MyGovCost News & Blog

Costing Out Governor’s Tunnel Vision


Wednesday August 24th, 2016   •   Posted by K. Lloyd Billingsley at 3:49pm PDT   •  

37727744 - determined businessman gets out of the tunnelAs we noted, California’s vaunted high-speed rail project will require 35 miles of tunnels through the mountains north of Los Angeles. Governor Jerry Brown, a backer of the bullet train, also has tunnel vision for the Sacramento-San Joaquin Delta. Brown wants to dig 35 miles of tunnels to convey water to the State Water Project and Central Valley Project. The tunnels are officially known as the California WaterFix, and as Dale Kasler notes in the Sacramento Bee, a 2013 state cost-benefit study concluded that the project “makes financial sense.” On the other hand, according to Jeffrey Michael, director of the Center for Business and Policy Research at the University of the Pacific, the tunnels are a financial bust.

In the new study, Benefit-Cost Analysis of The California WaterFix, Michael argues that the project “is not economically justified under both the base and optimistic scenarios.” According to his estimate, Waterfix will provide “only 23 cents of benefits for each dollar of cost.” Construction costs, estimated at $16 billion, “are still more than 2.5 times larger than benefits.” The project could only be justified “if its construction and mitigation costs were below $2 billion or if its water yield could be increased from an annual average of 225,000 acre feet per year to about 2 million acre feet per year without negatively impacting the environment or causing any additional harm to other water users.”

As Michael’s study emerges, Gov. Brown is seeking approval for WaterFix from two federal agencies. As Kasler explains, state officials “believe it’s crucial to get those approvals before President Barack Obama leaves office next January, or risk losing momentum on the entire project.”

Gov. Brown appears undisturbed by the financial, environmental and safety concerns, and his brand of tunnel vision can’t reverse itself. The governor prefers to focus on the joys of spending and a glowing legacy down the road. Long after he leaves office, California taxpayers, and their children, will be stuck with the costs.

Armed Enforcement: Bureaucracies Get Bigger and More Militant


Monday August 22nd, 2016   •   Posted by K. Lloyd Billingsley at 9:11am PDT   •  

60843163 - spec ops police officers swat in black uniform in actionThey came before dawn, a squad of six armed officers, banging on the door of Maria Elena Hernandez, 62, a Los Angeles grandmother. When she identified herself, one of the officers twisted her arms behind her back and slapped her in handcuffs. Hernandez protested that the officers had the wrong person, but they duly carted her off to jail. The armed squad was not from the Los Angeles Police Department, the DEA or the Department of Homeland Security. As Marisa Gerber notes in the Los Angeles Times, the armed squad was from the California Department of Insurance (CDI) and they did have the wrong person. The CDI had confused Hernandez with an insurance fraud suspect of the same surname, but it took them more than two months to catch the error. By that time she owed $2,000 in bail bonds and $1470 for a medical exam initiated by jail staff. The CDI said they deeply regretted the error, but the Hernandez case might prompt Californians to take a hard look at this state agency.

The CDI claims it is the “largest consumer protection agency in the state,” with more than 1,300 employees and an annual budget of more than $260 million. The 1988 Proposition 103 “expanded CDI’s authority” and made Insurance Commissioner an elected office. The CDI’s fraud division dates from 1979 and in 1980 the division’s detectives became sworn peace officers conducting surveillance, undercover operations, and making arrests. The Fraud Division’s funding “is primarily secured from assessments on insurance policies issued in the State,” including every automobile policy. The CDI bills the division as “the premiere insurance fraud investigative agency in the nation with over 200 sworn officers operating in nine regional offices throughout the State of California.”

This “premier” agency sometimes busts the wrong person in an armed pre-dawn raid. The CDI also confirms that bureaucracies tend to get bigger, more expensive, and also more militant. In similar style, the federal U.S. Department of Education deploys an armed enforcement division that conducts pre-dawn raids. The Transportation Safety Authority, initially limited to airports, deploys a Visible Intermodal Prevention and Response program that rousts people at train stations and other transportation hubs. It’s all for the protection of the public of course.

Taxpayer-Financed Stadium for Sale!


