By Chris Reed

The hegemony of Democrats in California is based to a striking degree on the ability of public employee unions — whose leaders and most affluent members are predominantly white — to keep minorities on board even though “social justice” means sharply different things to teachers union members and to most Latinos, African-Americans and Asian-Americans.

This task is made easier by many Republicans, whose views on immigration and English-only policies and whose nostalgia about the way California used to be can easily be depicted as nativist fear of the other. Even as Democratic stewardship of the state’s economy has created the longest sustained unemployment in 70 years, the GOP’s horrible image has insulated Democrats from losing minority votes.

That’s the bad news. The good news is that at least some minority politicians are beginning to figure out that a party primarily devoted to preserving the jobs, automatic pay hikes and generous pensions of public employees is a party that’s not necessarily interested in what’s best for minorities.

African-American Councilwoman warns about union power

The latest is Los Angeles City Councilwoman Jan Perry, an African-American progressive who pushes for green regulations and nanny-state causes but is also a budget hawk.

Perry lost last week’s mayoral primary after a campaign in which  she criticized the other two Democratic candidates — L.A. Councilman Eric Garcetti and L.A. Controller Wendy Greuel, who are both white — for their subservience to labor. Garcetti has tight ties with the SEIU; Greuel works closely with the police and fire unions.  In a weekend interview with the Los Angeles Times, Perry offered a distinctly Republican-sounding critique of the effects that raw union power and union-bankrolled candidates have on local government:

“Voters ‘need to examine what that will mean to them,’ Perry said. ‘They should look at where the money in this campaign comes from and think about if they want to have greater control of their public utility, for instance. Otherwise, if they don’t pay attention, they will be completely rolled over.

“‘Because that is what is at risk here, at great risk,’ she continued. Having someone too closely allied with employee unions in the mayor’s office could mean ‘the death of independent politics altogether. It could mean the only way you get elected in this town is if you get money from unions.'”

Poor schools for Latinos defined as civil-rights issue

Preceding Perry in realizing that union interests are often inimical to minorities’ interests was another Los Angeles Democrat, Gloria Romero, herself a former union member when she worked as a college professor.

As state senator, Romero  saw teachers unions sabotage reforms over and over again and fight relentlessly for policies that put veteran teachers at the safest, whitest schools and put the least experienced teachers at the poorest schools — often teachers who taught classes for which they didn’t even have the proper credentials. Romero lost so many battles — and saw so many Latino kids failed by L.A. Unified — that she ended up dropping a bomb, likening the fight to improve poor schools to a battle over civil rights.

For her candor, Romero was rewarded with a vicious California Teachers Association attack campaign that depicted her as “dangerous” and killed her 2010 bid to be superintendent of public instruction. The CTA’s choice, Tom Torlakson, has been just what the CTA wanted and just what reformers feared: a guardian of the status quo, right down to sticking up for school districts using 30-year borrowing on basic supplies and equipment so as to free up operating budget funds for teacher compensation.

Now Gov. Jerry Brown has essentially put all Latino elected officials in the Legislature and on local school boards on the spot by proposing a dramatic change in school funding policies to give more money to schools with most students with lagging language skills.

Brown says it is crucial to the future of California that these students, often Latinos, graduate high school with solid job skills.

Gov. Brown to Latino lawmakers: Whose side are you on?

This is not going to be an issue that Assembly Speaker John Perez — heretofore a CTA and CFT bosom buddy — necessarily can finesse. If the teacher unions try to kill Brown’s plan so as to maintain a funding status quo designed to create the most comfort for veteran teachers, Perez will have to take a stand.

Does he care most about keeping the teacher unions happy? Or about the hundreds of thousands of Latino schoolkids whom Brown hopes to help?

We shall see. But here’s hoping that not just Romero, but the state media in general, frames this issue as it should be framed: Just what do elected California Democrats define as “social justice”?

Helping teacher unions?

Or helping disadvantaged Latino students?

This could be the defining moment that California politics has badly needed since public employee union power metastasized after Gov. Pete Wilson left office in 1999.

By Chris Reed

Despite some pension reforms and program cuts, the city of Los Angeles remains in difficult financial shape. A Jan. 24 Fitch credit-rating service analysis says the L.A. economy is rebounding, but that city leaders struggle to find the political will to deal with structural budget problems, and that huge annual deficits will cause headaches for many years to come.

What is a key culprit in L.A.’s financial woes? You guessed it. Fitch says that of the city’s $3.9 billion 2011 general fund budget, nearly 20 percent ($773.5 million) went to fund retirement health care and other post-employment benefits and that nearly 15 percent ($577.4 million) went to city employee and public safety pension funds.

