MyGovCost News & Blog


Thursday July 6th, 2017   •   Posted by K. Lloyd Billingsley at 3:17pm PDT   •  

Two years ago, California’s Legislative Analyst learned that 3,500 Caltrans engineers were doing little more than sitting at their desks and sought to eliminate those positions. Caltrans bosses cried foul and so did Bruce Blanning, executive director of Professional Engineers in California Government. As the union boss told reporters the Legislative Analyst was “childish,” that idle staff should be kept on in case of future projects, and that outsourcing work to independent contractors “wastes taxpayer money.”

In response to the LAO report, state senator John Moorlach wrote a bill to require Caltrans to contract out 50 percent of architectural and engineering services. As Moorlach recently explained, the engineers’ union killed that bill and now wants to add 400-500 new positions in the next fiscal year. If those were contracted out, according to a study for the for the American Council of Engineering Companies, that would save state taxpayers $43.4 million a year. That got a rise out of Bruce Blanning, who charged that Moorlach “cited phony figures – ginned up from the same private companies that want to gorge themselves on tax dollars – to try to justify his false assertion that it would be cheaper for taxpayers.”

Blanning did not show how, exactly, the figures Moorlach cited were “phony,” but he did contend that California has nearly 1,000 engineers on contract doing work that “Caltrans employees can perform at half the cost.” Giving the work to Caltrans employees, the union boss argued, would save $100 million in one year. “Let’s not waste public money by overpaying private companies,” Blanning concluded. “California is best served when a publicly employed professional engineer designs and inspects infrastructure projects.” And doubtless when more than 3,000 government engineers sit at their desks doing nothing, or when they play golf during work hours.

As the state auditor noted, for 19 months, one Caltrans engineer played dozens of rounds of golf during work hours, with Caltrans bosses duly approving his time sheets. Maybe Blanning can identify the lucky government golfer, and show how his game best served the state. The union boss did not indicate which infrastructure project he might have personally designed or inspected. Taxpayers might recall that Caltrans engineers supervised the new eastern span of the Bay Bridge which cost $5 billion more than the original estimate, came in ten years late, and remains riddled with safety issues.

The U.S. Department of Education’s $1 Trillion Debt Milestone

Thursday July 6th, 2017   •   Posted by Craig Eyermann at 11:02am PDT   •  

72774473 - trillion, 3d rendering, traffic sign According to the U.S. Treasury Department, the U.S. Department of Education has now cumulatively borrowed over one trillion dollars from the public for the purpose of funding its Federal Direct Student Loan program since January 2009.

Political Calculations’ charted the history of the Education Department’s borrowing to support its student loan business.

Between January 2009 and May 2017, the total public debt outstanding of the U.S. government increased by over 9.2 trillion dollars. Since $1 trillion of that borrowed money went to fund student loans, it accounts for 10.8% of the increase of the national debt over the last eight years.

Getting out of its money losing student loan business should be a top priority at the U.S. Department of Education.

Government Phones In Fraud and Waste

Wednesday July 5th, 2017   •   Posted by K. Lloyd Billingsley at 11:23am PDT   •  

As the Washington Times reports, the “Obamaphone” program, a federal government welfare gambit officially known as the “Lifeline Program,” was a massive fraud. Of the 10.6 million people with Obamaphones, a full 36 percent had dubious qualifications for the handout. Some 5,500 people had two Obamaphones and the program gave 6,400 Obamaphones to people who were in fact dead. Though Obamaphone was a federal program, the funding came from private carriers, so the program, as the Times notes, “has stashed some $9 billion in assets in private bank accounts rather than with the federal treasury, further increasing risks and depriving taxpayers of the full benefit of that money.” And as it turned out, “the FCC didn’t even have a good yardstick to measure whether the program was meeting its goals.” In other words, no accountability.

