CA Budget Still Needs Fumigation

Feb. 22, 2011

By JOHN SEILER

As Gov. Jerry Brown and the state Legislature continue crafting a budget, skunks keep being thrown into the room.

The biggest skunk is that the $146 billion California State Teachers’ Retirement System, CalSTRS, is effectively insolvent. Funded at 80 percent of liabilities today, CalSTRS calculations show that its funding will drop to 0 percent of liabilities by 2042, just 31 years from now. Reported the San Jose Mercury News:

The threat isn’t to teachers who have retired or plan to, but to the people of California. Taxpayers, who already pick up 23 percent of CalSTRS expenses, will be increasingly burdened as the giant pension system fails to meet its obligations.

“The governor is ignoring that they need another $4 billion a year, every year, for CalSTRS,” Marcia Fritz told me; she’s president of the California Foundation for Fiscal Responsibility, which keeps track of the state’s pension problems.

To make the system solvent, she said, about $11,000 per teacher will have to be put into the system. “That will have to come from the state budget, school budgets or teachers’ pay.” Taxpayers fund the state budget and school budgets, so they could be on the hook for higher taxes.

She said that Brown “included in his budget exactly what the law requires,” but that state law doesn’t require enough to be put into the system. It didn’t take the governor long to forget the promise in his Inaugural Address of January 3: “First, speak the truth. No more smoke and mirrors on the budget. No empty promises.”

Fritz said that a way to get reduced pension costs would be to require all public employees, including those in public safety, to work five years longer before retirement. Doing so “would cut overall retirement costs in half.”

Alternatively, she said, pensions payouts could be cut in line with the reduction in the value of private-sector 401(k) retirement funds. “It shouldn’t be any different,” she said, with those living off the taxpayers’ money having to reduce their budgets the same as taxpayers have been forced to by economic reality.

Right now, she warned, governments across the state are encouraging workers to retire early, thus getting high-paid workers off the budget, while putting the cost on the pension system.

Fritz pointed to an updated list on her group’s Web site of retired teachers that pull in more than $100,000 a year from teacher pensions. The number of such retirees now is 5,309. Here are those at the top of the list:

Name	Monthly	Annual	District
ISAACS, DANIEL M	$29,580.00	$354,960.00	LAUSD
FISHER, ROBERT J	$27,926.73	$335,120.76	LAUSD
ENOCHS, JAMES C	$24,712.95	$296,555.40	MODESTO CITY ELE.
WENTWORTH, FREDRICK	$24,207.07	$290,484.84	SAN JOAQUIN COUN.
HERNANDEZ JR, EDWARD	$23,866.35	$286,396.20	RANCHO SANTIAGO.
SHATTUCK, VIRGINIA J	$23,564.19	$282,770.28	NORWALK-LA MIRAD.
JAQUE-ANTON, DONNALYN E	$22,811.40	$273,736.80	LAUSD

Of the top seven, three were in the Los Angeles Unified School District, one of the worst-performing districts in the country, with only 41 percent of students graduating high school. No wonder the costs to school a child in LAUSD, as I have reported, are an incredible $30,000 per student.

Fritz added that 25,000 retired teachers receive $75,000 or more a year in CalSTERS pensions.

Federal budget slashing

A second big hit to the state budget could be the loss of $1.5 billion from the federal government. The new Republican majority in the House of Representatives approved the cuts in the budget it passed on February 19. The budget still will have to be approved by the Senate and President Obama. Negotiations are ongoing. And most of the cuts would be across-the-board, affecting other states as well.

But the position of California at the bargaining table has eroded since Rep. Nancy Pelosi, D-Sacramento, stepped down as House speaker.

Among the cuts, reported the Los Angeles Times:

$55 million in Pell Grant reductions

$100 million in biomedical research for the University of California system

$125 million for K-12 schooling

$15 million for the Presidio Trust in San Francisco, Pelosi’s home base

Budget maneuverings

As to the state budget itself, the passage of Proposition 25 last year is making things go much more smoothly — so far. Prop. 25 reduced from two-thirds to a majority the threshold for passing a budget in each house of the California Legislature.

Prop. 25 effectively freezes minority Republicans out of budget discussions. Their only remaining leverage is holding out on Brown’s call for them to join the majority Democrats in putting a $12 billion tax-increase vote before voters in a June special election. For that, a two-thirds vote in each house still is required.

Reported the Los Angeles Times on the smooth budget approval:

The legislators made relatively minor changes to the governor’s $84.6 billion spending proposal. Some differences remain on cuts in home healthcare services and healthcare for the developmentally disabled, as well as on Brown’s proposed elimination of redevelopment agencies.

But as Bob Morris of the California Independent Voter Network noted:

The effective deadline for this to happen would be March 7, as the state needs three months to prepare for the election. But it’s simply not possible for the governor to implement sweeping public pension reform in a couple of weeks. Plus, even if he could, it’s a certainty that CalPERS and public unions would sue to block it, tying it up in court for years…

Last Thursday, Republicans upped the ante saying they won’t vote to put taxes on the ballot even if Brown does magically slash pension benefits and impose a spending cap.  Republican Sen. Bob Dutton of Rancho Cucamonga said, “They [Democrats] really don’t need us to govern at all. They just need us if they want to raise taxes.”

Morris then described the tactic Republicans are using as one derived from activist Saul Alinsky and called “Eyes, Ears and Nose”:

Eyes: “If you have a vast organization, parade it before the enemy, openly show your power.”

Ears: “If your organization is small, do what Gideon did: conceal the members in the dark but raise a clamor that will make the listener believe that your organization numbers many more that it does.”

Nose: “If your organization is too tiny even for noise, stink up the place.”

It’s worth adding that President Obama himself, as a community activist in Chicago early in his career, was influenced by the techniques of Alinsky, who also hailed from Chicago.

Alinsky died in 1972 out here in Carmel. As the budget and pension debacles continue, it’s worth keeping in mind a quote of his from his well-known 1971 book, “Rules for Radicals”:

In this world laws are written for the lofty aim of “the common good” and then acted out in life on the basis of the common greed.

John Seiler is a reporter and analyst at CalWatchDog.com.

His email: [email protected].