Reported the Detroit News:

Detroit Public Schools is $53 million behind in pension payments, costing the cash-strapped district $7,600 a day in interest penalties — or the equivalent of one child’s annual state funding grant.

Based on its minimal payments, the Detroit school district would be $81 million behind in mandatory pension contributions by July 1, state records show. The cost is exacerbated by $78,000 in fees for each month DPS remains delinquent — depriving the city schools of the equivalent of one teacher’s annual salary and benefits.

The sporadic pension payments, which date to October 2010, are the latest sign of worsening finances for Michigan’s largest school system as it continues to rack up debts and hemorrhage students and cash. Forgoing required contributions for pension payments mirrors a cash-hoarding tactic the city of Detroit pursued in November 2012 — nine months before declaring bankruptcy.

Detroit itself used to be the “Paris of the West.” Its booming auto industry was like Silicon Valley today — highly prosperous, lifting the tide of the state and country. Then general political mismanagement, including unbearable public pension costs, brought hard times, and eventually bankruptcy.

Detroit is less a pattern California will follow than a cautionary tale that public finances matter, and mismanagement can lead to federal bankruptcy court.

“DETROIT — Coming to terms with what came to be seen as inevitable, this city’s public-sector retirees have voted to lower their expected pension benefits, a crucial step in the city’s plan to emerge from bankruptcy before the end of the year.

“The result, announced late Monday night, came after two months of court-required voting.

“The balloting revealed a belief by current workers and retirees that the city’s offer — as much as 4.5 percent cuts to some pensions and diminished future cost-of-living increases — would be even worse if this one was rejected.”

Note: That’s for those already retired.

But here’s what’s still going on in California, according to CalPensions.com

“A labor board may have helped open a new front in public pension battles last week by overturning a Los Angeles cost-cutting reform, ruling that pension cuts for new hires must be bargained.

“New hires have been a target for lower pensions because, unlike workers already on the job, they are not believed to have a ‘vested right’ to their current pension, protected by contract law, that can only be cut if offset by a comparable new benefit.

“The five-member Los Angeles Employee Relations Board unanimously adopted a hearing officer’s conclusion that the city violated labor law by imposing a pension cut on non-sworn new hires without bargaining with public employee unions.”

The ruling will be repealed. But it’s clear that California public-sector unions and their members don’t understand yet that there just isn’t enough money for the lavish retirements they have been promised.

]]> https://calwatchdog.com/2014/08/05/another-blow-to-pension-reform/feed/ 51 66555 https://calwatchdog.com/2014/05/29/people-leaving-ca-a-success-story/ https://calwatchdog.com/2014/05/29/people-leaving-ca-a-success-story/#comments Thu, 29 May 2014 08:09:46 +0000 http://calwatchdog.com/?p=64111 Joe Mathews presents the counter-intuitive thesis that people leaving California for Texas is a sign of Golden State “success”:

Yes, California has an above-average unemployment rate and other economic problems, and many of our people and companies are relocating or expanding to states like Texas that offer cheaper living and generous economic incentives. But there’s another way to look at these departures of Californians and California companies: as a colonization of Texas and the rest of the country. 

This colonization is not a sign of decline but of our success. Texas and other states are trying to steal our culture, our companies, and our jobs because we have so many things worth stealing.

If that’s the case, then Michigan is an even bigger “success.” When I got out of the U.S. Army in Feb. 1982, I returned to my native Great Lakes State. Unemployment was a Great Depression-level 16 percent. People were streaming out for Texas or wherever, bringing with them our Michigan charm and tolerance for cold weather.

I drove my father’s car around the Detroit area for weeks looking for work. This was a place where, just nine years before, anyone with a heartbeat could get a great factory job paying the equivalent in 2014 dollars of $120,000 a year. Nothing.

Eventually I ended up back in journalism — but in Washington, D.C. Then I came to California in 1987 during the boom times under Republican President Reagan, who cut national taxes; and Republican Gov. George Deukmejian, who in 1987 actually refunded to taxpayers the tax money the state didn’t need.

By contrast, Michigan’s population actually declined in the last decade. Detroit just went bankrupt, and in 60 years has lost 2/3 of its 2 million population.

