MyGovCost News & Blog

California Bureaucrats vs Government Services for Residents

Thursday February 8th, 2018   •   Posted by Craig Eyermann at 6:54am PDT   •  

68711054 - front view of a sad couple with hands on head sitting in the kitchen of a house If the claims of the League of California Cities is any indication, government officials at the county and local level will increasingly have to choose between providing services to the residents of their communities, or really generous pensions to the retired and retiring employees of their governments.

Adam Aston of the Sacramento Bee describes the dilemma that government officials at the state and local level within California will face within just a matter of years.

Most California cities expect their spending on public employee pensions to climb by at least 50 percent over the next seven years, restricting their ability to fund basic services like public safety and parks, according to a study from their lobbying organization.

The report escalates the League of California Cities’ appeal for more flexibility in negotiating pension obligations. Almost all of California’s cities belong to the $360 billion California Public Employees’ Retirement System, and some cities over the past year have raised increasingly loud complaints that fee hikes from the pension fund are “crowding out” other spending priorities.

The report, which was released Thursday, warns that pension costs are becoming “unsustainable.”

“The impact of pension costs are becoming such a large element of city costs that it is inevitably going to cause the reduction of services somewhere,” said Dan Keen, a retired Vallejo city manager.

If the city of Vallejo sounds familiar, it is because the city has had direct experience with unsustainable expenses – it declared bankruptcy back in 2008 because of a “combination of generous public-safety salaries, declining property values and fiscal mismanagement”, where Dan Keen spent a lot of his time in office working to keep the city’s financial situation on a positive track after it emerged from bankruptcy in 2011.

How big is the public employee pension issue in California? Long-time Los Angeles Times political columnist George Skelton cited figures about the magnitude of the fiscal problems that will be faced by governments at all levels throughout California provided by former California assemblyman Joe Nation, who is currently a public policy professor at Stanford University.

The state’s two biggest public pension systems are badly underfunded. They’re also the largest and second-largest public pension funds in the country. They’re the California Public Employees’ Retirement System, or CalPERS, and the teachers’ pension fund, CalSTRS.

CalPERS has unfunded liabilities — benefits promised compared with anticipated funding — of $136 billion, Nation says. For CalSTRS, the projected red ink is $87 billion. That’s based on 2016 data, the latest available.

If you total up the unfunded liabilities of all state and local public pension systems in California, the projected debt comes to around $333 billion, Nation says. But that’s a conservative figure based on official reports. It could be up over $1 trillion.

“No one believes the official numbers are correct except maybe people within the system itself,” Nation says. “They all use fuzzy math and play games with their debt.”

Just using the official numbers, Nation says, the unfunded liability amounts to an average of $26,000 per household — fourth worst in the country. No. 1 is Connecticut at $38,000, followed by Alaska and Hawaii.

In California, the pension systems are 69% funded, meaning they can project enough money to pay 69% of what’s promised.

“It’s clear pension costs are going to overtake so much else in the budget,” Nation continues. “We have these benefits that are not sustainable.”

No wonder that outgoing-Governor Jerry Brown recently indicated that when the next recession comes to California, the state’s public employee pensions will be in for a major haircut. It’s a shame that hardly any of his potential replacements have been willing to address the source of what is very likely to become the state’s most significant fiscal problem in the next several years. It really shouldn’t be that hard of a choice to make between the interests of bureaucrats and those of the people of the communities they serve.

Fe Fi Foe FISA

Wednesday February 7th, 2018   •   Posted by K. Lloyd Billingsley at 3:22pm PDT   •  

Last month president Trump signed the FISA Amendments Reauthorization Act of 2017, extending the Foreign Intelligence Surveillance Act until December 31, 2023. The law “allows the Intelligence Community, under a robust regime of oversight by all three branches of Government, to collect critical intelligence on international terrorists, weapons proliferators, and other important foreign intelligence targets located outside the United States.” Angelo Codevilla, professor emeritus of international relations at Boston University, was part of the Senate Intelligence Committee staff that drafted FISA in 1978. Codevilla believes FISA was “a big mistake to begin with” and wants to see it repealed.

