Topic: Public Finance
News
June 23, 2017

California’s new system for funding public education has pumped tens of billions of extra dollars into struggling schools, but there’s little evidence yet that the investment is helping the most disadvantaged students.

A CALmatters analysis of the biggest districts with the greatest clusters of needy children found limited success with the policy’s goal: to close the achievement gap between these students and their more privileged peers. Instead, results in most of those places show the gap is growing.

The test scores echo a broader and growing concern about the four-year-old Local Control Funding Formula from civil rights groups, researchers and legislators. They also raise concerns about whether the $31 billion invested so far in foster youth, kids learning English and students from low-income families has been well spent.

News
June 23, 2017

Here’s a cynical view: Maybe the law’s stated goal wasn’t its real goal. Maybe influential teachers unions wanted to shower big districts with money to pave the way for teacher pay raises denied during the state’s long revenue recession. Want evidence?

On the micro level, consider what happened in Los Angeles Unified, the state’s largest district. In August 2014, the United Teachers Los Angeles issued a statement calling for a 17.6 pay increase and asserting the raise was affordable because of all the “extra dollars [that] have already flowed into the district as part of the state’s new funding formula.” In May 2015, the union ended up winning a 10 percent, two-year raise, and a year of retroactive higher pay. The following month, state Superintendent of Public Instruction Tom Torlakson overruled an underling and said that Local Control Funding Formula money could be used for teacher raises. As Assemblywoman Shirley Weber, D-San Diego, immediately pointed out, this is not what the Legislature intended when it passed the law.

On the macro level, consider what’s happened in Sacramento. The Brown administration has been implacably opposed to attempts led by Weber and Assemblyman Phil Ting, D-San Francisco, to determine how school districts have spent their Local Control funds. It doesn’t want the public to know.

News
June 23, 2017

Four years ago, Los Angeles’ elected officials wrested major financial concessions from the Department of Water and Power’s biggest and most powerful employee union, persuading those workers to go three years without raises. City budget officials billed the agreement as a road map for negotiations with its other employee groups. Soon afterward, several other unions agreed to postpone pay increases for one or more years. Now a new salary package, backed by Mayor Eric Garcetti and heading to the City Council next week, would give six raises in five years to thousands of DWP workers. That could spur other unions to seek a similar deal, placing new burdens on a city budget already under significant stress.

News
June 23, 2017

Borrowing to make the extra payment would not reduce the state’s overall debt, obviously. Brown contends that it would save money in the long run, because the interest paid on the loan would be less than the projected growth of pension debt.

It’s quite similar to the “pension obligation bonds” that local governments have floated, hoping to come out ahead via arbitrage, but they have sometimes backfired, and Brown is betting $6 billion that CalPERS can achieve its 7 percent annual earnings goal despite what the governor describes as “poor investment returns.” Even if this fiscal gimmick works as hoped, the state’s retirement debt will continue to grow.

The state’s regular payments to CalPERS fall way short of what would be needed to keep the debt from growing, much less pay it down. Overall, CalPERS has less than two-thirds of the money it needs to cover all pension commitments.

News
June 23, 2017

Governor Jerry Brown and the California Legislature have approved a scheme under which a special state fund filled with citizen-paid fees will lend money to the state General Fund, which in turn will contribute the proceeds to a state pension fund that in turn will invest in stocks in the hope of generating profits to help reduce pension deficits. In doing so, Brown and legislature haven’t disclosed to citizens that the same profits, if earned, could’ve been used for more citizen services. . . . Though Jerry Brown has not used his recent two terms in office to address core fiscal issues, until now he has generally avoided budgetary gimmicks. This time is different.

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