MyGovCost News & Blog

Taxpayers in the northern California capital region wonder why their roads remain full of potholes, fire stations close down, and overall services decline. As Brad Brannan of the Sacramento Bee explains, this happens because of “rising pension costs.” An employee of the Sacramento Metropolitan Fire District can retire after 30 years, at the age of 50, with 90 percent of her salary for life. Those retirees bag an average annual pension of some $90,000, nearly $30,000 more than the state’s median annual income of $64,500. So no surprise that the district pays out $34 million in retirement costs, an increase of 26 percent from a decade ago. This works out to 42 cents for every dollar of employee salary, a jump of 25 percent from two years ago. Brannan has also calculated this ratio for cities in the region.

The city of Folsom spends 47 cents on pensions for every payroll dollar. Galt spends 46 cents, Davis 45 cents, and Sacramento 39 percent. In South Lake Tahoe, where pension costs amount to 34 cents for every payroll dollar, the city “deferred needed repairs for years,” as Brannan explains. Government union mouthpiece Steve Maviglio, who once bagged $165,000 a year as a spokesman for Assembly Speaker Fabian Nunez, believes it’s all justified because government employees didn’t get the raises they wanted during the recession.

As we noted last year, CalPERS boss Rob Feckner believes all is well and that government pensions are “a powerful financial engine,” generating “nearly $27 billion in economic activity every year, stimulating business growth, generating tax receipts and supporting more than 360,000 jobs in our local communities.” Former San Jose mayor Chuck Reed, however, cited shortfalls of more than $100 billion, and Dan Walters of the Sacramento Bee flagged unfunded pension debt of “at least $300 billion” and as much $1 trillion with lower earnings assumptions.

So the pension crisis is going to get worse and services will continue to decline as local governments fork over more money to retirees, many in their fifties and bagging nearly $100,000 a year. A sweet ruling-class deal for them means a bad deal for taxpayers.

Back in 2012, California’s Department of Fair Employment and Housing installed Houdini, a $640,000 computer system designed to automate the filing of complaints. In November, 2013, Jon Ortiz of the Sacramento Bee reported that Houdini was failing to deliver improved efficiency and the DFEH “has seen a decline in the speed and quality of its work.” DFEH boss Phyllis Cheng told Ortiz that Houdini was “challenging” but that the state agency had turned its business around. As it turns out, that was something of a stretch.

Adam Ashton of the Bee now reports that Houdini, despite $98,000 in modifications, has been “a five-year headache,” and remains “riddled with problems,” according to state workers who told the reporter Houdini “simply does not support the level of service previously provided by DFEH.” Ashton found that Houdini “shuts down often, at least once a week in November,” leaving employees to document cases on Microsoft Excel worksheets, which do not work with Houdini.

The DFEH director who picked Houdini resigned in early 2015, but new boss Kevin Kish stuck with the program. Now Kish wants to replace Houdini with Salesforce, a program already used by other agencies, giving “some assurance” it will work as intended. Taxpayers have grounds to be skeptical.

From 1994 to 2013, as Jon Ortiz noted, “the state government spent $985 million on seven computer projects that were either terminated or suspended. In one case, the state paid $1 billion in federal penalties because it took eight years to install an automated child-support enforcement system.” This happened, the state auditor reported, “because CalTech does not always hold projects accountable.” That should be no surprise, because the California Department of Technology serves as watchdog and consultant for many of those government projects. That is a slick trick worthy of Houdini.

Meanwhile, don’t forget that Covered California, the state’s wholly owned subsidiary of Obamacare, shelled out $454 million on a computer system that failed massively, leading to “widespread consumer misery,” as health reporter Emily Bazar put it. Given the technology problems, the state’s free spending, high-tax governor Jerry Brown might hold off on that satellite launch.

In 2009, as part of President Obama’s signature economic policy that was passed into law as the American Recovery and Reinvestment Act, which is more popularly known as the “stimulus package,” President Obama dedicated some $7 billion for the express purpose of improving academically failing schools through School Improvement Grants (SIG). In order to be eligible to receive a grant, the failing schools had to adopt one of four models for improvement that had been approved by the U.S. Department of Education.

