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Tax Hikes to Fund Bureaucrat Pensions

Sunday January 18th, 2015   •   Posted by Craig Eyermann at 1:01pm PST   •  

34491370_S Just before November 2014’s elections, we warned that a number of school bond issues that were appearing on voter ballots in the state of California were being advanced under false pretenses.

Here, local governments and school boards were advocating that voters approve the school bond issues because they would fund needed improvements to public education and school facilities. By and large, California’s voters bought their local politicians and bureaucrats’ sales job and passed the bond measures, which allowed the local governments and school departments to borrow large amounts of money that would be paid back through temporarily higher tax collections from the voters who approved them.

But California law doesn’t require the state’s politicians and bureaucrats to spend the money they collect through such ballot measures for the purposes they say the measures are for.

That lesson is being driven home now thanks to an op-ed by Steve Malanga that recently appeared in the Wall Street Journal. Malanga finds that the only things being improved are the lavish pensions of government bureaucrats.

California Gov. Jerry Brown sold a $6 billion tax increase to voters in 2012 by promising that nearly half of the money would go to bolster public schools. Critics argued that much of the new revenue would wind up in California’s severely underfunded teacher pension system. They were right.

Last June Mr. Brown signed legislation that will require school districts to increase funding for teachers’ pensions from less than $1 billion this year in school year 2014-15, which started in September, to $3.7 billion by 2021, gobbling up much of the new tax money. With the state’s general government pension fund, Calpers, also demanding more money, California taxpayer advocate Joel Fox recently observed that no matter what local politicians tell voters, when you see tax increases, “think pensions.”

Malanga goes on to reveal that this situation is not limited to California. He reveals that similarly motivated government bureaucrats, looking to put their own interests ahead of those of the people, are taking similar actions in other states, such as Pennsylvania, West Virginia, and Illinois.

But perhaps the most telling thing about their actions is that they have no intention of reining in their borrowing and taxing to sustain the pensions of public employees.

Burdened by so much debt, taxpayers in some places are unlikely to see relief soon. When California passed its 2012 tax increases, Gov. Brown and legislators promised voters the new rates would expire in 2018. But school pension costs will keep increasing through 2021 and then remain at that elevated level for another 25 years to pay off $74 billion in unfunded teacher liabilities. Public union leaders and sympathetic legislators are already trying to figure out how to convince voters to extend the 2012 tax increases and approve “who knows what else” in new levies, says taxpayer advocate Mr. Fox. It’s a reminder that in some places the long struggle to pay off massive government pension debt is just starting.

Taxpayers considering these kinds of measures should note that government bureaucrats are increasingly becoming a massive liability.

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January 2015