January 15, 2021

Here’s something Assembly Members Luz Rivas, David Chiu, Richard Bloom and Buffy Wicks don’t want their constituents to know:

  • Start at https://www.calhr.ca.gov/labor-relations/Pages/Unit-06-Corrections.aspx, where you will see a list of 21 “Bargaining Units” that represent state employees who get paid billions of dollars per year upon the approval of state legislators and the governor. The most expensive is Unit 6, Corrections.
  • Next, go to http://cal-access.sos.ca.gov/Campaign/Committees/Detail.aspx?id=1035434&session=2019&view=contributions, where you will see the political donations made by CCPOA, an employee enterprise that represents prison guards. Recipients include Assembly Members Rivas, Chiu, Bloom and Wicks.
  • With the approval of Assembly Members Rivas, Chiu, Bloom and Wicks and other members of the Legislature, the state spends $10b per year on prison employee compensation and benefits. That’s 5x the revenues of the largest private prison corporation, 5x the amount the Legislature allocates annually to the Judicial Branch, and 2.5x …

January 16, 2021

Dear Legislators,

We are pleased that more and more of you are eager to address the billions you unnecessarily divert every year from services to extravagant insurance subsidies for retired state employees (“Retiree Health Subsidies,” or “RHS”). Following are some basic facts followed by a list of reform opportunities.

  • RHS should not be confused with pensions. RHS fall into the “Other Post-Employment Benefit “(“OPEB”) category, and unlike pensions are neither ubiquitously offered nor consistently provided (e.g., Stockton doesn’t offer them, Huntington Beach limits them, the state is generous with them, etc.).
  • You have clear authority over RHS: Page 135 of your 2019 CAFR states, “benefit terms are governed by state law and may be amended by the Legislature” and “the contribution requirements of plan members and the State are established and may be amended by the Legislature, and can be subject to collective bargaining” agreements that are submitted to the Legislature for approval. …

Today’s SF Chronicle includes a misleading article about San Francisco Unified School District (SFUSD) claiming that “California spends about $12,000 per student per year” but just last Friday, the governor released a proposed budget that on page 61 posts this chart:

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The Chronicle also gets the explanation wrong, as one can see in the detailed State budget, and contains no reference to the huge share of SFUSD’s revenues being absorbed by retirement costs, as one can see at SFUSD’s Interim Reports. The article also fails to mention that additional money for SFUSD would have on the under which SFUSD is governed, including tenure granted after just 18 months of teaching, which have turned CA’s public schools into regressive bastions more protective of employees than students, As Table 3 of this publication of the Bureau of Labor Statistics illustrates, it’s no wonder that state and local education employees have the separation rates of major industry. …

Every January, governors in California are required to propose a budget (“Governor’s Budget”) for the next fiscal year commencing July 1. Governor’s Budgets provide detailed views of state finances but also are a mixture of fiction, facts and Kabuki. The principal fiction takes the form of projected General Fund revenues, about which planners have little idea since ~70 percent are from personal income taxes significantly dependent upon unpredictable capital gains from a tiny number of taxpayers during a 12-month period that doesn’t even start for nearly six months.* Projected expenditures are more factual but only on a cash basis. The Kabuki is that Governor’s Budgets are just political starting points. …

At a time when criticism is leveled at CA’s government for poorly performing agencies such as the Employment Development Department, it’s important to point out excellently performing agencies such as Covered California. Now that I’m on Medicare I no longer need CC but my wife and daughter do and it is a marvel. Application and renewal are simple and this morning (just seven days into the new year) 1095-A forms have already been sent. In contrast, our son who lives in New York has to deal with New York State of Health, which turns every task into a heavy effort.

CC’s excellence makes all the more baffling the choice of elected CA officials not to require retired public employees to access CC before draining school, state, city and transit budgets for $10 billion per year of subsidies. Because public employees in CA can retire before they are eligible for Medicare (eg, prison guards and police can retire at age 50), billions of mostly-federally-funded subsidy dollars are being left on the table. Retirees aged 65 and over also take subsidies, which aren’t necessary given Medicare’s robustness. No other state — and certainly no other state with an insurance marketplace as excellent as CC’s — is so extravagant in support of retired public employees. …

It’s not only public sector unions that earn huge returns from donations to elected officials. Tesla probably wouldn’t have survived its early years without the benefit of incentives and favorable regulations from California and other jurisdictions. Like the prison guards, Tesla learned there’s no ROI like ROPS — Return On Political Spending.

Tesla also learned that disruption may be good for business but not for politics, which it played the old-fashioned way. When dealing with a legal monopoly you have to win the inside game. Besides, disruption of government could lead to revolution, normally not a healthy outcome for capitalists.

CA is poorly governed because the general interest has not been represented in Sacramento with the same as special interests represent their interests. That’s what we do in support of the general interest. That’s what more Californians should do. …

Dear Legislators,

As you prepare for the release in early January of Governor Newsom’s proposed 2021–22 budget, consider this: The University of California is incurring $1.7 billion of unnecessary expense each year. That’s about half of the amount you allocated to UC from the state’s General Fund in 2020–21. To understand how that’s happening and how UC can stop it, see here.

Multiple CA agencies from the small (eg Golden Gate Transit) to the large (eg, BART), local governments (eg San Francisco) and the state are doing the same thing. Those problems should have been addressed after the federal Affordable Care Act went into effect and even more so after enactment of the state’s Middle Class Subsidies program. Fixing those problems and limiting subsidies now would free up billions of dollars for services.

Originally published at https://mailchi.mp.

Dear Legislators,

Last night I posted a thread on Twitter explaining how CA unnecessarily spends a fortune on health subsidies for retired police, prison guards and other employees and the two steps required to fix that.

Some of you are entitled to retiree health subsidies as a result of former employment with governments. I haven’t explored all your backgrounds but I believe Scott Wiener, David Chiu and Phil Ting are promised retiree health subsidies by the City and County of San Francisco. …

Dear CA State Legislators,

You lead the country in spending on prison employees. After granting them six salary increases since 2010, you are spending >$5 billion/yr on salaries for 57,000 state prison employees attending to ~115,000 inmates. But that’s not all. You also spend >$4 billion/yr on insurance subsidies for retired employees, the most expensive of whom are prison guards and CHP. These subsidies, known as “Other Post Employment Benefits” (“OPEB”), are in addition to pensions, which you allow prison guards and CHP to start collecting in their 50's.

No other state showers such OPEB subsidies on retired public employees. Colorado limits OPEB to $115 per month for retirees aged 65 and older, $230 per month for younger retirees. Oregon’s limit is $60 per month. But you impose no limits and sometimes subsidize spouses and dependents. Cities, agencies, colleges, universities and schools spend another ~$5 billion/yr, the most expensive recipients of which are retired police. …

On Taxes: Few things bother us more than folks who write us about an objectionable piece of legislation but don’t get in the trenches with us. Tax increases such as AB 2088, about which the WSJ has an opinion piece today, really get them going. GFC leads the efforts to kill such bills and to enact the fiscal and other reforms required to govern CA well but we have only as much power as you give us. So here’s some tough love for anyone reading this who is not already a financial supporter: Either get in the war or leave us alone. In January, Celeste will send a slate of 16 GFC Courage Committee chapters to which one will be able to donate up to $8,100 per chapter per year. …


David Crane

Lecturer at Stanford University and president of Govern For California

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