Council to decide tonight how to fill its vacant seat

By Spencer Custodio, Voice of OC | Fullerton residents could learn tonight if the vacant City Council seat will be filled by appointment or special election when the Council is slated to make a decision after deadlocking on the issue in December.

If the Council opts for a special election, it would be held Nov. 5. The idea of holding a mail-in election at an earlier date was floated at the Dec. 18 meeting. That could have saved the city nearly $200,000 for an election. But a Jan. 9 email exchange between Registrar of Voters Neal Kelly and City Manager Ken Domer said the city is too large to qualify for a mail-in election.

Now, the Council will have to choose between appointing someone or holding a Nov. 5 special election which could cost up to $428,000.

To read the entire article on the Voice of OC website, please click here.

Posted in City Council, City Council Elections | Leave a comment

Tonight’s city council meeting agenda

The AgendaTo read or download tonight’s detailed council meeting agenda, please  click here (pdf).

The public participation portion of the meeting begins at 6:30 with presentations and awards. Actual city business normally doesn’t start until 7:00 or 7:30 . . . or even later.

And you can also watch it at home on cable Channel 3 (Spectrum — formerly Time Warner Cable).

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What else is new? Newsom’s budget calls for more spending, higher taxes

By Jon Coupal | To the surprise of absolutely no one, California’s new governor has proposed a state budget with billions in increased spending and lots of tax hikes. And, as an added bonus, he is proposing new mandates on businesses and local governments as well as depriving Californians of the right to vote on certain kinds of local debt. From the perspective of taxpayers, this is not a propitious start.

Gov. Gavin Newsom’s budget envisions spending $144 billion of general fund dollars, a 4 percent increase over former Gov. Jerry Brown’s last budget, which clocked in at $138 billion. To put this in perspective, general fund spending was less than $100 billion just six years ago. In California, state government is the No. 1 growth industry.

A weekly column by Jon CoupalNo California spending plan would be complete without new “revenue enhancements.” And the biggest item on this list is the imposition of the “individual mandate” for health insurance. Recall that President Obama’s so-called Affordable Care Act (which was anything but affordable) imposed a burdensome tax on millions of Americans. (Indeed, it was only the fact that the ACA imposed a “tax” that saved it from a constitutional challenge).

The good news is that Congress repealed the tax at the federal level. The bad news is that Gov. Newsom wants to reimpose it at the state level in order to save Covered California from imploding. The cost to Californians for a state-imposed individual mandate with a penalty?: $700 per person, which is projected to raise $500 million in new revenue.

To read the entire column, please click here.

Posted in Gavin Newsom, Howard Jarvis Taxpayers Association, Jon Coupal, State budget | Leave a comment

Fullerton City Hall is closed today for another three-day weekend

City Hall Closure Dates and
Observed Holidays

It appear that this information on the city’s website has not been updated for 2019.

See this page to confirm today’s closure.

Fullerton City Hall

Posted in City Hall closure dates | Leave a comment

HJTA releases statement on Gov. Newsom’s state budget

Following the release of Governor Gavin Newsom’s proposed 2019-2020 state budget today, Howard Jarvis Taxpayers Association president Jon Coupal issued the following statement:

HJTA - logo“It is troubling that Governor Newsom has proposed a budget with lots more spending coupled with higher taxes. Moreover, he has proposed new mandates on businesses and local governments as well as depriving Californians from voting on certain kinds of local debt. From the perspective of taxpayers, this is not a propitious start.”

The proposed tax increases include the previously rejected surcharge on 911 service and a water tax on all California property owners that was killed in the Legislature last year. Coupal stated that, “while safe drinking water is a critical need, that is exactly why ensuring its availability should have a high priority from existing revenues.”

The bright spots for taxpayers is the Governor’s desire to grow the rainy day fund – in order to prepare for the inevitable recession – and also paying down pension debt. “Despite the higher spending and tax hikes reflected in the budget, we hope that the Governor will be able to resist even more spending proposed by state legislators who want $40 billion in new ongoing spending.”

