Jerry Brown’s Budget Is a Boon to California Unions

The Golden State governor rewards public-sector workers while ignoring the state’s tsunami of debt.

Gov. Jerry Brown continues to pose as an iconoclast who is willing to make the tough choices necessary to keep California afloat, but the budget he released recently is more evidence that he remains the cat’s paw for the state’s public-sector unions.

“I want to advance the progressive agenda,” Brown said at the press conference unveiling his supposedly balanced budget, “but consistent with the amount of money people made available … I respect and embrace my role of saying ‘no.’”

But he certainly has said yes to union demands. The budget is the culmination of Brown’s campaign to convince Californians to raise taxes on themselves. They complied by approving Prop. 30 to help the school kids, yet Brown has played games with that money—earmarking some of it for union pay hikes as a payback for all that help during the Nov. 6 campaign, according to GOP leaders.

But the biggest problem is the budget’s unbelievable refusal to grapple with the tsunami of debt cascading toward Sacramento. For the past decade, California officials have been ramping up pay and benefit packages for public employees, creating a level of enrichment that is almost hard to believe.

The ranks of the $100,000 Pension Club are growing rapidly. California public employees receive far more in pay and retirement compensation than those in other states, according to a Bloomberg series. We have public employees walking away from the job at age 50 with multi-millionaires’ pensions and six-figure payouts. It’s obscene—especially considering the meager retirements that most private-sector workers will receive.

The unions want us all to ignore the problem so that no one even modestly reduces the benefits they are set to receive. Brown has complied, but has left the state’s taxpayers in a precarious position.

The problem isn’t hard to fix from an actuarial perspective. Many good progressives have floated reasonable pension reforms that simply pare back the benefits going forward and eliminate pension-spiking gimmicks, double-dipping schemes, and other unfair game-playing. Brown need only live up to his own rhetoric of “fiscal restraint,” and he could have a stunning legacy.

But he refuses to get serious about the debt issue even though the current system is unsustainable. Sure, California can afford the annual payments on those pension promises, just as most nearly bankrupt people can afford the minimum monthly payment on their maxed-out credit card. But what about the “wall of debt”? Why can’t Brown see it?

“[Brown] presented a timeline for repaying nearly $28 billion the state owes to government programs that it raided for cash or deprived of funds over the years,” reported the Los Angeles Times. “But numerous reports by state agencies, think tanks and academics have shown the wall of debt to be many stories higher than $28 billion—hundreds of billions of dollars over the next few decades. Brown’s repayment plan does not significantly reduce the sizable debt to Wall Street or account for promises the state has made to its current and future retirees but is not setting enough money aside to cover.”

Brown has always talked a good game about reform. Last year, he proposed a solid pension-reform plan, but used no political capital to promote it. When Prop. 30 was in danger, Brown and Democrats in the Legislature hobbled together superficial reforms as a ploy to help the then-languishing Prop. 30 campaign, but that was more about politics than fiscal reform.

In the thick of the state’s budget problems, Brown “negotiated” an unconscionable give-away to the prison-guards union, once again enriching some of the best-paid workers in the nation at the expense of the high-minded ideals he claims to champion. At the time, I wrote that Brown was a “prisoner of the union.” Nothing much has changed since then.

By approving Prop. 30, the state’s voters have assured a delay in addressing the state’s real fiscal problems for yet another year. Crisis is the only thing that has driven reform here, and now that the state has extra money there won’t be any impetus for fundamental reform. We can at least hope that Brown makes good on his promise to put the kibosh on any big new spending programs to come from the newly empowered Democratic legislative supermajorities.

People adjust their behavior, shift their investments, and even move if the tax authorities and regulators get too greedy. Expect more deficits if the state doesn’t begin to treat its job creators more fairly.

California is a wonderful place and it still can have a bright future, but only if is leaders face up to fiscal reality and stand up to the insatiable public-sector unions. Some people thought the supposedly iconoclastic Brown would be the one to do that in that “Nixon goes to China” way. They were wrong. Perhaps new, more courageous leaders will emerge.

