When we first started looking hard at the city budget, back in 2008 before the economic collapse, the natural point of concern was employee compensation. It was a natural place to look, given just how much of the budget was dominated by compensation.
The real danger area at that time was the idea that we had made promises to employees for pensions and retiree health care that we had not funded. As the economy turned downward, it became increasingly apparent that the city balanced the current budget against future needs in investment infrastructure, particularly water, roads and parks.
The problem of pensions is not limited to California. As a study from Boston College’s Center for Retirement Research noted, “The bankruptcy of Detroit has focused attention on the financial outlook for cities and the role that pensions may play in determining their future. Some commentators presume that excessive unfunded pension commitments will lead to widespread bankruptcies.”
However, the researchers here find that, while other cities are not poised to fall like proverbial dominoes, California cities are a different matter. Of the 32 cities that the researchers identify as being in financial trouble, California represents 10 of them.
They argue that California has “serious structural problems.”
The first problem was Proposition 13. They write, “The initiative cut the property-tax rate from an average of 2.6 percent to 1 percent in every county. It also capped the annual increase in assessed values at 2 percent, unless the property is sold. To make sure that the tax cut was not offset by tax increases elsewhere, Proposition 13 required a two-thirds super majority in the legislature for any tax hike.”
This led to the state adopting new legislation that would introduce tax cuts or expand services without providing the funding. This forced budget allocations without legislative negotiations.
“The requirement for a super majority for any new revenue increase made it more difficult for policymakers to raise taxes,” they write. “The state, in effect, lost control of its finances.”
This passed the burden down to local government.
On the pension front, California got itself into hot water when it passed “a retroactive expansion of benefits in the late 1990s” – this not only made the state’s pensions among the highest in the nation, but the retroactive nature of them meant none of it had been funded through the normal mechanisms.
The researchers add, “Pension benefits for current employees are protected by statute, which makes it very difficult to reduce future benefits for current employees.”
The final plank of the problem is that the state was hit harder than most states by the financial crisis and recession.
California has also been slower to climb out of recession – local government revenue in California grew between 2007 and 2010 by only 3 percent compared to 9 percent for the rest of the nation.
As Charles Chieppo, a research fellow at the Ash Center of the Harvard Kennedy School, writes, “California succumbed to two classic temptations. First, it became convinced that the good times would last forever and conferred benefits that could not be sustained during lean years. Second, it sacrificed the future for short-term political gain by enacting popular new programs or tax cuts without paying for them.”
The question that many communities in California continue to grapple with is how to get out of the problem.
The study is illuminating about the problem but not the solution.
The researchers conclude: “The question is whether cities across the country are about to topple like dominoes. And whether pensions are the problem. The answer appears to be ‘no’ on both fronts.”
The problem in California appears to be exclusive to California, “Many of the troubled cities are located in California, where the state had largely lost control of its finances, where public pensions are among the highest cost in the nation, and where the bursting of the housing bubble wreaked havoc. Outside of California, the incidence of troubled cities appears to be scattered and varying in severity.”
When identifying the source of the problems, the biggest is fiscal mismanagement.
As we have noted many times before, the biggest problem with the city going to enhanced benefits in 1999, 3% at 50 for public safety employees and 2.5% at 55 for other employees, is that these benefits were not funded, so the policy changes produced immediate unfunded liabilities.
At the same time, the city did not realize that, under new GASB (Government Accounting Standards Board) regulations, it was failing to fully fund its retiree health care. However, while the real estate market was booming with double-digit property tax revenue increases last decade, and with short-term fixes like a sales tax, the city was able to avoid its day of reckoning until the financial collapse brought it all down.
However, from the period of 2008 until 2011, the city engaged in further fiscal mismanagement. City leaders dealt with only short-term budget needs, the 2009 MOU process failed to address key structural problems, and the budgets were balanced through attrition of employees and the designation of wide categories of infrastructure needs as unmet needs.
