There was an excellent Associated Press article earlier today on the public pension problem in California. Here are some highlights from the article:

• California has at least $63 billion in unfunded pension liabilities
• Gov. Arnold Schwarzenegger’s administration has estimated that these liabilities could grow to $300 billion if state pension funds continue to perform below anticipated returns.
• State and local governments across the nation are facing hundreds of billions of dollars worth of unfunded public employee pension and retiree health-care costs.
• Government retirees in California enjoy health-care coverage for themselves and their families that can cost the state $1,100 a month per retiree, according to the California Public Employees’ Retirement System (CalPERS).
• “The Center for Retirement Research at Boston College found that while 43 percent of private employers offered some type of retirement plan in 2006, they tended not to be as generous as public employee packages. Private-sector workers also rarely receive retiree health care coverage, meaning most have to work until they can start drawing Social Security and Medicare at age 65. Workers born after 1960 will not be eligible to retire until 67.”
• “Government workers and their union representatives often say the more generous pensions offset lower pay. But the latest U.S. Census survey, from 2007, shows the average annual salary of California state government employees was $53,958, compared with $40,991 for the average private-sector worker.”
• Other state governments are reducing benefits for new government employees to address their pension funding problems:

» New Mexico this year approved longer work requirements–from 25 years to 30 years–for state employees starting in 2010.

» New Jersey last year raised the minimum age to qualify for benefits from 60 to 62.

» Kentucky now requires new police hires to contribute 1 percent of their pay to help cover retiree health benefits.

» And Georgia has started a hybrid plan for new state hires that blends a defined-benefit pension–with set payments based on salaries–and a 401(k).

According to the article, Schwarzenegger is now reviving the idea of pension reform, which he abandoned during the last round of budget negotiations. The plan, which would apply to new hires, would scale back pension benefits to pre-1999 levels–before a bill increased government employees’ pension benefits by as much as 50%–and would require government employees to work five additional years before earning full pension benefits. The administration estimates that the proposal would save $95 billion over 30 years.

While the Schwarzenegger proposal would be an improvement over the current, overly-generous pension system, it would still be just nibbling at the edges when the system needs truly comprehensive reform. It does not address the increasing costs of retiree health-care benefits at all. Moreover, the entire defined-benefit structure of the pension system is unpredictable and unsustainable, as private-sector companies discovered long ago. (Just look at what has happened to private firms like those in the steel, airline, and auto industries that tried to maintain defined-benefit systems). The state should thus follow the private sector’s lead and switch to a 401(k)-style defined-contribution system, whereby the state would contribute a flat percentage of a government employee’s salary to that employee’s retirement fund, and adopt salary and benefit rates that are comparable to those earned in the private sector. Those who do not work for the government should not be forced to pay for ever-richer benefits for public employees while they are seeing their own retirement funds dwindle during difficult economic times.

Members of a subcommittee of the Review of U.S. Human Space Flight Plans Committee, an independent, blue-ribbon committee formed to analyze the U.S. space program, have recommended that the National Aeronautics and Space Administration (NASA) utilize private companies to transport cargo and people to and from the International Space Station. Relying on private firms for transportation services would free up NASA resources for more ambitious ventures, such as human missions to the moon or Mars.

“I think you will find out there are a lot of people who will rise and compete,” former Boeing executive Bohdan “Bo” Bejmuk told the panel. “Some of them will fail, some of them will succeed, but you will have essentially created a new industry.”

Private space companies like Space Exploration Technologies Corporation, commonly known as SpaceX, and Orbital Sciences Corporation have already made great strides in developing rockets and launching satellites and space probes. SpaceX won a $278 million government contract in 2006 as part of NASA’s Commercial Orbital Transportation Services projects. In 2007, Orbital Sciences took over a contract worth $170 million for its Taurus 2 launcher and Cygnus capsule combination after underfunded venture Rocketplane Kistler failed to deliver on its financial objectives.

The potential cost-saving privatization recommendation comes as questions are arising about the accuracy of NASA’s budget and the future of the space program. Current plans call for seven more shuttle flights through September 30, 2010, after which the shuttle fleet is to be decommissioned and new space vehicles are designed and built. The new vehicles are not expected to be completed for some time, however, leading to a “launch gap” of five to seven years. But according to human space flight review panel member Sally Ride, former astronaut and the first American woman in space, NASA’s budget–which totals $18 billion for the current fiscal year–is unlikely to even meet current goals. “We have come to believe very firmly that it’s important to have a realistic view of what the existing program as it will realistically unfold most likely will cost and not put any smoke and mirrors to the budget to make it look like it will fit under the budget profile,” Ride said during a public meeting earlier this week. In addition, panel members noted that NASA was unlikely to complete work on the space station and retire the shuttle fleet before March 2011, which would require additional funding. “But, of course, there is no funding for that possibility,” Ride noted. “That’s setting you up right away for a budget problem.”

