Global Economic
Trend Analysis

Recent Posts

Tuesday, November 24, 2009 11:05 AM

Plundering California: How Public-Sector Unions Brought The State To Its Knees

Mish Moved to MishTalk.Com Click to Visit.

Inquiring minds are reading Plundering California by Steven Greenhut, director of the Pacific Research Institute’s Journalism Center in Sacramento and a longtime columnist for the Orange County Register in Santa Ana.

The economy is struggling, the unemployment rate is high, and many Americans are struggling to pay the bills, but one class of Americans is doing quite well: government workers. Their pay levels are soaring, they enjoy unmatched benefits, and they remain largely immune from layoffs, except for some overly publicized cutbacks around the margins. To make matters worse, government employees—thanks largely to the power of their unions—have carved out special protections that exempt them from many of the rules that other working Americans must live by. California has been on the cutting edge of this dangerous trend, which has essentially turned government employees into a special class of citizens.

When I recently appeared on Glenn Beck’s TV show to discuss California’s dreadful fiscal situation, I mentioned that in Orange County, where I had been a columnist for the Orange County Register, the average pay and benefits package for firefighters was $175,000 per year. After the show, I heard from viewers who couldn’t believe the figure, but it’s true. Firefighters, like all public-safety officials in California, also receive a gold-plated retirement plan: a defined-benefit annual pension that offers 90 percent or more of the worker’s final year’s pay, guaranteed for the rest of his life (and the life of his spouse).

As I document in my new book, Plunder!, government employees of all stripes have manipulated the system to spike their pensions. Because California bases pensions for employees on their final year’s salary, some workers move to other jurisdictions for just that final year to increase their pay and thus the pension. Even government employees convicted of on-the-job crimes continue to collect benefits.

Even in these tough times, public employees continue to press city councils for retroactive pension increases, which amount to gifts of public funds for past services. Officials fear the clout that these unions, especially police and fire unions, wield on Election Day.

The story doesn’t end with the imbalance in pay and benefits. Government workers also enjoy absurd protections. The Los Angeles Times did a recent series about the city’s public school district, which doesn’t even try to fire incompetent teachers and is seldom able to get rid of those credibly accused of misconduct or abuse.

A state law referred to as the Peace Officers Bill of Rights, along with excessive privacy restrictions, likewise makes it nearly impossible to fire police officers who abuse their authority.

The media have finally started to take notice, largely because of some impossible-to-ignore financial excesses, particularly the tens of billions of dollars in “unfunded liabilities”—that is, future debt—run up by politicians more interested in pleasing union officials than in looking after the public’s finances. News reports have also focused on scandals at CalPERS, the California Public Employees’ Retirement System, which has faced record losses after making risky leveraged investments in bizarre real-estate deals. (The government pension system encourages such risky behavior: with defined-benefit systems, union members stand to gain if the investments go well, while taxpayers shoulder the burden if they don’t.) Meanwhile, the Los Angeles Times reported on a politically connected insider who received $53 million in finder’s fees from CalPERS, raising questions of pay-to-play deals.

But the real scandal is a two-tier society where government workers enjoy benefits far in excess of those for whom they supposedly work.
I am pleased to help Steven Greenhut spread the message. Public unions are something I have been railing about for years.

Greenhut writes, "It’s past time to start cleaning up the mess by reforming retirement systems and limiting the public unions’ power. If we don’t, California’s financial problems will become insurmountable."

On that score he is too late. California is bankrupt. Even with massive pension revisions, California is going to need a bailout of some kind. Sadly, changes in pension plans are not even on the table for discussion.

Mike "Mish" Shedlock
Click Here To Scroll Thru My Recent Post List

Last 10 Posts

Copyright 2009 Mike Shedlock. All Rights Reserved.
View My Stats