If that “success” pattern holds for California, its population will drop from 38 million today to 12.7 million in 2074. That will please anti-people environmentalists and the California Coastal Commission, as the state, as actually has happened to Detroit, returns to the wilderness.

Here's a little more background from the study:

“Municipalities have rarely defaulted on their debt. As a consequence, municipal debt is regarded as having an extremely low risk for investors. There are disconcerting trends developing that may change this historical view. The combination of the weak U.S. economy, high municipal debt levels, and large under-funded pension liabilities coupled with unfunded retiree health benefits raises the likelihood that more municipalities will become insolvent going forward.

“Declaring bankruptcy (officially Chapter 9 bankruptcy) is an option available to a financially troubled municipality— more precisely to state leaders who must consent to a municipality’s bankruptcy filing—if they meet the eligibility conditions. A municipality can only declare bankruptcy if it is insolvent and only after the municipality has conducted good faith negotiations with its creditors to resolve its financial obligations.

“To provide greater perspective on this subject, this study overviews the purpose of Chapter 9 bankruptcy and then reviews the bankruptcy (or near-bankruptcy) of several prominent cases including: Vallejo, California; Detroit, Michigan; Stockton, California;  San Bernardino, California; San Jose, California; Jefferson County, Alabama; Harrisburg, Pennsylvania; Scranton, Pennsylvania; and New York City, New York.”

“There are important similarities across these high-profile municipal bankruptcies and near bankruptcies that provide  valuable lessons regarding how financial insolvency arises and the value and limits of bankruptcy protection.”

Here's the link.

Detroit — If more citizens were armed, criminals would think twice about attacking them, Detroit Police Chief James Craig said Thursday.

Urban police chiefs are typically in favor of gun control or reluctant to discuss the issue, but Craig on Thursday was candid about how he’s changed his mind.

“When we look at the good community members who have concealed weapons permits, the likelihood they’ll shoot is based on a lack of confidence in this Police Department,” Craig said at a press conference at police headquarters, adding that he thinks more Detroit citizens feel safer, thanks in part to a 7 percent drop in violent crime in 2013.

Craig said he started believing that legal gun owners can deter crime when he became police chief in Portland, Maine, in 2009.

“Coming from California (Craig was on the Los Angeles police force for 28 years), where it takes an act of Congress to get a concealed weapon permit, I got to Maine, where they give out lots of CCWs (carrying concealed weapon permits), and I had a stack of CCW permits I was denying; that was my orientation.

“I changed my orientation real quick. Maine is one of the safest places in America. Clearly, suspects knew that good Americans were armed.”

Here are the murder rates per 100,000 inhabitants in 2010:

Maine: 0.8

California: 3.4

That’s 4 times as many in the disarmed Golden State as in the lockin’-and-loadin’ Pine Tree State.

Why? Well, it could be because it’s too cold in Maine to go outside and rob somebody. Or maybe Stephen King scares all the criminals to death.

Or it might be that criminals never know what victim might be armed, and will shoot back.

Whereas in California, criminals know that the victims have been disarmed by Gov. Jerry Brown, Attorney General Kamala Harris, the state Legislature and county sheriffs.

]]> https://calwatchdog.com/2014/01/03/detroit-police-chief-former-lapd-cop-carry-a-gun/feed/ 12 56769 https://calwatchdog.com/2013/12/24/judge-pensions-cant-be-cut-but-pay-can/ https://calwatchdog.com/2013/12/24/judge-pensions-cant-be-cut-but-pay-can/#comments Tue, 24 Dec 2013 16:04:58 +0000 http://calwatchdog.com/?p=55986 California still is a long way from resolving its pension crisis, in the courts and elsewhere. But here’s an important new development:

“SAN JOSE — In a landmark ruling that could help shape city budgets around the state, a judge invalidated key parts of San Jose’s voter-approved pension cuts but upheld other elements that could still save huge taxpayer costs.

“Santa Clara County Superior Court Judge Patricia Lucas’ tentative decision released Monday prohibits the city from forcing current employees to contribute significantly more toward their pensions, as called for in last year’s Measure B. But the ruling allows the city to cut employees’ salaries to offset its increasing pension costs.”

