The Government Union War on Meritocracy

How can you persuasively counter arguments for diversity quotas, when implacable fanatics purporting to represent every identifiable group whose aggregate achievements fall short of the mean will argue it is discrimination, not merit, that determine outcomes? Expect no help from government unions. Resentment gives them passion, restitution gives them power. Undermining the meritocracy is key to their survival.

Imagine a public school system where the excellence of teachers was the only institutional criteria for their job security and prospects for career advancement. Imagine government bureaucracies where innovative, more effective practices were adopted even if it meant smaller budgets and fewer employees. Imagine law enforcement agencies that had zero tolerance for officers that abused their authority. Are we there yet? Not if government unions have anything to say about it.

But the government union war on the meritocracy goes well beyond protecting bad employees. Government unions representing K-12 teachers and college faculty have been overran by “social justice warriors” who preach identity politics as the new religious gospel and the new academic canon. They have taken their war on the meritocracy into the classrooms and lecture halls, saturating the curricula from kindergarten to graduate school. Their message? Unless you are a heterosexual white male, you are a victim of discrimination by heterosexual white males. You live in an unjust society. Merit, according to this doctrine, is a smokescreen. It is discrimination in disguise.

What do you do if you believe in meritocracy? What do you do about this?

Math SAT Scoring Distribution by Ethnicity – 2015

If you want to earn more money in a merit-based, productive market economy, quantitative reasoning skills are required. The more of these skills you’ve got, the more money you’ll earn. So what happens when you have far, far higher percentages of highly qualified individuals in some groups than in other groups?

When it comes to college admissions and college curricula, the solution of the social justice warriors, and the faculty unions who nurture them, is many faceted. Here are some of their mitigating strategies:

  • Invent “holistic” admission criteria that diminishes the importance of quantitative aptitude.
  • Concoct theories of cognition that claim math itself is an arbitrary and subjective expression of white power (yes, this really happened).
  • Create entire college departments that are academically weak but instead offer separatist political indoctrination.
  • Blame most if not all of the gap in aptitude on systemic discrimination by the “white patriarchy.”
  • Demand race-driven quotas of ever-expanding scope; in hiring, promotions, housing, wealth, political office, whatever.

The problem with these solutions, if you want to call them that, are their actual consequences. In pursuit of quota driven diversity, colleges are turning away qualified applicants at the same time as colleges are failing to produce anywhere near the number of STEM graduates that American industry demands. Meanwhile, the students that are waved in despite being marginally qualified to pursue higher education are being trained to ascribe any failures they may encounter to racism, and any successes they may encounter to fortuitous state intervention. And not least, there is the consequence of bitterness and cynicism being bred into the psyche of all those more qualified students and future employees who are passed over in favor of meeting diversity quotas.

How does one challenge the doctrine of equality over merit? How do you challenge allegations of systemic racism? How do you do it persuasively, with hard facts, but also with compassion and empathy? It’s not easy. College youth need passion, they need a cause, they need clarifying polarities. The teachers unions offer them a good one: A rich and wealthy white patriarchy that has exploited people of color for centuries, one that must be resisted, uprooted, and replaced.

Tough love arguments should be part of any campaign of persuasion. Reality therapy. Why are people with lower test scores admitted to college if they’re being discriminated against? That’s ridiculous. And why do they think taking classes that replace difficult coursework with political indoctrination – fomenting resentment and advocating separatism – are going to give them marketable skills? Do they really believe they need on-campus “cultural safe spaces”? Aren’t those just a 21st century version of Jim Crow laws? Where does this end? And why do Asians perform so well on college aptitude tests? Why are Asians so successful economically? Aren’t they also “people of color”? Could it be because they study so diligently, and that a meritocracy is colorblind?

Along with tough love, opponents of quotas should offer understanding. It is our individuality that defines our abilities and challenges much more than the groups we’re a part of. All ethnic groups are collections of individuals with infinite diversity; short and tall, thin and obese, weak and strong, plain and beautiful, slow and smart, timid and assertive, surly and charming, lucky and unlucky, good and bad. As individuals we succeed and we fail. We endure crushing disappointments and spectacular success. Life is not always easy or fair – for anyone. We are joined by our common humanity, no matter what color we are. And nothing overcomes prejudice, should it ever exist, better than a smile.

