Government Unions Benefit from the Asset Bubble that Harms Workers

Earlier this month the California Policy Center released a study that provided additional evidence that the U.S. stock indexes are overvalued by approximately 50 percent, along with calculations showing the impact of a major downward correction on the solvency of California’s state and local government pension systems. Stocks are now at unsustainable bubble valuations.

Not covered in this study, but equally overvalued, are bonds, which pension systems misleadingly categorize as “fixed income” investments in their portfolio disclosures. CalPERS even went so far as to trumpet their success in earning a 9.29 percent return on “fixed income” investments in their most recent press release – a healthy return that offset losses elsewhere and allowed them to earn a marginally positive return of 0.61 percent last year. But “fixed income” investments usually refers to bonds, and bonds are also at unsustainable bubble valuations.

Here’s why bonds are overvalued today: Whenever new bonds are issued at lower fixed rates of interest than the bonds that were issued before them, then those older bonds that pay higher fixed rates of interest can be sold for more money than their original price. This is because on an open market, buyers will price a resold bond at a value calculated to equalize returns. When rates go down for new bonds, the prices for existing bonds go up. The problem is that back in the 1980s, bonds were being issued at rates as high as 16 percent, and today, they’re being issued at rates close to zero. After a 30 year ride, interest rate drops can no longer be used to elevate the value of bond portfolios.

At a macroeconomic level, every possible investment in the world is overvalued today, because central banks have lowered interest rates to zero in a desperate attempt to continue a decades long disease in which they have spent more than they’ve collected. Governments got to borrow money for next to nothing, and assets kept appreciating. But the binge is almost over, and unlike the savvy super-rich, pension funds can’t just take their winnings off the table.

New Bond Issues, Rates by Nation – June 2016 (red = negative)

Bond issue rates
Negative coupon bonds, a desperate experiment that isn’t going to end well.

This is all tedious drivel, however, if you are a unionized public employee in California. Your retirement security is guaranteed by “contract.” It’s the result of deals cut between union “negotiators” and the politicians they make or break. As a government employee in California, if you’ve worked 30 years, the average annual retirement benefit you can expect if you retire this year is worth over $70,000. To honor that expectation, CalPERS is already mid-way through their latest reassessment, a 50 percent increase to their collections from participating agencies. And if there is a 50 percent market correction (“fixed income” and equity), expect them to double or even triple their collections from taxpayers.

If you are a private citizen trying to prepare for retirement today after, say, 45 years of work and saving, good luck. Because there is no safe investment left in the world. And while you are likely to have to cope with, for example, suspended dividend payments on stocks that are down 50 percent, expect your taxes to go up in every imaginable category – sales, property, income, and hidden taxes embedded in your utility bills and phone bills. It will be “for the children” and “for public safety.” And if there’s a vote required to increase the tax, it will usually pass, because most voters don’t pay property tax, or income tax, or if they do, the taxes are indirectly assessed and invisible to them.

This is the oppressive hoax that government unions have perpetrated on the working families they claim they want to protect. They have exempted their own members, government workers, from the consequences of a corrupt financial system where they are leading partners. When governments spend more than they make and have to borrow money, central banks lower interest rates to make it easier to work the payments into the budget. At the same time, lower interest rates goose the value of stocks and bonds, helping the pension funds claim they can earn 7.5 percent per year. And when the house of cards collapses, taxpayers bail out the banks and the government pension funds.

The next time a spokesperson for a government union speaks disparagingly about Wall Street corruption, remember this: They are partners with Wall Street. They support overspending for their own compensation and benefits, creating deficits that have to be covered by taxes and borrowing. Their pension funds demand high returns, and the bankers comply, with rates that encourage borrowing and deny ordinary people the ability to save. Now that interest rates have hit zero and are even going negative in an exercise of monetary chicanery that has no rival in history, the end is near.

Public sector union leaders need to start remembering they represent public servants, not public overlords who are exempt from the reality that you can only spend as much as you earn. As it is, these union leaders are the overpaid mercenaries of capitalism at its most corrupt.

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Ed Ring is the president of the California Policy Center.

Populist Unity Can Overcome the Establishment’s Supermajority

Back in 2012, the California Policy Center published an article entitled “The Forgotten 33%,” which included a graphic entitled “American Voter Breakdown 2012.” It depicted the U.S. electorate as comprised of 46% who pay zero net taxes, 20% who work for the government and are net tax consumers, the 1% “super rich,” and the “forgotten 33%,” who work in the private sector and earn enough to be positive net taxpayers.

The point of the article, then and now, was that people with an intrinsic preference for big government comprise a super-majority of voters in America. But something has changed since 2012…

AMERICAN VOTER BREAKDOWN 2016

Tax paying chart

The emergence of Donald Trump and Bernie Sanders as serious contenders to become president of the U.S. reflects a growing awareness among voters in all of the above categories that things can and should be better. The 33% who constitute America’s beleaguered taxpayers were angry four years ago, and this time around they’re furious. Their ire is the most easily explained: Now more than ever, they work long hours for less wages or lower profits, all while being told by the establishment press, by mainstream academia, and by left-wing politicians that they’re “privileged,” and still aren’t paying their “fair share.” If they’re white, they’re told their success is the undeserved result of their color, when in fact they’ve been the recipients of institutionalized reverse discrimination for nearly two generations. And no matter what their ethnicity, they confront soaring prices for housing, health care, and college tuition for their children.

The 33% who work and make enough to pay taxes are angry. And they should be. But what about the 46% who pay no net taxes?

The anger of the 46% takes various forms, nearly all of it justified. Many of them work, but qualify for the earned income tax credit and subsidized health care, which makes them net tax consumers. Many of them would like to work harder, but the only jobs available are part-time with unpredictable schedules which makes it impossible for them to work two jobs. Many of them would like to get a better education, but they are the products of failing schools where teacher tenure is more important than student achievement. And if they’re people of color and haven’t yet been successful, they’re perpetually told by the establishment press, by mainstream academia, and by left-wing politicians that they are victims of discrimination and their failures are not their responsibility – fueling additional anger.

And what of the 20% who work for the government? They are, for the most part, ensured decent health care and a secure retirement. But they are the targets of relentless propaganda from their unions, who have waged a multi-decade campaign to convince them they are underpaid, underappreciated and overworked. Many of them succumb to this nonsense. Others, and more than a few, are disgruntled for the opposite reason – they resent working for a unionized government where merit means less than seniority, and innovation is a threat.

But why are taxes consuming the 33%? Why are opportunities for good jobs and education being denied the 46%? And why does government get bigger every year but deliver less?