Posted in Gavin Newsom, Howard Jarvis Taxpayers Association, Jon Coupal | Leave a comment

California’s Budget 2010–2018

Fast revenue growth, even faster expense growth

By David Crane | California’s annual General Fund revenues grew a fast 46 percent during Jerry Brown’s eight-year tenure as governor. That makes sense given the stock market more than doubled over that period and the state raised tax rates in 2012. But three costs grew as fast or faster:

California also became more reliant on personal income tax (PIT) revenues:

And doubled its reliance on capital gain realizations to nearly 10 percent of revenues:

Because tax revenues from capital gain realizations are unpredictable:

Governor Brown wisely asked voters to approve a rainy day fund (RDF), which they did. But that fund is limited in size and even though the governor and legislature also wisely chose to create some additional reserves, the combination of the RDF and those additional reserves is equal to less than one-third of the deficits Brown predicted the state will face during the next bear market or recession. Net of the benefits from the RDF and additional reserves, that means more than $40 billion of cuts would be necessary during that bear market or recession.

Meanwhile, over the same period of time the state doubled its Medi-Cal population and added more than $100 billion in liabilities for pensions and retired employee health insurance. Unlike the state’s revenues, expenditures related to those liabilities are not correlated with the stock market. Medi-Cal is an entitlement, pensions are a contractual right (the terms of which are currently being evaluated by the state Supreme Court), and subsidies for retiree health insurance are the result of collective bargaining negotiations. That means the only ways to reduce those expenditures are to make Medi-Cal more productive or reduce the terms of its entitlement, modify pensions to the extent permitted by law, and modify or eliminate retiree health insurance subsidies during contract negotiations.

As a review of any other 8-year period would demonstrate, California’s revenues are tidal in nature but because not all of its expenses are tidal, when the revenue tide goes out, cruel cuts to discretionary programs (eg, UC, CSU, courts, social services) and tax increases that don’t generate new services are the result. As an example, the 2012 tax rate increase was sold as a boost for K-12 education but faster-growing fixed costs in schools have offset those revenues, as explained here and demonstrated here.

Later today California’s new governor Gavin Newsom will release his first proposed budget. From his public statements it’s clear that Governor Newsom knows all the facts posted above and has hired a team with experience navigating California’s fiscal tides.

Warren Buffett points out that one only learns who has been swimming naked when the tide goes out. California’s tax revenues won’t always grow an average of nearly six percent per year. State legislators should work with Governor Newsom to keep Californians clothed.

David CraneDavid Crane is president of Govern for California.

Posted in David Crane, State budget | Leave a comment

Fullerton and cities across Orange County struggle with police and fire pensions

Many Orange County cities are struggling to maintain budgets that keep, or minimally cut services and employees, while trying to keep up with growing law enforcement and fire pension spending, reports Spencer Custodio on the Voice of OC website. In his article he quotes Fullerton council member Bruce Whitaker and city manager Ken Domer.

EXCERPTS:

Police officer and firefighter pension payments often take the biggest share of retirement benefits, especially in cities that have their own police departments, fire departments or both.

“See the problem is the great majority of public cost is in public safety and that’s very resistant to cuts. It’s politically powerful and the public wants public safety as well, so the public doesn’t like to see cuts there either,” said Fullerton City Councilman Bruce Whitaker.

Fullerton City Manager Ken Domer said it’s tough to pay pensions when the costs are rising at a faster rate than city revenues.

“It’s extremely difficult when your pensions costs are escalating at a pace that is much higher than your other expenditures and far higher than your revenues and if we have a recession in two years, we’re going to see our revenues decrease and our pension expenditures increase. And that’s where just about every city is going to struggle with,” Domer said.

According to CalPERS projections for Fullerton, the city will have to pay roughly $20.5 million total in pensions for the 2018-2019 fiscal year. The majority of that, $14.3 million, is for safety employees’ pensions.

Whitaker said Fullerton has had to put infrastructure projects, like road repair, on hold while the city figures out how to deal with the rising pension costs. At nearly every Fullerton City Council meeting, the city’s poor road conditions are brought up by residents during public comment.

“Actually what you’ve seen there has been threefold. One is postponing necessary infrastructure improvements, like in Fullerton, the streets have gotten worse because we need to take up the growing pension costs,” Whitaker said. “We’ve had to curtail a lot of the bottom-level employees when it comes to landscape maintenance, arborists … public works … it seems like that’s the choice area where cities start cutting back and we’ve seen some of that.”