Despite occasional rhetorical acknowledgments, government unions don’t like the message of individual accountability. But that is the message that must prevail, if we are to avoid the tyranny of quota-driven equality of outcome.

REFERENCES

Race gaps in SAT math scores are as big as ever – Brookings Institution (source for chart)
https://www.brookings.edu/blog/brown-center-chalkboard/2017/02/01/race-gaps-in-sat-math-scores-are-as-big-as-ever/

Why can’t California lawmakers stop sexual harassment in the capitol?

Assemblywoman Melissa Melendez, R-Lake Elsinore, sits at the Capitol. For four years, Melendez has authored a bill to enshrine whistleblower protections into law for those legislative staff members who come forward with allegations of sexual assault and harassment, only to have the bills killed in the Senate Appropriations Committee. (AP Photo/Rich Pedroncelli, file)

You know who doesn’t look so weird anymore? Vice President Mike Pence. When Pence told the Washington Post that he doesn’t dine alone with women, and never, ever attends an event solo if alcohol will be served, many gasped. He seemed like a too-tightly wrapped antihero from Margaret Atwood’s The Handmaid’s Tale.

But that was in ancient America, in March of 2017. Today, in the age of what a Reason magazine reporter calls “Weinsteining,” we know more.

We have pretty good reason to believe that film producer Harvey Weinstein is a sexual predator – a kind of horny zombie in a bathrobe, a powerful creature that eats not your brain but maybe your soul. But now, writes Cathy Young, we’re obliterating distinctions, in a #MeToo movement that “tends to lump together a wide range of male wrongdoing from rape to ‘creepy’ or boorish behavior.” That broad brush “raises a basic question about human relations in the working world,” she wrote in the Los Angeles Times this week: “Can work and sexuality or romance ever mix? For many supporters of this campaign, the answer seems to be no.”

Among those who said no before it became hip was Mike Pence. But when his perspective was published in the Post, he was ridiculed as a Victorian or worse. For her part, Young concludes “sexual interaction will happen unless the workplace is regulated to a dehumanizing degree and realistically, some unwanted sexual attention will happen as well. As we grapple with these issues, we desperately need nuance.”

Remember nuance? You’ll need some right now – as you read this – to understand why our state lawmakers can’t pass a bill to protect their staff members from sexual harassment of any kind.

Since last month, more than 300 women who have worked in the state capitol have said they too were victims of some sort of sexual harassment. You’d think our state legislature – dominated as it is by a liberal super-majority – would be eager to address the epidemic.

You’d be wrong.

“For four years, Republican Assemblywoman Melissa Melendez of Lake Elsinore has introduced a bill to extend whistleblower protection to legislative employees. And for four years, the bill has been buried by the Senate appropriations committee,” CalMatters’ Laurel Rosenthal wrote in September.

“It’s ironic to me that the Legislature passes laws that are very specific to what employers can and can’t do, but doesn’t want to impose the same rules on itself,” Melendez told Rosenthal in a separate story. “What is that?”

What is that, indeed? Why would a Democratic super-majority annually kill a bill to protect victims of sexual harassment? One explanation might be Reason writer Cathy Young’s – that Democrats in the appropriations subcommittee recognize that government over-regulation of the workplace is its own kind of harassment.

But that’s not how our Democratic majority ultimately explained it. Imagine a world in which Democrats demanded less regulation. Delightful.

Another obvious explanation for the failure to pass Melendez’s measure is that government officials delight in regulating others but generally see themselves as above the law. That’s a nonpartisan, human impulse. Understanding that impulse is behind the genius of democracy – and Lord Acton’s adage that power corrupts.

But acknowledging their own corruption on this issue would be impossible for the state legislature’s super-majority. So instead they have argued – in a state Senate subcommittee – that they cannot extend whistleblower protections to their staff because their staff members are not unionized. Their staff members are hired at will, the state Senate subcommittee said. And where employees are hired at will, they may be fired at will – they cannot be protected. Democratic translation: Where there are no unions, there can be no justice.

It’s an evil response, but (admit it!) somewhat clever for people who owe their political careers to the powerful government unions that keep California corrupt – and broke. Until their staff become union members, the Democrats will offer no protection.

