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The Beholden State - How public-sector unions broke California

Discussion in 'Political Discussion' started by PatriotsReign, Apr 20, 2010.

  1. PatriotsReign

    PatriotsReign Rookie

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    Super-duper great article! If the first paragraph doesn't upset you, nothing will.

    "The camera focuses on an official of the Service Employees International Union (SEIU), California’s largest public-employee union, sitting in a legislative chamber and speaking into a microphone. “We helped to get you into office, and we got a good memory,” she says matter-of-factly to the elected officials outside the shot. “Come November, if you don’t back our program, we’ll get you out of office.’

    The video has become a sensation among California taxpayer groups for its vivid depiction of the audacious power that public-sector unions wield in their state. The unions’ political triumphs have molded a California in which government workers thrive at the expense of a struggling private sector. The state’s public school teachers are the highest-paid in the nation. Its prison guards can easily earn six-figure salaries. State workers routinely retire at 55 with pensions higher than their base pay for most of their working life. Meanwhile, what was once the most prosperous state now suffers from an unemployment rate far steeper than the nation’s and a flood of firms and jobs escaping high taxes and stifling regulations. This toxic combination—high public-sector employee costs and sagging economic fortunes—has produced recurring budget crises in Sacramento and in virtually every municipality in the state."


    The Beholden State by Steven Malanga, City Journal Spring 2010
    Last edited: Apr 20, 2010
  2. DarrylS

    DarrylS PatsFans.com Supporter PatsFans.com Supporter

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    Often overlooked is that negotiations involve two parties.. and both have to sign off on benefit..

    Prison guards are an excellent example of an good idea gone bad, or unintended consequences... see the three strikes law.. which results in prison overcrowding and limits on who they can parole..
    Last edited: Apr 20, 2010
  3. PatriotsReign

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    I think you and I can find common ground on specific issues and causals, but you have to admit, what California has given to unions has come back to haunt them politically and financially.
  4. DarrylS

    DarrylS PatsFans.com Supporter PatsFans.com Supporter

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    But don't fall into the trap that it is a one sided issue, it takes two to negotiate...

    It takes laws like the three strikes rule to fill up prisons, a challenge will be for older non parole eligible prisoners.. they require a lot of supervision/protection and other medical services..

    Do not disagree that there does not seem to be much foresight, but that is part of the process... some call it planning..
  5. chicowalker

    chicowalker Rookie

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    Reason had a great piece on this earlier in the year.

    Darryl's right that this has 2 sides -- and that includes both the Republicans and the Dems, though many people like to point to California as an example of libruls gone wrong and just blame the Dems.

    Many of these deals with the devil and unanimous, or near-unanimous, bi-partisan support. There are traditional labor unions involved, but there are also unions that traditionally get strong backing from the right, including various police groups -- who, not surprisingly, have seen fit to plunder the public coffers for their own gain. (For example, getting "promotions" on their last day of service because their pensions would be based on their last rank, regardless of how long it was held.)

    Some of the loopholes have been truly astounding -- not just the promotion racket that police routinely engaged in, but also examples of people being given a 2nd job for a similarly brief period, and actually being able to collect a 90% pension based on the combined annualized income, or receiving a 90% pension and then, 3 months later, going to work at a similar job in a different department, thereby technically remaining eligible for their pension while they continued working in essentially the same job despite their recent "retirement."

    Good stuff. I'll be glad to stop funding it when I leave the state in the next year or 2.
  6. PatriotsReign

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    This is in reply to both you and Chicowalker...

    I agree that this isn't a dem vs. rep issue. I've long stated that issues aren't "dem or rep", but just plain old "right vs. wrong". Just as the resolution to this issue won't be dem or rep.

    What I have a HUGE fuggn' issue with is that TAXPAYERS are left hanging out to dry. I don't support bailing out any union without exception with tax dollars. If your pension has run dry....cry me a river, I do not care.

    That's my personal opinion on it.
  7. FreeTedWilliams

    FreeTedWilliams Moderator PatsFans.com Supporter

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    This one tells it...

    Attached Files:

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  8. DarrylS

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    Are Federal Employeess exempt from sucking the big teat of early retirement and other handouts????
  9. TripleOption

    TripleOption Rookie

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    Of course it's public employees that are evil and killing the budgets of the states.

    It has nothing to do with the BILLIONS spent by individual states on welfare, SSDI fraud and scam home healthcare aide jobs.

    If the government squared away the obscene waste in the "public assistance" budgets, there would be no more budget problems.