However, unlike San Bernardino, San Jose isn’t in bankruptcy court. Judge Lucas is a California judge, who must follow California law on pensions — or at least the common current interpretation that the California Constitution prevents cuts to pensions.

As Detroit’s bankruptcy has shown, federal bankruptcy judges are under no such constraints.

Here’s the response from the California Public Employees’ Retirement System:

CalPERS Issues Statement on Detroit Bankruptcy Ruling
December 3, 2013

In response to Judge Steven Rhodes ruling today that Detroit can impair current employee and retiree pensions as it moves through the bankruptcy process, the California Public Employees’ Retirement System (CalPERS) issued the following statement:

“The Detroit court failed to recognize the difference between a two party contract and the unique nature of a state public employee retirement system, which creates a three-way relationship among a public agency, its employees and the retirement system. In California, our members’ vested rights to their pensions are protected by the California constitution, statutes and case law.

“Unlike Detroit, CalPERS is not a city pension plan. CalPERS is an arm of the state and was formed to carry out the state’s policy regarding public employees. The Bankruptcy Code is clear that a federal bankruptcy court may not interfere in the relationship between a state and its municipalities. The ruling in Detroit is not applicable to state public employee pension systems like CalPERS.

“The ruling is short-sighted and does not take into account the promises made in exchange for the financial and physical investments that public employees and retirees make in our communities.

“CalPERS will continue to protect and champion the public employees and retirees who serve California every day.”

Taxpayers?

Two things need to be noted. First, notice which party isn’t even mentioned by CalPERS: you, the California taxpayer. CalPERS will not “continue to protect and champion” you. You’re stuck paying the bill even if that means your city effectively dissolves — with all police, fire, parks, roads and other functions canceled — and the city only existing to pay the pensions of long-retired workers.

Second, it’s touching how CalPERS has faith that the California Constitution presides; that the courts will interpret it according to the wishes of CalPERS; and that the federal government won’t say federal courts, federal laws, and the federal Constitution don’t trump California legalisms.

In fact, constitutions and laws are playthings for courts, legislators and chief executives. Look at the legal gyrations involving same-sex marriage in California in just the past 15 years.

Judges of all kinds, including bankruptcy judges, meet all the time for conferences. It’s a nice junket, paid for by taxpayers, and they discuss off-agenda matters over martinis and golf. The National Conference of Bankruptcy Judges threw a big bash in Atlanta just over a month ago. Nearby is a screen shot of the Oct. 31 panel on municipal bankruptcy.

Description: “This panel will discuss competition for a municipality’s funds between pension obligations and Capital Market Creditors.”

Notice one of the panelists: “Kevyn Orr, Emergency Manager, City of Detroit, MI.”

The judges obviously are aware of the municipal pension problems plaguing many cities, and likely won’t want their dockets stuffed with hundreds of cases. And they likely won’t want a passel of municipal bankruptcies bleeding red ink into state budgets. (Technically, state’s can’t go bankrupt; but they can become insolvent.)

So they’re letting CalPERS and the other pension funds know that the funds better start getting a little more reasonable, or they’ll all end up like Detroit.

Oh, and this also was from the brochure for the bankruptcy judge convention:

Most Californians live within about 50 miles of its majestic coastline — for good reason. The California coastline is blessed with arguably the most desirable climate on Earth, magnificent beaches, a backdrop of snow-capped mountains and natural harbors in San Diego, Long Beach and San Francisco. There is no mystery why California’s population and economy boomed after the Second World War.

The Golden State was aptly named. Its Gold Rush of 1849 was followed a century later by massive growth in the 1950s and 60s. Education in California became the envy of the world. Stanford became the Harvard of the West. A college education at the University of California and California State University systems was inexpensive. The Community College system that fed its universities was ostensibly free.

California’s public school system led the nation in innovation and almost all of its classrooms were new. The highway system that moved California’s automobile-driven commerce eliminated the need for public transportation systems like New York and Chicago. The fertile soil of the Central Valley became the breadbasket of the world.

