But old assumptions that Brown’s main foes would be environmentalists and trial lawyers have been undercut repeatedly in recent weeks. Instead, perhaps his most formidable obstacles to making the Golden State more hospitable to new construction are local officials eager to maintain control over what their communities look like. Across California, they’re preparing or considering ordinances that require local voter approval of projects of a certain size or density or otherwise put hard limits on certain types of development — measures that would block key provisions of Brown’s plan.

A recent Voice of San Diego article noted such efforts in Del Mar, Costa Mesa, Los Angeles, Santa Monica, El Dorado County, Cupertino and Gilroy. Among the requirements that those communities may impose: requiring voter approval of most new construction higher than two stories and creating zones in which any construction required ballot OKs.

NIMBYism popular in many communities

Critics claim this would worsen the California housing crisis, not help it. But in city after city, officials say they are responding to local sentiment.

This gets to a key weakness of Brown’s strategy: While there is a growing understanding that the best way to relieve California’s housing crisis is by adding more stock, people are often only enthusiastic about the idea in the abstract. When it comes to one’s own community, enthusiasm usually wanes as part of a “not-in-my-backyard” attitude.

A classic example of this NIMBYism is now playing out in Millbrae, just south of San Francisco, in the region with the highest housing costs in California. A proposal to build 300-plus homes with office buildings and retail space next to a Bay Area Rapid Transit station — a prototypical “smart growth” project — is facing growing opposition.

The project would be on 116 acres already owned by BART. It complies with local housing policies and comes after years of complaints from area residents that their children can’t afford to live near them.

But at a July 12 City Council meeting, residents jammed the chambers to warn the project would worsen crime and traffic and harm quality of life. According to a local newspaper account, one resident even said the BART effort amounted to a criminal enterprise — “like the Wild West for outlaws to come and take stuff.”

Former San Francisco mayor touts status quo

That same day, the San Francisco Chronicle printed an op-ed by former Mayor Art Agnos blasting Brown’s housing proposal and offering a defense of the status quo of strong regulation. Agnos challenged the idea that adding more housing stock is the best way to bring down housing costs and said “rent stabilization” — i.e., rent control — should be an option for every city.

Agnos also called for more government funding for affordable housing programs that critics say amount to lottery programs which only help a relative handful of families.

From 1993-2001, Agnos was the western regional director for the U.S. Department of Housing and Urban Development. On his personal website, he depicts his efforts to help poor people find housing in San Francisco with government subsidies as a rousing success story.

Agnos doesn’t mention this claim in the Chronicle op-ed.

CA Republican Party convention kicks off

TGIF! Today is the first day of the California Republican convention. While political conventions are usually a snoozefest — unless you like a dearth of news and partisans in funny outfits — this should be different. 

All three remaining GOP presidential candidates are scheduled to speak, including business tycoon Donald Trump. Opponents have promised to protest, according to the Los Angeles Times.

The Times also highlights some ballot initiatives that California Republicans may consider, including pot, the death penalty, the plastic bag ban, cigarette taxes and guns. 

Assembly Republicans — who, along with their Senate colleagues, are locked in a life or death battle between relevancy and being a super minority — are not expecting to make waves at the convention. Recognizing that the presidential contest will surely overshadow their messaging efforts, Assembly Republicans have resigned to holding seats in 2016, while building caucus unity as well as relationships on the other side of the aisle, in an effort to push an agenda after the election. CalWatchdog has more.

And speaking of Trump, he held a rally in Costa Mesa on Thursday, doubling down on immigration, according to The Sacramento Bee. “No state in America has suffered worse from open borders than the state of California,” Trump said. 

In non-Trump or CAGOP convention news, President Barack Obama, like his predecessors, failed to label as genocide the century-old mass slaughter of Armenians at the hands of the Turks, disappointing both Armenian-American leaders and the New York Times. CalWatchdog has more. 

April 11, 2013

By Ed Ring

“Forget about logic,” Jack advised. “My analytics instructor says that all logic is mere tautology. She says it is impossible to learn anything through logic that you did not already know.”

— Robert A. Heinlein, Tunnel in the Sky

What about facts? There are certainly facts we don’t already know. According to the logic of the labor union spokespersons who relentlessly lobby and negotiate for higher wages and benefits for public sector workers, they are still underpaid because they have higher levels of education than the average worker.

According to the logic of AFSCME Local 3336, the only reason anyone might think public sector employees are overpaid is because of right wing propaganda. Yet it seems the many studies that fund their own analyses come from taxpayer-supported institutions staffed with unionized faculty, or think tanks funded by grants from public employee unions.

But why impugn the sources? Why consider their logic? Why not just present the facts and let journalists, policymakers and voters employ their own logic to form an opinion?

That is what compensation studies from the California Public Policy Center have attempted to do. They have now done public employee compensation studies on four California cities, most recently Irvine, along with Costa Mesa, Anaheim and San Jose. Not only have they presented the data objectively. But for anyone to verify the data and the assumptions, they have made the payroll spreadsheets and analysis available for downloading by anyone who wants to review the data themselves; here are these spreadsheets: Irvine, Costa Mesa, Anaheim, and San Jose.