So what are the three key candidates in the March 5 mayor’s race saying they’ll do to deal with the budget and the daunting fact that more than one-third of the city general budget goes to fund public employee retirement benefits?

As this L.A. Times story makes clear, all want to basically duck the topic. Still, at least one candidate, City Councilwoman Jan Perry, knows tough times are ahead, with bankruptcy a possibility.

Wooing cops, firefighters and the SEIU

But two candidates want to make the problem even worse. Candidate Wendy Greuel wants to add 2,000 police and 800 firefighters — a 20 percent increase in a city where crime and fire problems are near modern historic lows. As the city controller, one would think Greuel should know better.

Meanwhile, City Councilman Eric Garcetti, the third major candidate, is in a fight with Greuel to see whom can do the most pandering to the Service Employees International Union, according to a Feb. 5 L.A. Times report:

“[Greuel and Garcetti] offered strong commitments of solidarity with the union representing a major chunk of civilian employees at City Hall, according to recordings of the [candidate interview] sessions obtained by The Times.

“The pledges [were] made last week in a members-only meeting for union workers considering a possible endorsement …

“Greuel … accused city leaders of failing to follow collective bargaining procedures when cutting retirement benefits for future city employees — a complaint being voiced loudly by the SEIU. …

“When it was his turn, Garcetti repeated a pledge to make all of the city’s department heads reapply for their jobs — offering a commitment that city workers would play a role in deciding which managers will remain. …

“The remarks show how much Greuel and Garcetti covet the backing of a union that represents thousands of janitors, trash truck drivers and other blue-collar city workers. If SEIU weighs in on the contest to replace Mayor Antonio Villaraigosa, it could mean hundreds of thousands of dollars and scores of volunteers for a favored candidate.”

Unfortunately for L.A., Greuel is considered the clear favorite, not the far more clear-eyed Perry.

Having lived in Southern California since 1990 and watched the city of Los Angeles go downhill under labor-friendly mayors (Antonio Villaraigosa and James Hahn) and do well under pro-business moderates of both parties (Richard Riordan and Tom Bradley), I’ve wondered when Angelenos would become as pragmatic as New Yorkers.

The same dynamic of mayoral success holds in the Big Apple — pro-business centrists like Michael Bloomberg and Rudy Giuliani have a way better record than labor-friendly liberals like David Dinkins and Abe Beame. And in New York, the heavily Democratic electorate figured this out long ago. When was the last time New York City voters elected a Democrat to be mayor?

All the way back in 1990.

By Brian Calle

Taxpayers in Los Angeles are facing a major crisis if Mayor Antonio Villaraigosa and other officials do not begin to address the systemic, structural issues putting the city on the fast track to economic upheaval. The situation is similar to that in other California cities such as Stockton and Vallejo.

Much ado has been made about the city’s projected $238 million budget shortfall for fiscal year 2012-2013 and the mayor’s proposal to cut jobs and tinker around the edges of pension reform. But the picture is much grimmer than a single year’s budget shortfall.

The tsunami of unfunded pension liabilities and health benefits is about to hit the shoreline for Los Angeles. And if Stanford University’s estimates are correct, Los Angeles is facing roughly $27 billion in unfunded pension liabilities. For a city whose annual budget is in the $7 billion range this year, that figure is daunting.

The Big Budget Picture

Budget gaps are no rarity for the City of Angels in recent years. It seems like an annual tradition. In fiscal year 2011-2012, the city projected a budget shortfall of over $400 million. For 2010-11’s fiscal year, the tune was the same. As was 2009-10, and so on.

L.A.’s chief administrative officer, Miguel Santana, noted that the budget shortfall is likely to be much greater by 2014-15. “Every year it gets worse,” he said.

The chain of events is always the same. City officials announce a budget shortfall and the mayor seeks to bandage it with gimmicks that fail to address the underlying causes.

Criticizing Villaraigosa’s approach to last year’s budget shortfall, City Controller Wendy Greuel said that “kicking the can down the road is not a solution when we can anticipate a growing structural deficit in future years.” She was referring specifically to a plan Villaraigosa outlined to borrow money to solve part of the deficit. But her summation applies to the inept budgeting approach of the city for years.

Former Los Angeles Mayor Richard Riordan predicted increased hardships and eventual bankruptcy if drastic action wasn’t taken by city officials.  In an editorial he penned in the Wall Street Journal in 2010, he wrote, “Los Angeles is facing a terminal fiscal crisis: Between now and 2014 the city will likely declare bankruptcy.”

Riordan is not shying away from those comments. In a recent phone conversation, he told me that bankruptcy for L.A. could come “as early as next year.”

