Freedom Line Blog

In a year or two, we may look back on the City of Bell public employee compensation scandal as the modern day equivalent of Upton Sinclair’s The Jungle.  Both stories showed the general public how bad a particular industry behaved, and prompted serious, far-reaching reforms.

The chief villain in the Bell fiasco (so far) is its former city manager Robert Rizzo.  At the time of his resignation, Rizzo was making close to $800,000 a year, and due to earn hundreds of thousands of dollars a year from his public employee pension.  Now that he’s retired, the pension is kicking in – and so are taxpayers in cities that share Bell’s pension pool.

That means that Hesperia, CA, is on the hook for $80,000 of Rizzo’s estimated $600,000 a year pension (not to work!), even though it fired Rizzo after his four year stint ended in 1992.  Taxpayers in Rancho Cucamonga will be paying $160,000 of the bill, with Bell and other cities who never even hired Rizzo chipping in the rest.

And remember, the estimated $600,000 is owed to Rizzo – by law – every year for the rest of his life.  After being fired by at least two of the cities that hired him.  Insane.  Public employee pension reform may not be a “sexy” issue on the campaign stump, but it is certainly a topic that is sure to get people’s attention during this era of runaway government spending.

The Bell scandal may be the the last, best chance to reign in the power of the public employee unions before they ruin the American economy.

CFIF Senior Fellow Troy Senik today reviews the most recent fix-it guide for California state politics in the Opinion section of the Wall Street Journal.  According to Senik the book, California Crackup, does a great job detailing the problems; especially the unintended consequences of pro-taxpayer measures like Proposition 13.  However, the “solutions” section leaves too much off the table – like taking on the mounting pension crisis spurred by public employee unions.

Read the entire column here.

California Governor Arnold Schwarzenegger is calling for all city, county and state employee salaries to be posted online for easy access by citizens.  Ordinarily, such a request wouldn’t merit a mention in a governor’s speech, but these aren’t ordinary times.  With California being home to 10 of the 12 highest unemployed metropolitan areas in the country, this is not the era to be paying salaries that total a million dollars in less than a decade to individual public employees.

The fallout from the City of Bell paying its top two city administrators plus the police chief a combined $1.6 million a year led to resignations from all three.  If media and prosecutorial scrutiny grows to include other municipalities, the taxpaying public will have a much better idea whom to blame for a good chunk of the state’s budget deficit: corrupt public officials and public employee unions.

For political observers looking for a glimpse into former e-Bay CEO and current gubernatorial candidate Meg Whitman’s (R-CA) job creation plan, a 34 page glossy magazine is available for free download (pdf) or delivery.  As both a PR document and a policy manual, the plan is impressive.  After listing the parade of economic horrible facing the Golden State, Whitman moves into prescription mode promising to promote tax cuts and streamline regulations that impede business.

Implementing any of these measures would help California.  Enacting all of them might actually save the state from financial collapse.  However, there is one addition I’d like to see that’s currently missing.

Tell the voters that governments can only create one type of job directly: a government job.  Whether it is a formal state position, a job that is made necessary to comply with a regulation or one to get a government contract, all of these jobs redirect talent and resources towards expanding the tax burden by increasing government spending.

A more sustainable model is implementing the kinds of policies Whitman is pushing; policies that create a tax and regulatory environment favorable to private sector job creation.  The more private sector jobs created means more people have more money, allowing government to lower tax rates while providing the same level of services.

In reality, Whitman as governor can’t create directly a single private sector job without picking winners and losers.  Instead, the most (and the best) she can do is create the conditions for success that allow private business to flourish and add workers.  Who better to educate the public on that point than a person with top-level business executive experience?

Once CFIF reported on the outrageous compensation packages of top city officials in Bell, CA, the city council announced the following resignations just after midnight today: Chief Administrative Officer Robert Rizzo ($787,637 annual salary); Assistant City Manager Angela Spaccia ($376,288); and Police Chief Randy Adams ($457,000).

Although none of the three will get severance packages when they leave, all will get substantial taxpayer-funded pensions not to work.

Rizzo would be entitled to a state pension of more than $650,000 a year for life, according to calculations made by the Times. That would make Rizzo, 56, the highest-paid retiree in the state pension system.

