Budget/Fiscal

My fear has been from the start that if we do not fix this problem, the voters, as they have in the past, will pass the first and most draconian “reform” package that they get their hands on.  The typical state worker and public employee is not the problem here.  The typical state worker makes less than $40,000 per year and gets 2% at 60.  Do the math and, even working for 35 years, such a worker would get no more than $28,000 per year in pensions.  That is a healthy retirement, but not the type of pension we are fearing.

While I appreciate his highlighting the contributions of Dan Chmielewski and myself to the debate with Steven Greenhut and Supervisor John Moorlach, I do have to take issue with the way he presented some of my comments, including the attribution of some statements out of context.

From my perspective, the fiscal problems that cities face with pensions have little to do with the average worker’s pension and far more to do with the 3% at 50 safety enhancement, early retirement ages, pension spiking, and the large pensions earned by those in top managerial positions.  The average state worker will earn roughly $27,000 upon retirement.  My hope is to protect that average state worker while reforming the excess at the top.

On July 2, the 3rd District Court of Appeals upheld a nearly year-and-a-half old ruling that would allow the Governor to order state  workers’ pay reduced to minimum wage until a new budget can be signed into law.  However, Controller John Chiang refused to pay it, and argued that he had legal room to maneuver.

However, this fight is far from over.  On Friday, Controller John Chiang argued that while he lost the appeal he still has legal room to maneuver.

In a letter from the Department of Personnel Administration Director Debbie Endsley, Controller Chiang is told, “Today is July 1,2010, and there is no state budget. Regrettably, we must take the steps outlined in the attached pay letter to adjust wages and salaries during this budget impasse. The six Bargaining Units with tentative agreements are not included because we are seeking and expect the Legislature to approve a continuous appropriation for these six units. We anticipate passage of a continuous appropriation for these bargaining units before the end of the month.”

The city of Davis managed to survive first through the collection of a half-cent sales tax that produced around three million per year in revenue and also because property tax revenue was increasing at a very robust rate during the last decade.  However once the real estate market flatlined in Davis and busted in the rest of the state, revenues could no longer keep pace with increases in employee salaries.

According to the Department of Finance, state spending per $100 of personal income is at its lowest level in nearly 40 years.  Under the Governor’s May Revision, General Fund spending, adjusted for inflation would at the lowest per capita level since 1993-94.  And as a percentage of personal income, state spending in 09/10 is at its lowest level in more than a decade.

The suit calls for the courts to get rid of the current financing system and to direct the governor and Legislature to create one that is sound, stable and sufficient.  They argued it prevents six million students from receiving the education that they are entitled to under the state’s constitution.

The problem is the solution is elusive at best.  Recently the word came down that neither Governor Arnold Schwarzenneger nor Republican candidate for Governor Meg Whitman will back an initiative that would have reduced pension payments and extend retirement ages for new state and local government hires.  Would have is the operative word because the initiative has been suspended in part because they were counting on major funding from Ms. Whitman.

Overall the numbers look like this: California’s state retirement systems have promised current and retired workers around $3.35 trillion in pension, health care, and other post-employment befits as of 2008 but have $2.35 trillion on hand to pay for them.  Strictly looking at the retirement system, there were $454 billion in pension and benefits on the book in 2008, $59 billion was unfunded liability, that means that the fund had the assets to cover 87 percent of its obligations.

To give this discussion a Davis flavor, Lenny Goldberg from the California Tax Reform Association is a Davis resident.  Last week he had an interesting article in the Capitol Weekly that followed the CTRA’s proposals for finding $20 billion in tax revenues that can help us balance the budget without further cuts to schools and other programs.

Earlier this week, the Assembly approved legislation by Assemblymember Julia Brownley (D-Santa Monica).  This legislation would lift the cap on the number of charter schools in California, at the same time revamping the state’s academic standards and target federal funding to those schools most in trouble.

Garnering less attention are the fee increases and policy shifts affecting the California State University system.  On Tuesday, the California Faculty Association, who represents faculty members of the CSU system, issued a “white paper” chronicling the restructuring of the CSU system that will fundamentally change its mission.

There were massive student strikes at UCLA where the UC regents held their meeting and at UC Berkeley where many of Northern California Students Coalesced.

A report was released earlier this week by the Death Penalty Information Center.  It concludes that states are wasting hundreds of millions of dollars on the death penalty, draining state budgets during times of economic crisis when money could be used more effectively on other programs.

But another study done by UC Berkeley’s Center for Labor Research and Education released on Thursday found that:

They wrote:

While the Governor argued that he was forced to do by the Assembly which removed some of the money from the budget they passed including taking local money that goes for infrastructure and also removing offshore oil leases as a solution, Democrats such as Assemblymember John Perez (D-Los Angeles) immediately cried foul.

During the budget agreement cities threatened lawsuits against the state if the state followed through with a suspension of Proposition 1A which was passed by the voters to prevent the state from raiding monies that are designated for cities and counties.  While the cities and counties were able to get a devastating take away from transportation funds, the state prevailed in taking monies from redevelopment and also Prop 1A.  Cities and counties are now in the position where they will have to decide whether or not to sue the state.