Sacramento Tax Increase Proposal Represents Statewide Trend

TaxesThe Sacramento City Council vote to place a tax increase on the November ballot is representative of what we’ll see around the state in many localities: a call for more taxes to maintain basic services when in reality the money is needed to meet pension obligations.

In one sense the argument that the money is needed to maintain services is correct. Because greater pension costs will eat into the general funds of local governments, services provided by government will be cut because of reduced revenue. The problem is that officials promoting the tax won’t talk about pensions. 

What’s needed is transparency.

In Sacramento, the city council placed a 1-cent sales tax on the ballot to offset a ½-cent tax that is soon to expire. The new tax will be permanent. The tax is projected to raise $100 million, twice what the temporary tax now brings in. The new money is purportedly for specific projects but money is fungible and can be used where the city needs it—and the city needs to deal with rising pension costs.

(UPDATE: The current tax take from the 1/2-cent tax is actually $36 million. The $50 figure came about because of carryover money from previous year. A full penny is about $72 million. Thanks to Dan Walters at CALmatters for the correct information.)

The city budget speaks of the long-term difficulty Sacramento faces dealing with pension obligations. “The pension cost (normal cost and unfunded liability combined) in the General Fund alone is projected to be $134 million in FY2024/25 when the rate change is completely phased in. This reflects an increase of more than $66.9 million over the eight years which is a 99.6% cost increase from FY2017/18 to FY2024/25.”

Sacramento’s General Fund has increased about 25% from the 2009/10 budget to now from $385.9 million to $484.4 million. Even that steady increase cannot match what is needed to keep pace with the expected pension demands.

A tax increase is a way to meet the obligation but you won’t hear much about that when a campaign is mounted for the tax increase. At the council meeting approving the tax there was talk of maintaining basic services and supporting a plan that would confront multiple problems including homelessness, neighborhood investments, and job issues.

This formula is not exclusive to Sacramento. Many local governments must face pension costs that are burdening their General Funds and are turning to taxpayers for relief. By paying more in taxes the taxpayers have less to contribute to their own retirement costs.

The debate over these taxes should be truthful about the pension monster that is devouring local budgets. Once that happens more attention will be focused on how to deal with the problem.

ditor and Co-Publisher of Fox and Hounds Daily

This article was originally published by Fox and Hounds Daily

Comments

  1. Smoke and mirrors!
    Elected politicians need to be removed from the negotiations with public employee unions. There’s too much conflict of interest with both parties. Either that or outlaw public employee unions.
    The only fix for this debt is to reduce benefits and increase the cost to the benefactor. No other way, it is not the responsibility of the Citizen, he was no where’s near the table when these excessive benefit packages were decided upon. His elected representative was sure not representing him! Benefits should never be greater than private industry. Public employment is sought after because of job security. Private industry is where risks are taken to achieve higher compensation.
    Grow up voters, get smart and know what you are voting for.

  2. Really??? says

    Maintain basic services?

    How about paying what the private sector pays. Most gov. workers pay and benefits out distance the private sector big time. These taxes are just an excuse to justify more pay increases when gov. cannot afford what they are paying now.

    Alternate Fridays off? Tell them to start working full weeks after all they are the silver spoon suck on the taxpayer wallet jerks.

  3. tomsquawk says

    Collectives, Socialists, Government, call it what you may. They only have the collective wallet to dip into.

  4. J. Richards Garcia says

    Socialists intensely want (covet) the money of everyone else for themselves and a little for their followers. They want it so badly they gladly tell any lie and perform any act to get everyone else’s money.

    As applied to government employee pension plans, this means all actuarial documents in support of the pension plans were and are bald face lies.

    A board member trustee of these plans could truthfully, upon receiving any unread actuarial or financial (CAFR) report, honestly say, “This report is filled with bald face lies for the purpose of knowingly defrauding the taxpayers of this jurisdiction!”

    There has been ample transparency in these matters to know the frauds your local, state and federal governments have been up to. Many, many of these frauds have taken place are in front of your face.

    The question is what we going to do about it.

    Related to government employee pension plans, are OPEB’s (Other Postemployment Benefits) about which there really is little transparency. And we are like sheep to slaughter.

  5. For once I like and agree with ALL of the above comments . Where can I sign up to get these jerks put in jail and out of office then in jail ?

  6. Pam and Cam Ong says

    CA needs to STOP paying money to and benefits for illegal immigrants. We need to support the legal citizens, vets, immigrants and seniors BEFORE we aid illegal aliens, it is crazy to do other wise. Until and unless we get gov. officials that put citizens and legal aliens FIRST we will NO on any tax increase or bonds, as will many of the other silent majority who live and CA and are totally disgusted at the condition it is in. Using the pension as an excuse is baloney!!!!stop blaming senior citizens who have worked hard for their pensions.

  7. If talk were a cure there would be no problems.

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