Posts

California Business Community Should Not Enable High Cost Government

The business community is in a very tough position in California.  The California Legislature is completely controlled by the Democratic Party and its pro-labor base.

The California Republican Party and Republicans candidates are their most natural allies but Republicans are only viable in a relatively small minority of legislative races.

The result is that the California business community must build alliances with the pro-labor Democrats and foster good relationships with the Democratic leadership and their power base—the state’s public employee unions.

The rise of the so-called “moderate Democrat” is perhaps the best manifestation, which is essentially a Democrat that tends to vote pro-business on some select issues, and pro-labor on many other issues, particularly those that relate to public employee compensation.   

But the real danger here is that the California Business Community finds itself in the precarious position of actually enabling “high cost government,” characterized by higher taxes and a deteriorating business climate.

Big business will almost always oppose a tax increase that impacts them directly, but they tend to stay neutral or even support tax increases on other taxpayer classes such as small businesses and individuals.

Prop. 30 from 2012 is a perfect example.  The measure temporarily increased income taxes on individuals and businesses earning over $250,000 per year, and also included a ¼ sales tax hike with the $6-8 billion in annual revenues going to education.

The business community did not like it but they tolerated it because the state was in a difficult financial position, and the tax was supposed to be temporary.  Certain segments of the business community, particularly small business, still strongly opposed Prop. 30 (and oppose Prop. 55 as well) because their members are directly impacted and less able to shoulder the brunt of the tax increase.

Prop. 55 on the November 2016 ballot seeks to extend the Prop. 30 tax increases for another 12 years, and is projected to raise nearly double the revenue, $8-11 billion annually.

Prop. 55 on the November 2016 ballot seeks to extend the “temporary” Prop. 30 tax increases for another 12 years

Big business in California has not mobilized a campaign to defeat Prop. 55 despite the fact that it represents a “broken promise” and is essentially a permanent tax increase.

The California Chamber of Commerce and Cal-Tax have voted to oppose the measure, but have not committed significant resources because Prop. 55 primarily impacts small business and individual taxpayers.

The California Business Roundtable continues to be neutral but is scheduled to reconsider its position in mid-September.  Many local chambers of commerce have also stayed off Prop. 55 because they have a large number of representatives of the education community on their boards.

Another consideration is that the business community may not see a path to victory, short of spending in excess of $10 million or more, and they still may not win.  Prop. 55 is supposedly polling above 60%, but still likely vulnerable if a major opposition campaign is mounted given that Prop. 30 only passed with a 55% Yes vote.

I believe that it is in the California business community’s interest to strongly oppose any major tax increase because proponents of higher taxation in California will keep coming back for more, albeit with a bigger war chest and more determination.

The reality is that the cost California government is growing at an unsustainable pace due to the inability of the California Democrat Legislature, as well as most locally elected officials, to adequately control public employee benefit costs, particularly pension and health care.

For example, state and local debt is already at all-time highs despite record revenues, with total debt for public employee compensation costs estimated to be in excess of $1.3 trillion as of 2013, and likely is closer to $2 trillion in 2016.  Calpers debt has increased by more than 50% since 2014, jumping to an estimated $150 billion in 2016 due to heavy investment losses and things are not projected to get any better.

Something is very wrong here—the state has amassed record revenues, but public spending and debt is still climbing at unsustainable rates of 10-25% per year.   And next to nothing is being reinvested in California in the form of roads and improved infrastructure.

These facts may not be altogether clear to anyone who has not studied the fiscal condition of state and local governments in California, and who has intimate knowledge of the state’s public employee unions.

I would encourage the California business community to become more serious about controlling the cost of government because even if the immediate tax increase at hand (Prop. 55 and others) does not directly impact your members this time around, next time it will, particularly once the more favorable revenue options are exhausted.

Over the long-term, California’s approach to taxation has been to max out every tax revenue source available to it, and that’s why we have the highest income taxes (13.3%), the highest sales taxes (9.5%), the highest gas taxes, and the list goes on and on.

The most important fact to recognize is that there will literally be no end to the amount of tax increases, and their negative economic impacts, that the public employee unions and hospitals interest will “need” to fund public sector costs that are rising far in excess of the ability of taxpayers and the state’s economy to pay for them.

To stem this trend, a strong public case will need to be presented to voters about the accelerated decline of the business climate in California, and its consequences for the state’s future.

The only alternative to fighting an ever increasing state tax burden is to continue to raise taxes higher and higher on a shrinking economic base, something the Democrats appear to be completely at peace with, but something that is disastrous for the future of the state’s economy and its residents.

At some point in the not so distant future, the only choice the California business community will have is to flee California for greener pastures as the more than 10,000 businesses have done in recent years.

About the AuthorDavid Kersten is an expert in public policy research and analysis, particularly budget, tax, labor, and fiscal issues. He currently serves as the president of the Kersten Institute for Governance and Public Policy – a moderate non-partisan policy think tank and public policy consulting organization. The institute specializes in providing knowledge, evidence, and training to public agencies, elected officials, policy advocates, organization, and citizens who desire to enact public policy change.

The Teachers Unions Faux Grassroots Organizing

The Hedge Clippers, a union run and organized group, laughably pretends to be grassroots.

