MOORLACH UPDATE — 2017-18 Budget Deadline — June 15, 2017

Today we vote on the state’s Budget. Session has been moved back to 12:30 p.m. The Republican Senate Caucus will meet to brief soon. And, another budget with the wrong priorities will be passed, along with the accompanying trailer bills, sometime in the late afternoon.

AB 100 deals with the supplemental payment to CalPERS (see MOORLACH UPDATE — A Better Way — June 13, 2017 june 13, 2017 john moorlach).

I have had a high regard for David Crane for many years. The first piece below is from Fox & Hounds, where he continues the public debate that he and I have been enjoying.

Yesterday afternoon, CalPERS slammed the door on me with regards to my request for a prepayment discount (see MOORLACH UPDATE — Obtain Prepayment Sizzle — May 17, 2017 may 17, 2017 john moorlach). The CalPERS Board, which is union dominated, lacks the creativity and understanding of those in the financial and investment industry. That’s what happens when you put public employees on a board with only one objective: more. But, that more is for the unions.

In Orange County, the retirement system’s board of nine members is divided between union and public members, with the County Treasurer being the deciding vote. This board has more business savvy and has been open to ideas that saved its largest plan sponsor more than $100 million.

Consequently, Governor Brown comes close to what we’ve done in Orange County, but just misses the real benefits. Just like his methodology of addressing the retiree medical liabilities. If he followed the OC model, the state could reduce its unfunded liability for this obligation by $50 billion!

It kills me to see financial amateurs get so close, claim they’ve done the best they could, and miss the bull’s eye.

Lip service may be good for the masses, but for those in the know, it’s infuriating.

David Crane seems to be hung up on the definition of what a payment is. Who cares about the funding source?

But, if there is no mechanism in the trailer bill to apply this toward any future year’s annual required contribution payment, then I’ll be convinced that the CalPERS board members are over their heads and the Department of Finance can’t shoot straight. I’ll be reviewing the bill language (AB 100) today, as the bill was published late in the night on Tuesday during this budget season madness. It should be heard next week.

The second piece, front page Sacramento Bee, is also about the budget. The disheartening fact about Sacramento is that it is a union town. There are Republicans and the Union Party. When I present bills to address fiscal issues, it’s usually union representatives that argue in opposition. And, because they own the monopoly party, my bills get voted down. So, my attitude is reflected in this piece (also see MOORLACH UPDATE — There Ought Not Be A Law — April 23, 2017 april 23, 2017 john moorlach).

For levity, a repeat of yesterday’s humorous moment is provided by Capital Public Radio (see MOORLACH UPDATE — Bureau of Cannibals Control — June 14, 2017 june 14, 2017 john moorlach).

One Last Plea to Stop the Pension Loan

David Crane

By David CraneLecturer and Research Scholar at Stanford University and President of Govern for California

Dear Legislators:

In my essay the other day I provided an alternative to Governor Brown’s pension loan — actually pay down pension debt.

You could do that by offering to redeem future pension payments for cash today. Provided the amount you pay is no greater than the present value of those future pension payments using the discount rate CalPERS uses to present value those payments, then you would actually pay off debt. If you wanted to save the citizens you serve even more money, you could start by offering less than present value.

Ideally such a pay-down would not be paid for with borrowed funds but if you insist on borrowing, then at least swap the floating rate loan from the special fund into a fixed rate loan so you actually know your cost and don’t subject citizens to floating rate loan risk. Together with the redemption outlined above, a fixed rate would lock in savings equal to the difference between the loan rate and the discount rate.

You should understand that the path proposed by Governor Brown and embraced by Treasurer Chiang and Senator Moorlach–a path you are about to embrace–is no different than the path mortgage lenders induced borrowers to take before 2008: i.e., a “teaser” low interest floating rate loan the proceeds of which are invested in assets (houses in that case) expected to grow at a higher rate and earn big profits for borrowers. Just see the stunning language from Brown’s budget below. That language goes beyond representations made by mortgage brokers and is eerily similar to assertions made by the state when it enacted SB 400 in 1999 (eg, “will not cost a dime”).

Public officials should not lead citizens down similar paths. You should actually pay down pension debt or you should not proceed with the current proposal.

David Crane

State budget has perks to help unions organize new members

Democrats add two union-protection provisions to the 2017 state budget. Labor groups see right-to-work laws gain ground across the country and have some pushback in California.


New California government workers will hear from union representatives almost as soon as they start their jobs under a state budget provision bolstering labor groups as they prepare for court decisions that may cut into their membership and revenue.

Unions would gain mandatory access to new employee orientation sessions in schools, cities and in state government through one of two labor-friendly provisions that lawmakers inserted into the state budget last week without much debate.

The second provision bans public agencies from releasing the personal email addresses of government workers, creating a new exemption in the California Public Records Act. Those email addresses are basic information that could be used in anti-union campaigns.

Both measures were discussed by the Legislature last year, but dropped when the Supreme Court deadlocked on a lawsuit that would have banned unions from collecting fees from workers who don’t want to join labor groups.

That stalemate left in place California’s practice of allowing unions to charge fair-share fees to workers who benefit from representation, but don’t pay full dues.

Now, two more so-called right-to-work lawsuits are jockeying to reach the Supreme Court where newly appointed Justice Neil Gorsuch may tip the balance against fair-share fees.