This produced the illusion of a balanced budget with a fund reserve. As those costs have come due, the fund reserve is about to be gone and the city still will be running a $5 million deficit without serious intervention this year.
From Davis’ perspective, pensions are a problem, but not the only problem. The far bigger problem was fiscal mismanagement.
—David M. Greenwald reporting
( Are Pensions to Blame For Widespread Fiscal Woes in California? )
No. We the voters allowed this to happen. But on the other hand we could always blame the village idiots we put in office…
Pensions are not the root cause of the problem, and they are not to directly blame. You cannot blame an inanimate object for poor decision-making. But pensions are the glaring symptom that illuminates the true root cause. And that root cause is the historical political collusion between politicians in the Democrat party and public sector unions.
It is clear unless we stay in denial or avoid the topic due to political sensitivity… the day we allowed government employees the right to form labor unions is the day we launched our road to fiscal mismanagement through a form of crony collectivism.
Prop-13 has little to do with this problem since California continues to be one of the top 15 states for collections of property tax revenue per capita. And please consider that every time you hear the complaint about prop-13 it is typically from someone that is a union-beneficiary or sympathizer, or otherwise it is someone that lacks perspective for the personal harm caused so many fixed-income families from the per-prop-13 impacts of wild tax increases in California’s volatile real estate market. And by the way, a volatile real estate market largely brought to us by other left-leaning government policies like the Community Reinvestment Act and Barny Frank’s Freddie Mac and Fanny Mae GSEs.
Until we get our heads out of the sand and start implementing right-to-work legislation, and eventually outlaw public sector unions, we will forever have a corrupted political system stuck on crony collectivism and prone to fiscal mismanagement.
Public sector unions are the root cause. Over-committed public sector pensions are just the main symptom of that root cause.
“You cannot blame an inanimate object for poor decision-making. ”
That’s really aside from the point. The question is whether the policy itself is the problem – and the decision to retroactively increase pensions was a start to the problem, and remains part of the problem.
Frankly, what island of financial independence do you live on that allows you to be so separated from the economy that lets you believe that unions are the problem? Do you have a gold mine in your backyard?
Dave Hart – I need some more detailed explanation of your point if I am to respond to it.
I am a working-stiff myself. Have relied on a paycheck for my entire adult life and several years of my childhood.
Even lefty FDR was against public sector labor unionization. He accurately predicted the very problems it would lead to.
Public sector unionization corrupts the democratic political process. It basically gives your unionized neighbor more political representative power and influence. Talk to any politician at any level, and fund raising is a constant challenge they face. Union money is easy money because all you have to do is to support a union-favored bargaining agreement. Keep doing that for years and eventually you have firefighters that are the new millionaire class. Keep doing it without any fiscal responsibility and eventually government goes so far into debt that it has to file bankruptcy.
What if public sector unions had been outlawed from the beginning like FDR demanded and instead government employees were paid the same as their peers in the general labor market? If that had happened we would not be having this conversation and Davis would not be suffering anything close to these dire financial circumstances without the ability to make enough cost-saving changes. Hence the unions are the root cause.
You raise a very good point about the corrosive affect of money in politics. The best way to limit that is to pass a U.S. Constitutional Amendment that allows local, state and federal legislation to cap spending. Very simple solution and I guarantee you most public sector unions will sign on and wealthy donors will fight it. Why? Because public sector unions, in aggregate, cannot outspend their private sector counterparts at a sustained level. Unions have members which translates to boots on the ground in campaigns and are at their best when talking to people one on one.
FDR was also initially against much of what he signed into law. He changed his mind on a lot of it as he matured as President so I wouldn’t put too much into statements he made in his first two terms.
I’ve learned that management always has the upper hand in negotiations with unions if they are coming from a position of honesty. I do recognize the difficult financial position the city and many other local and state governments are in due to the wanton destruction of our economy by the biggest financial institutions that we all idolize so much. That is the real basis of our problem. But none of our local politicians and precious few on the state and local level have been effective at rounding these people up, prosecuting them and seizing their assets to pay those of us back who suffered the most.