The legislation was supposedly to address complaints from leftists who sued the FBI and the National Security Agency after learning they had been overheard working against the United States during the Vietnam War. According to Codevilla, “the main push for FISA, in fact, came from the FBI and NSA” who sought to preclude further lawsuits by having wiretaps approved by a judge “thus absolving them of responsibility.” The law “removed responsibility for the substance of executive judgment from the shoulders of the very people who make such judgments” and the FISA court “creates an irresistible temptation to political abuse.” Therefore, “it behooves us to erase doubt about who is responsible for electronic surveillance by repealing FISA.”

What great national security successes FISA might have achieved remain unclear. The NSA, which pushed for FISA, conducts massive surveillance on U.S. citizens, allegedly in their best interest. It remains unclear whether the powerful agency captured emails and other records corrupt government officials sought to hide from the people. And of course, acts of terrorism continue on the domestic scene.

FISA allows the “intelligence community,” to conduct surveillance but long after FISA was authorized the 16 powerful agencies, plus the vaunted FBI, failed to prevent the 9/11 attacks. On the other hand, FISA succeeds as a Federal Internal Surveillance Act, easily subject to abuse. Mr. Codevilla makes a strong case for its repeal.

The Return of Trillion Dollar Deficits

Monday February 5th, 2018   •   Posted by Craig Eyermann at 6:35am PDT   •  

72774473 - trillion, 3d rendering, traffic sign It was only ever a matter of time, but trillion dollar deficits are once again on the radar for the U.S. government.

Susan Cornwell of Reuters has the news:

As the U.S. Congress limps toward the likely passage next week of another stopgap spending bill to avert a government shutdown, a Washington think tank has estimated the federal budget deficit is on track to blow through $1 trillion in 2019.

If it does, it would be the first time since 2012 the U.S. economy will have to support a deficit so large, highlighting a basic shift for the Republican Party, which has traditionally prided itself on fiscal conservatism.

The Committee for a Responsible Federal Budget, a Washington fiscal watchdog, said the red ink may rise in fiscal 2019 to $1.12 trillion. If current policies continue, it said, the deficit could top a record-setting $2 trillion by 2027.

The U.S. federal government ran its first trillion dollar deficit back in 2009, then went on to do so each year until its 2013 fiscal year, where the passage of the Budget Control Act of 2011 forced the Obama administration to rein in its spending, which was followed by the passage of the American Taxpayer Relief Act of 2012, which imposed higher income tax rates beginning in 2013. The combination of these legislative events led to the U.S. government’s deficits dropping below the trillion-dollar mark in 2013, where since then, they went on to bottom at $586 billion in fiscal year 2016, before beginning to rebound to $666 billion at the end of FY 2017 on September 30, 2017.

So what would the return of trillion dollar deficits mean for the rate of growth of the U.S. national debt today?

The following chart, which shows the year over year growth rate of the U.S. total public debt outstanding from January 20, 2009 through February 1, 2018, along with projections of that growth assuming that the U.S. government racks up a $1 trillion deficit in its current 2018 fiscal year, followed by an additional $1.12 trillion deficit in its 2019 fiscal year, illustrates how the growth of the national debt will change.

Year Over Year Growth Rate of the U.S. Government's Total Public Debt Outstanding from January 20, 2009 through February 1, 2018, with Projections Through the End of Fiscal Year 2019 on September 30, 2019

This chart may reveal the answer to why today’s Republican Party would appear to be much more comfortable with allowing trillion dollar deficits than the Tea Party-inspired deficit hawks that were reacting to the nonproductive and excessive federal government spending of the early years of the Obama era. Even with the nation’s total public debt growing by $1 trillion in FY2018 and $1.12 trillion in FY2019 to $22.4 trillion on September 30, 2019, the average year over year rate of growth of the national debt during the Trump era would average 3.7%, which is well less than half of the 9.1% rate of growth that was seen during President Obama’s entire tenure in office. More significantly, it is also less than the average of 4.9% year over year growth for the national debt that was recorded during the final two years of the Obama administration.

That’s partly due to the U.S. national debt having already been allowed to grow to such a gargantuan size over the past nine years, where today’s national debt of $20.5 trillion is nearly double the $10.6 trillion figure that stood when President Obama first assumed office.

