03/29/2024

News

What can $75,560 get you in California? A prison cell

The cost of imprisoning each of California’s 130,000 inmates is expected to reach a record $75,560 in the next year, enough to cover the annual cost of attending Harvard University and still have plenty left over for pizza and beer.

The price for each inmate has doubled since 2005, even as court orders related to overcrowding have reduced the population by about one-quarter. Salaries and benefits for prison guards and medical providers drove much of the increase. The result is a per-inmate cost that is the nation’s highest and $2,000 above tuition, fees, room and board, and other expenses to attend Harvard. For example, the corrections department has one employee for every two inmates, compared with one employee for roughly every four inmates in 1994.

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The Growth of Cal Grants

State law protects Cal Grant recipients from tuition increases at UC or CSU: when tuition rises, so do these students’ Cal Grants. Consequently, as tuition has increased and enrollment of low-income students has expanded, the program has grown rapidly. Next fall, tuition is scheduled to increase by $280 per year at UC and by $270 per year at CSU. In addition, UC, which has enrolled 7,400 new undergraduates in each of the last two years, plans to enroll an additional 2,500 in the fall of 2017‒18, the largest three-year increase in seventy years. CSU has added around 50,000 additional students over the past five years. The expansion of Cal Grants has drawn the attention of the governor. He noted in his May budget revision that “rising Cal Grant costs from tuition hikes will also limit the state’s ability to increase General Fund support in the future.”

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Lack of Transparency in Public Contract Negotiations Would Lead to Higher Taxpayer Costs

No state needs to reform the relationship that governments have with public-employee unions more than California. Yet lawmakers keep going in the wrong direction. Contract negotiations between government and the labor unions who represent the public employees should be transparent. Too often, both sides are working toward a common goal – a generous deal for the unions. Simply put, there isn’t much bartering between state and local governments and the public-sector unions. Union bosses secure the contracts they want because there is little push back during collective-bargaining sessions. This arrangement has been finely tuned. Unions have for decades delivered cash and manpower to elect friendly candidates to state and local office.

. . . Assembly Bill 1455, which is currently awaiting a State Assembly vote, would conceal the material content of collective bargaining talks with public-employee unions from taxpayers, who have to pay for above-market wages, hordes of duplicative and often unnecessary positions, and luxurious retirements.

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Pension Loan would Cover Up Wealth Transfers to Employees

California proposes to issue a pension obligation bond to finance extra contributions to the state pension fund, CalPERS. It would also cover up wealth transfers from citizens to state employees. Here’s how it works: When pension promises are made by the state to its employees, both the state and employees incur costs (“Normal Costs”) in the form of contributions to CalPERS with the hope that the sum of contributions and investment earnings will be sufficient to fund the promised pension payments. If investments earn at the rate CalPERS used when setting the Normal Cost, everything works out. But if investments earn at a lower rate, deficits (“Unfunded Liabilities”) arise. In contrast to joint sharing of Normal Cost, employees don’t share in the cost of Unfunded Liabilities. 100% of that cost falls on citizens, whose services get crowded out and taxes get raised to pay off the liabilities.

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Prepaying on CalPERS Massive Unfunded Liabilities

The big risk the Governor will have to face is the possibility that the investment markets may tank after making the contribution prepayment. Remember, if you lose 50 percent on your investments this year, you have to earn 100 percent next year just to break even on your principal. Will Rogers put it best, “I am not so much concerned with the return on capital as I am with the return of capital.”

It’s not a good idea to time the market. It’s better to dollar-cost average, which means investing the same amount at regular intervals over time.

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Fiscal 50: State Trends and Analysis

Even states that have overcome the effects of the recession may face financial pressures that could shape their budgets now and for years to come. A major issue for a number of states is how to cope with an accumulation of unfunded public pension and retiree health care liabilities, which total more than $1.5 trillion nationwide. In addition, debate among U.S. lawmakers over financing for Medicaid, which is jointly funded by federal and state governments, has sparked fresh uncertainty over how much of the costs states will pay. The health care program accounts for the largest share of total federal aid to states. Another challenge for states is tax revenue volatility, which can confound policymakers’ best efforts to balance budgets.

Research & Studies
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Cal State Can’t Explain Why It Needs So Many Bureaucrats

The California State Auditor has delivered a damning assessment of the management practices at the single largest university system in the United States. . . In other words, administrators have been hiring more administrators for make-work positions and giving each other raises without sufficient accountability in a self-perpetuating cycle of bureaucratic decay that is sadly endemic to academia at large.

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Another court setback for protectors of pensions

In another ruling allowing pension cuts, an appeals court last week overturned a state labor board ruling that a voter-approved San Diego pension reform was invalid because the city declined to bargain the issue with labor unions.

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Legislature OKs $52 billion road bill

California drivers will pay more to drive in the state under a bill the Legislature passed Thursday to raise $52 billion from new taxes and fees to repair roads and bridges. That bill, SB1, will be sent to Gov. Jerry Brown, who has said he will sign it.

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L.A. City Council backs plan to borrow $60 million to pay off legal settlements

The Los Angeles City Council took a step Tuesday toward borrowing up to $60 million to pay for legal payouts and court judgments despite a warning by City Controller Ron Galperin that the borrowing proposal is costly and unnecessary.

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Public Employees — Ever More Untouchable

One of the most obnoxious trends in the nation, and one that is particularly acute in California, is the continued push to enshrine public employees as a special, privileged

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New assessment shows California retired teachers’ account only 63.7 percent funded

The pension fund for California teachers is about $97 billion short of the assets it would need to pay all of the benefits it owes to its members today, according to a new valuation from the California State Teachers’ Retirement System. . . The $202 billion fund has about 63.7 percent of the assets it needs to pay the benefits it owes. That reflects a 4.8 percent decrease in CalSTRS’ funded ratio from its most recent assessment.

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California budget may hit tax rebate threshold

Confusion and uncertainty over the prospect of hitting the magic number has pervaded the challenge of measuring the actual budget itself. Disagreement has not gone away over just how big the number is. “Brown pegs the ‘General Fund’ budget at $122.5 billion and $179.5 billion if special funds — such as those spent on highways — and bonds are included,” wrote Dan Walters in the Sacramento Bee. “But that’s less than half of the true budget, which includes federal funds — especially those for health and welfare services — and such things as the fees on college students and pension checks to retired public employees.”

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School Districts Spend Bond Money on Staff Salaries and Benefits

Since 2012, the Los Angeles Unified School District has had the highest percentage of its bond funds going toward staff salaries and benefits. In that district – the state’s largest – 19.9 percent of school bonds have been spent on salaries and benefits.

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Dan Walters: Jerry Brown would undermine a spending limit he sponsored

The Legislature’s budget analyst, Mac Taylor, says Brown’s proposal is “violating the spirit of Proposition 4.” He describes the $22 billion in school-related spending Brown wants to exempt as “nowhere money” and is telling legislators that “the plan would be highly vulnerable to legal challenges.

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