Last week, the U.S. Department of Education released a report that concludes that money was wasted, especially in terms of either improving student test scores or graduation rates:

There were no significant impacts of SIG-funded models on math or reading test scores, high school graduation, or college enrollment of students in schools at the SIG eligibility cutoff… For 2012–2013, the impact on math test scores was 0.01 standard deviations, the impact on reading test scores was 0.08 standard deviations, and the impact on high school graduation was -5 percentage points, but these impacts were not statistically significant.

John Sexton of Hot Air interprets the report’s basic findings:

So the graduation rate actually went down, just not in a statistically significant way.

The Washington Post‘s Emma Brown echoes that conclusion:

One of the Obama administration’s signature efforts in education, which pumped billions of federal dollars into overhauling the nation’s worst schools, failed to produce meaningful results, according to a federal analysis.

Test scores, graduation rates and college enrollment were no different in schools that received money through the School Improvement Grants program — the largest federal investment ever targeted to failing schools — than in schools that did not.

The Education Department published the findings on the website of its research division on Wednesday, hours before President Obama’s political appointees walked out the door.

Such is the way of Washington D.C. bureaucrats, where failures are covered up for as long as needed before they escape to avoid personal accountability.

Inauguration Day in Washington D.C. is a day where not much happens in the U.S. government, where we can expect the real work to begin after all the pomp, circumstance, speeches, protests and parties have faded into the background noise. Since Inauguration Day 2017 is falling on a Friday, that day will come around after the new presidential administration has had the weekend to both get settled in and to recuperate after all the festivities, and as the federal government’s bureaucrats go back to work after their long weekend holiday. Monday, January 23, 2017 might therefore be considered to be the real “Day 1” on the job for the incoming President, which will be defined by a rush of activity as the U.S. government gets back to work under new management.

Until then, here’s a humorous video reminder that one of the things we just listed is considered to be one of Washington D.C.’s biggest problems, which Americans who value fiscal responsibility in government are looking to newly sworn in President Donald Trump to fix:

This is just the introduction, you can see all three parts of the YouTube video series “The Government” here!

Speaking of fixing the problem, here’s an early indication that much needed reforms in how the federal government operates and spends money is something that President Trump is seriously contemplating. The Hill‘s Andrew Bolton reports:

Donald Trump is ready to take an ax to government spending.

Staffers for the Trump transition team have been meeting with career staff at the White House ahead of Friday’s presidential inauguration to outline their plans for shrinking the federal bureaucracy, The Hill has learned.

The changes they propose are dramatic.

The departments of Commerce and Energy would see major reductions in funding, with programs under their jurisdiction either being eliminated or transferred to other agencies. The departments of Transportation, Justice and State would see significant cuts and program eliminations.

The Corporation for Public Broadcasting would be privatized, while the National Endowment for the Arts and National Endowment for the Humanities would be eliminated entirely.

Overall, the blueprint being used by Trump’s team would reduce federal spending by $10.5 trillion over 10 years.

The recently passed budget blueprint passed in the U.S. Congress proposes government spending that would increase the national debt by $9.7 trillion over 10 years if not offset by spending cuts that, as yet, have not been officially proposed.

We’ll find out how serious President Trump is about reining in the U.S. government’s spending when he presents his first budget proposal, which is expected to be delivered to Capitol Hill sometime in mid-April 2017.

Last December, the mayor and city council of Dallas, Texas, acted to stop a run on the city’s pension program for police officers and fire fighters, as it became increasingly clear that the fund was rapidly becoming insolvent.

Last week, the city’s elected leaders made their termination of the lump sum withdrawals that retired city police officers and fire fighters had been rushing to make to protect their retirement wealth before the pension fund went bankrupt permanently. Jim Schultze of the Dallas Observer describes the new action:

Whether or not the city can really get away with this new move — browbeating the police and fire pension fund into shutting down lump-sum withdrawals for Dallas cops and firemen — let’s be honest and name it for what it is. This is a default. It’s bankruptcy-lite.

