PUBLIC EMPLOYEE UNIONS ARE SINKING CALIFORNIA
January 26, 2010
California is in a precarious position, with a 12.3 percent unemployment rate (more than two points higher than the national average) and a budget $20 billion in the red (only months after the last budget fix closed a large deficit). Productive Californians are leaving for states with less-punishing regulatory and tax regimes. Yet so far there isn't a broad consensus to do much about those who have prodded the state into its current position: public employee unions that drive costs up and fight to block spending cuts, says Steven Greenhut, Director of the Pacific Research Institute's journalism center.
- Approximately 85 percent of the state's 235,000 employees (not including higher education employees) are unionized.
- As the governor noted during his $83 billion budget roll-out, over the past decade pension costs for public employees increased 2,000 percent; state revenues increased only 24 percent over the same period.
- An advisor for Gov. Schwarzenegger wrote in the San Jose Mercury News last week that, "This year alone, $3 billion was diverted to pension costs from other programs."
- There are now more than 15,000 government retirees statewide who receive pensions that exceed $100,000 a year, according to the California Foundation for Fiscal Responsibility.
Many of these retirees are former police officers, firefighters, and prison guards who can retire at age 50 with a pension that equals 90 percent of their final year's pay. The pensions for these (and all other retirees) increase each year with inflation and are guaranteed by taxpayers forever -- regardless of what happens in the economy or whether the state's pensions funds have been fully funded (which they haven't been).
A 2008 state commission pegged California's unfunded pension liability at $63.5 billion, which will be amortized over several decades. That liability, released before the precipitous drop in stock-market and real-estate values, certainly will soar, says Greenhut.
Source: Steven Greenhut, "Public Employee Unions Are Sinking California," Wall Street Journal, January 23, 2010.
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