So, that leaves us with problems in our own backyard and lo and behold, it must be the unions. As David said, much of that is because of poor and weak leadership by elected government officials. I would go further by asserting that the problem is not the ‘overly generous’ benefits, but a willingness to weasel out of actually paying for those benefits at the time they were granted. It has been and continues to be the preferred behavior of kicking the can down the road, hoping the day of reckoning falls on future elected public officials instead of setting aside money today for benefits promised tomorrow.
You say you are working for an hourly wage or a monthly salary. What would you want us to think of your employer if he (she) told you your pay was $3,000/month but when payday came said “Sorry, I can only afford $2,000 this month.” I would think your employer was trying to pull one over on you, then, I would feel you were justified to file a wage complaint with the Labor Commission to recover the $1,000. I would not be sympathetic to anyone to advocated that the proper response is to eliminate the Labor Commission because of your complaint or blame you for taking a job for he outrageous sum of $3,000 per month.
It is the job of unions to get what they can for their members and it is the job of employers to be reasonably generous but not profligate with their employees. Unions that make truly unwarranted demands on an employer will find that their members will question their leadership when they feel the line has been crossed. For that to happen, management needs to do a lot of educating and above all needs to be honest. I don’t think the city was honest with their workers by granting ever growing benefits while at the same time not paying for them.
“The best way to limit that is to pass a U.S. Constitutional Amendment that allows local, state and federal legislation to cap spending.”
You idea is not the best way.
First, it’s impossible now to amend the Constitution in that respect. Our democracy is far too corrupt to get an approval from 3/4ths of the states.
Second, there is a more effective route–albeit, one which also has no chance of getting past the entrenched interests: Have publicly financed campaigns.
The way I would suggest public financing is this: Place a 90% tax on all private contributions. So if the CTA gives Dan Wolk $40,000, Dan gets to keep $4,000 of that and the other $36,000 goes into a pool which would go to other qualified* candidates who choose not to accept any private donations, including self-financing. Those who self-finance or take private money would get none of the pool money.
Secondly, the pool money would be sweetened with taxpayer money, based on the size of the electorate. Maybe something like $2 for every potential voter. So a district with 250,000 people would start with a pool of $500,000.
*What is qualified? Not an easy thing to answer. I would start with anyone endorsed by his party, anyone else who had run previously and finished with more than 10% of the vote, and anyone who had run for a lower office and, whether he won or not, was the choice of a number of voters in that race which would add up to 10% or more of the previous vote total for the contest he now entered. Additionally, any other candidate who could get signatures of support from 10% or more of the electorate (without paying for those signatures).
“Very simple solution and I guarantee you most public sector unions will sign on and wealthy donors will fight it. Why? Because public sector unions, in aggregate, cannot outspend their private sector counterparts at a sustained level.”
Not true. Unions in California and their members give almost exclusively (not quite 100%) to Democrats; and unions and their members are the largest spenders in California politics.
Go to California Watch or cal-access to look at the raw numbers. This comes from the California Watch analysis:
“The biggest special interest donor, the California Teachers Association, spent more than $118 million on campaigns in the state during the past five election cycles and the first half of this one.”
That was written in 2012 and it keeps getting worse. The CTA is corrupt and corrupting.
HART: “Unions have members which translates to boots on the ground in campaigns and are at their best when talking to people one on one.”
I think that is a fair point, too. Unions do a very good job of getting their vote out and making stupid voters think that union greed is a public good.
You will note I said “in aggregate” so while it is probably true that the CTA was the single largest contributor, you really need to look at all of the contributors over $100,000 and you will see that unions are being far outspent http://www.opensecrets.org/industries/ which is obvious when you reflect on the size of the economy and reflect on the shrinking size of organized labor. In 2013-14 the tally nationally is $109Million by Finance/Real Estate and $29Million by Labor. Dwarfed by the Banksters and that is just one sector!
