Teachers’ Unions Appalled at Idea of Paying Teachers Like Rock Stars

October 26, 2018 By Steven Greenhut 10 Comments

TeacherIf you’re looking for a stellar example of teachers’ unions ongoing commitment to mediocrity or worse, then you need only look at their reaction to California GOP gubernatorial candidate John Cox’s idea of paying top-notch teachers much higher salaries – perhaps even rivalling those earned by ballplayers and rock stars. The unions, of course, pan the idea. One union official told the Sacramento Bee that “education should not be a competitive endeavor.”

Cox seemed to suggest in a statement to the newspaper that he engaged in some hyperbole: “Of course our teachers will never approach the pay of a Beyonce or a Lebron, but quite frankly, our classroom teachers influence, inspire and change the arc of more lives than even these music and athletic superstars.” But his idea of instituting a form of merit pay makes a lot of sense. Despite the naysaying, every successful enterprise is, to some degree, competitive.

Merit pay is a simple concept. It allows school administrators to pay good, effective teachers more than mediocre or poor-performing teachers. It allows signing bonuses and performance-based rewards. The obvious corollary is that it also allows them to pay bad or incompetent teachers lower salaries. In a truly competitive educational model that goes beyond this simple idea, school officials could even – get this – demote, discipline or fire teachers who aren’t making the grade. That’s how it works in almost any private business, and even private schools.

In the current public-school system, however, pay is based on seniority. A school teacher who has been just occupying a chair for decades, must be paid better than a young go-getter. A teacher who is willing to ply his or her skills in a tough, low-performing urban school must be paid the same as a teacher on autopilot in a wealthy suburban district, where the challenges are less severe and the stakes not as high. In times of layoffs, that energetic tough student working a hard gig must be laid off first, thanks to something known as LIFO, or “Last In, First Out.”

In the current, union-controlled monopoly system school administrators are not free to recruit the best and brightest talent from other industries because, well, they can’t pay enough to lure them out of more lucrative fields. And anyone who wants to be a regular, full-time teacher in California’s public schools must go through the long, expensive and mind-numbing process of getting an education degree. (Did I mention that those who receive such degrees tend to come from the bottom rungs of the academic ladder, according to numerous studies?)

To make matters worse, it’s nearly impossible to fire public-school teachers provided they show up for the job. School districts have “rubber rooms,” where teachers deemed unfit for the classroom twiddle their thumbs and collect full pay and benefits while their cases are adjudicated for months and even years given all the union protections against firing. It can cost school districts hundreds of thousands of dollars to go through the firing process, so most don’t bother.

That leads to an annual, cynical process called the “dance of the lemons.” As Peter Schweizer explained for the Hoover Institution, “Often, as a way to save time and money, an administrator will cut a deal with the union in which he agrees to give a bad teacher a satisfactory rating in return for union help in transferring the teacher to another district. The problem teacher gets quietly passed along to someone else. Administrators call it ‘the dance of the lemons’ or ‘passing the trash.’” These cases usually involve teachers accused of some terrible action, but it’s functionally impossible to get rid of or pass along teachers who are merely incompetent. I recall when John Stossel showed a long flow chart of how to fire a teacher in New York City. The audience was stunned. Then Stossel, held up more pages of the chart. It’s crazy and the results are insane.

In 2012, nine California public-school students filed a lawsuit against California and the CTA arguing that the state’s system of teacher protections violates the state constitution’s promise of an “effective” education. Los Angeles County Superior Court Judge Rolf Treu ruled on behalf of the students. He invalidated teacher tenure and other work rules because they assured that a percentage of “grossly ineffective” teachers would be left in the classroom, wreaking havoc on the future of many thousands of students, especially those in poor school districts.

In his decision, Treu noted that “an expert called by (California school administrators), testified that 1 – 3 percent of teachers in California are grossly ineffective. Given that the evidence showed roughly 275,000 active teachers in this state, the extrapolated number of grossly ineffective teachers ranges from 2,750 to 8,250.” That’s a lot of bad teachers, and a depressing number of students who suffer in their classrooms. But Treu’s decision was overturned on appeal, and the appeal was upheld by the California Supreme Court. But the facts are the facts, even if the court was unwilling to back a decision to shake up the state’s public-education system.

This is what happens when the educational system is not a “competitive endeavor,” but rather a union-controlled, government monopoly. It means that good teachers cannot be rewarded. Great teachers cannot easily be recruited. Grossly ineffective teachers cannot easily be removed. And mediocre ones have few incentives to improve. Imagine how this system would work in your particular profession or business. How well would it do if the worst are protected, the best are neglected and the so-so ones are rewarded?

In the news story, candidate Cox didn’t get into the details of the hiring/firing process, but his merit-pay idea should be widely applauded. Yet on its website, the California Teachers’ Association says that “merit pay is flawed in concept. Where it has been tried, it has proved to be a detriment rather than a stimulus to better education. CTA is open to consideration of alternative pay plans as determined by the local associations through the collective bargaining process.”

As a final note, the debate over merit pay reinforces the wisdom of the U.S. Supreme Court’s recent Janus decision, which declared that teachers and other public employees are not required to pay union dues even to support collective-bargaining purposes. Justice Samuel Alito, wrote for the majority that such bargaining often involved “fundamental questions of education policy,” so it’s antithetical to the First Amendment to compel people to support ideas to which they don’t agree.

“Should teacher pay be based on seniority, the better to retain experienced teachers?” Justice Alito asked. “Or should schools adopt merit-pay systems to encourage teachers to get the best results out of their students?” Public-school teachers no longer are forced to subsidize the opposition to merit pay and to reforms to the current tenure and seniority based system, but there’s still a long process ahead to move toward the idea that Cox touted.

Steven Greenhut is a contributing editor for the California Policy Center. He is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This article was originally published by the CA Policy Center

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Is One California Really Enough?

June 15, 2018 By Steven Greenhut 36 Comments

california-flagIs it time for Californians to seriously consider breaking up their state into smaller portions? We’ll soon see if they think so after Silicon Valley venture capitalist Tim Draper’s latest plan to turn California into three Californias has qualified for the November ballot. Unfortunately, it won’t fix most of the problems that ail our massive and ungovernable state because of the way the plan draws the borders. Breaking up is a good idea, but it has to be done the right way.

