Public Employee “Plunder” and California’s Perfect Storm

Published on
February 14th, 2020
Duration
47 minutes


Public Employee “Plunder” and California’s Perfect Storm

The Interview ·
Featuring Steve Greenhut and Michael Green

Published on: February 14th, 2020 • Duration: 47 minutes

Steve Greenhut, Western region director at R Street Institute and author of "Plunder: How Public Employee Unions are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation," joins Mike Green of Logica Capital Advisers to discuss his coverage of the political paralysis that surrounds the issue of pensions in California. He guides Mike on a deep-dive into the gargantuan public employee compensation complex and how that complex bleeds into every other aspect of California government spending. He argues that public employees have forced state and local governments into a corner wherein they cannot maintain their obligations because of the massive burden of pension disbursements and employee compensation. Due to a lack of transparency, pension assumptions based on guesswork, and legal precedent overturning democratic decisions, Greenhut says that the perfect storm that will surely "surprise" Californian politicians has been plain to see for longer than a decade. Filmed on February 6, 2020 in Sacramento, California.

Comments

Transcript

  • SC
    Sam C.
    25 February 2020 @ 12:57
    where is the accountability?
  • ZE
    Zachary E.
    19 February 2020 @ 23:30
    Michael, do you have any sources in regards to your comment on pension crises leading to failures of democracy? Mentioned with a little less than 13 minutes remaining in the interview.
    • MG
      Michael G. | Contributor
      22 February 2020 @ 15:42
      Germany and Italy 1920s, Russia 1990s, Rome ~75BC
  • FR
    Frank R.
    19 February 2020 @ 04:46
    Plan B is Bitcoin
  • AL
    Andrew L.
    18 February 2020 @ 18:40
    Trying to support unsustainable fiscal policy like in California opens the door to tons of corruption to keep the scheme going
  • MC
    Matt C.
    16 February 2020 @ 13:46
    Drink every time Mike Green says either “right” or “right, so...”
    • MG
      Michael G. | Contributor
      18 February 2020 @ 15:39
      While not how I would have said it, it’s helpful to have these tics pointed out (by someone other than my wife). I’m not a professional interviewer, I just play one on subjects that interest me. Hopefully you got suitably sloshed... subject matter demands it.
  • WB
    Wesley B.
    18 February 2020 @ 15:15
    Copy and paste this for Illinois. It's worse here though because we don't have the strength of the California economy to hide the the theft of the taxpayers. I'd like to see a video on whats happening to home equity in IL while much of the country has booming home prices
  • DC
    Doug C.
    18 February 2020 @ 04:12
    Steve’s voice sounds like Jon Stewart
  • VS
    Valeriy S.
    14 February 2020 @ 09:33
    Algorithm for making decisions about watching videos on RealVision: IF Michael Green is in the video THEN you have to watch it ELSE you may skip
    • TT
      Tokyo T.
      14 February 2020 @ 10:26
      haha, exactly.
    • PC
      Philip C.
      18 February 2020 @ 01:51
      My RV subscription is solely to watch MG. The guy could talk about paint drying and I’d want in.
  • TC
    Thomas C.
    15 February 2020 @ 00:02
    I know there are a lot of liberals in California that work very hard in the private sector and pay a lot of taxes. What I can't understand how they could listen to a video like this and not be outraged at these types of excesses of "big government" in their state. How they can continue to blindly just vote more people in that support this status type quo? What happens is a lot of people just get disgusted, give up, and "flee" these states. IL, CT and NJ are three states with very high taxes and major pension issues, that have no population growth or are losing population. What happens if your tax base keeps shrinking AND you have underfunded pensions, AND you have a expensive "cost structure" to keep your state gov't running??? Something has to give eventually!
    • LC
      Liliana C.
      15 February 2020 @ 06:54
      Short answer: those liberals vote on one or two key social issues for them like gay rights or abortion and do not care about finances.
    • SM
      Sean M.
      16 February 2020 @ 03:31
      What's is also weird about IL and NJ, not sure of CT is that property values in the cities are rising not falling with people moving out, and in Chicago for at least the last 5 years there has been tons of building.
    • SA
      Scott A.
      18 February 2020 @ 00:20
      Sean, in the city itself yes, in the burbs no. The big cities are still where the jobs are, and at least here in the Chicago area the new generations do not want to commute. I'm in my early sixties. My wife and I are getting out of Illinois the day we retire. Everyone I know has the exact same plan.
  • SA
    Scott A.
    18 February 2020 @ 00:11
