The state budget crisis continues, moving into what is one of the worst stalemates over the budget in history. Nothing is apparently being done by our Governor and state legislature except demonstrating their own incompetence, as the clock ticks toward running out of cash.
Now we hear that the state is going to go to the voters for tax increases, with a possible election in April. With the way that they are acting now, I can tell you that my vote is already no.
California has a structural problem in its budget, as evidenced by the fact that even in good economic times we have run a deficit. When times are bad, the deficits explode. This began in the year 2000, when a tremendous increase in the pension and compensation of state and local government employees began.
This is one of the real problems of the state’s structural deficits. Our expenses are more than we can ever hope to collect in taxes, even with large tax increases, and it centers around the state’s main expense, employee compensation.
In Gray Davis‚ tenure the pensions were increased to levels that even then actuaries realized were unsustainable. Safety personnel can now retire with 90 percent or more of their highest salaries at age 50, and other employees can retire with 75 percent or more at age 55.
If the Legislature and Governor really want to do something about fixing the budget, they first need to come to the public with some real cuts in spending. The time is ripe for real change, finally.
Here are a few pointers to get them started:
First of all, put a constitutional amendment on the ballot to reform all state employee pensions. A recent study by the League of California Cities showed that a person who retires with 70 percent of their highest salary maintains the same lifestyle as when they were working.
Change the constitution to limit safety pensions to a 70 percent cap, non safety to 50 percent. Reduce the amount of money that current pensioners receive. This will also reduce local county and city costs dramatically, as they are bound by state rules and the 70-50 percent cap will apply to them as well. This will not only save the state literally billions of dollars annually, it will save local governments millions.
While you are at it, change the recently lowered age of retirement back up to 55 for safety, 65 for non safety. That alone will cut pension costs in half, health care costs by a third. That will save billions of dollars, and public employees will still have a far better deal than most private employees.
Too radical for you? Guess what, the huge increases in taxes they are proposing equals a huge cut in the pay of taxpayers as well. Also, if we can change the constitution to redefine marriage, we can change it to fix the state budget.
Next, change the constitution if necessary to fix this ridiculous court ordered $8 billion increase for the prisons. Reduce prison guard salaries, and impeach the judge that ordered this nonsense. The legislature can do it if they want to, but right now the only special interest the Democrats are listening to is the public employee unions.
Next freeze all raises for state employees for at least two years. This also will save billions and will start to bring public pay more in line with private pay.
As has become well known at this point, since 2000 public employee pay in general has skyrocketed above private company wages in California. This is part of the reason for the structural imbalance that rarely gets talked about. Logic tells us that if you continuously raise the pay of public employees higher than the pay raises of private employees whose taxes go to pay for it all, you are going to hit a point of unsustainability. There is just no way around it.
The average salary for a CalPers employee in 2004 was about $46,000 and the average per capita income for all Californians was $35,000. Since then the gap has gotten bigger.
Except for the bottom fifth of employees, state worker pay has increased from 20 percent to 45 percent in less than five years. The top 20 percent’s median salary is now over $94,000 a year. Everyone has heard about the boom in State workers making over $200,000 by now, and in the UC system close to 10% of the employees make over $100,000 annually.
In 2000, local government wages in Sonoma County — including teachers' pay — were 1 percent higher than private-employer wages, according to the state Employment Development Department. By 2006 that gap was 11.5 percent. It is even higher today.
This list goes on and on throughout the state. In the private sector wages have barely kept pace with inflation, and last year actually went down 1 percent. In contrast regular 4-5 percent annual increases in public wages over time have put the public sector far ahead. They can stand two years of a flat salary, especially when the private sector looks like it will have to reduce wages in the same time frame.
This issue of government employee pay is not going to go away, and it behooves the public employees themselves to understand that they have gone too far and costs will be reigned in, it is just a matter of how and when. Even large tax increases will not be enough money to solve this problem,
Do we want to see what is happening in Wisconsin now, where virtually from one week to the next pension payments to current retirees are getting slashed? Far better to have an orderly evaluation of where spending is too high and unfair to the taxpayers, and reasonable reductions be made that can put the state on a long term basis of financial stability.
That is really the choice that is before us.
Michael Haley is President of the Napa Valley Taxpayers Alliance. He writes a weekly blog and a daily blog on local, state and national issues. He can be reached at firstname.lastname@example.org