One more thing, nobody was whining about the unions in 2007 before the Banksters drove the economy into the ditch. The unions are not the cause but they certainly have become the favorite whipping boy of people who don’t want to face the facts because they don’t want to question their version of reality.
Dave, I was exclusively considering the situation in CA. Here, labor directly gives more than half of the money that all Democrats running for the legislature or statewide office receive. On top of that, various unions at times will augment the direct contributions of the unions with organized but individual contributions from their members. Additionally, the unions in CA do a lot of grassroots work for Democrats, getting out the vote and publishing so-called independent brochures and ads and so on.
Since Republicans decided to be the stupid party, and Democrats run our entire state without serious competition, the unions call the shots. That is why we have such bad policies, which effectively steal from the poor and give to the rich unions and their members.
One more thing, nobody was whining about the unions in 2007 before the Banksters drove the economy into the ditch.
I disagree. We have been talking about unsustainable pensions costs long before 2007.
I also disagree with your over simplification of the cause of the housing bubble.
I can just ask a rhetoric question to make my point. If you put raw meat out all over your house and yard, how would you get your dog to eat his dogfood? How would you get him to pay attention to other treats to train him?
I have been working in the real estate lending industry for about half of my career. I have family and friends that were working in mortgage lending during the 80s. That was a time when there was a lot of hand-wringing about the growth of real estate equity and how minorities (over-represented as the poor) were missing out. So here comes government to the rescue exploiting Carter’s CRA to strong-arm banks to demonstrate lending to a percentage of minorities (again, who were poor). Before this there was basically one mortgage product that was a 30-years fixed rate. In order to lend to these people that could not meet credit standards, the banks started inventing all these fancy new adjustable rate and high LTV products. The sub-prime mortgage market was developed. Fanny and Freddie were then charged with expanding the secondary market and they also worked with Wall Street to pool the assets to create securities. Bottom line is that it was the government that created the feeding frenzy. And blaming the banks is like blaming your dog for eating all the raw meat you placed around your house and yard. Yes, the banks are like dogs in that they have a single purpose to make money with money. Then add the Clinton repeal of Glass Steagall… and now your dog can go through the fence to your neighbor’s yard to start eating that meat lying around. Eventually your dog gets real sick. Then you bail him out and let him start gorging himself again.
Unions have members which translates to boots on the ground in campaigns and are at their best when talking to people one on one.
When Meg Whitman campaigned there was a bus full of nurses or teachers screaming and interrupting many of her public presentations. As I understand these people took time off work (they all have very rich vacation and sick leave benefits) and the union paid for their travel and expenses.
I will admit that I have some divided opinion about this type of practice. On the one hand, people of their own free will campaigning and protesting for political cause is the essence of a working democratic system. However, there I think there is too much collusion and collectivism in the union-based boots-on-the-ground for me to put it in that same category of “good for democracy”. Campaigns not supported by unions generally have to pay their campaign workers. Union-friendly politics gets this free union labor. Labor has a direct value. Add this to the million and millions in union members’ dues that the unions funnel to the campaign coffers of their expected benefactors, and I see it as being absolutely corrupting, and basically unfair.
A private company is a taxed entity (unlike a union), and even so it lacks this collectivist boots-on-the-ground capability. All it can do is spend money to protect its interests.
You made a very good case for why unions are the best hope for protecting the working class. People walk precincts and get out the vote for unions because they believe in the mission and understand that most large corporations’ interests are opposed to theirs. That’s all that needs to be said. You don’t like it that people like me do this as volunteers (no paid precinct walking for me, but it’s good exercise) because that’s how we win. Money is important, but it isn’t everything.
