Posts Tagged ‘Houston’

Texas vs. California Update for February 15, 2017

Wednesday, February 15th, 2017

Welcome to another Texas vs. California Roundup!

  • California Governor Jerry Brown wants to hike gas taxes by 42% to bail out CalPERS.
  • Brown’s pension reforms have failed:

    Since 2012 passage of his much-heralded changes to state retirement laws for public employee, the pension debt foisted on California taxpayers has only grown larger.

    The shortfall for California’s three statewide retirement systems has increased about 36 percent. Add in local pension systems and the total debt has reached at least $374 billion. That works out to about $29,000 per household.

    It’s actually much worse than that. Those numbers are calculated using the pension systems’ overly optimistic assumptions about future investment earnings.

    Using more conservative assumptions, the debt could be more than $1 trillion.

  • And speaking of Brown: Math is hard.
  • Why California can’t repair its infrastructure: “California’s government, like the federal government and most other state and local governments, spends its money on salaries, benefits, pensions, and other forms of employee compensation. The numbers are contentious — for obvious political reasons — but it is estimated that something between half and 80 percent of California’s state and local spending ultimately goes to employee compensation.”
  • Put another way: “Governor Moonbeam and the other leftist kooks in charge are flushing a staggering $10 billion down an unneeded high-speed rail project, on top of the still more staggering $25.3 billion per year they spend on the illegal aliens they have gone out of their way to welcome.” (Hat tip: Director Blue.)
  • California can’t afford green energy:

    California has the highest taxes overall in the nation, worst roads, underperforming schools, and the recent budget has at least a $1.6 billion shortfall.

    Moreover, depending on how the numbers are analyzed California has either a $1.3 or a $2.8 trillion outstanding debt. This is before counting the maintenance work needed for infrastructure, particularly roads, bridges and water systems. Yet tax increases aren’t covering these obligations.

  • Three of the ten least affordable cities in the World are in California: Los Angeles, San Francisco and San Jose.
  • Austin named best city to live in the U.S. But wait! San Jose ranks third! I can only assume that “affordability” was not a significant criteria. Dallas/Ft. Worth ranks 15th (one ahead of San Francisco), Houston 20th, San Antonio 23rd (one behind San Diego).
  • “A sizzling residential real estate market fueled by incoming Californians, low supply, high demand, flat salaries, and local property taxes are pricing people out of homeownership in Austin.” More: “The Texas A&M Real Estate Center examined the Austin local market area (LMA) over five years. In January 2011, the Austin-Georgetown-Round Rock area median home prices were $199,700. By January 2015, that median hovered at $287,000. At the end of 2016, university real estate analysts found the home mid-price point at $332,000.” Of course, in my neck of the woods, $332,000 will buy you a 2,500 square foot house, while in San Francisco, you’d be lucky to find a 500 square foot condo…
  • “An IGS-UC Berkeley poll shows that 74 percent of Californians want sanctuary cities ended; 65 percent of Hispanics, 70 percent of independents, 73 percent of Democrats and 82 percent of Republicans.”
  • Of the top 20 cities for illegal aliens, five (Los Angeles, San Francisco, San Jose, San Diego and Riverside) are in California, while three (Houston, Austin and Dallas/Ft. Worth) are in Texas. I’m actually a bit surprised to see that San Antonio isn’t on that list, while Seattle and Boston are. “American citizens who paid into the system don’t receive benefits like long-term medical care because — in part — we’re all subsidizing aliens.”
  • California pays $25.3 billion in illegal alien benefits, or $2,370 per household. (Hat tip: Director Blue.)
  • By contrast, Texas pays $12.1 billion in illegal alien benefits, or $1,187 per household. (IBID)
  • “In testimony provided before the California Senate’s Public Safety Committee, Senate President Pro Tem Kevin De Leon (D-Los Angeles) decided to admit that “half of his family” is residing in the United States illegally and with the possession of falsified Social Security Cards and green cards.”
  • “California spent on high-speed rail and illegal immigrants, but ignored Oroville Dam.”
  • Pensions are breaking budgets across San Diego. (Hat tip: Pension Tsunami.)
  • “Despite California having some of the best recreation spots in the world, we have systematically reduced our business in California by 50%, and I have a moratorium in place on accepting new business (I won’t even look at RFP’s and proposals to avoid being tempted.)”
  • That same blogger on why his company pulled out of Ventura, California. Like this:

    It took years in Ventura County to make even the simplest modifications to the campground we ran. For example, it took 7 separate permits from the County (each requiring a substantial payment) just to remove a wooden deck that the County inspector had condemned. In order to allow us to temporarily park a small concession trailer in the parking lot, we had to (among other steps) take a soil sample of the dirt under the asphalt of the parking lot. It took 3 years to permit a simple 500 gallon fuel tank with CARB and the County equivalent. The entire campground desperately needed a major renovation but the smallest change would have triggered millions of dollars of new facility requirements from the County that we simply could not afford.

    And this:

    A local attorney held regular evening meetings with my employees to brainstorm new ways the could sue our company under arcane California law. For example, we went through three iterations of rules and procedures trying to comply with California break law and changing “safe” harbors supposedly provided by California court decisions. We only successfully stopped the suits by implementing a fingerprint timekeeping system and making it an automatic termination offense to work through lunch. This operation has about 25 employees vs. 400 for the rest of the company. 100% of our lawsuits from employees over our entire 10-year history came from this one site. At first we thought it was a manager issue, so we kept sending in our best managers from around the country to run the place, but the suits just continued.

  • California has some of the highest taxes in the nation, but can’t pay for road maintenance:

    Texas has no state income tax, yet excellent highways and schools that perform above average, way above California’s bottom-dwellers. Yet both states have similar demographics. For example, in the 2010 U.S. Census, Texas was 37% Hispanic, California 37.6%.

    Texas is a First World state with no state income tax that enjoys great roads and schools. California is a Third World state restrained from getting worse only by its umbilical-cord attachment to the other 49 states, a cord the Calexit movement wants to cut, but won’t get to.

    California is Venezuela on the Pacific, a Third World state and wannabe Third World country; a place with great natural beauty, talented people, natural resources – and a government run by oligarchs and functionaries who treat the rest of us as peons.

    (Hat tip: Pension Tsunami.)

  • “Texas Ends 2016 with 210,200 Jobs Added Over the Year.”
  • All Houston does economically is win.

    The Houston metropolitan area’s population now stands at 6.6 million with the city itself a shade under 2.3 million. At its current rate of growth, Houston could replace Chicago as the nation’s third-largest city by 2030.

    Why would anyone move to Houston? Start with the economic record.

    Since 2000, no major metro region in America except for archrival Dallas-Fort Worth has created more jobs and attracted more people. Houston’s job base has expanded 36.5%; in comparison, New York employment is up 16.6%, the Bay Area 11.8%, and Chicago a measly 5.1%. Since 2010 alone, a half million jobs have been added.

    Some like Paul Krugman have dismissed Texas’ economic expansion, much of it concentrated in its largest cities, as primarily involving low-wage jobs, but employment in the Houston area’s professional and service sector, the largest source of high-wage jobs, has grown 48% since 2000, a rate almost twice that of the San Francisco region, two and half times that of New York or Chicago, and more than four times Los Angeles. In terms of STEM jobs the Bay Area has done slightly better, but Houston, with 22% job growth in STEM fields since 2001, has easily surpassed New York (2%), Los Angeles (flat) and Chicago (-3%).

    More important still, Houston, like other Texas cities, has done well in creating middle-class jobs, those paying between 80% and 200% of the median wage. Since 2001 Houston has boosted its middle-class employment by 26% compared to a 6% expansion nationally, according to the forecasting firm EMSI. This easily surpasses the record for all the cities preferred by our media and financial hegemons, including Washington (11%) and San Francisco (6%), and it’s far ahead of Los Angeles (4%), New York (3%) and Chicago, which lost 3% of its middle-class employment.

    (Hat tip: Pension Tsunami.)

