Transparent California helps uncover massive fraud in LA school district

On Monday, the Los Angeles County Office of Education and the Fiscal Crisis and
Management Assistance Team (FCMAT) released their “Extraordinary Audit of
Montebello Unified School District.”

In the introduction, the audit cites the following as an impetus for their investigation:

Prior to the teacher’s request, there were many rumors alleging that some K-12 teachers and classified employees were given the opportunity to earn large amounts of extra money for little or no work, paid from adult education funds.

Coworkers accessed the Transparent California website (www.transparentcalifornia.com), which revealed that some of the district’s instructors earned exceptionally high salaries. This led to questions about how these instructors were earning such high compensation. (emphasis mine)

District administrators were told that instructors, including classified employees, had adult education class rosters with few or no students in attendance, and this raised serious questions that prompted an internal investigation and led to discussions with the county office of education.

The audit then found many instances where “hourly pay occurred during times when classes were not in session,” and that in the majority of cases studied “the district’s payroll records did not have sufficient supporting documents to conclude that compensation paid from adult education funds was for legitimate payroll expenditures…”

In its conclusion, the audit determined that:

there is sufficient evidence to demonstrate that fraud, mismanagement and misappropriation of the district’s funds and assets may have occurred.

The audit could only state that fraud “may” have occurred, citing a requirement that only a court could definitely make such a determination.

Consequently, the audit instructed the county superintendent to immediately inform “the local district attorney that fraud or misappropriation of district funds and/or assets may have occurred,” for further action.

Nonetheless, the audit findings are such that it’s almost impossible to imagine any explanation other than fraud.

The teachers’ use of Transparent California to help uncover this fraud is just one more example of the enormous benefits such transparency provides — although certainly not one we could have imagined when we first created the site!

You can read the full audit by clicking here.

Marin County promised pension benefits up nearly 1000%, dwarfing rate of economic growth

The total pension benefits promised by Marin County increased 982 percent from 1986-2016 — a rate 58 times greater than the cumulative increase in the county’s population, according to a just-released analysis from Transparent California.

Last week, Transparent California released Nearly 900% increase in CalPERS benefits dwarfs economic growth, taxpayers’ ability to pay, which analyzed the state pension fund.

Marin County, however, belongs to the Marin County Employees’ Retirement Association (MCERA), and is thus separate from CalPERS.

Applying the same methodology as used in the CalPERS analysis reveals that promised Marin County benefits grew even faster than CalPERS, as shown in the chart below:

MCPensionGrowth2

The below chart reflects the cumulative growth in Marin County’s promised pension benefits (accrued liabilities) alongside a variety of Marin County economic metrics:

Marin County Indicators Growth from 1986-2016
Promised Pension Benefits 982%
Personal Income 377%
Median Household Income 167%
Inflation 139%
Population 17%

Data sources:

  • Promised pension benefits reflects the growth in accrued liabilities for the County of Marin and related Special Districts, as reported by the Marin County Employees’ Retirement Association (MCERA).
  • Marin County personal income “is the income that is received by all persons from all sources,” calculated and reported by the U.S. Bureau of Economic Analysis.
  • Median Household Income data was provided by the U.S. Census Bureau. The Excel Trend function was used to fill in years in which data was unavailable.
  • Inflation is derived by calculating the growth in the Consumer Price Index for All Urban Consumers: All items in the San Francisco-Oakland-Hayward, CA region.
  • Population data was provided by the U.S. Census Bureau.

For more information, please contact Robert Fellner at 559-462-0122 or Robert@TransparentCalifornia.com.

Transparent California is California’s largest and most comprehensive database of public sector compensation and is a project of the Nevada Policy Research Institute, a nonpartisan, free-market think tank. The website is used by millions of Californians each year, including elected officials and lawmakers, government employees and their unions, government agencies themselves, university researchers, the media, and concerned citizens alike. Learn more at TransparentCalifornia.com.

