Coy about taxes and pension costs

By Dan Walters, CALmatters | California’s economy may be booming, but throughout the state, local governments—including school districts—are feeling the financial pinch and asking their voters to approve new taxes of one kind or another.

There were 111 local tax measures on the June primary election ballot, the vast majority of which passed, according to municipal finance guru Michael Coleman of CaliforniaCityFinance.com.

Dan WaltersDozens more—sales taxes, parcel taxes, marijuana taxes, utility taxes and hotel taxes—are being planned for the Nov. 6 general election.

So why are so many local entities feeling strapped?

Local officials will tell you, if you don’t quote them by name, that it’s mostly because their mandatory payments into the state’s two big pension funds are soaring.

The California Public Employees Retirement System (CalPERS) and the California State Teachers Retirement System (CalSTRS) lost tens of billions of dollars during the recession a decade ago and have never fully recovered.

CalPERS has steadily and sharply increased financial demands from cities, counties and school districts for their civil service workers while the Legislature and Gov. Jerry Brown cranked up contributions to CalSTRS from school systems to cover teacher pensions.

However, while seeking more money from their voters to cover their ever-increasing retirement costs, local officials have been very reluctant to say it’s for pensions, fearing backlash at the polls. Rather, on the advice of high-priced “consultants,” they promise the new taxes will enhance such popular services as police and fire protection and parks.

We can expect more such propaganda this fall, leading up to the election.

One example is in Sacramento, whose mayor, Darrell Steinberg, wants his voters to reauthorize a half-cent sales tax that will soon expire and to add another half-cent.

In a recent speech, he called his proposal “a real game changer” that would finance affordable housing, shelters and services for the homeless, job training in low-income communities and small-business incentives.

However, simple arithmetic tells us otherwise. The additional half-cent of sales tax would generate less than $40 million a year, city budget documents say, while by the city’s own estimate, its mandatory payments to CalPERS are expected to increase from $81.6 million a year to $129 million by 2023.

To its credit, the Sacramento Bee pointed out the looming effect of the city’s rising pension costs. The state’s other news media should follow suit as their local officials tout the benefits of increasing taxes. Reporters can easily calculate projected pension cost increases from CalPERS data and the potential revenues from sales tax data.

Meanwhile, one city just a half-hour’s drive from Sacramento is doing it the right way, telling voters why it needs more money.

Lodi also will place a half-cent sales tax increase on the November ballot and its officials are not shy about the reason.

Lodi City Manager Steve Schwabauer has been a leading figure in efforts to persuade CalPERS to moderate its demands, arguing that cities such as his will face insolvency unless they get relief or persuade voters to raise taxes.

Schwabauer told the city council, before it voted unanimously to ask voters for the tax hike, that without it the city will see operating deficits beginning next year.

“The cause of this, point-blank, is CalPERS and our pension fund, and I have spent at least two years of my life fighting with CalPERS,” Councilwoman JoAnne Mounce said.

Such candor may not make it easier to persuade voters, but it’s the right thing to do.

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