local pension systems began to fall well behind the value of their liabilities, creative accounting was employed to understate the amounts needed to reduce that debt.

Because of all these unknowns, there is a wide range of estimates of California’s total public sector pension debt. At the least it totals over a quarter trillion; at most, about triple that amount. This much is reasonably certain: if there is an economic downturn, and if pension benefits aren’t further reduced, it is likely that payments on pension debt will need to be in excess of $50 billion per year. In all, absent reforms and an epic continuation of the bull market, Californians are likely to be paying over $90 billion per year on state and local government debt. More than half of that will be to pay down unfunded pension liabilities.

The Public Sector’s Insatiable Desire for More Money

It is impossible to view California’s relentless pattern of tax increases apart from its public sector pension crisis, which is just beginning. Currently, the estimated annual payments on unfunded pension liabilities in California is estimated at $17 billion. Imagine the impact of that amount soaring to $55 billion. Just based on modest adjustments to the assumptions governing projections of pension solvency, and based on official announcements already made by California’s largest pension fund, CalPERS, the ongoing (normal costs for pension benefits earned in the current year by active workers) plus the unfunded payments for pensions are estimated to rise from $31 billion in 2017 to $59 billion by 2024. No tax increase, anywhere so far, not even all of them added up, are sufficient to cover this shortfall.

If analysts find California’s looming pension funding crisis alarming, public employees who receive these pensions find it terrifying. That’s why, when a new local tax or bond measure is on the ballot, local governments use taxpayer funds to engage in “information campaigns” aimed at their voters that come very close to being political advocacy. Sometimes they cross that line. After such activities in support of a local sales tax increase in Los Angeles County, the California Fair Political Practices Commission found cause to charge the county, as well as the individual members of the Board of Supervisors, with 15 counts of campaign finance violations.

Californians had a chance to apply vigorous pressure to its elected officials by passing Prop. 6, which would have repealed the gasoline tax. That repeal would have cost state and local governments $5.0 billion per year. Why wouldn’t Californians seize an opportunity to lower what are the highest gas taxes in the U.S.? The answer reveals more about California’s public sector, and their desperate need for more revenue.

Earlier today and in the aftermath of the Nov. 6th election, Carl DeMaio, a former member of the San Diego City Council, who launched the Prop. 6 campaign, described the tactics of the opposition. California’s attorney general is responsible for reviewing ballot initiatives and approving the final wording of these initiatives as they appear on the ballot. According to DeMaio, rather than objectively describing the intent of Prop. 6, which was to repeal the new gasoline tax, his department used focus group research to compile a title and summary for the initiative that was worded in a manner more likely to get people to vote no. But it didn’t end there.

Not only is California’s attorney general alleged to have doctored the language of Prop. 6 to draw down voter support, California’s public sector unions spent millions on an opposition campaign. Overall, the opposition to Prop. 6 spent $50 million on their campaign, compared to only $2.6 million spent by its proponents.

Even in California, $50 million buys a lot of airtime. Lost on California voters, sadly, was the irony of a veteran firefighter who made $324,000 in 2017, serving as the main television spokesperson opposed to Prop. 6 which would have lowered taxes. California’s public sector unions collect and spend at least $800 million per year. They can, quite literally, spend as much as they need to spend to defeat candidates and propositions that do not favor their own interests.

Why don’t California’s voters and policymakers overcome high taxes and an unaffordable cost of living? Partly it’s due to the grip that public sector unions have on politicians, which prevents the state legislature from ever getting spending under control. Partly it’s the lack of any effective opposition, since the supposedly tax averse Republican party in California is a hollow shell, lacking on-the-ground infrastructure, strong candidates, or a shared and compelling political agenda. Saddest of all, it’s because the media in California is entirely unwilling to make the connection between public sector compensation, the power of public sector unions, and the punitive taxes and living costs that are its consequences.

This article was originally published by the California Policy Center

Jim Lacy on Jim Acosta’s rudeness, midterm election results, and more – VIDEO on Weekend Breakfast

In this video airing on Saturday, November 10 on Australian Broadcasting Corporation, California Political Review publisher Jim Lacy comments on CNN reporter Jim Acosta’s rudeness at a recent White House press conference, the meaning of the midterm elections, and more.

