NBA Handout? Let Voters Decide

It now looks like there’s a chance that the decision about whether to pay extortion to the billionaires of the National Basketball Association could be made by the people of Sacramento themselves. Two lawyers representing opponents of the subsidy to the Kings franchise have sent a letter to the city’s leaders asking for a public vote on the question and suggesting that a referendum is likely if the city council does not itself seek voter approval.

A public vote is a good idea. As we pointed out in California Crackup, the referendum is the underused tool in the kit of California direct democracy. Unlike the state’s inflexible initiative, which is used for getting around elected lawmakers and tying their hands, the referendum is about holding a conversation: Our representatives make decisions and through the referendum we voters tell them whether they got it right, or should go back and try again.

The people’s right to pass judgment on legislative action through the referendum is guaranteed in the California constitution and Sacramento’s city charter. “The powers of the initiative, referendum and the recall of elected municipal officers are hereby reserved to the electors of the city,” the charter states, echoing the language of the state constitution. “All ordinances which may be passed by the city council shall be subject to referendum, whenever the use of the initiative or referendum is permitted by state law applicable to cities,” the charter provides. Qualifying a referendum against the issuance of revenue bonds for the arena would require signatures of 10 percent of the number of people voting for governor at the 2010 general election, or about 12,000 people.

If the past is truly prologue, though, expect Sacramento Mayor Kevin Johnson and his allies on the council to do everything they can to avoid making voters part of the conversation.

As the lawyers’ letter notes, “Last year, the City Council expressly voted not to allow the residents of Sacramento an opportunity to vote on the prior version of the proposed subsidy,” and put off taking any legislative act that might have triggered a referendum vote. It is the standard tactic of these sports extortion games to use a combination of delay and made-up deadlines to turn subsidy decisions into moments of crisis, where drama reigns and emotion defeats evidence and logic.

Expect Johnson and the friends of the billionaires to tell citizens that there can’t be a public vote because the deadline is too near—even though the deadline is too near because they wanted it that way. Expect them to follow the same path as the city of Santa Clara, which blocked a voter referendum on the subsidy for the new 49er stadium. Sacramento City Attorney Jim Sanchez has already claimed to reporters that the council’s upcoming March 28 vote on a “term sheet” for an arena handout isn’t subject to voter review because it isn’t a “final” act.

But California courts have found that the referendum right applies broadly to all legislative acts by city councils, and state law explicitly recognizes the referendum can be used, for example, to test voter approval of issuing revenue bonds, which would likely be used in any arena subsidy scheme. A time will come, perhaps many of them, when the council will have take a legislative action to make an arena subsidy real, and thereby trigger a referendum opportunity.

As divisive as the sports corporate welfare issue is, any attempt by Sacramento’s leaders to deny the city’s citizens their final say in such a critical decision would be more explosive still. Wouldn’t it be better to have the civic conversation upfront, before voices get raised and lawsuits filed?

Will Sacramento Be a Sucker For the Kings?→

Your city is plagued with high unemployment, rising crime, declining public services, and unfunded liabilities that now amount to $2 billion, or about $5,000 per resident. What do you do?

Well, if you are the Sacramento City Council, you vote, 7-2, to signal your willingness to spend hundreds of millions of dollars you don’t have to subsidize a billionaire by building a basketball arena. “Every great city has a coliseum,” said Steve Hansen, a council member.

But the question for Sacramento is not what great cities have but what measures a failing city should take to make itself great. Paying corporate welfare to the rich doesn’t even make the list (something that Hansen, a corporate lobbyist himself, may be professionally forbidden to recognize.) At Zócalo Public Square today I explain how the dark side of sports loyalty blinds those whom the gods wish to destroy.

The Taxes That Didn't Bark

Was it a good thing for California that legislative Republicans stymied Gov. Jerry Brown on taxes in 2011? Robert Kleinhenz, the chief economist for the Los Angeles County Economic Development Corp., thinks so. According to the Los Angeles Times, Kleinhenz told the Sacramento Press Club that, “We were still reeling from the recession. [A tax increase] could have taken an already dire situation and made it worse.”