Yesterday, the board of the Dallas Police and Fire Pension Fund blinked and did what the mayor was demanding. The pension board slammed the door shut on retirees who want to take all their money out of a special fund called DROP.

The mayor and the city manager want the board to agree not to open that door again until the pension board has taken a big chunk out of what DROP owes. And guess whose hide that chunk comes out of.

The city wants the pension fund to go back into the DROP fund and retroactively strip out all of the interest and cost of living increases that the pension fund originally promised to pay cops and firemen when they put their money into it in the first place however many years ago.

In finance circles, this kind of action is called a clawback, and it typically occurs only after an individual has been determined to have received excessive benefits or income through accounting errors or through fraud.

But for the city of Dallas, it wasn’t enough to avoid damaging the city’s credit rating. The Dallas Business Journal‘s Jon Prior reports:

Standard & Poor’s has downgraded Dallas’ credit rating over concerns about the struggling police and fire pension.

The city’s general obligation bonds were downgraded to “AA-“ from “AA.”

“The downgrade reflects our view that despite the city’s broad and diverse economy, which continues to grow, stable financial performance, and very strong management practices, expected continued deterioration in the funded status of the city’s police and fire pension system coupled with growing carrying costs for debt, pension, and other post-employment benefit obligations is significant and negatively affects Dallas’ creditworthiness,” S&P Global Ratings credit analyst Andy Hobbs said in a statement.

The police and fire pension system could go insolvent in the next 10 years because of a funding gap. The financial troubles, along with a multi-billion-dollar lawsuit between the city and emergency works, could put Dallas on a path to bankruptcy.

Credit rating agency Moody’s had previously acted to downgrade its assessment of the city’s creditworthiness twice in the last two months of 2016. The lowered credit ratings mean that the city will have to pay higher interest charges on any new money that it borrows, which will increase the cost of sustaining the city’s government to Dallas residents and businesses.

After the city’s credit downgrade, and with the leverage of the clawback, Dallas Police and Fire Pension officials acted late last week to once again permit lump sum withdrawals on more favorable terms to the city. Jon Prior reports again:

Officials of the troubled Dallas Police and Fire pension narrowly approved a plan Thursday to once again allow members to make lump-sum withdrawals that were halted last year if a judge approves the plan.

An estimated funding gap has put the system in danger of insolvency in the coming years, but officials crafted a plan to allow for limited distributions by members that hinges on the financial health of the fund each month. A judge will rule on Jan. 17 whether to approve the board’s plan.

For Dallas’ retired police officers and fire fighters, this last action means that whether they can have access to their retirement wealth will be entirely dependent upon how well the officials of the Dallas Police and Fire Pension fund manage the program. Given their disastrous track record to date, and without more serious reform, the ability of these Dallas city employees to protect their retirements from further clawbacks will likely be very limited.

For more than a decade, according to David Jensen of the California Stem Cell Report, the $3 billion California Institute for Regenerative Medicine “has given away money at a rate of $22,000 an hour, seven days a week, 24 hours a day.” Donald Kohn of UCLA got $52 million from CIRM, and his treatment of Evangelina Padilla-Vaccaro, age 6, is “just what Californians hoped for when they created the Oakland-based agency in 2004 via Proposition 71.”

CIRM therapies, Jensen continues, “would ease afflictions found in nearly 50 percent of California families,” and as then governor Arnold Schwarzenegger said, CIRM would create the “cures for tomorrow.” It hasn’t and the odds are against CIRM ever doing so.

