Thursday, September 9, 2010

Teachers' Unions: Running California Politics?

Do you have any idea how much California spends on education? Where does all that money go? If you're not sure, keep reading--you might be surprised.

The California Teachers Association has been the largest individual lobbyist in California over the last decade and has spent more than $200 million on campaign contributions and lobbying efforts.

Teachers' unions have also been effective lobbyists at the federal level. Unions have received federal money for 400,000 jobs. According to the White House, "Additional federal aid targeted at preventing [teacher] layoffs can play a critical role in combating the [economic] crisis. Such aid would be very cost-effective. There are no hiring or setup costs...The American Recovery and Reinvestment Act of 2009 included some of this aid for 2009 and 2010. The recipient reports filled out by states and school districts show that, last quarter, Recovery Act funds supported more than 400,000 education positions. (White House blog, June 12, 2010)

August 11, 2010: the gravy train continues for unions, even as the private sector continues to bleed jobs--"
The [$26 billion] legislation would funnel $10 billion to school districts to rehire teachers who were laid off, or prevent additional cuts just before the school year begins. Advocates estimate the money would keep more than 160,000 public education positions." More here.

Being the largest individual lobbyist in California has its rewards:

"In 2007, more than four-fifths (82.9 percent) of statewide spending for schools went to pay for the salaries and benefits of teachers and other staff."

From a California Dept of Education affiliated website (Jan 2010, "Teachers in California"): "Although there is some variation, expenditures on salaries and benefits for all employees typically make up 80 to 85% of a district’s budget, with the bulk of it going to teachers." More here. [Note: Ed-Data website no longer allows a direct link to the aforementioned statistics; for now, go to link and search for "Teachers in California" link.]

"According to the CTA's parent union, the National Education Association, California teachers were the nation's top-paid, with $64,424 average annual salary in 2007-08." More here.

From State of California website: "California ranks almost last in student achievement." "California has the highest average teacher salary of any state in the country." (http://www.lao.ca.gov/reports/2011/calfacts/calfacts_010511.aspx) [Added May 9, 2012]

"Because the termination process requires years of documentation, it not only is costly but it also seldom works – 91 teachers have been dismissed over 10 years in the entire state. Of those dismissals, 19 were based on unsatisfactory performance, while the vast majority were for egregious conduct." [Added August 1, 2014, from CS Monitor, "Vergara v. California," by Daniel B. Wood, 1/28/2014)]

As a result of Proposition 98, California is legally required to use a large portion of the growth in General Fund revenues for K-12 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.

Post-Prop-98, California tends to direct about half of its General Fund towards education. How much are we talking about in overall K-12 education spending? Total funding for K-12 education was projected to be $68.5 billion in 2008-09. For fiscal year 2006-07, K-12 funding was $55.1 billion. Again, 80 to 85% of this money goes into district employees' salaries and benefits, with the bulk of it going to teachers.

California state generally provides about 61% of total K-12 funding. The federal government provides an additional 11% and local property taxes provide another 21%. (See here.)

By the way, how's your 401(k) doing? Worried about your retirement? California's government employees don't have to worry so much. CalPERS has approximately $200 billion for their retirement. In addition, public school teachers have their own pension fund called CalSTRS. As of September 2009, CalSTRS was the second largest public pension fund in the United States and is currently the seventh largest public pension fund in the world. [CalSTRS had assets of $154.6 billion as of May 31, 2011--and is still underfunded by tens of billions of dollars.] Like it or not, you and your children will be paying for California government employees' safe jobs and safe retirements. And if the pension fund managers make mistakes or turn out to be Bernie Madoffs, too bad--you're going to make up the difference, because taxpayers are ultimately on the hook for every penny of government employee pensions.

[For more on California politics and government unions, click HERE (detailed article by Troy Senik, Fall 2009) and HERE (chart).]

What's the problem with having teachers' unions control such a significant portion of California's tax dollars? First, teachers lack a system and culture of accountability. Even the worst teachers can stay employed until retirement, and there isn't much anyone can do about it. Meanwhile, in the private sector, employees cannot typically under-perform for long and retain their jobs.

Second, teachers receive benefits far beyond what is necessary to retain or motivate them. After 25 years, California teachers can retire and receive annual pensions of $69,000. As of 2010, if you or I wanted to receive a stable $69,000 a year in retirement, we would have to save at least a million dollars in 25 years--and we're not even including the costs of the lifetime medical benefits some government employees receive (Note: for teachers, medical benefits can vary based on individual school districts). In short, we are overpaying tenured teachers, especially retired teachers, and we do not have the money to be so generous. To make matters worse, the cost of paying retired teachers is so staggering, we cannot afford to pay newer teachers higher wages. As a result, many new teachers quit within five years.

Third, Americans used to understand that union and government jobs were favors given to family members or politically-connected people. The Boston Irish, for example, used to joke that police jobs were "Irish welfare." Things haven't changed much. Unions and the government hire people they know and like, and in my experience, the testing and interview processes are mere procedure and show. (The government can score your interview responses however they like, while giving minimal weight to an initial objective/multiple choice test.) Nothing will change until government hiring becomes transparent and more objective. Until then, a vote for a California Democrat or pro-government-union candidate is a vote for non-accountability; a two-tier employment system where government employees get better benefits than non-government employees; and overly subjective hiring practices.

Michael Moore can talk all he wants about his idyllic youth and the union jobs that created the Michigan middle class. What he doesn't tell you is that back then, a hamburger, fries, and soda cost 85 cents and a gallon of gas was about 32 cents, so it was possible to create a middle class at very little cost. These days, public sector unions are running a tab of trillions of dollars, much of it borrowed from future generations of Americans, i.e., children.

Americans need to understand that the greatest threat to American prosperity isn't necessarily a foreign one. Most empires collapse because of overreach and inflation, which is usually caused by excessive government spending and borrowing. As Arnold J. Toynbee once said, "Civilizations die from suicide, not by murder." We would do well to heed Toynbee's sage words. Our respect for educators, firefighters, law enforcement, and other government employees is causing us to commit fiscal suicide. Surely we can provide essential services without bankrupting our children. Thus far, however, we've been unable to strike the appropriate balance.

Bonus: from Joel Klein, The Atlantic, June 2011:

[C]onsider the financial burden that comes with providing lifetime benefits. Given the time between first putting aside the money to fund such a “long-tail exposure” and having to begin paying it, the amount “reserved” by the employer necessarily depends on a host of imprecise assumptions—about the rate of return that the money invested in the pension fund will earn, about how long employees will live, and even about how much overtime employees will work during their last few years, which is normally included in calculations of the amount of the pension. Each dollar set aside this year to cover the ultimate pension exposure must be taken from what would otherwise be current operating dollars.

Consequently, elected officials have had every incentive to make extraordinarily optimistic assumptions about the pension plan—or to simply underfund it—so they can put as little as possible into the reserve. Unfortunately, but predictably, that’s exactly what has happened: most states “assumed” they would get an average 8 percent return on their pension reserves, when in fact they were getting significantly less. Over the past 10 years, for example, New York City’s pension funds earned an average of just 2.5 percent. Now virtually every pension plan in America that covers teachers has huge unfunded liabilities. A recent study by the Manhattan Institute estimated the total current shortfall at close to $1 trillion. There’s only one way to pay for that: take the money from current and future operating budgets, robbing today’s children to pay tomorrow’s pensions.

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