Rigonomics:

You cannot make this stuff up. There on page one of every newspaper was Gov. Arnold Schwarzenegger telling us that if we do not pass his initiatives Tuesday, not only will the sun not come out tomorrow, but he will have to sell the Orange County Fairgrounds to pay the state’s bills. Thumb a few more pages in and you read about ex-Anaheim City Manager Jim Ruth, who not only has a lifelong annual pension of $219,000, but now also runs the Orange County Sanitation District, where he makes an additional $225,000 per year.

If you look at the website set up by California Pension Reform, www.californiapensionreform.com/calpers/, you can see that the citizens of California, through our state elected officials, have agreed to pension benefits that are unsustainable. The term “public servant” has almost become an oxymoron.

The site allows you to search every retired California government employee in the state who has a lifetime pension worth more than $100,000 per year. The top retired employee in the state takes down $499,674.84 per year. Searching by city we see that Costa Mesa has 27 retired employees with pensions greater than $100,000 per year. Top on the list is former Costa Mesa Fire Chief Jim Ellis, who received a pension of $147,876.78 last year. Newport Beach had 38 with pensions worth more than $100,000 per year. Former Police Chief Robert McDonell beat out everyone, with a lifetime pension of $221,554.56 per year.

California residents are starting to see that these examples are not anomalies. According to the Bureau of Labor Statistics, the gap between lower-compensated private employees and public employing is widening. In December the overall compensation for state and local workers was $39.25 per hour while the private sector for equivalent jobs was $27.35 per hour.

It does not take long looking at the actual pay including overtime for all of California’s state workers, compiled by the Sacramento Bee, to understand that the state budget problem is not because of the recession, but because we have a structural compensation problem.

Now before I get all this hate mail about how public employees work very hard and deserve their pay and benefits, I will concede that there are a lot of public employees who earn every penny they get. But on the flip side, there are a lot of workers in the private sector who earn every penny they get. What is the difference? When the private sector agrees to pay benefits that are unsustainable, they go bankrupt. Think Chrysler, United Airlines, etc. The business model of government by its very nature is a monopoly. Try getting a building permit at Home Depot or a driver’s license at your Chevy dealer. Government has the ability to push costs of operations up before anyone understands that it is unsustainable. Unlike the private sector that keeps its cost in check because of competition, the public sector has no such limits.

In most of the private sector, when business is down employees take pay cuts, work longer hours or are laid off. In the public sector, which is mostly unionized, pay cuts are not allowed. In fact, the only thing that a city or county can do is layoff workers. Even asking the employee to take a day off without pay is not allowed. The Service Employees International Union is suing the state over that issue right now. State and local governments cannot impose any cut in pay or benefits. Today, while the private sector employees are taking pay cuts, being laid off and working extra hours without pay and covering for their own retirement, not one state employee has been laid off or taken any pay or benefit cut.

Why is it that public employees are protected better than an endangered species? Because they have the political power. I am only stating a fact when I say the Democrats control the state legislature. The Democratic Party is almost completely funded by the state labor unions. The unions decide who will be winner of the Democratic primary in most every seat in the state by the amount of money they fund toward any candidate’s campaign. Try winning a Democratic primary if you are not supported by the teachers union, SEIU or the prison guards. It will never happen. So what we have is the party in control with members who are unable to go against the unions and stay in office. With six-year term limits on legislators, not even a Democratic legislator who wants to rein in the state budget could. They will be quickly replaced by someone who will toe the union line.

I said last week that we are at the bottom of the recession and that we are starting to come out. The majority of the $787-billion federal stimulus package was used to fill in the budget holes in states like California to pay those same union workers who helped President Obama get elected. Many states like Texas balanced their budgets during this recession without federal help.

There will not be another stimulus bailout package for California. States that balanced their budgets will not allow their tax dollars to bailout the states like California that cannot live within their means.

So, unless California citizens force their legislators to make drastic changes in the law to lower costs, nothing will change.

In the past when the recession was over, state and local government picked up where they left off. It won’t happen this time. The unsustainable union contracts they agreed to have outstripped whatever revenue the states can generate.

Unless this changes, which I have no reason to believe it will, California will start defaulting by the end of this year.

If states could file for bankruptcy, California would be a good candidate.