The next golden wave in the 1980s grew from former orchards south of San Francisco known as Silicon Valley. Intel and other companies led the world’s computer and software revolution. In the 1990s, the dot-com revolution brought immense wealth to more Californians. Its innovators, Google, Apple and others, ushered in the Internet Era. The 2000s brought the greatest housing and mortgage boom in the nation’s history, with innovation centered in Orange County. California was truly the Golden State.

Why then would the author have the temerity to ask, “When did Californians become Stupid?” And: Is California the next Detroit?

Unique oblivion

Californians, due to their golden history, live in unique oblivion. When the Tea Party movement caused a political tsunami that swept more than 60 incumbents from political office in 2010, the wave petered out at California’s state line. There was no effect on the 2010 election that saw Democrats take every elected office in the state.

California voters rejected Meg Whitman, the billionaire founder of Ebay, in favor of Jerry Brown. Gov. Brown signed into law a “high-speed rail” bill that will spend $6 billion (the state does not have) to build a train between Fresno and Bakersfield — not Los Angeles and San Francisco, as promised. There was little outcry.

California has a $16 billion deficit that no one seems to notice. Brown’s budget “assumes” that California voters will pass massive tax increases on themselves. If they do not, the 2013 deficit becomes a mind-numbing $20 billion. The budget, mandated to balance by the Calfornia Constitution, has been billions in the red for 10 straight years. How could Californians re-elect the same politicians year after year that produce budgets with multi-billion dollar deficits?

To protect the endangered Delta Smelt, a fish known better as bait, water has been diverted from the Central Valley to the Pacific Ocean. Orchards in the Central Valley have been allowed to wither and die, resulting in unemployment in the Central Valley as high as 40 percent. Imagine Californians living in what was the breadbasket of American now living on food stamps. California voters rejected Republican Carly Fiorina for U.S. Senator in 2010. She ran Hewlett Packard. Instead, they re-elected Democratic Sen. Barbara Boxer ,who vowed to protect the Delta Smelt at the expense of the Central Valley.

California has 519 state agencies, like the state Blueberry Commission, that pay each of their commissioners more than $100,000 per year. State politicians, when asked to make cuts, fire teachers and fire fighters to inflict maximum pain on its citizens, while leaving these patronage commissions intact. State politicians have elevator operators in the state capital to push the buttons for them. Their solution for the overcrowding of the state’s prisons is to release inmates or transfer them to local facilities in already bankrupt cities. Yet, they are re-elected by California voters in numbers consistently higher than the old Soviet Politburo.

California’s public education system, once the envy of the world, now ranks 49th in the nation. Its business climate, according to 650 CEOs measured by Chief Executive Magazine, ranked dead last. Apple will take 3,600 new jobs to Austin, Tex. at its $280,000,000 new facility. Texas ranked first in the same survey.

California unemployment is consistently higher than 10 percent of its workforce, but it’s under-employed, according to a Gallup poll, is 20 percent. There are few jobs for college students who graduate with as much as $100,000 in student loans. Despite the overwhelming evidence that bad public policy is chasing away jobs, the same state politicians are sent back to Sacramento every two years.

In the last two months, three California cities have declared bankruptcy. Compton is next. More will follow. Some cities will simply cease to exist due to $500 million in unfunded pension obligations they simply cannot meet.

The unfunded pension obligations, now swamping California cities, were approved by these same politicians whose re-elections are financed by the unions they serve. Nine years ago, outraged Californians recalled Gov. Gray Davis from office for excessive spending and crony capitalism. Nothing has changed a decade later. Its residents believe the golden state will be golden forever. It may not be the case.

Detroit

History has an unpleasant precedent known as Detroit. In the 1950s, Detroit was a major American city with a dynamic labor force built on the manufacturing miracle that won World War II. Its factories quickly converted tanks, planes and artillery shells into trucks, automobiles and refrigerators that baby boom families demanded. Everyone had a good paying job. Detroit Iron had no competition. Its burgeoning middle class was the model of the world with excellent public schools and universities. It was the 4th largest city in America with 2 million inhabitants, with the world’s most dominant industry — the automobile.

