In reviewing http://en.wikipedia.org/wiki/List_of_California_ballot_propositions it seems that the ballot propositions that have gotten Californians excited recently involve same-sex marriage and marijuana. In looking through the past 20 years of propositions, I couldn’t find any that relate to the biggest costs to Californians, i.e., public employee salaries and pensions.
Naively I would think that middle class voters who learned about police and fire department workers earning $300,000 per year and receiving an inflation-adjusted pension of $200,000+ per year would be interested in propositions such as the following:
- public employee pensions must be based only on an average of five years of base pay and cannot be spiked up by overtime, vacation, or other additional payments
- public employees within California cannot receive more in compensation than the President of the United States (ABC says that the city manager of a 90-person town was earning $1.6 million per year or 4X the salary of Barack Obama; Bell, CA’s manager earned $800,000 per year and $600,000 per year as a pension)
- California governments cannot offer defined benefit pensions to any new public employees
- no police or fire department employee can receive more than 10,000 times the median hourly wage within the state (would translate to $181,210 per year currently)
- no police officer or firefighter can receive more than double the pay of a U.S. Army soldier of analogous rank serving in a combat zone (chart)
Perhaps California readers can explain why nothing like these seem to have been proposed. There have been some tax- and spending-related ballot propositions, but none that seem to directly address the biggest expenditures of the state (Vallejo was spending 74 percent of its budget on police and fire salaries (source)). I wouldn’t necessarily expect such propositions to pass, but I would at least expect them to be offered to voters.
Coming from Massachusetts to California as I did back in 1952, the state was regarded as a wonderland; i.e., magnificent highways, a plethora of parks open to the public, great weather and a population willing to pay the taxes neccessary to ensure that it stayed that way. Then came a huge influx of those whose only real ability was the one that they displayed when it came to paying those taxes. They didn’t have them at “home” and why should they pay them here?
So what I’d suggest Phil, is either move out here and help change it (since my home state of Massachusetts is now called “taxachusetts” by many people, or else quit carping about it. We’ll get it straight out here and it may take a lot of years……but that’s the way it has to be. Clean your own house before complaining about mine. Thanks.
Jim: Thanks for the education. I hadn’t realized that California’s “great weather” was due to government action and supported by tax dollars.
Separately, once hard-working government officials had persuaded God to continue to bestow sunshine on the state, wouldn’t you expect cost savings? For example, naively one might expect that the lack of snow would reduce the cost of government since there is no need to plow streets and the cost of heating buildings should be much lower than here in Massachusetts (the “taxachusetts” label may be obsolete; our sales tax is 6.25% and income tax on wages is 5.3% (compare to 8.75% and 9.55% in California)).
There is a proposal out there:
http://blogs.sacbee.com/the_state_worker/2011/03/niello-proposes-pension-rollback-initiative.html
Trust me, CA government workers are nervous about this one. Separately, there are numerous bills in both the CA Senate and Assembly addressing pension reform. Check out leginfo.ca.gov. There will be pension reform.
San Francisco had a ballot measure to reform bus drivers’ pensions last election. It was defeated resoundingly. Our bus drivers’ contract stipulates that they must receive the second-highest pay in the nation. I just hope there aren’t two other cities in the US dumb enough to accept such ridiculous terms, otherwise we will have a regressio ad infinitum…
Eric: “There will be pension reform”. I don’t see how it could have a significant effect on California finances within current taxpayers’ lifetimes. All of the reform proposals that I’ve seen would affect only newly hired workers. So, in the event that a dramatic “reform” was passed, the first savings would be realized starting 30 years from now.
Fazal: Your “dumb enough” question does actually bring up Occam’s Razor. Why would Californians vote to pay their police and fire department workers more than the highest paid Federal workers or more than U.S. military personnel serving in Afghanistan? Perhaps Californians are in fact dumber than people in most other states (http://www.morganquitno.com/edrank.htm says that in 2006-2007 California was the 4th dumbest state, two notches below Alabama and one notch above Mississippi).
A kinder and gentler explanation is that California has a lot of voters for whom English is not their first language. Therefore they may not have easy access to information about how many median California private sector incomes would be required, at a 100 percent tax rate, to support a single retired public worker.
