7 ms·

California’s New Taxes Are Paying for Pensions

44 points by ericfrenkiel 14y ago

fusiongyro 14y ago
> To the extent that school districts pick up the cost, kids in school today will be hurt because more dollars will go to pension costs and fewer dollars will go to classrooms. To the extent that the state picks up the cost, residents will receive fewer services. Either way, voters will get little for the tax increase they approved in November. The only real problem here is how this was presented. As worded, it sounds like Crane is arguing that the tax shouldn't have gone through. But the pensions were guaranteed, and taxes are how the voters pay for things. What the voters will get for their tax increase is fulfillment of obligations they've already promised. What they're "getting" is teachers in classrooms rather than rioting in the streets. The article comes across as whining about having to pay for things already bought.
- anigbrowl 14y ago
  The article comes across as whining about having to pay for things already bought. I'm all about funding public education but it's a fact that there's a lot of shitty, shitty deals in pension systems across CA - mostly of higher-level administrators rather than rank-and-file employees, but there you go. There's an opportunity cost to such deals. In my county (Alameda) the county administrator makes about $425k/year - more than the President - and is guaranteed her full salary in retirement, for life. It's nauseating.
  - reustle 14y ago
    I understand the arguments for and against pensions and I still think it's a ridiculous concept.
  - eli_gottlieb 14y ago
    Yeah, so why not just go after those extreme cases rather than broadly and generally defunding public education and ruining teachers' old age?
    - anigbrowl 14y ago
      I mention it because legally, most of these pension contracts stand on a similar footing in California. I'm not arguing for broad or general defunding of education, but I do think that sector needs root-and-branch reform from the federal level down. I'd need several pages to go into how though.
  - arethuza 14y ago
    We have a similar problem in the UK - some public sector administrators seem to make vast amounts of money for jobs that seem secure and rather undemanding to me. What I find particularly annoying is that people at the "sharp end" of the state (rather than administrators) often seem poorely paid for the responsibilities they have. A recent Royal Navy recruitment advert pointed out that you can make up to £95K serving on a submarine - to which my reaction was "that's all the commander of a UK Trident submarine makes?". NB In the case of UK Trident submarine commanders this seems particularly bad as they (and their crews) have far more freedom than people in equivalent positions in other navies. As far as I know, only the UK Trident submarines have the power to launch without any authorization from the PM or anyone else [there were good reasons for this, at least during the Cold War]. So we really trust these men and women.
- patio11 14y ago
  Voters have little meaningful check on the ability of the California teachers unions (and, more brazenly, public safety unions, and also state employees generally) to unilaterally award themselves extraordinarily expensive compensation schemes. This is particularly true with regards to pensions, since $X0 billion dollar future outlays are routinely described as "minor adjustments to administrative procedures" and often not subject to the discipline of the ballot at all. For example, consider a one-line alteration to a statewide contract for teachers, changing the calculation for defined-benefit pensions from being based off of "the average of the highest 3 years of salary in a career" to "the average of the highest 3 years of salary in a career for careers of less than 25 years, or the highest single year of salary for careers of 25 or more years." That doesn't look like "The teachers just asked for $50 billion in extra pensions", does it? But that's exactly what happened. (If you're unsure of why there's a difference between the two contracts, read up on "pension spiking", which is theft under the cover of law that is an institutional reality for California public employees since "everybody is doing it.")
  - wildgift 14y ago
