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. 

Consider: 

  • 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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