William Watson, executive director of the Space Frontier Foundation, which promotes commercial space activities, welcomes private-sector involvement in, and competition for, space transportation services. “Let’s have an American competition in space–to create good jobs, fuel innovation and close the [launch] gap more quickly,” Watson was quoted as saying in a May 2009 FoxNews.com article. “With private funds matching government investment, we can dramatically leverage taxpayer dollars to produce breakthroughs in a new American industry-commercial orbital human spaceflight.”

Aerospace consultant and retired NASA aerospace engineer Don A. Nelson similarly sees privatization as a way to stem rapidly rising costs, address the anticipated launch gap, and allow NASA to refocus on its core mission. As Nelson wrote on the nasaproblems.com blog earlier this year,

NASA is struggling with developing the Orion [space shuttle replacement] vehicles . . .  one for space station crew rotation and another for the lunar mission. It is the Orion space station crew rotation vehicle problems that is causing the launch gap. Privatization of the shuttle fleet solves these problems and allows NASA the time, resources, and budget to restructure the Constellation Program (CxP) for their primary goal of returning humans to the moon and beyond. Privatization of the fleet avoids the costly and embarrassing space gap, saves critical space jobs, and insures the operation of the space station. Privatization provides avenues to regain a share in the commercial launch market, crew escape pods, and the foundation for a 21^st century reusable space based transportation system.

The government is increasingly coming to the conclusion that a successful space program will depend on a partnership with private-sector ventures. Utilizing these resources will help contain costs, leverage taxpayer dollars, take advantage of the innovation and expertise of those employed by private firms, and free up NASA to focus on its core mission.

Rising personnel costs and retiree benefit payments have driven Chicago’s projected fiscal year 2010 budget shortfall to between $500 million and $1 billion, according to city officials. The Chicago Tribune reports today that the parking meter lease proceeds—which injected over $1.1 billion into city coffers—are playing a critical role in helping the city weather the fiscal storm:

Mayor Richard Daley’s administration Thursday predicted a gaping hole in next year’s budget that will eclipse the current financial problems — even after the city exhausts its brand-new $320 million rainy day fund.

The anticipated $6.2 billion budget for next year could be more than half a billion dollars in the red because of plummeting tax collections and rising wages that account for more than 80 percent of the city’s day-to-day spending, said Chief Financial Officer Gene Saffold. He announced the gloomy prediction as Daley aides began briefing aldermen in anticipation of public hearings next month.

Although higher taxes are “a last resort . . . nothing is ruled out at this point,” Saffold said. “The mayor has instructed us not to look at property taxes as we move forward in 2010.”

Daley has laid off city workers and pressured unions to take unpaid days off to save money this year, and aldermen and outside budget experts predicted that personnel cuts were likely next year. The biggest chunk of increased spending next year will come from $117 million in higher wages, benefits and pension fund payments, Saffold said.

“You have to look at personnel and personnel reductions because they represent 80 to 85 percent of the operating costs,” said Laurence Msall, executive director of the Civic Federation. [...]

Daley has been credited with bolstering city finances by innovative leases of public assets such as the Chicago Skyway. But after taking a public drubbing for the problem-plagued lease of city parking meters, the mayor will count heavily on one-time revenue from that deal — including all of the rainy day fund — to offset next year’s bad news.

As a reminder, Chicago split the proceeds from the parking meter agreement in four ways:

• $400 million was placed into a long-term reserve/revenue replacement fund, bringing the city’s total long-term reserves to $900 million.
• $325 million is being used for mid-term budget relief through 2012, with $150 million drawn down thus far to balance the city’s fiscal year 2009 budget.
• $320 million was placed in a budget stabilization (“rainy day”) fund.
• $100 million was placed in a human infrastructure fund used to supplement the budgets of a variety of low-income support programs for a five-year period.

For more on parking meter privatization, see here, here, here, here, here and here.

» Reason’s Privatization Research and Commentary
» Reason’s Transportation Research and Commentary

From PEW Research

Our own Rep. Brian Baird has introduced a bill in Congress to establish a social and behavioral science research program so that the gub’mint can dink with your head on energy consumption.  Oh boy…what we need…mind control over whether to turn up the thermostat or buy regular or premium gasoline.
 
Are you getting sleepy yet???  Walk…don’t drive…freeze or fry in you house…turn off the heat and air conditioning….Do…what…you…are…told…to…do…by…the…gub’mint…man.
 
