Peter Schrag

Viewpoints: Did Prop. 13 help produce the pension mess?

Published: Friday, Jul. 12, 2013 - 12:00 am | Page 13A

Twenty years ago, the ever-perspicacious Joel Fox, who then headed the Howard Jarvis Taxpayers Association, often complained that liberals were trying to blame everything that went wrong in California, from power failures to kidnapping, on Proposition 13. He even wrote a book spelling it all out.

And sometimes he was right. The tax-cutting initiative was not the cause of all that ailed the state.

But as state and local officials remain in deep denial on California's mounting multibillion-dollar unfunded public employee pension and retiree health care obligations, it's time to return to the subject.

Did Proposition 13 help create the conditions that have contributed mightily to those unfunded liabilities?

There's no way to prove it – or to disprove it – but there are indications.

In curtailing the power of state and local governments – city councils, school boards and the boards of hundreds of independent districts – to set and raise tax rates, it also undercut the desire of business groups and other conservatives to get involved in their management.

In cities like Sacramento, San Francisco and Los Angeles, where civically engaged business leaders ran for – and won – local offices, and where moderate conservative entities contributed to the campaigns of like-minded candidates, an increasing share of campaign money and candidates now comes from public employee unions: teachers, cops, firefighters, the state's prison guards.

And, not surprisingly, those groups came to dominate a growing number of local governing boards and in some instances the Legislature as well. There's nothing sinister about that: It's simply that in many places, as in the Capitol, Proposition 13 cleared the field for the growing clout of public sector workers.

They've never had the field to themselves. Countless other interest groups – real estate developers, hospitals, insurance companies – are still in the game. But public sector unions have power, state and local, that they never had before Proposition 13 passed.

In the meantime, something else happened that is even more directly traceable to Proposition 13. After the measure rolled back local tax revenue by nearly 60 percent in 1978, state and local boards and city councils strapped for cash increasingly met employee wage demands with long-term commitments – retiree pension and health care obligations – that took little from current revenues. In effect, they borrowed against future income – a lien to be paid off by the next generation.

Because health care costs were much lower a generation ago, that seemed relatively cheap at the time. And because cops especially had strong community support, you could hardly blame it all on union power.

But the benefits and the terms were scandalously generous, especially for cops and firefighters – early retirement; the presumption, for example, that any firefighter's lung and heart problems, even for heavy smokers, were job-related; the elastic terms allowing many to retire at a young age at nearly full pay. To this day, as we learned during last week's on-again, off-again Bay Area strike, BART workers still pay nothing into their pension fund.

Fox still disagrees with at least half of my argument. Property tax revenue, he says, increased eightfold since 1978, and public employees "for the most part" have done well compared to private sector workers. Gov. Gray Davis signed "a lavish pension bill in 1999, when the state was awash with money."

While Fox agrees about the increased power of the unions, he pins much of the blame on SB 839, the state law granting state employees collective bargaining rights that Jerry Brown, in his prior tenure as governor, signed in September 1977. In fact public employees of local entities already had such rights – had them since Ronald Reagan was governor.

Most California public employees, state and local, are relatively well paid. But the cost of living here is high and, as in the case of school teachers, they carry a heavier load than public employees in similar jobs in other states.

At last count California had 484 full-time state and local public employees per 10,000 residents; the national average is 549. In effect, some public sector unions, in negotiating contracts, have traded heavier workloads – bigger classes in the schools, fewer counselors and other support personnel – for higher compensation. A large chunk of that compensation has been deferred compensation.

There may be yet another reason for the large overhang of unfunded pension and retiree health care obligations, and that's the weakness of the Republican Party, which, through its disdain for minorities and immigrants, and its extremism on gay marriage and other social issues, has self-marginalized itself into near-irrelevance and allowed Democrats and the unions that support them to gain as much power.

That too, however, is partly a consequence of Proposition 13. Had it not imposed a two-thirds requirement to raise taxes, the GOP might have been forced to engage more directly on fiscal issues in Sacramento and locally. It might thus have exacted more restraint on long-term commitments rather than crouching behind constitutional tax barriers and just saying "no."

Peter Schrag is a former editorial page editor of The Bee.

© Copyright The Sacramento Bee. All rights reserved.

Read more articles by Peter Schrag



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