Ballooning Pension Costs

What has rapidly perpetuated financial woes for the city is that payouts for retirement benefits have increased in recent years, thus crowding out services the city provides. A study released in early April by the Stanford Institute for Economic Policy Research found that, for the city of Los Angeles, “Pension costs increased from 8.5 percent of total city expenditures in 1999 to 13.7 percent in 2011.” For fiscal year 2011-12, estimated pension costs look to have climbed to “15.4 percent of city expenditures.”

Stanford’s study also estimated that each of the city’s three independent pension funds is unfunded by billions of dollars: the city of Los Angeles Fire and Police Pension System is $9.25 billion unfunded; the Los Angeles City Employees’ Retirement System is $11.32 billion unfunded; and the city of Los Angeles Water and Power Employees’ Retirement System is $6.59 billion unfunded.

“In 1999, Los Angeles City’s aggregate annual required contributions for its three systems totaled $291 million, rising to $923 million in 2011, an annual average growth rate of 11.1 percent,” according to the Stanford report. 

But here is the kicker: The growth in pension spending by the city “outpaced that of spending on public protection, which grew at 5.2 percent, on health and sanitation (3.6 percent), and on recreation and cultural services (5.8 percent), and it occurred while spending on public assistance programs fell by an average of 3.0 percent per year.” 

If the trend continues, the city will be little more than a professional retirement payment and processing service.

Union Power

Economic downturn aside, interminable spending fueled by powerful unions has pushed Los Angeles to the brink of bankruptcy. As Riordan argues, unions basically control the Los Angeles City Council.

For example, “A compensation package negotiated in 2007 irresponsibly guaranteed many city workers more than 25 percent in pay hikes over five years,” according to a Los Angeles Times editorial.

And as the city continues its downward spiral, “most employees represented by the Coalition of Los Angeles City Unions are scheduled for 11 percent increases in compensation over the coming two years,” the Times reported.

One of the ideas for offsetting some of this year’s budget shortfall was to ask city workers to forgo raises. But the union bosses balked at the idea claiming that city employees had sacrificed enough in recent years.

As for pension benefits, some city employees are able to retire with up to 100 percent of their salaries, a benefit virtually unheard of in the private sector.

Triggering Bankruptcy

“What will likely trigger bankruptcy is when Wall Street stops buying bonds from [the city of] LA,” Riordan told me. “Someone will wake up and say, ‘They aren’t going to have enough money to pay off my bonds,’ and that will be that.”

“If you predict ahead three or four years,” Riordan argued, the city will have to “close parks, libraries and cut police and fire services,” similar to what has happened in the cities of Stockton and Vallejo.

Tap Dancing Around Reform  

To close this year’s budget shortfall, Villaraigosa plans to get rid of 669 positions in the city; 231 of the positions would be layoffs, the others are currently vacant and would be eliminated.

Of course, layoffs will not be enough, and Villaraigosa has argued that city workers will have to assume more costs for their own health care. And he has announced plans for changes to the city’s pension system, including raising the retirement age for new hires to 67 (current workers retire at 55 or 60) and limiting pension benefits so that retirees cannot retire with 100 percent of salary.

Union leaders instantly chastised the mayor for his pension proposals, specifically his plan to raise the retirement age. But frankly, his proposals barely scratch the surface of what’s necessary for fiscal sustainability. 

At the very least, a new, less-generous pension plan has to be created for new employees, something like the 401(k) plans private sector employees have. Jan Perry, a Los Angeles city councilwoman and candidate for mayor, told me, “A new pension tier for people not even hired is completely reasonable to pursue.”

Pension expert Marcia Fritz said that all of the city’s employees should pay at least half of pension costs. “This eliminates the employer paid pension contribution and will reduce pension costs as a whole,” she said. 

“Another thing L.A. should do,” if bankruptcy becomes reality, “is break retiree health contracts,” she said. “They weren’t prefunded, so are empty promises, and courts have allowed retiree health to be lumped in with other unsecured creditors.” 

The best option would be to adjust promised benefit levels for current workers. Some experts believe, as Fritz also noted, that “fiscally distressed agencies may have the ability to adjust benefits for current workers.” She argued that there is a growing precedent that governments can call on employees to increase retirement contributions and suspend cost-of-living increases when municipal or agency funds are at unhealthy levels. Still, these necessarily bold approaches are untested. 

Of course, another option to fix the hole would be astronomical tax increases, which would likely only delay real solutions. Riodan balked at the idea, asking, “Can you imagine L.A. quadrupling their taxes? Everyone would flee the city and the state.”

Even with the city’s challenges, as hard is it may be to believe, Riordan contended: “L.A. is better off than a lot of cities” in California and elsewhere. If that’s the case, there is a bumpier road ahead.