The Hedge Clippers, born last year, is an anti-capitalist, left-wing, purportedly grassroots organization whose focus is on exposing “the mechanisms hedge funds and billionaires use to influence government and politics in order to expand their wealth, influence and power.” The group received a mention in the Wall Street Journal a couple of weeks ago in a piece that centered around American Federation of Teachers president Randi Weingarten, who sicced them on a bunch of hedge fund managers that are involved with education and pension reform that the union finds objectionable. Perhaps #1 on the Hedge Clippers’ enemies list is Daniel Loeb, founder of the $16 billion Third Point fund. Loeb has the temerity of being a financial supporter of the wildly successful Harlem Success Academy charter school franchise, run by Weingarten’s avowed enemy, Eva Moskowitz. Weingarten has also accused Loeb of being involved with a group that is “leading the attack on defined benefit pension funds.”

The very same day the Journal piece appeared, the Los Angeles Times ran an “exposé” claiming that “activists reveal more dark-money donors to campaigns against unions and schools-funding tax.” The article centers around the Hedge Clippers outing donors who they claim made undisclosed contributions in 2012 as part of a “dark-money” scheme to defeat Prop 30, an initiative that raised income taxes on the richest Californians and sales tax on all Californians. The essential point of the article is that the Hedge Clippers have discovered that evil and greedy capitalists contributed money to an out-of-state organization, which circulated funds through a series of other groups and eventually back to California.

But just how does the Hedge Clippers enterprise do business? Is this really a “grassroots” entity, as billed? In “United Front: Teachers Unions Quietly Spend Millions on ‘Grassroots’ Groups The 74’s David Cantor reveals that the “grassroots organization” has been created, funded, and directed by two of the nation’s largest political contributors – you guessed it – the American Federation of Teachers and the National Education Association.  The group is led by a union lobbyist who is based at New York City’s United Federation of Teachers headquarters. Moreover, Cantor points out that the Hedge Clippers’ “crusade against opaque financial dealings also seems at odds with the fact that in the last election only two organizations contributed more than the AFT to 527s – less-regulated groups that, since the U.S. Supreme Court’s Citizens United decision, can raise unlimited money for or against candidates….”

But wait, there’s more.

Teacher union watchdog Mike Antonucci weighed in on the subject, pointing out that despite the contributions of those “opposing economic justice,” the Prop. 30 campaign was successful. Perhaps the fact that the alleged grassroots folks (mostly public employee unions) outspent the greedy and evil hedge-funders by almost $14 million had something to do with it.

To fully grasp the teachers unions’ “grassroots” activity, check out the following chart, plucked from the California Teachers Association website. (H/T Antonucci.)

CTA - grassroots chart

As you can see, CTA’s (like most teachers unions’) political organizing is top-down, centrally planned, bureaucratic and frequently at odds with its own rank-and-file. The unions are many things, but grassroots? Hardly. They are run more like the Politburo.

Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

Let’s Deep-six Prop. 30

The signatures for an initiative that would extend 2012’s “temporary” tax increase in California are due today.

Four years ago Californians voted in Prop. 30, a “temporary” tax, to pay back schools “from the years of devastating cuts.” But as I show here, there was hardly any devastation; in fact, our spending had continued to be quite robust. The measure jacked up income tax on people with incomes exceeding $250,000 through 2018 and increased sales tax on all of us through the end of this year. But, the Beholden State teachers unions are trying to get an initiative on the 2016 ballot that would continue the higher income tax through 2030. (The sales tax increase would expire as scheduled.) Earlier this month, California Teachers Association president Eric Heins told the union’s State Council that “…we need to gather 900,000 signatures to get our measure on the ballot. We are about 60 percent there, and we only have about three more weeks.”

Today, in fact, is the deadline. If enough signatures are gathered, the extension has a good chance of success. As reported by EdSource’s John Fensterwald, a Public Policy Institute of California poll found, “…among all Californians, 64 percent support the extension, 32 percent oppose it and 4 percent are undecided. Among likely voters, 62 percent back it, 35 percent oppose it and 2 percent haven’t decided. By party affiliation, 82 percent of Democrats support it while only 32 percent of Republicans do.”

When I read poll numbers like this, I always wonder if the people questioned know what we actually spend on education. My guess is that many don’t. A recent Education Next poll, which included a question about that issue, is instructive. The school districts in which their survey respondents resided spent an average of $12,440 per pupil in 2012 (the most recent data available). But when asked, the respondents estimated per-pupil expenditures in their local school district, they guessed, on average, just $6,307 – about half of what was actually spent. (By the way, these dollar amounts would be considerably higher if expenditures for transportation, capital expenses, and debt service were included.)

Should Prop. 30 (or any future such tax increases) make it on to the ballot, I would ask voters to consider the following:

  • The unions will tell you that the tax is only on the wealthy, whom they claim don’t pay their fair share. But a look at the actual numbers tells a different story. A report issued by the Congressional Budget Office in 2012 shows that the top one percent of income earners across the nation paid 39 percent of federal individual income taxes in 2009, while earning 13 percent of the income. Hence, it’s clear that the rich are already paying considerably more than their “fair share.”
  • Courtesy of Cato Institute’s late, great Andrew Coulson, we see that between 1972 and 2012 California’s education spending (adjusted for inflation) has doubled, while our students’ SAT scores have actually declined.
  • The latest study on the relationship between spending and achievement, recently conducted in Michigan, found no statistically significant correlation between how much money the state’s public schools spend and how well students perform academically. Mackinac Center Education Policy Director Ben DeGrow, who coauthored the study said, “Of the 28 measurements of academic achievement studied, we find only one category showed a statistically significant correlation between spending and achievement, and the gains were nominal at best.” He added, “Spending may matter in some cases, but given the way public schools currently spend their resources, it is highly unlikely that merely increasing funding will generate any meaningful boost to student achievement.”
  • Unconditional money poured into public education from the private sector doesn’t help either. In 2010, Facebook founder Mark Zuckerberg donated $100 million to the Newark public schools, which was matched by another $100 million from unnamed donors. As documented in The Prize: Who’s in Charge of America’s Schools, a book about the gift, the money went up in smoke, with the teachers union playing a big role in vaporizing it. As reported by the New York Times, Newark Teachers Union leader Joe Del Grosso “demanded a ransom of $31 million to compensate for what he felt members should have received in previous years — before agreeing to discuss any labor reforms.” The new labor contract accounted for almost half the $200 million. In a review of the book, Cato Institute’s Jason Bedrick wrote, “The union boss… made the back pay a condition for even holding the negotiations. ‘We had an opportunity to get Zuckerberg’s money,’ Del Grosso later explained, ‘Otherwise, it would go to the charter schools. I decided I shouldn’t feed and clothe the enemy.’” But it wasn’t only the unions that abused the gift. As Bedrick says, “The Prize demonstrates in depressing detail just how difficult it is to reform public schooling in the United States. Laws, regulations, and labor contracts favored adult jobs over kids’ education and this entrenched bureaucracy was difficult to change—especially because reforms met opposition from special interests and their political allies.”