 

 

Gavin Newsom and Impending Tax Increases

Gavin newsomIn his successful campaign for governor Gavin Newsom promised to advance a number of programs like universal pre-school, health care for all and education that will be costly. Where does he get the money while also considering how to reform the state’s tax system?

Shortly after the election, fellow Democrats, including Assembly Speaker Anthony Rendon are also talking tax increases.

If the Democrats secure the two-thirds supermajority in the legislature required to raise taxes—which appears likely at this time—the foundation will be in place for tax increases.

In a state notable for decades as the home of tax resisters, there are signs that voters may not object. In the last few statewide elections voters have raised income and sales taxes and rejected repeal of gas taxes and extending property tax breaks.

On the local level, voters continually vote to raise numerous taxes.

How many more tax increases are in the future and where will Newsom draw the line?

Is Newsom planning on confronting Proposition 13 when the split roll appears on the 2020 ballot—a position his predecessor, Jerry Brown, avoided?

Newsom is already listening to Senator Bob Hertzberg, re-elected Tuesday, to consider an overhaul of the entire tax system that would include some form of service taxes. If Newsom wants to spend political capital on such an ambitious effort it would likely come soon.

However, Newsom has said such an effort would take time. Look for another tax reform committee to be formed—which would be the fourth such committee over the last 20 years.

Or the incoming governor could rely on Hertzberg’s connection with Nicolas Berggreun’s Think Long Committee to do the heavy lifting on formulating a tax reform plan….or cut an overall tax package deal in the legislature that could include a move on commercial property taxes.

Another question: Will tax reform venture into the difficult area of spending issues, particularly the cost of pensions?

And what happens if the economy turns sour? Are all bets off on reform…or is that the time to go for it considering California’s current tax structure was birthed in the gloom of the Great Depression.

Look for early signs on tax questions in the budget and official announcements from the governor’s office.

This article was originally published by Fox and Hounds Daily

Signs of Hope in California?

CapitolRonald Reagan is not coming back, but California may be avoiding a trip to the insane asylum. Yes, the GOP’s lackluster gubernatorial candidate, John Cox, lost by almost 20 points, and the only issue in the legislature is whether the Democrats regain their supermajority in both houses. But it could have been much worse.

The GOP lost only two or three congressional districts in southern California and appeared to be holding its own in the interior. In my own district, to my surprise, Mimi Walters, who was out-campaigned and outspent, managed to win. Others, like the more contentious Dana Rohrabacher, did not.

Without a change in approach, Republican growth potential is limited by changing demographics and an increasingly bifurcated state economy. At best, the GOP, running on its traditional anti-tax platform, can get up near 45 percent—as shown in the failed repeal of the gas tax, Proposition 6—but no further. This strategy still works marginally in places like Orange County and the interior but fails overall.

In a sense, California elections are now about how far left the state is willing to go. Proposition 10, a measure to expand rent control, was soundly defeated by a massive ad campaign targeting homeowners fearful of seeing curbs on the prices that they could charge to rent their homes. The outcome suggests that if the business community appeals to the middle-class without the Trumpian baggage, voters will support more moderate positions. Perhaps even more important was the victory of Marshall Tuck, a Democrat running with Republican support for Superintendent of Education against the candidate of the teachers’ union. But the limits of moderation are always evident.  Steve Poizner, a registered Republican running for State Insurance Commissioner, appears to be falling behind Ricardo Lara, a far-left Democrat best known for leading the fight for single-payer health care.

Despite improved earnings by lower-wage workers, Republicans remain in serious trouble in Latino and African-American communities. Simply put, a competitive California needs a racial realignment that adds to the shrinking base of white GOP voters. The best target for that goal is the Asian community, the state’s fastest-growing and arguably most successful ethnic group. Asians may be repelled by Trump’s immigration rhetoric, but they tend to be middle-class homeowners who care about schools and safety, and they won’t be happy if the Democrats move further left in terms of seizing zoning policy from communities or feeding the public sector with ever more middle-class taxes.

Southern California Republicans have worked hard to appeal to Asian voters; there are three Asian-American assembly members, two state senators, and three supervisors (out of five total), all Republicans. A highlight yesterday was the election of Young Kim in a northern Orange County congressional district. Asians now make up about 20 percent of Orange County residents, and Asian Republicans are common. They seem to be able to win in districts where Trump is unpopular. It’s hard to run on a racism charge against someone born in Incheon.

