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The Real State of the State: California 2019

Key areas where our Governor might focus

By Senator John Moorlach, February 12, 2019 1:05 am

When he gives his State of the State address today, Gov. Gavin Newsom understandably will paint a largely rosy picture of California, with some problem areas needing to be fixed. I’m hoping to work with him on options that improve the state and, in particular, prevent it from falling into insolvency. Let’s discuss a few key areas where our Governor may focus.

Sen. John Moorlach

Unfunded Actuarial Accrued Liabilities

Financial solutions must come first because, if there’s no money, there’s no way to pay for existing programs, let alone solutions to problems. The two gigantic downturns of recent decades, the dot-com bust of 2000-01 and the Great Recession of 2007-09, hammered state and local budgets. Major budget cuts, in particular to education, precluded anything but survival.

So the primary items to be addressed are the unfunded liabilities of the state as well as of local governments, specifically pension and retiree medical care. Gov. Jerry Brown worked out a partial reform with the Public Employees’ Pension Reform Act of 2013, called PEPRA. It was a valiant, but meager attempt and did little to bring down immediate costs.

Gov. Newsom’s budget proposal for fiscal year 2019-20 scored $257 billion in unfunded liabilities for retiree pensions and medical care.

Commendably, the budget dedicated “all of the Proposition 2 debt payments – $1.8 billion in 2019-20 – toward paying down the state’s retiree health and unfunded pension liabilities,” including $1.1 billion in the current budget year. And it included $1.8 billion extra to pay down CalSTRS’ unfunded liability.

Savings are estimated to be $7.4 billion over the next three decades from a $1.8 billion earlier payment investment if actuarial assumptions are actually achieved. But that’s only 1.75 percent of the $103 billion liability for teachers’ pensions. Just think what a 3.5 percent or more reduction of this high interest obligation could generate in future savings. California clearly needs to work more on comprehensive pension reform or it will see higher contributions crowding out other budgeted programs.

Education

Then there are the liabilities for the university and public-school systems, which I analyzed in my recent report, “Financial Soundness Rankings for California’s Public School Districts, Colleges & Universities.” The key number for each is the Unrestricted Net Position, or UNP, which comes from each Comprehensive Annual Financial Report, or CAFR.

For the University of California, the UNP is a negative $18.9 billion, or a burden of $478 for each Californian for fiscal year 2017-18. That’s what $9.8 billion in pension and $18.9 billion in retiree health liabilities can do to a balance sheet.

Cal State’s equivalent numbers are a negative UNP of $3.66 billion for June 30, 2017, or $122 per capita, if shared equally by every resident.

Of the 72 community colleges, only one is in positive territory, South Orange County with a positive UNP of $83 million, or $141 per capita. The worst is Santa Monica at a negative $180 million, or a negative $2,391 per capita.

For public schools, the financial woes of the Los Angeles Unified School District were publicized during the recent teachers’ strike. My own analysis came in a December 27 op-ed, “Can we prevent the LAUSD budget crisis from taking down the California state budget?” Based on the district’s CAFR released a few days earlier, it tallied a negative UNP of $19.6 billion, or $4,180 per capita for those living within the district’s borders.

As I noted, if the state has to take over the school district to straighten out its finances, the cost could include a loan somewhere up to $19.6 billion. Where will that money come from?

Other school districts in bad shape include negative UNPs of $1.5 billion for San Diego Unified, $849 million for Fresno Unified and $770 million for San Francisco Unified.

Oakland Unified, also in the news after its teachers authorized by a 95 percent vote a strike that could hit on February 15, had a negative UNP of $427 million, or $1,001 per capita.

Overall, of 944 school districts in California, about two thirds are in negative territory.

These negative numbers are caused by a number of factors, including pension and retiree medical liabilities. If the related debt payments are not controlled, they could devour state and local budgets like a plague of locusts.

Homelessness

I’m a fiscal conservative. But government does provide essential services. And it needs money to deal with an ongoing crises. Housing is among the greatest of these now, which is somewhat correlated with the epidemic of homelessness.