As we noted, this medical-scientific bust has been angling for more money, and David Jensen is the lead pitchman. “California’s stem cell agency will run out of money in three years. Should voters OK spending more?,” runs the headline on Jensen’s January 17 Sacramento Bee piece, which finally acknowledges that he is a “retired Bee editor.” Jensen leads with the poster-child story, which as his highly promotional website confirms, was also on the cover of CIRM’s own publication. Jensen buries the reality that CIRM has handed out some 90 percent of its money “to institutions with links to past or present board members.” And despite stellar salaries, CIRM “has yet to come up with a therapy that reaches the general public despite rosy expectations raised by the ballot campaign.” No cures and therapies means no stream of royalties, as the 2004 campaign also promised.

Jensen invokes John Simpson of Consumer Watchdog of Santa Monica, letting slip that Simpson “was heavily involved in development of the agency’s intellectual property policy.” So no surprise that Simpson, supposedly a consumer advocate, wants CIRM to get more money “under the normal state budgetary process.” Jensen also invokes current CIRM boss C. Randal Mills, who compares CIRM to a flywheel. Once it gets turning, “it’s almost impossible to stop.” This guy understands that false promises, failure, corruption and waste are no bar to public funding in California.

With free spending high-tax evangelist Jerry Brown in office until 2018, look for more CIRM ad copy masquerading as journalism.

As Chriss Street of Breitbart News reports, California Governor Jerry Brown wants a 42 percent increase in the gasoline tax and seeks to hike Californians’ vehicle registration fees by 141 percent. These tax and fee increases are not to fix the state’s terrible roads, build more water storage, which the state desperately needs, or offer Californians some new service. The reason, as Street sees it, is “the insolvency risk from the exploding cost of California Public Employees’ Retirement System (CalPERS) public pensions.” Investment returns of 2.75 percent in 2015, and 0.61 percent in 2016, could have the state staring down the barrel of $964.4 billion in unfunded pension debt. For taxpayers, this should define government greed: extorting more money from the people in an attempt to fix problems of the government’s own making.

Governor Brown has already championed an income-tax rate of 13.3 percent, highest in the nation, and sales taxes approaching 10 percent in some cities. The state’s high corporate tax rate of nearly 9 percent is unfriendly to business, which also faces an onerous regulatory regime. In his first go-round, Brown authorized government employee unions and bulked up government with unelected bodies such as the California Coastal Commission. Brown has never seen a bureaucracy he doesn’t like and spends freely under any conditions.

He supports the state’s $64 billion “bullet-train” project, which some call a “Browndoggle.” He wants to drill two massive water diversion tunnels at cost of some $15 billion, doubtless much more. The state already has an attorney general, but Brown wants to hire former federal Attorney General Eric Holder to fight the new administration in Washington. And if Brown doesn’t like their policies, he says the state will “launch its own damn satellites.” That sort of rhetoric got Brown tagged “Governor Moonbeam.” Governor Greed would be more accurate.

Before anybody else climbs aboard California’s “high-speed rail” project, they might give a listen to Ralph Vartabedian of the Los Angeles Times, who has been riding herd on this boondoggle from the start. The reporter has obtained a confidential Federal Railroad Administration risk analysis charging that the bullet train could cost taxpayers 50 percent more than estimated, as much as $3.6 billion more, just for the first 118 miles in the Central Valley, supposedly the easiest stretch of the project. This is the same Federal Railroad Administration that forked over grants of $3.5 billion for that very segment.

As we noted, Mr. Vartabedian also charted the bullet train’s tunnel vision. The route will require 36 miles of tunnels through the mountains north of Los Angeles, a tectonic boundary riddled with earthquake faults. This would be the most ambitious tunneling project in the nation’s history, and the probability of cost overruns, according to experts, is 80 to 90 percent. All along the route the railroad bosses need property, but as in Blazing Saddles, one thing stands in way: the rightful owners. Even if built according to plan, from Los Angeles to the Bay Area, the bullet train would be slower and more expensive than air travel.

As we noted, 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. For that alone it deserves the Golden Fleece Award, but despite cost overruns the rail authority, which as Mr. Vartabedian notes has “never built anything,” does not disappear. Like other useless state government bodies, it remains a comfy sinecure for ruling-class retreads like board member Lynn Schenk, a former congresswoman and chief of staff for governor Gray Davis. That’s why the waste keeps running off the rails.