“And the third consequence of this has been increased taxes and fees. Most cities have been working on driving up structural taxes and fees and we’ve seen this election,” Whitaker said, referring to sales tax measures and fee increases throughout cities.

Like Santa Ana, the Garden Grove City Council put a sales tax question to voters in November. Voters overwhelmingly approved the sales tax measure by a nearly 30 percent margin, raising the sales tax by one percent, meaning Garden Grove will now have an 8.75 percent sales tax. Placentia voters also did the same this November.

“These are regressive taxes hitting people that are least able to pay. And they are shouldering some of the costs related to pensions and benefits — that really is the impact,” Whitaker said.

Economic downturns, like the Great Recession, often take a financial toll on cities. The downturns also hit CalPERS investments hard. In 2008 CalPERS had a negative 5.1 investment return and a negative 24 percent return in 2009, before going up to a 13.3 percent return in 2010.

“CalPERS projects about a seven percent return per year on investments and we are overdue for a recession and we are already seeing some weaknesses in the stock market. So if we get an economic downturn, that’s going to reduce the investment returns … taxpayers are always the backstop — so if investments underperform, the taxpayers get to throw in the difference,” Whitaker said.

Domer said the market trend affecting the pension system shows how difficult paying pensions can be.

“It’s been reflecting how easy it is to take a hit and how hard it is to climb back up,” Domer said. “I think everybody should be worried and we should be looking at ways to control our costs, reduce our pension load — we have to get through it.”

To read the entire article, please click here.

Posted in Bruce Whitaker, Ken Domer, Pensions | Leave a comment

Rapid pay increases are what’s driving L.A. Unified School District’s financial woes

The story behind the story

By Todd Madison | Los Angeles Unified is in financial trouble.  Anyone following the recent developments, potentially leading to a teacher strike very soon, knows this.

On September 11th the deputy superintendent of public instruction for the California Department of Education, Nick Schweizer, made an unannounced appearance along with Candi Clark, chief financial officer of the Los Angeles County Office of Education, at an LA Unified School Board meeting.

Their message?

According to education watchdog site The 74 Million, “the two warned LA school board members that time is running out for them to get their house in order — or they will lose control over it and the state will eventually take over.”

Their suggestions?

“Make more money, cut spending, or both”.

The same story is being repeated in many districts around the state, even though state funding has increased dramatically in recent years. As of this writing, 29 districts in California were at either “qualified” or “negative” status, according to the state Department of Education.

Why?

Much has been written on the impact of declining enrollment (usually blamed on the increase in charter schools) as well as increases in employee pension and healthcare costs. The Reason Foundation posted an excellent examination of these issues in June, which should be required reading for anyone interested in looking at school funding in California.

However they – along with many media outlets – only touch superficially on another key driver of the costs involved, the exceptional rate of increase in pay for existing employees.

Using Transparent California’s database of pay data for public employees we can easily look at how pay rates are rising for district employees throughout California, including Los Angeles Unified.

The Transparent California data for 2017 (the latest year available) contains records on the compensation of 104,334 employees.   The earliest data available is for 2014, when the district reported  data on 91,815 employees.

Comparing 2014 to 2017 pay data shows some interesting trends.  

To determine how quickly pay rates are increasing for existing employees (excluding new hires or those who terminated their employment during this period) we matched the two data sets by name, to select only those employees who were with the district in 2014 and still working there in 2017.

In this set of data, we find the average rate of increase in total pay for LA Unified employees has been 5.55% per year.

During this same time period, the US Bureau of Labor Statistics Consumer Price Index calculator tells us that the average rate of inflation has been 1.47% per year.

This means LA Unified has been giving itself raises at rates 3.75 times greater than inflation.

At the same time, average wages in Los Angeles County (again per the US Bureau of Labor Statistics) have risen from $55,311 to $61,794, an annual growth rate of 3.76%.

Using that measure, LA Unified has “only” been giving itself raises at a rate about 1.5 times greater than the people paying taxes to support them.

With that, we often hear a case made that education is a low-paying occupation and such high rates of increase are needed to make up for cuts that happened during the Great Recession.