Even if the initiative passes, it would only be a start in a long and arduous process that would ultimately require the approval of Congress and probably the state Legislature (depending on how the courts rule). Don’t start designing the new state flags quite yet. In what world will California legislators calmly give up power or Congress consider turning one state into three? The Draper-backed measure has gotten national attention, but it’s little more than an advisory vote, although his plan is more feasible than a couple of other break-up proposals.

Timing for the initiative is pretty good though, coming on the tail end of a primary election that has reminded us that virtually every other political reform idea here has failed. Last week’s wild California primary election was defined by a relatively new “top two” system that was supposed to moderate the extremes in each party and give voters a greater say in their representation. It was just the latest “rearrange the deck chairs” solution.

Under the new primary system, the top two vote getters move on to the general election, regardless of party affiliation. It’s hard to conclude that it did much this year in the governor’s race as liberal Democrat, Lt. Gov. Gavin Newsom of San Francisco, faces off in November against Republican businessman John Cox, a Trump-backed conservative from the San Diego area. This is a standard political match up — and one that heavily favors continued Democratic dominance. Republicans are unlikely to win any statewide office in November.

Other recent process-oriented reforms included a non-partisan redistricting committee that has made no discernible difference in the Legislature’s make up and allowing the Legislature to pass budgets with a simple majority vote rather than a supermajority. The latter “reform,” pushed by business-oriented moderates, reduced partisan bickering by totally cutting Republicans out of the process. It has paved the way for budgets that set spending records. What a triumph.

The problem, it seems, is more fundamental than anything that could be addressed by tinkering with political rules. This state runs nearly 800 miles from the border at Tijuana to the Oregon border. Some of those tiny eastern states — Rhode Island, Connecticut, Delaware — wouldn’t be more than a decent county out here. In fact, San Bernardino County is larger geographically than nine individual states and the four smallest states combined (those above three plus Hawaii). Considered in context, then, Draper’s idea isn’t so unreasonable.

Los Angeles County, with its 10 million population, is more populous than 41 states. Practically speaking, it’s hard for any Republican to win statewide office when one of its 58 counties has that many people — and its electorate votes overwhelmingly Democratic. The end result is people who live in the agricultural Central Valley, the rural resource-oriented north state, or in relatively conservative suburban coastal areas have little say in statewide governance. It’s the kind of problem that nationally was addressed by the Electoral College. Maybe there’s nothing else to do than break up the state into more sensible, self-governing portions?

Draper’s particular plan comes up short, though. Californians have been arguing about their state boundaries since it was admitted into the union in 1850. There have been more than 200 efforts since then to rearrange its boundaries, which were the product of happenstance and greed (the desire to grab as many of the gold fields as possible). It’s fine to try it again, but the reason for any current break up has to be clear. It’s not only to create smaller, more geographically compatible portions. It’s to give the state’s more conservative regions a chance to unyoke themselves from the liberal Democrats who have complete control of the place.

Draper had previously proposed a six-state solution that artfully solved most of the above-mentioned political problems, but he chiseled it down to three states to provide something more politically palatable to voters. The main impetus for a break up has come from residents of the low-population north state through a State of Jefferson movement that used to include southern Oregon counties. Its purpose is depicted by the two “X’s” that are on its proposed state flag. Residents have been double-crossed by politicians in Sacramento and Salem.

But this plan double crosses them again by drawing Northern California’s boundary so far south that it grabs the entire San Francisco Bay Area and Sacramento. Instead of getting greater independence, these residents would get the same situation, only worse. San Francisco area voters will have more influence in that region than they currently have now in the Golden State. Draper then puts Los Angeles in with the state’s left-leaning Central Coast, thus creating a second state that’s still called California. That makes sense. The third state, Southern California, includes the more conservative southern suburban areas (Orange County, San Diego, the Inland Empire) and grabs a large swath of the San Joaquin Valley, the state’s agricultural heartland.

That’s a reasonable new state, also. It would become something of a political toss up, given that its main population areas are trending Democratic. My three-state proposal is far better. I would put California’s most liberal coastal areas into one long state that goes from Long Beach through the Bay Area to the northern border of Mendocino and cuts inland to grab Yolo (the college town of Davis) and government-centric Sacramento. This will be a progressive’s Nirvana, with counties that are totally compatible culturally, geographically, and politically. (I’d have to move, of course, but I can’t let personal considerations get in the way of a good map!)

Then the State of Jefferson will include the rural north state and drop down and grab most of the Central Valley. It will be a solid red state. Then the new state of Southern California will include the major Southern counties sans Los Angeles and run east through the desert regions and up through the eastern Sierra. It will be a purple state. This breakdown provides better representation for everyone, but doesn’t dramatically change the balance of power.

Even with the coming initiative ballot, it’s all largely for the intellectual exercise given its low likelihood of happening. Nevertheless, all good ideas start with thought experiments, so it’s important to get the maps right. Perhaps at some point we’ll all realize that California, in its current geographical framework, is unsalvageable — and that better boundaries will lead to better governance.

Steven Greenhut is Western region director for the R Street Institute. Write to him atsgreenhut@rstreet.org.

This article was originally published by the American Spectator

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California should copy New Jersey’s union fund takeover, but with one caveat

April 8, 2018 By Steven Greenhut Leave a Comment

UnionYes, unions should be free to control their own destiny. Their members are dependent on these defined-benefit pensions, so union officials ought to decide how the money is invested. Union leaders should select the expected rates of return. They should manage the assets, decide on cost-of-living adjustments and control every cent within the fund. They and their members deserve to reap the benefits, of course, but here’s the caveat: taxpayers no longer should have to foot the bill for their miscalculations. They simply need to remove the liability from taxpayers.

New Jersey’s pension fund is so mired in debt and so underfunded that it almost makes California’s system – long viewed as the national poster child for pension dysfunction – seem like a model of fiscal probity. Instead of coming up with a plan to address the root causes of the crisis, New Jersey’s politicians overwhelmingly approved the above-mentioned plan (without my caveat, of course). In all seriousness, it could plunge the state’s pension system into a death spiral. You should never give a special interest unchecked control over the public purse.

Most experts view a 50-percent funding level as the point of no return for pension funds. California Sen. John Moorlach, R-Costa Mesa, compiled per-capita unfunded liability figures for all 50 states and found that California residents are each on the hook for $4,287 in pension debts (using a fairly conservative estimate). That’s bad – 42nd in the nation. But New Jersey’s per-capita pension debt is even worse at $15,208. It gets the 50th spot.