Adams could get more than $411,000 a year.

Spaccia, 51, could be eligible for as much as $250,000 a year when she reaches 55, though the figure is less precise than for the other two officials, the Times said.

The reason these pensions are so high is simple.  In California, many state workers get pension awards based on their highest income earning year.  All the years of lower pay – decades’ worth! – are ignored.  Since the pension amount is a percentage of the worker’s best paid year, abuse is rampant.

Anyone familiar with the system knows a police officer, firefighter, state nurse or other public employee who arranges to get tons of overtime during their last 1 to 3 years of service.  Since overtime boosts a person’s highest annual income amount, it inflates the resulting pension percentage.  This allows thousands of California public employees to retire in their 50s making hundreds of thousands of dollars per year – for life – not to work.

In fact, that’s exactly the kind of retirement Bell Police Chief Randy Adams was enjoying when Bell officials approached him for the job.  Adams had retired as the police chief of Glendale, CA, and said he would only work for Bell if the city paid both his $165,000 annual salary and the amount he was making in retirement.  If we subtract $165,000 from his annual compensation of $457,000, we can see that Adams was making $262,000 a year in retirement.

This is insane.  The public employee unions who negotiate these kinds of ridiculous contracts – and the politicians who sign off on them – have corrupted both the budget process and the integrity of their offices.  A reckoning is coming at all levels of government for precisely this kind of behavior.  The “Bell Three” are just the first of many to be rung out of office.

H/T: FoxNews.com

Following on from my column last week, Steven Greenhut, editor-in-chief of CalWatchdog.com, sits down with Reason to explore the excesses of public pensions and public-sector workers in general, especially in California. Enjoy, if you can stomach it:

Why bother editorializing when — as lawyers and Romans would say — Res ipsa loquitur.

From President Obama’s Oval Office address last night:

When I was a candidate for this office, I laid out a set of principles that would move our country towards energy independence. Last year, the House of Representatives acted on these principles by passing a strong and comprehensive energy and climate bill – a bill that finally makes clean energy the profitable kind of energy for America’s businesses

Now, there are costs associated with this transition. And some believe we can’t afford those costs right now. I say we can’t afford not to change how we produce and use energy – because the long-term costs to our economy, our national security, and our environment are far greater.

From an article in today’s Ventura County Star about California’s draconian greenhouse gas regulations:

Californians need to acknowledge the full consequences of the state’s efforts to reduce greenhouse gas emissions and accept the reality “that the net result of green policies may be negative for the economy,” says a report released today by the California Lutheran University Center for Economic Research and Forecasting…

The report examines economic studies in Europe, where the movement toward green jobs began. It finds the government costs of subsidizing jobs in the renewable energy sector have been excessive.

“In Germany, as in Spain, there is considerable belief that the job creation afforded by investment in renewables has been more than offset by the impact of more expensive energy, which has slowed consumption and investment elsewhere in the economy,” the report says.

In the U.S., it says, “Even as energy prices have increased, the growth of green jobs has been slower than expected. The evidence shows that green jobs and the regulations needed to spur them are expensive and hurt the economy.”

So, Mr. President, how long-term were you thinking exactly?

More on the economic lunacy in my new column reviewing the President’s speech last night.

Buried amidst the landslide primary victories of GOP candidates Meg Whiteman (governor) and Carly Fiorina (U.S. Senator) is a far more consequential vote.  The passage of Proposition 14, the ballot measure that abolishes partisan primaries in favor of a top-two run-off in a general election, is not the panacea its supporters claim.  Then again, many of the people who voted for it aren’t sure what it will do anyway.  From the New York Times:

That no one actually knows what the real effect of Proposition 14 will be seems almost beside the point to frustrated voters. What mattered, supporters said, is that something fundamental about politics — anything fundamental — had been changed.

As supporters celebrated, they promised to bring the so-called “top two” system to a state near you, with Gov. Arnold Schwarzenegger leading the charge — though his second term, plagued by budget meltdowns and plunging popularity, was, analysts said, one of the leading motivators for the measure.

Whether the measure will empower more independent voters — who were already allowed to vote in Democratic or Republican primaries, provided they requested a ballot — remains to be seen. But what did seem certain was that California was again poised to capture the mood of the country, just as it did in 1978 with Proposition 13, which distilled widespread antitax sentiment into a cap on property taxes.