    Good luck with that, though.:(

    Easier to blame unions.
  10. atomdomb

    atomdomb Rookie

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    Good points on all but please especially in CA don't leave out the cost of all the illegals.
  11. chicowalker

    chicowalker Rookie

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    California's pension issues dwarf any "public assistance" spending, including that spent on illegal immigrants. We're talking an order of magnitude here.
  12. TripleOption

    TripleOption Rookie

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    Do you have numbers? California's Health & Human Services budget is 24 Billion dollars.

    You DO realize that public employees contribute to their pensions, just like public sector employees...right?
  13. chicowalker

    chicowalker Rookie

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    Numbers at my fingertips? No. But the figures cited in Reason, I believe (this was several weeks ago that I read it), were well over $100B.

    And, yes, I am aware that public employees contribute to their pensions. They do not contribute adequately, however, when the time periods calculated on their pensions are vastly underestimated, or when their pension is based on a compensation level they never earned, or when their retirement is a sham.
  14. PatriotsReign

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    Yes, but if you actually look at how much someone puts in during their career vs. what they get after they retire it's unfathomable. One can't put in $75k and take receive $1MM+ in benefits. The input doesn't come close to matching the output.
  15. TripleOption

    TripleOption Rookie

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    Your numbers are ridiculous. I know in this state, public employees are contributing large chunks into their retirement and still take a beating in the media.

    I'd love to see your 100 billion annual pension numbers. The welfare outlay is 24 billion annually.

    The media loves to extrapolate numbers such as "100 billion" and then the fine print is the figure is over 20 years.
  16. TripleOption

    TripleOption Rookie

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    And when does that happen? Billy Bulger? You are bringing up examples of the exceptionally rare circumstances that result in these abuses as if they are commonplace.
  17. TripleOption

    TripleOption Rookie

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    SPRINGFIELD - A former Southwick man, who once served on the town’s school committee before being convicted in the 1980s of raping two boys, for a second time faces spending the rest of his life behind bars.

    A prosecutor on Tuesday in Hampden Superior Court recommended Jeffrey D. Youens be sentenced to the life term he dodged in 1996 when he received a 15-year probationary term for raping two other children.



    At Tuesday’s hearing, Youens, who is registered with the state as a sex offender at the level deemed most likely to reoffend, admitted to having twice violated the condition he have no contact with children. One of the incidents involved having a conversation with a 7-year-old and a 9-year-old at a church dinner in West Springfield.

    ...In outlining the second violation to the judge, Tetrault said Youens met three boys while riding his bicycle in West Springfield, where he was living. He began giving the children money and cigarettes and inviting them to his home, according to the prosecutor.

    ...In July 1996 Youens, then 50, pleaded guilty to five counts of rape of a child as a second offender. He was sentenced by Judge Mary Lou Rup to a nine- to 10-year state prison term on some counts; the charges involved a child who was a frequent visitor to his home in the 1990s.

    On other charges, Rup imposed the life sentence, but suspended it with an order that Youens serve 15 years’ probation.

    The second offender charge was based on Youens’ 1982 conviction on charges for the rape of two 15-year-old boys. In that case, he was jailed for 2 1/2 years and resigned his school committee seat.
  18. patsfan13

    patsfan13 Hall of Fame Poster PatsFans.com Supporter

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    More money is spent administering the programs that is given to the supposed targets. Most is spent on salaries and benefits for the state employees.
  19. chicowalker

    chicowalker Rookie

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    According to Reason they aren't at all uncommon in California -- that's part of the problem they cite. I'll link the article later for you if I can manage that from my phone, or you can probably google it easily.

    I find it interesting that you seem so adamant in your defense of the government employees. Just curious, do you have any vested interest?

    and I find it particularly interesting given that you do have a problem with the countless programs that so many public employees are hired to work on
  20. chicowalker

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    Is there a point to this?
  21. PatsFanInVa

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    (1) Pensions are deferred compensation to begin with; that has always been the model on which pensions have been discussed. When the Union goes to the bargaining table, they say, essentially "Okay, we won't ask for as much cash now, but make the terms of the retirement sweeter." This applies whether there is a Union or not (i.e., employers offer deferred compensation in the form of a pension as a consideration in exchange for work performed now.)

    (2) Very often states are dealing with union negotiators

    (3) Often, therefore, pension promises states make are vis a vis union negotiators.

    (4) When a state makes pension promises, those are (eventually) outlays the state has to make. It goes on the balance sheet as a liability.

    (5) CALPERS (The California Public Employees' Retirement System), like everybody else, invests their pension funds rather than lets them erode via inflation.

