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.