The California Public Employees’ Retirement System (CalPERS), which is the nation’s largest state-based pension system, is funded at 68 percent, which means it only has slightly above two-thirds of the money it needs to fulfill all of its pension promises. The California State Teachers’ Retirement System (CalSTRS) is funded at 64 percent. These are dangerously low numbers, especially coming after a year of fabulous investment returns. But, as they say in Jersey, forgettaboutit. The New Jersey situation is on a different plane altogether. New Jersey’s system is funded at 31 percent.

Instead of dealing with the real source of the pension liabilities (excessive pay and benefit packages for public employees, unrealistically high assumed rates of return, decisions made by politicians rather than actuaries), lawmakers in Trenton chose to shift control of the Police and Firemen’s Retirement System (PFRS) from the state and its investment council to the police and firefighter unions whose members benefit from the fund. Former Republican Gov. Chris Christie had vetoed a similar measure, but it’s unclear whether Democratic Gov. Phil Murphy’s will sign it.

Police and fire union officials understandably are frustrated at the pension fund’s poor performance and note that police and fire pensions are funded at a higher percentage (65 percent) than pensions for other New Jersey public employees. Extricating the police and fire portion would create an obvious fiscal problem by removing a better-funded portion of the pooled resources, and could therefore lower the funding levels even further (is that even possible?) for the remainder of the fund.

“The massive shortfalls in public pension funds are the single biggest financial challenge for American states and cities,” reported Bloomberg News last month. “So allowing government workers to determine their own benefits – as New Jersey may soon do – seems a clear recipe for disaster.” As news reports suggest, the new board of trustees would have a majority of union members and would have the power to adjust contribution rate and increase cost-of-living benefits for retirees.

“We want to control our own destiny,” said one New Jersey union official, quoted in that Bloomberg column. But the legislation doesn’t really do that. Perhaps unions should be free to control their own destiny, but that means that they and their members – not the taxpayers – have to pay the price if they make bad decisions or the economy doesn’t perform as expected. That’s the only real way to have control over one’s destiny.

Sadly, the New Jersey bill echoes the current system there and here, but puts it on steroids. For instance, the CalPERS Board of Directors is dominated by retirees, union members and Democratic state officials who are elected with the support of public-employee unions. However, at some level state officials have to deal with fiscal reality. They are accountable to voters. If the unions gain direct control over pension funds, then there’s nothing to stop their spending sprees.

“What’s wrong with letting the unions manage their own pension funds?” asked Asbury Park Press columnist Randy Bergmann in a rhetorical way. “First most of the money … comes from taxpayers.” And “the unions can reap all the rewards while the taxpayers absorb all the risk.” His critique is exactly right. That’s where my idea comes in. Let unions benefit from their good decisions, but make them pay the price for their bad ones. If they blow it, then union retirees should be the ones to suffer.

This idea shouldn’t even be that controversial. After all, CalPERS officials argue that the pension fund is in solid shape because investment returns, taken over long-enough periods, always cover the payments. That sounds like a tacit admission that they don’t really need the taxpayer backing anyway. Yes, unions in New Jersey, California and everywhere deserve to control their own destiny. Agreed. And we, the taxpayers, deserve to control ours, too.

Steven Greenhut is contributing editor for the California Policy Center. He is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This article was originally published by the CA Policy Center

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Will City Voters Roll Back Minimum-Wage Hike?

February 17, 2018 By Steven Greenhut 6 Comments

Minimum wage fight for 15California voters apparently aren’t the only ones who believe that wealth can be created by government edict and income inequality fixed by approving ever-higher minimum-wage rates.

In the 72,000-population northern Arizona city of Flagstaff, voters in November 2016 approved a measure that raises the minimum wage to $12.50 an hour this year — and to $15 an hour by 2021. The City Council slowed implementation, but boosted the wage to $15.50 by 2022. That the local economy might not sustain such raises isn’t much of a concern to supporters.

Fortunately, a recent court ruling will allow local voters in the November 2018 election to consider a repeal of the wage hikes. But the fracas gained national attention shortly after the law was passed because, in the words of one resident quoted by the Associated Press, it had set the community “at each other’s throats.” Tensions are still high as the matter continues to dominate local politics. That’s what happens when economic opportunity is viewed as a zero-sum game, and when government decides what private businesses must pay their employees.

“We’ve already seen prices of goods and services increase and entry level positions being eliminated,” explained a fact sheet from the Greater Flagstaff Chamber of Commerce, which helped place the Sustainable Wages Act on the coming ballot. If that rollback measure passes, Flagstaff’s minimum wage will top out at $12.50 an hour.

That’s 50 cents higher than what the statewide minimum wage will reach (which was increased by voters in November 2016, also) but $3 lower than it would be under the current Flagstaff wage schedule, so the initiative will mitigate the worst problems. The “sustainable wages” initiative, which qualified for the ballot after its backers secured 9,000 local signatures, would also eliminate a particularly obnoxious aspect of 2016’s local initiative — a provision that requires a vastly higher minimum wage for employees who receive tips.

Typically, waiters, hairdressers and other tipped employees receive a significantly lower minimum wage based on the obvious fact that much of their income comes from gratuities. Eventually requiring the full minimum wage for these workers will wreak havoc on a college and tourist city where restaurants and other services are the backbone of the economy.

A recent survey of the chamber’s members confirmed the predictable ways that many businesses are dealing with these higher mandated costs: reductions of other employee benefits, cutbacks in hours, higher prices, and delays in expansion plans. Members also report pressure for higher wages for other employees who now earn above the minimum wage. And the full brunt of the city wage increase still is three years away, unless voters turn back the tide.

Flagstaff’s wage-hike law also is unnecessarily punitive. “The most egregious part of the new law is the new Office of Labor and Standards, which allows a city employee access to the books of any business, any time,” the Chamber explains. The law empowers the Arizona Industrial Commission to conduct myriad audits and impose penalties on businesses accused of underpaying workers. The law even allows employees to keep their names confidential “as long as possible” as any complaint they file winds its way through the adjudication process. The rollback measure would address this problem, too.

For insight into the thinking behind the wage mandate, consider the views of the activist group, Flagstaff Needs a Raise. The group’s website is filled with the usual hysteria about right-wing boogeymen: “After Flagstaff voters approved Proposition 414, the Greater Flagstaff Chamber of Commerce and a Phoenix-based ‘dark-money’ group … financed a petition campaign using paid out-of-town circulators to gather signatures to ‘amend’ Flagstaff’s Minimum Wage Act with a title misleadingly named ‘the Sustainable Wages Act.’”

