San Francisco is officially $10B in the hole
sfexaminer.com
sfexaminer.com
City booms, everyone whines about cost of living going up, unionized public sector employees extract massive concessions from politicians whose campaigns they fund. I'm not saying this in an ideological way; it's inevitable, given that unions get dues by default which most employees don't bother to opt out from, those dues get spent influencing local politics to favor union members, and over 50% of US union members are in the public sector [1] - only 16% of the US workforce is unionized, but 1/3 of public employees are - it's hard to see how this ends any other way.
Eventually business wises up and realizes the obscene salaries and taxes they have to pay their employees go a lot farther elsewhere, then they relocate and (rightly) leave this mess behind, on the hands of the local government, taxpayers, and politicians who ran on promises they could never deliver on, and the public sector employees who all but extorted the taxpayers out of their money.
This is the story of Detroit yesterday, Illinois today, and SF tomorrow. I don't see how this ends any other way. Look at how many companies are already hiring remote employees -- time for SF to wake up and realize how limited their bargaining power is.
[1] https://www.economist.com/news/united-states/21737318-suprem...
The problem in SF is obscene housing costs (and, like everywhere in the US, obscene healthcare costs), not overpayment of public employees. In CA municipal budgeting would also be much more straightforward, effective, and robust without prop 13.
As for unions: the US has seen several decades of intense ideological war on organized labor, with dramatic erosion of workers rights across the board, and in particular legislative and Supreme Court interpretation changes that make labor organizing much more difficult and dangerous than a half century ago. Public sector unions are some of the last hold-outs. The overall result we’ve seen for the past 35 years is continually rising productivity but stagnant wages and working conditions (for all workers, unionized and not), and skyrocketing inequality. The future does not look bright for the bulk of American workers. (Great for the financial sector though, like the hedge fund manager [and Peter Thiel protégé] who wrote this op-ed.)
I think that in the future, decisions about redistributive action will be much more individual and finer-grained. People sometimes forget that nation-states aren't the only way to provide a social safety net, and in fact, they have significant disadvantages, including tons of complex rules and an entrenched bureaucracy that resists change.
I would much rather have the social safety net work like American Red Cross (incidentally, to which I'm a donor) than the US federal government. The key is to install the right social norms so that as the power of states fall, people still feel compelled to engage in some level of redistributive personal donation. Fewer McMansions and boats, more volunteering and donation.
In sum, just because the power of government and organized labor is declining doesn't mean everyone is going to become a cold-hearted scrooge. I think there's a third way, where we could help a lot more people for a lot less money out of pocket.
I don't see that changing.
If you don’t want a union, cool, but don’t complain about the outcome then. Comparing to private sector workers is disingenous.
But I think you should consider why union membership is declining in the US. It's not some giant right-wing conspiracy. It's because the structure of industry is changing, firms are getting smaller, and the overall economy is getting more competitive. It's not like all the employees just decided, hey, we should all voluntarily decide to take a worse deal, great idea, let's do it.
What upsets me as a taxpayer is why this same thing doesn't apply in the public sector. Like, I get that teachers work hard, but if we paid by outcomes, the way any sane private-sector company does, half of teachers would just get fired. Look at any major big-city school district if you want to see the mediocrity in action, whether Chicago Public Schools (CPS), Oakland Unified, etc.
So yeah, it seems a little unfair that one sector of the economy gets paid for being mediocre at best, and other fires people and demands performance. Yeah, I'm a little upset.
I don’t think it’s a secret I’m hard to the left. People first. That’s how empathy works, economic efficiency be damned. Are there issues with how pension systems are gamed? Certainly, and fixes need to be put in place (benefit systems should never have the capacity to be gamed). Should public sector workers have reduced benefits or salaries because the American public has allowed their representatives to hand all the gains to Corporate America? Absolutely not.
We have slowly, over decades, mortgaged the future (at local, state, and federal levels, speaking specifically about the US). The bills are coming due, and everyone is surprisingly shocked. I can’t tell you what to do, but I have gotten involved in politics and intend to contribute to a solution. I encourage you to do the same.
[1] https://www.mckinsey.com/industries/social-sector/our-insigh...
It's funny, I'm on an HOA board and spent the entire day trying to figure out our reserve liability, and how to balance it. It's in fact EXACTLY identical to a pension, where you have to put money aside to offset future expenses today.
The main thing is that I hate unfunded mandates. As a voter, I don't mind paying for things even if they're a little expensive. I just wish we'd get honest about the costs. Situations like we're in smack of expedience to the point of dishonesty, where the long-term math is impossibly broken.
I'm seeing this on a micro scale on my HOA. We need to have more in reserves but people hardly even know how to think about the problem, let alone implement concrete policy solutions to fix it. It's softened my views a bit to see how something as colossally fucked as Illinois can happen on a small, person-to-person micro scale.
So yeah nice chatting...my HOA is 1000 people, which is the size of a small city. I feel like a small-city mayor who everyone sort of hates but grudgingly admits does an ok job :)
People get...optimistic, right? Pensions assumed an 8% return, which at the time, was realistic. And then the return curve declined. We're close to 5% returns into the future [1]. So what now? Where does the money come from to top up these pensions? Are we going to break our contract to pay these people because of poor forecasts? No, we're likely going to raise taxes (in a hopefully progressive manner).
Same thing with Social Security. Why did Social Security "lend" its funds to the US government [2]? Because the US government is the safest, most reliable investment in the world. But then, politicians go and spend that money. They're not around to deal with the fallout from their shortsightedness (and arguably, greed). There is no accountability built into the system. That's a flaw in the system, that we don't account for those incentives and guard against them. A better system needs to be constructed that accounts for centuries of existence and benefit delivery.
