Imagine a place where everyone knows they have a spending problem, no one cares, and no one minds passing the financial consequences to their children. Welcome to California.
Fun facts: California paid out $2.1 billion in bonuses, overtime, and other extras in 2007. (See SF Chronicle, Erin McCormick, A1, June 30, 2008.)
A Superior Court Judge makes $178,789 a year; an Appellate Court Justice makes $204,599 a year; and a state Supreme Court Justice makes $218,237 a year. All state judges are eligible for generous pensions, dental benefits, health benefits, basic life and AD&D insurance, supplemental life insurance, vision service plans, long term care insurance, a voluntary tax savings program (FlexElect), and a savings plus program (a Thrift Plan, i.e., a 401K, and a Deferred Compensation Plan (IRC 457)).
"And if an epitaph be my story, I'd have a short one ready for my own: I had a lover's quarrel with the world." -- Robert Frost
Showing posts with label California budget crisis. Show all posts
Showing posts with label California budget crisis. Show all posts
Tuesday, December 1, 2009
Monday, October 26, 2009
California Legislators Got Drunk on Stock Market Gains
I've been studying California's budget. From 1998 to 2009, California added over 80,000 full time government employees. That means future taxpayers must pay for an additional 80,000+ pensions, lifetime medical benefits, and annual salaries. However, adding 80,000 more government employees is not the major problem, as long as we reform their generous long-term benefits.
The biggest problem is that starting in 1999, California's legislators assumed revenue/tax numbers based on stock market gains/sales and spent accordingly. From 1998 to 2000, spending jumped dramatically, but from 1999 to 2008, expenditures declined only once--right after the tech bubble popped, in 2003/2004. (Note: the tech bubble's peak was in 2000; hit a low in September 2002; and continued in a tight range until 2007.) Basically, it seems our legislators banked on an ever-increasing stock market to finance spending. Oops.
Public sector unions aren't helping. Even though the stock market money isn't there anymore, public sector unions are still acting like it's 2004. Behind closed doors, various unions have negotiated generous benefit packages, such as lifetime medical benefits and pensions. Unfortunately, it is difficult to project the cost of such benefits because no one knows how long a state employee will survive after retiring. As a result, if taxpayers desire consistently balanced budgets, it makes more sense to pay public sector employees higher salaries while reforming their generous benefits. (CalPERS, the state's public pension/health care fund, already has over $200 billion in assets.) Fiscal reform is possible without threatening state workers' job security, because government workers will continue to be unionized--reform would affect only the hard-to-project costs inherent in pensions and lifetime medical benefits.
As far as education is concerned, I am concerned we are spending too much money on it without seeing results. The state's website indicates that approximately 50% of the General Fund is reserved for K-14 education. In addition, California's Constitution requires that school coffers receive first crack at the largess:
"From all state revenues there shall first be set apart the moneys to be applied by the State for support of the public school system and public institutions of higher education."
Education spending is probably a sacred cow that needs to be slimmed down before we see any real change in California's fiscal health.
See here for a detailed webpage outlining the major issues, with plenty of stat-porn for the political wonks.
Bonus: Meg Whitman promises to cut 40,000 government jobs--back to 2004 levels--if we elect her Governor; however, I am unclear how she will accomplish that goal without incurring massive litigation and settlement costs. Perhaps the 40,000 positions she wants to cut are non-union or part-time? If so, then it doesn't appear that cutting these positions will reform the problem of generous public sector benefits, which are typically reserved for full-time government workers.
Meg Whitman is probably the most successful female CEO in Silicon's Valley's history, but I wish she'd be more specific about how she plans on accomplishing her goals. If she does well in the Governor's race, expect to see her as the GOP's Vice Presidential candidate in 2012.
The biggest problem is that starting in 1999, California's legislators assumed revenue/tax numbers based on stock market gains/sales and spent accordingly. From 1998 to 2000, spending jumped dramatically, but from 1999 to 2008, expenditures declined only once--right after the tech bubble popped, in 2003/2004. (Note: the tech bubble's peak was in 2000; hit a low in September 2002; and continued in a tight range until 2007.) Basically, it seems our legislators banked on an ever-increasing stock market to finance spending. Oops.
Public sector unions aren't helping. Even though the stock market money isn't there anymore, public sector unions are still acting like it's 2004. Behind closed doors, various unions have negotiated generous benefit packages, such as lifetime medical benefits and pensions. Unfortunately, it is difficult to project the cost of such benefits because no one knows how long a state employee will survive after retiring. As a result, if taxpayers desire consistently balanced budgets, it makes more sense to pay public sector employees higher salaries while reforming their generous benefits. (CalPERS, the state's public pension/health care fund, already has over $200 billion in assets.) Fiscal reform is possible without threatening state workers' job security, because government workers will continue to be unionized--reform would affect only the hard-to-project costs inherent in pensions and lifetime medical benefits.
As far as education is concerned, I am concerned we are spending too much money on it without seeing results. The state's website indicates that approximately 50% of the General Fund is reserved for K-14 education. In addition, California's Constitution requires that school coffers receive first crack at the largess:
"From all state revenues there shall first be set apart the moneys to be applied by the State for support of the public school system and public institutions of higher education."
Education spending is probably a sacred cow that needs to be slimmed down before we see any real change in California's fiscal health.
See here for a detailed webpage outlining the major issues, with plenty of stat-porn for the political wonks.
Bonus: Meg Whitman promises to cut 40,000 government jobs--back to 2004 levels--if we elect her Governor; however, I am unclear how she will accomplish that goal without incurring massive litigation and settlement costs. Perhaps the 40,000 positions she wants to cut are non-union or part-time? If so, then it doesn't appear that cutting these positions will reform the problem of generous public sector benefits, which are typically reserved for full-time government workers.
Meg Whitman is probably the most successful female CEO in Silicon's Valley's history, but I wish she'd be more specific about how she plans on accomplishing her goals. If she does well in the Governor's race, expect to see her as the GOP's Vice Presidential candidate in 2012.
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 [without accountability]. 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 yelp.com 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'
1. Do not pass any more propositions that require taxpayer funds [without accountability]. 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 yelp.com 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'
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