Electoral politics isn’t the whole picture either. Activism is visible during elections, but millions of people who logically view unions as working class organizations that protect their general interests are active around many issues on a daily basis. People exercising their free speech rights in concert is the essence of democracy. Corporations are not people and aren’t entitled morally to spend a penny but do so legally owing to the heavy hand applied to the scale on their behalf by corporate interests who dominate all branches of government and the media including the so-called liberal media. The Tea Party phenomenon comes from deeply felt convictions similar to the believers in unions. Their problem is that once they started discussing the issues face to face with real people the complexity of real life demoralized many of them as in ‘Keep the government’s hands off my Medicare!’. Progressives are not stymied by complexity or dissimulation or lack of funds. They expect it, so they endure. They just seem much larger and richer than they really are and that’s why I love ’em.
Meg spent $150 million and lost decisively. It must have been the nurses.
Did you ever meet Howard Jarvis or Paul Gann? I met the former, and he was a very friendly guy, and also somewhat of a snake-oil salesman. Paul Gann hated government.
Prop 13 created an ‘un-fairness’. Prior to it’s enactment, some cities reduced their rate, as they did not need increased revenues… they were fiscally responsible.
Now, under Prop 13, a senior ‘aging in place’ may have it good. If they move, they have to pay the new assessments. Prop 13 doesn’t protect seniors, as a class. Reality.
Will admit I benefitted from Prop 13… but if assessed value goes up 20%, perhaps we should have a law that the tax rate goes down 20% absent a vote of the people.
Prop 13 and ERAF should be re-visited.
Never belonged to a union, never will. I despise them, in general, because the ‘weakest links’ get the same as star performers.
That is all fine, but it is clear that California cities are in trouble in large part for two reasons: they over-committed to government growth and government employee compensation; and the State did the same and the State in an effort of self preservation, took more away from the cities.
Go here http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=513 to see the last 15 years of state and local tax revenue per capita by state.
In 2011 – the last year reported – CA’s number comes in at $4,914. That is eleventh and behind states like Alaska, North Dakota and Wyoming that are all benefiting from big energy-production booms.
Of course we have New York, New Jersey, Vermont, Minnesota, Massachusetts & Maryland in front of us too.
And guess what? ALL of these states are forced unionism states. And all are significantly Democrat.
The problem isn’t specifically the unions. They are doing their job just fine for their members. The problem is that there is a fundamental conflict of interest when politicians who benefit from any group’s support are overseeing contracts with those groups. Whether it’s businesses that build military hardware or unions that represent public workers, that conflict of interest requires a wall of separation.
I’m beginning to think public employee pay needs to be set by independent commissions. The city just sets the parameters (such as Rich Rifkin’s proposal for a cap tied to revenues), and the commission allots it.
Basically, Davis needs its own Little Hoover Commission: http://www.lhc.ca.gov/studies/204/Executive%20Summary204.pdf
David asks:
> Are Pensions to Blame For Widespread Fiscal Woes in California?
We can argue about the “root cause” but pensions are to blame just like a $2,000 a month car lease would be to blame for typical families financial problems (it really costs $2K a MONTH to lease a new S Class Mercedes).
The pension “problem” is not a “political” problem it is a “math” problem. Exponential growth always slows and unless California (and Davis) can figure out how to double in size in the next 40 years the pensions can not be paid in full.
http://www.pensiontsunami.com/
I think it is both. In good times there is the temptation to give, and the problems are distant enough that there is no immediate political cost. Even here in Davis, people are very reluctant to assign blame.
From: Frankly, January 15, 2014 at 9:19 am
“….and (the) root cause is the historical political collusion between politicians in the Democrat party and public sector unions. ”
Good problem summary David, and thank you “Frankly” for your insightful response! As long as the average, non-union, taxpaying California citizen is denied representation (a seat) at the negotiation table described above, the pension problem will continue. It is a “blown” (open) circuit of corruption.
“The first problem was Proposition 13. They write, “The initiative cut the property-tax rate from an average of 2.6 percent to 1 percent in every county. It also capped the annual increase in assessed values at 2 percent, unless the property is sold. To make sure that the tax cut was not offset by tax increases elsewhere, Proposition 13 required a two-thirds super majority in the legislature for any tax hike.”
