The MGH Report

Michael G. Haran, Proprietor

ON PUBLIC PENSIONS

Posted by on Oct 30, 2012

I have been following this year’s city council race in Healdsburg. The town has a sales tax increase, Measure V on this year’s ballot which will raise about one million dollars which current city council member have said will go toward public safety, street maintenance, economic development activities and general repairs and maintenance to city facilities. Two of the council members running for reelection are Gary Plass and Susan Jones both retired public employees.

Everyone knows we need a strong tax base to ensure public safety and a smooth running local, county and state government which provides for both business growth and a good quality of life. What bothers me about agreeing to a tax increases is that I don’t feel enough has been done to get rid of the waste in government. Once redevelopment funds dried up it became obvious that city and county government had been using these funds to expand government growth whether it was needed or not. A recent CBS report which showed Caltrans administrators using state rented pick-up trucks to shop for wine and clothes at Nordstrom’s during business hours and then being stonewalled by Caltrans management continues to erode voter trust.

Back in 2002 the Board of Supervisors enacted measures that have now increased pension costs by over 400 percent. The 2012 Sonoma County Grand Jury concluded that these pension increases were approved in a manner that did not comply with the law in an obvious attempt to dupe voters. In a September 2012 Santa Rosa Press Democrat article on the subject Brett Wilkinson wrote “Zane and other county leaders, nevertheless, were unified in defending the legality of the enhanced pensions. Trying to roll them back would be a costly lost cause, officials said, so the county will continue to pursue changes through legislation and collective bargaining.” I think a jury might think otherwise.

Most newly enacted pension reforms pertain to new hires in a so called “second-tier” reform. As far as I know nothing has been done to reduce the spiked pensions of current retirees who continue to collect lifetime pay increases because they were allowed to roll in their vacation, sick and car allowance pay into their lifetime retirement benefits.

I really don’t blame the public worker rank and file for this. In fact, as the LA Times columnist Steve Lopez recently said (Don’t Blame the State’s Teachers 10/28/12) “As a group (private sector workers), we’re torn between envy and anger, faced with uncertain financial futures while we pay for the comfy retirements of government retirees.” A friend has joked, “Where were we when this gravy train was went by?” Not wanting to be hypocritical I know that if I were a public employee and was offered the same spiking opportunities I would have taken it them too. But this isn’t about blame it’s about correcting a wrong.

Because of, the thinking went at the time, lower pay for government employees should be offset by taxpayer retirement guarantees. That was all well and good until the tide went out on the private sector and exposed the rotten under pinning of the public sector. Again, I don’t blame the public sector workers I think the whole immoral practice of pension spiking was a result of union shenanigans due to their unrestricted power over our state legislators. This is what gave rise to this year’s Prop. 32. This country’s oligarchs saw a chance to deceptively crush the state’s unions. This is frightening thought but the unions have no one to blame but themselves for this challenge.

Power corrupts and absolute power corrupts absolutely. I’m not saying that what the Board of Supervisors did in 2002 is the same as what went on in Bell, CA but it came from the same “look how well the private sector is doing – we deserve this” mentality.  It was a culture of total contempt for the people who trusted them.

I don’t know if anyone has looked at what the saving would be if all currently retired public employees had their current retirement pay rolled back to what it would be if their retirement benefits hadn’t been spiked. I’m not suggesting reducing their base pay but just cutting off what was unfairly gained. Maybe if an actuary were to exam this it could be a substantial savings on the local, county and state budgets without reducing the retirement pay that the retirees agreed to when working. If the retiree has already collected what would have been a lump sum payment at retirement the overage should be cut off. If we just wait around for runaway inflation to bail us out the liability is just going to get bigger. There is nothing “grey” about insider trading and conflicts of Interest and there should be nothing grey about gaming a system of public trust.

This brings us back to our little burg north of Santa Rosa. Council members Gary Plass and Susan Jones are good people who care a great deal about our town. However, as retired public employees and the city facing a $26 million dollar unfunded pension liability I think their conflict of interest is just too great to ignore. One can’t help but wonder if they are supporting Measure V to help Healdsburg or to protect their retirement pay. If you have to rebuild the chicken coop you don’t want a fox designing the blueprint?

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MISSED OPPORTUNITIES

Posted by on Oct 17, 2012

I was happy to see the president hold his own in the second debate although I think he was again unnecessarily polite and I would like to have seen a little more of a political Chicago street fighter in him.

First of all why did the president let Romney rattle off a bunch of four year stats? The recession ended in the summer of 2009. That should be Obama’s floor. All analysis of the economy should start from there including the unemployment rate and why didn’t Obama slam Romney on the deficit.

The reason the deficit is up four trillion dollars is because we are just coming out of a devastating recession that shrank tax revenues and an economy that needed deficit spending to stimulate the economy much of which was stymied by the obstructionist republican congress whose only goal was not to tend to the economy but to get Obama out of office.

Next, with only three week left in the race Obama has to appeal to voter “lowest common denominator.” For example, why wasn’t the fact that consumer debt is the lowest it’s been since the bottom of the recession, consumer confidence is up and inflation is nowhere to be seen brought up?

And why didn’t the President bring up the fact that it is traditionally housing that lead us out of recessions. The reason this recession has been so sever is that the Wall Street derivatives allowed the largest building boom the world has ever seen. Massive over supply cause a massive crash and because almost every financial institution in this country, and many around the world, that were involved crashed too.

Housing is now getting stronger. Builder confidence is up and traffic to new home subdivision is the highest it’s been since the crash. It will be housing that will drop unemployment and start a sustainable recovery. The President should talk up housing and point out its momentum because if Romney wins guess who will take credit for this momentum.

Romney likes to refer to “trickle-down-government” and wants to see a smaller federal government. I kind of like a strong central government that has the power to bailout huge banks and can stabilize a crashing economy.

The President has also got to bring up the fact that the four hundred richest families in this country saw their wealth go up by over four hundred percent in the past ten years while the middle class took it in the shorts by a cool two trillion… as in trillion – in the past four years. What’s happening is that wealth is migrating toward the rich from the middle class. The reason it’s going to take a long time to stabilize the middle-east is because very few middle-eastern countries have a stable middle class. They are either rich or poor which does nothing for economic growth and leads to descent.

It also baffles me why the rich aren’t more proactive in getting the middle class back up and buying things again. Since two thirds of the economy is driven by consumer consumption you would think that it would be in the self-interest of the wealthy, a lot of who’s wealth came from consumer consumption, do more to help make the middle class whole again.

A good analogy is the old joke about the rich guy, the middle class guy and the poor guy who enter a room with only a table and on that table is a plate of 12 cookies. The rich guy takes 11 and tells the middle class guy and the poor guy that each is trying to steal the other guy’s cookie.

Time is fleeting so these points have got to get out either in campaign ads, presidential speeches or in the next debate. Speaking of the next debate the President has to really focus on the lowest common denominators – it works at the local level and, because people are people, it will work nationally. And it just might determine the election.

 

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