Detroit in 2012 is a shadow of that once great metropolis. Its population has shrunk to 714,000. There are 200,000 abandoned buildings in the derelict city. The average price of a home has fallen to $5,700, unthinkable in California terms. Unemployment stands at 28.9 percent. It has a $300 million deficit. Its public education system, in receivership, is a disgrace, producing more inmates than graduates. The jobs have long ago abandoned Detroit for places like South Carolina and Alabama, far hungrier than Detroit’s leaders who believed the gravy train would never end.

In 2006, the teacher’s union forced the politicians to reject a $200 million offer from a Detroit philanthropist to build 15 new charter schools. The mayor has proposed razing 40 square miles of the 138 square miles of this once great American city, returning it to farmland. Even such a draconian plan may not be enough to save the city from itself.

If a hurricane hit Detroit, more of us would know of this tragedy in our midst, but this fate was man-made and not wrought by nature. Detroit has had one party rule for more than 50 years. Louis C. Miriani served from September 12, 1957 to January 2, 1962 as Detroit’s last Republican mayor. Since that time, the Democrats have ruled the Motor City.

John Dingell, Democrat congressman for the 15th District outside Detroit, has served since 1956. His father was the congressman there from 1930 to 1956. Despite the disastrous decline of their city, Detroit voters send him back to Congress every two years.

One-party rule

Similarly, California now has one-party rule. The Democrats of California did not need a single Republican vote to pass their budget. They now own the Golden State’s fate. The politicians’ plan to address the nation’s largest deficit is to raise taxes instead of cutting spending. If the Proposition 30 tax increase passes, the deficit would drop from $20 billion to a mere $12 billion.

Democrats have done nothing to cure the systemic problems of a bloated bureaucracy. Brown, referring to the state’s highway system, once said, “If we do not build it, they will not come.” Caltrans stopped building highways under Brown, but the people kept coming. Now 37 million Californians are locked in traffic jams each day.

Brown was rewarded for such prescience with re-election as Governor. California’s egotistical politicians passed AB 32, the Global Warming Solutions Act in 2006. Dan Sperling, an appointee to the California Air Resources Board, and a professor of engineering and environmental science at UC Davis, is the lead advocate on the board for a “low carbon fuel standard.” The powerful state agency charged with implementing AB 32 and other climate control measures claims the low carbon fuel standard will “only” raise gasoline prices $.30 gallon in 2013. But The California Political Review reported implementation of these the policies will raise prices by $1.00 per gallon.

Detroit was once the most prosperous manufacturing city in the world.  Will California follow Detroit down a tragic path to ruin? In 1950, no one fathomed the Detroit of 2010. In 1970, when foreign imports started to make a foothold, the unions and their bought and paid for politicians resisted any change.

In the 1990’s, as manufacturers fled to Alabama and South Carolina, the unions and their political lackeys held firm even as good jobs slipped away. No one in Detroit envisioned their future, even as schools declined, the jobs withered and the once proud city deteriorated in front of their own eyes.

No longer golden

California was once the Golden State. Today, it is no longer so golden. Its schools are in decline. Its business climate is equally dismal. Its cities are facing economic ruin, with exploding pension obligations and a declining tax base. Housing prices have fallen 30 to 60 percent across the state, evaporating trillions of dollars of equity. Unemployment remains stubbornly high and under-employment is rife. The Central Valley is in a depression, with 40 percent unemployment. Do our politicians need any more signs?

Brown’s budget will first slash money to schools and raise tuition on its students, while leaving all 519 state agencies intact. He apparently will protect political patronage at all costs. Jobs, and job creators, are fleeing the state. Intel, Apple, Google and others are expanding out of the state. The best and brightest minds are leaving for Texas and North Carolina. The signs are everywhere. State revenues are declining during many years. Meanwhile, the voters sleep and blindly send the same cast of misfits back to Sacramento each year — just as Detroit did before them.

The beaches are still beautiful. The mountains are still snow capped and the climate is still the envy of the world. Detroit never had that. But will California’s physical attributes be enough? If the people of California want to glimpse their future, they need look no farther than once proud City of Detroit. It can happen here.

Robert J Cristiano, Ph.D., is the Real Estate Professional in Residence at Chapman University in Orange, Calif.; a Senior Fellow at the Pacific Research Institute in San Francisco, Calif.; and president of the international investment firm, L88 Companies LLC in Washington, D.C., Newport Beach, Denver and Prague. He has been a successful real estate developer for more than 30 years.