Here are some facts on total compensation (direct pay plus employer funded benefits) for full time employees of these four cities:

TOTAL COMPENSATION — FULL-TIME CITY EMPLOYEES

Irvine: Total compensation average = $143,691, median = $133,782.
Costa Mesa: Total compensation average = $146,863, median = $146,378
Anaheim: Total compensation average = $146,551, median = $138,442
San Jose: Total compensation average = $149,907, median = $139,634

TOTAL COMPENSATION — FULL-TIME CITY EMPLOYEES NOT INCLUDING PUBLIC SAFETY

Irvine: Total compensation average = $127,115, median = $120,063.
Costa Mesa: Total compensation average = $103,755, median = $95,526
Anaheim: Total compensation average = $122,717, median = $110,792
San Jose: Total compensation average = $120,092, median = $114,923

These figures are for full time workers, unlike the numbers provided by the State Controller on their “transparency” website. Those averages not only fail to include all employer provided benefits in the numerator, but they include every part-time worker in the denominator. Not surprisingly, these “facts” reveal much lower averages. Here are the “average wages for all employees” according to the California State Controller’s transparency website:

CALIFORNIA STATE CONTROLLER’S “AVERAGE WAGE” FIGURES

Irvine: Average wage = $48,506
Costa Mesa: Total compensation average = $72,177
Anaheim: Total compensation average = $56,850
San Jose: Total compensation average = $68,339

Why not let the reader determine which of these “averages” is more representative of reality? For any readers who might argue that the cost of benefits don’t belong in calculations of average or median earnings, we invite them, out of their direct pay, to start paying for 100 percent of their pensions, 100 percent of their retirement health care, and 100 percent of their health insurance, disability insurance, life insurance, 401(k) plan, and Social Security and Medicare premiums.

More facts

Here are some additional facts:

Using California’s Employment Development Department’s 2010 report, “Labor Market Trends,” (ref. figure 1), it is evident there are 2.4 million Federal, State and Local employees in California; 12.2 million full-time private sector employees who work for an employer; and another 1.4 million “self-employed” private sector workers. According to the California State Department of Finance, in 2011 the state’s Gross Domestic Product was $1.96 trillion.

So what if every one of California’s 16 million full-time workers was earning total compensation of $143,691 per year — the lowest of our four cities under consideration? Multiplying this average by the number of full-time workers in the state, and comparing the result to the state’s entire economic output might help us ascertain the feasibility of such a feat, would it not?

As it turns out, if every one of California’s 16 million full-time workers earned $143,691 per year in total employer paid compensation (pay and benefits), it would amount to $2.3 trillion, 17 percent in excess of California’s entire economic output. This means that if California had no net exports and no business investment — elements that typically comprise at least 30 percent of GDP — paying everyone what the average local government worker makes would still consume 17 percent more than the state’s entire economic output.

Average total compensation

Here’s another fact:

AVERAGE TOTAL COMPENSATION, FULL-TIME, CALIFORNIA, PRIVATE SECTOR: $63,361

According to the U.S. Bureau of Labor Statistics, and as reported in the Sacramento Business Journal, the average annual salary for a worker in California was $51,910 in 2012. To convert this into total compensation, using generous assumptions, add 7.5 percent for employer contributions to Social Security and Medicare, plus a 3 percent matching contribution to a 401(k), plus $500 per month for health insurance benefits, and you get $63,361 per year (don’t forget there are 2.4 million government workers who pulled the BLS statistics upwards). That is an absolute best case.

This means that the average worker for the City of Irvine, which has the lowest paid workforce among the four cities considered in the CPPC studies so far, is making $143,691 per year in total compensation, compared to the average Californian, who makes at most $63,361 in total compensation.

At the risk of Robert A. Heinlein turning in his grave, let’s now indulge in some logic.

Maybe, just maybe, their allegedly superior levels of overall educational attainment don’t justify municipal bureaucrats (not even including public safety) making average total compensation that is approximately twice as much as the total compensation earned by the average full-time private sector worker in California.

Maybe, just maybe, when public sector unions clamor for even higher levels of compensation and benefits because “public employees need to be able to afford to live in the communities they serve,” they might consider the fact that their relentless lobbying and negotiating for more pay and benefits, combined with their relentless lobbying and negotiating for more laws and regulations in order to expand their membership base of public employees, is the reason that nobody can afford to live in these communities.

And maybe, just maybe, public employees will renounce their union agenda of more taxes, more regulations, and more benefits for themselves, just enough to allow California’s economy to recover. Maybe they will take it upon themselves to oppose their union agendas that, if unchecked, condemn California to an immediate future where the rich play with movies and software, the poor collect entitlements, and the government employees are the only middle class left.

After all, despite Heinlein’s nearly 60-year-old vision, there is no tunnel in the sky, at least not yet. No M-class planets to escape to. For that matter, there are still no blue water floating city states beckoning just off the coast. But the interstate highway system is alive and well.

Ed Ring is the research director of the California Public Policy Center, and the editor of UnionWatch.org

By John Seiler

Los Angeles obviously doesn’t work. The election of a new mayor, the first phase of which was held Tuesday, won’t help.

L.A.’s schools are among the worst in the country. Driving through the city is an obstacle course the roads are so bad. The city is visibly deteriorating.