There’s a simple answer. Government unions. Especially at the state and local level, government unions have destroyed our public schools and driven our public institutions to the brink of bankruptcy. These government unions perpetually lobby for higher taxes, bigger government – more employees with more pay and benefits, more job killing regulations, and more programs ostensibly intended to help the less fortunate – regardless of their cost or actual effectiveness. The government union agenda is to increase their power and influence – a goal that has no connection with the public interest.

Government unions control state and local politicians, who in turn control every scrap of legislation sought after by big business. They encourage and enable cronyism. Their union controlled pension funds and their union backed government bond underwriting make them the biggest players on Wall Street. They ARE the “establishment” that has gotten everyone so agitated this time around.

Donald Trump, for all his hapless gaffes and hideous vitriol, is far too intelligent to identify government unions as the root cause of most of the problems in America. Unions make or break Trump’s development projects. And even if Trump did attack the government unions, he’d risk confusing voters, who by and large still don’t make a distinction between public and private sector unions.

Bernie Sanders, despite his belated attempts to pander to the African American left by challenging police organizations, is unwilling or unable to make the distinction between police personnel, whom we are lucky to have among us, and police unions that protect bad cops and intimidate politicians. And even if Sanders did take on the police unions, he would never take on the teachers unions – despite the fact they’ve practically destroyed public education in America.

Populist anger in America today is justified, and there is a unifying target for the anger – the “establishment” as represented by government unions and their clients; monopolistic corporations, America’s overbuilt financial sector, and the extreme environmentalist lobby that provides a phony moral cover for their iniquitous schemes. If public sector unions were illegal, this entire corrupt establishment would be threatened as never before. As it is, this awakening national dissent has seismic power, diffused in all directions, turning only on itself.

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Ed Ring is the president of the California Policy Center.

Californians Overwhelmingly Support New Local Bonds and Taxes

Two weeks ago, using information supplied by the California Taxpayers Association, we called attention to “$6.2 Billion in New Borrowing on June 7th Primary Ballot.” As noted, “Next week voters will be asked to approve 46 local bond measures totaling $6.18 billion in new debt, along with 52 local tax proposals. If history is any indication, more than 80 percent of them will pass.”

So how did they do?

The following table shows the results so far. With bonds, the trend is clear – they nearly all still pass. That’s partly because school bonds only require a 55 percent majority to pass, whereas with most tax increases, passage still requires a two-thirds vote. And while the rate of passage is lower for tax increases, the latest election shows two out of three passing.

Local Tax and Bond Ballot Propositions – June 7th 2016
Status of passage as of June 14th, 2016

Local Tax and Bond Ballot Propositions

The data after one week, as shown, indicates that if the “too close to call” decisions end up splitting at the same ratios as the already decided propositions, 66 percent of the tax proposals will pass, and a whopping 93 percent of the bond proposals will pass.

Why?

To answer this question, here are some comments from Jon Coupal, head of one of the largest and most effective taxpayer organizations in the U.S., and asked him. He listed a few key reasons:

(1) The true tax impact is not evident from the ballot label.

(2) There is a lot of voter of misunderstanding about how much money we already spend on education. Very few Californians realize we spend, at a minimum, 40 percent of our general fund budget on education.

(3) Local taxpayers don’t have nearly the resources or the sophistication to run big campaigns against the teachers unions and the construction industry.

(4) Many times, these proposals are placed on the ballot in a way to ensure there is no opposition argument – for example, they are added when there are only 72 hours left to get an opposing argument submitted. Procedural rules are manipulated to suppress opposition.

When asked how this could change, Coupal did not seem optimistic, but had a few suggestions. He noted that his organization and other reform groups are supporting bills to require greater transparency on taxes and bonds. In particular, he stressed the need for more public disclosure of the financial impact. Coupal also mentioned the need for more public education, stating that “voters don’t understand that when people say it’s for the kids, it’s actually for the unions.

With what data is available, it’s interesting to review some of the tax proposals that did not pass. The following table shows the proposed tax increases that voters turned down on June 7th:

Failed Local Propositions to Increase Taxes – June 7th 2016

Failed Local Propositions to Increase Taxes

Without dissecting the specific campaign dynamics, voter demographics, and other particular conditions in each case, there isn’t a clear indication why some local tax proposals failed, while two-thirds of them passed. One of the most expensive of all proposed parcel taxes, failed Measure C-16 in San Luis Obispo County’s Cayucos Fire Protection District, would have increased the annual assessment per house for fire protection services from $100 to $500. On the other hand, thrifty voters in Siskiyou County rejected a parcel tax that would have only cost each household $5 per year.

Similarly, when it comes to failed proposals to increase sales taxes, there is no common theme in the data. The failed proposals ranged from an increase of an eighth of one percent to a full percent, which mirrored the range of the measures that passed. The explanations were various, including public safety, general services, road and transit upgrades, and library services. Interestingly, two of the failed tax increases, in Napa and Solano counties, only required a majority vote.

Ultimately, despite California’s sporadically rebellious populace when it comes to new state taxes – state Propositions 1A through 1E on the state ballot in 2009 were all rejected by voters – their track record on local taxes and bonds remains consistently pro-tax. Voters need to realize that local tax increases do not begin to cover already scheduled increases to pension fund contributions, to fund pension benefits that are – even for non public safety – two to three times more generous than Social Security. Voters need to realize that school bond measures are usually to fund work that used to be paid for out of operating budgets, before the pension and compensation commitments got out of control.

And behind these hidden agendas impelling new tax increases, behind every broken budget and faltering service, voters need to understand that government unions are the cause.

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Ed Ring is the president of the California Policy Center.

California’s Economically Illiterate Legislature

Minimum Wage chartCalifornia’s minimum wage is set to rise to $15/hour over the next six years. While this topic has been beat to death, it is seldom pointed out that the inflation-adjusted minimum wage, based on 78 years of precedent, at most should only be around $10 per hour. A recent UnionWatch post “Raise the Minimum Wage, or Lower the Cost of Living?” proved this using CPI data. As can be seen, only once, in 1968, did the minimum wage in 2015 dollars exceed $10/hour.

A lot of things have happened since 1968, of course. To name just two, the earned income tax credit didn’t arrive until 1975, and the Affordable Care Act, offering health insurance to low-income participants at give-away rates, didn’t arrive until 2010. Needless to say these programs make it easier to survive on minimum wage.

The point of this isn’t to suggest workers shouldn’t earn more money, or to argue about whether or not we should have a minimum wage. The point is that the minimum wage, at $15 an hour, has no historical justification. And because of this, the unintended consequences are more severe. Like never before, this minimum wage increase will kill small businesses and it will kill entry level jobs.

There’s another point missing from the debate over the minimum wage. It is an indictment of the members of California’s state Legislature, because collectively, they have a simplistic, ideologically driven view of economics that is divorced from reality. Their naive enthusiasm is harming the working families they claim they want to protect. California’s legislators, nearly all of them coerced and controlled by government unions and seduced by extreme environmentalists, have enacted policies that deny upward mobility to working people.