You and I can call that what it is: the government unions’ war on women.

Will Swaim is president of the California Policy Center.

How California skims federal Medicaid payments to fund a powerful union

CONNECTED: Democratic presidential candidate Hillary Clinton and Service Employees International Union (SEIU) president Mary Kay Henry (left). The politically powerful union has worked a deal with several states, including California, to skim dues from Medicaid-paid workers. (AP Photo / Carlos Osorio)

By Sam Han and Will Swaim

Home caregivers serving Medicaid patients in California are being shortchanged and, chances are they don’t even know it.

Medicaid pays for elderly and disabled individuals who need support with activities of daily living to receive support at home from a caregiver. But California and 10 other states deduct union dues from caregivers’ Medicaid payments, in many cases without the knowledge or approval of patients and their caregivers. Given the fact that many caregivers work in their own homes caring for loved ones and relatives, unions typically have little role to play in exchange for the dues they collect.

In this way, unions skim an estimated $200 million each year in dues from Medicaid payments before those checks ever reach the patients they were intended to help. In short, dues skimming takes funds meant to provide care for our country’s most vulnerable people — the elderly, sick, poor, and disabled — and sends it to a politically favored special interest group that provides no services to the needy.

Federal reports filed by SEIU 2015, one of the two unions representing Medicaid caregivers in California, indicate that nearly 60 percent of the funds it collects in dues are spent on political work and other activity unrelated to representing caregivers.

Some caregivers — often parents looking after their disabled children or family members taking care of other relatives — have challenged the legality of forcing in-home providers to pay union dues just so they can care for a loved one. Illinois caregiver Pam Harris took her case all the way to the U.S. Supreme Court. Ruling in Harris’ favor, the Court called dues skimming a “scheme” and said unions couldn’t force caregivers to pay dues.

Unfortunately, unions have found ways to get around the decision and keep home caregivers paying dues. Often, they impose onerous hoops caregivers must jump through to resign, or they enact confusing and arbitrary rules intended to keep the dues money flowing. For instance, Oregon caregivers who belong to SEIU 503 may leave the union only during a 15-day annual period that varies by member. California caregivers are subjected to a half-hour-long union membership pitch before they’re allowed to work. Caregivers in Minnesota have alleged the union forged signatures on membership cards.

This piecemeal approach isn’t working for caregivers, and it’s time for Washington to finally put a stop to dues skimming so caregivers can focus on serving their patients, not overcoming hurdles to get out of the union. The U.S. Department of Health and Human Services could fix the issue by clarifying administrative rules to prevent states from diverting Medicaid dollars to unions. Congress could also act to stop this abuse.

Getting states out of the union dues collecting business would help protect the integrity of Medicaid for current and future patients while also upholding the rights of caregivers who don’t want to join a union. Most importantly, it would ensure the funds are spent on providing services to the needy, as originally intended. At the same time, nothing would prevent caregivers who desire to remain union members from paying union dues on their own.

California has an estimated 300,000 or more in-home caregivers serving Medicaid clients. Many, if not most, of these people are unaware they belong to a union and are having hundreds of dollars per year skimmed off their Medicaid payments for union dues, but that doesn’t make dues skimming right.

Medicaid patients are among the most vulnerable around us. Let’s not allow them to continue to be victimized by unions.

Samuel Han is the California Director of the national Freedom Foundation. Will Swaim is president of the California Policy Center. Both organizations work to advance free-market and limited-government principles. This commentary appeared first in the Orange County Register.

How Fraudulently Low “Normal Contributions” Wreak Havoc on Civic Finances

Back in 2013 the City of Irvine had an unfunded pension liability of $91 million and cash reserves of $61 million. The unfunded pension liability was being paid off over 30 years with interest charged on the unpaid balance at a rate of 7.5% per year. Irvine’s cash reserves were conservatively invested and earned interest at an annual rate of around 1%. With that much money in reserve, earning almost no interest, the city council decided use some of that money to pay off their unfunded pension liability.

