Napa Valley Taxpayers Alliance

Two Recent Articles on the NVTA

Both the St. Helena Star and the Napa Register ran articles on the NVTA this week. Here are some key paragraphs:

Star--"

Haley said he discovered that Napa County had no money for a parks and open space district, even though it has the highest per capita tax collections in the state. According to Haley, the primary culprit for the county’s money woes is the rapidly increasing amount of money going to salaries, benefits and retirements for public employees.

Haley said that three years ago, 77 percent of the city of Napa’s operating budget went to employee compensation and benefits; last year, that number had jumped to 88 percent.

He said the same problem exists at the county, state and federal levels. For example, the state’s CalPERS public employee program had a $14 billion surplus in 1998; in 2003, it was $60 billion in the hole, he said.

A variety of factors are responsible for the “pension tsunami,” Haley said, including the rising cost of health care, increasing longevity, and excessive giveaways to powerful, well-funded safety employee unions during former Gov. Gray Davis’ term.

Haley said he hopes the NVTA will raise awareness about the problem until it reaches a critical mass that will result in action.

“The power and money available to public employee unions is expanding,” said Haley. “We’ve got to stand up and start fighting against that. To me, a taxpayers group is the best way to do that.”

Register--

"Taxpayer alliance board member Don Clark is a registered Democrat, but considers himself a fiscal conservative.

“I came from Texas originally so I’m a little more conservative than most Democrats in California,” he said, adding that he shares Haley’s concern about a potential government fiscal crisis.

“I think like everyone should,” he said. “I have big concerns about the budgets at all levels: city, county state, federal. I think there will have to be big decisions to be made.”

True to his blogging roots (he maintains the Web site napablogger.com), Haley posted a kind of manifesto on the napataxpayer.org Web site, calling for government entities to open their books to the public, release salary information on public employees and pass ordinances requiring a vote of the people for further pension increases. He even suggested to the Napa County Board of Supervisors that it form a citizens’ group not unlike the General Plan Update Steering Committee to evaluate county spending priorities.

“It’s just complicated,” Haley said of the pension issue, adding that there was a learning curve to being a fiscal watchdog. “I’m not against the unions. I think they’ve done great, but it’s just like anything in the world. Once you get power you keep on going ... at some point it has got to stop.”

I thought the articles were good and fairly representative of what I said, although I am not just necessarily looking for fiscal conservatives. I think all of us, left and right, have to be concerned about where the budgets are going. Favorite programs for liberals are getting lost, there is no money for parks, for health care or insurance for children, or really anything else.

Citizens are going to have to get active and speak up, othewise the level of debt and lack of services that has already gone way too far is going to swamp us.

Employee Pensions

Due to lucrative government employee union contracts, pensions for government employees have reached a crisis in the State of California, and are soon to do so in Napa. Currently our local governments have little money to maintain current services, much less add any news ones such as Parks or needed road upgrades, much less quality road maintenance.

Napa County has some of the highest per capita tax collections in the United States, is listed as the highest property tax collections per capita in the state of California, and through high tax rates collects tens of millions in revenue from the tourists which are coming through in very high numbers. So where is all the money going?

80% of the County budget is spent on compensation for employees, and about a third of that is going to pensions. That amount will be increasing dramatically over the next few years. On top of that, right now Napa County has $50 million in unfunded liabilities.

The Center for Government Analysis recently completed a study of pension liabilities on the local level throughout California, as well as the state. Some of the alarming information gathered from that include the fact that right now state income tax collections total $37 billion, and last year $20 billion of that was paid out in current pension payments, for people who have already retired. That does not include payments to pension funds.

In the state as a whole, in the year 2000-01 all governments in California combined paid $3.4 billion into employee pension funds. Just four short years later in 2004-05 that figure was $19.5 billion, nearly six times the amount. Part of the reason for that was the huge increases given to the unions during the stock market bubble, but the rates owed to employee pensions have stayed the same, and in fact by law cannot be lowered. So we are stuck with this for current employees. 

What is happening is that the unions have managed to negotiate earlier and earlier retirements at higher and higher rates of pay. (See this.) Most police and sheriff’s can now retire in their 50's with 90% of their highest salaries or more, in some instances with more than 100%. Witness in 2005 after a lucrative new contract was signed that nine police officers retired in Napa at once, all younger than 60. That is nine employees who won’t be working yet drawing retirement salaries and benefits for many years to come, and they will have to be replaced by nine who will work. Napa cannot sustain that kind of cost for employees, at least not without huge tax increases.

Another phenomenon that is happening is that County or City employees retire, then come back to work in another local government job or as a consultant, essentially getting their retirement salary and another salary from the same pool of taxpayers. It used to be that retirement meant you stopped working, now it can mean you simply take a second job and get paid for both.

It is very difficult to get any specific information from the City or County about salaries and compensation, but that is one thing we will be working to do at the NVTA as a starting point. Unless we as taxpayers know exactly what we are paying our employees, it is difficult to assess what needs to be done to make sure we aren’t spending our way into deficits or worse.

We propose the following steps to ensure that employee pensions are fair and maintain financial feasibility:

1. Open up the books and make public where the current pension system stands, what are current and future unfunded liabilities, and what are we actually paying out to who? By the latter what is meant is not names of people, but job categories, years of service, etc.

2. Pass a San Francisco style ordinance requiring any further pension increases to go before the voters. (This article contains a good explanation of the San Francisco plan.)

3. Move toward a defined contribution plan rather than the defined benefit plan that we have now for all new hires. What that means in plain english is that a defined benefit plan is a plan that promises a set amount of money when you retire. A defined contribution means that you are promised a set amount of money each year to be put into a retirement account for you.

A 401(k) is an example of a defined contribution plan. The reason that this type of plan is more financially feasible is that the government would only be on the hook to maintain each years contribution, and would know year to year what its obligations are. When you promise people a set amount of money twenty years from now, which is what a defined benefit plan is, you could end up with any amount and it is impossible to plan for it.

Also, the method of funding for defined benefit plans are the stock market, hoping it will perform well enough that the money will be there when the need comes. To no one’s surprise, the stock market has not met projections across the state, resulting in billions of dollars of unfunded liabilities to California voters. That means that despite voters continually being promised that they will not have to raise taxes to pay for this, they will.

This is a complex area that will require study. Look elsewhere on the site for links to pension information, and we will also be adding further information as we go along.

Also note that Health Care is exploding in cost as well. Much of the problem comes from beyond the county or city. However, there are undoubtedly things that can be done to save money on health care, and perhaps that will be an issue the NVTA can address down the road.