Nearly 900% increase in CalPERS benefits dwarfs economic growth, taxpayers’ ability to pay

The total pension benefits promised by the California Public Employees’ Retirement System (CalPERS) increased 886 percent from 1987-2016 — a rate 21 times greater than the cumulative increase in the state’s population, according to a just-released analysis from Transparent California.

The growth in promised CalPERS benefits dwarfs the rate found in a variety of other economic metrics, as shown below:

CalPERSGrowth4

Transparent California credits Ted Dabrowski and John Klingner of Wirepoints as the source of inspiration for this chart and analysis. In Illinois state pensions: Overpromised, not underfunded — Wirepoints Special Report, Dabrowski and Klingner irrefutably demonstrate that the true source of Illinois’ pension crisis is the explosive growth in promised benefits, not a lack of funding.

Transparent California Executive Director Robert Fellner believes the same applies to California.

“Some politicians and government unions have claimed that last decade’s market downturn is the cause of California’s pension crisis. As this data makes clear, the real cause is the tremendous growth in the size of the benefits that were promised.”

The below chart reflects the cumulative growth in promised CalPERS pension benefits (accrued liabilities) alongside a variety of California economic metrics:

California Economic Metrics Growth from 1987-2016
Promised CalPERS pension benefits 886%
Total Personal Income 331%
Total State Tax Collections 311%
Median Household Income 121%
Inflation 119%
Population 41%

Fellner observed that blaming the inevitable market downturn as the source of CalPERS funding woes is analogous to a gambler citing a bad run at the blackjack table for having less-than-anticipated funds:

“Elected officials’ willingness to take on such massive debt, not the fact that the stock market sometimes goes down, is the root cause of California’s pension crisis.”

For more information, please contact Robert Fellner at 559-462-0122 or Robert@TransparentCalifornia.com.

Transparent California is California’s largest and most comprehensive database of public sector compensation and is a project of the Nevada Policy Research Institute, a nonpartisan, free-market think tank. The website is used by millions of Californians each year, including elected officials and lawmakers, government employees and their unions, government agencies themselves, university researchers, the media, and concerned citizens alike. Learn more at TransparentCalifornia.com.

Marin union votes to strike

Despite the fact that local government workers in Marin County receive wages higher than local government workers in over 99 percent of counties nationwide — even after adjusting for regional cost differences among the 50 states — the largest government union in Marin has formally authorized a strike, according to the Marin Independent Journal.

The dispute centers over the size of pay raises that will be provided over the next 3 years, as well as other unknown conditions. The unknown conditions reflect the fact that state law shrouds government union negotiations in secrecy, ensuring the taxpayers responsible for paying the entire cost of the eventual contract are kept in the dark.

The Marin IJ also reported that a salary survey revealed that Marin County workers are paid, on average, 7.8 percent higher more than their government peers in the Bay Area.

And this is on top of non-wage benefits (like job security, number of paid leave days, retirement benefits and health insurance) that are all significantly greater than what the average private-sector worker receives.

It is an uncontroversial fact that one of the defining features of a monopoly is its ability to obtain excess wages/profits, at the expense of social welfare.

This is true even when the monopoly in question is a labor union.

Thus, a willingness to strike despite receiving pay and benefits that are already significantly above market levels — even when that market is restricted to only other Bay Area governments — is an entirely predictable, and even rational action from the perspective of the monopoly union.

Absent a change to the state laws that grant government unions coercive, monopolistic powers, it is likely that Californians will continue to see their taxes raised in order to fund the demands of government unions.

Despite wages that rank in the top 1% nationwide, Marin union considers striking

The average wage for Marin County local government workers is richer than what their peers in 99.8 percent of counties nationwide receive, according to new wage data released from the federal Bureau of Labor Statistics (BLS) last week.

In 2017, local government workers in Marin County received an average annual wage of $76,138 — which ranked 6th out of the 2,867 counties surveyed nationwide, and was 53 percent higher than the $49,712 received by local government workers nationally.