    We need either a smarter mix of politicians (not likely), or some bureaucrats that have to review the financial effects and report their findings on all changes to compensation. Then we would need a smarter press corps. That is more do-able.
  - fusiongyro 14y ago
    Sure, but that's a different article about the real problem, while this one complains about how tax money was spent paying taxpayer obligations.
dakinsloss 14y ago
Check out cacs.org where the author is a board member for more information on ca govt.
- deleted 14y ago
  [deleted]
ChuckMcM 14y ago
Actually during the advertising blitz this was pointed out that all of this wasn't funding education but instead the teacher pension system. Not that most voters listened.
- gojomo 14y ago
  Indeed, I have at least one friend who voted for Prop 30 who had no idea (and was rudely surprised when he later learned) that it would retroactively increase his 2012 taxes. Ah, Democracy!
omegaworks 14y ago
Please, whine more about what we're paying schoolteachers. Your words are doing so much good in the world. SO. MUCH. GOOD.
- cmccabe 14y ago
  Why not try engaging your brain before spewing another "think of the children" post onto the internets? Calpers has argued that California is legally obligated to pay all pensions in full due to the California constitution. If the pension fund falls short, who do you think will suffer cuts? Hey, that's right. The kids of today, who will have to deal with fewer teachers, bigger classes, and so forth. David Crane is arguing that we should actually fund the pension fund properly rather than using Enron-style accounting tricks and ridiculous assumptions to kick the can down the road. For saying this, he lost his seat on the board. People deserve to know where their money is really going. If we need to pass an emergency tax to fund pensions, let's call it that, rather than dishonestly pretending it's to expand education.
- wildgift 14y ago
  Teachers get paid OK and have a lot of job security compared to the average workers. I think they deserve it, for the most part, but let's not fool ourselves into thinking they are paupers or working class. It's a solid middle class job with a great retirement package.
hkmurakami 14y ago
>Teachers, who don’t receive outlandish wages or pensions, didn’t cause this problem, and the good news for them is that they will get their pensions because the state is legally required to back up school districts if they can’t meet their commitments. How can teachers be completely absolved of responsibility for the current situation, considering that teacher's unions were at least partly responsible for negotiating the pension contents? Obviously the individual teachers or administrators never wanted a bankrupt system, but when you hand off representation to your union without taking responsibility for long term sustainability, stuff like this happens. Look at the Automobile Unions; basically the same sort of setup.
- gojomo 14y ago
  In California, the union didn't just negotiate the contracts from one side of the table. The California Teacher's Association (CTA) is, by amount spent, the most powerful entity in state politics (to say nothing of volunteer 'ground troops'). Thus they control both sides of the negotiating table, and also usually get what they want via the initiative process, as with 1988's Prop 98 (guaranteeing school funding by formula) or 2012's Prop 30 (as noted by this article, bailing out teachers' underfunded pensions). Here's a nice exegesis of their role over the last 40 years: http://www.city-journal.org/2012/22_2_california-teachers-association.html http://www.city-journal.org/2012/22_2_california-teachers-as... If it's part of school finance or operations in California, and it's broken, it's because the CTA made it that way.
  - rdl 14y ago
    I don't get how there is so much spending, but such crappy schools. There's a reasonable argument over how much should be spent on education (assuming returns are relatively proportional to spending), but CA seems to spend money for no return.
    - barry-cotter 14y ago
      No real quality control from outside (How many administrators aren't former teachers?) and really, really high switching costs. If you want to switch schools you can move house or pay for the government schools through taxes and private school in fees. Not that I think the evidence suggests there's much easy improvement in teaching quality but parochial/charter schools suggest you can do it for a lot cheaper.