These policies only begin with an excessive minimum wage hike that is going to reward large corporate franchises and drive small emerging companies out of business. They extend to the unaffordable cost of housing, caused by misguided “urban containment” policies in what is one of the most spacious developed regions on earth. They extend to the high cost of electricity and natural gas, elevated by policies inspired by a futile wish to set an example to the rest of the world – regardless of their regressive impact. They extend to a pension system built by an alliance of government unions and powerful financial interests that guarantees retirement benefits to government employees that are literally five to ten times more generous than Social Security, paid for by taxpayers, teetering on the abyss of insolvency. The list goes on.

Legislator business experienceHere’s part of the reason why: California’s legislators do not have experience running a business. Most of them have never worked in the private sector. A 2014 UnionWatch post “How Labor Money Undermines the Financial Literacy of California’s Legislators” documents, based on biographical analysis, the level of business experience in California’s 2014 state legislature. In all, 56 percent of them have NO experience in business – having spent their entire careers in government or nonprofits. Of the majority democrats, 76 percent of them have NO experience in business. The 2016 class of legislators is unlikely to be any different.

Understanding that you can’t raise the minimum wage without killing entry level jobs is a basic economic concept. So is the fact that if you make it nearly impossible to develop land or energy, prices will rise for those commodities. And it isn’t much of a leap to realize that when you do this, you are hurting the most vulnerable members of society.

More sinister, and perhaps harder to grasp, upper division stuff, is the fact that every time you add a regulation, you further empower the monopolistic corporate special interests who are supposedly the bad guys you’re fighting. Every time you lower interest rates to stimulate spending, you invite people of limited means to go further into debt, and you decimate the savings accounts of people unwilling or unable to gamble their modest fortunes in a volatile stock market. And every time you raise pay and pension benefits for government workers, you create deficits, pouring additional billions into the pockets of bond underwriters, and you redirect the money into the hands of the pension funds and their investment bankers.

And at the graduate level, in that rarefied space where sound-bites (that perform so well in Sacramento) just echo meaninglessly in the vast alpine air, consider this:  The impact of artificially elevating the cost of living creates an asset economy, so pension funds and rich people alike can ride the bubble for one more year, while ordinary folks endure servitude to their $700,000 mortgages. It doesn’t take an economist, however, to know this can’t last. It just takes horse sense. That too, appears to be in short supply in Sacramento.

Could it be that if California’s Legislature were committed to lowering the cost-of-living via policies that encouraged competitive development of natural resources including land and energy, maybe they wouldn’t have to bestow such lavish benefits on government workers, nor the crumbs of minimum wage increases to private workers?

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Ed Ring is the president of the California Policy Center.

Practical Reforms to “Right-Size” Government Unions

Rolling back the power of government unions in a state like California is almost impossible. Their power has been unchallenged for so long that they now virtually control the state Legislature, and their grip on local politicians extends to nearly every city, county, school district and special district.

Unions2But there have been reforms in some places, and they can serve as examples for municipalities throughout the state. Several Orange County cities have tried transparency ordinances of variable effectiveness. San Jose has restricted the use of binding arbitration. Voters in San Jose and San Diego have both passed pension reform measures. Cities scattered throughout California have grappled with unions over project labor agreements and prevailing wage laws. And in the courts, reformers have won the first round in the Vergara case, which challenges union work rules governing teacher dismissals, layoff preferences and tenure requirements.

Against the remorseless advance of the government union agenda, these and other measures are decidedly incremental. They are often overwhelmed by deceptive union measures that carry the reform label but are actually reactionary shams, designed to turn back the clock. Or they are challenged in court by an avalanche of suits and counter-suits designed to eviscerate reforms that voters overwhelmingly supported.

The game is rigged, but the nonpartisan hunger for quality public education and civic financial health is universal. Sooner or later, the will of the people will always prevail. Here then is a partial list of public sector union reforms that have been tried, or should be tried, in every city and county in California:

(1)  “Right-to-Work” for all government workers:

This would forbid government unions from getting a government employee fired simply because they didn’t want to join a union. Right-to-work is especially compelling in government organizations, where altruistic individuals who want to become public servants may not wish to financially support the political agenda of their union. Because government unions negotiate over work rules that determine how we manage our public institutions, virtually all union activity is inherently political. Right-to-work in government organizations therefore not only forces unions to be more accountable to their members, but is based on an employee’s constitutional right to free speech.

(2)  “Worker’s Choice” for all government workers:

This law takes right-to-work a step further, and should be implemented in tandem with right-to-work. One objection that unions make to right-to-work laws is that it allows those workers who did not join the union to become “free riders” who enjoy the alleged benefits of union representation but don’t pay any dues. “Worker’s Choice” allows workers under a collective bargaining agreement to opt-out and represent themselves individually in their wage and benefit negotiations with their employer. Something that professionals throughout the private sector do as a matter of course.

(3)  Union Recertification:

This would require government unions to regularly hold a “recertification” election, preferably once every year. The election would require secret ballots and participation by a quorum (usually a majority) of employees in the collective bargaining unit. Most government employees in California started working long after the unions took over. They should be able to decide if they want a union to continue to represent them. Recertification, like right-to-work and worker’s choice, is a practice that would ensure greater accountability by unions, because if they lose the annual election, they would be decertified and could not represent those workers until regaining their approval in an election to be held at least a year later.

(4)  Reduced Scope of Collective Bargaining:

This reform is recommended in order to provide elected officials the latitude to equitably balance the interests of taxpayers and government workers. It gives them the latitude to cope effectively with budget deficits caused by economic downturns that have already affected private sector workers. Limiting negotiations on compensation to current benefits, for example, would mean that elected officials retain the authority to modify pension benefit formulas. Not only budget issues but work rule issues could be restricted under this reform. For example, “last-in-first-out” layoff rules which favor seniority over merit could be scrapped.

(5)  Pension Reform:

The most likely way to implement effective pension reform – which, ironically, is the only way to rescue the defined benefit plan for government workers – is to revise the California constitution via a state ballot initiative. Such a reform, at the least, would give elected officials or voters the right to reduce pension benefit accruals earned by active employees for future work. It would require active employees to pay 50% of their normal contribution, calculated at a rate of return permissable under ERISA statutes, i.e., a truly “risk-free” rate of return. It would impose stricter curbs on spiking and double dipping that would be harder to circumvent in court. And it would provide tools to be implemented to ensure system solvency in a financial state of emergency, such as suspension of COLAs for retirees (retroactively if necessary), retroactive reduction in pension benefit annual accruals for active workers, raising of the pension-eligible retirement age, and a ceiling on benefits.