The FCC is seeking $51 million from a carrier that ripped off the program for $10 million but according to a Fox News report, Ajit Pai and other FCC commissioners “were told not to reveal the details of its investigation until April 1, a day after the FCC voted to expand the Lifeline program.” This directive had “the effect of preventing public knowledge of widespread fraud in the Lifeline program ahead of a contentious vote on expanding it despite persisting concerns about a lack of internal safeguards.” FCC mouthpiece Will Wiquest, a former press secretary for socialist Vermont senator Bernie Sanders, claimed the timing of the enforcement action was “in no way related to the timing of the vote on the program modernization.” Whatever you say Willy. In typical style, secrecy and obfuscation followed massive waste and fraud, with taxpayers on the losing end.

The Obamaphone scam, which launched in 2012, prompted imitation in California. As we noted, the California Public Utilities Commission handed out cell phones to homeless and low-income people in the hope that they would be better able to look for jobs. The Golden State also provided 250 minutes of call time a month and 250 free text messages. No reports on how many gained jobs through the plan, but when it comes to waste and fraud governments everywhere tend to phone it in.

The Assets and Liabilities of the U.S. Government

Monday July 3rd, 2017   •   Posted by Craig Eyermann at 6:56am PDT   •  

As we’re in the midst of celebrating the founding of the United States on for many is a long holiday weekend, it might also be a good time to consider the state of the federal government’s fiscal ledger on the eve of this year’s Independence Day.

In January 2017, the outgoing Secretary of the U.S. Treasury Jack Lew issued the Financial Report of the U.S. Government for the government’s 2016 fiscal year, which ended on September 30, 2016. In that report, Lew totaled up his estimates of the assets and liabilities of the entire U.S. government.

The chart below breaks down the U.S. government’s primary assets and liabilities while visualizing the sheer mismatch between the two sides of the U.S. Treasury’s ledger.

In the chart, we’ve shown the government’s largest asset as the combination of net Property, Plant, Equipment, Inventories and Related Property that the U.S. government owns, which includes the value of things like federal lands and forests, office buildings and equipment owned by the U.S. military, which accounts for over $1.2 trillion of the nation’s assets.

The second largest asset is the combination of Federal Direct Student Loans and Federal Family Education Loans, which together had a face value of $825 billion at the end of the government’s 2016 fiscal year. Other loans, such as those made by the U.S. Departments of Agriculture, Energy and others account for another $490 billion of the U.S. government’s assets.

Cash and other monetary assets, like the gold reserve held at Fort Knox, totaled up to $490 billion, and all other assets combined added up to $396.5 billion. All of these assets together added up to some $3.47 trillion.

Unfortunately, the value of the U.S. government’s assets are dwarfed by its $22.76 trillion worth of liabilities. Those liabilities are primarily made up of the $14,221 trillion of the U.S. government’s debt that is directly held by the public, which includes foreign nations, and also some $7.2 trillion of benefits promised to employees of the federal government and also to veterans of the nation’s military services.

Still, the assets that the U.S. government holds do provide part of the solution to that problem, where the Independent Institute’s William Shughart and Carl Close have proposed to sell them off as a real part of the solution to the U.S. government’s growing debt crisis.

Combined with getting the federal government’s spending under control by restraining its growth to be less than the rate of growth of the economy, this is the kind of revolutionary thinking that really needs to take hold in the U.S. Capitol this Fourth of July!

The High Cost of Government Not Paying Debts

Thursday June 29th, 2017   •   Posted by Craig Eyermann at 6:19am PDT   •  

37867592 - surprised woman shocked to see the bill As Illinois’ debt doomsday clock keeps ticking down to July 1, 2017, where in the absence of the state legislature passing a budget that can be approved by the state’s governor, the state government will almost certainly have its credit rating cut to junk status as it will also stop paying contractors to work on road projects throughout the state, it is important to consider what is going on in the U.S. territory of Puerto Rico, which has not only had its credit rating cut to below junk status, it is currently going through the state government-equivalent of bankruptcy proceedings for restructuring its debts.

Writing in Investor’s Business Daily, Illinois resident Ike Brannon describes how the actions being taken by the U.S. territory’s political leaders are directly and negatively impacting Illinois’ own dismal fiscal situation.

