CA Threatened by Massive Unfunded Liabilities

Despite a concerted effort from Gov. Jerry Brown to keep California from slipping back into the financial abyss, the state’s finances remain threatened by massive unfunded obligations.

“It’s California’s debt and liabilities that are concerning financial analysts, particularly the state’s rapidly growing unfunded retiree health care costs, which grew more than 80 percent over the past decade. California has promised $74 billion more in health and dental benefits to current and retired state workers than the state has put aside,” the San Francisco Chronicle reported.

Adding to the concern, new reporting rules have cast new light on local debt burdens. Changes issued by the Governmental Accounting Standards Board caused California governments to begin reporting “pension debts differently in their 2015 financial statements, which is becoming a wake-up call,” Reason noted. “Medical costs and other non-pension benefits will be accounted for differently in the 2017-2018 fiscal year. As a result, localities are facing much larger pension debts than previously reported.”

Observers have also had their eye on final developments in the case of one of California’s municipal canaries in the pension coal mine. “The bankrupt city of San Bernardino, California, said in a court filing […] it had reached a tentative agreement with the creditor holding its pension obligation bonds on how the debt would be treated in the city’s plan to exit bankruptcy but did not provide details,” according to Reuters.

Burdening Brown

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

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

CalPERS, the fund at the center of the ongoing pensions controversy, remained a sticking point. Its refusal to secure higher servicing payments created “a heavy political lift from Brown,” as the Contra Costa Times wrote in an editorial. “If CalPERS had required higher payments, he could have simply planned for it in his state budget. Without the requirement, he must persuade the Legislature to free the money.” Amid the recession, its funded ratio, the board wrote, “plummeted to 61 percent” in two years. “If that happened today, it would be devastating.”

“CalPERS is especially vulnerable because it assumes it can earn returns of 7.5 percent annually. To try to hit that target, it must make aggressive investments. In other words, it must take risk, which comes with upside potential and downside dangers. The higher the investment target, the greater the exposure in a down market.”

Bond struggles

One of Brown’s would-be replacements in the governor’s mansion, state treasurer John Chiang, has sought to shift expectations around California’s budgetary reliance on bond measures. Bond use has “risen substantially in California, with the state’s reliance on borrowing for infrastructure resulting in 1 of every 2 dollars spent on those projects going to pay interest,” the Chronicle noted, citing figures from the Department of Finance. But although Chiang suggested earlier this month that the state should “rethink” its use of bonds, Chiang has embarked “on a national tour this month aimed at seducing investors with an environmentally friendly investment alternative,” according to the San Jose Mercury News. “Chiang wants to plant a full-fledged green bond market. Individuals and institutions, such as mutual funds and hedge funds, will have the opportunity to invest. The bonds promise to appeal to environmentally minded investors, as well as those looking to diversify portfolios overly dependent on fossil fuels — in case future climate change regulations sprout up.”

But in a sign of the inertia and perverse incentives that critics often associate with entrenched bureaucracies, the bonds have been built to stretch beyond their narrowly tailored confines if given the right kind of tug. “Instead of rules, green bond issuers rely on a set of nonbinding guidelines called the Green Bond Principles, drafted by an international group of issuers and investors,” the Mercury News noted. “The lack of third-party monitoring means issuers can label almost anything a green bond. If the bonds’ popularity outstrips the number of green projects, issuers could have an incentive to label bonds as green, even when they’re not.”

Originally published by CalWatchdog.com

Union Greed

UnionChicago, long known as the Second City, may still be second in some things, but it seems to be #1 in teacher union greed. As it’s time for a new contract with the Chicago public school system (CPS), the inevitable blather has begun to befoul the air. Here are a few things Chicago Teachers Union (CTU) will not use as talking points:

  • Teachers in CPS are the second highest paid in the country, making barely less than New York City’s teachers.
  • On the 2015 National Assessment of Educational Progress (NAEP), only 30 percent of 4th graders and 25 percent of 8th graders tested as “proficient” in mathematics, and only 27 and 24 percent, respectively, were found to be proficient in reading.
  • Teachers only contribute 2 percent of their salary to their own retirement; CPS kicks in the the other 7 percent, the so-called pension pick-up.
  • Chicagoans are the most taxed people in Illinois and their already crisis-level pension shortfall is in freefall.

The economic situation is so bad in Chicago that Illinois governor Bruce Rauner has been making noises about CPS declaring bankruptcy. If successful, the state would take over the district, void the contact with CTU and possibly reduce pension payments. Needless to say the union and its enablers in the Illinois statehouse are not happy at the prospect and claim it is not legal under existing statutes.

In the meantime, to placate CTU, Chicago mayor Rahm Emanuel proposed a contract so generous that Rauner called it “unaffordable.” It was one-sided enough, however, that CTU boss Karen Lewis liked it. It offered:

  • A guarantee of no economic layoffs through the end of the contract in 2019; the only way to reduce the workforce would be through retirements and attrition.
  • Cost-of-living pay increases.
  • “Step and lane” pay increases based on experience and seniority.
  • No more new charter schools beyond the 130 presently operating; the only new ones allowed would be replacements for any that closed.