The “need a raise” folks also display their economic illiteracy by claiming that “higher wages lead to more money circulating in the local economy which means more revenue for businesses.” The minimum-wage hike also will mean “less stress for families, better health, and less domestic violence among other positive social outcomes,” according to the group.

Well, higher real incomes do create better social outcomes — but higher minimum wages only end up impoverishing more people by destroying job opportunities and raising prices. This is no surprise to Spectator readers, but higher minimum wages hurt the poor in other ways. The idea that higher mandated wages result in more money percolating in the economy is similar to the idea that moving water from a pool’s deep end will help raise the shallow end.

In a column last month in the Flagstaff Business News, Mayor Coral Evans noted the futility of raising minimum wages without adjusting federal poverty guidelines, which was a refreshing dose of common sense in that city government. “A 50-cent raise does little for someone who loses his or her rent voucher,” she argued. Furthermore, she wrote that the wage hikes are depleting resources for social-service providers and the school system, which also must pay the higher wages. That also creates pressure for tax increases, of course.

I typically write about California’s approach to politics, which is why the Flagstaff initiative grabbed my attention. It’s always disturbing to see the ideas that fester here gain traction in other, presumably more sensible parts of the nation. California has the highest poverty rate in the nation, based on the Census Bureau’s cost-of-living-adjusted metric. Driving up the cost of living, and shuttering small businesses, is a recipe for failure wherever it’s tried.

The Flagstaff minimum-wage hike is part of a union-backed national campaign, so don’t be surprised if you see ballot initiatives coming to a city near you. Conservatives need to do a better job combating such economic foolishness and explaining why less government intrusion and freer markets are the only way to help the working poor — before it’s too late.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This article was originally published by the American Spectator

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City services slashed to fund pensions, but your taxes are still going up

December 28, 2017 By Steven Greenhut 11 Comments

PensionsIn the coming months and years, California voters can expect to see a variety of tax increases pop up on their local election ballots. They will be called “public safety” taxes to hire more police or firefighters or “parks” or “library” taxes to pay for those popular public services. But don’t be fooled. Any new tax proposal is in reality a “pension tax” designed to help the California Public Employees’ Retirement System make up for shortfalls in its investment strategy.

In fact, liberal interest groups are getting ready to circulate a statewide ballot initiative that will gut Proposition 13 – the 1978 initiative that has limited property tax increases to 1 percent of a property’s sales price. It also limits property tax increases to 2 percent a year. The new initiative would remove those protections from many commercial property owners, thus raising taxes by another $11 billion a year. Money is fungible, so this is partly about paying for pensions, too.

California has an enormous problem with pension costs. Many observers see it as a crisis that threatens the economic health of the state. A recent study from the well-respected Stanford Institute for Economic Policy Research, run by former Democratic Assemblyman Joe Nation, details how pension costs already are “crowding out” public services, especially at the local level. Cities pay so much for retired employees that they are cutting spending on everything else.

“California public pension plans are funded on the basis of policies and assumptions that can delay recognition of their true cost,” according to the report. Yet pension costs still are rising and “are certain to continue their rise over the next one to two decades, even under assumptions that critics regard as optimistic.” So they are cutting “core services, including higher education, social services, public assistance, welfare, recreation and libraries, health, public works, and in some cases, public safety.”

Aside from cutting public services and running up and hiding debt levels, there’s only one other way that localities can come up with the cash to pay for these overly generous pensions, especially as pension costs consume 15 percent or more of their general-fund revenue. They will raise taxes. Meanwhile, the state government has to backfill pension costs as well, which leads to constant pressure for legislators to promote additional state-level tax increases. It’s a “heads they win, tails you lose” situation, as Californians pay more to get less.

Much of the problem goes back to 1999, when the Legislature rammed through a law to provide 50-percent pension increases to the California Highway Patrol. Backers knew that once CHP received these overly generous deals (including retroactivity, which is a pure giveaway that hikes pensions back to each employee’s starting date), pension increases would spread across the state. Indeed, they did. CalPERS said it wouldn’t cost taxpayers a “dime” because of stock-market growth, but then the market crashed.

Under the current defined-benefit system, public employees are promised an irrevocable level of pension benefits based on a formula. For instance, most California “public safety” workers (police, fire, billboard inspectors, prison guards, etc.) receive “3 percent at 50.” If they work 30 years, they get 90 percent of their final three years’ pay (often higher, because of pension-spiking gimmicks) until they die. They can retire with full benefits at age 50. Non-safety workers often receive a pension formula that lets them retire with 81 percent of their final pay beginning at age 57. These are very generous benefits given their typically high final salaries.

CalPERS invests the money in the stock market. It calculates the “unfunded pension liabilities” (i.e., debt) based on a projected rate of return for their investments. Higher expectations enable the pension funds and cities to go along their merry way, not worrying about their ability to pay for all the promises and avoiding pressure to pare back pay levels. CalPERS just lowered its rate of return from 7.5 percent to 7 percent, which is still overly optimistic.

But the lowered assumed rates mean that cities have to pay the pension fund additional fees to cover the difference. This is cutting into their operating budgets. In fact, cities have faced four rate increases in the past five years and are expecting a fifth one. A recent article tells the stories of El Segundo and Arcadia, two Los Angeles County cities that are considering hiking their sales taxes to maintain their current level of service.

El Segundo’s mayor pro tem said that in five years “the payment to CalPERS is expected to be $18 million and 25 percent of general fund revenue as the employer rate for safety employees increases from 50 percent of pay to 80 percent of pay,” reported Calpensions’ Ed Mendel. He noted that cities face a statewide cap on the size of their sales tax, but that Gov. Jerry Brown in October signed a law that allows some localities to bust through that cap.

You can see what’s coming: A push by unions to eliminate the sales-tax cap across the state, and a torrent of sales tax increases to pay for soaring pension costs. The other thing to expect: Continuing efforts to hide the size of the pension debt.

“The nation’s largest pension system is expected to adopt a funding plan … that anticipates shortfalls during the next decade and then banks on exceptional investment returns over the following half century to make up the difference,” wrote Contra Costa Times columnist Dan Borenstein this week. “It’s an absurd strategy designed to placate labor unions, who want more public money available now for raises, and local government officials who are struggling to make annual installment payments on past debt CalPERS has rung up.”