As reported in Governing magazine, starting in 2013, Irvine increased the amount they would pay CalPERS each year by $5M over the required payment, which at the time was about $7.7M. With 100% of that $5M reducing the principal amount owed on their unfunded liability, they expected to have the unfunded liability reduced to nearly zero within ten years, instead of taking thirty years. Here’s a simplified schedule showing how that would have played out:

CITY OF IRVINE, 2013  –  PAY $5.0 MILLION EXTRA PER YEAR
ELIMINATING UNFUNDED PENSION LIABILITY IN TEN YEARS

This plan wasn’t without risk. Taking $5 million out of their reserve fund for ten years would have depleted those reserves by $50 million, leaving only $11 million. But Irvine’s city managers bet on the assumption that incoming revenues over the coming years would include enough surpluses to replenish the fund. In the meantime, after ten years they would no longer have to make any payments on their unfunded pension liability, since it would be virtually eliminated. Referring to the above chart, the total payments over ten years are $127 million, meaning that over ten years, in addition to paying off the $91 million principal, they would pay $36 million in interest. If the City of Irvine had made only their required $7.7 million annual payments for the next thirty years, they would have ended paying up an astonishing $140 million in interest! By doing this, Irvine was going to save over $100 million.

Four years have passed since Irvine took this step. How has it turned out so far?

Not so good.

Referring to CalPERS Actuarial Valuation Report for Irvine’s Miscellaneous and Safety employees, at the end of 2016 the city’s unfunded pension liability was $156 million.

Irvine was doing everything right. But despite pumping $5M extra per year into CalPERS to pay down the unfunded liability which back in 2013 was $91M (and would have been down to around $64M by the end of 2016 if nothing else had changed), the unfunded liability as of 12/31/2016 is – that’s right – $156 million.

Welcome to pension finance.

The first thing to recognize is that an unfunded pension liability is a fluid balance. Each year the actuarial projections are renewed, taking into account actual mortality and retirement statistics for the participants as well as updated projections regarding future retirements and mortality. Each year as well the financial status of the pension fund is updated, taking into account how well the invested assets in the fund performed, and taking into account any changes to the future earnings expectations.

For example, CalPERS since 2013 has begun phasing in a new, lower rate of return. They are lowering the long-term annual rate of return they project for their invested assets from 7.5% to 7.0%, and may lower it further in the coming years. Whenever a pension system’s rate of return projection is lowered, at least three things happen:

(1) The unfunded liability goes up, because the amount of money in the fund is no longer expected to earn as much as it had previously been expected to earn,

(2) The payments on the unfunded liability – if the amount of that liability were to stay the same – actually go down, since the opportunity cost of not having that money in the fund is not as great if the amount it can earn is assumed to be lower than previously, and,

(3) the so-called “normal contribution,” which is the payment that is still necessary each year even when a fund is 100% funded and has no unfunded liability, goes up, because that money is being invested at lower assumed rates of return than previously.

That third major variable, the “normal contribution,” is the problem.

Because as actuarial projections are renewed – revealing that people are living longer, and as investment returns fail to meet expectations – the “normal contribution” is supposed to increase. For a pension system to remain 100% funded, or just to allow an underfunded system not to get more underfunded, you have to put in enough money each year to eventually pay for the additional pension benefits that active workers earned in that year. That is what’s called the “normal contribution.”

By now, nearly everyone’s eyes glaze over, which is really too bad, because here’s where it gets interesting.

The reason the normal contribution has been kept artificially low is because the normal contribution is the only payment to CalPERS that public employees have to help fund themselves via payroll withholding. The taxpayers are responsible for 100% of the “unfunded contribution.” CalPERS has a conflict of interest here, because their board of directors is heavily influenced, if not completely controlled, by public employee unions. They want to make sure their members pay as little as possible for these pensions, so they have scant incentive to increase these normal contributions.

When the normal contribution is too low – and it has remained ridiculously low, in Irvine and everywhere else – the unfunded liability goes up. Way up. And the taxpayer pays for all of it.

Returning to Irvine, where the city council has recently decided to increase their extra payment on their unfunded pension liability from $5 million to $7 million per year, depicted on the chart below is their new ten year outlook. As can be seen (col. 4), just the 2017 interest charge on this new $156 million unfunded pension liability is nearly $12 million. And by paying $7 million extra, that is, by paying $20.2 million per year, ten years from now they will still be carrying over $35 million in unfunded pension debt.