  • Texas conservative budget overview vs. the 2018-2019 proposed budget.
  • On the same subject: how to reduce the footprint of Texas government.
  • “Berkeley funds the Division of Equity and Inclusion with a cool $20 million annually and staffs it with 150 full-time functionaries: it takes that much money and personnel to drum into students’ heads how horribly Berkeley treats its “othered” students.”
  • New LA housing initiative to undo previous housing initiative. Frankly all of them sound like market-distorting initiatives guaranteed to backfire…
  • “California’s bullet train could cost taxpayers 50% more than estimated — as much as $3.6 billion more. And that’s just for the first 118 miles through the Central Valley, which was supposed to be the easiest part of the route between Los Angeles and San Francisco.”
  • “For the past five months, BART has been staffing its yet-to-open Warm Springs Station full time with five $73,609-a-year station agents and an $89,806-a-year train dispatch supervisor — even though no trains will be running there for at least another two months.” (Hat tip: Pension Tsunami.)
  • “After studying “tens of thousands of restaurants in the San Francisco area,” researchers Michael Luca of Harvard Business School and Dara Lee Luca of Mathematica Policy Research found that many lower rated restaurants have a unique way of dealing with minimum wage hikes: they simply go out of business.”
  • Meet Gordon, the robot barista. How’s that $15 an hour minimum wage working out for you, San Francisco?
  • “Nestle USA announced today that it is moving 300 technical, production and supply chain jobs to the Solon [Ohio] plant as part of the company’s plan to relocate its headquarters to Arlington, Virginia, from Glendale, California.”
  • Auto dealer AutoAlert is moving it’s headquarters from Irvine, California to Kansas City.
  • Peter Thiel to run for governor of California?
  • The Oakland Raiders may not be moving to Las Vegas after all, because billionaire Sheldon Adelson backed out of the stadium deal, accusing Raider owner Mark Davis of trying to screw him.
  • Now there’s talk the Raiders may rexamine moving to San Antonio.
  • Or even Dan Diego.
  • Lawsuits are flying over the Dallas Police and Fire pension fund debacle. (Hat tip: Pension Tsunami.)
  • MD Anderson Announces Layoffs

    Thursday, January 5th, 2017

    Well, this is a bad economic indicator for the Houston area:

    Financially ailing MD Anderson Cancer Center will announce today it will cut its workforce by 5 percent through layoffs and retirements.

    Dan Fontaine, Anderson’s chief financial officer, confirmed Thursday morning a little less than 1,000 of the staff of 2o,000 [sic] will be leaving the world-renowned cancer hospital. Some of those people are expected to volunteer to retire, he said.

    Dr. Ronald DePinho, president of the cancer center, Fontaine and other officials set a press conference today to announce the workforce reduction.

    Anderson officials said before Christmas they were considering staff cutbacks as the Houston cancer hospital tries to shore up its finances. During the September-through-November quarter, Anderson posted $110 million in operating losses.

    Officials said in the advisory MD Anderson’s long-term financial health remains strong. Last month, officials said the operating budget is an important indicator of the cancer hospital’s ability to be self-sufficient, but it doesn’t take into account other revenue streams like state funding, charitable gifts and investement [sic] income. At that time, officials said Anderson has $2.8 billion in cash on reserve.

    Snip.

    Other factors also are at play, Fontaine said, including patients’ higher insurance deductibles and a shrinking number of insurers willing to pay for MD Anderson’s expensive cancer treatments.

    Belt-tightening measures already are paying off, he said, noting that the $9 million operating loss in November was far smaller than the $102 million in losses recorded in September and October. Those losses followed seven months of operating losses to end fiscal 2016.

    MD Anderson is one of the premier cancer centers in the world, and my father received treatment there during his terminal illness. I wonder if the relentless cost-cutting required by ObamaCare was a contributing factor, as MD Anderson has been dropped by all ObamaCare plans.

    Also, the folks at the Houston Chronicle should have their proofreaders do a better once-over for breaking stories. Those two typos I’ve noted [sic] for should have been caught…

    Interview with TPPF’s James Quintero on the Texas Municipal Pension Debt Crisis

    Monday, January 2nd, 2017

    James Quintero, the Director of the Center for Local Governance at the Texas Public Policy Foundation, was kind enough to provide some detailed answers to questions I sent him about the municipal pension crisis in Dallas and other large Texas cities. My questions are in italics.


    The Dallas police/fireman’s pension fund issue is generally described as stemming from the fund manager’s risky real estate speculation. Are there any additional structural problems that helped hasten that fund’s crisis?

    When it comes to Texas’ public retirement systems, one of my greatest concerns is that there are other ticking time-bombs, like the DPFP, out there getting ready to explode. It’s not just Dallas’ pension plan that’s taken on excessive risk to chase high yield in a low-yield environment.

    Setting aside the issue of risk for a moment, the DPFP, like most other public retirement systems around the state, suffers from a fundamental design flaw. That is, it’s based on the defined benefit (DB) system, which guarantees retirees a lifetime of monthly income irrespective of whether the pension fund has the money to make good on its promises or not. This kind of system is akin to an entitlement program, warts and all, and is very much at the heart of pension crises brewing in Texas and across the country.

    One of the biggest problems with DB plans is that they rely on a lot of fuzzy math to make them work, or at least give the appearance of working. Take the issue of investment returns, for example. Many systems assume an overly optimistic rate of return when estimating a fund’s future earnings. Baking in these rosy projections is, among other things, a way to understate a plan’s pension debt. In an October 2016 study that I co-authored with the Mercatus Center’s Marc Joffe, I wrote the following to illustrate this very point:

    For example, the Houston Firefighters’ Relief and Retirement Fund (HFRRF) calculates its pension liability using a long-term expected rate of return on pension plan investments of 8.5%. During fiscal year 2015, the plan’s investments returned just 1.53%. Over a 7- and 10-year period the rates of return were 6.4% and 7.9%, respectively. Not achieving these investment returns year-after-year can have a dramatic fiscal impact.

    Even a small change in the actuarial assumptions can have major consequences for the fiscal health of a pension fund. According the HFRRF’s 2015 Comprehensive Annual Financial Report, a 1% decrease in the current assumed rate of return (8.5%) would almost double the fund’s pension liabilities, from $577.7 million to $989.5 million.

    So while risky real estate deals were certainly a catalyst in the current unraveling of the DPFP, I suspect that its refusal to move away from the defined benefit model and into a more sustainable alternative—much like the private sector has already done—would have ultimately led us to this same point of fiscal crisis.

    To what legal extent (if any) is Dallas police/fireman’s pension fund backstopped by the City of Dallas and/or Dallas County?

    Let me preface this by saying that I’m not a lawyer nor do I ever intend to be one. However, Article XVI, Section 66 of the Texas Constitution plainly states that non-statewide retirement systems, like DPFP, and political subdivisions, like the city of Dallas, “are jointly responsible for ensuring that benefits under this section are not reduced or otherwise impaired” for vested employees. Given that, it’s hard to see how the city of Dallas—or better yet, the Dallas taxpayer—isn’t obligated in some major way when their local retirement system reaches the point of no return, which may be a lot closer than people think given all the lump-sum withdrawals of late.

    Likewise, does the state of Texas have any statutory backstop to the Dallas police/fireman’s pension fund, or any other local pension funds?

    For non-statewide plans, I don’t believe so. Again, I’m not a lawyer, but the Texas Attorney General wrote something fairly interesting recently touching on aspects of this question.

    In September 2016, House Chairman Jim Murphy asked the AG to opine on “whether the State is required to assume liability when a local retirement system created pursuant to title 109 of the Texas Civil Statutes is unable to meet its financial obligations.” Title 109 refers to 13 local retirement systems in 7 major metropolitans that are a small-but-important group of plans that have embedded some of their provisions in state law (i.e. benefits, contribution rates, and composition of their boards) I’ve written a lot about this problem in the past (read more about it here).

    In response to Chairman Murphy’s question, the AG had this to say:

    In no instance does the constitution or the Legislature make the State liable for any shortfalls of a municipal retirement system regarding the system’s financial obligations under title 109. The Texas Constitution would in fact prohibit the State from assuming such liability without express authorization.

    …a court would likely conclude that the State is not required to assume liability when a municipal retirement system created under title 109 is unable to meet its financial obligations.

    So at least in the AG’s opinion, state taxpayers wouldn’t be required by law to bail out this subset of local retirement systems. But of course, the political calculus may be different than what’s required by law.

    Compared to the Dallas situation, how badly off are the Houston, Austin and San Antonio public employee pension funds?