What is more important for the American people however is how that projected rate of growth for the national debt compares with the rates of growth of both the nation’s economy and the population. If the rate at which the national debt grows is slower than the rates at which the economy and the population grows, then the burden of the national debt upon regular Americans will decline.

Whether that might happen however is a whole different question to consider.

A Super Bowl Stadium Scam

Sunday February 4th, 2018   •   Posted by Craig Eyermann at 7:33pm PDT   •  

Super Bowl 52, or rather, Super Bowl LII, to follow the numbering convention that the National Football League has chosen to distinguish all of its championship games but the 50th one from each other, featured the Philadelphia Eagles defeating the New England Patriots at the U.S. Bank Stadium in Minneapolis, Minnesota.

Now that it’s all over, we can confirm that the biggest loser at the big game wasn’t the New England Patriots, but rather, the residents of both the state of Minnesota and the city of Minneapolis. And it’s not just because their home town team didn’t win enough games to make it to the Super Bowl this year.

Instead, it is because Minnesotans got taken to the cleaners by a billionaire team owner who wanted a stadium that would be Super Bowl-worthy, regardless of whether or not the Minnesota Vikings ever played in the championship game. City Journal‘s Steven Malanga describes how the taxpayers of Minnesota and Minneapolis got played:

Vikings owner Zygi Wilf, a New Jersey real estate developer, began pushing for a new stadium soon after purchasing the team in 2005. His supplications became more earnest after the roof of the Vikings’ old home, the Metrodome, collapsed in December 2010. Wilf originally proposed contributing just one quarter of the new stadium’s $1 billion cost, a spectacularly low-ball offer in an era when backlash against stadium subsidies for professional teams increasingly force owners to pony up a bigger share of construction costs. Wilf claimed that he couldn’t afford more, but he wouldn’t release the financial details of his real estate empire. A Minnesota state investigation, undertaken after a New Jersey judge ruled that the Wilf family had defrauded real estate partners in a local project and had to pay them $84.5 million, determined that the family could afford to pay up to $500 million for the stadium.

Even after Wilf upped his offer, the road to the stadium deal was paved with controversy. Minnesota financed a portion of its share of the costs by introducing a state-licensed electronic-gambling game to generate construction revenues, but the game proved a clunker with local residents; to fill the financing hole, Minnesota drew on revenues from its tobacco tax and increased corporate taxes. Then Wilf announced that he’d help finance his part of the deal by charging season ticketholders a seat license fee—prompting a threat from Minnesota governor Mark Dayton to pull government financing. Dayton soon changed his tune, explaining that sports financing has its own ineffable logic. “I’m not one to defend the economics of professional sports,” he said. “Any deal you make in that world doesn’t make sense from the way the rest of us look at it.”

To translate that last statement, Minnesota’s governor most certainly knew that it was a very bad deal for the state’s taxpayers, one where the state would become a de facto business partner of a billionaire NFL team owner who had been found in court to have defrauded his previous business partners, who would most certainly be the biggest beneficiary of the deal, and chose to do it anyway.

But Governor Mark Dayton wasn’t the only politician to spend their way into the Hall of Shame for stupid stadium deals using their community’s tax dollars. Malanga continues with the story of how more local politicians got in on the deal at considerable cost to their community:

Though it lent its balance sheet to the deal, the city of Minneapolis, according to critics—including one former city councilman—has been “hosed” by the Vikings. The city officially contributed $150 million to stadium construction, but these observers contend that that figure doesn’t include expensive infrastructure improvements that Minneapolis was forced to make. As part of the stadium package, Minneapolis also agreed to send $7.5 million a year in operating subsidies to the authority running the facility, which amounts to $225 million over the course of the deal. City taxpayers also apparently remain on the hook for any shortfalls in the revenues that back the bonds used to build the surrounding infrastructure. Residents understand little of this financing because, as the Minneapolis Star Tribune noted, the stadium deal “was as transparent as the Berlin wall.”

Clearly, it wasn’t such a good deal for either Minnesota’s or Minneapolis’ tax-paying residents. But the story is different for a billionaire team owner that the politicians were desperate to please, who was the one and only clear winner in the taxpayer-financed stadium shenanigans.

Of course, the stadium has been a boon for the Vikings ownership. The Vikings are worth an estimated $2.4 billion, and the new stadium has increased the net worth of Wilf’s business empire by $200 million, according to estimates.