Monday August 22nd, 2016   •   Posted by Craig Eyermann at 6:22am PDT   •  

14200458_S In 1996, construction began on a brand new major league ballpark in Phoenix, Arizona, which became the home of the Arizona Diamondbacks when it was completed and opened in 1998. Originally called Bank One Ballpark, the stadium is now known as Chase Field.

The stadium cost $349 million to complete, of which, $238 million (68%) was contributed by the taxpayers of Maricopa County and $111 million (32%) was contributed by the Diamondbacks baseball team.

Last week, Maricopa County’s Supervisors voted unaminously to move forward with negotiations to sell Chase Field to a private developer who made an unsolicited bid of just $60 million for the stadium, which is just a little over 25% of the amount they paid nearly 20 years ago to build it.

In terms of today’s inflation-adjusted dollars, the total cost to build the 48,569 seat air-conditioned stadium with a retractable roof, which is fully owned by the Maricopa County Stadium District, comes in at over $515 million, with the equivalent taxpayer-contributed portion working out to be more than $351 million.

These inflation-adjusted figures that the stadium has really depreciated by nearly 89% since its construction began 20 years ago. For Maricopa County taxpayers, that $60 million sale would represent the recovery of just 17% of the inflation adjusted dollars they spent to build the stadium.

That’s a fire sale price, so a very good question to ask is why are the county supervisors of Maricopa County leaping all over the opportunity to sell the stadium for so apparently little. Laurie Roberts of the Arizona Republic asked the same question and got part of the answer:

How could a ballpark we spent $250 million to build not even 20 years ago on prime land in downtown Phoenix be worth only $60 million?

I built my house around that same time. It’s now worth more than twice what I paid for it. Why is Chase Field worth only a quarter of what we paid for it?

Why would we sell it for $60 million when the county’s own assessor puts the value at $351 million?

Maricopa County Supervisor Denny Barney, in selling the deal to his colleagues, laid it out: “This allows us to honor the public trust by not only returning public dollars to the public coffers ... and at same time finding a way to help Diamondbacks play and maintain their agreement to play in Chase Field.”

In other words, we’re holding this fire sale because team owner Ken Kendrick has threatened to go elsewhere if we don’t give him better terms than called for in his team’s contract with the county. Read: $187 million in ballpark upgrades.

Put another way: we’re contemplating selling a public asset for 25 cents on the dollar so that Diamondbacks can get what they want: Fewer seats, fancier suites and more doodads that the county says our contract doesn’t require us to provide.

If the sale doesn’t happen, then Maricopa County is on the hook to pay $187 million in upgrades to Chase Field, which would appear to be nearly $187 million more than the county has available to pay for such improvements. By selling the stadium, the Maricopa County government is also selling that liability to the potential new owners, who will be required by the stadium’s 30-year contract with the Arizona Diamondbacks to deliver those upgrades. For the buyer, that represents a cost of at least $247 million.

Otherwise, Maricopa County will need to both borrow more money to meet its contractual obligations and raise its taxes to pay for expenses it knew it would have from the outset and should have provided for paying.

But it didn’t. What the taxpayers of Maricopa County are really getting in this deal is $60 million in cash and the avoidance of at least an additional $187 million in costs. That combined $247 million then represents what the county is really getting in jumping on the opportunity to sell the stadium.

While that $247 million is almost 4% more than the amount it contributed to build the stadium back in the 1990s, once inflation is factored in, Maricopa County is really selling the stadium for a 30% discount, which is the gap between $247 million and the equivalent of $351 million in today’s dollars that it paid to build the stadium 20 years ago, which coincidentally happens to be the amount at which its assessor has appraised the current value of the stadium.

As bad as taxpayer financed stadiums are for the finances of nearly all cities that have built them, that may be the best deal the taxpayers in any city have been offered in return for their investment in major professional sport franchises.

282 TVs in a VA Closet and Nothing’s On


Thursday August 18th, 2016   •   Posted by Craig Eyermann at 6:41am PDT   •  

13057094 - a wall of old vintage tube televisions with wood trim The Department of Veterans Affairs has gotten itself into hot water with its Inspector General again, this time, for wasting over $292,492 to buy some 282 television sets for a new patient area in the John D. Dingell VA Medical Center in Detroit, Michigan that was never built, where the TVs were thus never installed. Instead, they have sat for over two and half years in storage.