Using the same pay data, we see that the average full-time LA Unified employee now makes $73,798, or about $12,000 more than the average LA County resident, annually.

And the average LA Unified teacher, about to go on strike because the 6% raise being offered is not enough?  They’re making $84,244/year, with an average increase of 4.52% per year.

We also need to keep in mind that when the media tell us the district has offered a “6% raise”, this is a raise on top of the normal annual increases teachers get from their salary schedule (called the “step-and-column”.)

In LA Unified’s case, if we look at the UTLA 2014-17 Contract Bargaining Agreement and pick a mid-point of their 2016-2017 salary schedule “T” we see their average annual raise runs 3.48%, which means in a year where their contract is given a 6% raise their total raise would then be 9.48% for that year.

Lastly, none of these compensation numbers include what are typically a very plush benefit plan.

If we include benefits in the calculations, LA Unified’s average increase goes up to 6.45% – more than four times the growth rate of inflation, and double the rate of everyone else’s raises in the county.

And the average total compensation of full time employees who have been with the district at least since 2014?  $96,520 for all employees, $108,503 for teachers.

What does this all add up to?

For LA Unified, if their raises had been held to the same as inflation (1.47%), they would now have over $352 million dollars a year extra to spend on education for our kids.  And that does not factor in savings on pension benefit costs.

If their raises had been held to the same as everyone else in the county (3.76%)?  They would still have over $157 million dollars a year that they do not have now – because they’re giving that money to themselves instead.

And this is just looking at the group of employees who have been with the district over this period.

We assume that any new employees hired during this time are also receiving comparable raises, which means the net savings by holding those raises to a level “the same as everyone else” would be even greater.

Conclusion

Given the precarious financial condition of LA Unified, is now really the time to be giving outsized raises to people who have already been getting raises significantly higher than you or I have for years?

Is now the time to cut back on services and programs for the kids of Los Angeles, to fund increases in the  paychecks of people who already are at pay levels much higher than the average county resident?

The parents of LA Unified need to know the data and make sure their board members know how they feel about continuing their high levels of annual increases into the future, at the expense of better education for their kids.

Todd Maddison is an involved parent with three school-age children and has been a leader of his school district’s Parent Advisory Committee as well as serving as a parent representative on his district’s LCAP Committee and school site council. This article cross-posted from Transparent California.

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On choosing leaders wisely

By Carl M. Cannon | It’s Monday, January 7, 2019. Twenty years ago today Senate Majority Leader Trent Lott and Senate Minority Leader Tom Daschle huddled on opposite sides of the Senate chamber, each with members of his own party. The gavel that day was wielded by 96-year-old Strom Thurmond, who called the session together and set the stage for the unfolding historical drama with these simple words: “The managers will be received and escorted to the well of the Senate.”

The “managers” were a contingent of elected officials from the House of Representatives led by Judiciary Committee Chairman Henry Hyde. The great issue to be managed was the impeachment trial of William Jefferson Clinton. It was the first time in 130 years that the Senate had tried a sitting president. Including Richard Nixon, who resigned to avoid such a trial, it was only the third time in our nation’s history that a president was made by Congress to answer to charges that he should be removed from office for “high crimes and misdemeanors.”

Adopted in 1787 at the Constitutional Convention in Philadelphia, the phrase had been around in English common law since the 14th century. The principle involved — that Americans had the right to choose their own leaders, and even to replace them for certain transgressions — was at the heart of the Colonies’ Declaration of Independence from Britain in 1776.

Sam AdamsIn Philadelphia on this date in 1776, Samuel Adams fretted in a letter to his friend and fellow patriot James Warren. Adams was ruminating on whether the 13 Colonies could unite in a strong enough bond to effectively oppose Great Britain. The Colonies were fractious, Adams conceded, but were continuously being reminded by the actions of Parliament and the Crown of the necessity for a united front. The idea of such a confederation “is not dead, but sleepeth,” Adams wrote. “To those who believed they would see the confederation completed long ago, I do not despair of it — since our enemies themselves are hastening it.”

Two days after Adams wrote these words of hope about the Colonies getting their act together, Thomas Paine published “Common Sense,” a fiery manifesto that did much to solidify public opinion in favor of independence.