If Kleinhenz offered any evidence or argument to back up his opinion, the Times didn’t say. In fact, the Times didn’t even bother, for the benefit of readers, to clear up Kleinhenz’s apparent case of amnesia. The issue facing California when Jerry Brown became governor in January 2011 wasn’t whether to raise taxes. Higher taxes had already been in place in California for nearly two years: the temporary tax increases approved by the Legislature and Gov. Arnold Schwarzenegger in February 2009, at the very depth of the Great Recession. In his first budget Brown sought only to maintain the status quo by extending the level of taxes already in place.

We don’t have to speculate, then, about whether higher taxes “could have taken an already dire situation and made it worse.” California took the leap in 2009. If higher taxes were destructive, Kleinhenz might be expected to offer evidence of it in the economic performance of the state while they were in effect. That’s the kind of thing a skeptical journalist (as opposed to a stenographer) might want to check, either by looking directly at the data or interviewing an expert. The Times failed to do so.

So let’s try it here:

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Job Growth, California and nation

The graph compares the year-over-year percentage change in private nonfarm employment in California (blue line) against the nation as a whole (red line) for 2010 through 2012. California’s rate of recovery almost exactly tracks the national economy both on the left half of the graph, the period when the temporary taxes were in place, and on the right half, after they disappeared in July 2011. Raising taxes “in an already dire situation” apparently didn’t makes things worse, nor did lowering them two years into the recovery make things better. 

This is not surprising. Readers would understand this if the Times and other media would occasionally provide some numbers to give context to our political arguments. One of the great failings of public policy reporting is that journalists so rarely show readers what they mean by phrases like “higher taxes.” Brown’s initial budget proposal to extend the temporary taxes would have raised revenues by a combined $15.5 billion over the 2010-11 and 2011-12 fiscal years. What does $15.5 billion mean? Well, total personal income in the state for those two years was $3.4 trillion. The argument was about less than one-half of 1 percent of personal income. 

And the alternative to that small drag on the economy, Kleinhenz and the Times neglect to tell us, was not to avoid all drag. Unable to extend the Schwarzenegger temporary taxes, Brown and the Legislature were forced cut spending. Firing teachers and state workers created its own small drag. Some of the private-sector job gain of 632,000 in the graph above was offset by the loss of 83,000 public sector jobs. 

So was it a good thing that Jerry Brown didn’t get his way on taxes in 2011? Measured by the short-term movement of the economy, it didn’t matter much one way or the other to most Californians. But to all those young Californians who found themselves shut out of college or trying to learn math and science and English in schools with shortened years and overcrowded classrooms, it may matter a lot for the rest of their lives.

Pension Reform Trap II

It’s been an item of faith among would-be pension reformers that switching public employees from defined benefit pension plans to defined contribution plans like 401(k)s would save taxpayers money. When I’ve suggested here that the savings may never materialize, the faithful have scoffed.

So here’s one, early data point: In its new budget, San Diego is projecting a $40 million increase in pension costs for the coming year, much of it due to the switch from defined benefit plans approved by voters in June 2012 in the Prop. B reform plan.

This is not a surprise. It was predicted by San Diego’s Independent Budget Analyst.

A switch to defined contribution pensions doesn’t, by itself, save money. Because of higher fees charged by financial institutions and the lower returns realized by individual workers in self-directed retirement accounts, it takes higher levels of contributions to achieve a given level of retirement savings in 401(k) plans. For the switch to save taxpayer dollars, government employers must either reduce their workers’ retirement saving or cut their wages. In San Diego, Prop B will yield lower costs for taxpayers only by holding total city worker pay—wages plus benefits plus contributions for retirement plans—below the levels anticipated before passage of the measure. In particular, this will require learning to say no to police and firefighters.

Good luck with that.

Faulty Sacramento Fault-Finding

My old newspaper, the Sacramento Bee, has once again gone into full panic mode over the rumors that a Seattle group may be trying to buy and relocate area’s National Basketball Association franchise, the Sacramento Kings. Dare I suggest that what the Bee’s readers need at the moment is less panic and more insight?