    If you’re a taxpayer or property owner in one of Texas’ major cities, I’d be concerned. Moody’s, one of the largest credit rating agencies in the U.S., recently found that: “Rapid growth in unfunded liabilities over the past 10 years has transformed local governments’ balance sheet burdens to historically high levels,” and that Austin, Dallas, Houston, and San Antonio had a combined $22.6 billion in pension debt—and it’s growing worse!

    Using the Pension Review Board’s latest Actuarial Valuations Report for November 2016, we can parse the systems within each municipality to get a little bit better sense of where the trouble lies. Pension debt for the retirement systems in the big 4 looks like this:

  • Austin Employees’ Retirement System: $1.1 billion, Austin Police Retirement System: $346 M, and Austin Fire Fighters Relief and Retirement Fund: $93 M;
  • Dallas Employees’ Retirement Fund: $809 M, Dallas Police and Fire Pension System—Combined Plan: $3.3 B, and Dallas Police and Fire Pension System—Supplemental: $23 M;
  • Houston Municipal Employees Pension System: $2.2 B, Houston Firefighters’ Relief and Retirement Fund: $467 M, and Houston Police Officer’s Pension System: $1.2 B; and
  • San Antonio Fire and Police Pension Fund: $360 M.
  • Of course, it’s important to keep in mind that the figures use some of the same fuzzy math as described above, so the actual extent of the problem may be worse than the PRB’s latest figures indicate.

    What similarities, if any, are there to current Texas municipal pension issues and those that forced California cities like San Bernardino, Stockton and Vallejo into bankruptcy? What differences?

    The common element in most, if not all, of these systemic failures is the defined benefit pension plan. Because of the political element as well as the inclusion of inaccurate investment assumptions in the DB model, these plans are almost destined to fail, threatening the taxpayers who support it and the retirees who rely on it. And sadly, that’s what we’re witnessing now across the nation.

    As far as the differences go, California’s municipal bankruptcies as well as Detroit’s were preceded by decades of poor fiscal policy and gross mismanagement. I don’t see that same thing here in Texas, but it’s also important that we don’t let it happen too.

    California pensions were notoriously generous (20 years and out, spiking, etc.). Do any Texas state or local pensions strike you as unrealistically generous?

    Any plan that’s making pension promises but has no plan on how to make good on those promises is being unrealistically generous. And unfortunately for taxpayers and retirees alike, a fair number of plans can be categorized as such.

    The Pension Review Board’s Actuarial Valuations Report for November 2016 reveals that of Texas’ 92 state and local retirement system, only 4 of them are fully-funded. At the other extreme, a whopping 19 of the 92 plans have amortization periods of more than 40 years. Six of those 19 plans have infinite amortization periods, which effectively means that they have no plan to keep their promises but are instead planning to fail.

    As far as specific plans go, there’s no question that the Dallas Police and Fire Pension System is the posterchild for the overly generous. The Dallas Morning News recently covered the surreal levels of deferred compensation offered, finding that:

    The lump-sum withdrawals come from the Deferred Retirement Option Plan, known as DROP. The plan allows veteran officers and firefighters to essentially retire in the eyes of the system and stay on the job.

    Their benefit checks then accrue in DROP accounts. For years, the fund guaranteed interest rates of at least 8 percent. DROP made hundreds of retired officers and firefighters millionaires. And once they stopped deferring the money, they received their monthly benefit checks in addition to their DROP balance. [emphasis mine]

    It’s probably fair to say that any public program that makes millionaires out of its participants is probably being too generous with its benefits.

    There seem to be only two recent local government bankruptcies in Texas, neither of which were by cities: Hardeman County Hospital District Bankruptcy and Grimes County MUD #1. Did either of these involve pension debt issues?

    I’m not familiar with those instances, but when it comes to the issue of soaring pension obligations, I can tell you that the system as a whole is moving in bad direction.

    In November 2016, Texas’ 92 state and local retirement systems had racked up over $63 billion dollars of unfunded liabilities, with more than half owed by the Teacher Retirement System. That’s a staggering amount of pension debt that’s not only big but growing fast. And worse yet, that’s in addition to Texas’ already supersized local government debt-load.

    How we’re going to make good on all of these unfunded pension promises is anyone’s guess. But I imagine that it’ll involve some combination of much higher taxes, benefit reductions, and fewer city services.

    What limits or constraints does Texas place on Chapter 9 bankruptcy?

    The Pew Charitable Trusts’ Stateline has some good information on this, at least as far as municipal bankruptcy is concerned. A November 2011 report, Municipal Bankruptcy Explained: What it Means to File for Chapter 9, had this to say about the process:

    Who can file for Chapter 9? Only municipalities — not states — can file for Chapter 9. To be legally eligible, municipalities must be insolvent, have made a good-faith attempt to negotiate a settlement with their creditors and be willing to devise a plan to resolve their debts. 

They also need permission from their state government. Fifteen states have laws granting their municipalities the right to file for Chapter 9 protection on their own, according to James Spiotto, a bankruptcy specialist with the Chicago law firm of Chapman and Cutler. Those states are Alabama, Arizona, Arkansas, California, Idaho, Kentucky, Minnesota, Missouri, Montana, Nebraska, New York, Oklahoma, South Carolina, Texas and Washington. 

    Hopefully this is a process that can be avoided entirely, but given the fiscal condition of the DPFP and potentially a few other systems, I’m not sure that’ll be the case.

    Next to Dallas, which municipal pensions would you say are in the worst shape?

    I’m most concerned about the local retirement systems in Title 109. The reason, again, is that these 13 local retirement systems are effectively locked into state law and there’s little that taxpayers or retirees in those communities can do to affect good government changes without first going to Austin. These systems have basically taken a bad situation and made it worse by fossilizing everything that counts.

    In the Texas Public Policy Foundation’s 2017-18 Legislator’s Guide to the Issues, I cover this issue in a little more detail. In the article (see pgs. 122 – 124), I write of these plans’ fiscal issues which can be seen below, albeit with slightly older data.

    texaspensiondebtchart

    (Funded ratios marked in red denote systems that are below the 80% threshold, signifying a plan that may be considered actuarially unsound. Source: Texas Bond Review Board.)

    The fact that these systems either are in or are headed for fiscal muck is a big reason why the Texas Public Policy Foundation is helping to educate and engage on legislation that would restore local control of these state-governed pension plans. People on the ground-level should have some say over their local plans, and that’s what we’ll be fighting for next session. Encouragingly, a bill’s already been filed in the Senate (see SB 152) and there should be legislation filed shortly in the House to do just that.

    Should Texas government agencies switched over to defined contribution (i.e. 401K) plans over standard pension plan, and if so, how might this realistically be accomplished without endangering existing retirees?

    ABSOLUTELY. Ending the defined benefit model and transitioning new employees into something more sustainable and affordable, like a defined contribution system, is one of the best things that the state legislature can do. This is something I’ve long been an advocate of.

    In fact, in early 2011, I played a very minor role in the publication of some major research spearheaded by Dr. Arthur Laffer, President Ronald Reagan’s chief economist, that advanced this same reform idea (see Reforming Texas’ State & Local Pension Systems for the 21st Century). I’ve also written a lot about the need to make the DC-switch, making the case recently in Forbes that:

    DC-style plans resemble 401(k)s in the private sector and the optional retirement programs (ORP) available for higher education employees in Texas. These DC-style plans put the power of an individual’s future in their own hands instead of depending on the good fortune of government-directed DB-style plans. DC-style plans are portable and sustainable over the long term as they are based on the contributions of retirees and a defined government match.

    With DC-style plans, retirees will finally have the opportunity to determine how much risk they are willing to take. They also reduce the risk that the government will default on their retirement or fund those losses with dollars from taxpayers who never intended to use these pensions. By giving retirees more freedom on how to best provide for their family, they will be in a much better position to prosper.

    Because of their efficiency, simplicity and fully funded nature, the private sector moved primarily to DC-style plans long ago. For the sake of taxpayers and retirees dependent on government pensions, it’s time for all governments to move to these types of plans as well.

    As far as dealing with transition costs, some much smarter people than I have written on this issue and found that it’s not as big of a challenge as it’s made out to be. Dr. Josh McGee, a vice president with the Laura and John Arnold Foundation, a senior fellow with the Manhattan Institute, and Chairman of the Pension Review Board, had this to say about the matter:

    Moving to a new system would have little to no effect on the current system. State and local pensions are pre-funded systems, and unlike Social Security, the contributions of workers today do not subsidize today’s retirees. Future normal cost contributions are used to fund new benefit accruals that workers earn on a go-forward basis and are not used to close funding gaps. Therefore, it matters little whether the normal cost payments are used to fund new benefits under the current system or a new system.