And now, Minneapolis and Minnesota have hosted their one and only Super Bowl, where the NFL is scrapping the bidding process that would make it possible for the city to ever host another. But they’ll always have memories of Super Bowl LII. And the bills for the stadium that it was played in.

Government Finally Violates No-Fire Zone

Friday February 2nd, 2018   •   Posted by K. Lloyd Billingsley at 3:04am PDT   •  

As we noted, EPA “policy advisor” John Beale told his bosses he really worked for the CIA and shirked his duties for a decade. During this time, EPA bosses never fired Mr. Beale but they did pay him generous retention bonuses. EPA boss Gina McCarthy presided over the massive toxic spill on Colorado’s Animas River but safely retained her job. Lois Lerner deployed the IRS to target advocates of lower taxes and accountable government but she was not fired. IRS boss John Koskinen covered up the scandal, but he wasn’t fired either. The firing of lower-level government workers is likewise rare, but one exception recently came to light.

On January 13, a Hawaii Emergency Management Agency employee triggered a false alert for an incoming nuclear missile. For the best description of how this happened, see Anthony Pignataro in Mauitime, wondering if Hawaii would survive the “Age of Stupid.” The false alert was a government snafu on a massive scale. Likewise, Pignataro’s report several hours after the false alert confirms that “huge numbers of people–residents and tourists–were terrified.” They didn’t know what was happening or who might be responsible.

As CNN reports, the government employee who triggered the alert “had a history of confusing drill and real-world events.” That serious disconnect led nobody to judge this person unsuitable for the job. After triggering the alert, the employee “seemed confused, he froze and another employee had to take over his responsibilities.” This employee refused to speak with FCC investigators and instead submitted a written account. By the end of January, the Hawaii Emergency Management Agency had fired this employee but did not reveal his identity or what kind of benefits he may have retained. The no-fire zone had been violated but the government employee still enjoyed special protection. When it comes to protecting the public, on the other hand, Hawaiians know their government can be real stupid.

Building California’s Stonehenge

Thursday February 1st, 2018   •   Posted by Craig Eyermann at 6:09am PDT   •  

Construction of California High Speed Rail Viaduct in Fresno The ongoing saga of cost overruns, waste and bureaucratic mismanagement related to the building of California’s bullet train project/boondoggle has provided a continuous stream of source material for us here at MyGovCost for many years.

But in terms of describing the likely legacy of California’s high speed rail, both Lloyd Billingsley and I would have a tough time topping Victor Davis Hanson’s recent description of the project as “California’s Stonehenge.”

Nobody quite knows who built Stonehenge some 5,000 years ago in southern England. The mysterious ring of huge stone monoliths stands mute.

Californians may leave behind similarly enigmatic monuments for puzzled future generations. Along a 119-mile pathway in central California from Bakersfield to Madera, there are now huge, quarter-finished cement overpasses. These are the totems of the initial segment of a planned high-speed-rail corridor.

Californians thought high-speed rail was a great idea when they voted for it in 2008. The state is overwhelmingly progressive. Silicon Valley reflects California’s confidence in new-age technology. Californians are among the highest-taxed citizens in the nation. They apparently are not opposed to borrowing and spending for ambitious government projects — especially to alleviate crowded freeways.

Planners assured voters that the cost for the first 520 miles was going to be an “affordable” $33 billion. The rail line seemed a good way to connect the state’s economically depressed interior with the affluent coastal corridor.

The segment from Madera to Bakersfield was thought to be the easiest to build. Rural land was cheaper to acquire in the interior of California. The route was flat, without the need to bore tunnels. The valley is considered seismically stable. Economically depressed counties welcomed the state and federal investment dollars.

But projected costs have soared even before one foot of track has been laid. The entire project’s estimated costs, according to various projections, may have nearly doubled. The current cost for the easiest first segment alone has spiraled from a promised $7.8 billion in 2016 to an estimated $10.6. There is no assurance that enough Central Valley riders will wish to use the line.

26608555 - stonehenge : one of the wonders of the world The fiscal viability of California’s high speed rail project really goes downhill from there, because it has to compete with other goals of the state’s politicians, such as paying pensions to state government employees, implementing a single-payer health care system for state residents, and repairing deteriorating highways and schools, to name just a few, all of which require massive sums of money that the state doesn’t have and is unlikely to ever obtain.