Puerto Rico is currently $73 billion in debt, which is close to 100% of the island’s annual output. It owes a sizeable portion of this to the island’s current and future pensioners: Puerto Rico’s pension fund is woefully underfunded. It also owes billions to general obligation bondholders—whose investments are guaranteed by the island’s constitution—and to COFINA (also known as Puerto Rico Sales Tax Financing Corp.) bondholders, who hold debt explicitly backed by sales-tax revenues.

The government wants to greatly reduce its payments to these creditors—and others—in order to avoid further spending reductions and to minimize necessary reductions in pension benefits, among other priorities. While such actions may appear to be a reasonable and fair outcome, the reality is that setting aside established law and precedent has long-term ramifications that go beyond Puerto Rico.

This is problematic because there are numerous other states—my home state of Illinois comes to mind—that are also in dire financial straits. The Prairie State has been effectively running a deficit for at least a decade and is burdened by a public pension that will likely go bust the next time there is a recession.

Illinois also has taken a page out of the Puerto Rico playbook by beginning to demonize its bondholders as greedy investment bankers profiting off the misery of others.

While such rhetoric plays well with the voters—and that is to whom Puerto Rico’s new governor, Ricardo Rossello, is clearly playing—it makes escaping the island’s financial predicaments more problematic. Once the Puerto Rican government and its oversight committee reach some sort of arrangement for moving the island forward, it will need to re-engage with capital markets to borrow money—whether it be for capital improvements, short-term credit arrangements, or something else.

If Puerto Rico spends the next year denigrating its lenders and trying to break contracts, few investors will want to take a chance lending money to the island again. Put simply, the market cannot credibly believe future repayment promises no matter what steps Puerto Rico takes—at least not until it returns to economic expansion and solvency.

What’s more, if Puerto Rico successfully breaks these covenants, municipal bondholders in Illinois—and elsewhere—are going to perceive that their investments now contain much more risk than they had previously perceived, and will demand a higher interest rate to take it.

In short, Puerto Rico’s shenanigans may hasten Illinois’ insolvency.

The key to regaining solvency is to reverse the overspending commitments of politicians that created the debt problems for each in the first place.


CalPERS Court Loss a Big Hit on Taxpayers

Wednesday June 28th, 2017   •   Posted by K. Lloyd Billingsley at 9:23am PDT   •  

The U.S. Supreme Court has dismissed a lawsuit by California’s public employee retirement system against investment banks that supposedly “duped” them into buying some $700 million of stock. CalPERS, the nation’s largest pension trust fund, could have joined a class-action with others but declined to do so. Then CalPERS missed the three-year statute of limitations to file its own suit and the Supreme Court voted 5-4 to toss the case. News reports said the loss would cost “California government retirees” tens of millions. In reality, government retirees will continue to receive their generous pensions while taxpayers ultimately pick up the tab for the losses of $300 million. CalPERS unfunded liabilities have increased 383 percent in ten years and last year CalPERS was some $100 billion short of fully funding its pension obligations.

CalPERS is obviously mismanaged and also corrupt. As we noted, Fred Buenrostro bagged a salary of $238,992 as chief executive of CalPERS from 2002 to 2008. He also took more than $250,000 in bribes from Alfred Villalobos, a former CalPERS board member, to steer the pension fund’s investments to the clients he represented. Last year Buenrostro was sentenced to four and a half years in prison, but he will still draw his CalPERS pension of nearly $12,000 a month, a full $141,228 a year before taxes. The recent loss of $300 million won’t hurt him because taxpayers will be picking up the tab for that, along with the massive unfunded liabilities. Taxpayers can be forgiven for believing that CalPERS corruption and mismanagement will continue unabated.

Uncle Jerry Wants Your Magazine

Monday June 26th, 2017   •   Posted by K. Lloyd Billingsley at 10:10am PDT   •  

The July 4 holiday is just around the corner but Californians might want to mark their calendar for July 1 because on that day they could become lawbreakers. Last year, the legislature passed gun laws, approved by governor Jerry Brown, that require Californians, by July 1, to get rid of any rifle or pistol magazine holding more than 10 rounds of ammunition. As Shasta County Sheriff Tom Bosenko told reporters, “We’re essentially making law-abiding citizens into criminals with this new law.” Those who fail to turn in their magazines could face jail time and those who do surrender the magazines receive no compensation for their property. Bosenko explained that he would not be going door to door demanding that citizens surrender their magazines, but Californians have good cause to remain wary.