With a debt of over $1 trillion and counting, California clearly has a spending problem, not a too-little-tax problem. The taxpayers must take action. First, we all need to know specifically where our edu-bucks are being spent. You can start at the Ed-Data website for general expenditures. Do some digging to find out how teacher union (and all public employee union) pensions are bankrupting cities across the state. For that kind of information, Pension Tsunami is an invaluable resource. Perhaps most importantly, communicate with legislators and demand school choice. Among other things – just as in business – competition lowers prices while increasing product quality. And God knows we would benefit from both.

Randi Weingarten and other union leaders have a prized talking point: “You can’t fire your way to a teaching force.” It’s a ridiculous claim, which I debunked last week. And at the same time, they erroneously believe we can spend our way to success. But they make no real case for this, because there isn’t one. It’s time for all of us to stop falling for the feel-good fairy tales. Just saying “No!” to the Prop. 30 extension – should it get to the ballot – would be a great place to start.

Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

$MORE

CTA press release reveals the union’s agenda toward education spending…and its utter disregard of reality.

Last week California Teachers Association president Eric Heins issued a press release that shows the union’s ignorance – or avoidance – of facts. It begins with, “Educators are encouraged to see the Governor use his proposed state budget and revenues generated by Proposition 30 to continue paying back schools from the years of devastating cuts – especially those serving our most at-risk students.”

Hence, we are led to believe that our education spending has declined sharply, especially for at-risk kids. One need not venture far to learn that Heins is, quite simply, full of it. Via EdSource, using California Department of Finance data (H/T Antonucci), we can see the “devastation” graphically:

Prop 98 fundingSo over the last five years our education spending – for all kids, at-risk and otherwise – has actually increased about 40 percent. Hmmm. Devastation sure ain’t what it used to be.

Heins then gets to his real agenda, which is campaigning to extend Prop. 30, the “temporary” tax that was passed in 2012. The measure, which jacked up income tax on the wealthy and sales tax on all of us, is due to sunset in 2018. But in a move that has Texas dusting off its welcome mats, CTA is trying to get an initiative on the 2016 ballot that would continue the “temporary” income tax through 2030. (The sales tax increase would expire next year as scheduled, however.)

And just what good has California’s education spending done for us? Courtesy of Cato Institute’s Andrew Coulson, we can see that between 1972 and 2012, our students’ SAT scores have gone down a bit, while our spending (correcting for inflation) has doubled.

Coulson - CA spending

And since 2012? According to the latest NAEP (aka the nation’s report card) results released in November 2015, California’s scores are pathetic. The state’s fourth-grade math scores place us at the bottom of the nation, just one point above New Mexico, Alabama and Washington, D.C. In fourth-grade reading, only New Mexico and D.C. fared worse than the Golden State.

Nationally, how does our education spending stack up against other countries? Quite well, according to recently released information by the National Center for Education Statistics, which expanded its biennial Comparative Indicators of Education Report beyond the G-8 to encompass the G-20 countries. In fact, the U.S. ranked #1 in spending. (Page 75.) But our high school graduation rates do not place us within spitting distance of first place. Whereas Germany, South Korea, the United Kingdom and Japan all had rates of 93 percent or more, ours was just 77 percent. (Page 79.) And the graduation rate in California has become something of a joke. Having done away with the high school exit exam, diplomas are now being distributed to anyone who failed the test but completed their coursework, dating back to 2006. Stating the obvious, Los Angeles Daily News’ Thomas Elias writes, “The exit exam’s demise cheapens high school graduation.

So whatever your metric of choice is – SAT, NAEP or grad rates – our state and country are doing a poor job of educating our young. But we are quite proficient in one area – spending – despite what Eric Heins and other union bosses try to con you into believing. If asked, how much should we spend on education, their dollar amount is $MORE. Please keep this in mind should the Prop. 30 extension make it on to the ballot this November.

Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

Split Roll and the Bottomless Hole

A union-led initiative wants to eliminate Prop. 13 benefits for businesses.

California’s Prop. 13, wildly popular on both sides of the political aisle, is under siege by unions. Using the Orwellian name “Make It Fair,” a coalition led by the California Teachers Association, California Federation of Teachers, SEIU and their friends has decided that they can milk businesses to the tune of $9 billion a year via a new ballot initiative.

As Dan Walters explains, “Proposition 13 limits property taxes on all forms of property to 1 percent of value, plus what’s needed to retire bonds and other debts, and limits increases in value to no more than 2 percent a year, except when properties change hands. Newly constructed homes and commercial buildings are placed on the tax roll at their initial values, but are protected by the limits thereafter.”