Amazingly, the union’s bargaining team rejected the deal, infuriating CPS CEO Forrest Claypool. In response, he fired off a terse letter to Karen Lewis emphasizing three unilateral moves CPS would now make:

  • The district will discontinue the pension pick-up, saving CPS $130 billion annually.
  • A reduction-in-force plan will go into effect that will necessitate layoffs and save another $50 million.
  • Repurposed federal funds will result in a “reduction in general funding to the schools while having no significant overall impact on school budgets.”

Well, as Larry Elder would say, “Then the fit hit the shan.” The union called the letter an “attack” and an “act of war.” The unionistas were especially exercised about the withdrawal of the pension pick-up, but their stance is indefensible. In the Windy City, teachers are obligated by law to contribute 9 percent to their retirement. But in fact, for 35 years CPS (i.e. the taxpayers) has been picking up 7 of the 9 percent. So teachers have been getting away with legal theft, paying only 2 percent of their own retirement contribution, which has helped to position Illinois as the state with the worst credit rating in the U.S.

Moreover, please keep in mind that Chicago has the second highest paid teachers in the country, with a median salary of $71,017, not counting comprehensive healthcare benefits for the teacher, their spouse or domestic partner and children. Also, the average teacher salary is 51 percent higher than Chicago’s median household income, which is estimated at $46,877. And teachers work just 178 instructional days (plus a few non-instructional ones), whereas other full-time workers toil for 240-250 days a year.

But some teachers were outraged at Claypool’s letter and about a thousand of them tore through the Loop aiming their venomous arrows at Bank of America. Sixteen were arrested for sitting in and chanting inside the bank. As Karen Lewis said, “(We’re) here, because we have to make a choice in the city: banks or schools.” (Don’t we need both?) The teachers also disrupted rush hour traffic, inconveniencing thousands of commuters. Ms. Lewis didn’t explain what the demonstrators had against people driving home at rush hour, many of whom pay a lot more than their “fair share” to the teachers’ pension fund.

At the end of the day, probably the best thing would be for CPS to declare bankruptcy, as Rauner proposed. It’s a novel approach, but one that, at first glance, would seem to have little chance of implementation. However, the Republican governor claims that Democrats outside of Chicago are in favor of it because hitting the reset button would void union contracts, thus saving taxpayers all over the state mountains of unnecessary debt. Declaring bankruptcy could also set a precedent. (Take note Los Angeles: LAUSD is due to go belly-up in 2019.)

Final note to union leaders, protesting teachers and fellow travelers: You are obviously looking out for yourselves. Fine. But please stop using “corporate greed” as a rallying cry. When you scream that “corporations must pay their fair share,” please be assured that they already do and then some. Federal tax rates on corporate income vary from 15 percent to 39 percent. Teachers unions – and in fact all unions – don’t pay a penny in income tax. They not only don’t pay their fair share; they pay no share at all. Now that’s what I call greed, with maybe a little gluttony added for taste.

Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

How Government Unions Are Destroying California

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

California was once the state that everyone looked up to. With the best weather and natural resources, we were full of hope and innovation. We had the best public schools, a world class system of higher education, the best freeways, infrastructure to provide fresh water to our growing population, which also doubled as a source of clean energy through hydro-electric power, a business-friendly environment where entire industries grew in entertainment, aerospace and technology, making our economy virtually recession-proof.

Then in 1978, then-governor Jerry Brown signed an executive order that imposed union-shop collective bargaining on public agencies in California, and the rise of public-sector union power began.

Today, public-sector unions are the most powerful political force in our state. They control a majority of our state Legislature and might control a supermajority in November if a few swing districts fall their way. No politician, Democrat, Republican or Independent, acts without considering how it will affect the union agenda.

These government unions press 100 percent for a progressive agenda, and they consistently agitate for increased spending. In two areas, the quality of our public education system and the financial health of our cities and counties, the consequences of government union power have been catastrophic.

Public Schools

The teachers’ unions, usually a local affiliate of the California Teachers Association, control most of our school boards, leading to control of our public schools. It is more than a coincidence that our public schools rank near the bottom in every category among the 50 states.

As lobbyists for staff and teachers, who are paid to run our public schools, public sector unions fight to maintain the status quo. They protect incompetent teachers, they permit excellent teachers to be dismissed in layoffs, they actively oppose charter schools, they fight poor parents who try to employ Parent Trigger Laws, and they conduct an active campaign 24/7 against any form of school choice.

The financial power of teachers unions:

  • There are over 266,255 public school teachers in California.
  • Each pays at least $1,000 in union dues annually.
  • The CTA acknowledges spending up to 40 percent of those dues explicitly on politics. That is $106 million per year.
  • If the lawyers in Friedrichs are right — that all public union spending is political — the actual total is $266 million per year.
  • Unions for non-teacher staff also are active. There are 215,000 school staff employees who are members of the CSEA (California State Employees Association), who each pay approximately $500 annually in dues. If all of those dues are spent on politics, that adds $107 million more for political spending annually.
  • The total spent by public education unions alone is estimated to be $373 million per year – just in California.