Environmentalists have used the allusion of the canary in the mineshaft when describing the importance of protecting the endangered Desert Sand Fly, Stephens Kangaroo Rat or the infamous Delta Smelt. By placing these insignificant creatures on the Endangered Species List, they were able to stop construction of hospitals, schools, roads and homes. And in the case of the Delta Smelt, they turned off water to countless farms in the fertile Central Valley of California.

Long ago, the death of a canary in a mineshaft signaled the presence of poisonous gases that would imperil miners. Today, environmentalists argue that the loss of the slightest of creatures is a signal of man’s impending doom. Policies like the Endangered Species Act worked — not to save species, but to slow or stop development. Countless jobs were lost by the imposition of such noble logic. Initially created to protect the American Bald Eagle, according to the Scientific American, only 1 percent of species (20 out of 2,000) under the protection of ESA have recovered to qualify for being taken off the endangered list.

It is time to use this same allusion to analyze the aggressive policies of the Progressive Movement in America as they seek to create their vision of a Blue Utopia in America. One must study the impact of their policies, not on canaries, but to the plight of hard-working American families. Will the canary warn us of the poisonous economic gases of Progressive policies? Or has the canary already died? Look no further than Detroit as a city and California as a state before entering the economic future mine shaft of our nation.

Detroit: A Model City in Blue Utopia

In the 1950ss and 60s, Detroit was the fourth largest city in the United States, with arguably the highest median income, the highest percentage of home ownership and the highest standard of living in the country. The industrial capacity of Japan, Germany, France and England had been decimated by war. America, the “arsenal of democracy” protected by oceans, stood alone with an untouched industrial capacity able to supply the Baby Boom population with the new suburban homes, appliances and cars they wanted.

Detroit’s workers had plenty of good-paying jobs thanks to the dominance of the auto industry. Detroit had modern skyscrapers, mass-transit trolley cars and great public services — water, sewer, roads, public schools and libraries. It had museums, parks, a symphony orchestra and a world-class zoo. Its sports teams included Lions, Tigers, Pistons and Red Wings. Detroit worked. Its weather was not great, but no worse than Cleveland, Philadelphia, New York or Boston. This was Detroit’s Golden Era.

After 1962, backed by the powerful unions of the auto industry, Detroit tilted from a two-party political system to one-party rule. Democrats, fueled by union contributions, routed Republicans from office and had their way governing Detroit for the next 50 years. They brought $400 million in federal funds to Detroit from President Lyndon Johnson’s Great Society and “Model Cities” initiatives. Their progressive policies were unchallenged.

With one-party rule, the Progressives were able to impose their utopian ideas on the bluest of American cities without political debate. What did their vision of Blue Utopia create? In 1967, Detroit burned. During horrific race riots, 2.500 businesses burned to the ground and 43 people were killed. That same year saw 67,000 people move out of the city and another 80,000 followed in 1968.

With the election of Coleman Young in 1973 as the nation’s first black mayor, the shift to Progressive policies supported by massive federal funding was complete. Detroit’s Golden Era was gone. The canary was dead. The proof is history itself.

Detroit in 2012 is a shadow of its former self. Its population has shrunk from 1,849,568 in 1950 to 706,000. Of 12,103 babies born in Detroit in 2009, 75.4 percent were born to unmarried women (2010 Census Bureau survey). Unemployment officially stands at 29 percent. But Mayor Dave Bing said at a recent White House Jobs Summit that Detroit’s unemployment rate was “probably close to 50 percent.”

Bing, like every Detroit mayor since 1962, went to Washington to press the federal government to channel more money directly into the city. There are between 100,000 and 200,000 vacant houses in the city and the average home price has fallen below $10,000. That unimaginable number is not a typo but a symbol of reality in modern Detroit. Over 500 arson fires are set in the city of Detroit per month.

According to one report, “The Detroit Fire Commissioner, Donald Austin has suggested that it be wiser for the sake of cost and safety, to allow some vacant structures to burn when set on fire by arsonists. He has suggested the fire department handle the fire as a controlled burn, rather than extinguish the fire and leave a half burnt down shell that poses the danger of an unpredicted collapse.”