    (Source: The transition cost mirage—false arguments distract from real pension reform debates.)

    Another pension expert, Dr. Andrew Biggs with the American Enterprise Institute, published research that found that:

    In this study, I show that if a pension plan were closed to new hires, over time the duration of liabilities would shorten, and the portfolio used to fund those liabilities would become more conservative. However, the effects of these transition costs are so small as to be barely perceptible.

    (Source: Are there transition costs to closing a public-employee retirement plan?)

    I’m confident that with the right plan in place, Texas’ state and local retirement systems can make the switch to defined contribution and we’ll be all the better for it.


    Thanks to James Quintero for providing such a detailed analysis!

    And since we’re on the topic, here’s a roundup of news on the Dallas Police and Fireman’s pension fund crisis:

  • The Texas Rangers have launched a criminal probe into the shortfall.
  • City Journal offers details on the unreasonable generosity of the Dallas plan (which covers some of the same DROP issues Quintero mentions):

    Dallas created the police and fire plan in 1916. The system’s trustees eventually persuaded the state legislature to allow employees and pensioners to run the plan. Not surprisingly, the members have done so for their own benefit and sent the tab for unfunded promises—now estimated at perhaps $5 billion—to taxpayers. Among the features of the system is an annual, 4 percent cost-of-living adjustment that far exceeds the actual increase in inflation since 1989, when it was instituted. A Dallas employee with a $2,000 monthly pension in 1989 would receive $3,900 today if the system’s annual increases were pegged to the consumer price index. Under the generous Dallas formula, however, that same monthly pension could be worth more than $5,000. No wonder the ship is sinking.

    The system also features a lavish deferment option that lets employees collect pensions even as they continue to work and earn a salary. Moreover, the retirement money gets deposited into an account that earns guaranteed interest. Governments originally began creating these so-called DROP plans as an incentive to encourage experienced employees to keep working past retirement age, which in job categories like public safety can be as young as 50. In Dallas, the pension system gives workers in the DROP plan an 8 percent interest rate on their cash, at a time when yields on ten-year U.S. Treasury notes, a standard for guaranteed returns, are stuck at less than 2 percent. According to the city, some 500 employees working past retirement age have accumulated more than $1 million in these accounts—on top of the pensions that they will receive once they officially stop working.

  • The Dallas Morning News says that there’s plenty of blame to go around:

    Over the years, the Dallas Police and Fire Pension System fund has amassed $2 billion to $5 billion in unfunded liabilities, the result of bad real estate investments and blatant self-enrichment from prior management. Coupled with a possible setback in ongoing litigation over public safety salaries, Dallas is in the most financially precarious position in its history.

    City officials are openly uttering the word bankruptcy, not just of the pension fund but the city itself. As Mayor Mike Rawlings told the Texas Pension Review Board this month, “the city is potentially walking into the fan blades that might look like bankruptcy.”

    The state Legislature created this mess by not giving the city a meaningful voice in the fund’s operation and allowing the former board of the pension fund to unilaterally sweeten its membership’s promised benefits without concern to the overall fiscal damage being done. Now it must help the city clean up the mess.

    Dallas already provides nearly 60 percent of its budget to support public safety services and recently contributed $4.6 million to increase its share of pension contributions to 28.5 percent — the maximum allowed under state statute. However, if Dallas loses the lawsuit over salaries and no changes are made to the pension fund, the city could take an $8 billion hit. That is roughly equal to eight years of the city’s general fund budget.

  • That said, the bond market doesn’t seem to think Dallas is near bankruptcy.
  • And it’s not just Dallas:

    Austin, Dallas, Houston and San Antonio collectively face $22.6 billion worth of pension fund shortfalls, according to a new report from credit rating and financial analysis firm Moody’s. That company analyzed the nation’s most debt-burdened local governments and ranked them based on how big the looming pension shortfalls are compared to the annual revenues on which each entity operates.

    “Rapid growth in unfunded pension liabilities over the past 10 years has transformed local governments’ balance sheet burdens to historically high levels,” the report says.

    Chicago had the most dire ratio on the national list. Dallas came in second. According to the report, the North Texas city has unfunded pension liabilities totaling $7.6 billion. That’s more than five times the size of the city’s 2015 operating revenues.

    Both those cities may turn to the public to partially shore up their shortfalls. Houston Mayor Sylvester Turner wants to use $1 billion in bonds to infuse that city’s funds. Dallas police officer and firefighter pension officials also want $1 billion from City Hall, an amount officials there say is too high.

    Meanwhile, Austin ranked 14th on the Moody’s list with unfunded pension liabilities of $2.7 billion. San Antonio ranked 22nd with a $2.3 billion shortfall.

  • LinkSwarm for December 9, 2016

    Friday, December 9th, 2016

    The Dallas police and fireman pension fund has halted withdrawals of money to stop a pension run in order to keep the system (temporarily) solvent. Texas municipal pension debt is a big story with a lot of different ramifications and angles, and I need to do some research before I post, hopefully sometime next week.

    In the meantime, enjoy a Friday LinkSwarm:

  • Why they voted for Trump:

    Working-class Americans have been mocked, maligned, and forgotten long enough. They are fed up and they went to the voting booth last week and said so.

    This election’s “red state” vote had little to do with racism or any phobias. The message we heard last week was, rather, a clear and simple plea from the average blue-collar, small-town mother and father for Washington and other big-city elites to stop belittling, disparaging and vilifying them and their families. It was their way of telling the “know-it-alls”; the politicians and pundits, to stop flying over and driving past their gutted factories and dying towns and pretending they don’t exist and do not matter. They simply wanted the “smarter and more educated” city folks to know that they are tired of insults and that the condescension needs to stop. They voted for Trump because someone finally appeared to care and listen.

    They voted for Trump because he seemed to get it. Finally, someone seemed to understand that the average guy: the plumber, the carpenter, the truck driver, the farmer — the good and decent family man from Dewey, Oklahoma, and from Hillsdale, Michigan — is the one who is now suffering from more cultural disrespect than perhaps anyone else in all the country.

    They voted for Trump because they’re sick and tired of being laughed at. They voted for Trump because they have, frankly, “had it” with being labeled intolerable by those who claim to be tolerant. They voted for Trump because they think it’s deplorable that they are the ones being called “deplorables.”They voted for Trump because they can’t turn on the TV, listen to the radio or read the news without some highbrow elitist in the mainstream media calling them “low-information,” “uneducated white males” who are too dumb to know what’s best for them and too stupid to see that Washington knows best. They voted for Trump because all they want is to have a job, get some respect, pick up a paycheck, go to church, raise their kids and be left alone.

    This is why. This is the explanation.

    Hate had nothing to do with it.

    (Hat tip: Director Blue.)

  • Kurt Schlichter: “The liberals are truly going nuts, and it’s beautiful.”

    They recently resurrected Nancy Pelosi for another glorious term winnowing away the House Democrat caucus. Pretty soon it’s just going to be her and some guy representing Berkeley who they recruited while he was shouting “Workers of the world unite!” at bored coeds on Telegraph Avenue. You know, if you want to reach out to the kind of hard-working, salt-of-the-earth, normal Americans who voted for the black guy then allegedly refused to vote for the woman because they are racist, you totally want an ancient, rich, snooty, San Francisco leftist and Botox after-picture like the Nanster.

    The only way you could further alienate these alienated voters is, I don’t know, making your DNC chairman some radical leftist, urban black Muslim who hates guns, loves Farrakhan and who parties with Middle Eastern scumbags who issue fatwas to kill those voters’ soldier sons and daughters. Now, that’s some real diversity, and the Dems should totally get right on it. But seriously, we could never dare to hope that the Democrats would be that stupid. Could we?

    And I had to laugh at this, even a little guiltily:

    Next up at bat is the hard-4 hedgehog that is anti-gun activist and alleged comedian Amy Schumer, another over-praised, over-hyped mediocrity who Tinseltown is trying to force down our throats like the fingers she clearly never forced down hers.