At some point, Californians will demand that the boondoggle that is the California bullet train come to an end. When it does, Hansen anticipates that all the state will have to show for its billions of dollars spent for high speed trains that will never arrive at their destination will be the concrete monoliths it is building today.

Hopefully, the ancient builders of Britain’s Stonehenge got a better return on their investment. And also more use out of it.

Oroville Dam Costs Soar to $870 Million

Wednesday January 31st, 2018   •   Posted by K. Lloyd Billingsley at 5:43am PDT   •  

Last February 7 during heavy rains, the Oroville Dam’s concrete spillway failed, launching fears of a complete dam failure, and forcing the evacuation of 188,000 people downstream from the structure. As the anniversary approaches, the total costs of the spillway reconstruction, including emergency response, have risen to $870 million according to the state Department of Water Resources. This government agency has no trouble charting costs but other issues remain on the murky side.

The massive January 5 Independent Forensic Team Report: Oroville Dam Spillway Incident, blames the failure on “a complex interaction of relatively common physical, human, organizational, and industry factors, starting with the design of the project and continuing until the incident.” The principal designer for the Oroville spillways was a post-grad student with “no prior professional experience designing spillways.” The forensic team did not name the unqualified designer, and former DWR engineer Don Colson, who worked on the dam, claims “there was no such” person and anybody who says there is “must be suffering from an advanced case of mental illness.” Both sides can’t be right, but DWR bosses and legislators are failing to resolve the mystery, hardly an academic matter.

A new concrete spillway is showing cracks that could lead to safety issues. The city of Oroville has filed a lawsuit against the DWR for mismanagement of the dam. Taxpayers statewide should not be surprised if the total costs wind up well north of $1 billion. And whoever the original spillway designer was, residents in Oroville and points south would have to be crazy to think the 1968 structure is safe.

Attack of the Bridge-Eating Microbes?

Tuesday January 30th, 2018   •   Posted by K. Lloyd Billingsley at 11:42am PDT   •  

According to an NBC report by Jaxon Van Derbeken, “Caltrans is investigating whether microscopic organisms are attacking critical welds on the submerged foundation of the new Bay Bridge tower, potentially endangering the projected 150-year lifespan of the troubled $6.4 billion structure.” Brian Maroney, Caltrans’ chief engineer on the project, told NBC that experts report “very small microorganisms that are feeding on iron.” For Caltrans “that’s really something new, and when it’s something new to us, we want to make sure we get on top of it as fast as we can.” Of course, the prospect of microbes chowing down on welds is not the only issue. As the NBC report notes, “this revelation is just the latest in a string of problems that have dogged the project, including cost overruns, flawed welds, broken bolts and pitted cables.”

As we noted, these problems were the subject of hearings in Sacramento in January, 2014. Witnesses testified that Caltrans bosses compromised public safety by ignoring problems with welds, bolts and rods. Caltrans also outsourced work to China, where workers produced cracked welds. Caltrans bridge engineer Douglas Coe testified that every one of the 750 panels had to be repaired. Caltrans geologist Michael Moore testified that safety problems were kept secret, ignored and covered up. Rep. Mark DeSaulnier, then a state senator overseeing the hearings, charged “a deliberate and willful attempt to obfuscate what is happening to the public” but failed to follow up on whistleblower’s call for a criminal investigation. “It’s frustrating that there’s never been anyone in the management of the bridge who has been held accountable.” DeSaulnier later lamented. And when apprised of the safety issues, governor Jerry Brown replied, “I mean, look, shit happens.”

In the 2014 hearing, nobody warned about the predatory microbes that Caltrans claims are now on the prowl. As they ponder the long-term risk, taxpayers and motorists might also recall that the bridge came in 10 years late and $5 billion over budget.

Should Taxpayers Pay Tab for Government Sexual Abuse?