The problem is not democracy, but the lack of democracy. The city council has 15 members for 3.8 million people. That’s one council member for every 253,000 people. How can the council possibly be responsive to what people need? Can you keep track of 253,000 people?

As with most cities in California, the council is held hostage by the ultra-powerful public-employee unions, which demand — and usually get — massive pay, perks and pensions. The pension situation is so bad the city is on the verge of bankruptcy.

’72 suburbs’

Dorothy Parker once said L.A. was “72 suburbs in search of a city.” Well, the break it up into those 72 suburbs. The new cities would be uneven in population, but the average would be about 53,000 per city.

Wouldn’t this duplicate government offices and increase costs to taxpayers? Not if it’s done right. The members of the new city councils would not be paid for their jobs. City Halls, instead of being gigantic “Taj Ma City Halls,” would be in strip-mall storefronts.

As Costa Mesa is trying to do, most city services would be outsourced to private companies. Fire departments would be of the voluntary kind. Police could be contracted out to the county sheriffs, or perhaps contracts could go to groups of cities forming competitive departments.

The L.A. Unified School District would be abolished. In its place — assuming the new cities even have public schools — would be 72 new school districts, all of them merely doing administrative work for charter schools, on the New Orleans 100 percent charter model.

Of course, the major resistance would come from the unions. But the bankruptcy of the current L.A. would take care of much of that.

The politicians also wouldn’t like it. The mayor of huge Los Angeles automatically becomes a statewide, even national player. I remember when Sam Yorty ran for president back in 1972.

Tom Bradley lost two campaigns for governor, in 1982 and 1986.

Richard Riordan lost a governor’s race in 2002.

And outgoing Antonio Villaraigosa often has been talked about as a gubernatorial candidate or to get a cabinet position in the Obama White House.

Political ambition aside, breaking up L.A. would do wonders for the people who live there. They could control their own affairs democratically at the small, local level, instead of trying to work through the immense city bureaucracy or the remote city council.

Breaking up L.A. is a reform whose time has come.

By Katy Grimes

In addition to a government reform ballot initiative attempting to stop unions from using employee dues for political purposes, three cities have initiatives on the November ballot asking voters to allow a constitutional change to become charter cities.

Proposition 32, the ballot initiative which would ban automatic payroll deductions by corporations and unions of employees’ wages to be used for politics, is a big deal and would give back the individual voice in politics.

Equally full of impact, Escondido, Costa Mesa, and Grover Beach, currently general law cities under the California Constitution, are also asking voters to allow the cities the chance to regain local control.

The change from a general law city to a charter city is technical, but very powerful and important. Charter cities have significantly more autonomy and flexibility than general law cities to protect taxpayer funds through more careful spending, and exemptions from state-mandated prevailing wage agreements and Project Labor Agreements.

Charter changes

The charter provides a city with the ability to control its own business on a local level. Local elections, decisions about city salaries, zoning and land use issues, and financing, are all issues that newly formed charter cities would have control over.

In providing local control, voters would have more input into how a city is run, and how projects are managed, and manage these projects at reasonable, competitive prices.

The charter city initiatives include important provisions to allow cities to decide whether or not to pay union wages on public works projects, an issue hotly contested by the state’s construction labor unions. Provisions also require voter approval to increase city workers’ retirement benefits.

Proponents of the charter city initiatives say that a charter will bring about tremendous cost savings by allowing cities to pay non-union wages and contract out for many projects.

Charter cities would be allowed to use local businesses. They could once again have volunteers work on projects, and accept donations for these projects.

Currently, if there is union labor involved in a local public works project, no one is allowed to volunteer or make a private donation to the project, lest it displace a union worker.

But the biggest benefit, according to Kevin Dayton, CEO of Dayton Public Policy Institute, an employment and labor specialist and charter city expert, would be not having to pay prevailing wages on local public works projects. In a recent interview, Dayton said that labor union prevailing wage rates do not accurately reflect the actual industry rates, nor do they accurately reflect the construction industry in all areas within the state.

Costa Mesa

“The fire-fighting model has to change, ” Costa Mesa City Councilman Jim Righeimer said in an interview. Righeimer, who introduced Measure V, the city charter change to Costa Mesa, explained that Costa Mesa gets 9,000 9-1-1 calls each year, but more than 6,000 of the calls are for medical services. “A couple thousand calls are duds,” Righeimer said, “but only 224 of the calls are actual calls about fire. Mostly barbeque fires, garage fires or kitchen fires. Costa Mesa doesn’t have many fires.”

Righeimer said what then happens after the 9-1-1 call is that fire engines arrive at the caller’s residence, along with ambulance services on medical calls, and merely follow the ambulance to the hospital where the fire fighters stand around until everyone is cleared to go. It works this way because the fire fighters’ union negotiated for two paramedics on each fire truck in addition to the fire fighters, requiring them to go to the hospital with the ambulance.

As a city council member, Righeimer wants the flexibility and control to be able to decide if this is cost-effective policy for Costa Mesa, and to establish its own government-mandated construction wage rate policy for municipal projects.

But the rational discussion about cost effectiveness has turned into an all-out assault. According to Dayton, unions have steamrolled right over smaller cities’ efforts to adopt charters. “Union leaders get very testy when someone points out that a charter city can establish its own policies concerning government-mandated construction wage rates,” Dayton said.