Marcus Breton assures readers that “whether the Kings ultimately move or stay, it's time that Sacramento embraces an undeniable truth: None of the turmoil surrounding the team is the fault of this community.” It’s all the fault, the ham-fisted local columnist tells us, of the team’s owners, the equally ham-fisted Maloof family. If that is so, why did the Kings fail to prosper, either on the court or as a business, during the tenure of the prior two owners?

Should the Kings leave, Phillip Reese reports, Sacramento would be the second largest metropolitan area in the nation without a major-league sports franchise, after only the Inland Empire area of San Bernardino and Riverside.

That’s a nice factoid but it raises the obvious question: Why? Pro sports teams are businesses. Leagues locate their franchises in the places where they are likely to yield the greatest revenue and profits. Is there something about Sacramento that explains why it has such a hard time supporting the Kings?

The Bee used to know and report the answer. NBA franchises draw a large share of their arena revenue from corporate sales. But Sacramento, its economy dominated by state government, is the weakest market when measured by the number of local firms able or willing to shell out for season tickets and luxury boxes. The area’s median household income is far below that of metropolitan areas on the coast, home to California’s other pro sports teams, or of Seattle, and its growth is hampered by its mediocre level of educational attainment. Those weaknesses, which have plagued the franchise since it moved to Sacramento in 1985, have been compounded by the effects of the Great Recession. The popping of the housing bubble and cuts in state government dealt a double blow to the region, which lags far behind most of the country in recovering lost jobs.

The uncomfortable truth that Breton and others at the Bee evade is that the Kings story is part of the larger story of Sacramento’s economic shortcomings and leadership failures. The area is a lousy market for delivering revenue to an NBA team, and its governments are in deep fiscal trouble and in no position to subsidize the franchise. A newspaper devoted to tough journalism would be telling that story, not whining and pointing fingers.

Remembering Aaron Swartz

It seems a too-small gesture in reaction to the government's persecution of Aaron Swartz, but here is my review, originally published in The California Journal of Politics and Policy, of Peter Schrag’s fine book on nativism, another instance where law often failed to live up to America’s ideals.

The Wages of Primary 'Reform'

Darrell Issa

The promise of primary reform, including California’s new jungle primary law, was that it would lead to more moderation in politics. Widen the electorate in primary elections beyond all those nasty partisans, the reformers told us, and those elected would be more responsive to a broader range of views.

Richard Winger at Ballot Access News uses the House Republican vote on the fiscal cliff bargain to test that promise. His conclusion? “When one breaks down the list of Republicans who had been re-elected in November 2012, one finds that Republican members from closed primary states were far more likely to vote for the bill than Republicans from states with more open primaries,” including California’s undemocratic new system.

That doesn’t count as definitive evidence, but it’s a reminder that we are still waiting for the reformers to show us any evidence that the changes they pimped have had any benefit at all.

Big Money in Initiatives Isn't New

Michael Hiltzik tells us at the Los Angeles Times that California’s initiative system is big, noisy, and expensive. The role of big money shouldn’t be accepted as “the new normal,” he argues.

He’s right about not settling for what we have. Like a lot of people, he’s wrong about this year being something new.

Big money from wealthy political players and interest groups has been part of the process all along. Before there was Tom Steyer, the San Francisco hedge fund operator behind Prop 39, there was Rudolph Spreckels, the San Francisco sugar magnate, behind Hiram Johnson and the creation of the initiative.

Current figures suggest that spending on this year’s initiatives will top $360 million, or about $20 per eligible voter. That’s a lot of money. The spending per voter is about twice what Nike spends each year per Californian to sell us shoes and sports gear. It’s also more than the $285 million that organizations and individuals spent last year to lobby the Legislature. But then we shouldn’t be surprised that it’s a lot more expensive to communicate with 18.2 million voter-legislators than it is to communicate with the 120 people we send to the state Capitol to represent us.

