The Cost of the Protected Class by our Governor....

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By ARNOLD SCHWARZENEGGER

Recently some critics have accused me of bullying state employees. Headlines in California papers this month have been screaming "Gov assails state workers" and "Schwarzenegger threatens state workers."

I'm doing no such thing. State employees are hard-working and valuable contributors to our society. But here's the plain truth: California simply cannot solve its budgetary problems without addressing government-employee compensation and benefits.

As former Speaker of the State Assembly and San Francisco Mayor Willie Brown pointed out earlier this year in the San Francisco Chronicle, roughly 80 cents of every government dollar in California goes to employee compensation and benefits. Those costs have been rising fast. Spending on California's state employees over the past decade rose at nearly three times the rate our revenues grew, crowding out programs of great importance to our citizens. Neglected priorities include higher education, environmental protection, parks and recreation, and more.

Much bigger increases in employee costs are on the horizon. Thanks to huge unfunded pension and retirement health-care promises granted by past governments, and also to deceptive pension-fund accounting that understated liabilities and overstated future investment returns, California is now saddled with $550 billion of retirement debt.

The cost of servicing that debt has grown at a rate of more than 15% annually over the last decade. This year, retirement benefits—more than $6 billion—will exceed what the state is spending on higher education. Next year, retirement costs will rise another 15%. In fact, they are destined to grow so much faster than state revenues that they threaten to suck up the money for every other program in the state budget. (See the nearby chart.)

I've held a stricter line on government employment and salary increases than any governor in the modern era (overall year-to-year spending has increased just 1.4% on my watch). Nevertheless, employee costs will keep marching upwards because of pension promises, and they will never stop doing so until we get reform.

At the same time that government-employee costs have been climbing, the private-sector workers whose taxes pay for them have been hurting. Since 2007, one million private jobs have been lost in California. Median incomes of workers in the state's private sector have stagnated for more than a decade. To make matters worse, the retirement accounts of those workers in California have declined. The average 401(k) is down nationally nearly 20% since 2007. Meanwhile, the defined benefit retirement plans of government employees—for which private-sector workers are on the hook—have risen in value.

Few Californians in the private sector have $1 million in savings, but that's effectively the retirement account they guarantee to public employees who opt to retire at age 55 and are entitled to a monthly, inflation-protected check of $3,000 for the rest of their lives.

In 2003, just before I became governor, the state assembly even passed a law permitting government employees to purchase additional taxpayer-guaranteed, high-yielding retirement annuities at a discount—adding even more retirement debt. It's as if Sacramento legislators don't want a government of the people, by the people, and for the people, but a government of the employees, by the employees, and for the employees.

For years I've asked state legislators to stop adding to retirement debt. They have refused. Now the Democratic leadership of the assembly proposes to raise the tax and debt burdens on private employees in order to cover rising public-employee compensation.  

 But what will they do next year when those compensation costs grow 15% more? And the year after that when they've risen again? And 10 years from now, when retirement costs have reached nearly $30 billion per year?   And the year after that when they've risen again? And 10 years from now, when retirement costs have reached nearly $30 billion per year?    That's where government-employee retirement costs are headed even with the pension reforms I'm demanding. Imagine where they're headed without reform.

My view is different. We must not raise taxes or borrow money to cover up fundamental problems.

Much needs to be done. The Assembly needs to reverse the massive and retroactive increase in pension formulas it enacted 11 years ago. It also needs to prohibit "spiking"—giving someone a big raise in his last year of work so his pension is boosted. Government employees must be required to increase their contributions to pensions. Public pension funds must make truthful financial disclosures to the public as to the size of their liabilities, and they must use reasonable projected rates of returns on their investments. The legislature could pass those reforms in five minutes, the same amount of time it took them to pass that massive pension boost 11 years ago that adds additional costs every single day they refuse to act.

And after they've finished passing those reforms, they could take another five minutes to pass legislation terminating the annuity give-away they passed in 2003 and ending the immoral practice of pension fund board members accepting gifts or even campaign contributions from lobbyists, salesmen, unions and other special interests.

Reforming government employee compensation and benefits won't close this year's deficit. It will, however, protect the next generation of Californians from overwhelming burdens. The same is true with respect to the other reform I'm demanding—the establishment of a rainy-day fund so that legislators can't spend temporary revenue windfalls.

All of these reforms must be in place before I will sign a budget.

I am under no illusion about the difficulty of my task. Government-employee unions are the most powerful political forces in our state and largely control Democratic legislators. But for the future of our state, no task is more important.

Mr. Schwarzenegger is the governor of California.