The Daily Caller News Foundation‘s Luke Rosiak has the story:

Detroit’s Department of Veterans Affairs (VA) hospital spent $311,000 on TVs that were never used and remain in storage.

The federal agency’s facility ordered the 300 TVs “because they had funds available,” which “may have violated the bona fide needs rule,” according to a new report from the department’s inspector general (IG).

Now, the TVs have sat “in storage for about 2 1/2 years. Further, warranties for the TVs expired.”

Detroit’s WJBK adds more to the story with personal interviews.

“You got a lot of homeless veterans that need help,” said veteran Robert Height. “To buy TVs and not use them, come on, we could have done something better with the money.

“There is a lot more that can be done. What’s more important -homeless veterans or TVs?”

That’s a good question, and other veterans interviewed by WJBK had some suggestions.

“For one thing, they can start off with some wheelchairs,” said veteran Earnest Smith. “I see a lot of veterans don’t have their wheelchairs. A lot of veterans have to be waited on, and water fountains that the veterans can use as they wait to see their doctor.”

“Basically the care here is more like a clinic than a hospital, I can get more help going to the DMC.” said veteran Larry Smith.

Imagine that. Veterans believe the VA should focus its priorities on providing medical treatment and disability accommodations to meet their health needs. The question remaining to be asked of the VA’s administrators is will they ever tune in to the reality show going on around them?

Trickle-Down Debt, Failure


Monday August 15th, 2016   •   Posted by K. Lloyd Billingsley at 9:38am PDT   •  

DebtLadder_MLPoliticians may bill it as “free”, but government monopoly in education is big business that racks up considerable public debt. As Dan Walters of the Sacramento Bee observes, in recent decades California has issued $45 billion in school bonds now being repaid at a cost of nearly $3 billion a year. With interest the total cost of retiring the bonds will be about $90 billion. That figure is about to get bigger because “a $9 billion bond issue has been placed on the Nov. 8 ballot by a coalition of school groups, developers and the construction companies that profit from school contracts.”

The measure is Proposition 51, the Kindergarten Through Community College Public Education Facilities Bond Act of 2016. Though it will increase debt, the educrats and their allies are billing it as the ticket to economic recovery. “Studies show that 13,000 jobs are created for each $1 billion of state infrastructure investment,” the measure claims. “These jobs include building and construction trades jobs throughout the state.” So the bond money supposedly trickles down into jobs, but only within a narrow range. Prevailing wage laws reserves those jobs for union companies, and more than 90 percent of workers in the private sector are not union members. So “free” public education is highly profitable for a select group of insiders. On the other hand, the whole K-12 government monopoly system is based on the trickle-down principle.

The late John Mockler was a wealthy lobbyist who became secretary of education and executive director of the State Board of Education under Governor Gray Davis. Mockler authored Proposition 98, the 1988 constitutional amendment that earmarked 40 percent of the California’s general fund budget for K–12 education. All that money, now some $65 billion, must trickle down through multiple layers of bureaucratic sediment before it reaches the classroom. Taxpayers might wonder about the results for students. Nearly half of incoming students in the California State University system need remedial math and English.

Weaponizing Ukraine’s National Debt


Monday August 15th, 2016   •   Posted by Craig Eyermann at 6:21am PDT   •  

36597643 - war in ukraine concept isolated on white background As much as we focus on the U.S. national debt, there’s a lot that we can learn from other governments whose national debts have surpassed their people’s ability to even hope to pay back their nation’s creditors.

A very strong argument to be made that the nation with the worst problem arising from its excessive national debt is Ukraine. The Economist explains how just one portion of its $18 billion national debt has put the nation at extreme risk:

Russia lent Ukraine $3 billion in December 2013. The bond was arranged by Western law firms (including White & Case and Clifford Chance) and is listed on the Irish stock exchange. The bond was essentially a bribe to Viktor Yanukovych, Ukraine’s now-ousted president, who was dithering between European and Eurasian integration. Senior Ukrainian officials say that the government itself never saw the money; most probably it was spirited out of the country by Mr Yanukovych’s cronies.