But adjusted for inflation and the growth of the number of voters in the state, this year’s initiative campaigns will spend less than was spent on initiatives in 1988 or 1998, two other big years full of controversial measures. What Hiltzik calls the “new normal” is, regrettably, just normal.

Expensive Cops = More Crime

The New York Times has a new story linking rising crime in Sacramento to cuts in the local police force. I doubt any reader finds this particularly surprising. Most people assume that putting police on the streets helps deter some crime and results in the arrest of criminals who aren’t deterred, thereby preventing them from offending again.

What the Times doesn’t explain is why Sacramento’s leaders would choose to inflict such a policy on their community. Are they just nuts?

You have probably guessed at least part of the answer. Like the rest of the nation, Sacramento was hit hard by the recession. It was one of the cities at the epicenter of the bursting of the housing bubble. The combination of the two economic blows depressed the city’s property and sales tax revenues, forcing budget cuts.

But another part of the answer is the extravagant level of pay and benefits for police and fire employees.

According to the California State Controller’s database, 168 police employees in Sacramento received in excess of $100,000 in reportable wages in 2010. Most of these also received more than $20,000 in city contributions to health insurance premiums and employer’s assumption of the employee’s share of pension contributions. In addition, 225 of the 446 fire department employees were paid more than $100,000 in wages.

The “why” here is clear. It is difficult for any community to provide adequate levels of police and fire protection when it pays cops and firefighters twice the average wage of full-time workers in the community.

The puzzled readers of the nation’s paper of record would have been well served by this added context.

'Orwellian,' Jerry? Look in the Mirror

Jerry Brown has hit the Prop 30 campaign trail this week, in full whine. With poll numbers like this and this, his bad mood is easy to understand. But is his whining justified?

The governor calls the opponents “Orwellian” for their recent TV ad saying that Prop 30 will raise the tax on gasoline. But the fact of the matter is that the issue is cloudy.

Prop 30’s opponents make a plausible legal argument that the provisions of Brown’s measure, written to be a constitutional amendment, will yield a higher tax on gasoline and diesel because of the way they interact with the contortions the Legislature has gone through in recent years on swapping sales taxes on fuels for fuel excise taxes. The Legislative Analyst disagrees, but that office brings no legal expertise to the table on the issue. This would not be the first time an initiative created unintended effects because of poor drafting. Given the complex tangle of fiscal knots with which California has bound itself in its laws and constitution, differing interpretations of how the law works are inevitable, and hardly the stuff of Orwell’s 1984 or Animal Farm.

When Brown invoked Orwell, perhaps he was thinking about his own ads for Prop 30. In this television spot, state Controller John Chiang looks into the camera and says, with a straight face, that Prop 30 “means no more school cuts, with strict accountability. Sacramento politicians can’t touch the money….”

None of that is true, of course. Prop 30 temporarily raises taxes and state revenue, thereby reducing the state’s deficit and avoiding the trigger cuts to schools Brown and legislative Democrats enacted to threaten voters. But it doesn’t guarantee that schools won’t be cut more in the future, either when the next recession arrives (as it surely will) or when the tax increase expires, some of it in four years and the rest in seven.

Nor does it put the money off limits to “Sacramento politicians.” The extra revenue created by Prop 30 will free up an equal amount of money that can be budgeted for any purpose. That budgetary flexibility is the great advantage Prop 30 holds over Molly Munger’s Prop 38, which is mostly earmarked only for schools and pre-school. It’s why Brown’s measure has attracted support from health advocates, hospitals, social services providers, prison guards, universities, and the like. The extra revenue protects programs they care about, and that many voters care about too. (Has anybody bothered to tell all those aging baby boomers opposing Prop 30 that they are voting against funding the Medi-Cal program that will pay for their nursing homes?) Giving the people we elect more authority and discretion in raising and spending money is essential to making California governable.