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  • John||

    How long before the credit markets just cut off California?

  • LTC(ret) John||

    People still buy debt from Greece, Italy, Portugal....the US.

  • LTC(ret) John||

    Illinois (although at terms less favorable than Mexico gets).

  • Libertarius||

    The US prints it's own money to buy debt from itself, not a bad gig if you can get it. The Eurozone is propped up by a treacherous scaffolding of insolvent banks selling toxic debt to each other, and as for the state of California...I don't know why the hell anyone would buy that debt.

    Come to think of it, it's probably the pension funds investing their withholding in state bonds, another nice state-run ponzi (thought I was supposed to hate private bankers?). Or Bernanke is buying their debt in those ubiquitous "off balance sheet" accounting volumes.

  • Sevo||

    Yep; there's several profit cycles left until the music stops.

  • John A. Estrada||

    as Mark said I'm taken by surprise that a mom able to earn $8502 in a few weeks on the internet. have you seen this website... http://www.ace60.com

  • Sevo||

    You're surprised that the sun comes up in the morning.

  • ChrisO||

    Brown's just a bullshit artist. His core voters are those same pigs feeding at the public pension trough, and he's obviously not going to do anything to upset them.

    The broader problem is that California (I'm guessing) can't afford its existing pension obligations even if they cut future pensions to zero. Bankruptcy is really the only option, and yes that's going to create a political and judicial shitstorm. I don't believe it's even settled that states can actually declare bankruptcy.

    Obama would probably bail out California, but the Democrats will be in big trouble nationally going forward if he does that. A lot of purple state Democrats would be in danger, so no one else particularly likes California.

  • califernian||

    . I don't believe it's even settled that states can actually declare bankruptcy.

    How would one prevent a state from defaulting on debt?

  • Cdr Lytton||

    I don't think it's so much about default but rather restructuring or discharging that debt via bankruptcy.

  • ChrisO||

    The Contracts Clause of the U.S. Constitution, for one thing. States are bound by their contracts to a large degree. Pensioners could likely sue to overturn such a default.

    That's one of the most insidious things about public pension debt--there's no easy way out from under it using existing legal mechanisms. The federal bankruptcy code isn't written to address public entities.

  • califernian||

    Creditors can always agree to accept a debt restructure. Bankruptcy is a process where the state agrees to protect a borrower and *force* the creditors to accept changes.

    If California doesn't have the money, bankruptcy is an irrelevant question.

  • JWatts||

    "If California doesn't have the money, bankruptcy is an irrelevant question."

    That's not really the issue. California will have the money to pay its pensioners. It just won't have the money to also pay the current employees. And legally the pensioners' obligations come first.

    So following current law the state would be forced to close down all but emergency operations and funnel all of the operating budget to the pensioners. There are no provisions for a state to go bankrupt and continue normal operations while suspending payments to creditors.

  • Sevo||

    "So following current law the state would be forced to close down all but emergency operations and funnel all of the operating budget to the pensioners."

    You're too kind in your analysis.
    Moonbeam and fellow assholes will shut down emergency operations *FIRST* in order to propagandize a further tax increase.
    How do you think the last one got passed?

  • JohnD||

    Not the same as declaring bankruptcy.

  • Sevo||

    ChrisO| 1.18.13 @ 12:29PM |#
    "Brown's just a bullshit artist."

    As someone who's had the displeasure of watching moonbeam in action for many years, this is the best description you'll find.
    The abiding fact is that he lies. He lies always and everywhere. He lies consistently. IFAICT, he lies even when the truth would be more favorable to him; I think he does so in those cases to stay in practice.
    But he lies.

  • califernian||

    In other words, he's a politician.

  • Sevo||

    There are degrees of politico-tude; he lands far under the septic tank.
    He's at least as sleazy as Pelosi, and we are not favored by him being at least measurably sentient.
    Like Chavez; the world will be better off when he dies, but his death won't repair the harm he's caused.
    Would that Pat Brown had been sterile; he could only have inflicted his damage on the state rather than adding what his evil spawn accomplished.

