In its 2013 obituary of Nobel-winning economist James M. Buchanan, the Washington Post described him as "the man who got economists to care about politics." I view Buchanan as the man who explained why California has so many long-term fiscal problems even though he didn't specifically focus on our state.
The political system, as described in civics textbooks (to the degree the public schools still teach civics) and by Capitol legislators, is a temple of democracy, where elected officials solve problems and do the public's work. But Buchanan realized that people who work for government are as motivated by economics as those who work outside of it.
They seek power and money within their organizations, just like everyone else.
This not-so-glamorous theory helps explain why most of California's long-term financial problems are tied to one source — the unsustainable levels of compensation paid to state and municipal workers. Sacramento budget issues revolve around underfunded public-employee pensions, unfunded retiree medical care and the like.
Even other issues — e.g., the lack of funds to pay for long-term infrastructure projects — are tied to public-sector compensation. State and local governments lack funds for many of these projects because they spend most of their money paying for current workers and retirees.
It so happens the most powerful interest groups in California's state and local governments are the public-sector unions, which are designed to push for higher-compensation levels and oppose private-sector-style cutbacks and efficiencies (e.g., outsourcing).
"By any metric that you look at, you're going to find that the average compensation for public employees (in California) is two-to-three times as much as the average compensation of the people who pay for these salaries. It's shocking, actually," said Mark Bucher, president of the free-market-oriented California Policy Center in Orange County.
The center recently released new data on its Transparent California Web site, which publicizes the names, salaries and benefit information for employees in 400 cities and 826 special districts.
The average full-time California municipal employee earned a compensation package in 2013 of nearly $121,000. These include the salary and only the paid costs of the benefits — the unpaid portion (the unfunded liabilities) would add to the totals because eventually someone will have to fulfill the benefit promise.
Statewide, more than 11,200 municipal employees earned northward of $200,000 a year — and 3,661 pocketed $50,000 in overtime. In the San Diego area, municipal workers received an average compensation package of $114,000. Data excludes city of San Diego employees because the city did not provide the group with pension costs.
Public employee groups tout studies showing that government workers receive lower pay than in the private sector (even if they get higher benefits). That argument is getting hard to make in the light of new information even if it tended to be true in the past.
Consider the anecdotal data: When the Los Angeles Fire Department had some openings at its academy, it drew more than 13,000 applicants. That's a sign that pay levels are far above market rates.
"The data strongly indicates that comparable public-sector employees are getting higher levels of pay alone," said Robert Fellner, Transparent California's research director. He points to Los Angeles County Census data showing public-sector workers earning on average 54 percent above the county's median income.
And they receive benefits "orders of magnitude" higher than in the private sector. "It's hard to quantify the ability to retire comfortably at 55, too," he added. "There's so much benefit to that versus being 65 and still having to work. You only have so much time on this planet."
So how did we create this imbalance? The people who work for government are part of powerful interest groups that help elect the politicians who vote on their pay packages. It's Economics 101, as applied to the political system. Why would we expect a different outcome?