  • Speaking of liberals going nuts, this Washington Post piece about how Trump’s election stole one woman’s sexual desire is an exemplar of the “Middle Aged Feminist Talks About How She’s Very Upset With Politics While Narcissisticly Sharing The Tedious Minutia of Her Life” piece.
  • “Liberals have migrated beyond observable reality into fantasyland.” (Hat tip: The Other McCain.)
  • Liberals prove once again how sane and generous they are by suggesting to let Tennessee wildfire victims burn because they voted for Trump.
  • The collapse of the political left:

    The rejection was apparent in the 2010 and subsequent House elections; Republicans have now won House majorities in ten of the last 12 elections, leaving 2006 and 2008 as temporary aberrations. You didn’t hear Hillary Clinton campaign on the glories of Obamacare or the Iran nuclear deal, and her attack on “Trumped-up, trickle-down economics” didn’t strike any chords in the modest-income Midwest.

    Republican success has been even greater in governor and state legislature elections, to the point that Democrats hold governorships and legislative control only in California, Hawaii, Delaware and Rhode Island. After eight years of the Obama presidency, Democrats hold fewer elective offices than at any time since the 1920s.

    (Hat tip: Director Blue.)

  • Hey, maybe liberals should use persuasion rather than automatically label everyone who disagrees with them racist. (Hat tip: Will Shetterly.)
  • Clintonistas are still bitching about Bernie Sanders, saying his challenge to their beloved Queen fatally wounded her. You know, the way Trump having a dozen primary challengers kept him from becoming President.
  • Piers Morgan (I know) on how Donald Trump pwns the media. “Every time they throw their high-minded journalistic toys out of their strollers at one of his tweets, Trump wins.” (Hat Tip: Borepatch.)
  • Trump is blessed by having weak opponents: “How influential did the press expect to be? It ran against Trump in the election and lost. Why should anybody inclined to support the president-elect — roughly half the country, you may recall — pay attention now to a press that has said the usual rules don’t apply? Again, the more the opposition was cranked up, the less effective it became.”
  • Outgoing Vice President Joe Biden says he’s running for President in 2020. It’s not like he would have done worse than Hillary did this year…
  • ObamaCare in one graphic. One big, depressing graphic…
  • Reminder: That “97% of scientists agree than man is causing climate change” factoid is false.
  • Ties between Recep Tayyip Erdogan’s Islamist government and the Islamic State.
  • Are NGOs smuggling illegal aliens into Europe with the help of the EU?
  • With her poll ratings dropping, Angela Merkel suggests a burka ban. Such actions would be unnecessary if Merkel hadn’t brought the “refugee” crisis on in the first place.
  • Five Afghan “refugees” charged with raping a 15-year old boy in Sweden. Strangely enough, I don’t remember gay gang rapes of children in Sweden being in the news before the current wave of Islamic immigration…
  • Speaking of Afghan “refugees,” an EU official’s daughter was murdered by one.
  • What Trump’s Taiwan phone call means:

    When evaluating this unorthodox and, yes, risky move, one has to remember that it is China, not the United States, that has been rewriting the rules of engagement in the East and South China Sea. It is China that has been unilaterally asserting territorial claims against its neighbors, China asserting jurisdiction over international waters and air space, China failing to rein in the increasingly serious North Korean nuclear program. The power that is challenging the status quo in Asia is not the United States.

    (Hat tip: The Corner.)

  • Italy’s PM: Hey, give me near absolute power, because that’s never backfired on Italy before! Italy: Get stuffed!
  • In related news, actress Paola Saulino, who promised blow jobs for those who voted against the referendum, says she’s making good on her promise. What? You want pictures of Paola Saulino? Well, if you insist:

    And here are the dates for her “thank you” tour:

    I get the feeling the adoring crowds will make Black Friday look tame by comparison… (Hat tip: Ace of Spades HQ.)

  • Now India is confiscating gold and jewelry from political enemies targets of corruption probes.
  • Canada wants to criminalize pronouns. (Hat tip: Instapundit.)
  • If the New York Times wants to fight “fake news,” perhaps they should look in the mirror.
  • A guide to winning the media wars:

    We all know that independent websites taking Hillary to task on her very real and very deplorable track record of being a compulsive liar is what was truly decisive. The mainstream media knows this, which is why they haven’t actually been focusing on censoring provably fake news sites, but rather have been promoting an agenda to lump any non-establishment perspectives within the umbrella of “fake news” in order to destroy their competition and regain an upper hand in the national narrative. If those of us who value independent media want to thwart this nefarious plan, we need to fully understand what these cretins are up to.

  • 27-year male Clinton supporter hits 69 year old woman over the head with a chair. In his defense, he really does not look like the sharpest knife in the drawer:

    Or even the sharpest spoon…

  • More fake hate crimes.
  • The amnesty crowd is at it again.

    A DREAM Act 2.0 that addressed these problems — that prosecuted fraud, implemented enforcement, prevented downstream legal immigration, and focused much more narrowly on those who came very young — would possibly be something that even I, were I a congressman, might be able to vote for. But the lack of these elements is clear proof that the amnesty crowd isn’t interested in fixing the specific problem of a sympathetic but small group of people; rather, these young people are simply poster children who have been used for years to try to justify a general amnesty for all illegal aliens. And when the DREAM Act fails, as it will, Pedro Ramirez and his fellows will need to ask the pro-amnesty politicians and lobbying groups why they were sacrificed on the altar of “comprehensive immigration reform.”

  • Instapundit suggests downsizing imperial Washington:

    Donald Trump ran for president on the slogan “Make America Great Again!” And he’s also promised to “drain the swamp” in Washington. But maybe the way to do that is to make Washington a little less great. Because as Washington has prospered over the last several decades — to the point where people are making Hunger Games comparisons — the rest of the country hasn’t done as well.

    So perhaps it’s time for a role-reversal. I propose that over the next several years, we transfer a lot of federal employees out of the Washington, D.C. metropolitan area, to parts of the country that aren’t doing so well economically. This would provide a boost to places like Buffalo, New York, or Quincy, Illinois, or Fresno, California, while getting federal bureaucrats out of the D.C. bubble.

  • Delusional liberal in Time suggests that people not pay their taxes while Trump is president. So he wants to: A.) Starve the federal government of money, and B.) Put liberals in prison where they can’t vote. OK, but what’s the downside?
  • Supreme Court Justice Clarence Thomas issues a stay of execution for an Alabama inmate. “Lawyers for Smith argue that although the jury rendered a verdict of life without parole, the trial court overrode the jury’s verdict and sentenced Smith to death.” Hmmm…
  • There’s a new cybersecurity commission report out. Guess what? It’s crap!
  • Black Workers’ Suit Accuses Job Agency of Favoring Hispanic Applicants.” Also: “He added that the staff of the MVP office in Cicero ‘was mainly Mexicans’ and that the employees were not welcoming toward African-American job seekers.” Also: “The vast majority of Hispanic job applicants served by MVP were in the United States illegally.” Note: The agency in question is not the Democratic Party, or the federal government… (Hat tip: Ann Althouse.)
  • Speaking of racial discrimination lawsuits in hiring, CNN is being sued for just that. (Hat tip: The Other McCain.)
  • Armor car robbery ringleader killed in Houston, accomplices arrested. (Hat tip: Dwight.)
  • Recovering from a devastating spinal injury via power lifting. (Ht tip: Instapundit.)
  • Marxist vegan diner closes. “Ultimately, the restaurant’s popularity among social justice warriors proved unable to sustain its rickety business model.”
  • Naval Base Bombed, Shinto Worshipers Fear Backlash – New York Times – December 8 1941.” (Hat tip: Director Blue.)
  • Noted without comment: The @EvilMopacATX twitter feed.
  • LinkSwarm for November 18, 2016

    Friday, November 18th, 2016

    Here we are, a week after one of the biggest political upsets in American history, and the reverberations are still being felt. Democrats seem to be stuck in the anger and denial phases of the Kubler-Ross grieving cycle, and probably won’t get to bargaining until the 2017 legislative session opens with Republicans in charge of the White House, Senate, and House.