Remarkably, even after accounting for regional cost differences among the 50 states, Marin County local government workers’ average wage still ranked firmly within the top 1 percent of counties nationwide, placing 8th out of the 2,867 counties surveyed.

Accounting for regional cost differences was achieved by adjusting the nominal wages received by each state’s 2016 Regional Price Parity, as calculated and reported by the Bureau of Economic Analysis.

For example, Marin County’s average was of $76,138 was reduced to $66,554 to account for average prices in California that were 14.4 percent above the national average, according to the BEA.

As indicated above, after a similar adjustment was made for all 2,867 counties nationwide, Marin County’s RPP-adjusted average wage for local government workers ranked 8th highest nationwide.

Government wages as % of private

In addition to outranking their local government peers in over 99 percent of counties nationwide, Marin County local government workers’ wages were significantly above average when measured against private-sector earnings.

Nationwide, average local government wages were 10 percent below private-sector workers. In Marin County, however, local government received an average wage that was 13 percent above what Marin County private-sector workers earned:

GovtvsPrivateNat.png

Similarly, while Marin County private-sector wages were 6 percent above private-sector wages nationally, Marin County local government workers’ wages were 34 percent higher than local government wages nationally:

GovtvsPrivateNat2

Why government pay matters

Because employee compensation is by far the single largest category of government expenditures — accounting for nearly 70 percent of Marin County’s general fund budget — it is critical that taxpayers have complete and accurate information regarding the government pay packages that they are required to fund.

While the BLS data reflects all local government workers in Marin County and not just those employed by the County of Marin, it is nonetheless a strong indication that county wages are already at very competitive levels.

This is particularly true given the average $86,629 wage[1] received by County of Marin employees — excluding police and fire officers — was significantly above the $76,138 reported by the BLS for all local government workers in Marin County.

Beyond Wages

In addition to wages, compensation for Marin County employees includes employer-paid health and retirement benefits, paid leave, job security and retiree health benefits.

Because the terms of benefits vary by collective bargaining group, this analysis will focus solely on the Marin Association of Public Employees (MAPE) General Bargaining Unit, sometimes referred to as “rank-and-file” workers.

In addition to being Marin County’s largest bargaining group, an assessment of these workers overall compensation is particularly relevant given the union has called for a strike vote over allegedly insufficient pay.

Like all government workers, Marin County employees receive significantly greater levels of job security than their private-sector counterparts. Academic research has estimated the job security premium for California local government workers to be worth between 5 and 15 percent of wages.[2]

Marin County government workers also receive significantly richer amounts of all non-wage benefits than the average private-sector worker[3], as shown below:

Type of Compensation

Average Private Sector

Marin County Government

Marin County Government vs Private

Employer-Paid Retirement, as a Percent of Wages

5%

22%

+320%

Employer-Paid Share of Employee Medical Premium

$5,310

$12,011

+126%

Employer-Paid Share of Family Medical Premium

$12,840

$18,843

+47%

Paid Holidays

7

14

+100%

Annual Paid Sick Leave for 10+ year employees

8

12

+50%

Annual Paid Vacation Leave for 10-20 year employees

17

20

+18%

Annual Paid Vacation Leave for 20-30 year employees

20

25

+25%

The cause

Such outsized pay packages for California’s local government workers — and the burden they impose on the taxpayers who, on average, earn much less themselves — are the inevitable result of the state’s mandatory collective bargaining laws.

Because California state law forces local governments to bargain with a single government union, the union is able to wield this monopoly power to push labor costs well above market prices — a cost that is then passed on to captive taxpayers.

Adding insult to injury is the fact that these negotiations are done entirely in secret — ensuring that the taxpaying public is shut out of the process entirely.

Unsurprisingly, this arrangement has resulted in about $10 to $20 billion annually in added costs to California taxpayers, according to the most comprehensive study ever conducted on this issue by scholars at the Heritage Foundation.[4]

The current landscape is a result of the profound differences between unionization in the public and private sectors — which is why, historically, the idea of government unions was widely opposed by economists, policymakers and politicians on all sides of the ideological debate.

