California was once the State that everyone looked up to. With the best weather and natural resources, we were full of hope and innovation. We had the best public schools, a world class system of higher education, the best freeways, infrastructure to provide fresh water to our growing population, which also doubled as a source of clean energy through hydro-electric power, a business-friendly environment where entire industries grew in entertainment, aerospace, and technology, making our economy virtually recession-proof.
Then in 1978, then-governor Jerry Brown signed an executive order that imposed union-shop collective bargaining on public agencies in California, and the rise of public sector union power began.
Today, public sector unions are the most powerful political force in our State. They control a majority of our State Legislature and might control a supermajority in November if a few swing districts fall their way. No politician, Democrat, Republican or Independent, acts without considering how it will affect the union agenda.
These government unions press 100% for a progressive agenda, and they consistently agitate for increased spending. In two areas, the quality of our public education system, and the financial health of our cities and counties, the consequences of government union power have been catastrophic.
The teachers’ unions, usually a local affiliate of the California Teachers Association, control most of our school boards, leading to control of our public schools. It is more than a coincidence that our public schools rank near the bottom in every category in the fifty United States.
As lobbyists for staff and teachers, who are paid to run our public schools, public sector unions fight to maintain the status quo. They protect incompetent teachers, they permit excellent teachers to be dismissed in layoffs, they actively oppose charter schools, they fight poor parents who try to employ Parent Trigger Laws, and they conduct an active campaign 24/7 against any form of school choice.
The financial power of teachers unions:
- There are over 266,255 public school teachers in California.
- Each pays at least $1,000 in union dues annually.
- The CTA acknowledges spending up to 40% of those dues explicitly on politics. That is $106 million per year.
- If the lawyers in Friedrichs are right—that all public union spending is political—the actual total is $266 million per year.
- Unions for non-teacher staff also are active. There are 215,000 school staff employees who are members of the CSEA (California State Employees Association), who each pay approximately $500 annually in dues. If all of those dues are spent on politics, that adds $107 million more for political spending annually.
- The total spent by public education unions alone is estimated to be $373 million per year – just in California.
Police and firefighter unions do the most damage at the local level. They have attained unsustainable pensions, known as “3%@50”, meaning that a member of that bargaining unit is eligible at age 50 for a pension equivalent to 3% of his highest salary times their number of years of service. While the age of eligibility has been raised for new public safety employees entering the workforce, the vast majority of active police and firefighters still retain these “3%@50” benefits. So at age 50, a 20-year veteran can retire with a pension equivalent to 60% of their highest year’s salary, which can be manipulated through spiking, and a 30-year veteran is eligible for 90% of his or her highest salary.
These pension requirements are held under the “California Rule” to be irreversible. In other words, once they have been adopted, democracy is incapable of turning off the spigot. With the spigot running constantly, communities go bankrupt. First, they cut other services. Then they increase taxes. Then they refuse to pay bondholders, so no one will invest again.
Current unfunded liabilities in California:
At CalPERS: $93.5 billion (ref. page 120, “Funding Progress,” CalPERS 6-30-2015 financial report).
At CalSTRS: $72.7 billion (ref. page 118, “Funding Progress,” CalSTRS 6-30-2015 financial report).
Local Unfunded Liabilities add considerably to this total, since CalPERS, with assets of $301 billion, and CalSTRS, with assets of $158 billion, only constitute 62% of California’s $752 billion in state and local pension fund assets. If all of these systems in aggregate were 75% funded, which is probably a best case estimate given the poor stock market performance since the official numbers were released, the total unfunded pension liabilities for California’s state and local government workers would be $256 billion.
And $256 billion in unfunded liabilities, a staggering amount, still understates the problem for two reasons: First, these pension funds may not succeed in securing a 7.5% average annual return in the coming decades. If not, then they will not earn enough interest to prevent their funding ratios from getting even worse. Also, this doesn’t take into account “OPEB,” or “other post employment benefits,” primarily health insurance. The unfunded OPEB liability just for Los Angeles County is officially recognized at over $30 billion.
A realistic estimate of the total unfunded liabilities for retirement obligations to state and local workers in California is easily in excess of $500 billion. These benefits, which are financially unsustainable and far more generous than the taxpayer funded benefits available to ordinary private sector workers, were forced upon local and state elected officials through the unchecked p0wer of government unions.
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Bob Loewen is the chairman of the California Policy Center.