Pensions

Police and firefighter unions do the most damage at the local level. They have attained unsustainable pensions, known as “3%@50”, meaning that a member of that bargaining unit is eligible at age 50 for a pension equivalent to 3% of his highest salary times their number of years of service. While the age of eligibility has been raised for new public safety employees entering the workforce, the vast majority of active police and firefighters still retain these “3%@50” benefits. So at age 50, a 20-year veteran can retire with a pension equivalent to 60% of their highest year’s salary, which can be manipulated through spiking, and a 30-year veteran is eligible for 90% of his or her highest salary.

These pension requirements are held under the “California Rule” to be irreversible. In other words, once they have been adopted, democracy is incapable of turning off the spigot. With the spigot running constantly, communities go bankrupt. First, they cut other services. Then they increase taxes. Then they refuse to pay bondholders, so no one will invest again.

Current unfunded liabilities in California:

At CalPERS: $93.5 billion (ref. page 120, “Funding Progress,” CalPERS 6-30-2015 financial report).

At CalSTRS: $72.7 billion (ref. page 118, “Funding Progress,” CalSTRS 6-30-2015 financial report).

Local Unfunded Liabilities add considerably to this total, since CalPERS, with assets of $301 billion, and CalSTRS, with assets of $158 billion, only constitute 62 percent of California’s $752 billion in state and local pension fund assets. If all of these systems in aggregate were 75 percent funded, which is probably a best case estimate given the poor stock market performance since the official numbers were released, the total unfunded pension liabilities for California’s state and local government workers would be $256 billion.

And $256 billion in unfunded liabilities, a staggering amount, still understates the problem for two reasons: First, these pension funds may not succeed in securing a 7.5 percent average annual return in the coming decades. If not, then they will not earn enough interest to prevent their funding ratios from getting even worse. Also, this doesn’t take into account “OPEB,” or “other post employment benefits,” primarily health insurance. The unfunded OPEB liability just for Los Angeles County is officially recognized at over $30 billion.

A realistic estimate of the total unfunded liabilities for retirement obligations to state and local workers in California is easily in excess of $500 billion. These benefits, which are financially unsustainable and far more generous than the taxpayer funded benefits available to ordinary private sector workers, were forced upon local and state elected officials through the unchecked p0wer of government unions.

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Bob Loewen is the chairman of the California Policy Center.

In Search of a Legitimate Labor Movement

UnionSarah has worked for a major grocery store chain for the past 25 years. Adjusting for inflation, she makes less now than she did over a decade ago, especially since her hours were cut in order for her employer to avoid being required to offer her health insurance. Even more difficult, she is “on call” most of the week, without a reliable schedule, which makes it impossible for her to take on a 2nd part time job to help make ends meet. Including benefits, Sarah is lucky to make $30,000 per year. Now in her early 50s, she will need to work for as long as there is strength left in her body to do the job.

George works for a fire department serving an affluent suburb on the California coast. Taking into account the vacation time he earns as a 25 year veteran, he works less than two 24 hour shifts per week before qualifying for overtime. Since five-day weekends are overkill, he often works one or two extra shifts a week, doubling his pay. When he goes on calls, 98 percent of the time they are medical emergencies, not fires. Including moderate amounts of overtime and the employer’s payments for his benefits, George makes about $250,000 per year. Now in his early 50s, he will retire in a year or two and collect a pension and health benefits package worth well over $100,000 per year.

Both of these individuals are hard working, honest and conscientious. Both of them perform jobs that have a vital role to play in our society. Both of them deserve to be treated with dignity and respect. Neither of them wrote the rules. And both of them are represented by unions.

While these individuals and the work they do is beyond reproach, the unions that represent them leave much to be desired. In Sarah’s case, typical of tens of millions of private sector workers, the unions who represent her have ignored economic reality in pursuit of ideological fantasies. Almost universally, to cite a particularly wounding example, these private sector unions have supported immigration policies that increase the supply of semi-skilled workers who compete with Sarah for work hours. Also common are the pragmatic alliances these unions form with extreme environmentalist organizations who have bottled up development of land and energy, driving the cost of living beyond the reach of an ordinary worker. One may cogitate endlessly over what constitutes optimal and humane policies with respect to immigration and the environment. But to agitate for higher wages and benefits in a society awash in cheap labor and artificially inflated costs for basic necessities is a fool’s errand.

In George’s case, which is equally typical, at least in California, the unions that represent him should not even be permitted to exist. Associations of government workers who engage in collective bargaining are not unions in any traditional sense of the word. They elect their own bosses, they take money from taxpayers instead of competing for consumer spending, and they operate the machinery of government which lets them intimidate or co-opt any special interest that might oppose them. They have priced normal government services beyond the capacity of ordinary taxpayers, and bred cynicism about government into the heart of any financially literate American. And government unions have even less interest than private unions in acknowledging the complexity of issues such as immigration or environmentalist overreach. In both cases, policies that harm the aspirations of private workers have the opposite effect on them, enhancing their job security.