    (6) In order to promise the actuarially assumed liability for employees, they value how much "in the hole" they are based on what they owe. That means if you are a 40-year-old firefighter, for example, they will actuarily determine that you should live to be age 77.4, or whatever the number is by their assumptions. They have to figure out based on your pension formula, and based on a standard assumption of what you'll do (i.e., stay or go, when you'll leave, when you'll retire, etc.) Those assumptions are probably determined by prior experience.

    (7) When you value that 40-year-old's benefits, if he's retiring at 65, you're therefore looking at about 12 years (using the mythical example above,) paid at a certain amount. Let's say that's 50K a year, current value.

    (8) That puts you on the hook for 600K plus for that one not incredibly well paid individual. So you can see where pension funds can run into serious money very quickly. A pension fund's deficit is not comparable to a single year's outlays for a given program; yet, if the fund is healthy, the deficit should be zero (i.e., it has assets to pay what it owes and will owe.)

    (9) To fund that future liability, CALPERS can collect some portion from the employees, I suppose. It can make a certain amount from assumptions of stock market returns. The remainder will come from taxes.

    (10) California famously revolted against taxes with its Proposition 13 arrangement, effectively making it impossible to raise Californians' taxes.

    (11) Prop 13 of course did not stop the state from making promises.

    (12) One way to look like you're doing that responsibly is to assume an endless high rate of return in investments. Let's say you have to get to $1b by the time 10 years pass. For simplicity we'll say you have to pay it in a lump sum at the end of 10 years. All you need in your pocket today to make this happen is $500 million.

    (13) Now, let's say you have that $500 million in your "Pocket" - i.e., your investments - and you lose 1/4 of their value. That's pretty conservative for what happened in 09 for the year. So now you have $375 million as your seed money to project to the next 10 years, when you owe 1 billion.

    Your $375 million is worth $750 million using the same growth assumptions.

    To fix this - sticking to the original growth assumption - let's say to cover your shortfall you just need to pump $125 million into the system. But the only ways to do that is to extract it from employees, or raise taxes. Employees aren't likely to have that kind of money laying around, and raising taxes is illegal. Rut roh!

    (14) Now, let's say there's no way to justify 8.5% growth assumptions, given what we know about what's happened in the market, what is likely to happen regarding inflation, and other factors. Let's say we now only believe we'll make 6% above inflation.

    Rut-roh again! Your remaining $375M is only going to turn into $633.5M over 10 years! So now your deficit - the difference between what you think you'll have and what is owed - is $366.5M.

    The amount you need to get to one billion at 6% per annum is $592M. Your present shortfall to fix your problem is now $217M - 2/3 again the value of your actual assets, and fully 20% of everything you will owe.

    Remember, this example assumes you will have only 10 years to cover. A real life fund has workers in every phase, from just starting to end-of-career to retirement status. It is much more complex than this example. But this example illustrates that you can go from "solvency" - having $500M to cover $1B, using aggressive growth assumptions - to bankruptcy, overnight, based on investment in volatile asset classes. CALPERS was not especially aggressive (everyone was doing it.) CALPERS is, however, a state fund. Like many other funds, public and private, CALPERS assumed its way into the current mess. Like other funds which did so, however, market returns will probably make the next CALPERS valuation suddenly look a little closer to sunshine and rose petals (well, except their real estate investments.)

    (15) What has not changed is that Unions negotiate for employees. What has changed is that the markets tanked, and aggressive growth assumptions as a substitute for taxation to pay unexpected obligations is not sufficient.

    It's a pretty valid premise that California made promises that are now the subject of a crisis. California indeed made those promises to workers represented by a union. It is not, however, a valid conclusion that the entirety of California's problem is a "greedy" union.

    The problem isn't that the union traded off raises in current standard of living in exchange for a promise of better retirement security. The problem is that CALPERS made the promise.

    This is not to say that the problem's solution cannot be shared by those to whom California is contractually obligated to pay.

    However it is striking that the very same voices screaming and moaning about how bonuses to Wall Street fatcats are contractual obligations that cannot be interfered with, are now screaming that the workers of California also have contracts they would prefer to see honored.

    PFnV
  22. TripleOption

    TripleOption Rookie

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    Sure, I am a state employee. I pay heavily for my pension as well as my health insurance. My wife works for a major private sector company and my benefits are similar to hers; maybe even worse.