Opposition to charter cities

Showing how much is at stake in this fight, Righeimer said that the Orange County Employees’ Association, the State Building and Construction and trades Council, and other labor unions, all opponents to the Costa Mesa charter city initiative, have just made a $160,000 media purchase  in Costa Mesa to fight the charter attempt.

“As more and more California cities head down a path toward becoming ‘charter cities,’ more and more officials reveal their true intention: to avoid paying the prevailing wage,” one opposition blogger wrote.

“The charter city movement in Costa Mesa, as most other places where this battle is being fought, is a thinly veiled anti-union attack akin to Michigan’s ‘Emergency Financial Manager’ law. It aims to put legislation into place that undermines the bargaining power of labor organizations under the auspices of fiscal responsibility. It’s playbook Right Wing stuff….”

However, a recent California Supreme Court decision upheld the right of California’s 121 charter cities to establish their own policies about government-mandated prevailing wages in municipal construction projects.

Righeimer said that Costa Mesa residents should not have to spend 20 percent more for public works projects, and will save money should the city adopt a charter. “We love our police and fire,” Righeimer said. “It’s just not sustainable at this level.”

Second in a series on public pensions. The first is here.

Sept. 27, 2012

By Mark Cabaniss

In taking on the California pension problem, the first step is dispelling some large, tenacious and commonly held illusions.

The first illusion is that pensions are contracts protected by the U.S. Constitution and the California Constitution, and therefore are legally unbreakable, “written in stone.”  But, as noted in my prior article, assuming that public pensions are contracts, there are nonetheless legally valid ways to get out of all contracts, including current pensions.  The most important of the contract law doctrines that could be used to get out from under current pensions is the doctrine of mistake. According to that doctrine, the current pensions were granted while relying on mistaken assumptions, specifically, unrealistic projected future pension fund investment returns which have turned out to be too high.

The second contract law doctrine which might be used to get out of onerous pensions is that the money simply isn’t there to pay excessive pensions (the current highest in California is, ha-ha, $302,492 per year). The legal arguments, as well as the political arguments, are the strongest for reforming the very highest pensions, those in excess of $100,000 per year.

But the only way to find out the extent to which these arguments would be successful is to try them in court. Which means that someone in government will have to try to alter the terms of current pensions, for example, by stopping pension payments in excess of $100,000 per year.  I myself have no doubt that the arguments would succeed at least to some extent, because no court is going to hold that every school, every prison, every hospital has to be shut down rather than a few retired people continue to receive in excess of $200,000 per year, and not a penny less.

Second illusion

These legal doctrines of mistake and impossibility of performance lead us to a consideration of the factual mistakes that really were made, and to the second great illusion created by those mistakes — that we are fighting over money.  Actually, we aren’t.  We are fighting over the illusion of money, or the hope of money.  In truth, the money doesn’t exist, and it never did exist. 

Two financial calamities, masquerading as booms, came in quick succession, and created an illusion of great wealth that simply was not there.  The first of these was the stock market dot-com boom of the late 1990s, during which companies with no earnings whatsoever nonetheless had, for a short while, stock market capitalizations of billions of dollars.  The bubble burst in 2000, many of the companies going bankrupt and their share prices going to zero.

Nonetheless, the dot-com boom lives on in the projected future returns of CalPERS, which currently has an assumed rate of return of 7.50 percent.  Last fiscal year, in 2011, they earned 1 percent.

The second great calamity which created an illusion of wealth was the housing bubble of the 2000s.  The latest California city teetering at the edge of bankruptcy, Atwater, since 2007 has seen its median home price drop about 40 percent to $139,000 and its property tax revenue drop by 27 percent.  Obviously, the property tax revenue has farther yet to fall, and Atwater’s woes are duplicated state wide.

Cherished illusions

But people cherish their illusions, particularly illusions about money, about how rich they are, or soon will be.  That is why the single most difficult part of reforming pensions may be simply moving the discussion to the plane of fiscal reality.  For example, CalPERS itself, on its “CalPERS Responds” website, recognizes that the stock market returns of the 1990s were highly aberrational, noting:

“The $400 million [that the state had to contribute to the CalPERS retirement fund] paid in 1999 was the lowest the State had paid in generations and it was due to the fact that the investment returns in the mid-1990s were so high, little was needed from the State to cover the plans. Some years, the State paid zero contributions for schools. This was due to higher than normal investment returns. Using a starting point of $400 million is misleading, because the late 90s was an atypical period for investment returns. In addition, payroll growth (bigger government) investment losses and people living longer and retiring earlier are the primary drivers of increased pension cost.”

Unfortunately, the aberrational returns of the 1990s are used by CalPERS only as the explanation for why subsequent state contributions had to be higher, and not as a reason to reassess growth assumptions.  And yet, to state the unpleasant and obvious, if the returns of the 1990s were “higher than normal,” then perhaps it is not a good idea to project them into the future with an assumed 7.50 percent rate of return.

Moreover, the money which did not exist in the past cannot be made to exist in the future by magical thinking.  The political “leadership” in Sacramento is doing virtually nothing to address the budget crisis, except for hoping for a tax increase which will do very little even if passed.