In his Inaugural Address, Gov. Newsom commendably called for a Marshall Plan to end homelessness in California. After World War II, the Marshall Plan helped Europe rebuild itself from wartime devastation. I have supported such reforms as Assembly Bill 448, which establishes a Joint Powers Authority in Orange County to provide long-term housing for the homeless.

Any funding will depend on getting the state’s fiscal house in order, as outlined above.

Also crucial is reform of the California Environmental Quality Act, or CEQA, to allow for more speedy approval of housing developments, not just for the homeless or those with low incomes, but for everybody. As an editorial in the San Diego Union-Tribune noted, it shouldn’t be only sports stadiums for teams owned by billionaires that are green-lighted quickly “by requiring that all environmental lawsuits, including appeals, be done within nine months.”

The same nine-month rule should be applied to all housing in California until the crisis has improved.

Unfortunately, Kate Gordon, the governor’s director of the Office of Planning and Research, poured ice on the CEQA reform flame. “I don’t see us doing a giant overhaul anytime soon,” she said recently. “I do think that CEQA is going to come into play as we’re thinking through these big crises: the affordability crisis and wildfire crisis.” 

Perhaps the governor can clarify his administration’s stance on CEQA reform in his address.

I also have to bring up that the wrong way to deal with homelessness is a heavy-handed intervention in cities, such as Huntington Beach, that are grappling with the crisis. That is why, as I have explained, I objected to the governor working with Attorney General Xavier Becerra in a lawsuit against Surf City. This and other cities need to be given time to advance housing construction before being hit with lawsuits.

Wildfires

Seeing large sections of California burn down was shocking. Many of the fires were caused by sparks from downed power lines. I authored two bills in 2016 and 2018, both numbered Senate Bill 1463 and described here, to mitigate wildfires by undergrounding power lines and using cap-and-trade funds for undergounding and other efforts to reduce the causes of wildfires. Neither bill became law.

But the cap-and-trade idea was incorporated into Senate Bill 901 by state Sen. Bill Dodd, D-Napa, which I supported. It included $200 million in cap-and-trade funds for mitigating wildfires. This year, I am working on new legislation to extend this idea to other revenue streams not being utilized for their intended purpose.

Such an approach is crucial because the 2018 wildfires generated greenhouse gases equivalent to that of a year’s worth of electricity, according to a new study by the U.S. Department of the Interior.

Securing Voting Rights

There are many more issues I could highlight that affect California. But let me stress one more, voting rights. The right to vote is sacred in our democracy. But that includes securing the integrity of the voting process.

The motor-voter law, passed in 2014, has turned out to be a disaster. The DMV, which has numerous other problems, just wasn’t prepared to implement signing citizens up to vote right when they were given drivers’ licenses.

As the Sacramento Bee recently reported, “As California prepared to launch its new Motor Voter program last year, top elections officials say they asked Secretary of State Alex Padilla to hold off on the roll-out.” He went ahead anyway.

Gov. Newsom has created a DMV Strike Team to fix a bureaucracy that has so many problems it’s like an old Yugo barely able to run downhill. Until the DMV itself is fixed, motor-voter should be delayed.

In summary, the great state of California remains a wonderful place to live, but has been stymied by governmental overreach and planning. The state will be much better once alternatives which allow for more freedom and prosperity are implemented to address these and other problems. The warnings of disaster are there for all to see. Yet the right spirit of cooperation – not government coercion – can be a driver for the right kind of change.

Senator John Moorlach

Sen. John M. W. Moorlach is a Republican California State Senator representing 37th Senate district, which includes portions of Orange County.

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7 thoughts on “The Real State of the State: California 2019

  1. Motor voter should be RESCINDED, not delayed…along with “ballot harvesting ” and all the other voting chicanery recently implemented by Jerry Clown’s culture of corruption in the La Raza legislature….

