Tag: California

The $822,000-per-Year Bureaucrat and the Death of California

Over the years, I’ve shared some outrageous examples of overpaid bureaucrats.

Hopefully we’re all disgusted when insiders rig the system to rip off taxpayers. And I suspect you’re not surprised to see that the worst example on that list comes from California, which is in a race with Illinois to see which state can become the Greece of America.

Well, the Golden State has a new über-bureaucrat. Here are some of the jaw-dropping details from a Bloomberg report.

The numbers are even larger in California, where a state psychiatrist was paid $822,000, a highway patrol officer collected $484,000 in pay and pension benefits and 17 employees got checks of more than $200,000 for unused vacation and leave. The best-paid staff in other states earned far less for the same work, according to the data.

Wow, $822,000 for a state psychiatrist. Not bad for government work. So what is Governor Jerry Brown doing to fix the mess? As you might expect, he’s part of the problem.

…the state’s highest-paid employees make far more than comparable workers elsewhere in almost all job and wage categories, from public safety to health care, base pay to overtime. …California has set a pattern of lax management, inefficient operations and out-of-control costs. …In California, Governor Jerry Brown hasn’t curbed overtime expenses that lead the 12 largest states or limited payments for accumulated vacation time that allowed one employee to collect $609,000 at retirement in 2011. …Last year, Brown waived a cap on accrued leave for prison guards while granting them additional paid days off. California’s liability for the unused leave of its state workers has more than doubled in eight years, to $3.9 billion in 2011, from $1.4 billion in 2003, according to the state’s annual financial reports. …The per-worker costs of delivering services in California vastly exceed those even in New York, New Jersey, Illinois and Ohio.

Cartoon California Promised LandActually, it’s not just that he’s part of the problem. He’s making things worse, having seduced voters into approving a ballot measure to dramatically increase the tax burden on the upper-income taxpayers.

I suppose the silver lining to that dark cloud is that many bureaucrats now rank as part of the top 1 percent, so they’ll have to recycle some of their loot back to the political vultures in Sacramento.

But the biggest impact of the tax hike—as shown in the Ramirez cartoon—will be to accelerate the shift of entrepreneurs, investors, and small business owners to states that don’t steal as much. Indeed, a study from the Manhattan Institute looks at the exodus to lower-tax states.

The data also reveal the motives that drive individuals and businesses to leave California. One of these, of course, is work. …Taxation also appears to be a factor, especially as it contributes to the business climate and, in turn, jobs. Most of the destination states favored by Californians have lower taxes. States that have gained the most at California’s expense are rated as having better business climates. The data suggest that many cost drivers—taxes, regulations, the high price of housing and commercial real estate, costly electricity, union power, and high labor costs—are prompting businesses to locate outside California, thus helping to drive the exodus.

Yet another example of why tax competition is such an important force for economic liberalization. It punishes governments that are too greedy and gives taxpayers a chance to protect their property from the looter class.

A Quick Round-Up on Education Policy and the 2012 Elections

Californians approved Prop 30, a $6 trillion dollar tax hike intended to save public schools from “devastating” cuts. In fact, the state is already spending around $30 billion more today on public schooling than it did in the early 1970s, after controlling for both enrollment growth and inflation—and SAT scores, the only academic outcome measure going back that far, are down. Prediction: this $6 billion will have little impact on children’s education even if it does make it to the school level. Instead, it will further slow California’s economy and drive a few more businesses out of the state.

Georgia approved a new charter school authorizer, which should lead to more rapid growth of charter schools in that state. Based on recent research published by the Cato Institute, this will increase generally mediocre options within the public school sector by, in part, cannibalizing generally better options in the private sector. Georgia can avoid a net reduction in educational diversity, freedom, and quality by expanding its existing education tax credit program.

Washington becomes the 43rd state to adopt charter schools. Initiative 1240 caps the state-wide charter school count at 40 over the next five years, however, so it will have little short term impact. If the charter cap is expanded before Washington state levels the financial playing field for private schooling through a tax credit program like Georgia’s, the existing independent education sector in the state will be largely consumed by the competition from new “free” charter schools.

High profile Indiana state schools superintendent Tony Bennett has been defeated by his rival Glenda Ritz. Ritz not only opposes the statewide voucher program championed by Bennett, she is among the plaintiffs in a lawsuit to overturn it. Indiana’s voucher legislation accords the state department of education the power to adopt rules and regulations pertaining to its implementation, including determination of students’ eligibility to receive vouchers. If Ritz does not use these powers in an attempt to hobble and curtail the program, I will be shocked.