The real, although so far unexpressed, hope seems to be that something will save us, perhaps all the high-paying but dirty manufacturing jobs that government is working so hard to create in California; or perhaps a federal bailout, in which all the senators from the fiscally solvent states would for some magical reason agree to fork over wads of their citizens’ cash to all the bankrupt states.

No. Being realistic, there is no reason to think anything is going to save us, not a sudden turnaround in the California economy, and not a Deus ex machina in the form of a federal bailout.  So the fact is, we are fighting over far less money than is commonly realized; sadly, we don’t really have the money to pay anyone a $302,492 a year pension; sadly, we are fighting over how to divvy up the lunch money, rather than the lotto payout.

Third illusion

Once we get over these dreams of pie in the sky and start talking about money that actually is here, now, we can move on to the third great illusion, which is that pension reform is somehow bad for unions.

In fact, as we have seen time and again throughout the state, such as when the city of Costa Mesa laid off nearly half its workforce, the only way to pay for the current highest, unsustainable pensions is to fire busloads of currently working union members. The bosses keep their $200,000 pensions, and the rank-and-file get laid off.  Returning once again to CalPERS’ own website, we find:

“About 2 percent of the nearly half million CalPERS retirees receive annual pensions of $100,000 or more. Many are retired non-unionized or specialized skilled employees or other high wage earners who worked 30 years or more. Many served in high-level management positions.” 

According to CalPERS itself, then, it is the non-unionized management bosses who receive the greater-than-$100,000 pensions.  So, to ask another obvious question: Just how is it anti-union to cut the non-union bosses’ pensions to save union jobs?

Fourth illusion

This brings up great illusion number four:  It is political suicide to even attempt to touch current pensions.  But CalPERS’ own numbers suggest precisely the opposite.

If only 2 percent of retirees receive pensions of more than $100,000, then that would leave, by my reckoning, 98 percent who do not.  Obviously, if you were a politician making a naked political calculation regarding the political benefit that you could garner from championing pension reform, you would rather be on the side of the 98 percent, than on the side of the 2 percent.

And that question — Why don’t politicians make that naked 98 percent vs. 2 percent political calculation? — brings us to the very heart of the political problem. The politicians don’t want to touch pension reform, not because it is not a political winner, but because they themselves are, by and large, in the 2 percent group, not the 98 percent. 

Obviously, intuition tells us that this tends to be true of union leaders too.  Anyone negotiating contracts is going to be someone with a lot of experience and seniority, a high-wage person with the expectation of a high pension coming.  So there is a huge systemic built-in bias against pension reform. All the union leaders and political leaders are automatically and strongly against it because they themselves stand to garner huge pensions, as long as there is no reform.

So that leads to the conclusion, which is perhaps the only way out.  We should begin asking a simple litmus test question of all political candidates:  Do you support a $100,000 cap on pensions, including current pensions and including your own?  If politicians running for office had to answer that question, in every race, up and down the state, the people, through their electoral processes, could begin to address the problem of the very very highest, unsustainable, current pensions.

Mark Cabaniss is an attorney from Kelseyville. 

First on a series on public pensions.

Sept. 20, 2012

By Mark Cabaniss

The politicians in charge of “doing something” about the ongoing California pension debacle like to play a little game. It goes like this:  They decry the high costs of pensions that have already been granted, pretend to want to do something to rein in future pension obligations, and then turn their hands up and shrug that there is really nothing they can do about current pensions (including, cough cough, their own) — since, after all, pensions are contracts, and therefore they are protected by the Constitution.

But there is a problem with this self-serving assertion:  Even if politicians’ pensions are contracts protected by the Constitution, they are still breakable.  In pretending otherwise, the politicians are lying.  In other words, merely noting that pensions are contracts protected by the Constitution is not the end of analysis, but only the beginning, for all contracts are breakable, and all constitutional rights are subject to limits.

When, not if, state and local governments begin dishonoring the highest public pensions, there will be, obviously, a huge blizzard of litigation.  And when those cases are heard, some of the following basic concepts of contract law may be applicable.  (Note: My purpose here is not to write a treatise on contract law, nor to predict the course and outcome of future litigation.  My purpose is simply to show the lay person that there are several possible theories under contract law under which governments might be able to reduce the highest existing pensions rather than go bankrupt.).

All contracts are breakable, if you have a legally valid reason for breaking them.  For example, if a used-car salesman sells a car to a 10-year-old, the contract can be broken on the basis that the 10-year-old didn’t have the legal capacity (age) to sign a binding contract in the first place.  And all constitutionally protected rights, including contract rights, are nonetheless limited by finite resources. For example, your right to a fair trial does not mean that the government has to hire the entire Harvard Law School faculty to defend you in your shoplifting case. Society can’t afford it.

Regarding public pensions, the best and most obvious legal ground under contract law to get out of onerous pension obligation may be mistake of fact.  The legal rule goes like this: If you make a contract while holding a belief that isn’t true, you can get out of the contract.  For example, you make a deal to buy a Picasso for a million dollars, but it turns out that the painting is not a Picasso.  You can get out of the deal.  (Under the mistake doctrine, both sides have to be making the same mistake.  If only one side is mistaken and the other side knows the truth, you may still be able to get out of the contract under a different theory, such as fraud; more below.)