The only other hope beyond debt and taxes is if the California Supreme Court guts the so-called California Rule, which forbids governments from reducing pension benefits even going forward unless they are provided with something of equal or greater value. That “rule” has made it nearly impossible to reduce costs for current employees. But there’s no guarantee the court will roll back the rule in a case it will soon consider –  or that the state and localities will bother to cut back benefit levels even if they are allowed to do so given union political power.

In the meantime, expect not only more of the same of hidden debt and reduced government services – but tax increases at every turn.

Steven Greenhut is a contributing editor for the California Policy Center. He is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This article was originally published by the California Policy Center

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Realtors’ ballot initiative could limit property taxes

December 3, 2017 By Steven Greenhut Leave a Comment

property taxSACRAMENTO – Property-tax-limiting Proposition 13 has long been viewed as the “third rail” of California politics given its continued popularity among the home-owning electorate. Public-sector unions occasionally talk about sponsoring an initiative to eliminate its tax limits for commercial properties, but the latest Prop. 13-related proposal would actually expand its scope.

The influential California Association of Realtors is launching a signature drive for a November 2018 ballot measure that would greatly expand the ability of Californians who are at least 55 years old and disabled people to maintain their low-tax assessments even if they move to other counties or purchase more expensive new homes.

Prop. 13 requires counties to tax properties at 1 percent of their value (plus bonds and other special assessments), which is established at the time of sale. The owners maintain that assessment even if values increase, as they typically do in California. The proposition limits tax hikes to no more than 2 percent a year. Prop. 13 passed overwhelmingly because many people – especially seniors – were being taxed out of their homes as assessments soared during a real-estate boom.

Under current rules, people 55 and older may keep their low assessments if they move within the same county or within one of 11 counties that accept these transfers. They may do so only once in a lifetime. It enables retired people, for instance, to downsize from a big family house to a condominium without paying a stiff tax penalty.

For example, if one purchased a home in 2008 for $350,000 and that home is now worth $750,000, they may continue paying taxes at the lower assessed value even after they sell the home and purchase a smaller one. The valuation goes with them. But the newly purchased property must have a market value the same or lower than the house that has been sold.

The Realtors’ proposal would, for seniors and the disabled, tie the assessed value of any newly purchased home to the assessed value of the old home. They would be free to take that assessment with them to any of the state’s 58 counties. They could carry it with them as many times as they choose. The reduced assessments would apply even for people who purchase home with market values above the ones that they sold.

As the nonpartisan Legislative Analyst’s Office explains, if the new and prior homes have the same market values (based on sales and purchase prices), the new tax valuation would be the same as the old one. A fairly complex formula would determine the tax rate for purchases that were either higher or lower than the sales price of the prior home.

The initiative addresses a problem faced by many empty-nesters. They are living in large homes where they raised their families and would like to downsize – but to do so would mean a huge tax hit given that their new tax rate would be tied to the purchase price of the new property. In the preponderance of situations, the new purchase price for even a smaller house would be far higher than the price that the seniors paid for the homes where they currently live.

The Orange County Register reports that, if passed, the initiative could spur an additional 40,000 home sales a year. Supporters say that could ease up tight housing markets, but foes argue that the Realtors have an interest in spurring more home sales. County governments – backed by LAO projections – say that it eventually will cost them as much as much as $1 billion a year.

“By further reducing the increase in property taxes that typically accompanies home purchases by older homeowners, the measure would reduce property tax revenues for local governments,” according to that LAO analysis. “Additional property taxes created by an increase in home sales would partially offset those losses, but on net property taxes would decrease.”

The Howard Jarvis Taxpayers Association, which defends the legacy of Prop. 13, disputes the idea of large tax losses, given that younger couples would move in to the homes that older people sell, and they would pay property taxes based on the new market value. In other words, an older couple will sell a house and keep their lower tax rate.

“We believe upward portability makes a lot of sense especially as property values across California continue to rebound,” said HJTA president Jon Coupal in a statement. The statement says he believes the measure would “help California alleviate its current housing crisis by removing a financial barrier that keeps many older homeowners from selling their homes, and many millennials from entering the housing market.”

The Realtors’ association had submitted three different potential measures, including one that would expand portability for people of all ages. But the final measure applies only to seniors and disabled persons. As the saying goes, the best defense is a good offense. Supporters of Prop. 13 have learned that the best way to protect it might be by trying to expand it.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This article was originally published by CalWatchdog.com

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Cities reeling under the burden of growing pension debt

November 22, 2017 By Steven Greenhut 6 Comments

pension-2The California Public Employees’ Retirement System’s union defenders feign shock whenever pension reformers accuse it of “kicking the can down the road” in dealing with the state’s mounting pension debt. It’s like the scene from Casablanca, when Captain Louis Renault is absolutely shocked to find gambling going on in a gambling house.

CalPERS is never going to state the obvious: “We know these massive, underfunded pensions are not sustainable, but we’re going to do everything possible to push the problem into the future and blame everyone else for the problem.” But the pension fund’s board might as well have said as much after two actions it took at last week’s Sacramento meeting.

In one case, it decided to seek a legislative sponsor for a bill that would enable it to shift the blame to local agencies whenever such agencies decide to stop making their payments to the fund and retiree pensions are cut as a result. In the second case, at the urging of cities CalPERS decided to delay a vote on a more actuarially sound means of paying off pension debt – rather than risk a fifth rate hike to local governments, and risk a mutiny among hard-pressed local governments.

Both of these actions maintain the status quo and – you got it – kick the can down the road.

The first action involved the fate of two local agencies that have exited the pension fund because they couldn’t afford to keep making their payments. As California Policy Center previously reported, the tiny Sierra Nevada town of Loyalton in 2013 decided to exit the plan, but then was hammered with a $1.66 million termination fee that it couldn’t possibly afford. The town’s entire annual budget is $1 million and it couldn’t even make its $3,500 month payments to the fund.

Furthermore, the East San Gabriel Valley Human Resources Consortium, known as LA Works, shut its doors in 2014, but was likewise penalized by CalPERS for stopping its payments. The end result: Loyalton’s four retirees have their pension benefits sliced by 60 percent, and LA Works’ retirees lost as much as 63 percent of their pension checks.