Since its issue, the bond has caused Ukraine big problems. A bizarre clause in the bond says that if Ukraine’s debt-to-GDP ratio exceeds 60%, Russia can demand early repayment; that might, in turn, trigger an automatic default on Ukraine’s other international bonds through a so-called “cross-default” clause. The government’s debt is well above the 60% threshold (it is touching 100%), thus enabling Russia to precipitate a default if it wants to. It has not yet done so. But repaying the bond would be very tricky for Ukraine, which has only about $12 billion in foreign reserves. Repaying Russia would also go down badly with the Ukrainian public.

How has Russia reacted to Ukraine’s debt-restructuring deal? Not well, you will not be surprised to hear. Anton Siluanov, Russia’s finance minister, says that Russia will not even talk to Ukraine regarding the restructuring of that bond. Russia now argues that the debt is an “official-sector” loan (not a private-sector one) meaning that it is not subject to the debt deal. By arguing this, Russia causes other problems, even if it does not get repaid. The International Monetary Fund is not supposed to lend to a country if it is in default to an official creditor. But Ukraine is desperately dependent on IMF funds to stay solvent; it is expecting another tranche of cash sometime in the autumn. Timothy Ash of Nomura, a bank, says he is “not sure that a clear strategy has yet been worked out” by the IMF. Ukraine’s debt saga is far from over.

That story is from September 2015. Since then, Ukraine’s debt saga has gone from bad to worse. In December 2015, Ukraine pulled the trigger on the national debt gun that’s pointed at itself, and defaulted on paying its $3 billion liability to Russia just before the bill came due. Bloomberg reports:

Ukraine said it won’t repay $3 billion in bonds due to Russia, moving a step closer to a court battle amid a new wave of economic tension between the two ex-Soviet neighbors.

Prime Minister Arseniy Yatsenyuk said Kiev is imposing a moratorium on the note due Dec. 20, which Russian President Vladimir Putin bought two years ago as part of an abortive bail-out for Ukraine’s former leader just months before he was toppled. Russia said on Friday it will wait until a 10-day grace period on the bond expires on Dec. 30 before starting legal action.

Legal action came quickly. Business Insider describes how relations have deteriorated between borrower and creditor:

Russia and Ukraine are embattled in full-blown economic war.

The latest step taken was by Russia, which confirmed in a statement on its Ministry of Finance website, that it is suing Ukraine for allegedly not paying back $3 billion (£2 billion) worth of debt.

This is the latest in a line of tit-for-tat disputes, bans, and lawsuits since the Ukrainian peninsula of Crimea was “reunified” with Russia by way of well equipped, organised, and trained “self-defense units,” who were actually Russian special forces, nearly two years ago.

In May 2016, the court actions involving Ukraine’s debt argument with Russia took a very unusual turn. The Duran describes a dramatic reversal in Ukraine’s legal arguments:

It has taken a while for Ukraine to file its Defence. As is usual in court cases Russia granted Ukraine at least one extension of time to enable it to do so. The reason given for the delay was apparently the change of government in Kiev following the forced resignation of Ukraine’s previous Prime Minister, Arseny Yatsenyuk.

In the event the Defence Ukraine has filed is one that has no precedent in legal proceedings of this sort. Ukraine claims it should be relieved of paying the debt because Russia’s alleged military aggression against Ukraine means Ukraine should be under no obligation to pay it.

The first thing to say about this Defence is that it essentially admits the debt. Ukraine is no longer saying the debt itself does not exist because it was a collusive arrangement – a bribe if you will – paid by Russia to Ukraine’s former President Yanukovich. Nor is Ukraine claiming the debt should not be repaid because it is intrinsically onerous.

These defences, if they were ever considered, essentially collapsed the moment the IMF recognised the debt as valid and said it was public debt – ie. debt owed by Ukraine to Russia as a sovereign state – not debt akin to that which Ukraine also owes to its private (mainly Western) creditors. Since the debt has been recognised as valid by the IMF Ukraine is no longer able to dispute it.