While it is true that there are a few loopholes which probably should be addressed on the commercial side of Prop. 13, the promoters of the so-called split roll initiative are using that as an excuse to essentially gut the tax protections for businesses. It is tantamount to owning a smooth-running automobile with an oil leak and being told you should ditch the car. To that end, Jon Coupal and Robert Lapsley joined together in 2014 to sponsor a reform bill that would have eliminated the loopholes. They explain,

AB 2371 was authored by the chair of the Assembly Revenue and Taxation Committee, Raul Bocanegra, and San Francisco-area Assemblyman Tom Ammiano and supported by a broad coalition of business and taxpayer organizations. Most importantly, we also had the support of the California Tax Reform Association (who is pursuing the split roll initiative) as it passed overwhelmingly off the Assembly floor.

But then a strange thing happened on the way to the Senate. The California Tax Reform Association suddenly flip-flopped and withdrew its support in the Senate, saying that AB 2371 was not real reform after all. Why? Because they realized that taking care of a potential problem would actually create a bigger problem for their political agenda to pass a split roll initiative next year. The California Tax Reform Association and other groups want to preserve the ‘loophole’ issue as one of their key messages in the 2016 campaign.

The unions would have us think that the state of California doesn’t receive its fair share of taxes. Of course nothing could be further from the truth, and most of us who pay them as residents and property owners in Taxifornia know it. As San Diego tax fighter Richard Rider informs us:

CA now has by far the nation’s highest state income tax rate. We are 21% higher than 2nd place Hawaii, 34% higher than Oregon, and a heck of a lot higher than all the rest – including 7 states with zero state income tax – and 2 more that tax only dividends and interest income.

CA is so bad, we also have the 2nd highest state income tax bracket. AND the 3rd.  Plus the 5th and 8th.

CA has the highest state sales tax rate in the nation. 7.5% (does not include local sales taxes). Two new 2015 bills seek a combined $10 billion++ CA state and local sales tax increase. At least one will likely pass.                          

CA has the nation’s 2nd highest gas tax at 63.8 cents/gallon (Jan., 2015). Add in the new 10-15 cent CA “cap and trade” cost and CA is easily #1. National average is 48.3 cents. Yet CA has the 6th worst highways.

CA in 2014 ranked 17th highest in per capita property taxes (including commercial) – the only major tax where we are not in the worst ten states. But the median CA property tax per owner-occupied home was the 10th highest in the nation in 2009 (latest year available).

That the teachers unions are promoting another tax raise at this time is especially galling. Due at least in part to the union-orchestrated Prop. 30 in 2012, Governor Jerry Brown has just announced a revised budget which will see billions headed for schools over the next few years, including $3.1 billion for the current year and $2.7 billion for next year. K-12 education funding will increase $3,000 per pupil – a 45 percent boost – over 2011-12 levels.

But is it possible that the unions will be affected by their own proposition? As Mike Antonucci points out, it isn’t clear if they will be exempt from the provisions in the initiative. CTA’s building in Burlingame is assessed at $22 million and its 2014 tax liability was $265,000 or about the same 1.2 percent rate my wife and I pay for our home in Los Angeles. CTA’s and other unions’ tax bills could increase considerably if the prop flies. So it would hardly be a surprise if they tried to carve out an exemption for themselves. (Please keep in mind that that at the same time CTA is trying to stick it to tax-weary Californians, it brings in about $185 million a year in forced dues and pays not a penny in state and federal income tax.)

However, even if CTA and other public employee unions are not exempted, they may figure that they will still make out because that extra $9 billion will enable the state to hire busloads of new employees, all of whom will be forced to pay the unions if they want to work. In short, it will be an investment with a great ROI.

If successful, what are the ramifications of this initiative for California? The Orange County Register points to a March 2012 study from the Pepperdine University School of Public Policy’s Davenport Institute. It found that “adopting such a ‘split-roll’ property tax would result in a loss of nearly 400,000 jobs and $72 billion in economic activity in the first five years.”

Grim news for Californians. However, Texans are grinning ear-to-ear, baking cookies and ordering evermore welcome mats.

Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers and the general public with reliable and balanced information about professional affiliations and positions on educational issues. The views presented here are strictly his own.

Teacher Unions and Their “Fair Share” Fetish

According to the California Federation of Teachers, taxed-to-death Golden Staters still don’t pay enough.

While teachers unions continue to slam the wealthy for not paying their fair share of taxes, it is the finger-pointers who are really the avaricious ones. Like spoiled children who just can’t get enough candy, they have no sense as to when to stop. Leading the brat campaign this time is the California Federation of Teachers, the smaller of the two state teachers unions. Its website proclaims,

Prop 30 stopped the bleeding in state revenue, but we will continue to see anti-tax, anti-government forces attempt to undermine the public sector. When you hear these people say, “We don’t have the money to provide adequate public services,” or “California has a spending problem,” they are wrong. We have a revenue problem.

Stopped the bleeding? Hardly. It’s the taxpayers who have been hemorrhaging and the higher tax bill is extracting even more blood. Nevertheless, CFT sees the passage of Prop. 30 as just the first step in solving the state’s “revenue problem.”

In fact, when Prop. 30 became law, it left California with the highest sales and income tax rates in the country. Our nation-leading state sales tax rate of 7.25 percent went up to 7.5 percent. And the top marginal personal income tax rate which was 10.3 percent – third highest in the country – is now number one at 13.3 percent – a 29.13 percent increase.

Yet, CFT wants more.