Pension spiking

Regarding high public pensions, the mistake that was made was simple, fundamental, and huge:  the supersize pensions that began to appear in the 1990s were justified on the grounds that pension funds “would” generate average annual returns of 7.5 to 8 percent or more into the future, forever.  This has turned out to be, ahem, not true.

The infamous SB 400, that then-Gov. Gray Davis signed into law in 1999, and which gave retroactive pension raises to state employees, including already-retired state employees, was sold by the California Public Employee Retirement System to the Legislature with lie after lie after lie — or “mistake” after “mistake” after “mistake,” if you prefer.  The CalPERS “analysis” that was “presented to” (perpetrated on?) the Legislature implicitly assumed that the Dow Jones Industrial Average would be at 25,000 by 2009, and 28,000,000 by 2099.  On the morning of Sept. 20, it is at 13,556.

Proving the existence of and reliance on the mistake(s) ought to be a lark. After all, a great deal of time, money, and work went into creating the rosy projections that were used to bamboozle government into granting the unsustainable pensions.  Were the mistakes made regarding future stock market returns mutual?  Well, the government certainly made a mistake on behalf of the taxpayers.  How about the public employees?  Who knows?  However, as a practical matter it is very hard to see how they would go in to court and say, “We were not mistaken as to future stock market returns.  We knew full well that the projections were a joke and that CalPERS was lying.”

Performance

The second big legal ground to get out of pensions is impossibility of performance.  If events make it impossible for you to perform the contract, then you can get out of it.  For example, you contract to sell your car, but before you deliver, it is destroyed by lightning.  Regarding pensions, the argument would be simply that the state and local governments have gone bankrupt since the pensions were granted.  In that event, the pensions could be modified to match the ability of government to pay them.

The third possibly applicable doctrine is known in contract law as consideration:  for a contract to be legally binding, there has to be something of value promised, on both sides.  For example, if I promise to give you a million dollars, and you promise to take three breaths between the hours of 1:00 p.m. and 2:00 p.m. next Tuesday, there is no mutuality of consideration, since I am giving something up and you are not.  The contract is voidable.

In the public pension realm, one obvious place where the consideration doctrine would come into play would be SB 400, the 1999 retroactive pension increase.  Since some of the workers who received retroactive pension increases were already retired, they obviously could not promise or give anything at all in exchange for the money, and indeed they did not.  Therefore, at least in regard to these already retired workers, there was a complete absence of consideration.  (A similar argument can be made not on contract law, but on Article 16 Section 6 of the California Constitution, prohibiting the giving away of public funds.)

A fourth possible ground for breaking managements’ pensions is fraud: If CalPERS or any of the other groups pushing big pensions knew that the pensions would not be self-funding and would require massive infusions of taxpayer cash, and they did not divulge that information, then any such pensions obtained on the basis of such fraudulent disinformation would be voidable.  Moreover, widespread and undisclosed self-dealing might qualify as fraud. For example, CalPERS officials, as public employees, themselves benefitted from the huge pension increases granted in 1999, and they did not disclose to the legislature that they would benefit.

Unconscionability

Another contract doctrine which might be used to break onerous pensions is “unconscionability,” which means simply that a contract is so one-sided that it is just unfair to enforce it against the disadvantaged party.  While normally this doctrine is applied to consumer contracts, some of the factors courts look to in weighing claims of unconscionability — such as whether the parties had equal bargaining power, whether the contract makes a one-sided allocation of risk (for example, where the taxpayers have to pick up the tab, all the tab, in the event that the Dow does not hit 25,000 by 2009, ha-ha) — are applicable to public employee pensions, as well.

Finally, one more area of contract law might be used to break the pensions: lack of capacity to contract.  If you are drunk or insane, for example, you cannot sign a contract to buy a house.  In the public pension context, the lack of capacity would be a little more subtle (maybe; hopefully).  For example, if you are under duress, being threatened to get you to sign a contract, that could qualify as a lack of capacity, since you lack free will.

Steven Greenhut and others have written recently about bullying tactics, including the attempt to frame a city councilman for DUI, being used in Costa Mesa to get local officials to see things the public employees’ way.  Testimony about such incidents could nullify the contracts obtained thereby.

Similarly, if you were being bribed to sign a contract, that too would qualify as a lack of capacity, since you would not be acting in your capacity as a fiduciary to the public, but rather in your private capacity as a criminal.  Another way to look at it is that if you are a manager sitting at a table “negotiating” a pension increase that will benefit not just the parties across the table but yourself as well, you may not be acting within the scope of your employment as a public official, but instead acting on your own behalf.  Therefore, you do not have the legal capacity to act to bind the public to pay for your self-dealing little scheme, since you are not at that moment acting as a public official.   Needless to say, were the courts to start taking bribery and self-dealing seriously, they could nullify a lot of contracts.

To sum up: There are a great many helpful doctrines under contract law that could be used to break onerous public pensions.  These legal arguments are strongest against the very top pensions, because they are the most unconscionable, they are the least possible to continue to pay, and they are the most likely to have been the result of self-dealing or bribery.

Therefore, the legal grounds for attacking the biggest pensions, managements’ pensions, coincide nicely with the public policy grounds of wanting to go after only the largest, most abusive pensions, and not the pensions of the retired school teacher or janitor.