  • While liberals were losing their minds over Trump, India was losing its mind by banning all bills over $1.50. The idea is evidently to force Indians to accept a cashless society (in the name of “fighting corruption”), but it’s actually grinding India’s economy to a halt.
  • More on the Democratic Party wipeout: “Republicans are now in control of a record 67 (68 percent) of the 98 partisan state legislative chambers in the nation, more than twice the number (31) in which Democrats have a majority.”
  • Conservatives have a once in a lifetime opportunity at the state level. Including supermajorities in a number of states, a Democratic Party which has gerrymandered itself into oblivion, and almost enough states to call a constitutional convention.
  • Mark Steyn. “If you keep insisting that half your fellow citizens are haters, maybe you’re the hater.” Also this: “One third of the Democrats’ representation in the House now comes from just three states – New York, Massachusetts and California. That’s one reason why they’re calling for the abolition of the Electoral College.”
  • Pundits who predicted Donald Trump’s rise. (Hat tip: Director Blue.)
  • Iraqi forces continue push into Mosul, driving out Islamic State forces.
  • Trump to hold post-election tour rallies in swing states. 1. He’s closed the sale, and now he’s servicing the account. 2. You know Obama has to be kicking himself for not thinking of that.
  • An even more thorough debunking of that “Trump is super extra mega ultra racist TurboHitler!” nonsense. (Hat tip: Borepatch.)
  • Liberal lawyer Alan Dershowitz defends Breitbart head/key Trump aide Steve Bannon from charges of antisemitism.
  • Tired of liberal tears over Trump’s victory? Of course not:

    (Note: You can skip the last 30 seconds of conservative cruise line ads.)

  • Actually draining the swamp? “Trump Team Announces Five-Year Lobbying Ban for Appointees.”
  • Nancy Pelosi draws a leadership challenge from Rep. Tim Ryan of Ohio. (Hat tip: Director Blue.)
  • More from the Democratic Party’s genius candidate selection process. “If you could choose any state in America where you might want to run a shemale candidate for the United States States, Utah probably wouldn’t be your first choice, nor anywhere in the top 40.”
  • Could Trump break up the EU? Let’s hope so… (Hat tip: Ed Driscoll at Instapundit.)
  • Threaten to kill random white people after Trump’s election? Expect to spend some time in involuntary committal for a mental assessment. Even if you’re a university professor.
  • Larry Coreia offers up A Handy Guide For Liberals Who Are Suddenly Interested In Gun Ownership.
  • Illinois tax hikes have lead to capital flight from the state.
  • ESPN admits that they have a problem with leftwing bias.
  • Not news: Man selling stolen firearms. News: Sheriff selling stolen firearms.
  • Rapper Kayne West says he would have voted for Trump…and will run for President in 2020. West is an idiot savant black nationalist car wreck married to Kim Kardashian, but after this year, would you really say he has no chance of being elected? (Hat tip: Stephen Green at Instapundit.)

    I will say this for West: He knows where to steal his riffs:

    How many piece of Gnostic symbolism can you spot in that video?

  • Speaking of Gnostic, turns out that Pepe the Frog is actually an ancient Egyptian god summoned by the chaos magic of 4Chan. (And the post-election followup.)
  • Austin police Chief Art Acevedo to become Houston’s police chief. (Hat tip: Dwight.)
  • Mother of the year candidate.
  • OK, I laughed.
  • Enjoy your weekend! Sometime next week I hope to tackle the DNC leadership race.

    Houston Jury Smacks SEIU With $5.3 Million Award

    Wednesday, September 7th, 2016

    Here’s a rare thing: A union actually being held accountable for breaking the law:

    A Harris County jury on Tuesday awarded a Houston commercial cleaning firm $5.3 million in damages, finding that a labor union’s aggressive organizing campaign went too far when it maligned the reputation of the company. It opens the door for more employers to sue unions over hardball tactics often used in membership drives and contract disputes.

    The jury, by a 10-2 vote, found for Professional Janitorial Service in a suit the company brought nine years ago against the Service Employees International Union, which targeted the company as part of its “Justice for Janitors” organizing campaign and wrongly claimed Professional Janitorial Service had violated wage, overtime and other labor laws.

    The case was the first time that a jury has found against a union in a business defamation or disparagement case, according to a search of legal records by the company’s law firm, AZA of Houston.

    “The jury found what PJS and its employees have known for more than a decade,” Brent Southwell, the company’s chief executive, said in a statement. “The SEIU is a corrupt organization that is rotten to its core.”

    Snip.

    The trial, which lasted four weeks, represented the first time the SEIU, which has nearly 2 million members nationwide, has had to defend its tactics in front to a jury. Other cases, including a federal racketeering lawsuit filed by the international food, maintenance and cleaning company Sodexo in 2011, were settled before they ever got before a jury.

    Empower Texans has more background on SEIU tactics:

    One of the tactics many unions use to access potential members is “salting,” and the SEIU is no exception. Salting is the tactic of sending a union-affiliate to a targeted employer to apply for, and then accept a position working for the company. Since unions are often prohibited from contacting employees at work, salts do it for them.

    Two of the salts used against PJS were Adriana Menchu and Eleanor Parada; both have been reoccurring figures during the SEIU trial.

    The union used Menchu’s name in various campaigns, lawsuits, and fliers. In one flier she was quoted saying, “They don’t give us gloves or masks to clean. I know a woman who brings her own cleaning supplies from home just so she can protect her health.” Which PJS refuted with their longstanding policy prohibiting the use of any outside cleaning agents unless supplied by the company.

    SEIU fliers claimed that PJS failed to pay Menchu for hours worked, but internal union emails contradicted that statement saying that PJS was trying to “buy” Menchu off by giving her a raise. More evidence that they knew the information they were releasing was false.

    One press release read, “Mostly immigrant janitors were instructed to work ‘off-the-clock’ and had pay withheld by the city’s largest locally-based cleaning company, Professional Janitorial Service (PJS), according to a new lawsuit filed today.”

    Never revealing that SEIU was the party behind the lawsuit, or that the union planted the “janitors” they were referring to.

    Parada was another salt frequently used in lawsuits, and was quoted in an SEIU press release about the unfair labor practice suit they filed saying, “We work hard, but PJS thinks they can treat us however they want…That’s why PJS janitors are taking a stand today – so we can have some basic protections.”

    It’s worth noting that until the SEIU came to Houston to unionize janitors PJS had never faced labor violation allegations, had not been investigated by the Department of Labor or National Labor Relations Board, and had not had unfair labor practice lawsuits filed against them. Also, out of the 20 ULPs the union filed against PJS, 19 were dismissed with the last being rectified by simply having the employer post safety signs in the workplace.

    Texas vs. California Update for August 10, 2016

    Wednesday, August 10th, 2016

    Time for another Texas vs. California roundup:

  • How California screwed itself:

    Then-Gov. Gray Davis and the Legislature had quietly, virtually without notice, decreed a massive, retroactive increase in state employee pension benefits, which was quickly emulated by hundreds of local governments.

    At the time, CalPERS was ringing up big earnings from the 1990s’ bullish stock market — so big that it had reduced contributions from member governments to near zero. Public employee unions hankered for a share of the bounty and pressed for a benefit increase.

    The CalPERS board, dominated by public employees and union-friendly politicians, sponsored the increase, Senate Bill 400, with assurances that it would cost taxpayers nothing. A state Senate analysis of the bill said CalPERS “believes they will be able to mitigate this cost increase through continued excess returns of the CalPERS trust.”

    Years later, it emerged that the assurances reflected the most optimistic of several scenarios developed by the CalPERS staff. More pessimistic scenarios were kept secret — but they were the ones that came true. By the time Seeling delivered his dark appraisal in 2009, the state was being hammered by an ultra-severe recession, and the CalPERS trust fund was losing what turned out to be nearly $100 billion in value.

    Seven years later, CalPERS and other pension funds still haven’t fully recovered, and they’re sharply raising mandatory “contributions” from state and local governments to cover the gaps left by meager investment earnings.

    (Hat tip: Pension Tsunami.)

  • California is deluding itself if it thinks it’s “turned to corner” and is on the path for sustainable growth:

    Between 2000 and 2015, Austin has increased its jobs by 50 percent, while Raleigh, Houston, San Antonio, Dallas, Nashville, Orlando, Charlotte, Phoenix and Salt Lake City – all in lower-tax, regulation-light states – have seen job growth of 24 percent or above. In contrast, since 2000, Los Angeles and San Francisco expanded jobs by barely 10 percent. San Jose, the home of Silicon Valley, has seen only a 6 percent expansion over that period.