    Couple corrections. Steve totally forgot to add in teachers pensions (worse than police and firefighters), and Illinois is spelled "Illinois", not "California" :) Great to see we are not the only state trying to become the Venezuela of the US.
  • SA
    Scott A.
    18 February 2020 @ 00:11
    Couple corrections. Steve totally forgot to add in teachers pensions (worse than police and firefighters), and Illinois is spelled "Illinois", not "California" :) Great to see we are not the only state trying to become the Venezuela of the US.
  • EK
    Edward K.
    17 February 2020 @ 15:09
    As a resident of California it is amazing how oversized public pensions are across the spectrum. In Sonoma county supervisors are "entitled" to a pension upon election of a second term. A fire fighter captain in Orinda, CA retired at 52 with a $225,000 a year pension and public databases show how many pensions over 100K (a lot). This is not sustainable and CALPERS will have cuts but these shortfalls will mean taxpayers on hook. Currently Social Security is exempt from CA state income but I can see that ending maybe before the decade is out.
  • MC
    Mario C.
    16 February 2020 @ 09:05
    Not being a US resident, no particular interest in this specific video, even more on such a dry subject. Still, thx to the magic of MG, enjoyed watching it and I feel more informed more clever afterwards. Thank you for your high quality standards!
    • DC
      Daniel C.
      16 February 2020 @ 10:38
      The whole serie shall be renamed to Retirement in USA
  • DC
    Daniel C.
    16 February 2020 @ 10:35
    This video is very country specific (USA)!
  • KM
    Klayt M.
    14 February 2020 @ 17:25
    Same problem the VA disability ratings have. People demanding more than they should have. We’re a Republic being gutted by socialist thinking.
    • F
      Floyd .
      14 February 2020 @ 17:37
      The VA needs to be run better no doubt but the implications that the veterans are claiming too many disability benefits as a significant portion of the problem is ridiculous. Talk to a veteran look at their wounds ,understand their sacrifice before making such uninformed comments.
    • TE
      Thomas E.
      14 February 2020 @ 18:08
      @ Floyd B - Klayt brings up a very good point. There's abuse in the system...not just the VA but even SS disability. Yes I support our veterans however, I don't have to support my tax dollars going to pay for disabilities that don't exist. It's been proven that many doctors will put individuals on disability if they don't have a job and can't pay their bills. Same happens at the VA. There are people who's sole job is to sign people up for disability benefits. Keep in mind many the definition of "disability" has been greatly expanded over the years to cover even more individuals including drug addicts. 50% of the American population gets some kind of Federal benefit. With Boomers retiring in great numbers and a recession just around the corner what do you think will happen to that number? What happens when 60% of the population gets some type of Federal benefit? How much is enough?
    • JB
      John B.
      14 February 2020 @ 19:13
      Thomas E. is pointing to the main reason so many people don't care about how the government spends tax dollars, something like 1/3 of people don't pay ANY effective taxes (on the federal level, state is more complicated with property tax). We have an entire class of citizens who's primary view of government is to provide them with free money. I'm not against the government helping people who genuinely can't help themselves. But every citizen of working age should be a net payer of taxes. Even if its only 1% of a very poor persons 20k/yr ($5 week in taxes). The simple fact of knowing that the government is spending YOUR money and not someone else's would lead people to demand more responsibility from their government. At some point people just wont take it any more. Look at NJ when Tepper left, 1 person = 3% of the state budget. There are now another 8 NJ residents that are worth a combined 22.5b (Tepper was listed at 11b when I looked it up). That means that 9 people in 2018 accounted for almost 10% of the state's tax base. NJ has 8.8 million people... This isn't a "progressive" tax system, its theft by voting. Obviously net-worth is only a proxy for income here but I seriously doubt the actual figures are much farther off. Id be willing to bet you could fit the people responsible for half of NJ's tax base inside of Met-life Stadium. There 83,000 seats and 294,000 millionaires in NJ.
    • F
      Floyd .
      16 February 2020 @ 01:09
      Thomas. The disability programs of the VA and the public disability program are not apples and apples. First the size of the public program dwarfs the VA program Second, a judge determines if someone gets a benefit. There is wide spread abuse and in some cases inconsistent judge’s rulings. Nationally,judges rule about 50% of the time in favor of the person applying for disability. In jurisdictions the approval rate is as high a 90%! The pubic disability program is a corrupt system run by some biased judges and the lawyers that advertise late at night. Once again no comparison with the VA system!