Thank you Howard Jarvis for Prop 13. I know I wouldn’t be able to afford living in my house today if the tax rate was 2.6%. Then you have to add the $2000 or so local parcel taxes on top of that.
This is a perfect example of the problems of collateral consequences. So you have defined a clear problem – the tax rates were too high, pre-Prop 13, people were getting priced out of their homes. But the mechanism to solve that problem led to additional problems down the road. So yes, you have your house, but cities and other local governments have limited ways to generate revenue.
Cities and local governments shouldn’t be paying firefighters $150,000/yr. in salary and benefits with retirement pay of up to 90% at age 55 along with many other public employee’s overbloated salaries.
I agree.
I lose my house if I don’t live within my budget, maybe what we need is for the City to go bankrupt and reel in some of these costs instead of always coming to the taxpayer for a bailout.
Do you think that’s made things better or worse in places like Vallejo and Stockton?
The courts and continued political corruption from the union-political connection have led to insufficient follow-up remedies. As you point out, these over-committed benefits have been tied up nicely with protection by statute.
Most firefighters can retire at 50 (not 55) and many get paid more than $150K after they retire (more money than most people with $4 million dollars of Davis rental property owned free and clear make in a year)…
http://www.fixpensionsfirst.com/calpers-database/
Some 3% at 50 firefighters retire with 90% pay before they are aged 50. An acquaintance of mine (a guy I knew when we were Freshmen at UCSB) retired at 48 from the LA County FD. His final salary was about $18,000 per month (~$216,000/year). He was an arson investigator (and he also had some deputy chief duties). So his pension started in 2011 at about $194,000.
I don’t mean to suggest this guy was overpaid in terms of salary. He was high in the ranks of the LACFD. He completed his BA and MPA and he was highly trained in arson investigation*. (On the side he and his wife, also a firefighter, own restaurants and bars in the Gardena-Bell Gardens area.)
The problem is that his extremely lucrative pension gave him a great incentive to retire early. There just is no benefit to the general public to offer sweetheart deals like that to anyone. If LA County had offered him a 50% pension if he retired after age 65, he could have retired well and it would have cost the taxpayers 25% as much.
*Note: he dropped out of UCSB after two years, and (I was told by a common acquaintance) he finished his BA at CSUDH and his MPA at USC. I was also told that LA County footed the bill for all of his “continuing education.”
I urge anyone to Google “immediate annuity calculator” and enter what the total dollar investment would be to ensure $11,250 per month for 40 years. This is the monthly amount of 90% of a $150,000 annual compensation with a retirement age of 50 and a life expectancy of 90.
http://www.miniwebtool.com/immediate-annuity-calculator/
You have to play with the investment amount and rate of return to get to the correct monthly amount.
Bottom line at a 5% ROR, it wold require an investment of about $2.5 million. So if you are a private fella’ wanting to live the life of a retired firefighter, you will need $2.5 million in your 401k at age 50.
It seems to me that some of the comments about the “unfair” nature of the firefighter compensation and/or retirement benefits verges on the “envy” or “class warfare” that is frequently cited in descriptions by conservatives of how lower income individuals and or philosophically left leaning individuals feel about the “rich”. Interesting.
Interesting that the left feels it’s okay to further tax the elderly and the poor in our city to maintain the lofty salaries, benefits and retirement packages of people who make $150,000/year or more.
It’s interesting that people prefer to focus on firefighters or cops making big pensions that they think is impoverishing them, but don’t see that they are being impoverished by the overly generous tax cuts for the very wealthy and the downright criminality of the banksters.
Tia, one thing to consider in that regard is that cities like Davis are raising the taxes on people who make much less in total compensation in order to pay those firefighter salaries. It’s taking from the poor to enrich the rich. ………..
By contrast, if someone in the private sector (working for a company that does not make its money off of the government) is paid $200,000 or more a year, that money is coming out of the pockets of the owners of the company, and they are freely choosing to pay that employee so much because they believe he is generating more than that for their business. (Their belief may be wrong in some cases, of course.)