Next article in this series: Breaking public employee pensions: The political path.

Mark Cabaniss is an attorney from Kelseyville. He has worked as a prosecutor and public defender.

Spitzer harshly criticizes the law enforcement unions and lawyers who tried to set up Costa Mesa Councilman Jim Righeimer. Righeimer, a pension reformer who has taken on the police unions, was subject to a despicable tactic by union operatives. He went to a pub after a community meeting and a private eye who had worked for a union law firm called in a false police report — claiming inaccurately that Righeimer was drunk and weaving all over the road as he drove home. The Costa Mesa cops came to Righeimer’s door after he arrived home and demanded that he take a sobriety test.

Righeimer held a press conference with other elected officials who have been subjected to similar Mafia-esque tactics by the police unions who have abused their authority to take down political opponents. Wrote Spitzer:

“Righeimer has been elevated beyond his wildest dreams. He shouldn’t complain about being followed. He should send the union’s law firm and investigator (now both fired in the aftermath of being caught) a big “Thank You” and a big kiss. By going after Righeimer they not only did not discredit him, but their target of him proved that his message is so powerful and persuasive to the general public that they felt that they had no choice but to silence him. It proved that he is the most powerful messenger about public employee abuses in Orange County and California today.

“For generations, plenty of minority, inner-city youth have been falsely arrested and accused. Society’s tolerance for police misconduct has been very high since the unspoken rationale has been that it makes our streets and communities safer (‘Well, they probably committed other crimes that they never got caught for’). Other countries imprison their political enemies to silence their voices.

“The Righeimer 911 call just didn’t cross the thin blue line; it erased it. Given all the events facing police in Orange County calling into question police officers’ credibility, in concert with the pension issues, the line may never be able to be redrawn. Someday, when we get beyond these events, we will be able to evaluate whether this is a good or bad thing for our county.”

This is an important article, given that it comes from someone closely associated with the police unions. I doubt those unions, or their dirtbag consiglieres, will get the message. They are so deeply enmeshed in their insulated world, where they protect and serve the union and treat the public with disdain.

In my column in today’s Register on the same topic, I quote former San Jose Police Chief Joseph McNamara: “It’s a pretty dark side of American policing, and I have personally been a victim of this twisted cop behavior when I was police chief.” This “gangster cop” mentality, he said, becomes more prevalent during salary negotiations.

And I conclude: “It’s one thing for elected officials to be ‘taken out’ at the ballot box. But quite another thing for them to be harassed, intimidated and set up on false charges as union operatives, sometimes acting under the color of authority, try to silence them.”

It’s time for the public to demand accountability when police behave like mobsters. Perhaps Spitzer’s words will give other union supporters the courage to speak out at such outrageous transgressions.

SEPT. 2, 2012

By JOHN SEILER

If you listen to people in the political game, they usually tell you what they’re going to do. But you sometimes have to check out their internal communications.

One of my best sources is California Teacher, the magazine of the California Federation of Teachers, which is part of the massive AFL-CIO super-union. The latest number doesn’t disappoint (.pdf here). It contains the strategy of the CFT — one of the most powerful unions in the state — for jacking up taxes and maintaining their members’ high pay, perks, pensions and political clout.

In his “Up Front” column, retiring CFT President Marty Hittelman laments the budget cuts, then writes:

We must do all that we can to reverse this erosion — and we will….Passage of Proposition 25 [majority vote for the Legislature to pass a budget] will help, but we need to conclude that chapter by passing a ballot proposition that will allow the Legislature to approve taxes by majority vote.

We need to find ways to increase state revenues through a combination of higher tax rates for the wealthiest 1 percent (for now, those making more than $500,000 per year), an oil depletion tax, a tax on services, and a change in Proposition 13 property tax laws, so large corporate properties are reassessed on a regular basis [he’s talking about the split-roll property tax]. California is a rich state anbd we should be able to afford the services that are the responsibility of a civilized nation.

For him, it’s all about jacking up taxes not just in a couple of areas, but everywhere and anywhere. For civilization. So if you’re against him, you’re not civilized.

And he still believes that California is a “rich state,” even though businesses and jobs are fleeing, and we have the second-worst unemployment rate in the country, behind only Nevada — which is improving faster than California.

Certainly, he’s right in one sense: California is a “rich” state for government-union workers.

Hittelman continues:

We must not allow the pressures of everyday life [that is, budget deficits and other realities] to erode our ability to negotiate collective bargaining agreements that support and protect workers so that we can live dignified and productive professional lives.

Deletates to our annual CFT convention were united in their determination to fight back against the continuing attacks on public employees and our unios. Speakers called for solidarity with our brothers and sisters in Wisconsin, Ohio, Indiana, Florida and numerous other states….

One thing I have learned in my more than 40 years in educatino and union work is that you have the power you assume. Exert your power. Embrace your professional responsibility to speak and act up. And persevere.

Well, the CFT and other California unions have exerted their power so much that they bankrupted the state. They put kept Democrats into all seven statewide offices, and hefty majorities in both houses of the Legislature. The unions also exert strong influence on Republicans in the Legislature. So, they have only themselves to blame for what has happened.

Tax the Rich

The All-Union News section of the magazine includes this headline: “CFT-sponsored poll finds strong support for taxing the rich — Voters respond positively when presented with alternative to slashing public services.” Here’s a Chronicle news story on the same thing.