A legitimate labor movement is easy to justify in the abstract. If not unions, what sort of movement will speak for ordinary workers in an era when jobs are being relentlessly automated, global competition is tougher than ever, and the cost of living is punitive? What sort of movement can speak for ordinary workers if, along with these challenges, the nation is gripped by a deep recession brought on because interest rates can’t go any lower and stimulative debt can’t go any higher?

The reality today is that much of America’s labor movement has gone astray. Private sector unions often put ideological goals ahead of the economic interests of their members. And public sector unions, which are not unions in any traditional sense of the word, and which represent the economic interests of their members all too well, are an abomination. They have corrupted our democracy, they are a corrupting influence on government workers because they have exempted them from the economic challenges facing private American workers, they are driving our governments at all levels towards authoritarianism, they are bankrupting our cities and counties and states, and the pension funds they control epitomize the most corrupt elements of America’s grotesquely overbuilt financial sector. Maybe what would remain after abolition, still very powerful voluntary associations, could start fighting for CEQA reform, for example, to benefit all workers instead of just themselves. Before unions infested our governments, that’s what public service meant.

Envisioning exactly how the labor movement might best operate in the interests of the American worker is difficult but necessary. It requires balancing libertarian and mixed-capitalist economic world views. But two reforms would be a very good start. First, outlaw collective bargaining in the public sector. Second, the leaders of the private sector labor movement need to starting caring more about American workers, and less about their elitist ideological fantasies.

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

The Case That Could End Forced Union Dues

http://www.dreamstime.com/-image1661658The U.S. Supreme Court will hear from 10 teachers Monday in a case that could upend decades of labor law by granting public-sector workers the right refuse to pay union dues.

Generations of lawmakers and legal experts have struggled with the question of whether unions can require mandatory payments. The Supreme Court ruled in the 1977 case Abood v. Detroit Board of Education that unions can collect dues so long as the mandatory payments are used solely on representation costs and not political activities. Workers are allowed to pay fees instead of full dues if they don’t want to fund the political activities of the union.

Rebecca Friedrichs and the nine other teachers, however, don’t want to make any payments to the California Teachers Association (CTA). They also assert the process to opt-out of paying full dues or partial fees should be an opt-in system instead. The Supreme Court agreed Jun. 30 to hear their case. Here are the nine most important facts about Friedrichs v. California Teachers Association.

1. Free-Riders Or Captive Passengers

The question before the court is whether the teachers have the right to disassociate from their union. To the teachers and their supporters, the case could mean the end of laws that restrict worker freedom. To opponents, though, unions are what give workers a voice and limiting their power will adversely impact their ability to fairly communicate and negotiate with their employers.

The teachers have argued mandatory union payments violate their constitutional right to free-speech. They said the union often engages in activities or takes a position they neither support nor wish to fund. The union disputes the argument by noting they are legally compelled to represent the teachers regardless of whether they pay dues. Therefore its only fair all workers should have to pitch into the cost of representation.

“The court also has implemented various procedural requirements to ensure that unions are properly reimbursed for chargeable costs,” the union stated in its brief to the court. “While protecting objecting non-members from having their funds used for purposes not germane to collective bargaining and contract administration.”

When a union gets voted in as the exclusive representative for a workplace, they are required by law to collectively bargain for all the workers. Unions often warn workers could just free-ride on those benefits were dues an option.

“The free-rider argument is bad for several reasons,” Jacob Huebert, senior attorney at the Liberty Justice Center, told The Daily Caller News Foundation. “These people don’t consider the union to be a benefit.”

The teachers are allowed to leave their union but are still required to pay the representation fees. If they leave, they lose their liability services and the ability to talk at union meetings.

2. Who Exactly Is Rebecca Friedrichs

It all started when Friedrichs, while teaching out of Buena Park, Calif., tried to leave her union. She felt it benefited its members at the expense of the students. Though she could leave and forfeit most union benefits, she was still forced to continue paying dues. She and a group of other teachers were left with no choice but to file a lawsuit in April of 2013.

“Many of the things the union bargained for made it harder for me,” Friedrichs recalled Thursday during a phone interview with reporters. “To the union, salary and seniority came before everything else.”

Her first encounter with the union culture was when she was an assistant teacher at the beginning of her career. At the time, she said she felt as though the teacher who worked in the classroom next to hers was abusive towards her students. The teacher, she said, couldn’t be fired because the union had implemented a seniority structure. Friedrichs eventually took a leadership position in the union but was still unable to change what she saw as a bad culture.

“I wanted to be there to speak common sense,” Friedrichs said. “But the response from union leadership was to ignore everything I tried to do.”

3. The Case Goes Far Beyond Just Teachers

A decision in favor of the teachers is likely to go beyond just schools. All government workers could be granted the right to stop funding union activities since the teachers are technically public-sector employees. Such a decision could be devastating to the labor movement which has already lost a lot of members in the private-sector.