We have a tax system that does not ask those who have the most wealth and resources to pay their fair share—even with passage of Prop 30, wealth and income have been massively redistributed in California and the nation over the past three decades in the wrong direction.

So, CFT is suggesting that the wealthy among us are getting away scot-free, but a look at national numbers tells a different story. A report issued by the Congressional Budget Office in 2012 shows that the top 1 percent of income earners paid 39 percent of federal individual income taxes in 2009, while earning 13 percent of the income.

Hence, it’s clear that the rich are already paying considerably more than their “fair share.” The CBO also reports that “the top 20 percent of income earners (those earning over $74,000) paid 94 percent of federal individual income taxes, 85 percent more than the share of national income they earned.

CFT would also have us think that public education is underfunded, but as Cato Institute’s Andrew Coulson pointed out recently:

Over the past four decades, real per pupil spending in California has roughly doubled. In dollar terms, Californians are spending $27 billion more today on K-12 education than they did in 1974, when Gov. Jerry Brown was first elected to office—and that is after controlling for both enrollment growth and inflation.

And what have we gotten for our increase in spending? A look at our latest National Assessment of Education Progress (NAEP) scores tells the tragic story. For example, on the most recent 4th grade math test, California students came in 45th nationally; in science, the same 4th graders scored higher than only Mississippi.

Perhaps when CFT and their ilk are making their “fair share” accusations, they may want to reconsider. In 2011, the California Teachers Association – CFT’s bigger brother – issued a press release (H/T Mike Antonucci) which announced its “support of the nationwide ‘Occupy Wall Street’ movement for tax fairness and against corporate greed.” It goes on to say, “…a stable tax structure begins with everyone paying their fair share.”

Paying their fair share? Everyone?

The unions really have hit a new low here. According its latest available income tax form, CTA took in $185,222,341 in 2010. As a 501(c)(5), the union has a special tax exempt status with the IRS which is accorded to “Labor, Agricultural, and Horticultural Organizations.” So the union paid $0 in income taxes. (By comparison, CFT pulled in a measly $23,226,311 and also paid no tax.)

Our teachers unions – private corporations – take in over $200 million every year in forced union dues, pay not a penny in income tax, and yet want the rest of us to pay our “fair share.”

Have hypocrisy and hubris ever been more blatantly demonstrated?

Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers with reliable and balanced information about professional affiliations and positions on educational issues.

The Not So Merry Month of May

In California schools, the fifth month (formerly known as May) is now Labor History Month.

As Kevin Dayton pointed out in Union Watch last week, the entire month of May is now officially deemed Labor History Month in California. Courtesy of AB 2269, the state education code has been amended to read,

The month of May is hereby deemed to be Labor History Month throughout the public schools, and school districts are encouraged to commemorate this month with appropriate educational exercises that make pupils aware of the role the labor movement has played in shaping California and the United States.

Once upon a time, the private employee unions may have done some good things for their workers – they typically get credit for the 40 hour/ 5 day work week. But as John Stossel says,

Workers’ lives improved in America because of free enterprise, not because of union rules. Union contracts helped workers for a while, but then they hurt even union workers because the rigid rules prevent flexibility in response to new market conditions. They slow growth. And growth increasing productivity, which leads to higher wages and new opportunities is what is best for workers.

Whatever the truth is about the old days, let’s fast forward to the present and find out what the teachers unions – which own and operate the California legislature that gave birth to this law – have accomplished and what they have in mind to teach our kids. It probably won’t come as a shock that students will be getting a bowdlerized and glorified version of the union movement.

There are resources galore available for teachers to help them indoctrinate their students. Here are but a few:

  • California Federation of Teachers – many “children’s stories,” including one which features a mean farmer and the hens who organize against him.
  • California Teachers Association – which can be readily summed up, “Workers are poor; CEOs are rich.” In other words, class warfare 101.
  • University of California Miguel Contreras Labor Program – lots of fun stuff for the little ones, including material by noted Socialist Barbara Ehrenreich and songs by long time Communist Pete Seeger.

That the teachers unions are playing an important role in this brainwashing is particularly ironic given the damage they have done as part of the blob that runs education in the Golden State. They may be able to brag that they have gotten higher salaries and more perks for teachers, but I have a sneaking suspicion that they will not be posting labor history lessons with the following information:

Though they claim to be everyman, national teacher union bosses are really part of the reviled one percent. In 2011, the two national teacher union presidents made a bundle in total compensation:

  • Dennis Van Roekel, NEA: $460,060
  • Randi Weingarten, AFT: $493,859

The other union officers aren’t exactly scraping by either. Salaries for the elite at the National Education Association:

  • John Stocks, Executive Director: $379,260
  • Becky Pringle, Secretary-Treasurer: $332,539
  • Lily Eskelsen, Vice President: $332,390

Will the teachers unions tell the kids that in California, they have done everything within their abusive power to maintain the failing status quo by trying and mostly succeeding to kill every effort at education reform that would have benefited students?

Will they tell the kids that they regularly buy and sell school board members? And that if a prospective member doesn’t toe the party line, the union will support his/her opponent with vast sums of cash?

Will they tell the kids that they consider the California State Assembly “their house?” Most legislators there fall into line like obedient ducks as witnessed by the shameful death of SB 1530, which would have simplified the process to get rid of pedophile teachers.

Will they tell the kids that they insist on maintaining a seniority system whereby teachers-of-the-year are routinely laid off before a mediocre or worse teacher just because the former was hired the day after the latter?

Will they tell the kids that they fight to keep a tenure system in place whereby the most mediocre teacher essentially has a job for life after just two years in a classroom?

Will they tell the kids that they do their best to try to kill (mostly non-unionized) charter school growth every chance they get?