In 2010, Detroit Mayor Dave Bing proposed a radical plan to bulldoze 40 square miles of the city (25 percent), turning it back into pre-1950′s farmland. Economics writer Benjamin Clement wrote in an article, “Detroit: America’s War Torn City“:

“Visiting Detroit is the closest Americans can come to viewing what appears to be a war-torn city without leaving the U.S. This former powerhouse is a barren stretch of land, devastated by looters and full of run-down, vacant houses. Rows upon rows of dilapidated structures line the streets; empty apartment buildings and factories consume the landscape. Almost a third of Detroit has been abandoned.”

Detroit once manufactured 5 million cars per year and now produces just 2 million. Detroit has been ruled for 50 years by one party, which is funded by the once-powerful labor unions. In the 1970s, the unions arrogantly ignored low-priced Japanese imports and allowed Toyota and Nissan to take their jobs. They refused to make wage concessions when manufacturers threatened to move to Ohio, Alabama and South Carolina — and lost more jobs.

As even more automobile manufacturing was outsourced under the North American Free Trade Agreement, the unions had become too weak to block the legislation in 1994. Understandably when jobs left, people followed in search of work, just as in the dust bowl days. Detroit today is a city on life support; its factories silent, its jobs gone, its coffers empty, its schools bankrupt and its families ripped asunder.

In 1960, no one could envision the rapidity of Detroit’s decline. How could this happen in Blue Utopia?

California: Today’s Blue Utopia

Spanish-American philosopher George Santayana said, “Those who cannot remember the past are condemned to repeat it.” Californian’s political leaders ignore the canary lying on the bottom of its cage and blindly follow Detroit’s model.

Last November, California voters vanquished the last of the state Republicans, leaving no Republican holding statewide public office. Democrats, capturing supermajorities in both the state Senate and the Assembly, no longer need a single Republican vote to pass legislation, including tax increases. They are fueled by powerful labor unions that collect dues from teachers and public employees to fund campaigns that guarantee the re-election of their proxies in the Legislature, who vote higher and higher benefits to union members.

City after city faces bankruptcy and ruin from massive unfunded pension obligations that allow lifeguards in Newport Beach to retire at 50 years old with $108,000 annual pensions for life. The Stanford Institute for Economic Policy Research reported in Feb.  2012 that local governments have $200 billion in unfunded pension obligations that will consume 17 percent of municipal budgets. An earlier report in 2010 revealed the State of California has $500 billion in unfunded pension obligations.

Gov. Arnold Schwarzenegger issued a supposed hiring freeze during the worst of the 2008-2009 recession. Yet the state continued to hire more workers, adding over 13,000 employees in 2008-2009.  Salaries that fuel high pension costs are also out of control. U.C. Berkeley’s “Institute for Research on Labor and Employment” produced a detailed policy paper entitled “The Truth about Public Employees in California” that revealed the following:

• The average public sector worker makes $65,000 per year, plus pension, health and vacation benefits, making their average total compensation $102,225 per year.
• The average private sector worker makes $46,500 per year, plus pension, health and vacation benefits, making their average total compensation $57,558 per year.

With policies like this, California ran $20 billion deficits year after year. Gov. Jerry Brown declared California should generate a surplus this year with the passage of Proposition 30, which raised the top state income tax on the wealthy to 13.3 percent — higher than top tax rate in Russia. And Californians also have to pay the 39.6 percent top federal income tax rate.

But  Brown and his fellow Progressives have plans to spend this tax windfall on new state spending like a Bullet Train between Fresno and Bakersfield that will cost $68 billion.

California’s schools once were the envy of the world. This is no longer true. Journalist Peter Schrag describes it as the “Mississippification” of California.

California voters and politicians have drained education’s coffers to pay for prolific spending elsewhere in the state budget. In 2011, public colleges and universities received 13 percent less in state money than they had in 1980 (when adjusted for inflation). Its Community College system lost $809 million — or 12 percent of their state funding — since 2008. The state’s K-12 education system now ranks 49th in state spending per pupil. California could face a shortfall of a million skilled workers by 2025.