This time, it is the anger of the electorate that Californians have bottled, experts said, even if they are not totally sure what they are doing.

This kind of thoughtless voting was the same motivating factor in passing the Golden State’s term limits measure in 1990s and the electorate’s more recent decision to have an unelected commission draw legislative and congressional districts.  Like Proposition 14, both have the effect of minimizing accountability by shifting power away from publicly elected officials toward staff, lobbyists, and moneyed insiders.

Perhaps the greatest irony of all is that in modern California politics Proposition 14 is likely to have zero effect on which two candidates are selected to run in the general election.  For over a decade the Republican and Democratic nominations have gone to those with high name recognition and/or independent wealth.  Whitman and Fiorina had tremendous advantages as a billionaire and multi-millionaire, respectively, and benefited enormously from establishment support that cut off their opponents’ ability to raise funds.

When Proposition 14 is implemented in 2011, they still will – only this time the decisions will take place not in an open, voter decided forum, but in informal discussions among special interest groups picking their candidates and clearing the field.

So, way to go California!  By voting for less structure you’ll get less control.  Maybe next year someone will qualify a ballot measure to abolish the legislature and let every citizen decide every issue by popular vote.

What could go wrong?

After letting medical marijuana dispensaries illegally mushroom to about 1,000 within city limits, L.A.’s city council is imposing tough new restrictions designed to reduce that number to between 70 and 130 within six months.  Under the recently passed ordinance, violators could be fined up to $2,500 a day, and possibly face jail time.

Here’s a mind-blowing perspective:

“The sky isn’t going to fall down,” Asha Greenberg, assistant city attorney, told National Public Radio. “LAPD isn’t going to go around kicking down doors, etc. Initially we’re going to be doing information gathering.”

At least there’s one deleterious activity the people running L.A.’s City Council are willing to fight against.  (At least until November…)

You will if John Eastman wins next Tuesday’s Republican primary.  Eastman is a former law school dean, clerk to Justice Clarence Thomas, and appellate litigator with experience in over 50 cases before the U.S. Supreme Court.  He is also a dyed-in-the-wool conservative.  His nomination for CA AG would instantly make the race the most important contest going into November for state voters.  Why?  Because unlike any of the gubernatorial candidates, Eastman is laying out a comprehensive strategy to fight for lower taxes, stronger borders, and less federal intrusion in the state’s prison and pension systems – all by suing to enforce existing laws.  It’s not often that the expert most likely to be the principal office holder’s deputy runs for the top job.  If Eastman emerges with the California GOP’s nomination next week, get ready for a full court press of conservative first principles.

For those paying attention to the U.S. Senate race in California, it would be a forgivable sin of omission if one thought that all of Senator Barbara Boxer’s (D-CA) campaign opponents sported an “R” after their name.  But apparently, she’s got competition in her Democratic primary next Tuesday: Slate contributor Mickey Kaus.

Surprisingly, Kaus is running to Boxer’s right on issues like firing bad public school teachers (supports), and amnesty for illegal immigrants (opposes).  And for those who would tar and feather Kaus as an ideological heretic, consider his response:

I’d argue these are the positions a liberal who cared about government and inequality would take. Why do Democrats reject them? They increasingly say it’s not so much because of policy, but because of politics: they have to turn out the “base” to win the next election, and the “base” consists of union members and Latinos (plus African Americans, who are badly hurt by illegal immigration but whom the party takes for granted).

Never mind that this theory is nearly unfalsifiable–if the Democrats lose, its proponents will always say that they just didn’t please the base enough. Has base-pleasing ever panned out? Looking back over recent elections, I can only think of one where the “base” was clearly more important than the moderate middle–that was the presidential election of 2004, when George W. Bush turned out millions of new right-wing voters many people thought didn’t exist. But most recent mid-term elections have been preceded by predictions that “Hey, given the low turnout it all depends on mobilizing the base!”–only to be followed by acknowledgments that it was moderate swing voters who swung the result.

