How Does a California Family Survive?

It’s common enough to discuss the high cost-of-living in California. It’s become a serious topic, at last. But for Californians who are used to paying ridiculous prices for everything, it may be helpful to present a comparison in the form of an annual family budget. How much does it cost to take care of a family of four in Los Angeles compared to Houston?

The choice of Los Angeles is logical enough. One in four Californians live there. And while Los Angeles County may be more expensive than most of California’s inland counties, it is not cheaper than Orange, San Diego, or any of the nine counties of the San Francisco Bay Area. Altogether there are over 25 million Californians living in expensive coastal counties. Two out of three Californians endure the types of prices depicted here.

The choice of Houston is also logical, not simply as a representative of cheaper Texas, but as a proxy for nearly all of the United States, with the only exceptions being those high-tax (usually coastal) metropolitan areas located in states ran by progressive Democrats. In terms of the cost-of-living, Houston is an authentic stand in for most of America.

Reviewing the budget depicted below, the first thing to realize is that most people don’t have a household income of $100,000 per year. The median household income in California is $71,805. That means half of those 25 million people who have to live in places like Los Angeles have a household income that […] Read More

Estimated Impact of Janus on California’s Public Sector Unions So Far: $50M/year

On June 27, 2018, the U.S. Supreme Court ruled in the case Janus vs AFSCME. An immediate consequence of this ruling was that public sector unions could no longer collect so-called “agency fees” from workers in their bargaining units who had opted out of full union membership.

The other main consequence of the Janus ruling was that those workers who were full dues paying members of public sector unions would have the right to terminate their memberships. In anticipation of a result unfavorable to them, which Janus certainly was, public sector unions have used their influence with lawmakers to pass numerous pieces of legislation designed to make it harder for union members to quit. As a result, the full impact of union members terminating their membership will not be felt immediately.

With nearly a year passed since the Janus case was decided, however, it is possible to begin to quantify the impact so far on union membership and on union revenues. It’s not at all an easy task. The mandatory disclosure requirements for public sector unions are minimal. Public corporations and private sector unions are both required to disclose much more information about their finances and operations than are public sector unions.

Nonetheless, over the past several months, the California Policy Center has filed numerous public information requests with public agencies in California, asking their payroll departments to disclose how many of employees had union membership dues and fees deducted, and how much those deductions amounted to. While […] Read More

Why is San Diego’s Pension Settlement Estimate So Much Money?

In 2012, San Diego voters approved Proposition B, a pension reform measure that replaced pensions for new hires with a 401K plan. Seven years later, it is possible this reform will be completely unwound, because union attorneys have successfully argued that the city didn’t “meet and confer” with the unions before putting the reform measure on the ballot for voter approval.

As reported two weeks ago, the U.S. Supreme Court refused to hear the city’s argument that the San Diego’s mayor, who supported Prop. B, was exercising his right to free speech, and to force him to meet and confer with the unions prior to supporting Prop. B would have been a violation of that right.

Since then, the case has been returned to the original appellate court, which on 3/25 ruled that the city must “meet and confer over the effects of the initiative and to pay the affected current and former employees represented by the Unions the difference, plus seven percent annual interest, between the compensation, including retirement benefits, the employees would have received before the initiative became effective and the compensation the employees received after the initiative became effective.”

This ruling raises more questions as it answers. For example, does this ruling definitely require the city to pay those employees affected by Prop. B? This is unclear, because the next sentence of the ruling seems to offer the city a way out, by stating:

“The City’s obligation to comply with the compensatory remedy extends until […] Read More

Sacramento’s Software Incompetence in the Software Capital of the World

California owns a well-deserved reputation as being the global epicenter of high technology. In nearly every critical area, from aerospace to biotech, from nanotech to green tech, to telecommunications, to chip design, California’s universities and private companies are either the best in the world, or they are counted among the leaders.

Probably at the pinnacle of global achievement is California’s software industry, spawning companies that over the past few decades and especially in recent years have completely transformed how we live. Some of these companies, for better or for worse, have designed products that are literally rewiring our brains.