But Brown and his hired liars are afraid to say so. Instead, the Prop 30 campaign puts out ads in which a Sacramento politician tells us untruths about what Sacramento politicians can or can’t do with the money the measure raises. It’s easy to understand why they do that. But understanding why someone might say “War is peace. Freedom is slavery. Ignorance is strength” doesn’t stop it from being Orwellian.

California's shrinking public workforce

If you’re one of those people who likes to blame California’s public workers for the state’s problems, Stephen Levy of the Center for the Continuing Study of the California Economy has good news for you. California’s public workforce, which has long ranked among the smallest in the nation relative to population, shrank even further from 2007 to 2011.

The ratio of California state and local employees per 10,000 residents fell by 7 percent in that period; the ratio of K-12 school employers fell by 11 percent. These numbers are Census Bureau estimates for March 2011. Given the continuing budget cuts and workforce reductions by the state government, cities, and school districts over the last 18 months, the current numbers are far lower.

Which means that if you are one of those people who’d like the police to investigate and capture car thieves or who’d like the fire truck to arrive quickly in an emergency or who’d like your child’s school to have a library where she can research her homework or a counselor to guide her through applying to college—well, chances are that you are out of luck.

Will Kyle Palmer Ride Again in San Diego?

“[Kyle] Palmer was nothing if not consistent. He had been the kingmaker of Republican politics in California since the 1930s. Short, cynical, curly haired, bow tied, and pushing sixty in 1950, he was known by friends and enemies alike as Mr. Republican or the Little Governor. When candidates came by… to pay him a visit, it was known as 'going to kiss Kyle’s ring.’ He felt that telling candidates what to do was improper, but he expected them to follow his 'advice.’ Asked what happened when they didn’t, he replied, 'they got into trouble… political trouble.’ Palmer once advised Richard Nixon to smile when he clobbered an opponent—and apparently Nixon took the instruction to heart.”

So writes Greg Mitchell in his fine book Tricky Dick and the Pink Lady: Richard Nixon vs Helen Gahagan Douglas—Sexual Politics and the Red Scare, 1950. If your hair has not yet turned gray, you have likely guessed Kyle Palmer was a paid political consultant or strategist. Your guess would be only half right. Palmer was indeed paid but his employer was the Los Angeles Times. As political editor there, he wrote articles, columns, and editorials to make or break candidates according to the dictates of the Times’ GOP political agenda.

California has not seen Palmer’s like in journalism for many years, but in San Diego the clock is being turned back.

The paper that used to be the Union-Tribune but that now is brutally called U-T San Diego will be hosting a September 11 invitation-only event to advise Republican candidates how to present themselves to the media and secure the paper’s endorsement. (A spokesman for U-T San Diego told Politico a more sparsely attended event will later be held for Democrats.)

Democrats may be excused wondering whether they have been invited to lunch or to be lunch, because it is clear that Doug Manchester, the developer who bought the declining paper last year (to which he has now added the North County Times), is taking it boldly into the past. He uses its pages to tout his development plans with front-page editorials, bully local officials who don’t support his efforts to grab taxpayer dollars for himself and the local pro football franchise, and trumpet far-right views and candidates. On the U-T website you will find a page, Seeing Red, of right-wing commentary, including a U-T editorial predicting a second Obama term will lead to U.S. abandonment of Israel, Medicare death panels, and removal of “In God We Trust” from coins. A search for a comparable See Blue page yields the following image:

Nonetheless, by the standards of Palmer and the newspapers publishers of the last century, including Joseph Knowland of the Oakland Tribune and George Cameron of the San Francisco Chronicle, Manchester and his rag are still minor league.

Palmer recruited candidates, taught them what positions to take and how to take them, wrote their speeches and radio scripts, and tore down their opponents. The publishers in Oakland and San Francisco were GOP kingmakers in the north state. I was made editorial page editor of the Oakland Tribune shortly after it had passed from the Knowland family to the Gannett chain. During my long march of conducting endorsements interviews of local candidates, old-timers would tease me that I was doing it all wrong. In the Knowland days, they explained to me, the publisher would pick the candidates he wanted to run for each local office. The paper would then forget to cover their rivals. This procedure saddened reporters and editors wishing to do serious journalism but gave them much more time to drown their sorrow at the bar next door.