If only Senator Boxer would debate this guy…

H/T: Huffington Post

From California Governor Arnold Schwarzenegger’s press conference unveiling his budget proposal amidst a $19.1 billion deficit:

“California no longer has low-hanging fruits – we don’t have any medium-hanging fruits, and we also don’t have any high-hanging fruits,” Schwarzenegger said, explaining the cuts Friday at a news conference in Sacramento. “We have to take the ladder from the tree and shake the whole tree.”

And no, he wasn’t making a Steve Miller Band reference.  (At least, I hope not.)

Though Sacramento’s spending commitments must be addressed, it’s interesting that the governor targeted eliminating the welfare-to-work program known as CALWorks, along with certain child care funding.  For their part, Democrats are wailing for a delay in scheduled corporate tax breaks.  As if further depleting business capital is the answer to balancing the state’s budget.

There are no easy, “comprehensive” answers for reforming California’s budget crisis.  But there is a better place to start the discussion: suspend AB 32, Schwarzenegger’s signature global warming bill.

In fact, that’s the name of a group making the case that since California is responsible for – at most – 1.4% of the world’s greenhouse gas emissions, AB 32’s severe, self-imposed restrictions amount to a jobs killer.  The group estimates that when fully implemented, AB 32 will cost the state 1.1 million jobs, the average family $3,857, and each small business $49,691.

The net result?  “Devastated budgets of California social services agencies through massive losses in tax revenue.”

Granted, suspending AB 32 would be largely symbolic, but if Schwarzenegger took the ax to his prized “green” bill, he could chalk it up to serious times calling for serious budgets.  When times are good, economies can afford to absorb major public investments on microscopic returns.  These are not those times.  Californians have needs and wants; it’s past time the state’s nutty politicians understood the difference.

The numbers don’t lie: Californians are voting with their feet when it comes to protecting their pocketbooks…all the way to Texas.

Though it’s hard to believe that more taxes don’t create more jobs, it’s down right shocking to realize that taxpayer financed commercials like this one are failing to draw people to the Golden State.

To answer the Governator’s question: as soon as Sacramento adopts a tax and regulatory regime WAY more friendly to businesses.

H/T: Reason.tv

One of the curious things about business people turned political candidates is how much they retain the language of commerce, yet shuck its practice.  The best example is of self-funded multi-millionaires (or billionaires) spending gobs of their own money at an unsustainable clip while excoriating career politicians for being fiscally irresponsible.  Although you can’t run a government exactly like a business, the notion that spending should match revenue is perhaps the one financial concept that applies to any endeavor not operating on the barter system.

All of which makes a Republican candidacy like Meg Whitman’s for California governor so paradoxical.  Like her political mentor, Mitt Romney, Whitman is loaning her campaign tens of millions of dollars from her personal wealth to fund her run.  The money is going to support a top-notch staff, endless media buys in California, and a slick website.  It is not, apparently, attracting an equal amount of financial contributions from people with a different bank account.  So, in order to make it to the June primary, Whitman will have to cut herself another check.

That approach won’t fly as governor.  One of the chief criticisms of Whitman’s campaign narrative is that she can’t fire underperforming bureaucrats and politicians in Sacramento the way she did as CEO of Ebay.  Now, it looks like her candidacy can’t muster enough popular support to prop up her big spending ways.  Californians already have a political class accustomed to spending money without regard to sustainability.  It is a lesson with consequences they don’t need to learn from a governmental rookie.

Maybe it is 100 years of Progressive institution building that obscures the lessons of history, but the writers of Slate are kidding themselves if they think that just because there are no formal legal structures to handle California and Greece’s looming bankruptcies, then it must also be true that they cannot declare bankruptcy.  That view betrays the positivist’s creed that if a problem isn’t addressed in law, then it cannot be resolved by government. More likely, private creditors will get soaked while the larger governments negotiate a separate peace.

History teaches that the inability or refusal to pay sovereign debt (whether loans or tribute) typically leads to the expansion of government power.  Since both California and Greece are de facto sub-agencies of the US and EU, respectively, here’s betting that on net, the federal governments of the United States and European Union will emerge with even more power than before.

The Golden State may now be the world’s largest banana republic.  After being approved by the state Senate, Governor Arnold Schwarzenegger’s pick to be Lieutenant Governor didn’t receive enough votes in the state Assembly to secure approval or rejection.  The result spawned name calling, threats of constitutional litigation, and the possibility that Schwarzenegger would seat his nominee personally and dare legislators to oppose him.  He has since backed down and will re-nominate his candidate, thus restarting the process.