old-gregg 14y ago
Why do state employees enjoy the privilege of pensions and free healthcare? Why can't we force them into the real world of shitty insurance plans, financial responsibility for their own retirement supplemented by social security checks, you know, the life style that private sector employees are "enjoying"? By "private sector" I don't mean the tiny group of high-tech workers and other 6-figure professionals, but regular people who represent the median $61K/household income, just to be clear. Isn't this just utterly fucked up: to pay for state employees entitlements while not being eligible to receive any ourselves? I was hoping that California will simply go bankrupt and we'll be given a chance to start from scratch, but apparently a State cannot be bankrupted, so how are we supposed to get rid of Sacramento without resorting to violence? "Voting them out" is clearly not working because they're simply lying on the ballots now.
- rdl 14y ago
  I'd far rather move (even just within the US) than resort to violence. WA, TX, NV, etc. all seem comparatively well governed. The natural environment in CA is a plus, and it still has the best overall nexus of capital, startups, and people, but that advantage is rapidly declining vs. other states.
  - seanmcdirmid 14y ago
    WA put in the same bucket as TX, that's a bit wrong. Washington has decent public schools, Texas is notorious for how bad it's schools are...
    - rdl 14y ago
      I just meant "has tech jobs, isn't insolvent". I didn't know anything about TX schools (UT-Austin is great, as is UW, but I assume the discussion is mainly about K-12).
      - seanmcdirmid 14y ago
        UTA is ok, not as good as UW. Washington K12 is in a different league from Texas, which suffers from a completely dysfunctional non government. California has much better weather than Texas. There is a reason housing prices continue to rise in CA while they are basically stagnant in TX. Don't brush off Cali because of a few gov problems, they will still continue to kick every other state's ass in the long run. Anyways, I'm happy as long as Californians move to Texas and not Washington.
wildgift 14y ago
I'm a CA Dem, but wish that the CA GOP would get its act together so there would be a credible threat to this voodoo economics. Right now, the CA GOP is in such a sorry state that many people seeking office switch to Dem to even have a shot. My party is crawling with GOP defectors. The Republican Party has become the Tea Party, Anti Immigrant, Anti Abortion, Anti Tax, Anti Gay party. There's no room for compromise.
maked00 14y ago
Typical 1% rant designed to flumox the 99%. Overlooks that teacher pensions is a legitimate expense if you just happen to be running schools, like CA is. Just goes to show, when you want to lie, lie big. Take away teachers' pensions, and you might as well say goodbye to attracting any new teachers or retaining the good ones. As Dr. Martin Luther King worked so hard for, everyone, which includes teachers, has a right to a decent living which includes a decent retirement.
- rayiner 14y ago
  The attracting teachers bit is crap. We have a huge surplus of fresh college graduates in this country with no jobs. You could get rid of pensions entirely and still have bright people lining up to fill positions.
  - FelixP 14y ago
    Also, I imagine that most potential new teachers would be skeptical at best about receiving their full pension benefits.
    - danielweber 14y ago
      It's very economically difficult to move either into teaching or out of teaching. There's nothing fundamental about this; it's just the systems we've set up. Teaching really should be one of the things that it's as easy as possible to switch into or out of.
vondur 14y ago
A big part of the pension problem in California comes from Firefighters and Police. They don't contribute to the pension system, yet used to be able to cash out at age 50 with a full pension. Also, since their pension was based on their highest attained salary, they would work one year with a bunch of overtime, often spiking their salaries to six figures.