The CFT story is by Communicatins Director Fred Glass. Typically, he doesn’t understand that raising tax rates isn’t the same as raising tax revenues. If taxes get to high, people just leave, or quit working. Is it really a good idea to make California even more anti-business?

The article reads:

Likely voters also thought it would be a good idea to close business tax loopholes, reassess large commercial properties at current market value (“split roll”), and levy a 10 percent severance tax on oil….

Assemblywoman Nancy Skinner, D-Berkeley, floated the “1 percent on 1 percent” idea by introducing AB 1130 in the Legislature. Passage of the bill is unlikely though, because no Republican will vote for any tax, any time, and the Legislature needs a two-thirds vote to pass a tax.

Well, we’ll see if the GOP holds firm instead of, as always in the past, suffering a couple of sellouts who back tax increases.

AB 1130 and the CFT poll results do provide an opportunity to talk about reasonable state budget solutions. By contacting legislators and telling them the wealthiest Californians need to pay their fair share of taxes, rather than continue to see colleges and schools deteriorate, CFT members can create a new understanding in Sacramento and a new direction to channel voter anger an frustration with the economy. Republican legislators should be informed that their base constituents support the 1 percent on 1 percent bill.

On Wisconsin? — No

The publication continues with an article by Mindy Pines, CFT reporter, on the actions by new Wisconsin Gov. Scott Walker to rein in the immense power of his state’s government worker unions. She writes:

Moved by the union stand in Madison, CFT members joined 1 million workers throughout the nation in protesting the Republican attack on public employees, unions, and collective bargaining….

According to Aaron Neimark, kindergarten teacher and member of the United Educators of San Francisco [a CFT affiliate], educators are the human face of public employees. [So other unions’ members are the inhuman face?] “We see the families of our students every day and we can counter ideas that we are part of the problem. Collective bargaining for educators directly speaks to how we teach, class size, working conditions…and this directly affects kids.” (Elipses in original.)

This is the promotion of the indoctrination of students by CFT members. Instead of just teaching the subjects in the school, they “can counter ideas that we are part of the problem.”

Legislator of the Year

Another article in the magazine reports that the CFT named state Sen. Loni Hancock, D-Oakland, its Legislator of the Year:

State Sen. Loni Hancock says CFT members can turn around the attacks on unions and education in California. “Let’s go get ’em, just like we did in Wisconsin.

“I get nervous when I hear the word reform,” said Hancock…addressing the conservative push to demonize public workers. All workers should have pension plans, she smphasized. “A fixed benefit pension is a hallmark of civilization.”

Hancock thanked CFT for its leading role in passing Proposition 25, which changed the vote to pass the state budget from a two-thirds to a majority [sic]. “If Prop. 25 had not passed, we would be in Sacramento now negotiating what we have to give away to pass the budget.”

Acknowledging that the state was truly out of money, she apologized for the drastic cuts made to the state budget and likened them to “amputating a leg to save a life.” [Actually, it’s more like liposuction.] The enormous task now is to pass the tax extensions, she said, calling taxes “what people pay for all the things that make a civilized society.”

“All the things” including massive bloat and waste in government, and budget-busting pension programs for the government-worker elite.

Suicide Worker

Then there’s yet another lament for the union worker who, after being fired by the city of Costa Mesa, jumped from a building to his death.

Of course, at least 90 percent of Americans lose jobs in their careers, yet don’t kill themselves, or the country’s population would be 31 million in instead of 330 million. To blame Huy Pham’s death on city cutbacks is absurd. But the California Teacher magazine does it anyway, in an article by CFT Reporter Malcolm Terrence:

Ann Nicholson is president of the nearby Coast Federation of Classified Employees. Her local is in negotiations now, so Huy’s death “makes us realize just how serious our work is at the negotiation table.” She said the attack on organized labor across the country represents a threat to all middle-class wage earners and the contributions they make to the economy.

So, when the middle class revolts and insists on budget cuts instead of tax increases on the middle class, that’s a “threat to all middle-class wage earners”?

The article continues, reporting that Kimberly Claytor, president of the Newport-Mesa Federation of Teachers…

organized a group of delegates to the CFT Convention to attend a candlelight vigil following the death of 29-year-old Huy, who had worked for the city’s maintenance department for four years. He supported his mother and siblings. Costa Mesa city officials predicted they would save from 15 percent to 40 percent of labor costs by outsourcing.

By the way, according to Ballotpedia, last November voters in Costa Mesa actually approved a hefty 33 percent increase in the city’s hotel tax. But even that wasn’t enough to close the city’s budget gap, hence the cutbacks.

The CFT magazine then continues with these amazing words:

Huy’s death recalls that the unstoppable wave of pro-democracy demonstrations sweeping North Africa were triggered by the suicide of Muhammad Bouazizi, a 26-year-old unlicensed fruit vendor.

The CFT just doesn’t get it. Bouazizi was a private businessman oppressed by Tunisia’s tyrannical ruling elite. But in California, the government-worker unions are the tyrannical ruling elite.

It’s shameful how the CFT, and other unions, used Huy’s death to advance their agenda which, as reported above, is spearheaded by even more assaults on taxpayers.