COMMENT:

Thank you, Gov. Schwarzenegger! You are Right On and absolutely correct in his commentary.  What is also true is that the above applies to probably every one of the 47 States wearing budgetary red; including our Federal Government!

Another 'Truth' not even addressed is the fact that the "Protected Class" of Union Administration and wage-earner is not allowed in the U.S Constitution nor in the California Constitution:

U.S. Constitution: Amendment X:  Not Federal, Not State, therefore the people's business.  Amendment XIV: Citizens of the United States are citizens of the State in which they reside. "..No State shall make or enforce any law which shall abridge the privileges or immunities.." as citizens of the U.S.."..nor deny any person within its jurisdiction the equal protection of the laws.  Taxation is a law - unions are a special class of citizen receiving privileges and immunities other citizens do not receive.

California Constitution is also addressing the XIV in Article I:1; 3(b)2,4; 7(a)(b)  7(b) is copied here: (b) A citizen or class of citizens may not be granted privileges or immunities not granted on the same terms to all citizens. Privileges or immunities granted by the Legislature may be altered or revoked. 

No taxpayer who is non-union has his/her retirement account 100% covered - including for market losses - and spiking; the majority of non-union tax-paying earners don't even have retirement accounts both by choice and by opportunity - same is true of vacations, paid time off, or guaranteed jobs!  Government union members enjoy a closed shop Union, noncompetitive system!!!!

Federal Government and States have no grounds to enter into special agreements with any special group of citizens hired to perform the work of any level of government on the Federated Form triangle including increasing taxation for the purpose of paying the "Protected Class of Union Administration and Membership"; or confiscate additional taxpayer earnings for covering additional loses incurred by the taxpayer funded retirement plans of Union Administrators or members. Using taxpayer funds to 'spike'  the last year of a worker's earning to increase a retirement benefit appears fraudulent which doesn't require any constitution---just plain old, fashioned law!  


Most frequently Mutual Funds are from the resources of the Dow, Wilshire, Nasdac Markets, that union administrators of politicians love to call the enemy of 'Main Street'. This is the exclusive location of unions; because it is the rare corporation or business in the private sector that: 1) pays 100%, ever, for the benefit of retirement accounts; or 2) - covers any employees losses if the market topples down as it is now. The deficit to the Union Administrators - Member's retirement accounts, are among the Top Reasons, for increasing taxes from city to county to state to federal levels of government; and doesn't take in consideration for Commissions (311 in CA). Amendment XVI has never placed a limit on the Federal Branch of government to tax. That is one reason this Obama, Socialist Regime can continue to demand, force more taxes out of taxpayer earnings as Legal Plunder, a.k.a Social Justice in the Socialist circle of elitist power and money.

It is very difficult to understand why legislatures and governors tend to ignore the applications of American Principles the Constitutions supply.  And Remember, the U.S Constitution is to be read from 7-8yrs. throughout adult voting years as the duty of 'We the People' just powers governing the government! While State Constitutions aren't as well written in deductive to inductive logic, and the needed principles can be harder to find; the principles are present, but require more a discerning read. 

The blatant disregard of the individual's right to the pursuit of happiness; with the risk of loss or profit part of each person's own efforts; continues as a principle that the so-called 'Democratic-Socialist' Party cannot comprehend; and this Administration has no intention of respecting, attending, or supporting the Oath of Office to support the Supreme Law of the Land, as well as the California Left Legislature of either CA or U.S. Constitutions.


Use the Constitutions! That is what both exist to be used to stop the invasive, too large central with abandon of separation of power with the 'checks and balances' of overlapping of the 3 branches of Federal Government. Elected and about to be newly elected Representatives of The Republic to take State and Federal office: PLEASE LEARN AND TEACH THE PRINCIPLES OF DUTY, HONOR, LAW, SERVICE, IN GOD WE TRUST, ACCOUNTABILITY, LIBERTY, INDEPENDENCE, UNITY, SACRIFICE, GIFTS which establish the contents of the Constitution; learn and pay attention to Hamilton's Legislative Test; and get the Federal - especially Executive Branch out of areas it has proven incapable of handling and has no enumerated powers: Education, Environment, Energy, Medicine with both Medicare and -Caid, private insurance: College, medicine, unemployment with Social Security a choice for each recipient: invest, or the Fed's program without guarantee's that money deposited to the Treasury - will ever be returned because it is not the Government's business to guarantee any grant, loan, SS income from money a taxpayer provides. That is the reason the founders did not tax.  Money without ownership = irresponsibility especially without accountability(i.e. when a program is placed by an Act, and it cannot or does not meet the goal which caused the spent money; then Accountability requires the government to STOP THE PROGRAM).

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