(http://www.taxfoundation.org/publications/show/2181.html has a lot of good data; unfortunately it shows that Massachusetts has accumulated $14,234 in debt per resident compared to California’s $9,370 (don’t think this includes pension obligations, but only straight bonds). California rakes off 10.6 percent of state income; Massachusetts makes do with 10 percent, though we spend a lot on some stuff, e.g., universal health insurance, that will soon be taken over by the federal government. Connecticut, New Jersey, and New York are off the charts at more than 12 percent. The most efficient states manage with 7-8 percent. I wonder if these numbers will start diverging dramatically in the next 30 years as the effects of different pension systems are felt.)
California Propositions aren’t quite as clear cut as they might appear. There are significant industries built up around them, in terms of getting the signatures needed to put them on the ballot and then advertising for and/or against them. I wouldn’t bother trying to put a public pension reform Proposition up without having lined up significant funding and organization in advance. Significant funding because every public employee union in the state would be spending big bucks to defeat it, while it’d be harder to raise the funds needed to counter-advertise from the much more disperse folk who’d be in favor of it, but not necessarily willing to spend their own money to get it passed, not having an immediate vested interest in doing so.
The public sector unions own the state, own the politicians. No one has any long term POV except their own pension. They don’t care who has to pay for it, or that the system is morally and financially bankrupt.
I just met with an intelligent man who was a teacher for 30 years. He worked it out that if he switched to the business side for several years, he could then move on to being a superintendent at a relatively small district, and make 200k per year. Within a few years he could retire at $160k /yr (he said), with full medical benefits for he and his wife, for life.
He saw nothing wrong with the fact that most of his working years he earned about $80k, but with about 8 years of calculated job switching he could earn double that in retirement.
Our school districts now average 89% of their revenue on salaries and benefits. That’s why there’s no new books and leaky roofs. The unions (not just teachers, there are classified and management unions) have their boot to the throat of the districts, and thus us taxpayers.
Every article in the (online) Sacramento Bee that discusses reining in union pensions will receive hundreds of comments like “screw you union haters, it is time to pay up!” Complete disconnect with any economic reality.
With these people “teaching” our students, what does the future hold?
BobT: I don’t think that we can blame the teacher-superintendent for taking $200k/year (more than the U.S. Secretary of Defense!) from California taxpayers and then taking another $160k/year, inflation-adjusted, for the rest of his life (and $80k/year for the surviving wife for the rest of her life?). If the government offered me $160k/year for the rest of my life, I would certainly take it.
My original posting was asking the question “Why don’t at least some voters try to stop the California state government from offering such deals?” (e.g., http://online.wsj.com/article/SB10001424052748704132204576285471510530398.html (“California Prison Academy: Better Than a Harvard Degree”) says that 120,000 people apply every year for 900 jobs in the California prison system; most companies would cut the compensation offered if they had 120,000 applicants for 900 openings) I think that union influence might be able to explain why voters can’t succeed in damming up the river of money flowing to public employees, but it doesn’t explain why voters apparently aren’t trying (Tom Galloway’s comment above provides some insight, though).
[I guess the example of Greece is instructive. Groups that were being protected by government regulation or direct handouts managed to keep those regulations and handouts, even after Greece became insolvent. Greek voters weren’t able to stop the cash bleed even after most of the cash was gone. The only way for a Greek taxpayer to escape enriching the politically connected was to emigrate. Check out the WSJ article “Greece’s Cosseted Classes Fight Red Tape Reform” from January 26, 2011. The country had run out of money more than a year earlier, but proposals to reduce minimum fees for pharmacists, lawyers, etc., were still just proposals.]
As the New York Times points out, many pensions schemes in that state already explicitly give the pension only on your base salary. Yet, despite these rules, it continues to happen, over and over.
Requiring employers to buy their pensions on the open market as they are earned would solve this and most other pension issues. I think defined-benefit plans can work great and have a good value in not requiring every citizen to manage retirement funds — but no employer, of any shape or size, should be allowed to self-fund them. Employers can still borrow from the future to pay for generous pensions now, but they’d have to do it explicitly.
(As an aside, I don’t think the President is necessarily a good scale to use. As you’ve said before, the President has many non-pecuniary benefits not included in his nominal salary.)
Dan: Thanks for the article on New York State. It certainly isn’t a surprise given that they manage to spend 12% of their citizens’ incomes without providing any better services than other states. I was a little surprised that New York City is already paying 64 percent of its police payroll into the pension fund. I suppose that soon they will be paying more for pensions than for current workers. It will be interesting to see if there is any public reaction.