  • AH
    Andrew H.
    15 February 2020 @ 23:06
    Michael with the deadpan delivery about the reporters salary lol.
  • DW
    Daniel W.
    15 February 2020 @ 19:51
    Looks like a firefighter in San Diego has a higher salary than a heartsurgeon in europe...
  • RR
    Ryan R.
    15 February 2020 @ 17:10
    This conversation is based on the premise that SB 400 and the "classic" members 3% at 50 employees are still being hired. The majority, 95% of new hires since 2013 are now PEPRA Employees PEPRA – new employees hired on or after January 1, 2013 The following are some key factors relating to the PEPRA classification: - Benefit formula for PEPRA employees is 2% @ age 62 - Minimum retirement age is 52 - Employees are required to make bi-weekly pre-tax contributions equal to 50% of the normal cost of their pension benefit, currently determined by CalPERS to be 6.75% Fire and Police - 2.7 at 57 - Minimum retirement age 50 - Employees are required to make bi-weekly pre-tax contributions equal to 50% of the normal cost of their pension benefit, currently determined by CalPERS to be 6.75% Essentially millennial new hires are paying for the Cadillac system of the retired Baby Boomers.
    • MG
      Michael G. | Contributor
      15 February 2020 @ 18:40
      This a very good comment, especially the conclusion. I am increasingly impressed with Millenials “waking up”... they still annoy the cr@p out of me, but I’m an increasingly old guy so that’s to be expected
  • WA
    Wissam A.
    15 February 2020 @ 13:31
    You folks in America are just amazing. So you have the state public employees raping the tax payers with their ridiculous excessive pay, the CEO's raping the corporations through stock buy backs and golden parachutes, and the politicians raping the votes with fiscal deficits and all kinds of promises that will not be fulfilled. But having said that I'm still long the dollar and the 30-years US Treasury :)
  • AC
    Andrew C.
    15 February 2020 @ 03:42
    The more we look at the future, the more it changes because we looked at it. The corona virus is gunna infect everyone; let's quarantine them and wear masks; hmm, not so many infected. I think this is why the pension issue has been dragged on for so long. Daniel Want says we approach the cliff edge, make some small tweaks and don't go over. This could go on for years yet....
  • BS
    Bill S.
    14 February 2020 @ 14:54
    Benefit increases that politicians have never reigned in.....so again the solution? The 3% example is replicated all over the xtry and not just law enforcement...an analysis by state would reveal some amazing formulas as well as direct contribution percentages that are choking school budgets. Rampant. Politicans, Schools Boards etc are not nor ever have made the hard choices.
    • JB
      John B.
      14 February 2020 @ 18:50
      The bottom line is any public service employee has an embedded racketeering option in their employment contract. Citizens are required to engage with these people, with essentially 0 recourse or competition; there is no alternative. If you don't pay these people then they go on strike and essential services, for which there is no replacement cease to exist. The best part is, they go on strike and you still have to pay the taxes. Here is a hypothetical to demonstrate why public employees do not deserve the same collective bargaining rights as private workers. Let's assume that my drivers license is going to expire next week and the DMV goes on strike for higher pay. Now I can't renew my license. This means I'm now breaking the law and can be fined for not renewing my license with the DMV which is refusing to do its job. Public safety is the most egregious. Won't pay fire fighters 300k? Ok I'll let your neighborhood burn down and grandma die because I'm on strike. Won't pay police 250k? Sorry I guess that guy who murdered your daughter will never be brought to justice. There is a reason we don't have this problem at the federal level, its illegal for essential federal workers to strike for pay and benefits. Just ask the air traffic controllers what happened in 1981 when they went on strike. This should be the law in every single state in the country. If you work for the government you shouldn't be allowed to strike for wages or any other financial reason.
    • AC
      Andrew C.
      15 February 2020 @ 03:29
      John, have you been reading Taleb ? 100% agree !
  • DM
    Douglas M.
    15 February 2020 @ 02:27
    This guy Mike Green is good. A good mix of dry humor and well prepared questions. Good stuff and exceedingly informative.
  • DC
    Darren C.
    15 February 2020 @ 01:48