    It's so easy to attack public sector employees; they are the boogeyman now. The real culprit is the countless scams being run by the social programs. I deal with people involved regularly and I can say with authority that it is far worse than you could ever imagine. SSDI, Welfare, hotels for the "homeless":rolleyes: ,home healthcare...all overrun with fraud and abuse.
  23. PatsFanInVa

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    Got a link establishing this? Looks pretty off-the-cuff.

    Or is this one of those "this is my opinion and people are way too hung up on facts" statements?
  24. TripleOption

    TripleOption Rookie

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    "Prison guards are an excellent example of an good idea gone bad, or unintended consequences... see the three strikes law.. which results in prison overcrowding and limits on who they can parole.."

    Just responding to the implication that such limits are necessary. If you read the article, the Judge on the case is torn about sentencing this oxygen burglar to life in prison despite the fact that he has apparently raped boys again and again...and is still "courting" more. If you give the Judges the leeway, that is one of the consequences.
  25. chicowalker

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    Just to be clear: I'm not attacking public employees -- other than those gaming the system. I'm also not saying that abuse of various social programs isn't a problem, or that some of those programs aren't overly generous or illconceived.
  26. TripleOption

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    That post is one of the most dead on assessments of the "pension crisis" I have ever seen.

    Management and government love to bargain with unions, take give-backs in exchange for benefits and then run to the media crying about the "greedy unions" when they are actually expected to come through on their end of the bargain. Of course, they don't ever offer to give the raises or benefits they basically stole back to the employees.
  27. chicowalker

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    I don't think the answer to that potential problem is to put into place blanket policies that can just create other problems. If you don't want a child rapist to get off with an easy sentence or early parole, make a longer sentence without parole the minimum for a heinous crime such as that. Don't try some overly clever way around it that could ensnare somebody who's nowhere near the threat that the pedophile is.
  28. PatriotsReign

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    I have no problem with gov't workers other than if your pension gets in deep do-do, I don't want to bail you out. That's not a taxpayer problem, it's YOUR problem. and if your pension goes belly up, I don't care and I don't want my tax dollars to help you out.

    I hope that's pretty clear.
  29. DarrylS

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    State government is a labor intensive activity, thus most of the costs are due to payroll.. and there is a negotiated retirement system ( two sides are needed to negotiate) and a benefit is a retirement program..

    Over the years instead of paying to the pension system, there have been other needs, and the dollars flowed there.. so now they are approaching dire straights everyone wants to reneg??

    There is so much fraud in state government on all levels, in Mass. Billy Bulger comes to mind.. in RI there was a time when state police and judges did not pay into retirement systems.. believe it has changed recently.. The most recent idea is to develop a hybrid of a smaller pension combined with a 401K account chosen by the employee.. this may be viable...

    So you do not want to bail these folks out, have to remember if it is not done the majority of retirees get a modest benefit.. and if that goes away then there will be the other safety nets, i.e. public assistance etc that will have to be utilized.

    Also have to remember that there are plenty of non union employees who enjoy the same benefits.. and there are a bunch of political patronage appointees in this group..

    The legislatures also do not get paid much, but get a lot of benefits including health care and pensions..

    Is there need for a change, certainly, and most states have made significant changes recently regarding age of retirement, contributions and benefits.. but to just demonize the public employee and make blanket statements beg the issues.. it is a very complicated issue, and to just blame "public sector unions" is a flat out lie.

    As mentioned before the whole prison thing is out of control and one of the biggest growth industries in the state systems, these are very labor intensive and there are incredible legacy costs.. in RI they just increased the minimum retirement age for Correctional Officers until age 59.. that will lead to a series of other issues, as corrections are a younger mans game.. and will only lead to a whole bunch of career ending injuries..

    There is little planning or foresight on the part of state governments, and now due to financial limits it has changed.. but much of the damage has been done.. the change is happening, albeit slowly..
  30. TripleOption

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    It's ignorant. Cities/states make deals on pensions (in order to get concessions) then mismanage the money and cry poor to the media.

    I don't know where you work, but I'd be willing to bet that if your company told you that you would have a 401K etc you would expect it to be there when you retire. Same goes for insurance etc.

    When various companies scammed employees out of their retirements, criminal charges were filed and the government was on their high horse condemning the "scammers". When the government is the one doing the scamming, I guess it's ok.

    Public sector jobs don't pay as well as private sector but they have always been steady and had good benefits. I didn't hear anyone complaining about public employees when the .com boom was going and everyone was making boatloads of "cash" while public employees made pretty much the same as they do now.

    The economy tanks and suddenly everyone wants to attack public employees. It's a turtle/hare scenario.

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