Thursday, October 8, 2009

California Dreamin' Over?

The Guardian has a somber story on California's decline here. Read it and weep. And then do something about it. Here's a short "To-Do" list:

1. Do not pass any more propositions that require taxpayer funds. In the alternative, make sure you read the actual text of any proposed laws/propositions before you vote in favor of them. If you can't understand a proposition's actual language, vote against it. Force legislators to use plain language statutes.

2. Do not allow the state government to get bigger--it's big enough already. If you don't believe me, look here and here.

3. Whenever someone starts talking about California's so-called education crisis, remind them about Proposition 98. Prop 98 requires California to use a large portion of the growth in General Fund revenues for K-14 education. Basically, Prop 98 forces California to use at least a certain percentage of its revenue for education, even if California needs funding for other projects, and even if it constrains funding for other portions of the state's budget. Prop 98 passed (barely) with a 50.7% vote and amended the state Constitution, Article 16, Section 8. Here's subsection (a):

From all state revenues there shall first be set apart the moneys [sic] to be applied by the State for support of the public school system and public institutions of higher education.

Read that Constitutional provision carefully, and don't ever let anyone whine about California education--not only are the kids set, the Constitution puts them first in line for money. And if any government employee--including a teacher--starts whining about pay, remind him/her that state employees' pensions and health care benefits are helping bankrupt California.

Side note: it's not like government workers, including teachers, are going to be destitute if we cut their medical benefits and reduce their pensions--CalPERS already has almost $200 billion for state workers' pensions. Yes, that's "billion" with a "b." Guess who paid all that money? If you work in the private sector and paid taxes, you did. Do you have a pension, a relatively safe job, and the possibility of lifetime medical benefits? I'm just sayin'.

4. Stop trying to divide the state by race or immigration status. We're all in this together. No one's going to be happy if we try to deport millions of people, because mass deportation would require us to separate mothers from their American-born kids. It won't happen anyway, so what's the point of bad-mouthing your neighbors? Turn your attention to helping everyone assimilate, regardless of race.

5. Spend your money on local businesses. Use to separate the wheat from the chaff.

6. If you're really brave, consider a Treasury Note or a California bond. These investments will hurt you if inflation hits, but some of the bonds are yielding more than average money market rates.

That's all for now. Vaya con dios. We may need divine intervention to help get us out of this mess, but we'll get through it.

Bonus: The LA Times'


Anonymous said...

I agree with much of what you write here.
You have the Calpers info incorrect, though. State employees contribute to their calpers pension--in some cases 5% of their income to their pensions (like at Cal State Fullerton). The employer also contributes, which for the state is the taxpayers.

One reason why people go to work in the public sector is for the pension--they trade off a higher income in the private sector for less money as income and more guaranteed money at retirement. Like all employement decisions IF having guaranteed medical or a pension is more important than competence, innovation, higher income, etc--then an employee should go to the public sector.

And if someone was hired under a contract that says "you do this, pay this to pension, and when you retire we will pay you a percentage of your income based on the number of years worked" I don't think it is ethical or legal to nullify or ignore that contract.

K_Yew said...

First, let's agree we have a problem. As Steve Malanga points out (WSJ, 11/18/08), "California state and local governments are paying some $12.8 billion a year to finance public employee pensions, up from $4.8 billion in 1999, according to the U.S. Census Bureau's survey of government expenditures."

Second, most government workers no longer make the trade-off you describe, i.e. sacrificing current pay for a stable retirement.

"Astonishingly, the average state and local government employee now collects 46 percent more in total compensation (salary plus benefits) than the average private-sector employee, according to the nonpartisan Employee Benefit Research Institute."

No one disagrees that gov workers pay some money into the pension system; however, that money comes from taxpayers, and due to annual (COLA) increases, taxpayers are forced to pay more and more every year. As Warren Buffett has said, this process is unsustainable:

"Whatever pension-cost surprises are in store for shareholders down the road, these jolts will be surpassed many times over by those experienced by taxpayers. Public pension promises are huge and, in many cases, funding is woefully inadequate."

As for your contractual morality argument, contracts are re-negotiated all the time. When GM and its union realized their current contract was unsustainable, they re-negotiated it. At some point, public sector unions will have to do the same thing.

As I've written before, if a voluntary 401(k) or 403(b) plan is good enough for most engineers, nurses, and lawyers, why isn't it acceptable for government workers, firefighters, and police officers? After all, most gov workers do _not_ take a pay cut to work in the public sector.

In any case, most Americans would gladly take a pay cut to have a pension, a stable job, and lifetime medical benefits. It is unclear why gov workers are unwilling to make sacrifices to help California return to fiscal responsibility.

Anonymous said...

You should stop blaming government workers for the current economic crisis. I have a law degree from Santa Clara University. Practicing law wasn't in the cards for me. So I worked for Santa Clara County for over 20 years and retired a few years ago.

My pension is a mere $1,500 a month. If I hadn't worked hard and paid off my mortgage, I couldn't have retired on such a meager income.

And there are others like me who are receiving very small pensions.

Don't blame government retirees for our fiscal crisis. The greedy banks got us into this fiasco. Also, mortgage insurance companies played with our money and made a lot of bad deals.

If anything, we need to regulate banks, mortgage insurance companies and others who were involved in the real estate fiasco.

K_Yew said...

@Anonymous: I just saw your most recent comment. I agree banks made a mess of things, but so have public sector unions. There is no reason we should not deal with both problems. If you have a missile and a bullet coming at you, you don't just defend against the missile.

Also, whatever salary you received must have been more than adequate if you were able to pay off your house within 20 or so years. If you live in Santa Clara County, then your house is probably worth around $500,000+. For you, twenty years of work have resulted in no mortgage; $1,500/mo in disposable income; and lifetime medical benefits. Can you point me to a secure (not "at-will") private sector job that is able to provide an American with those benefits after just 20 years of work?