44 points by ericfrenkiel 14y ago

> To the extent that school districts pick up the cost, kids in school today will be hurt because more dollars will go to pension costs and fewer dollars will go to classrooms. To the extent that the state picks up the cost, residents will receive fewer services. Either way, voters will get little for the tax increase they approved in November. The only real problem here is how this was presented. As worded, it sounds like Crane is arguing that the tax shouldn't have gone through. But the pensions were guaranteed, and taxes are how the voters pay for things. What the voters will get for their tax increase is fulfillment of obligations they've already promised. What they're "getting" is teachers in classrooms rather than rioting in the streets. The article comes across as whining about having to pay for things already bought.

anigbrowl 14y ago
The article comes across as whining about having to pay for things already bought. I'm all about funding public education but it's a fact that there's a lot of shitty, shitty deals in pension systems across CA - mostly of higher-level administrators rather than rank-and-file employees, but there you go. There's an opportunity cost to such deals. In my county (Alameda) the county administrator makes about $425k/year - more than the President - and is guaranteed her full salary in retirement, for life. It's nauseating.
- reustle 14y ago
  I understand the arguments for and against pensions and I still think it's a ridiculous concept.
- eli_gottlieb 14y ago
  Yeah, so why not just go after those extreme cases rather than broadly and generally defunding public education and ruining teachers' old age?
  - anigbrowl 14y ago
    I mention it because legally, most of these pension contracts stand on a similar footing in California. I'm not arguing for broad or general defunding of education, but I do think that sector needs root-and-branch reform from the federal level down. I'd need several pages to go into how though.
- arethuza 14y ago
  We have a similar problem in the UK - some public sector administrators seem to make vast amounts of money for jobs that seem secure and rather undemanding to me. What I find particularly annoying is that people at the "sharp end" of the state (rather than administrators) often seem poorely paid for the responsibilities they have. A recent Royal Navy recruitment advert pointed out that you can make up to £95K serving on a submarine - to which my reaction was "that's all the commander of a UK Trident submarine makes?". NB In the case of UK Trident submarine commanders this seems particularly bad as they (and their crews) have far more freedom than people in equivalent positions in other navies. As far as I know, only the UK Trident submarines have the power to launch without any authorization from the PM or anyone else [there were good reasons for this, at least during the Cold War]. So we really trust these men and women.
patio11 14y ago
Voters have little meaningful check on the ability of the California teachers unions (and, more brazenly, public safety unions, and also state employees generally) to unilaterally award themselves extraordinarily expensive compensation schemes. This is particularly true with regards to pensions, since $X0 billion dollar future outlays are routinely described as "minor adjustments to administrative procedures" and often not subject to the discipline of the ballot at all. For example, consider a one-line alteration to a statewide contract for teachers, changing the calculation for defined-benefit pensions from being based off of "the average of the highest 3 years of salary in a career" to "the average of the highest 3 years of salary in a career for careers of less than 25 years, or the highest single year of salary for careers of 25 or more years." That doesn't look like "The teachers just asked for $50 billion in extra pensions", does it? But that's exactly what happened. (If you're unsure of why there's a difference between the two contracts, read up on "pension spiking", which is theft under the cover of law that is an institutional reality for California public employees since "everybody is doing it.")
- wildgift 14y ago
  We need either a smarter mix of politicians (not likely), or some bureaucrats that have to review the financial effects and report their findings on all changes to compensation. Then we would need a smarter press corps. That is more do-able.
- fusiongyro 14y ago
  Sure, but that's a different article about the real problem, while this one complains about how tax money was spent paying taxpayer obligations.

dakinsloss 14y ago

Check out cacs.org where the author is a board member for more information on ca govt.

deleted 14y ago
[deleted]

ChuckMcM 14y ago

Actually during the advertising blitz this was pointed out that all of this wasn't funding education but instead the teacher pension system. Not that most voters listened.

gojomo 14y ago
Indeed, I have at least one friend who voted for Prop 30 who had no idea (and was rudely surprised when he later learned) that it would retroactively increase his 2012 taxes. Ah, Democracy!

omegaworks 14y ago

Please, whine more about what we're paying schoolteachers. Your words are doing so much good in the world. SO. MUCH. GOOD.

cmccabe 14y ago
Why not try engaging your brain before spewing another "think of the children" post onto the internets? Calpers has argued that California is legally obligated to pay all pensions in full due to the California constitution. If the pension fund falls short, who do you think will suffer cuts? Hey, that's right. The kids of today, who will have to deal with fewer teachers, bigger classes, and so forth. David Crane is arguing that we should actually fund the pension fund properly rather than using Enron-style accounting tricks and ridiculous assumptions to kick the can down the road. For saying this, he lost his seat on the board. People deserve to know where their money is really going. If we need to pass an emergency tax to fund pensions, let's call it that, rather than dishonestly pretending it's to expand education.
wildgift 14y ago
Teachers get paid OK and have a lot of job security compared to the average workers. I think they deserve it, for the most part, but let's not fool ourselves into thinking they are paupers or working class. It's a solid middle class job with a great retirement package.

hkmurakami 14y ago

>Teachers, who don’t receive outlandish wages or pensions, didn’t cause this problem, and the good news for them is that they will get their pensions because the state is legally required to back up school districts if they can’t meet their commitments. How can teachers be completely absolved of responsibility for the current situation, considering that teacher's unions were at least partly responsible for negotiating the pension contents? Obviously the individual teachers or administrators never wanted a bankrupt system, but when you hand off representation to your union without taking responsibility for long term sustainability, stuff like this happens. Look at the Automobile Unions; basically the same sort of setup.