Will they tell the kids that in 2000, they spent millions to defeat Prop. 38 – a voucher bill that would have enabled some poor kids to escape their failing schools?

Will they tell the kids that this past fall, they lobbied for and succeeded in passing Prop. 30 – a ballot initiative that raised taxes on most Californians without getting any reform for their money? (Hence, the status quo is maintained with more than one in four students never graduating high school – and a majority of those who do graduate and go on to college are not prepared for it and need remediation.)

Will they tell the kids anything about the National Right to Work Foundation, an organization that fights for a worker’s right not to join a union?

The answer to every one of these questions is, of course, “No.” As such, I would encourage all parents to find out just what their school plans for Labor History Month. If it is planning lessons espousing only the unionista party line, I suggest keeping your kids home when these activities are planned and using that time to tell them the truth about what the teachers unions really stand for, and what their “accomplishments” over the past decades have wrought.

Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers with reliable and balanced information about professional affiliations and positions on educational issues.

California’s FYE 6-30-13 Deficit Already $2.7 Billion Above Projections

California revenue is up from a year ago. Unfortunately, California revenue is not up as much as expected, while spending is up way more than expected.

Please consider California Finances in November 2012 by state controller John Chiang.

November’s tax receipts fell 10.8% short of expectations contained in the 2012-2013 State Budget, although they were above the year-ago level. Total revenues year to date are now 2.6% less than anticipated at this time, with shortfalls among all of the major sources.

Expenditures are 4.9% above estimates contained in the Budget, with assistance to local governments driving the overage.

Total revenues were $806.8 million below projections in November, with corporate taxes accounting for a significant amount of this divergence. Compared with a year ago, total revenues year to date were up by 2.5%, with an impressive gain in income taxes offset-ting shortfalls in the other revenue sources.

The difference between actual and estimated numbers is larger on the spending side. For the first five months of the fiscal year spanning July through November, actual disbursements exceeded projections by $2.2 billion, or 4.9%. Education and health care accounted for the majority of the difference.

Here are a couple tables I put together from the report.

Fiscal Year 2012-2013 Revenue To-Date


Fiscal Year 2012-2013 Spending To-Date


Spending Problem, Not Revenue Problem

Here are a couple images from the report showing want any rational person knew anyway: California has a spending problem, not a revenue problem.


November 2012 vs. November 2011


Key Revenue Facts

  • Total Revenue is up $608.3 million from a year ago. Unfortunately, total revenue is down $806.8 million vs. expectations.
  • Income tax is up $367.0 million from a year ago. Unfortunately, income tax is down $842.5 million vs. expectations.
  • Corporate taxes are down 160.1% from a year ago and $187.8 million vs. expectations.
  • Sales taxes are the only bright spot, up $386.1 million from a year ago. Yet, sales taxes are only up $99.0 million from expectations.

Corporate taxes are skewed by early payment in November. However, the overall bottom line shows rampant optimism. And that is just the revenue side.

Bottom Line

  • Fiscal year-to-date, in spite of healthy growth in revenues, California revenue came in 2.63% lower than expected.
  • Fiscal year-to-date, California managed to spend 4.87% more than budgeted.
  • Total receipts were down a mere 1.60% only because non-revenues were 21.43% greater than expected.

6.46% in the Hole

Taking into consideration the jump in non-revenue, California is 6.46 in the hole, for July through November.

Fear-Mongering and Tax Hikes

Is this a spending problem or a revenue problem?

The answer should be clear, but thanks to fear-mongering by governor Jerry Brown, fear-mongering by teachers’ unions, fear-mongering by police and fire unions (and fear-mongering by every other public union in the state), California voters were stupid enough to pass Proposition 30.

The proposition hikes California’s sales tax to 7.5% from 7.25%, a 3.45% percentage increase over current law. It also “temporarily” hikes income taxes for seven years, on four high-income tax brackets for taxpayers with taxable incomes exceeding $250,000, $300,000, $500,000 and $1,000,000.

The top income bracket in California is now 13.3% tax rate on taxable income over $1,000,000–a percentage increase of 29.13% over current “millionaires tax” policy of 10.3%.

Proposition 30 Will Backfire

I confidently predict Proposition 30 will backfire.

Indeed,  proposition 30 will be the final straw prompting many millionaires to exit the state. I expect some major businesses will follow as well.

Expect More Hikes in Taxifornia

A US recession started this summer or is on the way now (take your pick). Either way, since California could not bring in enough revenue in 2011, it will fail to do so in 2012, even with those monstrous tax hikes.

Expect unions to ask for still more tax hikes because tax hikes and unions go hand-in-hand. Good luck with that Taxifornia.

About the author: Mike “Mish” Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management. His top-rated global economics blog Mish’s Global Economic Trend Analysis offers insightful commentary every day of the week. He is also a contributing “professor” on Minyanville, a community site focused on economic and financial education. Every Thursday he does a podcast on HoweStreet and on an ad hoc basis he contributes to many other websites, including UnionWatch.

More Money for Business as Usual

Throwing ever more funds at education without making substantive changes to the system is a horrible waste of money, not to mention children’s lives.

California Democrat Congressman Mike Honda and National Education Association President Dennis Van Roekel recently collaborated on an op-ed that played up just about every bit of feel good, cliché-riddled drivel ever written about education. If this piece was a drug, the FDA would have banned it years ago. A few examples:

Lamenting the fact that many teachers leave the classroom within the first few years, they say,

According to research estimates, one in four beginning teachers will leave the profession within their first three years in the classroom, and in urban areas, close to 50 percent will leave within five years.

