As Scandals Proliferate, Senate Tries to Polish Image

From The Sacramento Bee:

This is the drill in the state Senate this year, a least so far:

A scandal of some type erupts and Senate leaders respond with some supposedly corrective changes in rules governing the political game.

So far, three senators have run afoul of criminal laws this year and have been suspended while their cases meander through state or federal courts.

(Read Full Article)

Photo courtesy of jglazer75, flickr

Photo courtesy of jglazer75, flickr

Women Must Be Protected From Another Gosnell

From The Daily Caller:

It reads like the script for a horror movie: The spinal cords of just-delivered infants “snipped” with scissors. A dying woman trapped in a “house of horrors” abortion clinic by a padlocked emergency exit, lost in the clinic’s “confusing maze of narrow hallways and multiple twisting stairways.” The pervasive smell of animal urine; furniture and blankets stained with blood; broken and inoperable medical equipment; and the remains of dozens of babies stored in jars, milk jugs, and cat food cans.

This isn’t a work of fiction. This was the evidence and eyewitness testimony that lead to the conviction of abortionist Kermit Gosnell, one year ago this month.

(Read Full Article)

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Dems seek to extend Prop. 30

Once again it is time for taxpayers to get a good grip on their wallets because Sacramento politicians are looking to extend the “temporary” taxes imposed by Proposition 30, approved by voters less than two years ago.

There is nothing more permanent than a temporary tax. They are as immortal as a vampire and nearly as hard to kill. Take the “temporary” tax imposed in 1898 to pay for the Spanish-American War. It remained on the books until 2006 when Congress discovered that the Spanish-American War ended a century earlier.

More recently and more relevant to Californians, two decades ago the political establishment — both Republicans and Democrats — backed a 1¼% increase in the state sales tax, a half cent of which was supposed to be temporary. (The tax increase was justified, in part, on the argument that the higher taxes were less pernicious than deficit spending. But this tax package just institutionalized even greater spending and debt.) At the time, to quell opposition, Sacramento politicians went out of their way to draw public attention to the temporary nature of the half cent increase. But within a year of its expiring, it was reinstated and made permanent through a ballot measure whose passage backers claimed was absolutely essential to maintain local public safety services.

In 2012, Gov. Jerry Brown and his government employee union allies backing Proposition 30 promised the tax increases would be temporary, that the sales tax increase would expire in 2016 and the income tax increase on upper-middle income earners, and above, would expire in 2018. But the politicians, who have been lying in the weeds waiting until closer to the expiration date to spring an extension of the tax increases on unwary taxpayers, are already tipping their hand.

In January, state schools chief Tom Torlakson called for an extension of Proposition 30 beyond its full expiration in 2018. “We need to renew Prop. 30,” the Superintendent of Public Instruction told a meeting of PTA leaders.

Now state Sen. Mark Leno has spoken up, telling an education rally at San Francisco City Hall it’s time to start thinking about the need to extend the Proposition 30 tax increases. One of the reasons Leno opposes the governor’s effort to establish a prudent budget reserve is that such a “rainy day fund” would make it harder to justify a continuation of higher taxes on sales and incomes.

While it is common to question the veracity of politicians, in this case, it would be wise to accept these Sacramento leaders’ comments as genuine expressions of their greed for ever greater amounts of taxpayer dollars.

Gov. Brown, to his credit, has urged majority Democrats in the Legislature to make due with current revenues and keep faith with the voters by letting the taxes expire on schedule. But even this responsible approach, a reflection of his minimalist approach in his first two terms, may not help taxpayers much as we approach 2018, the year, that even if he is reelected, Brown will end his final term.

Meanwhile, the Sacramento politicians are salivating over the prospect of new and extended taxes. “Shoot for the moon,” Sen. Leno told a reporter. “We might not get there, but that’s where we have to start.”

However, Leno and his colleagues are not shooting for the moon, they are shooting for taxpayers’ wallets.

(Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights. Originally published on HJTA.)

CalPERS defends Detroit unions

CalPERS, the large California public pension plan, has filed an amicus brief in the case of Detroit’s bankruptcy.

CalPERS does not like the Detroit pension plans being treated like unsecured creditors in a bankruptcy proceeding, and cites the constitutional (state constitutional, that is) protections for pensions. Thing is, there’s law, and there’s reality.

But let’s see what CalPERS had to say on this matter:

“U.S. Bankruptcy Judge Steven Rhodes ruled last year that Detroit was entitled to creditor protection under Chapter 9 of the U.S. Bankruptcy Code and could try to alter the terms of workers’ pensions. The decision, which would let a bankrupt municipality fail to meet its pension obligations in spite of state prohibitions, was ‘wrong on several levels,’ CalPERS said.

“‘Congress did not envision that Chapter 9 would become a haven for municipalities that seek to ignore and break state laws and constitutional provisions in order to adjust their debts,’ the pension fund said.

“CalPERS, which has been involved in disputes with the bankrupt city of San Bernardino, California, said the judge’s decision raises issues of critical importance to its 1.7 million members. If a municipality in bankruptcy is allowed to break state laws and ignore its obligations to the pension system, it ‘may threaten the actuarial soundness of the system as a whole,’ CalPERS said.”

I do not agree.

What actually threatens the actuarial soundness of public pension plans is behavior like the following:

  • Not making full contributions.
  • Investing in insane assets so that you can try to reach target yield. Or even sane assets that have high volatility to try to get high return, forgetting that there are some low volatility liabilities that need to be met.
  • Boosting benefits when the fund is flush, and always ratcheting benefits upward.

CalPERS should be extremely familiar with that sort of behavior.

Here is the problem: all sorts of entities directly involved in public pensions have thought that the pensions can’t fail. Because of stuff like: constitutional protections of benefits (so paying pensions would take precedent over other spending needs, like paying for current services), “government doesn’t go out of business,” the supposedly infinite taxation power of the government, and so forth.