    Obviously this runs counter to the notion of California being business friendly, since the ratio of jobs to workers is lower here than in Texas and the rest of the United States, and sometimes a lot lower.

    Snip.

    Gov. Brown has achieved bragging rights by suggestions of a vaunted return to fiscal health. True, California’s short-term budgetary issues have been somewhat relieved, largely due to soaring capital gains from the tech and high-end real estate booms. But the state inevitably will face a soaring deficit as those booms slow down. Brown is already forecasting budget deficits as high as $4 billion by the time he leaves office in 2019. As a recent Mercatus Center study notes, California is among the states most deeply dependent on debt.

    The state’s current budget surplus is entirely due to a temporary tax and booming asset markets. The top 1 percent of earners generates almost half of California’s income tax revenue, and accounts for 41 percent of the state’s general fund budget. These affluent people have incomes that are much more closely correlated to asset prices than economic activity, and asset prices are more volatile than economic activity generally. Brown’s own Department of Finance predicts that a recession of “average magnitude” would cut revenue by $55 billion.

    More critically, the state continues to increase spending, particularly on pensions. Outlays have grown dramatically since the 2011-2012 fiscal year, averaging 7.8 percent growth per year through FY 2015-2016. Seeing the writing on the wall, the state’s labor leaders now want to extend the “temporary” income tax, imposed in 2012, until 2030. This might not do much to spark growth, particularly in a weaker economy.

    During this recovery, California has made minimal effort to eliminate the state’s budget fragility. To use a recently popular term, this is gross negligence. It is, thus, no surprise that credit ratings agency Moody’s Investors Service ranked California second from the bottom in being able to withstand the next recession. Someday the bills will come due.

  • More on California’s business climate vs. Texas:

    Note that across the entire decade the unemployment rate in California was consistently greater than that in the United States, averaging 1.5 percentage points greater overall and maxing out at 2.9 percentage points in January and February of 2011. Except for the first six months of 2006, the same story holds true for California and Texas, although the differences here are more pronounced: an average of 2.5 percentage points greater and a maximum difference of 4.2 percentage points at various points in 2009 and 2010. Also note how long double-digit unemployment persisted in California (43 months) during this decade compared to the United States (1 month) and Texas (0 months).

    Also: “Texas outperformed California in 9 of the 10 years. And Texas had a CAGR of 3.1 percent, meaning its economy grew at more than twice the pace of California’s each year.” (Hat tip: Pension Tsunami.)

  • Texas’ economic, labor Market, and fiscal situation. “The Texas model leads comparable states and U.S> averages in most measures.”
  • “CalPERS has not met its expected 7.5% rate of return for the last 20 years.” (Hat tip: Ace of Spades HQ.)
  • Things in Texas are very different than they were in the 1980s:

    This is what Krugman and others really get wrong about the Texas miracle.

    The state had its last major recession from 1986 to 1987, after oil prices collapsed and the real estate and financial sectors crashed. Back then, the mining sector, dominated by oil and gas activity, was directly related to about 21 percent of the real private economy and roughly 5 percent of the labor force. Today, mining is 15 percent of the real private economy and less than half of the labor force share. As a result, the combination of more economic diversification and pro-growth policies has produced a much more resilient economy. Texas in 2016 looks a lot different than Texas in 1987.

  • “A major impediment to economic growth and a factor chasing people and businesses away from California is the state’s high tax rates and poorly structured tax code. California levies the highest top marginal income tax rate in the nation at 13.3% and has the country’s 6th highest overall tax burden. Such a hostile tax climate has consequences. During the last decade, from 2000 to 2010, California had a net outmigration of over 1.2 million residents move to other states. Those former Californians took over $29 billion in income with them.”

    Residents of San Diego, Newport Beach, Los Angeles, San Francisco, and many other cities and towns across California enjoy beautiful scenery and enviably pleasant weather year round; while folks in Dallas, San Antonio, Austin, and Houston ride out their hot and humid summers by staying indoors as much as possible. Yet Texas has been the number one recipient of California refugees. While the physical climates found in states that are the top recipients of California refugees don’t hold a candle to the Golden State’s, the business tax climates are far more hospitable.

    California imposes the nation’s highest income tax, while Texas is one of nine states with no income tax. While Texas has the 10th best business tax climate in the nation, according to the non-partisan Tax Foundation, California has the country’s third worst. During the last decade, over 225,000 people moved from California to Texas, bringing over $4.4 billion in income with them to the Lone Star State. After Texas, Nevada is the number two recipient of ex-Californians. Like Texas, Nevada can’t compete with California’s natural beauty and climate, but the Silver State makes up for it by having no state income tax and the nation’s 5th best business tax climate.

    (Hat tip: Pension Tsunami.)

  • The deregulated energy market is still working to lower costs for Texans.
  • California’s Democrat-dominated local governments are riddled with nepotism in their hiring practices. In San Diego, “Investigators uncovered an employee vetting process they allege was ‘abused’ — so that in a third of the cases reviewed, ‘friends and family members’ of city staff were hired ‘to the detriment of public job applicants.’” (Hat tip: Pension Tsunami.)
  • Liberal complains about how San Francisco’s progressive policies killed affordable housing. “Instead of forming a pro-growth coalition with business and labor, most of the San Francisco Left made an enduring alliance with home-owning NIMBYs. It became one of the peculiar features of San Francisco that exclusionary housing politics got labeled “progressive.” Do note this piece is from a year ago. (Hat tip: Instapundit.)
  • Speaking of San Francisco, three of the city’s supervisors have decided that he would like to take the goose that laid the golden egg (i.e., the city’s high tech employers), smother it with locally source rosemary, thyme and organic butter, and broil it at 450° in the form of a payroll tax for those companies that earn $1 million or more in gross receipts.
  • “In 2014 there were 142,417 housing starts in the city of Tokyo (population 13.3m, no empty land), more than the 83,657 housing permits issued in the state of California (population 38.7m).” (Hat tip: Instapundit.)
  • “California To Proclaim August “Muslim Appreciation And Awareness Month.” So when do we get Christian Appreciation Month?
  • “Relocation of Highway 99 in Fresno, a key part of the bullet train project, is over budget, behind schedule and will cost millions of dollars more to complete.” (Hat tip: Cal Watchdog.)
  • DAE Systems is relocating its headquarters to Catawba County and intends to create 46 new jobs and invest $6.8 million during the next three years, Gov. Pat McCrory’s office announced Monday. The California-based company, which is moving to Claremont, will receive a grant of up to $110,000 from the One North Carolina Fund that is dependent on the company meeting job-creation goals.”
  • Nothing says “adult oversight” quite like playing strip poker with teenage camp counselors. Take a bow, Stockton Mayor Anthony Silva! (Hat tip: Dwight, who also notes that Silva is a member of the criminal-ridden “Mayors Against illegal Guns.”)
  • Noted for the record: Mayor Silva comes up twice at the very top of Stockton real estate developer Dan Cort’s Facebook page. (Previously.)
  • LinkSwarm for July 15, 2016

    Friday, July 15th, 2016

    Enjoy a Friday LinkSwarm, including some recent big stories:

  • Truck plows into Bastille Day celebration in Nice, France, killing at least 84, including a father and his 10 year old son from Lakeway.
  • The murder is evidently a Muslim from Tunisia. And his name is evidently Mohamed Lahouaiej Bouhlel. Try to contain your shock.
  • The Permanent Court of Arbitration in The Hague rules against China in the South China Seas dispute. Whether China heeds the ruling is another question…
  • Another day, another Democratic congresscritter indicted. “Corrine Brown, the House rep from the 5th District of Florida, was indicted (along with Ronnie Simmons, her chief of staff) on federal charges of mail and wire fraud.”
  • Donald Trump and Hillary Clinton are neck and neck in swing states.
  • “The U.S. State Department funneled tax dollars to a group that worked to oust Israeli Prime Minister Benjamin Netanyahu, according to a Senate report released Tuesday.”
  • Another ObamaCare exchange shuts down, this time in Illinois.
  • And six of the seven remaining exchanges are in trouble.
  • Philadelphia airport workers to go on strike during the Democratic National Convention.
  • Houston City Councilman calls for segregation in police shifts. Next up: Their own drinking fountains… (Hat tip: Director Blue.)
  • Previously deported illegal alien sentenced to life in prison for murder in Laredo.
  • Following in the footsteps of Annise Parker, Austin City Council wants to silence opponents who speak out on politics.
  • The left’s war on police. (Hat tip: Ed Driscoll at Instapundit.)
  • El Paso police chief Greg Allen calls Black Lives Matter “a radical hate group.”
  • University of Texas to return athletic ticket sales to a group previously proven to be corrupt.
  • Ghostbusters reboot toys already on clearance before the movie’s opening.
  • Strippers, arson and a potato. (Hat tip: Dwight.)
  • Understatement of the Year Award:

    An inspection of the truck’s cargo revealed 169 bundles of marijuana with an estimated weight of 3,996 lbs. were on board.