CITY OF IRVINE, 2017  –  PAY $7.0 MILLION EXTRA PER YEAR
REDUCTION OF UNFUNDED PENSION LIABILITY IN TEN YEARS

This debacle isn’t restricted to Irvine. It’s everywhere. It’s happening in every agency that participates in CalPERS, and it’s happening in nearly every other public employee pension system in California. The normal cost of funding pensions, which employees have to help pay for, is understated so these employees do not actually have to pay a fair portion of the true cost of these pensions. If this isn’t fraud, I don’t know what is.

It gets worse. Think about what happened between 2013 and 2017 in the stock market. The Wall Street recovery was in full swing by 2013 and by 2016 was entering so-called bubble territory. As the chart below shows, on 1/01/2013 the value of the Dow Jones stock index was 13,190. Four years later, on 12/31/2017, the value of the Dow Jones stock index was up 51%, to 19,963.

Yet over those same four years, while the Dow climbed by 51%, the City of Irvine’s unfunded pension liability grew by 71%. And this happened even though the City of Irvine paid $12.7 million each year against that unfunded liability instead of the CalPERS’s specified $7.7 million per year. Does that scare you? It should. Sooner or later the market will correct.

DOW JONES INDUSTRIAL AVERAGE
PERFORMANCE FOR THE PAST FIVE YEARS, 2013-2017

While the stock market roared, and while Irvine massively overpaid on their unfunded liability, that unfunded liability still managed to increase by 51%. Perhaps that normal contribution was a bit lower than it should have been?

Irvine did the right thing back in 2013. CalPERS let them down. Because CalPERS was, and is, understating the normal contribution in order to shield public sector workers from the true cost of their pensions. The taxpayer is the victim, as always when we let labor unions control our governments and the agencies that serve them.

REFERENCES

CalPensions Article discussing CalPERS recent polices regarding pension debt repayments:
https://calpensions.com/2017/09/25/calpers-considers-paying-down-new-debt-faster/

Irvine 2017-18 Budget – discussion of faster paydown plan on UAAL
http://legacy.cityofirvine.org/civica/filebank/blobdload.asp?BlobID=29623

Irvine Consolidated Annual Financial Report FYE 6/30/2016
http://legacy.cityofirvine.org/civica/filebank/blobdload.asp?BlobID=28697

Irvine – links to all Consolidated Annual Financial Reports
http://www.cityofirvine.org/administrative-services-department/financial-reports

CalPERS search page to find all participating agency Actuarial Valuation Reports
https://www.calpers.ca.gov/page/employers/actuarial-services/employer-contributions/public-agency-actuarial-valuation-reports

CalPERS Actuarial Valuation Report – Irvine, Miscellaneous
https://www.calpers.ca.gov/docs/actuarial-reports/2016/irvine-city-miscellaneous-2016.pdf

CalPERS Actuarial Valuation Report – Irvine, Safety
https://www.calpers.ca.gov/docs/actuarial-reports/2016/irvine-city-safety-2016.pdf

Governing Magazine report on Irvine
http://www.governing.com/columns/public-finance/col-irvine-california-plans-prepay-pension-bill.html

In Search of Heroes

California is not just any “blue state.” By many measures, California is a blue nation. It boasts the world’s sixth largest economy, isolated from the rest of the nation by mountains and deserts that were virtually impassable before modern times. It is blessed with diverse industries, abundant natural resources, and the most attractive weather in North America. California is nearly a nation unto itself.

And it is an occupied nation. California is ruled by a coalition of monopolistic businesses, public sector unions, and the environmentalist lobby. These Occupiers control a Democratic super-majority in the state legislature, as well as nearly all of California’s major cities, counties and school boards. To enrich and empower themselves, the Occupiers have oppressed California’s dwindling middle class and small business sectors, and condemned millions more to poverty and dependence.

For the average working family, no state in America is harder to live in than California. It has the highest cost-of-living, the highest taxes, the most onerous regulations, one of the worst systems of public education, congested freeways and failing infrastructure.  It will take heroic efforts to turn this around. And heroic efforts require heroes.