In addition to well documented opposition from traditionally pro-union policymakers such as President Franklin Delano Roosevelt, even labor unions themselves historically opposed the concept of unionizing government workers.[5]

For example, in 1955, AFL-CIO President George Meany said, “It is impossible to bargain collectively with the government.” Four years later, the AFL-CIO executive council passed a resolution declaring that, “In terms of accepted collective bargaining procedures, government workers have no right beyond the authority to petition Congress — a right available to every citizen.”[6]

So what changed?

As Geoffrey Lawrence and Cameron Belt document in The Rise of Government Unions: A review of public-sector unions and their impact on public policy, the shift towards favoring government unions didn’t occur because of any change in logic or analysis, but was simply the result of union bosses scrambling to find new dues-paying members in response to declining private-sector membership:

The American Federation of State, County, and Municipal Employees (AFSCME) was the first labor organization to explicitly acknowledge these points and to begin a systematic effort to bring compulsory collective bargaining to state and local governments. “Industrial unions seem to be at the end of a line…as more and more plants are automated,” and craft union membership “is growing only slowly,” the organization observed. “In public employment, however, there is an expanding reservoir of workers.”

While the original labor movement was created to prevent the exploitation of workers by profit-hungry corporations, no such justification exists for unionization in the public sector, which has neither owners nor profits over which to negotiate.

And because the government is funded via taxation, it faces none of the cost restraints found in the for-profit private sector. Private employers, on the other hand, are only able to generate revenue to the extent that consumers voluntarily purchase their goods or services.

Governments, by contrast, can finance above-market compensation by simply taxing the public. Most problematic is that the elected officials who approve these labor contracts bear none of the cost. In fact, these elected officials are routinely rewarded for doing so, as the concentrated political support bestowed upon them by appreciative government unions far outweighs the cost of taxpayers’ dispersed frustration.

On this point, Lawrence and Belt observe that:

Instead of resisting union demands, politician-employers have a keen interest in encouraging unionization among government employees because they can use government unions as political machines to secure election.

Thus, mandatory collective bargaining in the public sector has led to the very one-sided, exploitative arrangement that private-sector unions were originally designed to prevent — albeit with organized labor wielding the power, and the taxpaying public at large left largely powerless.

Given such a lop-sided power dynamic, it is little surprise that California’s public unions continue to push for more, despite already receiving compensation packages that, on average, significantly exceed market levels.

Illustrating the point

Despite belonging to the top 1 percent of counties with the highest-paid local government workers nationwide, in addition to receiving benefits that dwarf private-sector levels, the Marin County union (MAPE) recently rejected an across-the-board 7 percent pay raise over the next three years, and is demanding 11 percent instead (3.5 percent in FY19, 4 percent in FY20 and 3.5 percent in FY21).

It is worth mentioning that these across-the-board raises are on top of average yearly step increases of nearly 5 percent, which are available to employees who receive a “meets standards” or above assessment in their annual performance review and have not already reached the fifth step maximum.

So an employee still working their way up the step pay ladder would receive annual wage increases of roughly 7 percent under the county’s offer, and 8 to 9 percent under MAPE’s counter-offer.

As this example shows, government unions are not in the business of securing fair wages for workers who are being underpaid by profit-hungry employers. Instead, the incentives are such that most unions have one simple, unchanging goal: More.

Indeed, this approach is precisely what drove public compensation so far above market levels to begin with.

This is why, despite already having one of the highest tax burdens in the nation, municipalities across the state are seeking to raise that burden even further. And because the vast majority of these tax hikes — sales tax and fees for public services — are regressive in nature, it is precisely California’s lower- and middle-income residents who will fare the worst.


[1] Marin County Employees’ Retirement Association
Actuarial Valuation Report as of June 30, 2017.

[2] Jason Richwine and Andrew Biggs, “Are California Public Employees Overpaid?” The Heritage Center for Data Analysis, March 17, 2011.