The question is where this potential white-Asian alliance is going. Michelle Steele, the politically aggressive supervisor in Orange County, where the board is majority-Asian, is considering a run for statewide office. If Republicans can pull Asians away from the Democrats, at least at the local level, they could restore a semblance of political competition in the state.

In the years ahead, the most important struggle in California will be within the Democratic Party. Two distinct factions increasingly predominate. One, close to the tech community, adopts the gender, environmental, and race agenda of the Left, but rejects income redistribution and is congenitally hostile to unions. Voters in this group tended to back Tuck for education superintendent, and many supported Poizner for insurance commissioner, but they remained cool to Cox’s gubernatorial bid.

The other, now-ascendant faction, comes from the hard Left, and is backed by public-employee unions, nurses, and other service providers. Their constant campaigning—particularly in the face of gross inequality in the Bay Area—has begun to reach the tech hoi polloi. As recent protests at Google suggest, the hard Left may not be ready to embrace the edicts of “the Brahmin Left,” which is fundamentally devoted to looking progressive while preserving, to use the Left’s terminology, their distinct, mostly white and male, privilege. Silicon Valley oligarchs, who have often funded “woke” activists in their native Bay Area, now face being awakened themselves by rising demands for “social justice.”

California’s Left today is not like that of the past. It is not interested in building usable infrastructure, meeting the aspirations of working- or middle-class families, or creating middle-skill jobs. These are exceedingly difficult tasks if you also want to adopt the state’s draconian green agenda. The new Left’s solutions to state problems, like housing, tend toward ideas like turning single-family neighborhoods into “vibrant” (read: crowded) apartment blocks, boosting housing subsidies, and imposing rent control.

Donald Trump’s presence in the White House and the GOP’s control of the Senate creates real problems for California. Under Barack Obama, greens could hope that the rest of the country would follow the California lead. But for the next two years, at least, other states will be busily picking off companies and individual talent eager to escape California’s high prices and regulatory restraints. As a result, the feudalization of the state will proceed, necessitating ever-more expansive subsidies for everything from housing and energy to education. The demographics certainly are in place for a potential lurch leftward. Proposition 10, for example, may have lost the votes of home-owning Democrats, but it was widely backed by their children, who have little choice, if they stay in the state, but to remain renters for life.

Ultimately, California’s battles over rent control — as well as single-payer health care, restrictions on driving, and expanding racial and gender quotas — will only intensify. These policies can be implemented only with huge tax increases, in a state that already imposes one of the highest taxation rates in the country. (Single-payer alone could double the state budget.) Silicon Valley may hold the purse strings and, increasingly, the means of communication, but the California that it has helped shape may soon choose other priorities besides virtue-signaling while the super-rich get still richer.

Will California Blue Wave Lead to Insolvency Faster?

However, California is another story, remaining as blue as can be, and headed right into insolvency. In the contest for governor, California voters chose Democratic politician Gavin Newsom over Republican businessman John Cox, who is not a politician.

California goes ‘Full Nuthouse’ as my friend Leslie Eastman reports at Legal Insurrection. In addition to electing Newsom, Eastman points out voters rejected a repeal of the gas tax, and says, “a majority of Californians are thrilled that Sacramento will squander more of their money.”

A friend pointed out “California is a state where everyone bitches about how poor they are and how they need rent control, and yet constantly vote to raise their taxes every chance they get. The voters of this state have never seen a tax increase or bond measure they didn’t love.”

Brilliant.

Californians also re-elected long-time incumbent Democratic U.S. Sen. Dianne Feinstein, rejecting Democratic State Senator Kevin de Leon (Los Angeles). Dumb and dumber was the choice there.

There were some surprises as well. California Democrats flipped three Republican districts: Rep. Steve Knight, (CA-25th District) lost to Democrat Katie Hill, Republican Diane Harkey lost Rep.Darrell Issa’s 49th District to Democrat Mike Levin, and Republican Rep. Dana Rohrabacher lost his race in the  48th District to Democrat Harley Rouda.

