There's not much to celebrate in California's state capital today
It sounds unbelievable, but last month Governor Arnold Schwarzenegger began a series of measures to slash the cost to his state from public sector pay. These include forcing all but a small group of public sector unions to accept minimum wage – $7.25 per hour – and "furloughs" to close government offices as much as two to three days per week.
Welcome to the new California, a region addled by debt. The once proud and mighty Golden State, a beacon for every dreamer on the planet, is stuck without enough money to pay its bills.
A feature report by City Journal titled The Beholden State: How public sector unions broke California describes one set of circumstances – uncontrolled growth of spending on public sector salaries – that created this dead end for legislators in Sacramento. City Journal (featured on our CityCaucus.com Links) is a quarterly magazine sponsored by the conservative Manhattan Institute for Policy Research.
Writer Steven Malanga is an industrious critic of bad government spending who in The Beholden State provides a detailed history of how powerful unions have controlled the California's political destiny. There are echoes of the experience in British Columbia in Malanga's tale that we should heed.
It should be pointed out that to the great credit of BC's largest public sector unions – the BCGEU, CUPE and the HEU – the Government of BC has signed "net zero" contracts for the next two years. That's sixty percent of the labour agreements in the Province. The previous Minister of Finance Carol Taylor was heralded for signing 2 & 3% increases plus a thousand dollar signing bonus – spending a $1 billion windfall from a spike in natural gas sales. Difficult economic times have made forced the government and union reps to reign in their expectations with positive results.
In California, they were not so lucky. Malanga describes the direct threat that the State's largest union, the SEIU (which represents both government and health care workers), made to those politicians who do not obey them – we will get you unelected.
The unions’ political triumphs have molded a California in which government workers thrive at the expense of a struggling private sector. The state’s public school teachers are the highest-paid in the nation. Its prison guards can easily earn six-figure salaries. State workers routinely retire at 55 with pensions higher than their base pay for most of their working life. Meanwhile, what was once the most prosperous state now suffers from an unemployment rate far steeper than the nation’s and a flood of firms and jobs escaping high taxes and stifling regulations. This toxic combination—high public-sector employee costs and sagging economic fortunes—has produced recurring budget crises in Sacramento and in virtually every municipality in the state.
The powerful push to control local government and the state legislature involved millions raised by labour groups and an army of "foot soldiers" – unionized workers – who could send any political challenge to their authority down to defeat.
The SEIU’s California numbers have given it extraordinary resources to pour into political campaigns. The union’s major locals contributed a hefty $20 million in 2005 to defeat a series of initiatives to cap government growth and rein in union power. The SEIU has also spent millions over the years on initiatives to increase taxes, sometimes failing but on other occasions succeeding, as with a 2004 measure to impose a millionaires’ tax to finance more mental-health spending. With an overflowing war chest and hundreds of thousands of foot soldiers, the SEIU has been instrumental in getting local governments to pass living-wage laws in several California cities, including Los Angeles and San Francisco. And the union has also used its muscle in campaigns largely out of the public eye, as in 2003, when it pressured the board of CalPERS, the giant California public-employee pension fund, to stop investing in companies that outsourced government jobs to private contractors.
Of course, the man who was supposed to come in and fix this mess was Arnold, the Austrian-born action film star. But as Governor Schwarzenegger, all of the action star's strength was met with equal resistance:
[As] Schwarzenegger soon discovered, most of California’s government machinery remained union-controlled—especially the Democratic state legislature, which blocked long-term reform. Frustrated, Schwarzenegger backed a series of 2005 initiatives sponsored by taxpayer groups to curb the unions and restrain government growth, including one that made it harder for public-employee unions to use members’ dues for political purposes. The controversial proposals sparked the most expensive statewide election in American history. Advocacy groups and businesses spent a staggering $300 million (some of it, however, coming from drug companies trying to head off an unrelated initiative). The spending spree included $57 million from the California Teachers Association, which mortgaged its Sacramento headquarters for the cause.
All of the initiatives went down to defeat.
A brief respite occurred not long after Arnold was elected, thanks to a spike in real estate prices. But when the crash followed, California faced an awful reality. They simply could not pay their bills.
Malanga's story in my opinion is not meant to aim its criticism at public sector workers. Rather, it asks all of us – citizens, elected officials and union leaders – to look seriously at how we address these costs, and to reconsider the rules that allow those with deep pockets and the ability to organize to manipulate the system to their own ends.
Here in British Columbia we have clear evidence of the same tactics being used to control school boards, as well as local and provincial governments. We also have a rather toothless response to it, and a public who tune out until they get their tax bill. Meanwhile, we even have politicians and public sector management equally guilty of getting fat off the system.
The California experience is a brutal lesson to other jurisdictions. As Malanga concludes, "the status quo is unsustainable" and the system has been corrupted. His story in City Journal is an eye-opening piece of journalism that citizens, politicians and public sector union leadership should read. If we cannot make government spending sustainable, then draconian measures like those being used in California today await us all.
- post by Mike