At this point, why not pistols at dawn?  Anyone killed or unable to work thereafter wouldn’t be replaced, thus thinning the cancerous governmental herd feasting on tax dollars.

…so go aslyums masquerading as state governments throughout the nation. Despite the fact that the Golden State is staring a $20 billion budget deficit in the face (and facing the prospect of cutting off much of the revenue they’ll need to get out of the hole thanks to a Byzantine global warming law), policy entreprenuership is alive and well in Sacramento. The latest big idea:

California is going to be first state in the nation to monitor cow gas emission. The state plans to install a network of computerized devices to measure methane gas emissions in places where there are lots of dairy ranches and landfills.

Sounds like the state’s bureaucrats are competing with the bovines to see who can produce the most … waste.

So, can Californians get rid of it?  After all:

A new study from the nonprofit Highway Loss Data Institute found that rates of crashes before and after the landmark law took effect in 2008 have not significantly changed. It also found that the trend of California’s crashes before and after the law followed that of neighboring states — like Arizona and Nevada — that do not have bans on hand-held phones.

“The laws aren’t reducing crashes, even though we know that such laws have reduced hand-held phone use, and several studies have established that phoning while driving increases crash risk,” Adrian Lund, president of the Insurance Institute for Highway Safety and its affiliate, the data institute, said in a statement.

I’m just saying, it seems like the science/evidence/proof/etc. is pretty settled…

A good friend of mine is fond of pointing out that majority opinion condemned both Socrates and Jesus to death for speaking truth to power. One wonders if the political equivalent will happen to Greek Prime Minister George Papandreau now that his country has avoided being booted from the European Union for it’s out of control deficits. Part of the deal keeping Greece in the EU fold is Athens’ promise to do “whatever it takes” in order to get the nation’s fiscal house in order. The other part is the knowledge that the EU will not bail Greece out of its problems. For his part, the prime minister gets it:

“Greece is in a situation where we need to take very strong measures and structural changes in our country,” he said. “We’re determined to implement the programme.”

Unfortunately, the current solution is to sell a series of bond measures to finance the debt. This is exactly the same situation facing the State of California. Yearly budget shortfalls should no longer be patched with accounting gimmicks and stimulus money from the feds. Instead, if the state is going to avoid running out of money on April 1st, Sacramento needs to cut spending – NOW. But the only way that’s going to happen is with a sustained, detail-oriented presentation about the need for systemic reform from someone with access to the media. In effect, California needs a public figure willing to get the electorate to sober up on spending and make a priorities list funded with at least 10% less money than the state has taken in since 2007.

True, that won’t be politically expedient for any of the main contenders running to replace Schwarzenegger next year. It may even cost them the election. Then again, no one who’s running needs the job. Republicans Meg Whitman and Steve Poizner have over a billion dollars in wealth between them, and Democrat Jerry Brown wants a third turn at the governor’s mansion. If any of them want to start their tenure off on a realistic foot, they’d be talking about ways to cut, not ways to spend. As Greece shows, at some point the money runs out. Crazy thought: Why not start correcting the problems before they’re too big to fix?  Put another way, anybody willing to be a potential martyr for sake of actually telling people the truth?

Apparently, if you poke an earthworm a few hundred times, it eventually starts avoiding your finger. In California state politics, it’s looking like a few liberal stalwarts are starting to think twice about the Democrat Party’s sweetheart pension deals given to public employee unions. Any rational person that looks at the financial benefits of becoming a California cop, firefighter, or prison guard (among others) is bound to give serious thought to abandoning any other career option. Why? Because you can retire at 50 and get 90% of your last year’s pay. For the rest of your life. Guaranteed.

Think you can get that kind of compensation in the private sector? There’s a reason – it’s unsustainable. So says Democratic State Treasurer Bill Lockyear. But with the state facing a $20 billion deficit this year and Arnold Schwarzenegger entering his last as governor, it looks like Golden State taxpayers are in for another round of deferred maintenance on state budgeting. All this insanity kinda makes one wonder why anyone would want to be governor of California – or even a citizen.

H/T: Wall Street Journal