You may have heard how Sacramento buys $36,000 European super-wheelchairs for the disabled when more modest wheelchairs work fine, and the Legislature slips an extra $266,000 in the budget to satisfy their taste-buds, having found that $125 per diem for food and housing doesn't keep them in sufficient luxury.
It finally appeared as if the California Legislature had turned a new leaf as the assembly held "efficiency" hearings in March at which such excesses came to light. Speaker Fabian Nunez, a Los Angeles Democrat who 12 months ago was mostly interested in raising new taxes, even stated: "First, we're going to find cuts instead of talking about taxes."
If you added up the cuts suggested at the "efficiency" hearings, it amounts to hundreds of millions of dollars. That sounds impressive-if these cuts are ever really made.
Bravo. Except for one problem. It was mostly an exercise in distraction.
"You have to really give credit to the Democrats for trying to find some efficiencies," says Assemblyman Keith Richman, a San Fernando Valley Republican and physician known for his pragmatic centrism. But Richman is being a diplomat. The savings they might recover are petty cash compared to the $14 billion to $17 billion shortfall embedded in the 2004-05 budget by chronic legislative overspending.
To make up for the $14 billion shortfall he estimates, Gov. Arnold Schwarzenegger in January proposed big program cuts, plus sliding fees for the non-poor for all sorts of free services including health care. He also wants to borrow a few billion.
It's no secret that the Democratic majority in Sacramento intends to reject some very big cuts proposed by Schwarzenegger. Regardless of how much the Democrats refuse to cut from state overspending, the truth never varies. And the truth is, we still have to undertake deep structural reform-fundamental change to the way the state does its business-because it's the only way to close the gap.
Yet Nunez and Assemblyman Darrell Steinberg of Sacramento, who chaired the "efficiency" hearings, allowed all of March to slip by without addressing this issue at all. Sure, they deftly manipulated the media into printing gushing stories about "efficiency" hearings. But they took off the table the two biggest chances for reforming years of chronic state government overspending.
As Richman notes, "Two things were not allowed on the table at all, and those issues were cutting back the size of the state employment rolls, and rolling back the massive compensation packages granted to state unions."
The state's high-carb, high-fat, 235,000-person workforce needs to go on a fiscal crash diet. Yet as Richman notes, cutting the huge bureaucracy, protected by powerful public employee unions, was not allowed as a serious topic for discussion at the "efficiency" hearings.
Since we can't even talk about it, is it any wonder why we've got several thousand highly paid Caltrans union engineers sitting around, mostly unneeded, because the state's transportation projects have dried up? This legislature is still far too gutless to consider handing out lots of pink slips.
The state's workforce, the size of a city, enjoyed a mind-blowing 41-percent jump in salary and benefits in the past five years. It's not uncommon for a state worker to make $70,000 to $80,000 a year. According to a report by Los Angeles Daily News journalist Troy Anderson, state workers enjoyed this massive hike in compensation while Californians' per capita income rose 24 percent.
During the same period, state unions managed to wangle an incredible concession out of our weenie political representatives amid the stock market dot-com frenzy, and this concession is costing taxpayers a bundle. Under a terrible law signed by former Gov. Gray Davis, the state's workers can now retire with a fat pension just when many reach the height of their knowledge and expertise, at the age of 50. This cushy early retirement reward was once reserved for those with punishing jobs such as highway patrol officers. But we now pay a staggering amount of money so pencil pushers can prematurely retire.
Here's why: the Legislature-led by union-controlled Democrats, and abetted by wussy Republicans-suffered a mass hallucination in the 1990s. It became convinced that riches flowing into California's worker pension funds from investments in the frenzied stock market would last forever.
Somebody forgot to tell our dopey legislators, few of who hail from the private sector, the Wall Street truth that what goes up always comes down. As in market slumps. As in reality.
During its shared hallucination, the Legislature approved the so-called "three percent of 50" deal. It awards a very robust three percent of state workers' earnings for every year they work. This retirement money can be collected beginning at 50. Steven B. Frates, senior fellow at the Rose Institute at Claremont McKenna College, says a loophole allows a worker's earnings base to be substantially boosted by accumulating overtime or sick-pay benefits.
In the bizarre collective mind of legislators, this treasure was supposed to be paid to retirees from the state pension fund, which was skyrocketing due to investing in stocks. Under this law, if the fund's investments faltered, guess who would pay so that our pre-Botox state workers could keep retiring young?
Oh yes, California taxpayers.
Frates says that because workers can pad their base salary with accumulated overtime and unused sick pay, "you can actually make more in retirement than when you are working for the state of California." Says Frates, "If you were to ask an actuary... how much it would cost an average citizen to pay for somebody else to retire at the age of 50 on $90,000 or so for life, I suspect they will say it will cost over $1 million."
The deal was a scandal the moment Davis signed it. Many who leave state jobs do what other 50-year-olds in America do-they go to work. They are taking away jobs in California-possibly thousands of jobs-while getting huge retirement checks. That's a stupid policy hurting our truly jobless citizens.
State Sen. Tom McClintock of Thousand Oaks argued fiercely against the "3 percent of 50" law. Naturally, he was ignored. He says, "We now have exponential increases in taxpayer subsidies for this. Was it Louis the 16th who said, "After us, the deluge?'"
Whether you agree with the Republican McClintock's fiscally ultra-tough politics or not, he is a respected budget watchdog. That's why Democratic voters in California gave McClintock a huge "integrity" rating in recall polls last year.
Unfortunately, it's nearly impossible to turn back the clock on the 235,000 state workers who have been told for three years that they will get fatter pension checks and can retire early. So McClintock suggests a two-tier system in which all new workers return to the sensible old deal, or something like it.
Even if Schwarzenegger somehow forces the Legislature to deal with this issue, he still faces big battles to cut the state's workforce and contract out for routine work that can be done cheaper by private business.
McClintock notes that, according to a study by the Reason Foundation, if California adopted extensive contracting out of state services, "We could save $9 billion from that single reform."
Bill Eggers, director of Deloitte Consulting's public sector research division in Washington, D.C., worked on the Texas Performance Review that cut billions in costs-a model that Schwarzenegger hopes to emulate.
Eggers' associates from Texas-including efficiency expert Billy Hamilton-are now in Sacramento, hired by Schwarzenegger to scour for cuts. The Performance Review Team includes more than 150 keen-eyed state employees culled from the ranks for their money-saving ideas.
Eggers tells me, "California is one of fewer than 10 states that have significant laws against contracting out, including the recent law banning school districts from doing things cheaper and requiring them to use unions. In Sacramento, the restrictions go all the way up to the executive level. These restrictions handcuffed [Pete] Wilson and Davis, and they're handcuffing Schwarzenegger."
The California team is likely to produce 100 detailed issue papers that each propose a cut and discuss how to proceed with legislation or executive order, as well as detailing the so-called "best practices" by other states, according to Eggers.
California's legislature has resisted a lot of "best practices" that have swept the nation, and this bullheadedness has cost us billions in missed savings. Our lawmakers continually argue that California is "unique," so its policies must be created from scratch and the wheel re-invented with each new issue. This attitude has bred our most powerful law, the Law of Unintended Consequences, which has in turn bred disaster after fiscal disaster.
Yes, California is big. Yes, California is diverse. But California is not unique. California faces the same troubles faced by many big states. Our uniqueness is in how grossly we failed to protect the public's money.
Sadly, the March "efficiency" hearings only probed the petty cash drawers. The real troubles are still locked deep inside the vault. ©
Write to jillstewart@SDcitybeat.com.