In making an example of these small agencies, CalPERS revealed an ugly truth. The pension fund assumes a rate of return of 7 percent to 7.5 percent on its investments. The higher the assumed rate, of course, the less debt on its books. It’s in the union-controlled fund’s interests to assume the highest-possible rates and maintain the status quo – even if that means that taxpayers ultimately will have to pick up any slack.

When agencies decide to leave the fund, however, CalPERS puts them in a Terminated Agency Pool, where CalPERS assumes a rate of return of a measly 2 percent. Upon departure, these agencies can no longer expect future earnings or taxpayers to pick up the shortfall, so the 2 percent rate is the actual risk-free rate that CalPERS expects from its investments.

The legislation the fund seeks, facetiously referred to as the Anti-Loyalton Bill, would “require a terminating agency to notify past and present employees of its intention to terminate,” according to the language approved by the full CalPERS board last Wednesday. Bottom line: CalPERS wants local agencies to provide the bad news to employees and retirees so that they, rather than the massive pension fund, receive the brickbats.

The proposed bill is not a big deal per se, but it’s yet another example of how CalPERS is more interested in hiding – rather than dealing with – its pension debt. Basically, this is a public-relations strategy designed to discourage agencies from leaving the fund. It’s a way to tighten the golden handcuffs and punish agencies that want to exit the fund.

In reality, if 2 percent is the earning rate that CalPERS can safely expect on its long-term investments, then that should be the rate that it assumes for all of its investments. But lowering the assumed earnings to such a realistic number would cause mass panic, as municipalities would need to come up with dramatically increased payments. They already are struggling with their current payments.

Under that scenario, the state’s pension debt would be around $1.3 trillion, according to some estimates – and it would become implausible to push the problem down the road. Even with the current high assumption rates and even after a great year of earnings of 11.2 percent, CalPERS is only funded at a troubling 68 percent. (The California State Teachers’ Retirement System had even better returns last year, but is funded only at 64 percent.)

In its second major action last week, “CalPERS delayed action … on the chief actuary’s proposal to shorten the period for paying off new pension debt from 30 years to 20 years, a cost-cutting reform that would end the current policy not recommended by professional groups,” explained Ed Mendel, on his respected Calpensions blog.

Localities already have faced four major rate increases since 2012. CalPERS assesses the increases to make up for the unfunded liabilities, and recent studies suggest that local governments are slashing public services to come up with the cash. Had CalPERS decided to pay off new debt in a shorter time frame, it would have meant a fifth increase, according to Mendel. He quoted the League of California Cities’ official Dane Hutchings with these words of warning: “The well is running dry.”

It’s a mess. If CalPERS does the right thing, it exacerbates local governments’ current problems. But maintaining the status quo will make them worse down the road. As Mendel explained, under CalPERS’ current payment approach, “the debt continues to grow for the first nine years” with the payment not even covering the interest. “(T)he payments do not begin reducing the original debt until year 18, more than halfway through the period.”

In other words, I have a great 30-year plan for paying off your credit-card debt: You make minimum payments for the next 18 years and then worry about it then. Isn’t that the very definition of kicking the can down the road?

It’s hard to feel too sorry for these struggling cities. Do you remember when they warned about the impending disaster if the state Legislature passed a 1999 bill, promoted by the California Public Employees’ Retirement System, that would retroactively raised pensions across the state by 50 percent? Do you remember when city managers angrily resisted union-backed efforts to raise pensions at their city councils? Neither do I.

Unfortunately, their efforts to avoid another rate hike only helps CalPERS do what it likes to do most – remind us that all is well and that the stock market will pay for all the pension promises. It might, but then again it might not. If the market slows, there will be a lot of California officials shocked to find a dead end up ahead.

Steven Greenhut is contributing editor for the California Policy Center. He is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This article was originally published by the California Policy Center

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Study confirms the California pension crisis is hitting now

October 11, 2017 By Steven Greenhut 4 Comments

Debates about California’s pension crisis almost always focus on the big numbers – the hundreds of billions of dollars (and, by some estimates, more than $1 trillion) in unfunded liabilities that plague the public-pension funds. For instance, the California Public Employees’ Retirement System is only 68 percent funded – meaning it only has about two-thirds of the money needed to pay for the pension promises made to current and future retirees.

Calpers headquarters is seen in Sacramento, California, October 21, 2009. REUTERS/Max Whittaker

CalPERS and its union backers insist that there’s nothing to worry about, that future bull markets will provide enough returns to cover this taxpayer-backed debt. Pension reformers warn that cities will go bankrupt as pension payments consume larger chunks of municipal budgets. They also warn that pensioners are at risk if the shortfalls become too great. The fears are serious, but they mainly involve predictions about what will happen a decade or more into the future.

What about the here and now? California municipalities and school districts are facing larger bills from CalPERS and from the California State Teachers’ Retirement System (CalSTRS) to pay for sharply rising retirement costs. Most of them can come up with the money right now, but that money is coming directly out of their operating budgets. That means that California taxpayers are paying more to fund the pension system, and getting fewer services in return.

The “bankruptcy” word garners attention. This column recently reported on Oroville, where the city’s finance director warned about possible bankruptcy during a recent hearing in Sacramento. The Salinas mayor also has been waving the bankruptcy flag. The b-word understandably gets news headlines, especially after the cities of Stockton, Vallejo and San Bernardino emerged from bankruptcies caused in large part by their pension situation.

But there’s a huge, current problem even for the bulk of California cities that are unlikely to face actual insolvency. They are instead facing something called “service insolvency.” It means they have enough money to pay their bills, but are not able to provide an adequate level of public service. Even the most financially fit cities are dealing with service cutbacks, layoffs and reductions in salaries to make up for the growing costs for retirees.

A new study from Stanford University’s prestigious Institute for Economic Policy Research has detailed the depth of this ongoing problem. For instance, the institute found that over the past 15 years, employer pension contributions have increased an incredible 400 percent. Over the same time, operating expenditures have grown by only 46 percent – and pensions now consume more than 11 percent of those budgets. That’s a tripling of pension costs since 2002. Contributions are expected to continue their dramatic increases.

“As pension funding amounts have increased, governments have reduced social, welfare and educational services, as well as ‘softer’ services, including libraries, recreation and community services,” according to the study, “Pension Math: Public Pension Spending and Service Crowd Out in California, 2003-2030” by former Democratic Assemblyman Joe Nation. In addition, “governments have reduced total salaries paid, which likely includes personnel reductions.”