In light of this the Defence Ukraine has filed – claiming it should not be required to pay the debt because of the aggression Russia has allegedly committed against it – was realistically the only Defence possible if Ukraine was to defend the case at all.

Since then, the court case over its debt to Russia has faded as the nation’s problem appears to have gone from worse to perilous. According to CNN, a new series of Russian military troop movements along Ukraine’s border with Russia, including within the Crimean peninsula controlled by Russia, has put Ukraine on high alert:

Ukraine is ordering its troops to be on the “highest level of combat readiness” Thursday, amid growing tensions with Russia over Crimea.

The order comes after Russia accused Ukraine on Wednesday of launching a militant attack at “critically important infrastructure” near the city of Armyansk, Crimea, according to Russia’s state news service TASS.

But Ukrainian President Petro Poroshenko refuted the claims, calling them “insane” and suggesting Russia’s aim was more military threats against its neighbor.

The spat has seen tensions between the countries rise to their highest level since Russia annexed Crimea in 2014.

On Friday, August 12, 2016, Russia proceeded to up the stakes by positioning air defense missile systems in Crimea. Russia has announced that from August 16 to 19 it will hold military exercises in Crimea to “simulate the effect of an enemy attack using WMD” (Weapons of Mass Destruction).

Geopolitics appears to be playing a role, with Russia’s saber rattling having the immediate strategic goal of preventing Ukraine from joining NATO and keeping it within its sphere of influence. Russia’s leaders are clearly playing all the cards they have at their disposal. In that context, the battle over Ukraine’s debt owed to Russia may be just one front of a much larger conflict.

The situation reminds us of a key historical danger: Military conflicts sometimes arise whenever one nation becomes too indebted to another, as Investopedia‘s Stephen D. Simpson explains:

Countries that rely on other nations to buy their debt run a risk of becoming beholden to their creditors and having to trade sovereignty for liquidity. Although it probably seems unthinkable today, there was a time when countries would actually go to war and seize territories over debts. The well-known Mexican-American holiday Cinco de Mayo actually doesn’t celebrate Mexican independence, but rather a battlefield success over France in an invasion launched by France over suspended interest payments.

Actual military action over debt may no longer be tenable, but that doesn’t mean that debt cannot be a tool of political influence and power. In disputes over trade, intellectual property and human rights, China has frequently threatened to reduce or cease purchases of U.S. debt – an act that would very likely drive up rates for the U.S. government. China made a similar threat to Japan over territorial disputes related to the Senkaku/Diaoyu islands in the East China Sea.

Readers also need only look at what has happened to Greece and Spain to see how excessive debt imperils national sovereignty. Due to its inability to pay its debts and a desire to remain in the eurozone, Greece has had to accept various external conditions from the EU regarding its budget and national economic policies in exchange for forbearance and additional capital. Since then, unemployment has soared, civil unrest has grown and Greece is effectively no longer in charge of its own economic future.

While Russia appears to have far greater aims than than simply collecting loan repayments from Ukraine. The trade of sovereignty for liquidity is a key lever that Russia has at its disposal. In that sense, Russia’s position of acting as a creditor to Ukraine gives it another weapon to use against the much smaller nation, putting Ukraine at a greater disadvantage than it would be if not for its fiscal liability to Russia.

Federal Financing for Los Angeles Sports Park


Friday August 12th, 2016   •   Posted by Craig Eyermann at 6:24am PDT   •  

Coliseum-Front-Edited-1-of-1-1500x991 Last May, the City of Los Angeles decommissioned its Memorial Sports Arena, lowering three flags that had flown over the facility—those of the United States, California, and Los Angeles County and City—for the last time before making way for a new $250 million sports development in Exposition Park.

But there’s a problem. Neither Los Angeles City, County, or the State of California have enough money to realize the dreams of the project’s planners. So they’re turning to the federal government to finance the remaining $22.5 million that they haven’t been able to come up with between themselves. The Los Angeles Daily News reports:

The Los Angeles City Council agreed Friday to apply for a $22.5 million federal loan to help fund a sports museum, conference rooms and other facilities next to the Los Angeles Football Club’s 22,000-seat soccer stadium in Exposition Park.