(6)  “Paycheck Protection”:

This would require unions to obtain permission, preferably annually, before deducting the political portion of their dues from worker paychecks. California’s government workers currently assert their right to not pay the political portion of their dues – notwithstanding the argument that ALL dues paid to a government union are used for essentially political purposes – via a cumbersome “opt-out” process. This reform would change that to an annual “opt-in” process, making it much easier for government workers to avoid having to support the political agenda of their unions.

(7)  “Dues Checkoff”:

Under this reform, government payroll departments would no longer be required (or allowed) to withhold union dues from government employee paychecks and turn that money automatically over to the union. Instead unions would be required to bill and collect dues without relying on payroll withholding, just like other membership organizations. This is particularly justified in the case of government unions, under the assumption that the government should not be acting as a collection agent for a private organization.

(8)  Clarification of “Public Employee”:

This is an interesting reform that can be interpreted in two ways. On one hand, by broadening the description to include government contractors, then in conjunction with other reforms, appropriate regulations restricting inappropriate union activity can be extended, for example, not only to home health care workers, but to construction contractors whose unions negotiate for project labor agreements and prevailing wage agreements. On the other hand, narrowing the description of what constitutes a public employee can counter the aggressive expansion of government unions in states such as California where there are virtually no checks on government union power. Either way, the principle governing the application of this reform would be that unions that operate in the public sector should be subject to more restrictions than those unions that operate in the private sector.

(9)  Transparency in Negotiations:

Lost on most voters is the fact that government unions epitomize the so-called abuses of the elite establishment. Powerful corporate and financial interests make deals with government unions in an Alliance of The Big. More regulations drive out innovative commercial competition at the same time as they expand unionized government. Transparency in negotiations, obviously, means that unions have to disclose their wage and benefit demands for public review. But it means much more than that. Disclosure of their financial and operating reports, their membership dues, their internal leadership election processes. And more than anything, a spotlight on how government unions collude with the most powerful and corrupt among the private sector elites they claim they are protecting us from.

(10)  Ban on Political Activity:

Public employee unions, if they should exist at all, should not be permitted to use their resources to conduct any sort of political lobbying or campaigning. There is an inherent conflict between the agenda of unionized government and the public interest. Government unions, by definition, want to increase their membership and want to increase the pay and benefits of their membership. That causes more government to trump good government. It causes more spending to trump efficient spending. At its root, it means that failure of government programs constitutes success for government unions, because their solution is inevitably to call for more government spending. Political activity by government union should be illegal.

Perhaps the most important point to be made in the context of these ten recommendations is that they are utterly nonpartisan. Unions in the public sector bear little relation to unions in the private sector, for reasons that are well documented: They don’t operate in agencies that have to make a profit, which limits how much private sector unions can ask for from their employers. They elect their own bosses through massive campaign spending, something unheard of in the private sector unions whose management is determined by shareholders. And they run the government, which allows them to make common cause with the most powerful and corrupt among the private sector elites. What part of this is partisan?

Californians of all political persuasions are going to eventually have to face the reality that government unions are the reason our schools are failing students and parents, and the reason we can’t balance our budgets and control our debt. These reforms are all ways to begin to reduce the power of government unions, which will be a giant step towards making California’s state and local governments truly accountable to the interests of all workers – not just government workers.

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Ed Ring is the president of the California Policy Center.

Why Aren’t Unions Fighting California’s Bullet Train Boondoggle?

Photo courtesy of Jon Curnow, flickr

Photo courtesy of Jon Curnow, flickr

Back in 2008, voters in California approved Prop. 1, a statewide initiative to spend “$9 billion for building a new high-speed railroad between San Francisco and Los Angeles.”

Total cost, $9.5 billion. Remember that?

Quoting further from the original initiative’s ballot language:

Bond Costs. The costs of these bonds would depend on interest rates in effect at the time they are sold and the time period over which they are repaid. The state would make principal and interest payments from the state’s General Fund over a period of about 30 years. If the bonds are sold at an average interest rate of 5 percent, the cost would be about $19.4 billion to pay off both principal ($9.95 billion) and interest ($9.5 billion). The average repayment for principal and interest would be about $647 million per year. Operating Costs. When constructed, the high-speed rail system will incur unknown ongoing maintenance and operation costs, probably in excess of $1 billion a year. Depending on the level of ridership, these costs would be at least partially offset by revenue from fares paid by passengers.” (ref. UC Hastings Scholarship Repository, Propositions, California Ballot Propositions and Ballot Initiatives)

Over time, fantasy always yields to reality.

The most recent reputable estimate of high-speed rail costs come from an in-depth special report published last month by the Los Angeles Times, entitled “$68-billion California bullet train project likely to overshoot budget and deadline targets.”

The title of that special report says it all. California’s high-speed rail was sold to voters for an amount that is at least seven times less than our most recent estimate of costs, and if the author of the LA Times special report is to be believed, it is very unlikely this project will come in for a total cost under $100 billion.

High-speed rail was sold to voters back in 2008 in roughly the same way pension benefit enhancements were sold to naive politicians back around 1999. In both cases, the decision makers were told it would cost next to nothing. Isn’t this called fraud? To sell a good or service to a consumer at a given price, then come back and demand ten times as much money?

Payments on these construction costs will be paid from the California state general fund, and based on a $100 billion total cost and a 5.0 percent interest rate, that comes out to $166 per year per California resident. Not that much? Unimpressed? Put another way, based on roughly 6 million taxpaying households in California (about half of California’s 12 million households pay no taxes; their sales tax burden is largely offset by the earned income tax credit), construction of this train will cost $1,084 per taxpaying household per year.

Do you want to pay $1,000 per year for a project that will not alleviate California’s transportation challenges one bit? A project that will lose money forever? A project that will use up massive amounts of capital that could be deployed to achieve literally dozens of other huge and vitally needed infrastructure objectives?

This is where California’s labor leadership, by continuing to support high-speed rail as a centerpiece project, are showing how out of touch they truly are with the average working family. Because they are unwilling to fight for major infrastructure investments that would improve the quality of life and lower the cost of living for all Californians; improvements to existing rail, upgraded roads, state-of-the art natural gas and 5th generation nuclear power stations, reservoirs and aquifer storage projects, upgraded sewage treatment plants to produce potable water, and much, much more. If California’s labor leaders care about all workers, they will find the vision and courage to fight for these useful amenities, instead of promoting high speed rail.

20151123-UW-HSR

High Speed Rail CEO Jeff Morales made $477,760 in 2014

A legitimate role for government spending is to make strategic investments that reduce costs for basic necessities. That is what makes a nation prosperous. That is a proper use of public funds. Artificially inflating the costs for energy, water and transportation – which is the current policy of California’s government, abetted by big labor in this state – is a crime against the people of California.