This is totally misleading. The implication here is that teachers are leaving the profession in droves because they are overworked, underappreciated, overwhelmed and underpaid. But the reality is that they leave for a wide variety of reasons, including taking an administrative position, personal or family reasons, pregnancy, health, change of residence, etc. A survey from North Carolina, for instance, reveals that only 2.24 percent said they were leaving the profession due to dissatisfaction with teaching.

Another fiction the authors use to sway the unknowing public is the “competitive teacher salary myth.”

…the lack of competitive salaries for classroom teachers compared to other professions diminishes the consideration of teaching as a viable long-term career option. All of these issues rob children of the diverse, committed, capable teachers they need and deserve.

Before reaching for the Kleenex, please consider the following: Andrew Biggs, a researcher at the American Enterprise Institute and Jason Richwine, a senior policy analyst at the Heritage Foundation, conducted a study on teacher pay, the results of which were released just a year ago. They found that when perks like healthcare and pension packages are taken into consideration, teachers are in fact overpaid. Armed with facts, charts and a bevy of footnotes, the authors make a very good case for their thesis. For example, they claim,

Workers who switch from non-teaching jobs to teaching jobs receive a wage increase of roughly 9 percent, while teachers who change to non-teaching jobs see their wages decrease by approximately 3 percent.

When retiree health coverage for teachers is included, it is worth roughly an additional 10 percent of wages, whereas private sector employees often do not receive this benefit at all.

Teachers benefit strongly from job security benefits, which are worth about an extra 1 percent of wages, rising to 8.6 percent when considering that extra job security protects a premium paid in terms of salaries and benefits.

Taking all of this into account, teachers actually receive salary and benefits that are 52 percent greater than fair market levels. (Emphasis added.)

Honda/Van Roekel then delve into professional support:

The educational career ladder should entice quality teachers to remain in the classroom by developing positions of teacher leadership.

The book on this subject has already been written by Teach For America, a very successful outfit that recruits high performing college students who exhibit leadership qualities. TFA then gives them a five week intensive teacher training and ongoing professional support. So maybe NEA should hitch a ride with TFA? No. After years of trashing the organization, NEA recently offered TFA a twig-sized olive branch, but even that is rejected by many local unions because an army of bright, young, idealistic teachers poses a threat to the old guard.

On Election Day, Californians sadly bought into the union propaganda and voted to further “invest” in education by passing a controversial ballot initiative. With the passage of Prop. 30, California now has the highest sales tax and top marginal income tax rate in the country.

A nearly $6 billion infusion from Proposition 30 and a Democratic supermajority in the Legislature are a welcome pre-holiday gift to public education from voters, but it also could set the stage for battles between those laboring for education reform and suddenly fortified unions protecting teacher interests.

“Proposition 30 is a bandage on the current system,” said former state Sen. Gloria Romero, an outspoken education reform advocate. “We got no reform for the investment.”

She and others cite the urgent need to raise student achievement, modify the rule of teacher seniority, dismantle the Byzantine school finance system and ensure the teacher pension fund stays solvent.

Romero hits the nail on the head. Continuing to throw money at a failing system will result in nothing more than a more expensive failing system. If you are hungry, spending more money on rancid food won’t solve your nutrition problem.

Stanford Professor Erick Hanushek, who has studied student achievement and education economics, adds,

I’m concerned now that we’ve gotten past the fiscal cliff, we’re going back to business as usual. To improve student performance, he said, schools need an effective teacher evaluation system and need to be able to get rid of the worst teachers and to reward the best ones. But he said there’s no movement toward either of those.

…Everybody in the state would like major changes without really changing…. the cost is that California is at the rock bottom in student performance, and it’s dragging down the nation.

Responding to the reformers, California Teachers Association President Dean Vogel snapped,

We’re not opposed to education reform…. We’re opposed to stupid reform.

…teachers believe before adjusting funding formulas, the state needs to ensure adequate — meaning more — funding for schools….

But as Heritage Foundation policy expert Lindsey Burke reported recently,

Students headed back to school this fall will have historically high levels of dollars spent on them in the public school system. (Bold added.) Nationally, average per-pupil spending exceeds $11,400 this year….

To put this into perspective, just 10 years ago we spent $9,482 per pupil (in constant dollars). Thirty years ago we paid $5,718 and 50 years ago just $2,808 per student! In California, spending has doubled over the last 40 years and what do we have to show for it? Our National Assessment of Education Progress (NAEP) scores speak volumes. For example, on the most recent 4th grade math test, California students came in 45th nationally; in science, the same 4th graders scored higher than only Mississippi.

Internationally, of the world’s 28 major industrial powers, the U.S. is second in spending, slightly behind Switzerland. Yet when it comes to achievement, our performance is middling at best. Education Next recently reported,

A new study of international and U.S. state trends in student achievement growth shows that the United States is squarely in the middle of a group of 49 nations in 4th and 8th grade test score gains in math, reading, and science over the period 1995-2009.

Students in three countries – Latvia, Chile, and Brazil – are improving at a rate of 4 percent of a standard deviation annually, roughly two years’ worth of learning or nearly three times that of the United States. Students in another eight countries – Portugal, Hong Kong, Germany, Poland, Liechtenstein, Slovenia, Colombia, and Lithuania – are making gains at twice the rate of U.S. students.

A fitting coda to this dreary ongoing saga, came from a recent Wall Street Journal editorial,

No reform effort is too small for the teachers union to squash. In this month’s election, the National Education Association descended from Washington to distant Idaho, spending millions to defeat a measure that limited collective bargaining for teachers and pegged a portion of teachers’ salaries to classroom performance. In Alabama, Republican Governor Robert Bentley says he’s giving up on his campaign to bring charter schools to the state after massive resistance from the Alabama Education Association.