> So yeah, it seems a little unfair that one sector of the economy gets paid for being mediocre at best, and other fires people and demands performance. Yeah, I'm a little upset.
Sidenote: I think the labor system in the US is seriously dysfunctional compared to the rest of the Western world and needs to be fixed as well (more labor protections). One election at a time.
[1] https://www.bloomberg.com/news/articles/2017-08-02/5-is-the-...
I moved south 4 years ago, my taxes are less than half of what they were in NY for a 2500sq/fr home compared to our current 4000sq/ft home. The education system is no better in NY than it is down here in my town. The public workers/teachers down here are not unionized - it’s not great for them, but I’m not willing to pay for their gold-plated benefits and pensions.
People continue to vote with their feet in situations where the local governments are unwilling/unable to change. In my subdivision, of 100 families 95% are transplants from up north. It doesn’t take a genius to figure out why - that old style of lush benefits for public workers is no longer competitive.
https://www.nytimes.com/2018/03/05/opinion/investor-class-pe...
It turns out it's a political farce that pensions are unsustainable. Voting with your feet doesn't help (although I can understand the appeal of avoiding taxes that prior political representatives set you up for, that's just poor reserves planning), as the federal government will end up backstopping state finances (with those funds coming out of federal income taxes). Public workers will (and should) continue to find ways to increase their salary and benefits to more closely align them to their value (as we saw succeed in West Virginia, and shortly, Oklahoma).
EDIT: > Our value systems aren’t really relevant here - I would love a pension and I’d love it if we all had them, but that ship sailed a long time ago.
Yes, they are. I support pensions for those who have them because I support societal safety nets, which those are a part of. You say the ship has sailed, but it hasn't. If people advocated for these sorts of systems, they would exist. They still can exist. Workers just need to demand them.
> Nope, I’m just not willing to pay for it since paying more for the same services does nothing to better my situation.
I like taxes. With them, I buy civilization. Otherwise, it's going to be a race to the bottom, which you might be fine with, but I am not. Everybody has to be comfortable with their decisions.
As a software developer, I’m unlikely to find a position with a pension and a decent salary. I could go work for a university that might provide a pension but the pay would be dismal. In a system with choice between pensioned and non-pensioned competitors, eventually the pension burdens will make them less competitive.
Just to provide some background, my dad worked in a union (UAW) for nearly 40 years - so I benefited from that system.
The issue to me boils down to economic competitiveness. Pension systems are expensive and pose immense risk. Most businesses can’t afford it today. Governments can just borrow money to make up for gaps - until they can’t (Detroit.)
(a) because it's much easier to promise benefits without fully contributing the present value of future liabilities. Ask the average taxpayer how much a pension costs, they'd have no idea how to even start thinking about all the complex financial math this requires (life expectancy, discount rates, return expectations, etc) so it's too easy to play games. Especially when game playing=lower taxes and more benefits.
(b) because pensions are huge pots of money and it's just too hard not to touch that. Though CalPERS seems to have resisted this temptation to some extent, which I find impressive.
Believe me, I wish I was wrong, but we're talking about basic human nature here, which I don't think is something you can really change.
I suppose it is not sustainable to increase earnings and maintain pensions forever.
http://www.governing.com/gov-institute/voices/col-public-pen...
https://www.cnbc.com/2017/10/18/state-pension-funds-continue...
So right there, we are compensating private sector employees for the reduced job security.
I could go on many more, but that one is pretty solid.
And yes, private sector people are paid too much just on this basis alone.
https://mysfers.org/wp-content/uploads/Plan-Provisions-Misc-...
Working 20y covers 100% health benefits when retiring. Working 20y allows you to retire at 53. Pension calculated averaging only the 3 best years.
Regarding
Do we just expect government employees to not be able to live in the city they work?
Do they have more right than others to live in the city they work in? Because thousands commute to SF every day because they can't afford it.
edit: formatting
Do no, I don't expect the employees to necessarily be able to live there.
Ferrari mechanics cannot afford Ferraris. Stanford regular employees cannot afford to send their kids there, etc. So what?
Look at Illinois.
>BART janitor grossed $270K in pay and benefits last year
BART is totally lawless. In the past 4 years, I've had a knife pulled on me, and had someone try to steal my computer. Every day I see dance shows, littering, people passed out on two seats, people blasting music, rampant fare evasion, and drug use at Powell/Civic Center. I'm tired of it and want the system's rules to be enforced.
Won't happen because, let's face it, minorities are going to predominantly be affected by enforcement. SF's far too progressive to let that happen.
Let's see what happens in the mayoral election. If London Breed gets elected, I take that as a signal that the city wants something different.
Politics in the Bay Area has changed noticeably in the 7 years I've lived here. Guys like Wiener are getting more of a voice passing sensible common-sense solutions without getting shouted down by head-in-the-sand idealists that won't see things for what they are. Long-term, I think SF is going to become more like NY, a place with plenty of traditional progressives, but also a healthy share of pro-business, socially liberal conservatives who just want the trains to run on time, and don't give a damn about political correctness.
Or maybe I'm just dreaming.
I didn't see that much marijuana being consumed when I was there last week, and the one recreational dispensary I went to was selling fairly small quantities in dollar terms... (I bought $17 of edibles, so I'm afraid I didn't help much in plugging the SF deficit.)
Then later, he estimates that the actual amount is approximately twice that, since the official ten billion figure is based over optimistic assumptions.
He was stating that the 7.5% return they wanted is not likely, that 6.5% is much more likely, and that he wouldn't be surprised if the return was less than that 6.5%.