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Ed Ring is the executive director of the California Policy Center.

“Myths vs. Facts” Propaganda Will Not Change Pension Reality

California’s largest state/local government employee pension system, CalPERS, has posted a page on their website called “Myths vs. Facts.” Included among their many rather debatable “facts” is the following assertion, “Pension costs represent about 3.4 percent of total state spending.”

This depends, of course, on what year you’re considering, and what you consider to be direct cost overhead for the state as opposed to pass-throughs from the state to cities and counties. But CalPERS overlooks the fact that most of California’s government workers who collect pensions do not work for the state, they work for cities and counties and school districts. As can be seen on the “view CalPERS employers” page on Transparent California, there are 3,329 distinct employer retirement pension plans administered by CalPERS, and the vast majority of these are not state agencies paid from the state budget, but local agencies.

In a study earlier this year, “California City Pension Burdens,” the California Policy Center calculated 2015 employer pension contributions as a percent of total revenue for California’s cities to be 6.85%, more than double the amount CalPERS implies is the average pension burden. But this hardly tells the whole story, because CalPERS is systematically increasing the amounts that their clients will have to contribute as a percent of payroll, and hence, as a percent of total revenue.

UnionWatch has obtained budget documents from Costa Mesa showing how the pension contributions as a percent of payroll will grow between their 2014/15 fiscal year and 2020/21. Over the next six years, as the chart below shows, Costa Mesa’s total payroll is projected to grow from $50.1 million to $54.6 million. Their pension contribution, on the other hand, will grow from $23.2 million to $33.0 million. That is, their pension contribution as a percent of total payroll will increase from 46.3% of payroll today, to 60.4% of payroll in 2020.

Pension chartCosta Mesa’s pension burden as a percent of payroll is a bit higher than average, but not much. And in terms of the percentage increases to pension contributions announced by CalPERS, they are typical. California’s cities, based on CalPERS announced pension increases, can expect to add another 15% of payroll to whatever amount they are already sending to CalPERS each year.

For every dollar they pay their employees in salary, should California’s cities be sending, year after year, $.50 cents or more to CalPERS? That’s the best case. It assumes that CalPERS will continue to be able to realize annual returns on investment of 7.5%, on average over the next several decades. It also assumes they’ve got the demographic projections correct this time, and won’t have to contend with the otherwise happy eventuality of people living longer than their current projection of approximately 80 years. These are big assumptions.

And how much of this fifty cents (or more) on the dollar do the employees themselves pay as a percent of withholding? In many cases, up until recently, they paid nothing. Or if they did pay via withholding, at the same time as they became subject to that requirement, they received a raise to their overall salary of an equivalent amount. But under California’s 2012 Public Employee Pension Reform Act, employees will gradually be required to pay more for their pensions – with a ceiling of 8% for regular employees, and 12% for public safety employees.

If they paid the maximum via withholding, for a miscellaneous employee in Costa Mesa, that 8% equates to a 4-to-1 employer match today, rising to a 5-to-1 matching in 2020. Similar employer matching ratios will apply for public safety employees. How many companies, anywhere, provide 1-to-1 matching, much less 2-to-1, or more? 5-to-1 matching? It is unheard of. For good reason – it is absolutely impossible for a private company to afford this in a competitive economy.

Returning to the Myths vs. Facts page posted by CalPERS, they also assert that “The average CalPERS pension is about $31,500 per year.” This is profoundly misleading. It is based on the assumption that every CalPERS retiree worked a full career in government. Returning to the CalPERS Employers page on Transparent California, one can see a more accurate estimate of the “average pension,” because it is limited to the average for retirees who put in at least 30 years of work. Take a look. For Costa Mesa, the average 2014 pension for a full career retiree was $91,805.

If our cities could afford this, nobody would care, but they cannot. If Social Security, which withholds benefits until a participant, typically, has worked 45 years, could afford to be equally generous, nobody would care. But the average Social Security benefit is around $15,000 per year and even at that pittance, without major restructuring it will go broke.

One can debate forever regarding how much of a premium public employees should receive over private sector workers because they’re, on average, more educated, or take more risks in their jobs. But as it is, taxes are going up to pay pensions and benefits to government workers that are by any objective standard many times greater than what private citizens can ever hope to achieve. No premium, however much deserved on principle, should be this big.

The insatiable demand by CalPERS and other government pension systems for more money to keep these pensions intact does more than create financial stress to our cities and counties. It exempts public employees from the economic challenges that face everyone else. It takes away the sense of shared fate between private citizens and public servants. It undermines the social contract. It exposes a self-dealing, hidden agenda behind all new regulations. It erodes the credibility of laws, ordinances, codes, because perhaps they are merely there to generate revenue.

CalPERS and California’s other government pension systems have the financial wherewithal to lobby and run PR campaigns that dwarf that of reformers. But myths and facts are not defined in press releases. They are defined by reality. The reality is that California’s pension funds have increased their required contributions as a percent of municipal budgets by an order of magnitude in just the last 15-20 years, and there is no end in sight. If and when they can no longer seize public assets to force payment, bully compliant judges to overturn reforms, or find enough money from new taxes to save their financially shattered systems, they are going to have a lot of explaining to do – not only to the beleaguered taxpayers, but to their own members.

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Ed Ring is the executive director of the California Policy Center.

10 Government Union Myths and the Moral Implications

union-protest-washington-132Often missing from entirely legitimate criticism of government unions is an accompanying explanation of the moral values that underlie the criticism. Last month we published a post entitled “Deceptive and Misleading Claims – How Government Unions Fool the Public,” which listed 10 myths that government unions use repeatedly in their propaganda campaigns. Missing in that post, and added here, are the moral values that underlie the need to expose each of these myths.

TEN GOVERNMENT UNION MYTHS AND THE MORAL ARGUMENTS AGAINST THEM

Myth #1:  Government unions are protecting the middle class.

Reality:  Government unions are protecting government workers at the expense of the private sector middle class. The agenda of government unions is more wages and benefits for government workers, and more hiring of government workers. To adhere to this agenda, failure of government programs still constitutes success for these unions. More laws, more regulations, and more government programs equates to more unionized government workers, regardless of the cost, benefit, or need for these programs. The primary agenda of unionized government has nothing to do with the welfare of the private sector middle class, whose taxes pay for it.

Moral value:  The dignity and security of ALL workers is important, not just government workers.

Myth #2:  Government unions are a necessary political counterweight to “Wall Street,” big business, and billionaires.