As we noted, on July 1 the UC Davis Firearms Violence Research Center gets its first $5 million from the state. Supposedly a scientific enterprise, the Center’s first project, according to director Garen Wintemute, will be “a survey that looks at who owns guns, why they own them, and how they use firearms.” They want “the names,” of the gun owners, and this is troubling. Some types of firearms are more easily fitted with high-capacity magazines, the popular AR-15 for example. Since guns are registered, state officials could easily track down the owners and come knocking to see if they still have any magazines holding more than 10 rounds. After all, California’s attorney general Earl Warren strongly supported the internment of American citizens of Japanese ancestry. So for the Golden State, jailing people for keeping the magazines they lawfully purchased should not be a problem.

Gun-control politicians fancy themselves as compassionate progressives but their approach recalls the highly restrictive policies of National Socialist Germany. In Gun Control in the Third Reich: Disarming the Jews and “Enemies of the State” author Stephen P. Halbrook compiled data on the way Adolph Hitler’s regime restricted firearms. The Nazis also wanted to know “who owns guns” and used registration records of the Wiemar Republic to suppress firearm ownership by disfavored groups.

Accountability Finally Arrives at the VA

Monday June 26th, 2017   •   Posted by Craig Eyermann at 6:33am PDT   •  

30365766 - accountability word under a magnifying glass looking for someone to take responsibility, credit or blame Last Friday, President Trump signed the VA Accountability and Whistleblower Protection Act into law, which promises to finally make it easier for the Department of Veterans Affairs senior leadership to remove supervisors and employees who have engaged in misconduct from their jobs, while also better protecting the employees who make misconduct at the VA known to the public.

The Associated Press‘ Darlene Superville and Jonathan Lemire report on the President’s comments at the signing ceremony:

“Our veterans have fulfilled their duty to our nation and now we must fulfill our duty to them,” Trump said during a White House ceremony. “To every veteran who is here with us today, I just want to say two very simple words: Thank you.”

Trump repeatedly promised during the election campaign to dismiss VA workers “who let our veterans down,” and he cast Friday’s bill signing as fulfillment of that promise.

“What happened was a national disgrace and yet some of the employees involved in these scandals remained on the payrolls,” Trump said. “Outdated laws kept the government from holding those who failed our veterans accountable. Today we are finally changing those laws.”

What made the event more remarkable was a bit of play-acting between President Trump and VA secretary David Shulkin. The Washington Post covered that angle of the event depicting what would happen if the VA secretary failed to uphold the new law by allowing VA employees who have engaged in misconduct to remain on its payroll.

President Trump on Friday pantomimed killing off his veterans affairs secretary should he fail to successfully implement new reforms at the long-plagued Department of Veterans Affairs.

At a ceremony in the East Room of the White House where he signed the VA Accountability and Whistleblower Protection Act, Trump said, “I have no doubt it will be properly implemented.”

Turning to VA Secretary David Shulkin, who stood on stage to Trump’s right, the president said, “Right, David?”

“Absolutely,” Shulkin replied.

Smiling, Trump responded, “Better be, David, or ...” He then made a pistol with his right hand, aimed it at Shulkin and mouthed his signature words: “You’re fired!”

The audience of administration officials, lawmakers and veterans and their families laughed at the president’s joke.

The seemingly never-ending series of scandals emanating from the Department of Veterans Affairs and the feckless actions of former President Obama in addressing them are major reasons why the VA Accountability Act passed the U.S. Congress with a strong bipartisan majority. We can only hope that the passage of the law to impose greater accountability at the VA is finally the beginning of the end of the department’s ongoing scandals.