[3] Employee benefits data for private-sector workers in not available on a state level, and thus this analysis uses national data for private-sector workers’ paid leave data and Pacific regional data for retirement and health benefits.

[4] How Government Unions Affect State and Local Finances: An Empirical 50-State Review, The Heritage Foundation, April 26, 2016.

[5] Cameron Belt and Geoffrey Lawrence, The Rise of Government Unions: A review of public-sector unions and their impact on public policy, Nevada Policy Research Institute.

[6] Ibid.

Oakland engineer and police officer again earn a combined $1 million, as superhuman OT continues

Today, Transparent California — California’s largest public pay database — released previously unseen 2017 pay data for the City of Oakland.

Fourteen Oakland city employees received over $400,000 apiece in pay and benefits last year — more than double the 6 employees who received that much in the preceding year.

Topping the list once again was police officer Malcolm Miller, whose $113,158 regular salary was more than quadrupled to $494,384 after specialty pays, overtime pay and benefits are accounted for.

Thanks to continually receiving overtime pay that more than doubled his base salary, Miller has been the city’s top earner every year since 2013, with the exception of 2015 when he was the city’s 2nd highest compensated employee.

Such continuously extreme amounts of overtime pay for a police officer — and the number of hours worked it suggests — is troubling, according to Transparent California Executive Director Robert Fellner.

“The data indicate this one police officer has been working roughly two times the regular hours for years on end. This is a recipe for disaster given the life-or-death situations police officers routinely encounter.”

Civil engineer Kenny Lau was Oakland’s 2nd highest compensated worker last year, with $480,562 in pay and benefits — most of which came from an agency-high $283,514 overtime payout.

107-hour average workweek

Like Miller, Lau has consistently received overtime pay in excess of his regular salary since at least 2013.

In 2016, Lau’s time cards showed that he worked all 366 days of the leap year, according to a San Francisco Chronicle report.

Lau’s $283,000 overtime pay in 2017 suggests a similarly intense workload, equating to an average 107 hours worked for all 52 weeks of the year.

After Miller and Lau, the next 3 highest compensated Oakland city workers were:

  1. Police lieutenant Trevelyon Jones, who received $462,370 in pay and benefits.
  2. Police lieutenant Sean Fleming, who received $435,695 in pay and benefits.
  3. Fire engineer Preetpal Dhaliwal, who received $433,054 in pay and benefits.

Average wages up over 20% since 2013

The average full-year city worker collected $114,620 in wages last year, a 21 percent increase from 2013. When benefits are included, that value rises to $167,363 — which represents a 26.5 percent increase from 2013.

Total city-wide spending on employee compensation was up 33 percent over that same time period, hitting an all-time high of $578 million last year.

Data from the U.S. Census Bureau shows a less than 5 percent increase in median earnings for Oakland private-workers from 2013 ($48,610) to 2016 ($50,893) — the most recent year for which data was available.

The disparity in rate of growth between wages in the private sector and Oakland city hall is a troubling trend, according to Fellner.

“The ultimate ability to fund government pay packages rests with the taxpayers. If pay at Oakland city hall continues to outpace the growth of wages in the private sector, there may reach a point when taxpayers are unable to meet such a burden.”

To explore the entire 2017 Oakland payroll report in a searchable and downloadable format, please click here.

Transparent California will be continually updating the site with new, 2017 data from the remaining cities and counties in the coming weeks. Be sure to follow our blog and Twitter accounts, or sign up for our mailing list, in order to receive the latest updates.

For more information, please contact Robert Fellner at 559-462-0122 or Robert@TransparentCalifornia.com.

Transparent California is California’s largest and most comprehensive database of public sector compensation and is a project of the Nevada Policy Research Institute, a nonpartisan, free-market think tank. The website is used by millions of Californians each year, including elected officials and lawmakers, government employees and their unions, government agencies themselves, university researchers, the media, and concerned citizens alike. Learn more at TransparentCalifornia.com.