City officials say these facilities, which are part of the plans for the $250 million stadium project, face a funding gap that can be bridged with a loan from the U.S. Department of Housing and Urban Development.

With the council’s unanimous vote Friday, the Economic and Workforce Development Department will be able to move forward on seeking a loan under HUD’s Section 108 program.

According to Los Angeles Councilman Curren Price, here is what is being asked of HUD, the U.S. Department of Housing and Urban Development:

The $22.5 million HUD loan would only go to the facilities being built next to the stadium, which include a sports museum, meeting and conference areas, retail and dining space, and a culinary academy, Price said.

The HUD Section 108 program is typically aimed at supporting projects that will either alleviate poverty or build affordable housing.

In this case, since the larger $250 million project is fully contained within the existing boundaries of Exposition Park, which has no residents and where no affordable housing will be built, it’s really tough to see why HUD’s Section 108 program should be the go-to lender for bankrolling the remainder of the project.

This case shows some evidence of the problem of mission creep in the federal government’s spending programs, which are stretched beyond their original missions, to provide things that are increasingly unrelated to their original purpose. That stretching is done because it’s easy, not because it’s right.

In a saner world, if the Los Angeles City Council really needed to locate a culinary academy at its new sports complex and the city itself didn’t have the money to build and operate it, wouldn’t it make more sense to get funds from the state’s Department of Education? Or perhaps from its Employment Development Division? Or if you really had to involve the federal government, from the Departments of Education or Labor? Why not let HUD focus on succeeding at its core mission without diverting its resources?

It’s not like we don’t have legislators to write laws to set up dedicated programs that are limited to specifically fulfill this kind of need if it is something that the public believes is really needed. That’s something that is essential to keeping control of spending.

If the City Council is successful in its application, it means that $22.5 million will not be available to go to projects where the affordable housing that HUD is supposed to promote might otherwise be built. Los Angeles, it’s worth noting, has a fairly serious affordable housing crisis.

It’s the Council’s call to decide whether it is more worthwhile to borrow from the federal government to fund a sports museum, retail and dining space, meeting and conference areas and a culinary academy, than to support affordable housing. It is the call of the people of Los Angeles to hold them accountable if they are wrong.

Bullet Train Railroads Property Rights, Taxpayers


Wednesday August 10th, 2016   •   Posted by K. Lloyd Billingsley at 9:35am PDT   •  

43626212 - seaside railwayAs we noted, in Blazing Saddles the devious Hedley Lamarr (Harvey Korman) plots to build a railroad and has his eye on the land he needs. “Unfortunately,” he laments, “there is one thing standing between me and that property – the rightful owners.” As Ralph Vartebarian notes in the Los Angeles Times, California’s bullet train bosses faces the same obstacle.

The high-speed rail project aims to move a 2.5 mile stretch of Highway 99 in Fresno. Unfortunately, “work has been held up by litigation over obtaining rights to private property, the same issue that has contributed to a more than a two-year delay in building the first 29 miles of rail in the Central Valley.” The land acquisitions, writes Vartebarian, “have proved to be far more contentious than the rail authority ever considered. The Central Valley was touted as the easiest place to start construction, but wealthy farmers were more prepared, more passionate and tougher in resisting state demands.” California High-Speed Rail Authority now seeks “a $35-million increase in state funding from the original $226 million, which was granted to Caltrans in 2013.”

Disrespect for respect property rights is not the only reason the bullet train is certain to cost more than the 2012 estimate of $68 billion. The plan calls for 36 miles of tunnels through mountains north of Los Angeles, the most ambitious tunneling project in the nation’s history. Besides the costly tunnel vision, high-speed rail bosses are merging local commuter rail links with the larger bullet train project. This means that the local rail links also share the financial challenges of the larger project, and those are considerable.

As Mongo (Alex Karras) said in Blazing Saddles, it all has to do with “where choo-choo go,” and there is some truth to that. On the other hand, taxpayers and “rightful owners” of property have grounds to believe that California’s bullet train is more about spending than transportation.