None of this translates to California’s public sector, which is gummed up by a unionized workforce assembled based on fulfilling ethnic and gender quotas instead of merit, along with the usual waste, fraud and corruption that attends to any institution that relies on taxes instead of having to earn revenues in a competitive marketplace.

If you want to know just how bad California’s state government is at implementing software projects, despite being nestled in the software capital of the world, just review the “IT Project Tracking” report, courtesy of a laudable effort at transparency produced by the California Dept. of Technology.

At first glance, it’s not that bad. Of the 23 projects evaluated, only four are marked with a “red” status, defined as “Escalated for immediate corrective action. There is a significant risk to the health of the project.” But consider the cost of these […] Read More

What Would it Cost for the U.S. to “Go Solar”?

Proponents of renewable energy claim that wind and solar energy is now cheaper than fossil fuels. According to USA Today, “Renewables close in on fossil fuels, challenging on price.” A Forbes headline agrees: “Renewable Energy Will Be Consistently Cheaper Than Fossil Fuels.” The “expert” websites agree: “Renewable Electricity Levelized Cost Of Energy Already Cheaper,” asserts “energyinnovation.org.”

They’re all wrong. Renewable energy is getting cheaper every year, but it is a long way from competing with natural gas, coal, or even nuclear power, if nuclear power weren’t drowning in lawsuits and regulatory obstructions.

With both wind and solar energy, the cost not only of the solar panels and wind turbines has to be accounted for, but also of inverters, grid upgrades, and storage assets necessary to balance out the intermittent power.

Taking all variables into account, what might it cost for the entire U.S. to get 100 percent of its energy from solar energy?

Speaking the Language of Energy and Electricity

According to the U.S. Energy Information Administration, the United States in 2017 consumed 97.7 quadrillion BTUs of energy. BTUs, or British Thermal Units, are often used by economists to measure energy. One BTU is the energy required to heat one pound of water by one degree fahrenheit.

If we’re going understand what it takes to go solar, and usher in the great all-electric age where our heating and our vehicles are all part of the great green grid, then we have to convert BTUs into […] Read More

A New Approach to Pension Reform Goes to Appellate Court

The recent ruling by the California Supreme Court in the case CalFire vs CalPERS has garnered much attention from pension reformers. While falling short of being a landmark ruling, the result was nonetheless encouraging. The court left open the possibility that vesting does not protect prospective benefits of current employees. The implications of that are left to related, still active court cases to decide.

Meanwhile, a completely different approach to pension reform has been hitting courts around California, centered on the argument that government agencies did not follow due process when approving pension enhancements. Between 1999 and 2007, one by one, nearly all of California’s government agencies enacted pension benefit increases of 50 percent or more. These increases were made retroactively, causing an actual financial impact well in excess of 50 percent. But when they did this, did they obey the law?

Three lawsuits have been filed by citizens taxpayers seeking to have pension increases overturned on the ground that they were adopted in violation of Section 7507, but each time, the trial court has dismissed the case on the ground that the lawsuit is barred by the three-year statute of limitations.

Convinced that the statute of limitations should not act as a bar to taxpayer claims to challenge these statutory violations, taxpayer/plaintiff George Luke raised the money to hire counsel, Robinson & Robinson LLP, to take an appeal from the statute of limitations ruling. If Mr. Luke is successful, it will open the door to every agency, or […] Read More

How to Make California’s Government Agencies Far More Transparent

Last year, California’s state Senate and Assembly passed 1,217 pieces of legislation. Governor Brown signed 1,016 of them into law, and most took effect January 1st. Included were predictable acts of liberal zealotry – sanctuary for the undocumented, gender equity on corporate boards, gun control, “me-too” inspired laws, a mandate to move California to 100% “clean” energy by 2045, laws to protect government unions, reduce mandatory criminal punishment, and, of course, a ban on plastic straws.

To be fair, most of these issues aren’t black and white. But what’s notable is a complete lack of legislation that might reflect some kind of ideological balance. Where were the laws to rebuild our highways, fast-track the construction of the Sites Reservoir, open land for housing development, license new nuclear power plants, or permit drilling for natural gas? As Tony Soprano would say, “fuggedaboutit!”

There’s one law pending in this year’s legislative session, however, that could do a world of good. It’s probably the best new proposed law that nobody’s ever heard of. It’s utterly bipartisan, and wouldn’t cost much at all to implement.

