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How Government Unions Are Destroying California: California was once the State that everyone looked up to. With the best weather and natural resources, we were full of hope and innovation. We had the best public schools, a world class system of higher education, the best freeways, infrastructure to provide fresh water to our growing population, which also doubled as a source of clean energy through hydro-electric power, a business-friendly environment where entire industries grew in entertainment, aerospace, and technology, making our economy virtually recession-proof.
Then in 1978, then-governor Jerry Brown signed an executive order that imposed union-shop collective bargaining on public agencies in California, and the rise of public sector union power began.
(Mod: Ronald Reagan signed something similar into law in 1968 called the Myers-Milias-Brown Act. Just to keep everything accurate and nonpartisan. As most Tattler readers know, in this matter there are few innocent parties in California government.)
(Mod: Ronald Reagan signed something similar into law in 1968 called the Myers-Milias-Brown Act. Just to keep everything accurate and nonpartisan. As most Tattler readers know, in this matter there are few innocent parties in California government.)
Today, public sector unions are the most powerful political force in our State. They control a majority of our State Legislature and might control a supermajority in November if a few swing districts fall their way. No politician, Democrat, Republican or Independent, acts without considering how it will affect the union agenda.
These government unions press 100% for a progressive agenda, and they consistently agitate for increased spending. In two areas, the quality of our public education system, and the financial health of our cities and counties, the consequences of government union power have been catastrophic.
Pensions
Police and firefighter unions do the most damage at the local level. They have attained unsustainable pensions, known as “3%@50”, meaning that a member of that bargaining unit is eligible at age 50 for a pension equivalent to 3% of his highest salary times their number of years of service.
While the age of eligibility has been raised for new public safety employees entering the workforce, the vast majority of active police and firefighters still retain these “3%@50” benefits. So at age 50, a 20-year veteran can retire with a pension equivalent to 60% of their highest year’s salary, which can be manipulated through spiking, and a 30-year veteran is eligible for 90% of his or her highest salary.
These pension requirements are held under the “California Rule” to be irreversible. In other words, once they have been adopted, democracy is incapable of turning off the spigot. With the spigot running constantly, communities go bankrupt. First, they cut other services. Then they increase taxes. Then they refuse to pay bondholders, so no one will invest again.
Current unfunded liabilities in California:
At CalPERS: $93.5 billion (ref. page 120, “Funding Progress,” CalPERS 6-30-2015 financial report -link).
At CalSTRS: $72.7 billion (ref. page 118, “Funding Progress,” CalSTRS 6-30-2015 financial report - link).
Local Unfunded Liabilities add considerably to this total, since CalPERS, with assets of $301 billion, and CalSTRS, with assets of $158 billion, only constitute 62% of California’s $752 billion in state and local pension fund assets (link). If all of these systems in aggregate were 75% funded, which is probably a best case estimate given the poor stock market performance since the official numbers were released, the total unfunded pension liabilities for California’s state and local government workers would be $256 billion.
And $256 billion in unfunded liabilities, a staggering amount, still understates the problem for two reasons: First, these pension funds may not succeed in securing a 7.5% average annual return in the coming decades. If not, then they will not earn enough interest to prevent their funding ratios from getting even worse. Also, this doesn’t take into account “OPEB,” or “other post employment benefits,” primarily health insurance. The unfunded OPEB liability just for Los Angeles County is officially recognized at over $30 billion.
A realistic estimate of the total unfunded liabilities for retirement obligations to state and local workers in California is easily in excess of $500 billion. These benefits, which are financially unsustainable and far more generous than the taxpayer funded benefits available to ordinary private sector workers, were forced upon local and state elected officials through the unchecked power of government unions.
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