Tuesday January 30th, 2018   •   Posted by K. Lloyd Billingsley at 3:11am PDT   •  

As we noted last month, sexual abuse has been thriving in Hollywood, Congress, the media, and in the California legislature. Senate boss Kevin de Leon sought to hire an independent legal firm to investigate but the latest revelations come from a different source. According to an investigation by the Sacramento Bee, “the state paid more than $25 million in the last three fiscal years to settle sexual harassment claims against state agencies and public universities. Sexual harassment settlements cost California taxpayers about $21.3 million of that amount, while the two university systems say insurance plans covered their payouts of nearly $3.9 million during the same three-year period.”

According to the investigation, California is outpacing New York and Florida in the volume of sexual harassment claims and settlement costs. Those involve 24 California state agencies and 10 campuses in both university systems. The payouts ranged from a relatively meager $500 to a prison inmate to the $10 million the Department of Corrections and Rehabilitation paid in 2016 to wards claiming abuse by a staff counselor. The highest single settlement was a cool $1.7 million to Tyann Sorrell of UC Berkeley School of Law for sexual harassment at the hands of former dean Sujit Choudhry. The state did not volunteer any of this information nor make it easy for anyone to find.

The Bee investigators had to piece together more than 40 California Public Records Act requests and copies of settlement agreements from the 38 state entities with 900 or more employees, excluding the judicial branch. The $25 million in payouts over the past three years, “almost certainly under-estimates the scope of California’s settlement costs.” The figure that California taxpayers should have paid out is zero. Dean Choudhry and his fellow abusers should have paid the settlements out of their own pockets. Until the state makes abusers take responsibility for their own actions, and comes clean with the public, nothing is going to change.

A Bigger Pentagon Budget

Monday January 29th, 2018   •   Posted by Craig Eyermann at 6:48am PDT   •  

55015762 - financing war concept, money with tank shadow If President Trump gets his way, the amount of U.S. defense spending will increase by nearly 13% above their current level in 2019. Bloomberg Quint‘s Eric Watson and Tony Capaccio report on the proposed surge in U.S. defense spending.

President Donald Trump will propose $716 billion in defense spending in his fiscal 2019 budget request, a 7.2 percent from his request for this year that backs the Pentagon’s push for a major buildup, a U.S. official said.

The funding would include $597 billion for the Defense Department’s base budget, with the rest going for its war-fighting account and to other government programs such as the Energy Department’s nuclear weapons program, said the official, who spoke on condition of anonymity in advance of the release of Trump’s second proposed budget next month.

The amount is a sharp increase from the $668 billion total Trump proposed last year for fiscal 2018 and also offered as a placeholder for fiscal 2019. Currently, the Pentagon is operating under stopgap funding at fiscal 2017 levels, which totaled $634 billion. The plan, reported earlier Friday by the Washington Post, represents a victory of defense hawks over those trying to constrain deficit spending.

From a deficit spending perspective, the proposed $82 billion increase in defense spending over their current level, which was set in 2017, could be twice as bad because congressional Democrats have been demanding a dollar for dollar increase in non-defense spending programs in the negotiations to increase the national debt ceiling. David Sherfinski of the Washington Times has that story:

Republicans and Democrats are supposedly close to a deal that would lift universally derided spending caps, but the negotiations have been hamstrung by the fact that the two sides can’t even agree on what constitutes “parity” between defense and non-defense funding.

Senate Majority Leader Mitch McConnell says he won’t be bound by past “arbitrary” agreements that raised the caps equally for defense and non-defense discretionary spending, as he and other Republicans say a massive new military funding boost is needed to play catch-up after years of neglect.

Democrats, though, are again insisting on a dollar-for-dollar increase, saying certain domestic programs have taken under-the-radar hits from the caps and that defense hawks have consistently managed to sneak in extra money through a special war fund that’s exempt from the limits.

If you’re scratching your head wondering why non-defense spending should be in any way linked to defense spending increases, you’re not alone. Why, for example, would the need to address newly developing geopolitical crises elsewhere in the world require any new non-defense spending within the United States, when the two types of spending are almost completely independent of one another? But, that’s Washington D.C. thinking for you.

Better thinking would have members of the U.S. Congress working to close deals to reform the spending programs that have already put the U.S. government’s fiscal path onto an unsustainable trajectory, well before any new spending is added to worsen the nation’s fiscal situation. Alas, that concept seems to elude the politicians elected to the U.S. Congress, who would appear to have other priorities.

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