Reality:  When government is expanded to serve the interests of government unions, the elite and privileged special interests are relatively unaffected, and often benefit. Large corporations can afford to comply with excessive regulations that drive their emerging competitors out of business. When governments borrow to finance deficits created by an over-built unionized government, bond underwriters profit from the fees. Government pension funds are among the biggest players on Wall Street, aggressively investing hundreds of billions each year to secure their 7.0% (or more) per year returns. Billionaires can afford to pay taxes and fees – it’s the middle class taxpayer who can be overwhelmed by them. When powerful special interests want favorable legislation passed in California, they go to the government unions and make a deal. Government unions are the brokers and enablers of special interest cronyism. They are allies, not counterweights.

Moral value:  As government contractors and as representatives of public servants, financial special interests and their government union partners should care about ALL citizens, not just themselves.

Myth #3:  Government unions represent and protect the American worker and the labor movement.

Reality:  For better or worse, government unions represent and protect government workers. Government unions and private sector unions have very little in common. Unlike private unions, government unions elect their own bosses, and their agencies are funded by compulsory taxes, not through profits earned by creating products and services that are voluntarily purchased in a competitive market. Moreover, government union members operate the machinery of government, giving them the ability to harass their political opponents under cover of authority. Private sector unions – properly regulated – have a legitimate role to play in American society. Government unions, on the other hand, exist to serve the interests of government workers, not the ordinary American citizen.

Moral value:  Democratic government represents and serves ALL Americans, not just government workers.

Myth #4:  Public employees are underpaid.

Reality: In past decades, prior to the unionization of government, a public worker exchanged lower base pay for better retirement benefits and more job security. But today, not only have retirement benefits been greatly increased from what was normal back in the 1980’s and 1990’s, but in most cases the base pay of government workers exceeds the base pay for private sector workers performing jobs requiring similar skills. A 2015 study by State Budget Solutions estimated the total compensation of California’s government workers to exceed private sector workers by 31%. But these studies typically omit lower paid independent contractors who now constitute one in three workers. A California Policy Center study that examined 2012 data showed the average pay and benefits for California’s city workers was $124,058, county workers $102,312, and state workers $100,668. And this study did not take into account the value of additional paid vacation benefits, extra paid holidays, and generous “comp time” policies, which add significantly to the total value of annual compensation. Just how much public employee pay exceeds private sector pay for equivalent jobs is the topic of ongoing debate. But they’re not underpaid by any reasonable measure.

Moral value:  Taxpayer funded government benefits – whether they are generous or minimal – should extend to ALL workers according to the same set of formulas and incentives.

Moral value:  Public service should not automatically bestow better pay, more job security, and superior benefits compared to private sector workers.

Myth #5:  The average public sector pension is only $25,000 per year (or some similarly low number).

Reality:  The problem with this profoundly misleading statistic is that this low average is the result of including participants who only worked a few years in state/local government, barely vesting a pension. Should someone who worked less than a decade (or two) in a job expect a pension based on a full career of service? When normalizing for 30 year careers and taking into account the uptick in retirement benefit formulas that rolled through California starting in 1999, the average state/local retiree in California collects a pension and retirement health benefit package worth over $70,000 per year. For a private sector taxpayer to collect this much in retirement, they would have to save at least $1.5 million.

Moral value:  We support modest, financially sustainable retirement security benefits for ALL American workers, not just government workers.

Myth #6:  California’s state/local pension systems are being reformed and will be just fine financially.

Reality: Virtually every official post-reform projection among California’s 80+ public sector pension systems are predicting eventual financial health based on a huge, extremely risky assumption – that the average annual returns of these funds over the next few decades will exceed 7.0% per year. Common sense should tell any unbiased observer that ongoing 7.0% average annual returns are not a safe bet. If they are, why are Treasury Bills only yielding 3.0%? What are mortgage bankers only able to get 3.5% on 30 year fixed mortgages? Why are bank CD’s only offering 2.0%? The spread between equity returns and truly risk-free returns has never been this large for this long. Pension funds are basing future performance projections on past results. The problem is that over the past 30 years, interest rates have been steadily lowered to allow people to borrow more. This borrowing stimulated the economy, creating corporate profits and driving up the price of corporate equities. But interest rates cannot be lowered any further. We are at the end of a long-term credit cycle, and pension funds are just beginning to deal with the consequences.

Moral value:  Government worker retirement funds should be managed cautiously and responsibly, not gambled on Wall Street with taxpayers liable if returns don’t meet unrealistic expectations.

Myth #7:  The teachers unions care about student achievement more than anything else.

Reality: The evidence simply doesn’t support this assertion. Consider the reaction of the California Teachers Association to the recent Vergara decision, in which a Los Angeles superior court judge agreed with student plaintiffs who challenged three union work rules. The CTA criticized the ruling and announced their support for an appeal. What does the Vergara lawsuit aim to accomplish? It would take away the ability for teachers to earn tenure in less than two years. It would end the practice of favoring seniority over merit when deciding what teachers to layoff. And it would make it easier to fire incompetent teachers. These are commonsense, bipartisan reforms that the teachers unions oppose.

Moral value:  Good educations for our children matter more than job security for bad teachers.

Myth #8:  Billionaires are trying to hijack California’s public education system.

Reality:  Wealthy individuals come from a diverse background of political orientations. All of them share a desire to rescue California’s next generation of citizens from a union monopoly on education. And unlike the unionized traditional public school, public charter schools and private schools survive based on the choice of parents who want a better education for their children. And if they don’t do a great job, the parents can withdraw their children from the failing charter or private school. Introducing competition to California’s unionized K-12 education system is a healthy, hopeful trend that gathers support from concerned citizens of all incomes, ethnic groups, and political ideologies.

Moral value:  What matters is the character and intentions of philanthropists and investors, not whether their ideology is right-wing or left-wing.

Myth #9:  Proponents of public sector union reform are “anti-government workers.”

Reality: This sort of claim is a distraction from the reality – which is that public sector unions have corrupted the democratic process and have been attempting to inculcate public employees with the “us vs. them” mentality that is the currency of unions. Sadly, the opposite is the truth – government unions alienate the public from their government, and, worse, alienate government employees from the public. They have created two classes of workers, government employees who have superior pay, benefits, job security and retirement security, and everyone else in the private sector. They know perfectly well that this level of worker comfort is economically impossible to extend to everyone. Government unions have undermined the sense of common rules and shared fate between public and private individuals that is a foundation of democracy. Those who oppose government unions recognize this threat. It has nothing to do with their support and respect for the men and women who perform the many difficult and risky jobs that are the role of government.

Moral value:  All American citizens should live according to the SAME government laws, rules, incentives.

Myth #10:  Opponents of government unions are “right wing extremists.”