    The estimated street value of the marijuana is between $1.6 million and $1.9 million. Perez was charged with Trafficking Marijuana in the Superior Court of DeKalb County, Georgia.

    Doraville Police say they are “pretty confident this would exceed personal use.”

    (Hat tip: Ace of Spades HQ.

  • Texas vs. California Update for June 28, 2016

    Tuesday, June 28th, 2016

    Welcome to another Texas vs. California update!

  • California’s skyrocketing housing costs, taxes prompt exodus of residents.” “During the 12 months ending June 30, the number of people leaving California for another state exceeded by 61,100 the number who moved here from elsewhere in the U.S.” Plus this: “The majority of the people we are seeing are moving to states that don’t have state income taxes.” And this “My husband’s salary would be in the six figures, but six figures is not enough to cover the rent, day care (and) food prices.” (Hat tip: Pension Tsunami.)
  • The middle class can no longer afford to live in the Bay Area.
  • “Orange County’s public city employees earned $144,817 on average last year.” (Hat tip: Pension Tsunami.)
  • In a completely unrelated story, lavish pension hikes have resulted in exploding levels of Orange County debt. (Hat tip: Pension Tsunami.)
  • “City employees working full-time in Long Beach earned an average of $128,731 in total compensation last year.” (Hat tip: Pension Tsunami.)
  • “A survey of 45 cities in Riverside and San Bernardino counties shows the average full-time city worker received $127,730 in pay and benefits last year.” (Hat tip: Pension Tsunami.)
  • On paper, Nevada County, California, is technically insolvent (which is the best kind of insolvent.) (Hat tip: Pension Tsunami.)
  • As good as Texas is doing compared to California’s profligacy, the people at the Texas Public Policy Foundation think the budget is still growing way too fast.
  • “Jacobs Engineering Group, one of the world’s largest engineering companies, is preparing to move employees from its Pasadena [CA] headquarters to Dallas, becoming the latest major corporation to relocate significant operations from California to Texas.”
  • “A California-based orthopedic goods manufacturer and distributor has decided to move its Ohio-based distribution hub to Dallas/Fort Worth International Airport, which will give the company a place to significantly expand operations and possibly relocate its West Coast headquarters. The company, Santa Paula, California-based Hely & Weber, has signed a lease totaling nearly 40,000 square feet of space at 755 Regent Blvd. in Dallas/Fort Worth International Airport.”
  • Still more companies leaving California. Plus why the “Bernie Sanders effect” will result in a veto-proof majority for Democrats in the California legislature. (Hat tip: Pension Tsunami.)
  • Bankrupt San Bernardino, union fight over settlement payments.” Clip and save this headline, as you’ll be able to use it again and again over the coming years…
  • Marin County pension reformer launches GoFundMe campaign to sue the county over pension increases. Though his $198,000 request strikes me as excessively optimistic…
  • Texas scores three of the top five cities (Houston, Austin, San Antonio) for U-Haul destinations. (Hat tip: Ted Cruz on Facebook.)
  • California Democrats and Social Justice Warriors conspire to drive Christian colleges out of the state. (Hat tip: Ace of Spades HQ.)
  • Once again, California leads the nation…in car thefts.
  • Which lead to this: “More than 71 percent of all recovered stolen cars in 2005 in Texas, New Mexico, Arizona, Nevada, and California were stolen by illegal aliens or by ‘transport coyotes,’ those who bring in illegals across the Mexican border.”
  • “Paul Tanaka, once one of the most powerful law enforcement officials in Los Angeles County, was sentenced Monday to five years in federal prison for interfering with an FBI investigation into jail abuses by sheriff’s deputies.” (Hat tip: Dwight.)
  • Oakland police chief resigns because at least 14 Oakland police officers (and 10 other law enforcement officers had sex with the same underage girl. (Hat tip: Ed Driscoll at Instapundit.)
  • And the guy Oakland found to replace him? He lasted…five days.
  • Bay Area law enforcement agencies have lost 944 guns since 2010. Maybe that’s the “gun control” Democrats should be focusing on… (Hat tip: Stephen Green at Instapundit.)
  • Californians face rolling blackouts this summer…some of which could last as much as 14 days.
  • Shuttered California hospital files for Chapter 7 bankruptcy.
  • You could count this Silicon Valley robot pizza technology startup as a win for California, but the subtext here as that many human California pizza workers will never work a day under that new $15 minimum wage…
  • LinkSwarm for June 17, 2016

    Friday, June 17th, 2016

    Today is a quadruple witching hour for markets, so try not to freak out if there’s more than the usual market volatility today.

  • “Obama Is Bringing 100 Syrian Refugees Into U.S. Every Day.”
  • And Syrian refugees are blowing big holes in Sweden’s welfare budget. (Hat tip: Director Blue.)
  • The rich aren’t paying their “fair share,” they’re paying everyone’s share. (Hat tip: Ace of Spades HQ.)
  • Swiss overwhelmingly turn down “guaranteed income,” the latest pie-in-the-sky socialist scheme to rob every Peter to pay every Paul.
  • David Horowitz believes that Donald Trump’s post-Orlando foreign policy speech is a game changer. (Hat tip: Director Blue.)
  • Not a game-changer: Continued vapid liberal cheer-leading for multiculturalism at all costs. (Hat tip: Director Blue.)
  • “Orlando wasn’t about ‘gun violence’ or ‘homophobia.’ It was about Islam. (Hat tip: Director Blue.)
  • Yet another MSM journalist caught lying about guns.
  • “Why it’s called a ‘modern sporting rifle‘ and not an ‘assault weapon.'” (Hat tip: Instapundit, who notes “Remember, none of this is about saving lives. It’s about the cultural domination of the people in flyover country, by their coastal ‘betters’ who get a near-erotic thrill out of such domination, and who are reduced to blind rage whenever their efforts at domination fail.”)
  • Aside: Is the Washington Examiner paying Ashe Schow enough? She’s like some indefatigable writing machine…
  • The Corrosive Politics of the New York Times Editorial Board Led to the Orlando Shooting. (Hat tip: Director Blue.)
  • “Right now the debate seems choked with people who don’t know, are proud of not knowing, and think you’re a redneck gun-nut asshole if you want them to know because they feel very strongly about this.” (Hat tip: Dwight.)
  • No charges for officer Brad Miller. He’s the one who shot the “unarmed teen” who had driving his Jeep through a plate glass window and was in the process of vandalizing cars.
  • And here’s a police shooting where the use of lethal force was clearly justified.
  • JFK and LSD. Meh. It’s not that I think Kennedy wouldn’t have dropped acid given a chance, but Timothy Leary was basically a con man, and we already know that Nina Burleigh is irrational.
  • Wow, believe it or not, still another reason to never visit Oklahoma. “I’m going to need your driver’s license and all the money on your prepaid debit cards.”
  • “The prohibition of comments that are considered biased or hateful is an explicit denial of freedom of speech.” (Hat tip: Ace of Spades HQ.)
  • Australia’s women’s Olympic soccer team defeated by teenage boys.
  • Are shipping containers the future of farming?
  • Your auditor finds huge cost discrepancies in Houston ISD construction costs. Does HISD: A.) Call in an outside auditor, B.) Launch a criminal investigation or C.) Suspend the auditor who found the problems?
  • New UT President Greg Fenves is a vast improvement over Bill Powers merely by being mediocre.
  • Land’s End decides to commit suicide.
  • Father buys car for son to go to college. Son decides to smoke pot and hang with no-good friends instead. Father sells car.
  • You’re not authorized to know the dire secrets of the Amtrak snack car! (Hat tip: Director Blue.)
  • Affluent buyers snapping up Hill Country land and building mansions.