In the face of this overwhelming power, this alliance of oligarchs and government bureaucrats that has conned voters into embracing their servitude, where do you begin? What steps can you take? How do you rescue education, cut taxes, encourage new homes and new infrastructure, and save small businesses from crippling regulations?

As it turns out, a lot has been done in select locales, where heroes stepped up and successfully fought for reforms. And if those reforms could be replicated in other cities and counties, things would begin to change. To borrow a quote from Winston Churchill, if small local reforms began to spread across this great state, it would “not be the beginning of the end, but it would be the end of the beginning.” Here are some examples:

(1) Turning failing schools into charter schools:

As recently reported by CPC general counsel Craig Alexander, in 2015 parents at the Palm Lane Elementary School of the Anaheim City School District turned in far more signatures than needed under the Parent Trigger Law. The goal of the law and the parents at Palm Lane was to convert a public school that had failed their children for over a decade into a charter school. But the district, as a pretext to denying the Parent’s Petitions, improperly disallowed many signatures. It took a few years for parent volunteers and pro-bono attorneys, all of them heroically volunteering their time, to fight in court. But on Friday, April 28, 2017, the Court of Appeals issued a 34-page opinion that upheld in full the trial court’s ruling in favor of the parents and against the Anaheim Elementary School District. The Appeals Court found the trial court’s initial ruling, including the court’s findings of the bad faith tactics of the district, was correct in all aspects. Palm Lane Elementary school will start the 2017-2018 school year as a charter school.

(2) Stopping secret negotiations between cities and counties and public sector unions:

It wasn’t easy, but a few years ago, heroic progress was made. Orange County, Costa Mesa, and Fullerton all adopted so called “COIN” ordinances. COIN stands for “civic openness in negotiations.” This prevented elected officials from approving sweetheart deals with the government unions whose campaign contributions got them elected, all behind closed doors with minimal opportunities for public review. And to explain what happened next, one may borrow a quote from Tolkien: “Sauron’s [the Occupiers] wrath will be terrible, his retribution swift.” California’s union-controlled legislature passed a law they termed “CRONEY” (Civic Reporting Openness in Negotiations Efficiency Act), which mandates government agencies with COIN ordinances make public all negotiations with private vendors involving contracts over $250,000. There’s no comparison, of course. Private vendors disclose proprietary cost information in negotiations, and public entities are already required to take multiple bids in a competitive process. By contrast, public sector compensation, benefits and work rules are by definition not proprietary, they are public. And public sector unions, regrettably, have no competitors.

(3) Reforming financially unsustainable pension benefits:

If someone told you that they were going to invest their money, but if that money didn’t earn enough interest, they were going to take your money to make up the difference, would you think that was fair? Of course not. But that’s how a couple of million unionized public sector workers are treating the rest of us. California’s annual pension costs have risen from 3% of all state and local government revenue (i.e., “taxes”) to nearly 10% today, and there is no end in sight. But heroes are out there. In June 2012 voters in San Diego and San Jose passed pension reform initiatives. In both cases, to borrow some Star Wars terminology, “The Empire [The Occupiers] Strikes Back.” After relentless attacks in court, San Diego’s reforms were left largely intact, and San Jose’s were severely undermined, although some important provisions were preserved.

The people who fought for these reforms are too numerous to mention. They are all heroes. Some of them, like San Jose mayor Chuck Reed, San Diego councilmember Carl DeMaio, Costa Mesa mayor Jim Righeimer, and California state senator Gloria Romero, were elected officials whose courage has earned them the permanent enmity of the Occupiers. Other heroes, far more numerous, were the citizens, parents, and activists who dedicated countless hours to these causes.

Turning California back into a place where ordinary citizens can afford homes and get quality public education is not going to be easy. But there is no chance unless heroic individuals band together and fight the Occupiers, one issue at a time, one city at a time, one school district at a time.

Over the next several months, the California Policy Center intends to find more examples of heroic local reforms. It is our intention to not only compile these stories, but for each of them, distill them to the essential steps that were taken, so that these winning formulas can serve as an example to others.

We are in search of heroes. Contact us. Tell us your story.

 *   *   *

Ed Ring can be reached at ed@calpolicycenter.org.

 

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