California Expands Travel Ban Inequality

Friday June 23rd, 2017   •   Posted by K. Lloyd Billingsley at 1:07pm PDT   •  

California has added Texas, Alabama, Kentucky and South Dakota to its travel ban. State attorney general Xavier Becerra made the announcement accompanied by representatives from the ACLU and Equality California, which apparently fancy themselves part of government. California’s AB1887, enacted last year, purports to ban state employees from travelling to states perceived to discriminate “on the basis of sexual orientation, gender identity, or gender expression.” As Becerra explained, “We will not spend taxpayer dollars in states that discriminate.” Actually, the state will.

The travel ban, conveniently enough, does not apply to law enforcement officers, tax auditors and certain training events that are required to gain grants. California also allowed UCLA to participate in NCAA tournament basketball games in Memphis, Tennessee, a state on the ban list along with Kansas, Mississippi, and North Carolina. Lots of money was spent in Tennessee, and gained there by way of television rights and such. The inclusion of Texas, however, brought an interesting fact to light.

California’s Board of Equalization, a tax agency that does not equalize anything, maintains offices in Chicago, New York, and Houston, Texas. As we noted, the BOE is a corrupt, wasteful body that misallocates public funds, stages useless events, and dishes out raises to high-salaried staff without performance reviews. BOE bosses are also fond of spending taxpayer dollars to promote themselves, and the shabbily constructed BOE headquarters in Sacramento remains a safety threat and bottomless money pit. Recent attempts at reform simply move thousands of BOE employees to a new revenue department reporting to the governor.

By all indications, California government will continue to spend taxpayer dollars in Texas. With so many exemptions, the state travel ban is not exactly a model of equal treatment under the law. The state’s embattled taxpayers could not be blamed for seeing the ban as a power play, an intrusion into the affairs of other states, and a matter of posturing.

California High-Speed Rail Rides No-Bid Gravy Train

Thursday June 22nd, 2017   •   Posted by K. Lloyd Billingsley at 9:42am PDT   •  

California’s vaunted bullet train has yet to carry a single passenger but it has managed to make the news. As it turns out, the state’s High-Speed Rail Authority offered a contract extension of $3 million on a noncompetitive basis. In other words, it was a no-bid sweetheart deal. That emerged in a new report from California’s state auditor Elaine Howle, who finds that the state’s General Services and Technology departments “did not provide adequate oversight of the billions of dollars state agencies awarded through noncompetitive contracts from fiscal years 2011–12 through 2015–16.” The 27 noncompetitive deals the auditor reviewed “could have been avoided if the agencies had engaged in sufficient planning.” Likewise, “both General Services and Technology have enforcement mechanisms, they rarely employed them, allowing agencies to continue inappropriately using noncompetitive requests.” Taxpayers should not be surprised that the vaunted “bullet-train” is on this track.

As we noted, it was pitched as a swift route from Los Angeles to the Bay Area, but construction began way out by Fresno, not exactly on the route. The land the rail project needs remains in the hands of the rightful owners, and the first 118 miles could cost $3.6 billion more than expected. The Federal Railroad Administration has already forked over grants of $3.5 billion for that very segment, supposedly the easiest. Other parts would require the most elaborate tunneling project in U.S. history, certain to incur massive cost overruns.

Few Californians are panting for an essentially 19th century form of transportation that was slower and more expensive than air travel. California’s high-speed rail project is best viewed as a bait-and-switch ploy to get state voters to finance local transit projects they otherwise would not support. The state’s High Speed Rail Authority has no experience building anything, but has managed to establish, count ‘em, four offices, a Sacramento headquarters and three regional offices. Commuters can’t ride those, but the Authority works well as a comfy sinecure for ruling-class retreads like board member Lynn Schenk, a former congresswoman and chief of staff for governor Gray Davis. As we noted, a convicted embezzler also found work with the rail authority, so criminals are also all aboard.

Taxpayers should not be surprised that this bloated, useless outfit should hand out $3 million in a no-bid deal to favored insiders. And according to High-Speed Rail’s new business plan, the total cost for the project will now be $98 billion.

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