SACRAMENTO – As government employee unions were negotiating their lucrative retirement deals during the rising economic tide of the past decade, they promised cities and counties that the deals would pay for themselves, citing fanciful rates of return on investment income. Now that the economic tide is no longer rising, and investment returns are being reconfigured to match the real world, those boats are crashing on the shore. Pension obligations are eating up larger shares of budgets, and municipalities are cutting services and scrambling for revenue.
A falling tide, it would seem, would be the ideal time to rebuild the boats – or whatever the correct metaphor would be here. Yet, I was wrong when I said during a recent speech that the California Legislature isn’t doing anything about the problem. It is busy making the problem worse by making it harder for cities to fix the problem by any other route than raising taxes.
I’ve watched some otherworldly efforts to expand pension and disability benefits. Filing bankruptcy is one of the few options cities have to open up these ill-advised union contracts for renegotiation. Now, an old piece of legislative mischief has been reintroduced and already has passed out of the Senate Local Government Committee, thanks to some heavy-handed maneuvering by Senate President Pro Tem Darrell Steinberg, D-Sacramento, who removed two critics of the bill from the committee and replaced them with union yes-people.
The proposed legislation, which is one of the top priorities of the state’s public employee unions, would make it nearly impossible for cities to declare bankruptcy and void their unsustainable employee union contracts. For instance, the city of Vallejo declared bankruptcy when its expenditures – mainly for current and retired public employees – far exceeded revenue. Assembly Bill 155 would require that cities first get approval for bankruptcy from a newly formed and state-controlled Local Agency Bankruptcy Committee comprised of the controller, treasurer and finance director.
Given that liberal Democrats have dominated those positions and will certainly continue to do so in the near future, the bill would, in essence, close off the bankruptcy option. Not many municipalities have taken the Chapter 9 bankruptcy route, but it’s a good option in extreme circumstances, and the unions know that, thanks to their successes, more such cities will find themselves in dire straits. The union goal these days is to stop any renegotiation of pension deals no matter what it means to the state or taxpayers or no matter how ridiculous those deals might have been. It’s no surprise that union activists have been heard chanting “Raise Our Taxes” at various rallies.
AB155 supporters argue that the bill is necessary to protect the state’s credit rating given that local bankruptcies could, under some circumstances, reflect badly on the state’s finances. But the League of California Cities offered a stinging retort in a letter to bill sponsor (and former union activist) Tony Mendoza, D-Norwalk: “We frankly are astonished by this argument. The state today has one of the worst credit ratings in the nation – not due to a city, but due to a lack of confidence among major bond rating and financial institutions that the state can’t solve its own budget problems.”
And, of course, the reason the state can’t solve its own problems is that the place is run by union hacks such as Steinberg and Mendoza, who constantly put the interests of the public sector brotherhood above the interests of taxpayers and business owners.
The Sacramento Bee argued that Steinberg’s action “stinks” and summarized the real purpose here: “The bill would circumvent the current judicial system, forcing locals to receive permission from a special panel dominated by politicians beholden to unions before they could file in bankruptcy court.” The Riverside Press-Enterprise argued, likewise, that “The real goal is to protect labor unions’ contracts with cities, counties and special districts.”
As published reports note, if the bill passes the state could be financially liable for cities that can’t pay their bills – which pretty well sums up the union approach these days. Everyone else must pay for their enormous benefits gained thanks to a cynical manipulation of the political system.
Ironically, the Legislature is still doing union bidding even as the public catches on to the real cause of California’s fiscal problems, especially as Californians compare their meager retirement savings and delayed retirement dates with those received by their fellow citizens who work in the public sector. As writer Bill Lobdell notes in OC Metro magazine, “I’ve attended two retirement parties in recent months. Both of my friends were all of 50 years old. They retired with 90 percent of their final annual pay and a generous health care package. They were public employees. I’m turning 50 later this year, and my retirement is nowhere in sight. In fact, because of the economy, I’ve recently had to use some of the money I’d socked away for my golden years just to pay some bills.”
Lobdell is no conservative. But views such as his are becoming widespread because of the common and unfair disparities. I was stunned – pleasantly so – by a recent “Saturday Night Live” sketch lampooning public employees. In the “2010 Public Employee of the Year Award” skit, the host of the “event” was on disability after being paralyzed from the neck down, even though he clearly had no signs of paralysis. The contestants included the surliest Department of Motor Vehicles employee, a double-dipping employee disabled because of a fear of cats and an employee who was taking a smoke break when he was supposed to be performing.
As someone who has written about public employee disability scams, I can attest that this bit of comedy wasn’t as far-fetched as one might suspect. The best line: “In these times of anti-tax hysteria and threats of government budget cuts, it’s important to remember that people with government jobs are just like workers everywhere,” said the awards host. “Except for the lifetime job security, guaranteed annual raises, early retirement on generous pensions, and full medical coverage of no deductibles, office visit fees or co-payments.”
When “SNL” is lampooning these folks, you know the message is getting out beyond editorial pages and think tanks. But it apparently isn’t seeping into the halls of the state Capitol. Unless the economic tide starts rising quickly (good luck with all the debt and government meddling!), we must brace for a showdown between those who pay the taxes and those who benefit most directly from them. Given the way this state government works, I have no illusions about who will win this battle.
Steven Greenhut is director of the Pacific Research Institute’s Journalism Center (www.calwatchdog.com).