Palmer, according to Mitchell, was more generous with the unanointed. In the 1950 U.S. Senate campaign between Nixon and Douglas “Palmer’s idea of balanced coverage was reflected in his public explanation that even though his newspaper opposed Helen Douglas 'from time to time, as space allows, news accounts of what she has to say and what she is doing will be published.’”

Many people will have no problem with a form of journalism that returns from professional to partisan—just look at the rise of Fox News. Those in San Diego who want to look at the world through open eyes are lucky to have an online alternative, Voice of San Diego, which has already replaced the self-destructing U-T as that city's most reliable and interesting source of local news and commentary. If you don't want to see the return of Kyle Palmer, you might consider sending some dollars their way.

The Bee Drops the Veil

In a September 9 editorial the Sacramento Bee announced it is abandoning the newspaper’s long support for the death penalty.

“For most of its 162 years as a state, California has had laws on the books authorizing the death penalty. And for nearly all of its 155 years as a newspaper, The Bee has lent its support to those laws and use of capital punishment to deter violence and punish those convicted of the most horrible of crimes,” the paper’s editorial board wrote.

“That changes today. The death penalty in California has become an illusion, and we need to end the fiction.”

You will note the ambiguity of that “we.” Is it the editorial “we?” Or is it “we, the people of California?” The editorial promiscuously mingles the two. A careful reader will conclude it is most likely the latter; a reader who served a long tenure writing editorials for the Bee — someone like, well, me — will understand that the ambiguity is real and (possibly) quite deliberate.

“We need to end the fiction.” Memory can’t provide an exact count of how often that phrase was spoken at the Bee’s editorial board during the nineteen years, from 1985 to 2004, I spent there. But a good approximation would be this: those words or something like them were uttered every time some ballot measure or court decision obligated the paper to speak on the death penalty.

Because the fact of the matter is that the “Bee” that supported the death penalty wasn’t the Bee of the people who wrote in its voice. I think it’s fair to say that at no time while I worked at the Bee would the death penalty have won the support of the majority of the editorial board. Simply put, the Bee that supported the death penalty was the McClatchy family that owned the paper.

Acting as mouthpiece for the deeply held but lightly considered views of newspaper owners is part of the editorial writer’s job description. Those of us who worked for McClatchy were lucky on that score. C.K. McClatchy, the editor who hired me and a prince of a man, liked his views well thought out, and went out of his way to hire people capable of putting such views into his newspapers. The list of things about which he was both adamant and wrong was short and always subject to trimming through the proper application of logic and evidence. Only the death penalty was untouchable. No arguments or logic from editorial board writers could shake its hold.

But that hardly mattered. As the Bee’s editorial makes clear, California has had the death penalty in name only; the state has conducted more statewide elections than executions in the last two decades. It wasn’t a great moral hardship for us to support a policy that rarely occasioned sitting down at the keyboard to say so. And when readers complained that the Bee was unthinkingly liberal in all things, we could point to the paper’s support of the death penalty as evidence that we could be unthinkingly conservative too.

I have no idea how the family’s heart was changed or even if the family cares any more what the papers it owns write on their editorial pages. But I congratulate Stuart Leavenworth and the other members of the current editorial board. Change is hard, but they have ended the fiction.

I ask them to consider only one thing. The next time they sit down to write an editorial to berate the Legislature or Congress for not doing this or that, let them take a moment first to reflect on the Bee’s own experience.

By their own account, it has been blindingly clear forever that the death penalty is expensive, unjust, and ineffective. Yet it has taken the Bee, as an institution, a whole 155 years to figure that out.

If it takes so long for a simple institution, in which a decision rests with a handful of writers and executives, to get a big and emotional issue right, imagine what it takes for a legislative body or government to do the same. If those who have completed a long journey to the light will not appreciate the difficulties others face in moving complex institutions, and if they will not offer respect for their successes, who in our culture of instant gratification will?