That law is SB 598, the Open Financial Statements Act, sponsored by Senator Moorlach. It’s fitting that Senator Moorlach is the author of this bill, because Senator Moorlach is the only certified public accountant serving in a state legislature that, in general, is quite likely the most financially illiterate group of state legislators in America.

This isn’t idle speculation. An recent analysis by the California Policy […] Read More

Economic Headwinds Came Long Before Trump’s Presidency

After the unexpected election of President Donald Trump, something else unexpected happened. The stock market soared.

In the final week before the 2016 election, the Dow Jones Industrial Average closed at 17,888, an unimpressive level, since it had reached that same point nearly two years earlier in December 2014. But following Trump’s victory, the Dow went wild. By the time he took office in January 2017, it had already jumped over 12 percent, to 20,094. By January 2018, it peaked at 26,616, then edged upwards to 26,828 on October 3, 2018. In less than two years, the Dow Jones Index grew by an astounding 50 percent.

Since then, however, the Dow, along with the other major U.S. indexes, have been tumbling. By Christmas Eve, the Dow was 19 percent off its high, down to 21,792. What had been called the “Trump Bump” is now being called the “Trump Slump.”

While President Trump has been criticized for taking credit for the stock market rise, Barack Obama also got into that action, claiming in October 2018 that “the booming started on his watch.” But today’s economy, and especially the stock market, are reacting to longer-term trends for which neither president deserves full credit or blame.

Depicted on the chart below is the performance of the Dow from 1995, when the markets began first showing signs of “irrational exuberance,” to the extremely exuberant present day. On clear display are the past two bubbles, the internet bubble of 2000, […] Read More

Pension Funds, Meet the “Super Bubble”

Earlier this month, outgoing California Governor Jerry Brown predicted “fiscal oblivion” if California’s state and local agencies are not granted more flexibility to modify pension benefits. As if to help Governor Brown make his point, U.S. stock indexes took an obliging plunge. The Dow Jones average cratered in December, dropping nearly 16 percent in three weeks, from 25,826 on December 3rd to a low of 21,792 on December 24th. And whither hence? Nobody knows.

If history and trends are any indication, however, “up” is unlikely. Depicted on the chart below is the performance of the Dow Jones Index from 1995, when the markets began first showing signs of “irrational exuberance,” to the extremely exuberant present day. Clearly shown are the past two bubbles, the internet bubble of 2000, the housing bubble of 2007, and what we may call the “super bubble” or “everything bubble” of 2018.

Dow Jones Stock Index – 1995-2018

It doesn’t take an economist to notice a pattern here. The Dow Jones Index, which tracks closely with all publicly traded equities in the U.S., more than doubled in the four year heady runup to its January 2000 peak, than went into decline for nearly four years, before doubling again between 2004 and 2007. Then when the housing bubble popped, the Dow went off a cliff, dropping to half its 2007 peak in little over a year. In the ten years […] Read More

How to NOT Solve California’s Housing Crisis

There are obvious reasons the median home price in California is $544,900, whereas in the United States it is only $220,100. In California, demand exceeds supply. And supply is constrained because of unwarranted environmental laws such as SB 375 that have made it nearly impossible to build housing outside the “urban service boundary.” These laws have made the value of land inside existing urban areas artificially expensive. Very expensive. Other overreaching environmentalist laws such as CEQA have made it nearly impossible to build housing anywhere.

Then there are the government fees attendant to construction, along with the ubiquitous and lengthy permitting delays caused by myriad, indifferent bureaucracies with overlapping and often conflicting requirements. There is a separate fee and a separate permit seemingly for everything: planning, building, impact, schools, parks, transportation, capital improvement, housing, etc. Government fees per home in California often are well over $100,000; in the City of Fremont in 2017, they totaled nearly $160,000 on the $850,000 median value of a single family home.

This is a shakedown. It has caused a politically engineered housing shortage in California that enriches billionaire property developers that have the financial strength to withstand decades of delays and millions in fees, because they reap the extreme profits when they sell these homes at inflated prices. Also enriched are the public servants whose pay and pensions depend on all taxes – definitely […] Read More