Sam Adams’ “confederation” did indeed come into being. But getting a large and diverse nation (and it is much larger and more diverse now) to bridge regional, racial, spiritual and ideological differences — not to mention setting aside political partisanship — has never been a modest task. You could ask Bill Clinton about that: His impeachment trial that began 20 years ago today was initiated in the House on a party-line vote — and decided in the Senate essentially the same way.

President Clinton’s lawyers didn’t, but could have, invoked the words of Sam Adams. In that same letter to James Warren in which he said the idea of union was merely sleeping, Adams added his opinion that certain members of the Continental Congress possessed “the vanity of the ape, the tameness of the ox, or the stupid servility of the ass.”

This was 230 years before Twitter, and 170 years before Bill Clinton (and Donald Trump) were born. Yet, some things are constant.

Four years later, in another latter to James Warren, Samuel Adams found himself trying to bolster the spirits of his friend. Warren had grown disillusioned and was talking of retiring from politics. Adams appealed to him to remain in public life on the grounds that officials who put the general welfare ahead of their own are treasured assets in a democracy. Adams closed by saying that when governors and other government officials were appointed by a far-off power, “it was our misfortune.” But in the future, he added, if a people empowered with choosing its own representatives cannot choose better leaders, “it will be our disgrace.”

Carl M. CannonCarl M. Cannon is Washington Bureau Chief for RealClearPolitics.

Posted in Carl M. Cannon, Sam Adams | Leave a comment

Sacramento’s silliest subsidy

By David Crane | In December, I became eligible for Medicare, the national health insurance program for people aged 65 and older. Medicare is fantastic — and fantastically cheap — insurance. But, believe it or not, if I was a retired California state employee, I would also be entitled to a state-provided health insurance subsidy that this fiscal year will cost the state $2.6 billion — more than double the cost ten years ago:

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If you think Retiree Health costs are growing fast just because health costs are growing fast generally, you’d be wrong. Health costs for the state’s active employees grew at half the pace of Retiree Health spending. No, Retiree Health costs are growing fast because the state legislature and governor have created huge — and unnecessary — liabilities:

https://gallery.mailchimp.com/448d2bec418120afaae389449/images/932aa055-f206-4302-826c-aca4071e598a.png

At $91 billion, Retiree Health obligations are now the state’s second largest retirement liability:

https://gallery.mailchimp.com/448d2bec418120afaae389449/images/8ddbbb89-b828-48ce-86f4-f4b1d98258f7.png

 

Even General Obligation Bonds, which require voter approval, are surpassed in size by the state’s Retiree Health obligations, which are created by elected officials without voter approval.

Because most of the state’s spending is determined by the constitution and entitlements and the legislature and governor tend to protect Corrections spending,  such as courts, UC and CSU. Looked at that way, the $2.6 billion spent on Retiree Health this year represents ~10 percent of discretionary spending. $2.6 billion is 35 percent more than the state will spend on courts, nearly 70 percent of the amounts the state will provide CSU and UC, and more than 85 percent of the expected cost of insuring undocumented seniors in California.

The state’s Retiree Health spending is not necessary. Retired employees aged 65 or older have federally-funded Medicare. Retired employees under the age of 65 can get federally-funded subsidies from the Affordable Care Act (Obamacare) through the state’s excellent health care exchange, Covered California. If necessary, lower-income retirees could still be selectively subsidized by the state.

Glendale shows the way. By transitioning retired employees to Medicare and Covered California, delinking the medical insurance premium rates paid by active and retired employees, and providing subsidies only to those who need them, the City of Glendale reduced its retiree health liabilities by >90 percent (see page vii of 2017 Glendale CAFR). Using the same math, the state could reduce liabilities by >$80 billion and save >$2 billion per year. Glendale provides answers to frequently-asked questions about its changes here.

There’s no reason for California to starve discretionary programs, squeeze current employees or charge taxpayers to provide unnecessary subsidies when generous federal subsidies are available. The state should end the practice of subsiding retired employee health care. In doing so it would also set an important example for California’s many school districts and local governments suffering from similar unnecessary liabilities.

David CraneDavid Crane is president of Govern for California.

Posted in David Crane, Govern for California, Health Care costs | Leave a comment