The Orange County Register, 11/28/12.
It took less than two weeks to confirm what we suspected: Much of the money from the Proposition 30 tax increases approved by voters is not going to go to schools, as advertised, but to teachers’ pensions.
According to CalPensions.com, “More money for the underfunded California State Teachers Retirement System may be considered by the Legislature next year, thanks to new attention from lawmakers and a state budget deficit narrowed by a voter-approved tax increase this month.”
We talked to David Crane, lecturer in the Public Policy program at Stanford University and president of Govern California. A Democrat, he has advised officials from both parties on pensions. “I’ve always thought the tax increase would create the money for them to fund the deeply underfunded CalSTRS pensions system,” he told us. He said Gov. Jerry Brown, Senate President Pro Tem Darrell Steinberg, D-Sacramento, and Assembly Speaker John Perez, D-Los Angeles, “wanted to keep quiet about CalSTRS’ problems during the election. Now they’re not being so quiet.”
Mr. Crane pointed to his own writings, collected on his website, DavidGCrane.org. On Bloomberg.com in July, he warned that Prop. 30 wouldn’t help the state budget without major spending reform. Rather, “Solving California’s budget woes requires addressing five root causes: unfunded health care promises to retired employees, excessive incarceration rates, a boom-and-bust revenue system, underfunded pension commitments and fast-growing spending on Medicaid.”
Longtime state reporter Ed Mendel, who maintains CalPensions.com, referred to Legislative Analyst Mac Taylor’s Nov. 14 report on how the tax increase supposedly improved the state government’s fiscal outlook. Mr. Taylor wrote, “The state’s economic recovery, prior budget cuts and the additional, temporary taxes provided by Prop. 30 have combined to bring California to a promising moment: the possible end of a decade of acute state budget challenges.”
The improved fiscal condition supposedly allows the state to begin tackling such long-term problems as the CalSTRS funding deficit. Mr. Taylor added, “A key priority of the state in this regard probably should be a funding plan to address CalSTRS’ unfunded liabilities. Additional funding from the state, districts, and/or teachers of over $3 billion per year (and growing over time) likely will be required to keep CalSTRS solvent and retire its unfunded liabilities over the next several decades.”
We have admired the Legislative Analyst’s nonpartisan work for decades. But under both Mr. Taylor and his predecessor, Elizabeth G. Hill, the office has had a tendency to downplay the negative effects of tax increases. We won’t know until sometime next year how much the Props. 30 and 39 tax increases have retarded economic activity, and, thus, higher tax revenue, in the state.
Also, the federal budget’s fiscal cliff looms Jan. 1. Even if that double whammy of automatic tax increases and spending cuts is avoided, the new year also brings a package of other tax increases from the implementation of the Affordable Care Act.
This past summer’s pension reform was mainly window dressing before the election. Now, reality is setting in. Government employee pensions continue to devour more of the budget.
With Republicans now marginalized in state government, it’s time for moderate Democrats to step forward. One of them is state Sen. Lou Correa of Santa Ana. Another is newly elected Assemblywoman Sharon Quirk-Silva of Fullerton. Now is another time to show leadership.