These are not future projections but real-world consequences. The problem is particularly pronounced because “many state and local expenditures are mandated, protected by statute, or reflect essential services,” thus “leaving few options other than reductions in services that have traditionally been considered part of government’s core mission.” Many jurisdictions have raised taxes – although they never are referred to as “pension taxes” – to help make ends meet, but localities have a limited ability to grab revenue from residents.

The report’s case studies are particularly shocking. The Democratic-controlled Legislature and Gov. Jerry Brown often talk about the need to help the state’s poorest citizens.Yet, the Stanford report makes the following point regarding Alameda County (home of Oakland): Pension costs now consume 13.4 percent of the county’s operating budget, up from 5.1 percent 15 years ago. These increases have “shifted up to $214 million in 2017-18 funds from other county expenditures to pensions,” which “has come mostly at the expense of public assistance, which declined from a 33.6 percent share of expenditures in 2002-03 to a 27 percent share in 2017-18.”

The problems are even more stark in Los Angeles County. As the study noted, pension costs have shifted approximately $1 billion from public-assistance programs including “in-home support services, cash assistance for immigrants, foster care, children and family services, workforce development and military and veterans’ affairs.”

It’s the same, basic story in all of the counties and cities analyzed by the report. For instance, “the pension share of Sacramento’s operating expenditures has increased over time, from 3.2 percent in 2002-03 to 12.5 percent in the current year.” That percentage has gone from 3 percent to 12 percent in Stockton, and from 3.1 percent to 15.2 percent in Vallejo.

These are current problems, not future projections. But the future isn’t looking any brighter. “The case studies demonstrate a marked increase in both employer pension contributions and unfunded pension liabilities over the past 15 years, and they reveal that in almost all cases that costs will continue to increase at least through 2030, even under the assumptions used by the plans’ governing bodies – assumptions that critics regard as optimistic,” Nation explained.

So, yes, the public-sector unions and pension reformers will continue to argue about when – or even if – the pension crisis will cause a wave of California bankruptcies. But overly generous pension promises are destroying public services and harming the poor right now.

Steven Greenhut is a contributing editor for the California Policy Center. He is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This piece was originally published by the California Policy Center.

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San Diego mayor hopes to lead state GOP out of its morass

August 18, 2017 By Steven Greenhut 9 Comments

Kevin Faulconer 2SACRAMENTO – Even Republicans admit the state GOP is something of a rudderless ship these days. The party doesn’t control any constitutional offices. Democrats have supermajorities in both houses of the Legislature. Assembly Republican Leader Chad Mayes of Yucca Valley, is the target of a grassroots effort to force him from his leadership post after he backed a Democratic bill to expand the cap-and-trade system for 10 years.

Meanwhile, the national Republican Party has become anathema to ethnically diverse California, especially after President Donald Trump doubled down on his initial comments about Saturday’s white-supremacist march in Charlottesville, Virginia. On Tuesday, the president assured the media that there were some “very fine people on both sides” at the protests. Yes, the California party’s predicament is dismal, especially from a recruitment standpoint.

Yet Tuesday night, one prominent GOP official detailed a positive direction for the party. San Diego Mayor Kevin Faulconer says he isn’t running for governor, but gave a major speech to the Commonwealth Club in San Francisco regarding the future of the California Republican Party. He wasn’t there “to offer suggestions about what we ought to do,” he said. “I’m here to tell Republicans what we’ve already done in San Diego.”

He described it as a call to action – an opportunity to rebuild the party centered on the theme of “fixing California.” Faulconer detailed five themes on which the party should unite as a way to win over new generations of voters. The first of them involves freedom. “Not only is individual liberty part of California’s heritage, it’s a classic conservative principle – one that Republicans have watered down to our own detriment,” he said. “People have stopped seeing the GOP as the party of freedom. They see it as the party of ‘no.’”

He even singled out a freedom theme that could be controversial in a socially conservative party: freedom of sexual orientation. But he contrasted his vision with that of the Democratic Party, “which has organized itself around the proposition that an individual’s most defining qualities are gender, sexuality and race.” He calls that a party based on differences, whereas he envisions a “New Republican Party” built around a set of common ideas.

“One of our biggest failures is that Republicans do not communicate our shared values to underrepresented communities,” Faulconer said. He pointed to his successful San Diego mayoral race: “Facing a Hispanic candidate in a city where just 25 percent of voters are registered Republican, I won more than 57 percent of the total vote – and close to 40 percent of the Latino vote. … Why? Because I campaigned in communities Republicans wrote off as lost – and Democrats took for granted.”

His second theme involved immigration. Faulconer said that Republicans are doing a poor job inviting new Americans to join the party of freedom and limited government. In fact, he said he wouldn’t even need to give such a speech if the GOP weren’t failing at that message. He called for welcoming immigrants, while acknowledging that the party can’t ignore the issue of illegal immigration. “We must push for efficient ports of entry and get smarter about border security,” the mayor said, while emphasizing the importance of treating nearby Mexico as “neighbors and economic partners.”

Faulconer’s third theme involved the environment, about engaging responsibly on conservation and climate-change issues with “plans that don’t plunder the middle class.” He again used his city as an example. “San Diego is now on a path to slash greenhouse gases in half and shift to 100 percent renewable energy – without a tax increase,” he said.

His fourth theme is for California leaders to focus on California issues, rather than “chasing the latest soundbite out of Washington, D.C.” He chided Sacramento Democrats, who he says “are suffering from what I like to call ‘outrage FOMO’ – a Fear Of Missing Out on the latest controversy that will allow them to score political points on social media and TV.” By contrast, Faulconer said the “New Republicans” need to focus on “the fundamentals of government service.”

That includes infrastructure. “The fact that 50 percent of California’s roadways are in poor condition is an absolute failure,” he said. “We have the nation’s second highest gas tax but some of the worst roads, with no guarantees that the taxes we pay at the pump will actually go toward fixing the problem.” But, for his fifth and final point, he focused on the overall need for “reform.” This theme involved the role of the state’s powerful unions in resisting reform.

“Too often Sacramento politicians are unwilling to say ‘no’ to entrenched special interests – at our expense,” he said. “California ranks in the bottom 20 percent of K-12 schools nationwide. Yet Democrats continue to side with unions against meaningful changes to improve student achievement.” He noted that “California falls dead-last in housing affordability in the continental United States” but “Democrats are blocking revisions to housing rules that were designed to protect the environment but that labor has hijacked for its own gain.”