  2. Oh, and Padilla should be brought up on charges for aiding and abetting voter fraud and for whatever other charges can be brought against him for the illegalities committed by him and that Trump Derangement Syndrome AG, Becerra….
    That clown cares more about protecting illegal alien immigrants than he does the rule of law and the US citizens of the formerly great state of California…and he’s the highest law enforcement officer in the state???
    Rise up, California voters….your livelihoods and economic futures have been placed in the hands of those who don’t have your best interests at heart at best, and wish you harm at worst…
    The fringe element of MEChA that amused me in college in the ’80’s, now makes policy for you in the teens….sad….

  3. It’s amazing that “entitlement” to those promised DEFINED benefits, will drive the so called “entitled” to put the costs of those entitlements onto their kids!

    State and local workers are promised generous DEFINED BENEFIT PENSION PROGRAMS that few private sector companies offer any longer because they are unaffordable. Making matters worse, thanks to complicit politicians, the state and local governments have failed to adequately fund these overly generous DEFINED benefit pensions. The huge unfunded pension liability debt crisis is the inevitable result that younger generations, unable to vote today, that will bear the costs.

    Fully funding these pensions is unfair to current hard working taxpayers, so the “consensus” of the courts and current taxpayers is to defer the responsibilities for paying for these overly-generous “Defined retirement benefit” pension programs to younger generations, for them to pay higher taxes and work later into their lives to pay for the promises of previous generations, to subsidize older Americans.

    It’s frustrating and appalling that the “courts” are actually saying that future generations will continue to be legally responsible for DEFINED BENEFIT PENSION PROGRAMS established by previous generations! Are the courts really supporting taxation on younger generations without representation?

  4. The policy of California lawmakers is to burn down the ENTIRE Forest. There are 300 trees to the acre and whoever starts a small fire will have the liability for the entire forest burn be their responsibility when it should be the Legislature’s responsibility. Don’t sue PG&E, Sue the State of California, it’s their policy that is burning down the forest and you should include the SIERRA Club and all the other conservancies.

  5. Please California, become your own Nation. This Nation-State talk is just the beginning. These frauds aka California politicians you all have supposedly elected have destroyed this once great state I called home for many years. It’s like watching the movie demolition man(seriously, watch it and see the correlation). They appease the 10% ultra left wing nutballs who control the state, offer all this candy with no way of paying for it. Coddle illegals, pay the homeless and spew so much BS it’s comical you all suck it up. How many cities in Cali went bankrupt 10 short yrs ago? The state has moved so far to the left, they preach equality and unity yet berate, denigrate and applaud violence to anyone who doesn’t agree and calls out there BS. Please leave the USA. Become your own nation as what you don’t realize is your $13 trillion economy will shrink by more than half( $6.5 trillion ain’t bad) and with all the illegals/homeless people that will flock to the open borders you all love, the businesses (you tax out the ass) that will leave the state as the U.S will hammer you with tariffs , it will be fun to see how your gonna pay for all the socialist programs you have. Spare us with California provides all the produce etc. We can import farm to fork. America is a capitalist country, that’s what made us who we are. The good bad greed and ugly that comes with it, but also makes us the most powerful on earth and gives us the freedoms we have. Take a good look at NY/NYC. The wealthy and their business’s are leaving in droves. The once great state of California that I loved has become a sesspool of hate, violence,antifa liberals and terrorist’s against there own country/fellow citizens that provides all the freedoms we all take for granted. Comparing anyone who is not a ultra liberal democrat socialist must be a nazi. To take a phrase of a great California movie, BYE Felicia!!!! Don’t let the door hit ya in the ass. Ps. Thanks for the SF human shit/crack pipe/used heroin needle street locator app. Pay $3000/month for a tiny apt with human shit on your sidewalks. To Hollywood celebrities who scream ban guns yet love to shoot/kill everything in there movies/tv shows/ video games then preach those things have nothing to do with the violence we see today. REALLY?? Lastly, you all elected a POS slimy used car salesmen names Gavin who banged his BF’s wife while still married, then promotes himself as honest and has integrity. Srry for the rant, I needed to vent. Miss the California where dreams cld come true, opportunities seemed endless. Now it’s the definition of “California bull shit” I was told about as young kid growing up. Semper Fi!!

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