The political balance in New Hampshire’s legislature has shifted toward Democrats strongly supportive of the educational status quo. This raises the possibility that there will be efforts to cripple or repeal a K-12 scholarship donation education tax credit in that state. Though the program is quite small, it was among the best-designed in the country and it would be an unfortunate turn of events for low-income children in that state if the program is killed.

None of these developments or possible developments are likely to derail the growing interest in expanding educational freedom in America as a whole, but they do suggest that reformers have more work to do in educating themselves and the public about what works and what doesn’t in education policy.

California Officials: ObamaCare ‘Exchange’ Will Hike Premiums up to 25%

California is one of the few states charging ahead on establishing one of ObamaCare’s health insurance “exchanges.” According to the Los Angeles Times:

California insurance officials have expressed concern about substantial rate hikes for some existing policyholders going into the exchange.

Under a new rating map approved by state lawmakers, the Department of lnsurance estimated that premiums for similar coverage could increase as much as 25% in West Los Angeles, 22% in the Sacramento area and nearly 13% in Orange County.

California officials have floated the idea of legislating lower prices. One way would be to throw West Los Angeles and Orange County into the same risk pools. That might reduce premiums in West L.A., but only by increasing premiums in Orange County. With a few simplifying assumptions, premiums in both  West L.A. and the O.C. could rise by 19 percent. An alternative would be to cap premium increases. One state official proposes a cap of 8 percent. But that would just be an implicit form of government rationing. If insurers cannot charge premiums that cover their costs, they will cover fewer services.

If Oklahoma prevails in its lawsuit against the IRS, or if any similar plaintiffs prevail, California will look pretty silly for charging forward with an Exchange. California will have imposed on its employers an unnecessary tax of $2,000 per worker – a tax that California employers can avoid by relocating to states that have not created an Exchange. It will also have unnecessarily exposed 2.6 million California residents to ObamaCare’s individual mandate – i.e., a tax of $2,085 on families of four earning as little as $24,000 per year, which those residents can likewise avoid by relocating to another state.

Watch this space for development.

86ing the Arguments for California Props 30, 38

Californians are being asked to raise their taxes by between $7 billion (Prop 30) and $10 billion (Prop 38) to prop-up public school budgets. If they don’t, backers warn, public schools will face “devastating cuts.” That’s the fear mongering. This is the reality:

Over the past four decades, real per pupil spending in California has roughly doubled. In dollar terms, Californians are spending $27 billion more today on K-12 education than they did in 1974, when Gov. Jerry Brown was first elected to office—and that is after controlling for both enrollment growth and inflation.

The last dashed spike on the spending line is the increase if Prop 30 passes, as Governor Jerry Brown has been assuming. If it doesn’t pass, per pupil spending will still be up more than 80 percent over this period, after controlling for inflation. What’s more, there is no evidence that the fantastic spending increases of the past have done anything to improve student achievement.

The only state-level achievement data we have that go back this far are the SATs, and, taking into account the renorming that occurred in the mid 1990s, they have actually declined by five percent. None of the customary excuses can explain away this dismal record. A larger share of students participated in 1972 than do so today, so if a shrinking test-taking pool is the sign of a more elite subset of students taking the test, then scores should be higher today, not lower. And while state-level breakdowns by race and ethnicity are not available that far back, the national trend is similar and it shows stagnation in the scores of majority white students—which excludes changing demographics as an explanation.

As I wrote earlier this year:

It is true that a $7 billion tax increase would at least preserve a certain number of public sector jobs, even if those jobs have not, and likely will not, improve educational outcomes. But if that $7 billion is not taxed out of the free-enterprise sector of California’s economy, it will preserve or create private-sector jobs when it is spent or invested. And, contrary to the pattern shown in the accompanying chart, jobs in the free-enterprise sector do produce things that people value: from movies and music to citrus fruits and cellphones—thus generating new revenue. Tax away that money and you take away those private-sector jobs and revenue.

The final question boils down to this: Can Californians afford to tax $7 billion out of the productive sector of the economy and get nothing in return for the damage it would do?

That’s the question California voters must ask themselves on November 6th.

Trade Problems May Not Always Call for Trade Answers

The federal system of government in the United States has the invaluable consequence of enabling policy experimentation.  If a state legislature is considering adopting a particular policy, it can often look at the experiences of other states that have tried that policy before.  A recent study from the Milken Institute in California tries to take advantage of such potential comparisons to offer ways that California could increase its dwindling share of U.S. exports.  It is a valiant effort, but California’s decline is not the consequence of inadequate trade policy and no amount of export promotion is going to fix it.