Unions fight as hard as they do because they have one priority—preserving their jobs and increasing their pay and benefits. Students are merely their means to that end. Reforming public education is the civil rights issue of our era, and each year that passes without reform sacrifices thousands more children to union politics.

Thousands? More like millions. It is a national disgrace. We the people need to wrest control from the teachers’ unions and demand serious reform immediately.

Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers with reliable and balanced information about professional affiliations and positions on educational issues.

The Public Education Jobs Program

As you go to the polls next week, please consider the facts before voting to pour more money into the K–12 black hole.

Last week, The Friedman Foundation for Educational Choice released a comprehensive study which details an employment explosion in America’s public schools.

America’s K-12 public education system has experienced tremendous historical growth in employment, according to the U.S. Department of Education’s National Center for Education Statistics. Between fiscal year (FY) 1950 and FY 2009, the number of K-12 public school students in the United States increased by 96 percent while the number of full-time equivalent (FTE) school employees grew 386 percent. Public schools grew staffing at a rate four times faster than the increase in students over that time period. Of those personnel, teachers’ numbers increased 252 percent while administrators and other staff experienced growth of 702 percent, more than seven times the increase in students.

In a recent Heritage Foundation Backgrounder, Lindsey Burke (2012) reports that since 1970, the number of students in American public schools increased by 8 percent while the number of teachers increased 60 percent and the number of non-teaching personnel increased 138 percent.

And how much bang for our buck has the country received for this out-of-control hiring?

There is no evidence in the aggregate that the increase in public school staffing caused student achievement to improve. In a shocking finding, economist and Nobel laureate James Heckman and his co-author, Paul LaFontaine, found that public high school graduation rates peaked around 1970. Thus, as staffing was rising dramatically in public schools, graduation rates were not.

In addition, scores on the National Assessment of Educational Progress (NAEP) Long-Term Trend exam for 17-year-old students in public schools have not increased during the time period studied. Between 1992 and 2008, public schools’ NAEP reading scores fell slightly while scores in mathematics were stagnant.  After the sizeable increase in the teaching force and the dramatic upsurge in the hiring of non-teaching personnel, student achievement in American public schools has been roughly flat or modestly in decline.

Instead of this wasteful spending, had non-teaching personnel growth been in line with student growth and the teaching force had grown “only” 1.5 times as fast as student growth, our schools would have an additional $37.2 billion to spend. Benjamin Scafidi, the study’s author, makes some suggestions. He says we could:

  • …raise every public school teacher’s salary by  more than $11,700 per year;
  • …more than double taxpayer funding for early childhood education;
  • …provide property tax relief;
  • …lessen fiscal stress on state and local  governments;
  • …give families of each child in poverty more than  $2,600 in cash per child;
  • …give each child in poverty a voucher worth  more than $2,600 to attend the private school of his  or her parents’ choice;
  • …support a combination of the above or for some other worthy purpose.

In addition to national figures, the study includes an interactive state-by-state map. For those of us in cash-strapped California, the map shows that from1992-2009, student population increased 24 percent, but teachers, administrators and supplementary staff increased 36 percent. As a middle school teacher during this time period, I saw this first hand – my school experienced an ongoing increase in the number of deans, counselors, assistant principals, coordinators, coaches, teaching assistants, etc., but we fared no better academically with all the extra personnel.

As Cato Institute’s Andrew Coulson pointed out recently:

Over the past four decades, real per pupil spending in California has roughly doubled. In dollar terms, Californians are spending $27 billion more today on K-12 education than they did in 1974, when Gov. Jerry Brown was first elected to office—and that is after controlling for both enrollment growth and inflation.

The last dashed spike on the spending line is the increase if Prop 30 passes, as Governor Jerry Brown has been assuming. If it doesn’t pass, per pupil spending will still be up more than 80 percent over this period, after controlling for inflation. What’s more, there is no evidence that the fantastic spending increases of the past have done anything to improve student achievement.

The only state-level achievement data we have that go back this far are the SATs, and, taking into account the renorming that occurred in the mid 1990s, they have actually declined by five percent.

And a look at our latest National Assessment of Education Progress (NAEP) scores is anything but encouraging. For example, on the most recent 4th grade math test, California students came in 45th nationally; in science, the same 4th graders scored higher than only Mississippi.

On Election Day, Californians will be faced with two initiatives – Prop. 30 and Prop 38. If either passes, Golden Staters will be paying millions of dollars more in taxes every year, the bulk of which will be poured into public education. Prop 38 would raise income taxes for most Californians, but Prop. 30 is worse. Our nation-leading state sales tax of 7.25 percent would go up to 7.75 percent. And the top marginal income tax rate which is now 10.55 percent – third highest in the country – would become number one at 13.3 percent – a 26 percent increase.

As it is, roughly half our state budget already goes to public education. And it is apparent that featherbedding is rampant in our K-12 schools. With the economy of California starting to look like Greece, it’s time to get serious. All the warm and positively gooey pro-30 and 38 TV and radio ads are meant to tug at your heartstrings, and distract you from the more realistic image of more of your tax dollars are going up in smoke. If either prop becomes law, education won’t improve, but we will all be taxed at an even more exorbitant rate than we are now. And high-earners, job creators and corporations will continue to flee the state.

Larry Sand, a former classroom teacher, is the president of the non-profit California Teachers Empowerment Network – a non-partisan, non-political group dedicated to providing teachers with reliable and balanced information about professional affiliations and positions on educational issues.