“It’s an extremely important case,” Huebert said. “It certainly might be a landmark case, especially if they side with Friedrichs.”

Huebert adds the case should only impact public-sector workers and not private. The Supreme Court will decide on a wide variety of issues this session, from how sentencing hearings are conducted to whether colleges admission offices should consider race. NYU Law Professor Richard Epstein, though, says the Friedrichs case could very well be the most important.

“This is a case that attracted scrutiny on both sides,” Epstein told TheDCNF. “In some ways this is the most important case this session.”

The case seeks to reverse the decision in Abood, which has allowed public-sector unions to require mandatory payments for nearly three decades. Abood also dealt with teachers, but the decision set a precedent that impacted all public-sector employees.

4. Are Public Sector Unions Done For? Probably Not.

Unions have argued on numerous occasions the case is aimed at destroying the labor movement. Membership is likely to go down, but many workers are still likely to stay unionized. Former Supreme Court Clerk Carrie Severino notes the case will not take down public-sector unions.

“It’s not a victory that will take down the unions,” Severino, now chief counsel for Judicial Crisis Network, told TheDCNF. “It just gives people the right to choose.”

Federal employees already have the right to not fund unions, yet membership is still fairly high. In states that have passed right-to-work legislation, all workers are allowed the same privilege, yet it hasn’t destroyed the unions. The policy, which has passed in 25 states, outlaws mandatory union dues or fees as a condition of employment. Terry Pell, a lawyer representing the teachers, predicts the membership drop will be slight.

“A 10 percent drop in members won’t impact their ability to bargain,” Pell said during a Thursday call with reporters. “The 25 states show that.”

Pell said the biggest difference once right-to-work is passed is that the salaries of union leaders go down.

5. The Beneficial Burden Of Collective Bargaining

Collective bargaining is the burden put on unions when they become the exclusive representative for a workplace. It means they are required by law to benefit all the workers they represent. Collective bargaining already comes with a huge benefit often overlooked during the free-rider debate.

“When you have a union whose already in power to be the monopoly bargainer,” Severino said. “That’s already a huge benefit to unions.”

The Heritage Foundation notes in a fact sheet that the union claim is very misleading. Exclusive representation is not the only way a union can organize workers. Unions can choose to only represent dues paying workers by becoming a member-only organization. A member-only union, though, would not have monopoly rights and therefore other unions could try to organize the same workplace. It’s an option they tend to avoid.

6. Recent Cases Give Union Critics Hope

Supporters are optimistic the court will side with Friedrichs given recent decisions. In the 2015 case Harris v. Quinn, the court ruled Illinois state home healthcare workers could not be forced to pay union dues. The decision found a middle ground by only applying to the workers upon whom the case was centered.

The court was faced with the question of whether home healthcare providers were public-sector employees. State healthcare workers are required to fund the union which represents them. The Friedrichs case has a much broader scope. Teachers are already considered public employees, therefore a decision in their favor is much more likely to impact all government workers.

“The middle ground is essentially accepting the opt-in argument,” Epstein stated. “That’s why this case is so much more important than Harris.”

7. The Powerful Groups Behind The Case

The Center for Individual Rights (CIR) is a non-profit public interest firm representing Friedrichs and the other teachers involved in the case. Pell said they looked for teachers that were willing to join onto a lawsuit. For a case to be considered by the courts, the plaintiffs must have standing by proving in some way they have suffered damages.

“We were pleasantly surprised when there were so many teachers focused on this,” Pell said. “It came together much more quickly than other cases.”

Pell added that the response showed them many teachers were discontent with their union. The case has also attracted a lot of attention from outside groups and lawmakers. The National Right to Work Legal Defense Foundation, the Mackinac Center for Public Policy, the Cato Institute and the Goldwater Institute have all filed legal briefs in support of the teachers. The organizations are primarily conservative and libertarian leaning. Labor unions have condemned the lawsuit as being nothing more than a coordinated attack by the right.

Nevertheless Labor unions are some of the most powerful political entities and fighting them is not an easy task. The AFL-CIO, AFSCME and the Service Employees International Union among others have banned together against the teachers. Even local unions have spoken out about the case. Some of the most influential unions have also submitted legal briefs urging the justices to rule against the teachers.

8. Workers Would Still Be Able To Unionize

Union leaders have claimed the case is an attack on the rights of workers to collectively come together. The teachers in the case, though, counter the argument by noting its actually about giving workers a choice.

“The main thing you need to know is that this is an attack on working people’s freedom to come together and form unions, plain and simple,” the AFL-CIO noted. “These are the nurses who make sure their patients have what they need to get well and the teachers who advocate for their students and class sizes.”

The case does not seek to prevent workers from organizing despite the union claim. A decision in favor of the teachers would be very unlikely to outlaw the right to unionize. Instead it would simply mean public-sector employees would have the right not to participate or fund their workplace union if they so choose.

“This case does not impact public employees and their right to join a union,” Pell added. “It impacts a union funding mechanism.”

Friedrichs notes unions would be compelled to do what’s best of their members if workers were free to leave.