The study begins by comparing California’s decline in export share to the dramatic rise in cross-border trade originating from Texas, the nation’s leader in goods exports. After using Texas’s success as an example of how California is lagging behind, the study decides not to use Texas as a model for reform and instead focuses on other states that have used export promotion (subsidy) agencies as case studies for how California can improve its bureaucracy to reverse the current trend.

If the success of Texas is what California should seek, then why not look at Texas as a model for reform? The study says that Texas is “unique” because it 1) has no export promotion agency, 2) has a low cost of doing business, and 3) has benefited from increased trade with the growing economy of Mexico by virtue of NAFTA-enabled integration. These differences seem to point to clear policy choices: don’t worry about export promotion (easy), improve your state’s business environment, and be close to Mexico (done!).

If it becomes more business-friendly, your state will have more business, export-oriented business included.  Since we’re looking at Texas as a model, may I suggest improving the business environment by lowering taxes and reducing regulation.

Now, I realize that the Overton Window for politically feasible reform proposals in California may not include lowering the cost of doing business. It makes a lot of sense for the authors of the study to point out the root causes of different outcomes in Texas and California but still seek a different solution more palatable to Californian sensibilities. I think their specific proposals for enhancing the capacity and quality of the export promotion process are insightful and well-supported.

There is a larger lesson in all of this for national economic policy. Increasing exports through the National Export Initiative has been a major goal of the Obama Administration’s economic recovery plan, and subsidizing loans through the Export-Import Bank has been a primary tool in that endeavor. But the people of the United States don’t need more bureaucracy to engage in more trade. They need policies that remove artificial barriers and decrease the cost of doing business—international and otherwise.

California Knows How to Party… $16 Billlion Too Lavishly

Californians may be forgiven for expectorating coffee over their morning newspapers today, as they learn that their state deficit is not $9 billion, as Governor Brown’s administration had predicted, but rather $16 billion. Oops.

Further increasing the breakfast table choking hazard is the Governor’s “solution”: raise taxes. Gov. Brown is pushing a fall ballot initiative that would raise both sales and income taxes. He argues that this is preferable to cutting spending on things like public schooling on the grounds that schools have already been slashed to the bone. But have they? Actually, no. California’s per pupil spending has nearly doubled over the past forty odd years, in real inflation-adjusted dollars, and remains near its all-time high.

What did California get for that massive spending increase? Not a great deal if the SAT performance of its college-bound high school students is any guide. And, as I pointed out in this op-ed, it’s a pretty reasonable guide.

But while raising taxes has consistently failed to improve educational performance, cutting them actually works—via tax-credit school choice programs that give families an easier choice between public and private schools. Florida’s education tax credit program, for instance, has been shown to improve the achievement of students who stay in public schools, to improve the achievement of students who accept scholarships and attend private schools, and to save taxpayers millions of dollars a year. If expanded on a mass scale in a large state like California, it would save billions of dollars a year.

So what’ll it be, Californians? Fiscal and education policy sobriety, or the Governor’s hair-of-the-dog continued big government partying?

Gay Marriage Still Has an Uphill Climb

The right answer to the same-sex marriage question is to remove government from the marriage business altogether.  That’s a legislative matter, however, and not something the courts should decree. Until then, because state and federal laws confer benefits based on marital status, the equal protection provisions of the Fifth and Fourteenth Amendments require that same-sex couples not be subject to discrimination in receipt of those benefits. But that issue was not addressed by the U.S. Court of Appeals in California—a state that permits gay unions and does not discriminate against such unions in conferring “marital” benefits. The specific issue the court decided was whether the label “marriage” could attach to heterosexual but not homosexual partnerships. Quite properly, the court ruled that it could not. That’s a narrow but important step in the right direction. But it does not settle the more significant question whether states may grant benefits to heterosexual couples while granting less or no benefits to homosexual couples.

In fact, there’s a negative aspect of the court’s ruling, which essentially declared Prop 8 unconstitutional because California went further than other states in allowing civil unions. The court held there’s no rational basis for allowing such unions but requiring that they carry a different label. That’s quite different from invoking the Equal Protection Clause to forbid a state from denying gays a right to the benefits of marriage. That issue didn’t arise because California grants such benefits to gays. Regrettably, other states may be dissuaded from following the California civil union model because their voters wish to limit the definition of “marriage” to exclude gays. In this instance, the better may become the enemy of the good.