A Pension Dialogue

Scribbler: As someone who has written a paper about pensions, you must be tremendously disappointed by the pension bill just passed. As our fellow scribblers at the Los Angeles Times said, “Brown’s plan to stem pension costs is no panacea.”

Curmudgeon: Panaceas are as hard to find as unicorns and Mitt Romney tax returns.

Scribbler: But surely you agree with Dan Walters that the “Pension overhaul plan falls short.”

Curmudgeon: That headline is also going to be on Walters’ column the day after the Second Coming. He will fault Jesus for not having returned hundreds of years ago to spare millions from hellfire and damnation, and he’ll scoff that salvation is just a promise, easily revoked when Yahweh throws one of his Old Testament fits of temper, or needs a contribution from the prison guards.

Scribbler: So you think it’s real reform?

Curmudgeon: What is “real reform?”

Scribbler: Don’t go all Socratic on me. Even under AB 340, most public workers in California will have pensions better than most people in the private sector.

Curmudgeon: True. Public workers will still enjoy more security than the huge numbers of private-sector workers who have totally inadequate retirement plans, or none at all. But as Micah Weinberg and I wrote in our paper, taking away retirement security from public workers doesn’t add to the sum of well-being in society. Envy is not reform, it’s one of the seven deadly sins, best cured by repentance and prayer.

Scribbler: Okay, but you agree that pensions are way too expensive, right?

Curmudgeon: If pension costs are your measure, then the bill certainly counts as reform. It reduces the pension formula for new workers, requires employees to pay half the normal cost of pension contributions, caps the size of pensions, and curbs lots of abuses. That will save a lot of money.

Scribbler: But former legislator Joe Nation, now at Stanford and a pension critic, says that “No one should believe that this is going to have an appreciable impact on the public pension problem.”

Curmudgeon: CalPERS actuaries estimate that AB 340 will save the public between $43 billion and $56 billion over the next 30 years. The present value of that savings is between $12 billion and $15 billion, roughly equivalent to what the state spends each year to run the prisons and support the two university systems, UC and CSU. (If CalPERS’s estimates used the low discount rate that critics like Nation trot out to puff up their estimates of the system’s unfunded liability, the present value of the savings would be much larger.) Hobnobbing with the billionaires in Silicon Valley may have warped Nation’s sense of proportion, but like most folks, I still count saving $12 billion as “an appreciable impact.”

Scribbler: So you do, in fact, think this is real reform. How can you say that when the large pensions promised to current workers haven’t been curtailed?

Curmudgeon: And just how might you go about curtailing those pensions? The courts have been firm in ruling that pensions are a contractual obligation that can’t be retroactively taken away.

Scribbler: Pension hawks like David Crane and Joe Nation say that the law isn’t as clear as it appears and that local governments ought to try to convince the courts that reducing future pension accrual by current workers is permissible because the only alternative is deep cuts to parks, libraries, and public safety.

Curmudgeon: If they want to mount a full frontal attack on the machine gun nest, I wish them all the luck in the world. Just remember, though: Judges have pensions too.

Scribbler: What a cynic. So we just give up now?

Curmudgeon: No, not at all. But we ought to try to think more clearly about the real issue here. It’s not pensions. What matters is total compensation for public employees. The public needs to hire people to teach our children, guard our streets, put out our fires. In return for their work, we pay them with a package of compensation, some of it providing them current income, some of it future income: a wage, a health insurance plan, a pension, employer contributions to Social Security and Medicare, and, in some cases, retiree health benefits. As a taxpayer, I don’t care how public workers want to divide that bundle of compensation between current pay and retirement income. I care about the total cost to the public employer.

Scribbler: What’s your point?

Curmudgeon: The point is, if you understand the real issue, it becomes obvious that there may be more promising strategies than attacking the machine gun nest, with its protective legal bulwarks. We can achieve lower total costs more easily by reducing or containing other parts of the package.

Scribbler: Such as?

