S.F. Establishment Hits Pension Reform

Steven Greenhut
Western Region Director of the R Street Institute

Crossposted CalWatchDog To outsiders, liberal San Francisco may seem preoccupied with leftist protesters occupying prime real estate in the Financial District or with debating proper restaurant etiquette for the city’s small but flagrant nudist population, or until recently, with arguing whether male circumcision should be outlawed. But the prospect of bankruptcy focuses the mind, even in a city so […]

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Rules Have Unintended Consequences

Steven Greenhut
Western Region Director of the R Street Institute

Crossposted at CalWatchDog People assume that if the government passes a new law that the actual effect of the law is what the legislators intended. But free-market economists understand that intent has nothing to do with effect. I like the example of the $1 million tax on poodles. If Congress were foolish enough to pass […]

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Will unions now thank Wall Street?

Steven Greenhut
Western Region Director of the R Street Institute

Cross-posted at CalWatchdog.

Last week, I was a witness on a mock trial at Freedom Fest, in which public employee unions were in the dock over the detrimental effect of their pensions on the public treasury. It was a fun event, designed to debate and discuss the role of public employee unions in the current fiscal situation, but the union officials who questioned me and made their case kept coming back to the same argument.

Wall Street is evil. That’s what they say, basically. They deny that the routine six-figure pensions have anything to do with any fiscal problems suffered by cities and states. They deny that pensions are too high. They insist that public employees remain underpaid. They deny the obvious numbers about unfunded pension liabilities. The whole problem is in their view due to Wall Street greed, which sunk the economy and reduced the rates of return that kept sustaining the pensions their members receive.

Now, the unions are crowing over new reports that CalPERS and CalSTRS have recorded huge gains in the last fiscal year based on their stock-market investments. They now claim that there is no pension crisis and that we can go back to business as usual. But even the Bee report shows the following: “Yet the two systems, like many public pensions around the country, remain underfunded and are still feeling the effects of the market crash of 2008. Officials said it will be difficult to duplicate the latest investment results in the coming years, and both funds are likely to continue looking to taxpayers for higher contributions.”

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Attack on the Initiative Process

Steven Greenhut
Western Region Director of the R Street Institute

Originally published in the Orange County Register

California legislators – who seem unable to come up with an honest balanced budget, who always pursue tax increases and who won’t pass even modest reforms to the state’s unfunded pension system or to anything else, for that matter – want to blame the government’s problems on voters, rather than themselves.

Several bills, some of which are likely to pass, would gut the initiative and referendum process, or at least make that process far more burdensome. The ultimate goal: eliminating the main vehicle Californians have to reform a government that will not be reformed by elected officials, thus leaving us completely at the mercy of legislators and the liberal interest groups that control them.

In this June 10, 2010 file photo, Assemblyman Mike Gatto, D- Los Angeles, center, receives congratulations from Assemblyman Jerry Hill, D-San Mateo, left, after he was sworn-in to the state Assembly at the Capitol in Sacramento, Calif. Gatto was critical of Controller John Chiang’s decision to not pay members of the Legislature for not approving a balanced budget by the June 15 deadline.

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Proving the Redevelopment Rule

Steven Greenhut
Western Region Director of the R Street Institute

Cross-posted at City Journal.

Doug Tessitor is the mayor of Glendora, a city in Los Angeles County. He’s a self-described conservative and dead certain that preserving California’s redevelopment agencies (RDAs) is essential to his city’s fiscal health. In a pair of recent online columns, Tessitor mounted an impassioned defense of redevelopment in response to my City Journal article depicting the agencies as a “secret government” that runs up debt, abuses eminent domain, and doles out subsidies to favored developers. Tessitor’s response is worth rebutting, not because his arguments are exceptional but because they echo those of other California Republicans who defend redevelopment.

One of Democratic governor Jerry Brown’s few good ideas so far has been his proposal to shut down the RDAs as part of an effort to close a massive budget gap. Democrats in the state assembly tend to favor redevelopment, with its big-government, central-planning tools, but they backed Brown in order to shave about $1.7 billion from the budget. Republicans often complain about redevelopment’s abuses of property rights, but they blocked Brown’s plan, with only one Republican—longtime redevelopment foe Chris Norby of Fullerton—joining Democrats in April to support the measure, which fell one vote shy of passage. It might return for another vote. When I confronted several of the Republicans about their votes, I kept hearing the same rationale: they don’t like central planning, these Republicans say, but redevelopment works in their communities. (The abuses I described take place only in other cities, apparently.)

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Prop. 13 Still Left’s Bogeyman

Steven Greenhut
Western Region Director of the R Street Institute

Cross-posted at CalWatchdog.

California has become such a basket case that outsiders are starting to parachute in and report on the tales of woe from our deficit-racked, economically stagnant and politically dysfunctional state. It makes for good reading for a broader audience, and the reporters can enjoy themselves at the beach or at the mountains while they wag their finger at us foolish Californians.

Unfortunately, these critiques usually end up regurgitating conventional liberal wisdom, which certainly was the case in a ballyhooed recent story in the Economist.

