This week, there were two interesting reactions to my last Sunday’s editorial submission to the OC Register (see MOORLACH UPDATE — State of the Municipalities — January 24, 2016
January 24, 2016January 24, 2016 John Moorlach).
The first is a San Jose Mercury News editorial that predicts the pension shortfalls will produce a flood of local tax measures on November’s ballot. This piece was also picked up by Inside Bay Area News out of Oakland and the Daily Democrat out of Woodland. The state is waking up to the "pension taxes" that are being proposed (see MOORLACH UPDATE — Pothole Tax — August 30, 2015 August 30, 2015 John Moorlach).
I only have one minor correction to offer. I was referring to an anticipated $250 billion Unrestricted Net Deficit for the State of California on its June 30, 2015 Comprehensive Annual Financial Report’s Basic Financial Statements.
The second reaction goes in the opposite direction. The OC Register has a Letter to the Editor from a public employee union representative. While I understand his angst over facing a pension system that is woefully underfunded, I have to point out that he misrepresents the facts.
For example, he says that having union members pay in more toward their retirement has “solved” the problem. Not so. Even Governor Jerry Brown in his State-of-the-State address referenced the unfunded pension problem as needing potentially 20-years to pay down. That’s not a problem solved. In fact, the unfunded liabilities increased by $24 billion for CalPERS and CalSTRS just this past year.
This writer also states that my bill to increase Caltrans outsourcing from 10% to 50% would add to the problem. That’s just not factual either. Caltrans has 10,000 engineers on staff. The state’s Legislative Analyst’s Office found that Caltrans’ engineering department is overstaffed by 3,300 personnel at a cost of nearly half a billion dollars yearly. Contracting out for these positions would allow flexibility and dramatic cost savings. These extra 3,300 engineers also would not be a draw on the state’s pension plan.
Caltrans is responsible for about $10.5 billion annually. By contrast, the County of Riverside is responsible for some $7.5 billion and only has 9 engineers. California, Caltrans is bloated and the union knows it. So it has to identify that Caltrans does no-bid contracts, showing that things are even worse than expected. And somehow that is my fault. You’ve got to love obfuscation.
For a little fun on this topic, see:
California braces for flood of tax measures
By Andrew McGall
Tax propositions might rain down on Bay Area residents like an El Nino downpour this year as cities, counties, school districts and agencies try to persuade voters to pay for improved transit, smoother roads, school repairs, city building rehab, and bay water and wildlife conservation.
Transportation authorities in Contra Costa, Solano, Santa Clara and Santa Cruz counties are planning sales tax elections. Santa Clara County is also talking about a sales tax to help the homeless.
BART directors plan a $3 billion bond measure in Contra Costa, Alameda and San Francisco counties. AC Transit directors are talking about a bond measure for the bus system’s Oakland to Richmond area. An obscure SF Bay Restoration Authority led the rush to the ballot box with a nine-county parcel-tax measure for the June election.
The Walnut Creek City Council and the Walnut Creek School District are discussing measures; so are Orinda, Lafayette and its school district. Not to be left out: the city of Hayward and the Hayward Area Recreation and Park District.
On top of that not necessarily complete list, Gov. Jerry Brown has said that the state needs new taxes and fees to maintain its transportation systems. The legislative fist fight between Democrats and Republicans over taxes vs. reallocating existing money has led to months of inaction.
An initiative petition campaign has qualified for the November ballot a $9 billion statewide Public Education Facilities Bond Initiative for new and modernized school and community college facilities.
"It does seem somewhat unusual," said Mark Baldassare, president of the Public Policy Institute of California. "Anyone thinking about asking voters to raise taxes or fees is aiming for the November 2016 ballot" that will draw more voters, he said.
Low voter turnout has plagued California elections in recent years, he said. Los Angeles city elections in March drew just 10 percent of eligible voters.
Historically low bond rates might also be driving governments to the ballot box, he said, before the Federal Reserve starts ramping up interest rates.
The rush to get a hand into residents’ wallets unnerves taxpayer advocates.
"Why didn’t anyone tell me it was open season on taxpayers?" asked Kris Vosburgh, executive director of the Howard Jarvis Taxpayers Association.
He challenged the bay conservation measure as one that many would pay for but that would most benefit the corporations ringing the bay shoreline, not the people in the outer reaches of the bay.
The "Clean and Healthy Bay Ballot Measure" on the June ballot would charge residents $12 a year, raising $25 million a year for 20 years to reduce trash and pollution, improve water quality, restore habitat, improve shore access and protect against floods.
Another taxpayer advocate cast a gimlet eye over the ballot prospects and said he was appalled. "We’re certainly challenged just to keep track of them," said Jack Weir, president of the Contra Costa Taxpayers Association.
The problem he and others see is the growing burden of paying for underfunded public employee retirement benefits.
Under new rules that require public agencies to account for their unfunded pension liabilities, the state pension deficit could reach $250 billion, state Sen. John Moorlach, R-Costa Mesa, said in a Jan. 24 Orange County Register column.
That figure does not include the hundreds of cities, school districts, community college districts and utility districts, each with pension obligations, he said.
As the public agencies try to meet new requirements to fund that debt, they have less available for the services they are meant to provide, Weir said. That sends them to voters pleading for more money.
"We have to solve the problem," he said. "We can’t continue to spiral into fiscal insolvency."
Pension woes driving down the cities? Maybe, maybe not, said a state expert.
"We have 482 cities, and it is hard to make a general statement," said Mike Coleman, a fiscal adviser for the League of California Cities and the California Society of Municipal Finance Officers.
"Each community is in a different place on pension and health benefits," he said.
And, until the final decisions come down, it won’t be possible to say whether it will be an unusual election year.
Whatever happens, Weir said putting such a number of tax measures before voters would lead many to say, "Hell, I can’t afford this," and vote no on all of them.
SB9 not in taxpayers’ interest
Re: “Report: Pensions drowning California and its cities” [Opinion, Jan. 24]: When public pension funds suffered during the recent recession, new state legislation required state and local employees to begin paying more money into the pension plan with lower benefits for future hires. On average, a state engineer pays out of pocket around $800 a month for his or her pension benefit. The result is that the investment assets of CalPERS and other retirement plans are now larger than ever.
Problem solved, but not for state Sen. John Moorlach, R-Costa Mesa. While claiming he is “an accountant and a CPA” and it is “irresponsible” to make “unaffordable commitments” by providing pensions to retired public servants, he quietly introduced Senate Bill 9.
Currently, Caltrans overspends by more than $100 million per year by issuing no-bid contracts for engineering and related services, such as the design and inspection of our state highways and freeways. A state engineer costs the taxpayers $116,000 per year, including pay, benefits and overhead. To outsource the same work to a private engineering company through no bid contracts, the costs are $237,000, not including the cost of advertising and awarding the contracts. Caltrans outsources nearly 1,000 jobs per year, putting the annual additional cost at more than $100 million.
SB9, introduced by Sen. Moorlach, would mandate that Caltrans outsource five times the current level of contracting, increasing the excess cost to more than half-a-billion dollars per year, all through contracts without competitive bidding.
He says the problem for taxpayers “is now staring us straight in the face.” The real problem for taxpayers is Sen. Moorlach himself and his desire to cut jobs, cut pensions and irresponsibly overspend your tax dollars and mine.
President, Professional Engineers in California Government
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