TIPPING POINT — It’s your money, you decide.
I can’t decide whether I’m more alarmed by the news that 41 Obama White House aides last year owed $831,000 in back taxes or that the city manager of Bell, California, was paid $1.1 million to manage a city of 37,000 people. Unfortunately both of these cases represent just the tip of the malfeasance iceberg.
When President Obama was vetting—or NOT! —his cabinet, one after another was exposed to have tax problems. Now we learn from articles in the Washington Post (T. W. Farnam) and the LA Times (Andrew Malcolm) that these folks were just showing the way.
Not only do aides in the White House owe almost a million dollars to the IRS, but across the administration $1 billion—as in BILLION—was owed in back taxes at the end of last year. For example, of Treasury Department personnel (who have grown from 107,000 in 2008 to 114,000 in 2010) 1,204 individuals owed $7,670,814 in back taxes. At Justice (which has grown from 106,000 to 119,000 employees) they owed $14,350,152. At the Labor Department, 463 employees owed $7,481,463 in back taxes. At Homeland Security, 4,856 workers owed a total of $37,012,174. And even worse, 81 employees who work for the Federal Reserve System’s Board of Governors owed the IRS $1,076,733 in back taxes.
Capitol Hill doesn’t pass muster either. On the House of Representative side, 421 individuals owed a total of $6,524,892 in back taxes. And 217 employees on the Senate side are behind in their taxes to the tune of $2,774,836. No wonder the administration is reluctant to grant tax cuts to the American people; those folks came up with their own tax relief plan. Does anyone out there feel like a chump for paying your taxes last April?
Federal workers come into focus for their pay and benefits as well. From the point when John F. Kennedy by executive order in 1962 allowed the unionization of the federal workforce, government employee salaries and benefits have spiraled upwards. At first there was an unwritten agreement that public employees generally would receive lower wages than private-sector workers in exchange for more job security, earlier retirement, and generous benefits. That scenario is long gone. Because politicians oppose the right of the now 2.7 million federal workforce to strike, public-sector labor leaders switched their strategy to one of increasing pay and benefits.
The Bureau of Labor Statistics reports the hourly wage of federal workers is about 48% higher than private workers. Adjusting for additional education and training, public employees still enjoy a 24% wage premium. It has been widely reported that private-sector employees must work 13 ½ months to earn what federal employees make in 12 months. Who pays for this largesse to public union employees? We do: workers in the private sector.
Even more damaging for taxpayers are ruinous pensions and health plans at the national, state, local, and city levels. In most cases government workers can retire at 50 – 55 years of age with pensions near or even more than their base pay and with fully paid health care packages for them and their spouses. Not all contracts are identical, of course, but many fit a similar pattern.
One example is the post office, which expects budget shortfalls of $7 billion in both 2009 and 2010. The average postal worker makes $83,000 in wages and benefits, up to 50% above the average compensation of private economy workers, according to federal wage data. Approximately 80 cents of every postal dollar pays salaries and benefits. If just health benefits of postal workers were brought in line with the generous health benefits of other federal employees, the post office could save $560 million a year, as reported by the Government Accountability Office.
The Bell, CA, scandal, uncovered by the LA Times (Ruben Vives and Jeff Gottlieb)—not surprise, surprise, by any state regulatory agency California taxpayers hire to find and stop such abuses—is epoch in scope. The mayor, former city manager, and several city council members (who were paid $96,000 to $110,000) have been arrested and will face civil and criminal charges. Residents of Bell had awakened to these abuses and started recall proceedings to oust most of the council members. Thanks to their efforts and the LA Times stories, along with politicians who are running for office, Bell residents finally are receiving help from the state.
This story is significant on its own, but even more so because it represents how out of control state and local public unions across the country have become, and no more so than in California. In 1978 the Dills Act provided state public employees with collective bargaining rights on top of civil service protection. The Bureau of Labor Statics reports that now wages are 34% higher than private-sector wages—not illegal as in the case of Bell’s officials; just unfair to the rest of us.
Pensions are a huge challenge as well. There are 15,000 government retirees statewide who receive pensions that exceed $100,000 a year, according to the California Foundation for Fiscal Responsibility. This is particularly an issue when a state commission in 2008 reported California’s unfunded pension liability is $63.5 billion (a Stanford University public policy study reports the true unfunded liability is $500 billion, nearly eight times greater than officially reported.) Governor Arnold Schwarzenegger reported that this year for the first time ever the state of California spent more on retirement costs ($6.5 billion) than on higher education.
Until recently California had been without a budget since July in large part because public unions and their cohorts in the Legislature refused to make even slight concessions in pay and pension contributions. When Governor Schwarzenegger instituted an unpaid personal day a month to keep from shutting down state government, the unions took the state to court. With 12.3 % unemployment in California, the unions refused to compromise. This was true even though the Bureau of Labor Statistics reported that state and local employees enjoy a 70% advantage in health insurance, retirement benefits, life insurance, and paid sick leave over private-sector workers. The impasse finally was broken on Oct 8 by a deal brokered by the Governor with some of the state’s 170,000 unionized employees that promises concessions and reforms.
Anyone who is offered a pay raise or new benefit will say, “Hey, great!” and rightly so. That’s human nature. But to cast a vote demanding special benefits that will bankrupt the state is irresponsible. The large percentage of California’s budget directed to public employee salaries and pensions is starving other state obligations such as higher education, transit, parks, and libraries.
Can we all agree this is WRONG? Politicians and unions who created this mess have broken the government and MUST BE STOPPED!!
Then there is the California Department of Social Services report in the LA Times (Jack Dolan) that $69 million in California welfare debit cards were cashed on international cruises, Hawaii vacations, and at Las Vegas casinos, but that’s another story.