Because they thought that pensions could not fail in reality, that gave them incentives to do all sorts of things that actually made the pensions more likely to fail. Because, after all, the taxpayer could always be soaked to make up any losses from insane behavior.

Public employee unions have been pretty quiet over the years as states and municipalities have undercontributed to pensions. Using the state of Illinois as an example, take a look at this graph:

Changes to unfunded pension liability for Illinois from 1996 to 2013 

20140512-Campbell

 

That’s the components of the changes to unfunded pension liability for Illinois from 1996 to 2013. Far and away, the biggest reason for the extremely low funded ratio in Illinois is that Illinois made far less than the full contributions needed to keep the plan at full funding. Note that the second highest component comes from not meeting investment targets (8 percent return for that period). [Editor’s note: It would be interesting to see this graph for California public sector pensions, taking into account the impact of benefit increases.]

If the employee unions in Illinois knew that it was possible that they might actually only get 40 percent of what was promised, they might not have been so blasé about the undercontributions. They might have asked for more realistic investment targets.

The explicit ability to renege on pensions (known by all parties) would make them less likely to fail, because employee unions would then have some incentive to make sure pension contributions are made, and they would be less likely to ask for benefits that may make their pension plan insolvent. If they knew that no, the taxpayer wouldn’t be there to bail them out of stupid investment decisions, they might not be so happy with all the opaque investments.

Detroit’s bankruptcy is making it clear that pensions are not safe, and that they can go down with the ship. They really aren’t much different than any other creditor. It may not be fair that they get whacked, but then, it’s not the bondholder’s fault either (though, really, bondholders are more faultless than those directly involved in boosting pay and benefits … and bondholders always knew they could be defaulted on).

CalPERS does not like this veil being lifted.

It was one thing when it was a puny place like Prichard, Alabama, where the pensions actually failed (and the bankruptcy itself was ultimately rejected, but the pension was gone anyway). Reality always trumps law. Central Falls, RI, was also troubling but similarly puny. In both these cases, the pension plans were in horrid shape, and the direct cause of bankruptcies.

Detroit is much larger, and the pension plans supposedly were in good funded status. CalPERS is in a similar position. And Detroit is very big. CalPERS is even bigger.

CalPERS may very well win the legal argument. In the short-run.

But they’re not going to win the argument with reality. It always wins.

If they only knew that ahead of time.

(Mary Pat Campbell is an actuary who takes an interest in Mozart, public pensions, math, education, and math education, amongst other things. Originally published in Union Watch.)

VA Waiting Room


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Texas Demolishes As Best State To Do Business

From The Daily Caller:

For the tenth year in a row, Texas has taken home the blue ribbon for being the best state in the country for business.

“Texas is the best state for business and I don’t see anything slow it down,” one CEO who was questioned for Chief Executive Magazine’s annual survey wrote. ”The education and quality of eligible employees is excellent right now. Business is booming and growing quicker and more rapidly in 2014 than any other year. It’s an exciting time in Texas.”

(Read Full Article)

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Prop 13 Safe-Guarded by Democrats’ Loss of Supermajority

From The Sacramento Bee:

Next month marks the 36th anniversary of Proposition 13, California’s iconic property tax limit, and time has not healed its political wounds.

Conservatives still love it, liberals still hate it and it’s perpetual fodder for academic, journalistic and political cogitating.

Decades of polling tell us that voter support for Proposition 13’s property tax limits and high vote thresholds for other taxes remains strong – too strong, evidently, for a frontal assault by its critics, such as a ballot measure to repeal it.

(Read Full Article)

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GOP Leaders Reconsider Rand Paul

From Politico:

Not that long ago, most Republican leaders saw Rand Paul as the head of an important faction who, like his father, ultimately had no shot at becoming the party’s presidential nominee.

Now the question is no longer whether Paul can win the nomination, but whether he can win a general election.

(Read Full Article)

Rand Paul

Effects of CA Workers Compensation Overhaul Not Certain

From The Sacramento Bee:

Two years ago, the Legislature and Gov. Jerry Brown gave their blessing to an overhaul of California’s multi-billion-dollar system of compensating workers who sustain job-related illnesses and injuries.

The overhaul, billed as a reform, had been worked out privately by employers and labor unions and was opposed, in the main, by two other major workers compensation interest groups — attorneys who specialize in disability cases and medical care providers.

The legislation, Senate Bill 863, raised cash benefits to disabled workers and promised to offset their costs by clamping down on medical costs.

(Read Full Article)

BART and Unions present before  state panel

 

Democrats have a Koch Problem

From Politico:

As Senate Democrats brace for what looks to be a bruising election cycle, Majority Leader Harry Reid remains hellbent on demonizing David and Charles Koch as a central part of his campaign strategy. He is even planning a vote in the Senate to overturn the Supreme Court’s Citizens United decision, citing the brothers’ campaign spending — which could top $125 million this year, according to a new report in POLITICO — as one of the reasons. But as Democrats gear up to make the Kochs the boogeymen of 2014, their strategy faces some real problems.

Election season has barely begun, but Democrats have already launched an all-out assault against the billionaire brothers. Reid’s Senate Majority PAC has spent millions of dollars in campaign ads attacking them, while the Democratic Senatorial Campaign Committee unveiled a digital campaign called “The GOP is addicted to Koch.” Vulnerable Democrats across the country have made the brothers a central talking point on the campaign trail. Reid has even taken to the Senate floor to attack the Kochs, calling them “power-drunk billionaires” and “un-American” and accusing them of “trying to buy America.” So far, Reid has mentioned the Kochs at least 100 times on the Senate floor.

(Read Full Article)

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