Last week, the U.S. Senate voted in favor of a new budget resolution, an action that was followed by the House of Representatives a day later, as it approved the same 10-year blueprint for the future budget of the federal government.

The measure is highly significant in two ways. First, it clears the legislative path toward the repeal and replacement of the controversial and failing Affordable Care Act, more popularly known as Obamacare, through the same means by which it became law.

Second, it would allow for the national debt to increase by an additional $9.7 trillion over the next 10 fiscal years, through its Fiscal Year 2026, which ends September 30, 2026.

That very large figure is perhaps best understood in the context of how the national debt has grown during President Obama’s presidency. As of this date, the total public debt outstanding of the U.S. government is all-but-kissing the $20 trillion mark, having grown by over $9.3 trillion during the past eight years.

To have grown by that much during the eight years of President Obama’s tenure in office, the U.S. national debt has had to increase at an average rate of $1.16 trillion per year. The Congress’s new budget blueprint would slow that average growth rate to $0.97 trillion per year, which is about 16 percent slower than than the average speed at which it grew during the past eight years.

At present, it is likely that the national debt will surpass $20 trillion in February 2017. The only reason it has not done so already is because the U.S. Treasury Department put the brakes on its issuance of new debt back in December 2016, to keep it under that amount through the end of President Obama’s term in office, in anticipation of the reimposition of the national debt ceiling on March 16, 2017.

When the national debt ceiling goes back into effect on that date, the national debt is projected to be $20.1 trillion.

The next major event that will help determine how fast the national debt will grow will be Donald Trump’s release of his first budget proposal, which should come within several weeks after he is sworn into office as the next President of the United States on Friday, January 20, 2017.

This week, a three-judge panel of U.S. Ninth Circuit Court of Appeals laid down the law on whether government bureaucrats, in this case ones employed by Orange County, can have a free pass from having to comply with any sort of ethical standards of conduct while appearing in court as part of their official capacity as government employees. As R. Scott Moxley reports on the court’s decision in OCWeekly, it turns out that federal judges really do frown on anybody committing perjury or presenting false evidence in court, including government officials:

Using taxpayer funds, government officials in Orange County have spent the last 16 years arguing the most absurd legal proposition in the entire nation: How could social workers have known it was wrong to lie, falsify records and hide exculpatory evidence in 2000 so that a judge would forcibly take two young daughters from their mother for six-and-a-half years?

From the you-can’t-make-up-this-crap file, county officials are paying Lynberg & Watkins, a private Southern California law firm specializing in defending cops in excessive force lawsuits, untold sums to claim the social workers couldn’t have “clearly” known that dishonesty wasn’t acceptable in court and, as a back up, even if they did know, they should enjoy immunity for their misdeeds because they were government employees.

A panel at the U.S. District Court of Appeals for the Ninth Circuit this week ruled on Orange County’s appeal of federal judge Josephine L. Staton’s refusal last year to grant immunity to the bureaucrats in Preslie Hardwick v. County of Orange, a lawsuit seeking millions of dollars in damages. In short, judges Stephen S. Trott, John B. Owens and Michelle T. Friedland were not amused. They affirmed Staton’s decision.

Moxley goes on to present the verbal exchanges that took place between the attorneys hired by Orange County and the Ninth Circuit’s judges, which you have to see to believe really happened with state-licensed attorneys.

Following the Ninth Circuit panel’s decision that government bureaucrats, despite what they might believe, are not entitled to commit perjury without penalty, the civil case against the government of Orange County will continue forward, where the county is at risk of a multi-million dollar judgment against it for the so-far-unanswered misconduct of its employees.

Twenty-two years earlier, Orange County went bankrupt in large part because of the unethical conduct of its government officials. While its potential liability in the new case is far below the level that would sent it back into bankruptcy proceedings, it would be nice if the county’s officials would finally learn their lesson about the proper conduct of public employees so it can avoid imposing such unnecessary liabilities on Orange County residents for their abuses of power in the future.