  • Troglodyte Rex||

    The people voted for it, now the people have to live with the results. That they can't look beyond the campaign slogans and rhetoric is irrelevant. Democracy at its finest.

  • ChrisO||

    California can slide off into the ocean for all I care. I'm more worried about the Democrats trying to pass off this shit sandwich to the rest of us in the form of a bailout.

    And, obviously, other states are not far behind California in this area. They're just the most egregious example.

  • CampingInYourPark||

    "California can slide off into the ocean for all I care. I'm more worried about the Democrats trying to pass off this shit sandwich to the rest of us in the form of a bailout."

    I don't worry about the possibility of this happening, I take it as a given.

  • Moridin||

    ^ THIS

  • JohnD||

    I'm still waiting for the San Andres fault to have it's say.

  • CampingInYourPark||

    "The people voted for it, now the people have to live with the results."

    Unfortunately, as in the case of bank bailouts, auto company bailouts, etc. the people voted for it and all of us will probably have to live with the results.

  • LTC(ret) John||

    "Perhaps new, more courageous leaders will emerge.:

    From where?! The legislature with supermajority Dems who want to spend the shit out of every stray dollar the see? Are you going to come pouring out of the Reason Foundation building with the armor of God on and ride to the rescue?
    These people have dug their fiscal hole and all we can hope for is a lack of federal bailout money going their way. Sow, reap and all that.

  • Sevo||

    "These people have dug their fiscal hole and all we can hope for is a lack of federal bailout money going their way."

    They'll blame in on the rethuglicans.

  • Raven Nation||

    "consistent with the amount of money people made available."

    WTH? How about "consistent with the amount of money the legislature & SOME people authorized me to confiscate from the citizens of the state."

  • Bill Dalasio||

    Brown would be the one to do that in that “Nixon goes to China” way. They were wrong. Perhaps new, more courageous leaders will emerge.

    Not terribly likely. If they were to go into default, it might have happened. Sadly, this will likely end with a bailout of California rather than a default. Consequently, the rational choice for Californians (and likely most other states) going forward will be to turn on the spending machine. Why deny yourself if you know you can get it paid for by everyone else?

  • Libertarius||

    You can only kick the can (print fiat dollarz) so far and for so long.

  • Sevo||

    There's a lot of ruin...
    It took several hundred years for the Roman dictators to finally cause the total collapse. Wiemar Germany was quicker, but then it wasn't a reference currency.

  • Johnimo||

    Are there Representatives and Senators who would vote to bail out California, other than those from the Golden State? Wouldn't that be a fun debate to watch?

  • JohnD||

    All the congressmen from states teetering on the edge would vote for it.

  • Libertarius||

    And it's not just the state of California that's drowning in debt. Even as recently as five years ago, California munis were the place to be and they were selling 'em like hotcakes. The municipalities are just as fucked up as the state government.

  • Sevo||

    Libertarius| 1.18.13 @ 3:31PM |#
    ..."Even as recently as five years ago, California munis were the place to be"...

    They still are; just make sure you get a decent rate and can dump 'em off before the music runs out. There aren't enough chairs.

  • Jay_of_BTown||

    Is it just me or does does it sound like Don Jerry Brownlioni is balancing the budget with "protection money": http://www.businessinsider.com.....z2IMNbXY00

  • Sevo||

    Not sure I see 'protection money' in the article linked, but my goodness!
    That's the first I've seen of that sort of foolishness, and that might even make limo-liberals take notice (presuming that's a possibility).

  • Muzzle of Bees||

    So... I live in California. Where should I move to?

    aaaaaand GO!

  • Moridin||

    Don't move to North Idaho, please. Unless you're a true libertarian. We have enough california liberals flocking here and trying to change the state to what they fled from.

  • Peabo||

    California will not get any better. Californians have been there long enough to see what's going on, and they haven't done anything to fix it. They've made it worse.

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  • JohnD||

    I look forward to the day when the only people left in CA are the corrupt politicians and the illegals.

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