9. How An Opt-In System Might Impact Unionization

CTA states the opt-out system is legal and fair. It allows workers the right to refrain from funding union political activities. If a worker doesn’t want their dues going to politics they can simply sign a form and mail it to the union. The teachers included as a secondary point to their lawsuit that an opt-in system would be fairer. Essentially public-sector workers would have to request to join a union instead of getting automatically enrolled.

“The right to opt out sufficiently protects both First Amendment guarantees and other core constitutional rights,” CTA noted in its brief to the court. “There is no justification for carving out a special exception based solely on petitioners’ animus toward statutorily recognized union activities.”

Critics contest opting out is not always easy for workers. Rules regarding membership are not the same in every union. Most unions only allow members to leave at certain points in the year. These opt-out windows are often not disclosed to members. Unions have also been known to ignore opt-out requests.

“They often don’t have good information on how to opt-out,” Huebert added. “And its often a difficult process.”

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This piece was originally published by the Daily Caller News Foundation

Free Speech Rights on the Line as SCOTUS Hears Friedrichs Case

Rebecca FriedrichsIn less than one week the U.S. Supreme Court will begin to hear arguments in the case Friedrichs v. California Teachers Association, to determine whether unions can force public employees to fund speech through collective bargaining with which they might disagree. The case could result in a landmark decision impacting the First Amendment rights of millions of public sector workers nationwide. The California Policy Center joins hundreds of other organizations and millions of individual activists in urging the Supreme Court to rule in favor of the plaintiffs.

If the justices rule in favor of Friedrichs, the decision would not only take away government union’s ability to get public employees who do not pay them fired in the half of the states – most definitely including California – which do not have right-to-work, but would allow public workers to opt out of their union without needing to renew their objection every year. Here in California, the decision, which is expected in June 2016, would impact well over 1 million state and local public employees who are currently unionized.

The Friedrichs case rests on the argument that anything and everything that public employee unions negotiate is inherently political. We couldn’t agree more. To state an obvious example, negotiations between unions and elected officials over public employee pensions and pay are arguments over how elected officials should use public money – an inherently political question. Conceding to demands for higher salaries during an economic downturn – or at any time, for that matter – is a political choice. When public employees make more, either other services are cut, or taxes are increased. These are political decisions, not mere employer/employee issues.

While how public agencies spend taxpayers’ money is obviously a matter of public policy, the work rules negotiated by government unions also are inherently political. Union negotiated rules governing California’s system of public education provide examples of this in the form of “lifetime tenure” – awarded after less than two years in the classroom, dismissal procedures that make it nearly impossible to fire incompetent teachers, and “last in first out” layoff policies that reward seniority over merit. Conscientious teachers can be forgiven for believing these union rules, among others, are public policy decisions, inherently political, that have harmed California’s children. Yet they are forced to pay to support the unions who negotiated these rules.

The Friedrichs case, despite an avalanche of well-funded propaganda from unions, is not about whether or not unions even belong in the public sector. The point of the Friedrichs case, again, is that everything that public sector unions negotiate for is inherently political. And because they are inherently political, public employees should not be forced to fund these unions if they don’t want to, because that is a violation of their First Amendment free speech rights. You don’t have to restrict the scope of your argument to the explicitly political activities of government unions to make this case. Because everything government unions do, everything they fight for, affects government policy.

As a result, members of government unions should not be merely permitted to opt-out of the acknowledged “political” portion of their union dues, the amounts spent on political campaigns and lobbyists. They should be allowed to opt-0ut of paying all of it, including the so-called “agency fee.” And because these unions have made the “opt-out” process a difficult bureaucratic ordeal, where members can only opt-out during a certain limited time each year, and have to do that over and over again, year after year, paying union dues should instead depend on an “opt-in” process. This would mean the government unions themselves would have to obtain affirmative consent, year after year, in order to continue to collect dues from government workers.

Government unions are not just inherently political in everything they do. Their agenda is inherently in conflict with the public interest. Unlike private unions, government unions elect their own bosses. Unlike private unions, government unions can demand pay and benefits without having nearly the same concerns about how that may impact the financial health of their organization. And unlike private unions, government unions run the government bureaucracy, which means they can more easily intimidate their opponents. For these reasons, perhaps the Friedrichs case doesn’t go far enough. But it’s a very good start.

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

Teachers Union Leaders Want to Kill Off Thriving Charters and Voucher Schools

shocked-kid-apJust last week it was announced in New York City that three failing public schools would be closing. With a total enrollment of 217 students, there really was no other choice. Indeed, it was such a no-brainer that even United Federation of Teachers president Michael Mulgrew didn’t threaten anyone with bodily harm over the decision. But Mulgrew’s acquiescence is a rarity for him and other teacher union leaders.

Like a failing business, when a school goes bad it should close. This phenomenon is occurring more and more in big cities, especially when families are given choices. If there is a charter school available that suits their needs, parents will yank their kid out of the failing traditional public school the first chance they get. But the teachers union bosses’ default position is that a failing school should never be closed; a piece on the National Education Association website tries feebly to make that case. Penned by in-house writer John Rosales, “Closing Schools: Privatization Disguised as ‘Accountability’” is typical union claptrap in which shibboleths and lies predominate:

When they close schools, they are closing hospitals, grocery stores and police stations … . This is a human rights issue … . School closings are not isolated incidents but rather a movement toward privatization.