The British publication’s cover story on California, “Where it all went wrong,” pins the state’s woes on direct democracy and on one initiative in particular – 1978?s tax-limiting Proposition 13. While the lengthy feature included incisive details and offered a handful of interesting ideas, it was one of the most intellectually dishonest investigations I’ve read in a while.

How does one look at California and its woes without mentioning the power of the state’s public employee unions, which control the Legislature and have driven spending on their members’ pay and benefits to unsustainable levels? How do you not focus on Democratic dominance of virtually every level of government?

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Redevelopment: California’s Secret Government

Steven Greenhut
Western Region Director of the R Street Institute

Cross-posted at City Journal.

In Sacramento, Governor Jerry Brown is planning to close California’s $26.6 billion structural deficit through spending cuts and tax extensions. Opposition has been spirited but less contentious than expected, probably because of the size of the budget hole. But one item of Brown’s plan—something that would save about $1.7 billion annually—has generated heated debates between local officials and the new administration. The governor has proposed eliminating California’s approximately 400 redevelopment agencies (RDAs).

In theory, RDAs spearhead blight removal. In fact, they divert billions of dollars from traditional services, such as schools, parks, and firefighting; use eminent domain to seize property for favored developers; and run up California’s debt to pay those developers to construct projects of dubious public value, such as stadiums and big-box stores. Most Californians have long been unaware that these agencies exist. As the activist group Municipal Officials for Redevelopment Reform puts it, RDAs constitute an “unknown government” that “consumes 12 percent of all property taxes statewide,” is “supported by a powerful Sacramento lobby,” and is “backed by an army of lawyers, consultants, bond brokers and land developers.”

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Democrats Prepping State For Tax Hikes

Steven Greenhut
Western Region Director of the R Street Institute

Cross-posted at CalWatchdog.

California’s Democratic leaders would have you believe that our state’s budget has been cut to the bone. They contend that the state’s never-ending budget deficit—currently estimated at more than $28 billion over 18 months—is the inevitable result of an unusually bad economy, and that more revenue is needed to avoid devastating service cuts. This is a false choice—there remains fat to cut in California’s budget, if politicians are willing to overcome union objections to doing so.

Governor-elect Jerry Brown (D) held a budget briefing earlier this month and fiscal conservatives took heart that the new governor was dealing forthrightly with dismal budget realities.

However, there’s no mistaking that Brown and his Democratic colleagues featured at the briefing (Senate President Pro Tem Darrell Steinberg, Assembly Speaker John Perez, Controller John Chiang and Treasurer Bill Lockyer) view higher taxes as the prime solution to California’s problem. Perez, a former union organizer, said as much at the meeting. Steinberg, a close union ally, repeatedly voiced his concern about the effect of budget cuts on the state’s public employees.

The briefing was designed to show that California can no longer afford the sort of one-time budget-balancing gimmicks tried in the past. That much is true. There are no more revenues to shuffle around redevelopment agencies, no more federal revenues that will backfill gaping holes in the budget, no more opportunities to accelerate the collection of personal income and corporate taxes. In fact, Brown’s presentation noted that 75 percent to 85 percent of the predicted savings from short-term budget solutions over the last three years did not materialize.

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Group Touts New Pension Initiative

Steven Greenhut
Western Region Director of the R Street Institute

Cross-posted at CalWatchdog.

A pension reform organization has released a draft initiative plan for the 2012 ballot that would require public employees to pay half their retirement benefit costs, mandate defined contribution plans for new employees, significantly limit public pension benefits and require public employers to fully fund all pension and retiree medical benefit plans by 2020. The initiative will impose stringent new rules on the governance structure of public pension plans.

Sponsored by Californian Pension Reform, the initiative would apply to all public agencies in the state of California. “The last time we tried to reform pensions, the unions convinced everyone that the benefit changes we sought could best be negotiated at the bargaining table,” explained CPR President Marcia Fritz, the head of a Citrus Heights accounting firm. “We’ve seen a little  movement in this direction, but mostly it’s been done to avoid public scrutiny. The unions have offered few changes that would begin to fix a half-trillion-dollar unfunded pension liability problem.  In fact, they’ve actively tried to stop even modest pension reform efforts at the local level. So it’s time to take this matter to the state’s voters.”

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Mostly Good News On California Pensions

Steven Greenhut
Western Region Director of the R Street Institute

Cross posted CalWatchdog.com

Those of us who applauded the national backlash against the Obama administration’s big-government overreach have been straining to find good news in California, which defied the national trends by electing a slate of liberal Democrats and approving an initiative that makes it easier for the state’s Democrats to raise taxes and pass budgets without Republican help.

To make matters more depressing, a much-celebrated city initiative in San Francisco to rein in the crushing costs of pensions was handily defeated on Tuesday. The city’s progressive Democratic public defender, Jeff Adachi, sponsored Proposition B because public employee pensions were sapping the life out of other programs. I saw a grand opportunity to build a coalition between conservatives/libertarians and old-fashioned liberals who understand that lush and underfunded pensions threaten their values, too.

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