In statewide races, it appears Marshall Tuck has beat Assemblyman Tony Thurmond in the race for Schools Superintendent. Tuck is a real reformer. “Tuck made a name for himself in Los Angeles turning around high-poverty, low-performing charter schools before then-Mayor Antonio Villaraigosa recruited him to improve schools within the conventional public school system,” the San Francisco Chronicle Editorial Board said in their endorsement of Tuck. “Marshall Tuck is the clearest and most emphatic voice for reform in the field.”

Democrat State Senator Ricardo Lara and Steve Poizner appear in a near tie for Insurance Commissioner.

California’s Legislative Democrats appear poised to regain their supermajority in the state Senate and retain the supermajority in the Assembly.

Democrat Assemblywoman Anna Caballero beat Republican Rob Poythress in the race to succeed outgoing Republican Sen. Anthony Cannella in the Central Valley 12th Senate District.

Incumbent Republican State Senator Andy Vidak surprisingly lost his reelection against Democrat Melissa Hurtado in Senate District 14.

“Picking up both seats would give Democrats 28 seats in the Senate and restore the supermajority they lost in June when voters recalled Josh Newman of Fullerton,” sacbee.com reported.

The ballot initiatives were another surprise. Proposition 3, the water bond, was thankfully defeated. “With millions of dollars of unspent water bond money from 2006 and 2014 water bonds, why is there yet another a water bond on today’s June Primary ballot, and another on the November ballot?” I wrote in June 2018.

Proposition 5 was defeated, which would have allowed homeowners age 55 and older to sell their current homes, purchase a replacement property anywhere in the state and transfer the property tax assessment from the home they sold to the home they bought. The opposition lied and claimed that the state would have lost millions of dollars if Prop. 5 passed. Not so – Prop. 5 would have encouraged empty-nesters to sell their large family homes and downsize without being penalized. And it would have meant more money with the sale to the new owners.

Proposition 6, the gas tax repeal was also defeated – California’s high gas taxes and high car registration fees will remain. Sadly. Prop. 6 would have also amended the state constitution to require voter approval of all future increases in fuel and vehicle taxes or fees.

Proposition 8, which would have authorized State Regulation of Kidney Dialysis Clinics, was defeated. Thankfully.

Proposition 10, repeal of Costa-Hawkins, was defeated. Prop. 10 would have allowed state government to regulate rent, and would actually have created an even worse housing shortage in California.

Sacramento’s Measure U sales tax increase, a slush fund for greedy politicians, was passed by voters, despite that Sacramento city revenues are more than $120 million up from 2010, and up 16 percent in just the past two years.

Measure U doubles the 2012 half-cent sales tax increase and makes it permanent, raising Sacramento’s sales tax to 8.75 percent.

Mayor Darrell Steinberg and most of the members of City Council can’t or won’t be honest about their gross spending and particular taste for other people’s money. Despite promising to spend the Measure U tax increase money wisely, the additional $50 million will likely go straight to unfunded city pensions, which are expected to increase by $60 million a year and are projected to hit $129 million by 2022-23.

What is needed is spending discipline rather than continuing to pick the pockets of the taxpayers and business owners.

Buried at the end of the SacBee article on Measure U’s passage, is this little gem:

“Even with Measure U’s passage, the city’s budget is still projected to be in the red. The city deficit is estimated to be $7.6 million in fiscal year 2019-2020 and $28 million in 2022-23, according to the city budget. If Measure U had failed, the city’s deficit was projected to grow to $47.3 million in fiscal year 2019-2020, and to $80 million in 2022-23.”

Will California’s Blue Wave lead to insolvency faster?

Costa Mesa Republican Sen. John Moorlach’s fiscal report, “Financial Soundness Rankings for California’s Public School Districts, Colleges & Universities” finds 2/3 of California’s 944 School Districts bleed red ink. That report follows his March 2018 reports on the state’s 482 cities that found 2/3 of them in the red; of 58 counties, 55 suffered deficits and only three enjoyed positive balance sheets. His May 2018 report on the 50 U.S. states found only nine were financially healthy, with California ranked among the worst, in 42nd place.

There is only so much we faithful, native Californians can take. How much beautiful weather is worth this leftist insanity, and/or before this leftism turns into liberty crushing authoritarianism? Just sayin’ …

This article was originally published on the Flash Report