In reality, a public school closes when parents stop sending their kids there because it doesn’t live up to its mission, which is to educate students in a safe environment. In fact, a recent study conducted in Ohio by the Fordham Institute shows – not surprisingly – that displaced students typically receive a better education in a different setting.

Three years after closures, the public-school students had gained, on average, what equates to 49 extra days of learning in reading — gaining more than a year of achievement growth, as measured by state reading exams. In math, they gained an extra 34 days of learning, as measured by state math exams. In the charter sector, displaced students also made gains in math — 46 additional days.

But then again, there are schools that union leaders do think should be shut down – charter schools, especially the non-unionized ones, and especially those run by one Eva Moskowitz. In fact, New York’s UFT has begun that process by calling for a moratorium on new Moskowitz-led Harlem Success Academy charters. The unionistas are ecstatic because they think they finally have something on the operator of 34 extraordinarily successful schools. In late October, it was revealed that one of her schools’ principals had a “to go” list of undesirable kids. The principal was reprimanded by Moskowitz, which should have ended the story. But the unions continue to act as if they’ve discovered the mother lode, which, of course, is silly. Even if Moskowitz is guilty as charged, it should be noted that traditional public schools – with the blessing of the unions – have a long history of removing and transferring undesirables, either to other public, continuation or opportunity schools.

Another example of teachers unions fighting a successful education enterprise is in Washington, D.C. where the Opportunity Scholarship Program has been a raving success. The federally funded program, which has been in the NEA’s crosshairs since its inception in 2004, has led to greater parental satisfaction and school safety, as well as higher graduation rates and test scores than those of the public schools the voucher students had escaped. But despite the program’s success, the DCOSP schools are private and not unionized, and that is what matters to organized labor. The NEA claims that vouchers are not “real” education reform and that “opposition to vouchers is a top priority for NEA.” In 2009, NEA president Dennis Van Roekel wrote a threatening letter to every Democratic member of Congress advising them that NEA “strongly opposes any extension of the District of Columbia private school voucher … program.” And just last week, due to strong union-fueled Democratic opposition and undemanding Republicans, the program was not reauthorized, although its funding has been retained for another year.

So the union fights to knock out successful charters and privatization programs but keep traditional public schools open no matter what miserable failures they are. And they are doing this for the children, of course.

This piece was originally published by UnionWatch.org

Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

Which Initiatives Will Qualify for California’s 2016 Ballot?

“There are some lunatics out there and for $200 we encourage them.”

– Senator Mark Leno, speaking in favor of AB1100, as quoted by the Los Angeles Times, August 17, 2015

Voting BoothsFiling an initiative in California is about to get harder, thanks to a law taking effect on January 1st, 2016, that will increase the filing fee from the current $200 to $2,000. While $2,000 may seem like a lot, if the original fee, set at $200 back in 1943, were adjusted for inflation, today it would cost $2,366. And anyone seriously intending to place their initiative onto California’s statewide ballot will need a lot more than $2,000, since qualifying the measures invariably requires paying professional signature gatherers. How many signatures are required varies depending on turnouts in California’s gubernatorial elections. Based on the 2014 turnout, getting ballot initiatives onto California’s 2016 and 2018 ballots will require 365,880 signatures for a statute, or 585,407 for an amendment. Count on spending between $2 and $5 million, depending whether you’re working on a statute or an amendment, how early you get started, how much resistance you encounter, and who you hire.

When you only have to spend $200 to trigger a full analysis by California’s Attorney General, there are indeed some far-fetched, arguably frivolous schemes that end up as initiatives qualified for circulation. These almost never make it onto the ballot, but the nuttier ones attract an avalanche of publicity. But the majority of the 61 initiatives currently cleared for circulation are serious, even if they have no chance. If you want to know which ones definitely will appear on the November 2016 state ballot, just look for the government union label.

For example, #1691 “Cigarette Tax to Fund Healthcare, Tobacco Use Prevention, Research, and Law Enforcement” will increase the cigarette tax by $2.00 per pack, all of the proceeds to fund government programs staffed by unionized government employees. Among the sponsors – the president of the California State Council of Service Employees.

Then there’s #1704 “Property Tax Surcharge to Fund Poverty Reduction Programs,” which will increase property taxes on any real estate valued over $3.0 million. The proceeds, always towards laudable goals, will create thousands of new unionized government jobs in California. With the average coastal home already worth around $1.0 million, and countless small business properties worth a lot more than that, don’t assume this tax won’t eventually bite everyone. Then again, it’s supposed to “expire” in 20 years.

And speaking of “expirations,” remember the temporary personal income tax increases enacted in 2012? The taxes to “save our schools” that are really to “save our government employee pensions?” They’re back, thanks to #1727 “Tax Extension to Fund Education,” this time for another 12 years. Or there’s #1731 “Tax to Fund Education, Healthcare, and Child Development,” which unabashedly aims to make the 2012 tax increases permanent.