He noted that California was “rated the worst state for business” because “lawmakers keep layering regulation on top of regulation until budding entrepreneurs are crushed, and only the biggest businesses survive.” He also pointed to the state’s massive pension debt and, again, used San Diego as an example, given that city’s successful voter-approved pension reform.

These reform themes echo talking points Republican leaders have traditionally made. And he was predictably pointed in his critique of Democrats, noting that their policies have resulted in “economic inequality; troubled schools; sky-high housing costs; failing infrastructure; and crippling pension debt.” Those problems have festered, he added, while Sacramento “pursues the kind of political fantasies that grip a party when it gains complete and total control.” But his approach signified a break from typical Republican efforts.

To break that one-party control, Mayor Faulconer’s blueprint focuses heavily on repackaging the party’s long-held ideas and reaching out to communities that the party hasn’t successfully appealed to in the past. He envisions a day “when San Francisco’s Republican mayor is standing before you, she isn’t talking about how California Republicans are endangered, but rather how we are ushering in a government that is uniting our people and looking out for the middle class.” It’s a bold challenge for a party that seems to be collapsing, but his ideas received a warm reception.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

This piece was originally published by CalWatchdog.com

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Two different solutions to California housing crisis – which will work?

July 30, 2017 By Steven Greenhut 13 Comments

house-constructionSACRAMENTO – Before the recent legislative recess, California Democratic leaders and Gov. Jerry Brown announced their intention to tackle one of the state’s biggest crises: housing affordability. It’s the rare instance where virtually everyone in the Capitol at least is in agreement about the scope of the problem, even though there’s far less agreement on solutions.

Real-estate prices have gotten so high that they stretch family budgets and are a root cause of California’s highest-in-the-nation poverty rates, based on the Census Bureau’s new cost-of-living-adjusted poverty measure.

The situation is so acute it’s drawn the attention of the national media. “A full-fledged housing crisis has gripped California, marked by a severe lack of affordable homes and apartments for middle-class families,” according to a recent New York Times article. Median home prices have hit a “staggering $500,000, twice the national cost.”

The problem is particularly bad in the state’s major metropolitan areas. The median single-family home price in the nine-county San Francisco Bay Area, for instance, has topped $750,000. Public-opinion surveys suggest soaring home prices – rather than job opportunities or the state’s business climate – are the key reason many people are moving to other states.

But while there’s broad agreement that housing affordability is in crisis, there are two schools of thought on how to address it. Democrats are primarily trying to raise taxes and fees to pay for more government-subsidized affordable housing, whereas Republicans want the state to chip away at local governmental barriers to home construction.

Legislators and the governor have made little progress in crafting a detailed housing plan for this legislative session. But there are a handful of bills moving their way through the Capitol that encapsulate their approach. Their high-priority measure, when legislators return to the Capitol late next month, is Senate Bill 2, which would impose fees of $75 to $225 on every real-estate transaction to provide $225 million in annual funding to subsidize developers of low-income housing.

“With a sustainable source of funding in place, more affordable housing developers will take on the risk that comes with development and, in the process, create a reliable pipeline of well-paying construction jobs,” according to the Senate bill analysis.

Senate Bill 3 also takes a similar approach toward building affordable housing. The measure authorizes $3 billion in general-obligation bonds to pay for low-income and transit-oriented housing. It would need to be approved by voters in the November 2018 election. There’s also talk about using proceeds from the cap-and-trade auctions to fund such programs.

One major bill embraces some of the concerns expressed by those who want to encourage market-oriented solutions to the problem. Senate Bill 35, by Sen. Scott Wiener, D-San Francisco, “creates a streamlined, ministerial approval process for development proponents of multi-family housing if the development meets specified requirements and the local government in which the development is located has not produced enough housing units to meet its regional housing needs assessment,” according to the bill summary. The streamlined process would apply where a project meets “objective zoning, affordability, and environmental criteria, and if the projects meet rigorous labor standards,” according to Wiener.

The bill circumvents local planning decisions, but New Urbanists and others say such pre-emption is needed because “not in my back yard” (NIMBY) sentiments among residents and city officials have impeded developers’ ability to add high-density housing in urban areas. The latter point – the requirement that workers receive union wage rates – has been a major sticking point for some conservatives, who believe the mandate could drive up the cost of home construction.

The building industry has neutralized another measure, Assembly Bill 199, which could have required such above-market wage rates for a wide range of privately funded housing projects. AB199 originally would have required “prevailing wage” for any project that involved an agreement with a “state or a political subdivision.”

The building industry argued that “the language was purposely ambiguous and could mean simple tasks, like a new porch, would require union labor,” according to a San Diego Union-Tribune report. The amended version removes that language and now applies only to projects that receive public subsidies.

There’s wide disagreement about whether additional mandates for affordable housing will substantially boost the supply of lower-priced homes. Even if the new subsidies pass, those dollars are a drop in the bucket, given the overall size of the state’s housing market, critics say. And government mandates that builders provide a set number of affordable units as part of their new subdivisions may ramp up the overall costs for market-based units.

The Union-Tribune’s Dan McSwain compared the process to something out of a Kafka novel: “Raise the overall price of market units, thus ensuring that fewer get built, in order to subsidize a handful of poor families … who win a lottery administered by local government agencies, with staffs funded by housing fees that inflate prices.” McSwain blamed high costs partially on city-imposed fees that inflate housing prices by 20 percent or more.

The Legislature isn’t about to tackle that broader problem. Legislators have yet to reform the California Environmental Quality Act and other environmental rules that drag out the approval process for major new developments. For instance, Southern California Public Radio recently reported that the Newhall Ranch development in Los Angeles County finally “is moving forward after recently winning key approvals.”

That Santa Clarita Valley project, which will house 60,000 people, has been in the works since the 1980s and still is a long way from a ground-breaking. It’s been delayed by environmental lawsuits and legal challenges related to its possible impact on climate change.

Southern California Public Radio quoted real-estate experts who say the project will only make a small dent in the region’s housing shortage. But is that the fault of the developer or of policymakers who have ignored the problem so long that adding tens of thousands of new housing units only amounts to adding a few drops in the housing bucket?

The good news is the Legislature and governor are paying attention to a serious problem that has been percolating for years. The question, as always, is whether state officials can craft legislation that will make a real dent in the problem.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.

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