Welcome to the June Changing World of Business issue of NorthBay biz magazine. In addition to all our regular features and columnists, this month’s issue also includes a Special Report on Health. All year long, in every monthly issue and our three bonus issues, NorthBay biz attempts to provide coverage, analysis and insights on the topics that matter most to the business community in the North Bay. This issue marks the 10-year anniversary of our acquisition of the magazine in June 2000. And if we can believe all the feedback we receive from our readers and advertisers, we’ve managed to do a fairly good job of providing a publication that resonates with their needs. I’d like to thank you on behalf of my partners, Joni and John, for all the support you’ve given the magazine over the past decade. We’ll continue working to improve the publication and our commitment to delivering information that serves the best interests of the business community in the North Bay.
“When you subsidize poverty and failure, you get more of both.” —James Dale Davidson, National Taxpayers Union
This road to perdition is the one California has been traveling over the past couple of decades, driven by an evolving philosophy of central planning that penalizes success and rewards special interests. Soon the music will stop and there will be no money left to pay the band. Sure, it’s taken a while—and an extraordinarily bad economy—to bring us to this point, but the conclusion was inevitable. Because of an insatiable desire to continue to spend money the state didn’t have, Sacramento legislators have sealed our fate. California’s redistributive mentality has resulted in importing poverty and exporting wealth.
How can a state prosper when just one budget line item, the unfunded liability for public sector employees, will reach $1 trillion in just a few years? Once upon a time, unions were a positive force in our national economy, working for better wages, conditions and benefits for their members, resulting in better and fairer management practices for everyone in and out of the unions. However, that time has largely passed as employers adopted better practices. Of course, changes in the laws over time helped tremendously. Workers became protected from racial, sex and age discrimination, OSHA came into being and pensions were protected. Once upon a time, 36 percent of private sector employees were union members. Today, that number has fallen to 7.2 percent. Why do you suppose that happened? My guess would be because, over time, the role unions played was diminished. Return on employee investment in union membership dues diminished. Membership fell.
Contrast that with what’s happening in the public sector. Even though these same employee protections have long been in place, public sector union membership grew to 37.4 percent last year from being nonexistent in the 1950s. Early on, private sector unions had a predictable, adversarial relationship with the employers they battled for the betterment of the employees they represented. That’s certainly not the case today with public sector employee unions. They’re literally in bed with the politicians that approve, with impunity, the fiscal largesse showered upon them. Let’s be clear: This isn’t the unions’ fault. I certainly don’t blame them for negotiating the best deal possible for themselves and their families.
The blame rests entirely with our elected officials. They were elected to serve all the people. Instead, they’ve knowingly entered into a relationship that enriches themselves and their political party at the expense of the taxpayer. Public sector unions contribute hundreds of millions to these self-serving politicians to ensure their election to public office. In return, the elected “corruptocracy” delivers double-digit pay raises regardless of the state’s ability to pay. It makes it possible for some union members to retire at age 50, at 90 percent pay with lifetime medical benefits. And it’s all done on the taxpayer’s dime. This practice is simply unsustainable.
Is it surprising, then, that outbound migration from California is on the rise—and has been for a decade or more? Every state that practices this trade-off (including New York, New Jersey and Michigan) of enriching public sector unions on the backs of taxpayers faces huge budget deficits, unfunded pension liabilities and a shrinking tax base.
Contrast this with Texas—no state income tax, low taxes overall and a smaller state government that’s in session only 90 days every two years. How is it doing? Its economy is booming. Inbound migration is booming. It has a budget surplus. Its schools deliver higher test score results while its teachers are paid much less. Not surprisingly, unemployment rates are below the national average as new businesses generate new jobs. Public employee unions are almost nonexistent.
My question now is, with all this evidence of which approach to governing produces unquestionably better results, why are California’s politicians’ solutions to our state’s problems just more of the same? Spend more money. Not enough revenue—raise taxes some more. Unable to compete with neighboring states because they’re easier to do business in—enact more onerous regulations. These policies make no sense. How do you communicate with ideologues when documented outcomes of their previous policies either elude them or just simply fail to be acknowledged?
I’m certain of one thing: Voters’ tolerance of business as usual is waning quickly. Incumbents beware the ides of November.
That’s it for now. Enjoy this month’s magazine.