While sorely needed pension reform and tax relief initiatives will likely wither away, because they lack financial support from those heavily demonized billionaires who supposedly have their wicked way with California politics – these government union supported initiatives will be on the ballot. By the time the government unions have finished spending tens of millions to campaign for these three initiatives, the message will be clear: If you don’t vote for them, then you hate cops, children, and poor people. There will be more. The insatiable desire of unionized government to expand itself finds perennial expression in California’s initiative process.

Students and fans of direct democracy are invited to view all of California’s current initiatives either qualifiedeligiblecleared for signature gatheringunder review or recently failed. By this time next year, they may not be nearly as abundant.

One thing is certain – the government unions will continue to put onto the ballot any initiative that serves their interests, and then, using money provided by taxpayers, spend whatever it takes to sell it to voters.

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

The Alliance Between Wall Street and Public Unions

“It’s [private equity investments] generating real returns for our members, which is exactly what it’s supposed to do,” said Joe DeAnda, a CalPERS spokesman. “It’s real value that we don’t feel there’s another way to achieve.”
–  “Are private equity investments worth the risk?,” Los Angeles Times, November 14, 2015

Wall_Street_Sign_(1-9)The alliance between government unions and America’s overbuilt financial sector is one of the most unreported stories of our time. It is a story saturated in greed, drowning in delusion, smothered and marginalized by an avalanche of taxpayer funded propaganda. If this story were known and appreciated by the people most victimized by its effects, it would fundamentally shift the political landscape of the nation. The most obvious example of this alliance are the government worker pension systems, Wall Street’s biggest players, controlled by union operatives.

The problem with public sector defined benefit pensions can be boiled down to two cold facts: They are too generous, and they rely on rate-of-return assumptions that are too optimistic. The first is the result of greed, the second of delusion. To indulge these vices requires corruption, and it is a rot that joins public sector unions with the most questionable elements of that Wall Street machine they so readily demonize.

In an attempt to earn in excess of 7.0 percent per year, government pension systems have increasingly turned to hedge funds, whose charter, essentially, is to earn over-market returns. To do this, they do all the things that public sector unions are supposedly opposed to – opaque private equity deals, currency speculation, high-frequency trading – all those manipulative tools used by the super-wealthy, super empowered Wall Street players to siphon billions out of the economy. Except now they’re using tax dollars, channeled to them via government pension systems. And if it goes south? Taxpayers pay for the bailout.

Which brings us to sheer abuse of power. Hypocrisy aside – and how much more hypocritical can it be for union leaders to rhetorically demonize “profits,” yet ignore the fact that only profits can permit pension funds to appreciate at rates of 7.0% per year or more – it is raw power, sheer financial and legal might, that enables pension systems, with unions cheering them on every step of the way, to sue city after faltering city to ensure their “contracts” are inviolable, that relentlessly escalating pension contributions keep pouring in, even if it means raising taxes via court order, then selling the parks, selling the libraries, closing government offices and “furloughing” public servants, and giving raw deals to their new hires.

The alliance between Wall Street and public sector unions isn’t restricted to the over $4.0 trillion in government pension assets that they’ve wagered in a volatile investment market with taxpayers on the hook to guarantee perpetual winnings. The alliance extends to bond underwriters, who join with government unions to sell overpriced, often unnecessary projects to taxpayers, collecting billions in fees. It even extends to auctions of government permits to emit CO2, which when fully implemented will guarantee Wall Street firms a cut on virtually every energy transaction in America, while quietly pouring a huge portion of the proceeds into funding public sector jobs – redefined to meet “mitigation” criteria: code inspectors enforcing energy retrofits, entire cities who zone ultra-high density which presumably lowers transportation related emissions, bus drivers and other mass transit workers, police and fire agencies who confront higher crime rates and more wildfires during hot weather. And, of course, the bullet train.

Whether it’s financially unsustainable government pension systems, who are the biggest players on Wall Street, or financing overpriced public construction projects of dubious value, or imposing billions in hidden taxes on energy users to supposedly save the planet, public sector unions receive formidable political, legal and financial support from their partners in the financial sector, corrupt, crony capitalists who indeed give capitalism a bad name.

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

Despite California’s budget surplus, unions eye tax hikes

As reported by the Los Angeles Times:

Here is one thing for California to be thankful for: The state treasury is overflowing with tax money.

Long gone are the dark years of multibillion-dollar deficits — $42 billion in 2008 — and sharp cuts in state services, especially healthcare for the poor and education.

Credit the recovering national economy. Gov. Jerry Brown also gets a high-five for holding big spenders in check. But the governor’s 2012 voter-approved, soak-the-rich tax hike was a crucial budget healer.

The nonpartisan legislative analyst’s office reported last week that the state’s tax take for the current fiscal year is expected to exceed earlier estimates by $3.6 billion. And by the end of the next fiscal year, the state is on track to have …

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