The truth behind the county workers' strike

Why our hard-left, pro-union County Supervisors are locked in a wage struggle with the union employees who put them there (hint: think pensions). Edward Ring of the California Policy Center explains in the California Globe.

"With 2020 upon us, it appears likely that two unions representing Santa Clara County employees will be going on strike. Unless agreements can be reached, 3,000 members of the Registered Nurses Professional Association will strike, along with over 11,000 members of the SEIU.

"When one considers the political leanings of the Santa Clara County Board of Supervisors, which tilt overwhelmingly pro-labor in one of the most liberal strongholds in the world, it seems inexplicable that negotiations have reached an impasse. Inexplicable, that is, until you review the financial situation confronting Santa Clara County.

"To get started, have a look at the most recent publicly available consolidated balance sheet for Santa Clara County, showing the change in their assets and liabilities between their fiscal years ending 6/30/2017 and 6/30/2018.

"As can be seen from this table (found on page 7 of Santa Clara County’s most recent CAFR), the county’s total assets increased by an impressive $891 million between 2017 and 2018. But the county’s total liabilities increased by an even more impressive $2.1 billion over the same period, nearly three times as much.

"Digging in, it isn’t hard to see what happened. Santa Clara County’s finance department finally decided to accurately represent the size of their unfunded retirement obligations. They increased their net pension liability by $545 million, and they increased their OPEB (“other post employment benefits,” typically retirement health insurance coverage) liability by $1.0 billion.

"Anyone who has dug around financials long enough knows that the balance sheet is where the bones are buried. Simply expressed, sooner or later, liabilities sitting on a balance sheet have to be paid. And in the case of Santa Clara County and other agencies up and down the state, it’s turning into sooner rather than later.

"The reason for this is because CalPERS, adhering to long overdue new requirements from GASB (the government accounting standards board), has decided to require their participating agencies to pay down their unfunded pension liability within twenty years. Previously, as this liability crept relentlessly skyward, creative accounting allowed payments to be deferred. The result can best be described as analogous to those negative amortization mortgages that were popular right up until the real estate bubble blew up in 2009.

"According to a recent CPC analysis which consolidates the CalPERS projections for all major employee groups (download here), during the current 2019-20 fiscal year, CalPERS is demanding $652 million from
Santa Clara County. Of that $652 million, Santa Clara County employees, via payroll withholding, will contribute $145 million, or 22 percent. Put another way, for every five dollars that taxpayers send to CalPERS this year to fund Santa Clara County employee retirement pensions, those employees themselves will kick in just over one dollar.

"It gets worse. By the 2025-26 fiscal year, CalPERS will require Santa Clara County to pay $904 million to keep their pensions afloat. And of that total contribution, county employees will themselves be required via payroll withholding to contribute $170 million, or 19 percent. The employer share will increase by $227 million, or 45 percent. By 2025, for every five dollars that taxpayers send to CalPERS to fund Santa Clara County employee retirement pensions, those employees themselves will kick in less than one dollar.

"Santa Clara County’s board of supervisors is staring down an increase to their annual CalPERS payment that in a few short years will be nearly a quarter-billion dollars higher than it is today. And based on the recent billion dollar bump to the county’s OPEB liability, Santa Clara County payments to fund retiree health care are also set to dramatically increase. This is the implacable financial reality that is behind their tough negotiations with the unions."

Read the whole thing here.

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