According to Columnist David Spady, California local school districts have become some of the worst abusers of passing on debt to future generations. In Poway, voters approved borrowing $105 million for its schools. Payments of $50 million per year begin in 20 years, with total repayment of $981 million. Voters shackled future residents with a terrible burden for spending today.

Poway is not alone. In response to reduced funding, since 2007 school districts in California borrowed $7 billion for new construction projects using Capital Appreciation Bonds that feature no payments for 20 years.

The Central Valley, once the food basket of America, found its water diverted from farms to the ocean to “protect” the Delta Smelt. To protect this tiny fish, otherwise known as bait, water was diverted from farms, eliminating 37,000 jobs and leaving 300,000 acres fallow. Unemployment in the Central Valley is now 40 percent in places with farm workers relying on food stamps to feed their families.

With unemployment in California officially near 10 percent, but practically around 15 percent, people continue to migrate out of the Golden State in search of jobs and opportunities elsewhere. It is understandable and the consequences are obvious.

This migration, which began two decades ago, has now picked up speed with new taxes on the wealthy and the successful fund the Progressive vision of Blue Utopia. Golfer Phil Mickelson was ridiculed for stating the obvious — that he might have to leave California. With the new California taxes imposed by Prop. 30, Mickelson’s “fair share” is around $8 million per year — $22,000 per day or $1,000 per hour — for the privilege of living in their Blue Utopia. Can anyone blame Mickelson when he moves to Florida, where there is no state income tax?

Blue Utopia America?

We have a Progressive President who, with his re-election, made it clear he plans to pursue a Progressive agenda. He wants clean water, clean air and green energy. He proclaims Republicans want dirty air and dirty water and oppose him on green energy. He would like nothing less than one party rule so he can impose his vision of Blue Utopia on America.

If Americans paid attention to the past, they might not be condemned to repeat it. If they were paying attention now, they would notice the canary in their mineshaft gasping for breath. If they studied the policies that have already failed miserably, making Detroit a third world city, they could change course and save the Golden State. If our leaders in Washington did the same, they would know better than to push us down this path. The problem is we do not teach history anymore. And if Americans cannot remember their own past, they too will be condemned to repeat it.

Robert J Cristiano, Ph.D., is the Real Estate Professional in Residence at Chapman University in Orange, Calif.; a Senior Fellow at the Pacific Research Institute in San Francisco, Calif.; and president of the international investment firm, L88 Companies LLC in Washington, D.C., Newport Beach, Denver and Prague. He has been a successful real estate developer for more than 30 years.

But when it comes to public employee benefits and the damage they wreak on local governments, scoundrels have another refuge: blaming racism for concerns about lavish, unaffordable benefits and broken governments.

We are seeing one version of this in some pontificating about Detroit’s bankruptcy. Now it could be coming to Sacramento, courtesy of Democratic consigliere Steve Maviglio.

Government workers ‘disproportionately black’

Tuesday on Twitter, Steve linked to a Bloomberg column that tried as hard as it could to reframe the pension debate in racial terms.

 “Public-sector workers are disproportionately black. In 2011, about 19 percent of black workers were employed by the government, compared with 14 percent of whites and 10 percent of Hispanics.  …

“The share of blacks in the public sector coincides with worrisome economic figures for blacks overall. Just 52 percent of blacks 16 or older were employed in 2011, compared with 59 percent for whites and Hispanics. Median net wealth for black households was $4,900 in 2010 — about 5 percent that of white households. …

“The upshot is pretty clear: Reducing the value of public pensions and other benefits wouldn’t just hurt blacks disproportionately; it would do so at a time when other economic trends have already hurt them more than most. So the question isn’t whether race is part of the debate over public pensions, but how to address it.”

Groan. The racial makeup of the public sector work force should not be a factor in deciding whether public employees’ retirement benefits are unaffordable and must be scaled back. Math and public policy priorities should be what drives the debate.

But in Sacramento, which didn’t even blink in 2009 when an Assembly speaker likened opponents of tax hikes to terrorists in an interview with the state’s largest newspaper, we can expect cries of racism to be a new blunt-force tool of Maviglio and Maviglian lovers of the pension status quo.

Great. Just great.