gojomo 14y ago
In California, the union didn't just negotiate the contracts from one side of the table. The California Teacher's Association (CTA) is, by amount spent, the most powerful entity in state politics (to say nothing of volunteer 'ground troops'). Thus they control both sides of the negotiating table, and also usually get what they want via the initiative process, as with 1988's Prop 98 (guaranteeing school funding by formula) or 2012's Prop 30 (as noted by this article, bailing out teachers' underfunded pensions). Here's a nice exegesis of their role over the last 40 years: http://www.city-journal.org/2012/22_2_california-teachers-association.html http://www.city-journal.org/2012/22_2_california-teachers-as... If it's part of school finance or operations in California, and it's broken, it's because the CTA made it that way.
- rdl 14y ago
  I don't get how there is so much spending, but such crappy schools. There's a reasonable argument over how much should be spent on education (assuming returns are relatively proportional to spending), but CA seems to spend money for no return.
  - barry-cotter 14y ago
    No real quality control from outside (How many administrators aren't former teachers?) and really, really high switching costs. If you want to switch schools you can move house or pay for the government schools through taxes and private school in fees. Not that I think the evidence suggests there's much easy improvement in teaching quality but parochial/charter schools suggest you can do it for a lot cheaper.

old-gregg 14y ago

Why do state employees enjoy the privilege of pensions and free healthcare? Why can't we force them into the real world of shitty insurance plans, financial responsibility for their own retirement supplemented by social security checks, you know, the life style that private sector employees are "enjoying"? By "private sector" I don't mean the tiny group of high-tech workers and other 6-figure professionals, but regular people who represent the median $61K/household income, just to be clear. Isn't this just utterly fucked up: to pay for state employees entitlements while not being eligible to receive any ourselves? I was hoping that California will simply go bankrupt and we'll be given a chance to start from scratch, but apparently a State cannot be bankrupted, so how are we supposed to get rid of Sacramento without resorting to violence? "Voting them out" is clearly not working because they're simply lying on the ballots now.

rdl 14y ago
I'd far rather move (even just within the US) than resort to violence. WA, TX, NV, etc. all seem comparatively well governed. The natural environment in CA is a plus, and it still has the best overall nexus of capital, startups, and people, but that advantage is rapidly declining vs. other states.
- seanmcdirmid 14y ago
  WA put in the same bucket as TX, that's a bit wrong. Washington has decent public schools, Texas is notorious for how bad it's schools are...
  - rdl 14y ago
    I just meant "has tech jobs, isn't insolvent". I didn't know anything about TX schools (UT-Austin is great, as is UW, but I assume the discussion is mainly about K-12).
    - seanmcdirmid 14y ago
      UTA is ok, not as good as UW. Washington K12 is in a different league from Texas, which suffers from a completely dysfunctional non government. California has much better weather than Texas. There is a reason housing prices continue to rise in CA while they are basically stagnant in TX. Don't brush off Cali because of a few gov problems, they will still continue to kick every other state's ass in the long run. Anyways, I'm happy as long as Californians move to Texas and not Washington.

wildgift 14y ago

I'm a CA Dem, but wish that the CA GOP would get its act together so there would be a credible threat to this voodoo economics. Right now, the CA GOP is in such a sorry state that many people seeking office switch to Dem to even have a shot. My party is crawling with GOP defectors. The Republican Party has become the Tea Party, Anti Immigrant, Anti Abortion, Anti Tax, Anti Gay party. There's no room for compromise.

maked00 14y ago

Typical 1% rant designed to flumox the 99%. Overlooks that teacher pensions is a legitimate expense if you just happen to be running schools, like CA is. Just goes to show, when you want to lie, lie big. Take away teachers' pensions, and you might as well say goodbye to attracting any new teachers or retaining the good ones. As Dr. Martin Luther King worked so hard for, everyone, which includes teachers, has a right to a decent living which includes a decent retirement.

rayiner 14y ago
The attracting teachers bit is crap. We have a huge surplus of fresh college graduates in this country with no jobs. You could get rid of pensions entirely and still have bright people lining up to fill positions.
- FelixP 14y ago
  Also, I imagine that most potential new teachers would be skeptical at best about receiving their full pension benefits.
  - danielweber 14y ago
    It's very economically difficult to move either into teaching or out of teaching. There's nothing fundamental about this; it's just the systems we've set up. Teaching really should be one of the things that it's as easy as possible to switch into or out of.

vondur 14y ago

A big part of the pension problem in California comes from Firefighters and Police. They don't contribute to the pension system, yet used to be able to cash out at age 50 with a full pension. Also, since their pension was based on their highest attained salary, they would work one year with a bunch of overtime, often spiking their salaries to six figures.