The Problem with Mo’ Bigger Government


Monday August 8th, 2016   •   Posted by K. Lloyd Billingsley at 9:31am PDT   •  

11419595 - highway through california coastThe Sacramento Bee is disturbed that the Assembly has derailed SB 1190, which would ban lobbying of California Coastal Commission members. Lobbyists had set up meetings between commissioners and David “The Edge” Evans, a guitarist with U2, who sought to build a house in Malibu, and members of the Newport Banning Ranch Project in Orange County. Such activity is what happens when a state sets up a powerful unelected commission.

The Coastal Commission was supposed to be temporary, but before the end of the 1970s, legislators duly made it permanent. In practice, the Commission became the private domain of Peter Douglas, a regulatory zealot with little regard for property rights. On his watch the Commission was also known for Mafia-style corruption. During the 1990s, Coastal Commissioner Mark Nathanson attempted to shake down celebrities for bribes, and wound up serving a prison term.

As we noted last year, the Commission has been expanding its power into new areas. It remains a classic example of government becoming progressively more intrusive, more expensive, and less responsive to the people. When we last checked in, legislators were poised to add three new commissioners, appointed by the governor, the Assembly Speaker and the Senate Committee on Rules. The new appointees are to work with communities burdened by pollution and focus on “issues of environmental justice.”

In February the Commission fired executive director Charles Lester, a rare case of a bureaucrat getting the axe. Lester has yet to be replaced, and while the CCC searches for a new boss, complaints persist.

Banning ex-parte communications and lobbying would be good moves, but the state would do better to get rid of the entire Commission. The duly elected government in Malibu is fully capable of dealing with Mr. Evans’ new home. Elected governments in Orange County are competent to deal with the Newport Banning Ranch Project. Elected governments along the coastline are capable of preserving the coast for all Californians.

One Weird Trick to Restore Solvency to State Pensions


Monday August 8th, 2016   •   Posted by Craig Eyermann at 6:21am PDT   •  

top10wayscover-thumbnail How many times have you followed a link that began with the “One Weird Trick” clickbait meme?

Hopefully, a lot of state government elected officials and bureaucrats do this, which is why the title of this article is “One Weird Trick to Restore Solvency to State Pensions.” For the states that are so far behind in funding the pension plans for state and local government employees that they have almost no hope of ever making up the gap, such as Illinois and New Jersey, where the gloomy outlook has become even darker, there actually is hope from a highly unlikely source.

That highly unlikely source is the state that CNBC just defined as being the worst for business in 2016: Rhode Island. And the amazing thing is that even with being such a bad business environment by CNBC’s metrics, the state’s leaders have managed to effect a dramatic turnaround toward restoring the solvency of the state’s public pensions, using, you guessed it, one weird trick!

To be honest, it’s really not so weird, and it involves two basic steps. The first thing they’ve done is to move away from traditional defined benefit pension plans for government employees, the kind that guarantees that state government employees will get a steady pensions check from the state government after they retire, no matter if the state’s pension fund has the money to pay it or needs to make up the difference by raiding the state’s Treasury, even if that means taking money away from things that state residents thought they were really paying for with their state taxes, like schools.

The second step is to put state government employees onto defined contribution pension plans, much like the kind of 401K-type plans that are common in the private sector, where the state government instead guarantees that it will match a percentage of the money that their employees sock away for retirement into the plan out of their regular income.

The numbers for Rhode Island’s pension turnaround are dramatic.

Rhode Island ranks 45th in Economy in our study this year. State GDP grew just 1.7 percent last year, to around $50 billion. The state has a long history of financial woes, including a pension that was underfunded by nearly $9 billion as recently as 2011.

But by the end of last year, those unfunded liabilities had been cut nearly in half to around $4.8 billion, according to the state treasurer’s office. Raimondo points to sweeping reforms—she was state treasurer before she was elected governor—including switching from defined-benefit retirement plans to defined contribution plans.

That’s amazing progress from a state whose economy isn’t firing on all cylinders and hasn’t been for years. Governor Gina Raimondo (D), deserves a lot of credit for taking on the state’s pubic employee unions and making the transition to a more sustainable pension funding system that ensures that state government employees can have reasonable pensions without overly burdening the state’s citizens.

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