“We may get a decision that eliminates various forms of union security that prevent free riders, so we’re trying to find an alternate message,” said David Rosenfeld, a Bay Area labor attorney.

The measure inviting unions to participate in new employee orientation will give labor groups an opportunity to make their case just as workers begin their jobs.

Many public agencies already allow unions to brief new workers. The budget bill would make that a standard practice across the state.

Its supporters cast it as way to ensure that public employees are well informed about their rights, and about the general workplace environment of their new offices.

“We want a better-trained and well-informed workforce,” said Assemblyman Jim Cooper, D-Elk Grove, who carried the bill last year. “It really wasn’t about the unions so much as it was just an orientation.”

Gov. Jerry Brown’s administration favored the measure, which allows government agencies to negotiate with unions over what kind of access labor groups would have to new employee orientation sessions.

Republicans voted against the provision at budget hearings over the past week.

“I don’t think the unions need to be involved in orientation. It’s that simple,” said Sen. John Moorlach, R-Costa Mesa. “It’ll be a rare day when I vote for a bill that gives (unions) some kind of advantage.”

The second provision adds the personal email addresses of public employees to a list of privacy exemptions in the California Public Records Act. The exemption is to be included in an existing law that compels public agencies to disclose that information to union representatives.

The California Public Employees’ Retirement System has received public records requests seeking personal information about its beneficiaries, including their personal email addresses. CalPERS has denied those requests, said spokesman Wayne Davis.

Open government advocates at the First Amendment Coalition and the California Newspaper Publishers Association were surprised to see the provision surface.

They’d watched a similar provision move forward last year and stalled it. They wanted to wait for a decision from the state Supreme Court in a lawsuit that argued that the public should have access to emails and text messages that public officials send from personal devices if the content is relevant to their work in government.

In March, the Supreme Court sided with open records advocates in holding that those records are public even if they’re sent from personal devices.

Last year, the publishers’ group opposed the privacy exemption for public employee email addresses. That information, said Jim Ewert, general counsel, might have helped citizens piece together important information that public officials attempt to hide by working from personal devices.

“This year, unbeknownst to me, this language just appeared and I’m not sure how that happened,” he said.

Now, with the state Supreme Court ruling favoring access to the content of those messages, Ewert says the actual email addresses are less important. The ruling requires public agencies to search personal devices and email accounts for information that could be relevant to citizen watchdogs and the new legislation does not contradict the court decision.

“I don’t think it would render a substantial or significant amount of public records inaccessible because it makes clear that if the email is used for public business, it’s subject to disclosure,” said David Snyder, executive director of the First Amendment Coalition. “It probably in the broad scope of things doesn’t do great harm.”

Fair-share fees top 99 percent of full dues at some unions. If they’re banned, an anti-union group might solicit union members with messages telling them they could have the benefits of union representation without paying union dues, according to union advocates.

Paul Secunda, director of the Labor Law Employment Program at Marquette University, said other Democratic-leaning states might adopt similar measures if the Supreme Court one day strikes down fair-share fees.

“I think you’ll see that in more progressive states similar types of innovative laws to try to soften the blow potentially of one these types of cases,” Secunda said.

Twenty-eight states have so-called right-to-work laws with Kentucky and Missouri becoming the most recent ones to ban fair-share fees.

Moorlach and Assemblyman Matt Harper, R-Huntington Beach, submitted a right-to-work bill to the Legislature this year. It died in committee. At an April hearing, they argued that fair-share fees undermine the free speech rights of workers who disagree with the political stances of California’s Democratic-leaning unions.

“You have a First Amendment problem,” Samuel Han, California director for the Freedom Foundation, a group that wants to break the “stranglehold” of public sector unions.

Union membership has declined somewhat in states that recently blocked mandatory union fees, but it has not plummeted. Michigan, for instance, became a right-to-work state in 2013 and union membership has edged down from 16.3 percent of the state’s workforce to 14.4 percent of workers, according to the Bureau of Labor Statistics.

Indiana banned fair-share fees in 2012 and union membership has increased there from 9.1 percent of the state’s workforce that year to 10.4 percent in 2016.

The right-to-work laws are “a stumbling block, but labor isn’t going anywhere,” Secunda said.

Adam Ashton: 916-321-1063, @Adam_Ashton. Sign up for state worker news alerts at

California Senate Budget Committee Cracks Up Over Bureau Of ‘Cannibals’ Control

Julia Metric

If you’re a reporter covering California’s landmark cannabis bill, chances are you tuned in for a Senate Budget Committee hearing this week.

After several hours of public comment on many other bills, the focus turned to legislation that would align the state’s rules on medical and recreational marijuana.

That is, cannabis.

Soon it was Republican John Moorlach’s turn to pose a question to Democratic Committee Chair Holly Mitchell.

He asked senators to go to the committee report and look at the bottom of page one.

"It refers to a bureau," said Moorlach. "And I’m kind-of curious…"

"The bureau of cannibal – cannabis – control?" clarified Mitchell.

"It says ‘cannibals’ control," replied Moorlach.

"It’s a typo and you knew it was a typo!" countered Mitchell, laughing.

"Bureau of C-a-n-n-a-b-i-s Control. Yes, you knew," insisted Mitchell as laughter rippled through the chamber.

"Let’s get to your question," added Mitchell, trying to re-direct the hearing.

The exchange sounded like the dawning of the Age of Cannabis.


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