Reality: The problems caused by government unions should concern everyone, and they do. Conscientious left-wing activists who favor an expanded role for government expect positive results, not failed programs that were created merely to increase union membership. They realize that unionized government is expensive and inefficient, leaving less money or authority to maintain or expand government services. Public libraries and parks with reduced hours and curtailed maintenance. Pitted, congested roads. After school recreation programs without reliable funding. Public schools where students aren’t learning and apathetic teachers are protected from accountability. Government has to be cost-effective, no matter how big or how small. Opponents of government unions can disagree on the optimal size of government, yet passionately agree on the problems caused by a unionized government.

Moral value:  Good government is something EVERYONE believes in, whether they are right-wing or left-wing.

This list of ten myths promulgated by spokespersons for government unions only begins to chronicle their many deceptions. But each of these myths offer strategic value to these unions – giving them the ability to put reformers on the defensive, change the topic of discussion, redefine the terms of the debate. Each of them has powerful emotional resonance, and each of them – along with many others – is continuously reinforced by a network of professional communicators backed by literally billions in dues revenue. But they are myths, not facts, and equally if not more important, they rely on premises of questionable moral worth.

Although intellectual integrity and emotional resonance are important and necessary elements of any effective argument critical of government unions, it is the moral worth of those arguments that matters above all. When you consider these myths – which is a charitable way to describe these distortions, deceptions, and misleading claims – in the context of the moral arguments that impel critics to refute them, what emerges is a new and decisive approach to countering union propaganda. Because government unions are destroying our democracy, our freedom and our prosperity, merely to enrich themselves. The moral high ground belongs to their critics, not to the government unions.

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Ed Ring is the executive director of the California Policy Center.

Silicon Valley Moving Toward Alliance With Big Labor

Apple headquarters

Artists rendering of Apple’s new headquarters (public domain image)

Back in the late 1970’s something happened to the Santa Clara Valley. Increasingly it became referred to as the Silicon Valley, because the emerging silicon based semiconductor industry found its first home in plants nestled along the southern shores of the San Francisco Bay. Boasting what are among the finest universities in the United States – Stanford and Cal Berkeley – and the best weather in the world, high technology companies began choosing the San Francisco Bay Area in the 1940s and never looked back. Where once there were endless orchards of Prune, Apricot and Cherry trees, a sprawling ecosystem of high tech companies and venture capital firms now attracts talent from everywhere on earth. The Silicon Valley became, and remains, the epicenter of the most dramatic technological advances in history.

For the first 25 years or so, certainly through the end of the 20th century, the mantra in the Silicon Valley was “better, faster, cheaper.” Entrepreneurs were creating entire new industries, as digital technology enabled “mini-computers” to replace mainframes, and “work-stations” to replace mini’s, which were in-turn replaced by PCs and laptops, which are themselves being replaced for many applications by smart phones. But as we move to the “internet of things,” and as the Silicon Valley ecosystem matures from a jungle of creative destruction to a forest where a handful of gigantic firms wield unprecedented economic power, the “better, faster, cheaper” mantra is fading away.

Silicon Valley’s new breed of entrepreneurs have realized they don’t necessarily have to compete for customers who will voluntarily choose their products over those offered by their competitors. They have realized the government is a customer with very deep pockets, that more regulations will empower big companies and destroy the emergent ones, that environmentalist mandates will force consumers to buy their products as they forge OEM relationships with manufacturers of durable goods, that the security state is a voracious consumer of high technology, and that public bureaucrats can be sold billions of dollars worth of educational hardware and software.

The Silicon Valley’s new breed of “entrepreneurs” have realized something else, too. They’ve realized that as they evolve from competition to cronyism, big labor can be a powerful political ally.

A recent report in the San Francisco Chronicle entitled “Unions and tech: A most unlikely political alliance forms,” sums up the new reality. Author Joe Garofoli writes:

“Led by the 1.4 million-member Teamsters union, some in labor are ready to support friendly tech companies when the corporations face regulators in San Francisco, Sacramento and beyond. Support from the Teamsters will make labor-backed Democrats much more receptive to the needs of a tech company. ‘Labor supports their employers in a lot of cases,’ said Rome Aloise, Teamsters International vice president. ‘We fight with them, but we support them — because they’re the creator of jobs, which creates members for us. On the other hand, for the ones that don’t pay decent wages and benefits, we’re not going to be supportive of them.'”

This has little or nothing to do with wages and benefits. The firms where the Teamsters have already gotten a foothold, eBay, Zynga, Yahoo, Genentech, and Apple, can easily afford to offer their drivers pay and benefits that render union dues a superfluous drain on their paychecks. And if these well heeled high-tech corporations haven’t granted their drivers and other service employees stable hours and competitive pay, that is a shameful omission they ought to correct without union intervention. They should, they could and they would. But they don’t want to. Because what this is really about is acquiring political power.

A few examples should suffice to convey the nauseating threat heralded by this new reality:

When the crony “greens” want to force every toilet and faucet manufacturer to install sensors to micro-monitor indoor water consumption, when the crony “education reformers” want to force every home school parent to purchase laptops wired with approved educational software, when the crony security and law enforcement “innovators” want to sell more drones and remote sensors to look into our backyards and listen in on our living room conversations – the unions will be there, adding their political muscle, public and private, to make sure our elected representatives do the right thing.

If union activism in the Silicon Valley was merely about wages, benefits, work hours, and dignity, they would have a legitimate role to play. Ideally, in those situations, private sector unions earn their clout by acquiring and retaining members voluntarily in a right-to-work environment. But unions, unfortunately, care just as much about power and organizational aggrandizement as the big corporations they purport to fight. That’s why they thrive in the powerful places where they are needed the least, in monopolistic entities with captive markets who can afford them – government and giant corporations – entities that realize union alliances will help them intimidate the political objectors, appease the union controlled pension funds, and obliterate the commercial competition.

The dawning unionization of the Silicon Valley is an ominous development. It must be challenged. The people who run Silicon Valley should consider what will happen when there’s an economic downturn, and labor contracts curtail their options to restructure. They should ask how their new allies will view utilization of self-driving cars and countless other labor saving innovations. They are putting the culture of “better, faster, cheaper,” at mortal risk, a culture that has enabled unprecedented global prosperity, and has the potential to offer wondrous new achievements for decades to come.

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Ed Ring is the executive director of the California Policy Center.

How Government Unions Are Destroying America

UnionNot one presidential candidate, apart from Gov. Walker’s last-ditch rhetoric prior to dropping out, has discussed the problems with unionized government as a major issue. That’s too bad, because these problems are bigger than even most critics acknowledge.

When people discuss the need to reform, if not eliminate, public sector unions, the only reason typically cited is that their demands are bankrupting our cities and states. And reformers also usually fail to communicate the fundamental differences between government unions and private sector unions, or emphasize the bipartisan urgency of public sector union reform. Government unions don’t merely drive our cities and counties into service insolvency if not bankruptcy, they are distorting policy decisions of fundamental importance to the future of America.