    I am enjoying the content of these pension videos more than I thought I would. Question for the owners of Real Vision. At the end of next week are you planning on publishing a set of recommendations on what say New Jersey should do to improve their pension situation? Or since it is all political and they are keen to kick the problem down the road are you not going to waste your time? The reason I think it might be worth your time is if local activists are armed with better understanding of the problems and can offer realistic solutions maybe they can persuade their neighbours to put pressure on the politicians. Likely I am being to optimistic and should just pour a couple of adult beverages and ignore the problem, like a good sheep.
  • TC
    Thomas C.
    14 February 2020 @ 23:19
    I have been hearing the doom and gloom on pensions for 20 yrs now. Even in 2008 during the crash nothing really happened that affected me as an investor. I agree with all I read and hear negative about pensions, but nothing ever seems to happen that hurts me as an investor. I would like to hear more of these interviews come up with more guesses of financial knock on effects. We had a couple of cities in the US (out of thousands of cities) go BK in the last recession (Detroit, Stockton). I think Detroit city workers still got most of their pensions and the bond holders took a haircut. This is what needs to happen, the MUNI bond holders need to take a major haircut. Then if this cities and states can't borrow money, they might start getting serious about reform. But then again, all the endless hand wringing in the perma bear world (and I am a perma bear by the way) about this issue, and 20 yrs has gone by very little bad has yet happened due to pensions. It's another one of those scary things where disaster seems to be "right around the corner" for decades. But then becomes another nothing burger. Like remember all the fear mongering about "soverign debt contagion" after Greece in Europe in 2009? 10 yrs later, another nothing burger. Are we finally going to see some action here??? Or is this another kick the can for another 20 yrs?
    • cy
      christopher y.
      15 February 2020 @ 00:05
      That was the same logic the Turkey used on the 3rd Wednesday of November. You can't infer the danger of something happening from the reality it hasn't happened yet.
  • NI
    Nate I.
    14 February 2020 @ 23:11
    Pension reform is mischaracterizing the problem. What is desperately needed is much smaller government. Get that done and the pension problem will take care of itself.
  • TE
    Thomas E.
    14 February 2020 @ 18:24
    Radical thought.....public employees get the same benefits as the private sector.
    • PG
      Pinchas G.
      14 February 2020 @ 18:30
      Why should they be different?
    • KC
      Kenneth C.
      14 February 2020 @ 19:15
      Ive never had more than a week and a half of vacation, pay raises are not guaranteed unless I increase the amount of business I produce, and Id be paying for my oen insurance if my wife wasnt in corporate America. What are you talking about?
    • NI
      Nate I.
      14 February 2020 @ 23:05
      Then you would also need to increase the pay. When I left government and went back to the private sector, I tripled my salary. Our pay was so low that many of the people in the agency qualified for food stamps. That was fine because there was some job security and the total compensation evened out with the pension; however, when it was clear to me that I was going to be defrauded on the pension agreement, I left government. I'm not saying we don't need pension reform, but it won't be a free lunch. What we really need more than pension reform is smaller government.
  • KC
    Kenneth C.
    14 February 2020 @ 19:26
    you start by prosecuting politicians for failing to be fiduciaries to their constituents and use that as your basis for adjusting pension liabilities both future and current.
  • F
    Floyd .
    14 February 2020 @ 17:39
    I continue to believe Mike is one of the best interviewers bringing some of the most pertinent topics to RV!
  • JE
    James E.
    14 February 2020 @ 16:46
    PERS employees do get SS but STRS employees are excluded from SS. I think going defined contribution is way to go for sure- DB plans are impossible to fund properly unless of course, SARS hits the USA
  • VS
    Victor S. | Contributor
    14 February 2020 @ 16:40
    WE HAVE A SLOGAN IN OUR FIRM : THERE IS NO HOPE” SEE THE COMING PENSION CRISES.
  • JC
    John C.
    14 February 2020 @ 13:11
    If I would have known that California paid law enforcement 3% for each year of service, I wouldn't have spent 23 years working for Federal law enforcement. Federal law enforcement pensions are 1.7% for the first 20 years or 34% and only 1% for each additional year over 20 years.
  • DK
    D K.
    14 February 2020 @ 07:46
    The unions are playing the game that they’ll get bailed out by the Fed or the taxpayers. So far, no union has been bailed out by either in the few muni bankruptcies to date. If the FedGov decides they have to save the poor union employees, better own a LOT of gold.