Curmudgeon: Nation has suggested that California recoup some of those overly generous pensions with a surtax on the pensions of “double-dippers,” public retirees who collect a pension while they continue to work.

Scribbler: That’s all?

Curmudgeon: For years there has been growing concern among budget wonks about the growing cost of, and unfunded liability for, retiree health benefits. Now we have a real opportunity to act. Retiree health benefits are a relic, first authorized in 1961, before the passage of Medicare. Even after Medicare came into being, its benefit package was incomplete, and workers who retired before Medicare age had no assurance that they would be able to qualify for, or afford, coverage in the individual market. The passage of the Affordable Care Act has changed all that. In 2014 every retiree, early or not, will be able to buy health insurance regardless of pre-existing conditions. Obamacare has solved the problem retiree health care benefits were created to address. We can, in good conscience, eliminate them and harvest for state and local budgets the savings made possible by our historic move to universal health insurance.

Scribbler: Doesn’t that create legal issues, too?

Curmudgeon: For people already retired, yes. But there’s no bar to eliminating retiree health benefits for new workers and those for whom they have not vested, either because of insufficient years of service or contractual language.

Scribbler: That’s your panacea?

Curmudgeon: No, you haven’t been listening. There are no panaceas—never are, never will be. Over the last generation, the combination of a broken governance system and public inattention has allowed the total compensation of public employees—and most particularly that of police, firefighters, and prison guards, which is far out of line with national standards—to soar. It will take years of hard bargaining and sustained attention to the issue to bring that compensation back in line. For example, my calculations suggest that the considerable savings achieved in AB 340 would be totally wiped out by a 7 percent pay increase. If we don’t keep watching, the gains will disappear.

Scribbler: Do you really think that the media, politicians, and public in California are capable of that sustained attention?

Curmudgeon: Hey, how about those Athletics and Giants!

The Shadow Government of Kevin Johnson

In 2008 I ran into Kevin Johnson, the former NBA basketball star, at a restaurant near his condo in midtown Sacramento. I congratulated him on advancing into the runoff in his campaign to oust then-Mayor Heather Fargo. He thanked me, and then asked if I had any advice.

I replied that the most important skill in politics was being able to say “no” to the people funding his campaign. As I spoke, Johnson winced, as if having gas pains. “But they all want something,” he moaned. “Sure they do,” I said. “But remember what the great Jesse Unruh said. ‘If you can’t eat their food, drink their booze, screw their women and then vote against them, you have no business being up here.’”

In a terrific bit of reporting at Sacramento News & Review, Cosmo Garvin makes clears that my playfully offered advice was not heeded.

As Sacramento’s mayor, Johnson has built a shadow machine of nonprofit front groups funded through large and often undisclosed contributions. Although figures at Sacramento City Hall have long had ties to state government and the Legislature—former mayor Phil Isenberg was a legislative staffer, Fargo was a parks bureaucrat—Johnson is the first to tap so heavily into the assembled hordes of lobbyists, consultants, liars for hire, and fund-raisers who have infested the capital city as a result of the Prop 13 centralization of power in California. In fact, it is hard to know for certain whether Johnson formed what Garvin calls KJ Inc. to advance his political fortunes and whether KJ Inc. has latched on to him as a way to generate fat paydays for themselves.

Whichever may be the case, the strategy has worked. The four years of Johnson’s tenure as mayor has been the worst of times for Sacramento. Its economy is among the worst performing in the nation, public safety is being cut in the face of one of the highest big-city crime rates in the country, foreclosures have been rife, and the city budget, burdened with outsize pay and pensions for cops and firefighters, faces a large structural gap. Yet Johnson has done little to nothing on the housing front and has declined to pursue the full-court press for pension reform such as that pushed by San Jose Mayor Chuck Reed. Instead he devoted his attentions to a clownish pursuit of building an arena for the equally clownish NBA Kings franchise. A failure in every respect, he nonetheless had built so formidable a money and institutional machine around him that no serious candidate was willing to challenge him for reelection.

So I’m changing my political advice. To wannabe politicians: Don’t worry about being good, just try to look good.