With a focus on California, and in no particular order, here is an attempt to summarize how this is occurring:

(1) The Economy

California has the highest taxes and fees in the U.S., and is consistently ranked as the worst state in America to do business. California also has the highest paid public employees in the United States, and with state and local debt and unfunded retirement obligations now hovering around $1 trillion – nearly half of the state’s entire GDP – virtually all new state and local taxes and fees are to pay for services that have already been performed. The uncontrollable political power of state and local government unions, combined with their insatiable appetite for more pay, more benefits, and more members, has – across all areas of policy – shifted political priorities from the public interest to the interests of public employees. The primary reason for excessive taxes and fees, as well as fewer services and less infrastructure investment, is because California’s unionized state and local government workers receive pay and benefits that are twice what the average private citizen earns.

(2) Cronyism and Financial Special Interests

When government unions control the government, big business either gets out of the way or gets on board. The idea that government unions protect the public interest against big corporate interests is absurd. Government union backed policies create deficits that bond issuers earn billions underwriting. Excessive pension benefits create additional hundreds of billions in pension fund assets invested on Wall Street. Excessive regulations are enforced by additional unionized government employees, to which only the biggest corporations can afford to comply. Government unions enable and enrich the largest corporate and financial interests at the expense of small independent businesses and emerging competitors.

(3) Environment

When it comes to cronyism, the “clean-tech” sector has risen to the top of the list. Government unions are partnering with “green” venture capitalists to carve up the proceeds of California’s carbon emission auction proceeds, a tax by any other name that will eventually extract tens of billions each year from California’s consumers to fund investments that wouldn’t make it in a normal market. From high-speed rail to side loading washers that tear up fabric, strain backs, and require expensive maintenance, “green” projects and products are being forced on Californians in order to enrich investors and corporations. But it doesn’t end there. A bad fire season isn’t because of normal drought recurrence, no, the cause is “man made climate-change,” so fire crews have a claim on CO2 emissions auction proceeds. A heat wave isn’t a heat wave, it’s global warming – and since crime is statistically known to increase during hot weather, police agencies also have a claim on CO2 emissions auction proceeds. Code inspectors and planners? Climate change mitigation via enforcing “additional” energy efficiency mandates and higher housing density. Transit workers whose conveyances replace cars? Ditto. Teachers who insert climate change indoctrination into curricula? Ditto.

An entire article, or book for that matter, could be written on the synergistic symbiosis between environmental extremists, big business/finance, and government unions. What about the artificial scarcity environmentalism creates by restricting development of land, energy, water, and other natural resources? When this happens, the wealthiest corporations and developers make higher profits while their smaller competitors go out of business. Utilities, whose margins are fixed, raise revenues which increases their absolute profits. Union controlled government pension funds, whose entire solvency depends on asset bubbles, ride investments in these artificially scarce commodities to new heights. Property tax revenues rise because home prices are artificially inflated.

(4) Infrastructure

California’s deferred maintenance on existing infrastructure – roads, bridges, rail, port facilities, utility grid, dams and aqueducts – has been assessed in the hundreds of billions. New infrastructure to solve, for example, water scarcity, would include toilet-to-tap sewage reuse, desalination, enhanced runoff capture, and – dare we say it – a few new dams. But none of these projects get off the ground, not only because environmentalists oppose them based on mostly misguided principles, but because artificial scarcity enriches established special interests, and because all the public funds that can possibly be found are instead perpetually needed to pay unionized government workers. More pay. More benefits. More government workers. Infrastructure? It’s environmentally harmful.

(5) Immigration

No matter where one stands on this sensitive and complex issue, they must recognize that government unions win when immigrants fail to prosper or assimilate. While American culture retains a vitality that is almost irresistible to newcomers and may overcome all attempts to undermine and fragment it, if government unions had their way, that’s exactly what would happen. Because the more difficulties new immigrants encounter, the more government workers are required. If immigrants fail to find jobs, if they become alienated and traumatized, if they turn to crime or even terrorism, then we need more welfare and social workers, we need more multilingual teachers and bureaucrats, we need more police, and we need more prisons. The unpleasant truth is this: If we import millions of destitute immigrants into America – people with marginal skills from cultures that are hostile to American values – it is a meal ticket worth billions of dollars for government unions, and for every crony business who services the programs they administer.

(6) Authoritarianism

By over-regulating all activity that so much as scratches the earth, whether it’s to develop land, water, energy, minerals; to farm, transport, build, manufacture; to enforce these rules, more government powers are required. Similarly, by upending the cultural fabric that’s nurtured a social contract in America so strong that volumes of law never had to be written, but were instead the stuff of mutually understood courtesies and customs, we invite strife. To manage this, more rules and referees are necessary, enforced by more government. As society loses its cohesion, and as ordinary honest citizens rebel against excessive taxes and regulations, government unions benefit from training their members to mistrust the fractious and rebellious public. After all, unionized government workers are now a special class. As society fragments, they become more cohesive. As the middle class dissolves, they retain their economic privileges. Perhaps more than any other factor, government unions impel the growth of a police state.

(7) Education

To consider education is to save the most important for last. Because everything that is wrong with where our culture is headed can either be magnified or mitigated by how we educate our young students, regardless of their income or gender or culture or faith. As it is, in California’s public schools, students are taught that open space is sacred, that energy development will destroy the planet, that capitalism is innately flawed if not irredeemable, and that the legacy of Western European culture is a primary cause for most problems in the world. Instead of teaching children to develop functional skills in reading and math, they are being indoctrinated to believe that any failure or disappointment they ever encounter is the result of discrimination. Given the demographics of California’s youth, the union fostered educational environment currently imposed on them is nothing short of a catastrophe.

The reader may not agree with all seven of these assessments, but regardless of the scope of anyone’s reform advocacy, they must confront government unions. Because reform in all of these areas is stopped by government unions. Do you want to unleash California’s economic potential? Do you want to reduce the power of the financial special interests and crony capitalists? Do you want to restore balance to environmental policies, and build revenue producing infrastructure that eliminates scarcity and lowers the cost of living for ordinary people? Do you want to stop importing welfare recipients and instead admit highly skilled and highly educated workers who will enliven our economy and our culture with spectacular success? Do you want to avoid living in a police state? Do you want California’s children to be taught lessons that build their character and give them useful skills?

Reformers must recognize that government unions have a natural interest in preventing any of these reforms from ever happening. Addressing any of these issues without also taking on the government unions is futile. Conscientious members of government unions can play a vital role in reforms, by the way, if they are willing to make their personal interests secondary to their duties as a public servant. If California can be rescued from the grip of government unions, eventually everyone will benefit. And as goes California, so goes the nation.

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Ed Ring is the executive director of the California Policy Center.