That said, I don’t think all highly paid employees of private companies really earn what they are being paid in all cases. Many work for companies like yours, which charge very high prices and pass them along to government agencies. That is the only way the Kaiser Family Plan can go up in price by 10% or more every year, when healthcare inflation is closer to 4.2% (still much higher than CPI inflation).
Likewise, when the government bails out banks, which made bad decisions in the market, and those banks take those billions of dollars in taxpayer money and overpay their employees, it is even more galling than seeing the firefighters rip off the taxpayers.
I also think there are a lot of lawyers who are in the private sector–that is, not on the government payroll–but make fortunes due to bad government policies which are shaped by those same lawyers donating to politicians. A great example of that is with our medical malpractice system, which enriches frauds like former Sen. John Edwards. I imagine you know how he made his living, exploiting OB/GYNs in cases where they “failed” to perform a Cesarian birth and the baby was born with a deformity. If our political system were not so corrupt, we would have a malpractice system like they have in France. (See: http://drexel.edu/~/media/Files/law/law%20review/fall_2011/Rodwin.ashx.)
Lastly, I think there is good reason to think that many corporate executives of mediocre talent at public companies are overpaid due to endemic problems with public companies. I won’t get into the details. But suffice it to say these sort of corrupt greenmail scams don’t happen with private equity firms. There is an unfortunate and systemic failing of many corporate boards of directors to look out for shareholder interests, when they are assessing the performance of their friends who are running those same companies.
I’m dumbfunded how anyone can defend or justify this. It is absurd. I did not even include the value of lifetime healthcare at retirement. So maybe this is $3 million in your 401k at age 50.
Here is some more looming absurdity. The broken budgets of the Federal, state and local governments have politicians drooling about the dollar value of private 401k accounts. Obamacare slipped in some changes that rip off some of that value. We see more and more of it going forward.
That is how we roll now in the union-Democrat crony collectivism world.
Curious Frankly, how are they going after our 401k’s?
In response to Frankly’s 5:58 P.M. post on January 15: Part of the problem is that 401k plans generate more money for the fund managers and companies than do defined benefit pension funds like Calpers.
Only if you hold all the other variables is this true. When Prop 13 passed and reduced property taxes real estate values sky rocketed. The home owners dollar is divided among principal, interest, taxes, insurance and maintenance. When prop 13 changed the ratios other costs increased. Without prop 13 you would still probably be able to afford your home. it would have cost you less and be worth less but your housing dollar would go about as far as it does today.
As for your assertions about affordability they only if you hold all the other variables is this true. When Prop 13 passed and reduced property taxes real estate values sky rocketed. The home owners dollar is divided among principal, interest, taxes, insurance and maintenance. When prop 13 changed the ratios other costs increased. Without prop 13 you would still probably be able to afford your home. it would have cost you less and be worth less but your housing dollar would go about as far as it does today.
I was trying to insert the above remarks under Growth Issues January 15, 10:58 AM remarks where GI claims without Prop 13 GI would not be able to afford home expenses. I don’t know why this was placed down here.
In 1999 SB400 was the piece of legislation that increased the pension benefits for state workers. For those who think this bill was approved as part of some liberal Democrat-union comspiracy with the Republicans doing their very best to fight it and be financially responsable, the bill was passed with overwhelming support in both houses of the State Legislature. There were only seven no votes in the Assembly and zero opposition in the Senate. Twenty-two Republicans in the Assembly and all 15 Republican Senators voted yes. On Jan 1, 2000 all state workers received their pension raises – retroactively.
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Yes, WesC, and you will also recall that the ‘corrupt state worker unions’ negotiated less generous benefits for new hires in 2011 and yet Rifkin, Frankly, Hayes, etc., don’t seem to have a theory as to why the unions who are portrayed as the dark overlords of the Democrats in the state Legislature would do such a thing. So which is it? Do the unions have so much control they should be outlawed or is there some kind of double-dealing secret deal where they get to dip into everyone’s private 401K?