Tip of the hat to Glenn Beck for getting the word out about what a Congressman from Washington state is up to. 
 
Brings to mind…If you haven’t already (and why haven’t you???), then isn’t it time to purchase your tickets to see Glenn Beck when the Evergreen Freedom Foundation brings him to Seattle in a little less than two months?  Go here  for more information, then click on the link to the tickets page.  Tell ‘em The Piper sent you.
 
Rep. Baird, since I’d stake my life on the fact that some staff flunky in your office is assigned the task of monitoring LibertyLive.org, I’ll make you an offer you can’t refuse: I’ll buy a ticket for you to come to Safeco Field on September 26 to see and hear Glenn Beck.  It will turn your life around enough so that you’ll stop instroducing bupkis legislation like Energy Department mind control.  Ring me up, and let me know…
 
Glenn Beck in Seattle – be there or be square.
 
The Piper

White House Office of Management and Budget director Peter Orszag released a new policy memorandum on federal acquisition this week, but as Stan Soloway at Washington Technology writes, several agencies are already moving down the path of de-privatization (so called “insourcing”) in a manner contrary to the administration’s new policy objectives:

The Obama administration released this week the first in a series of much-anticipated policy memorandums focused on federal acquisition. The new guidance focuses on contractor past performance, managing the multisector workforce, and improving acquisition. President Barack Obama directed Office of Management and Budget to develop the guidance in his March memorandum on contracting. Additional guidance on inherently governmental functions, enhancing competition, and more will follow in September. [...]

The most significant document is that which deals with managing the multisector workforce and how to approach the possible insourcing of contracted work. Consistent with (unfortunate) legislative direction, the document makes clear that insourcing must be considered in a range of circumstances. But it also properly and thoughtfully sets forth a decision process that provides agencies the requisite flexibility to do the right thing for their missions and the taxpayer.

Indeed, the document intentionally and overtly strikes an impartial tone, which itself is a welcome and notable relief from the jingoistic tone that has been struck by those whose focus is far more parochial than substantive. The same is true with its treatment of the multisector workforce. There, the guidance lays out very reasonable and impartial guidelines for assessing both agency need and agency capability which, together, help drive smart sourcing decisions.

In sum, the administration’s first substantive acquisition policy foray offers a positive direction and opens the door to important improvements that will both serve the public’s interest and help improve confidence in the process. Unfortunately, even as the guidance was being developed, numerous components, particularly but not only in the Defense Department, have launched their own insourcing and acquisition policy initiatives that are to varying degrees inconsistent with the new administration guidance and, frankly, inconsistent with the best interests of their departments or the taxpayer.

When it comes to functions that are neither inherently governmental in nature nor so critical to mission performance that they really should be performed by government employees, there must be a disciplined process associated with any insourcing decision. That process must carefully consider accurate, total, life cycle costs, performance and the availability of talent. Simply put, it is both fair and important that agencies be required to assess the full range of factors that should inform any sourcing decision. As taxpayers, we should demand no less.

Unfortunately, that discipline appears to be missing in much of the field’s early insourcing activity. Perhaps this would be a good time for everyone to step back and carefully consider the president’s directive and guidance. In so doing, perhaps they, too, can step up.

Well put. Decisions on what to privatize or not should be made in a dispassionate, analytical process, rather than be driven by politics. This is exactly why entities like Florida’s Council on Efficient Government are so valuable in the policy framework—policymakers need to be focused on making smart spending decisions divorced from politics and justified by a business-case type of analysis. That’s a standard part of decisionmaking in private enterprise, and it’s one that’s severely underutilized in government at all levels.

» Reason Foundation’s Privatization Research and Commentary

Two years ago, I wrote the following (slightly edited):

SB 3, the hastily enacted energy bill would require state citizens to help pay the electricity bill for Texans, Californians, or other out-of-state individuals.

Since there is not enough renewable energy in the state, SB 3 allows utilities to…

AMERICAN MAJORITY ACTIVIST TRAINING

PORTLAND, OR, AUGUST 8, 2009: American Majority is pleased to announce an excellent opportunity for liberty-minded, freedom-loving citizens to learn how effect change in their community, state and nation. The…

The Kauffman Foundation released a new study entitled, “The Anatomy of an Entrepreneur: Family Background and Motivation.” The purpose of the study is to delve into the backgrounds of some of America’s successful entrepreneurs, to see what makes them tick,…

Americans For Prosperity North Carolina delivered thousands of petitions to the State Capitol today. Those petitions urge Gov. Beverly Perdue to veto any budget plan that includes tax increases.
Click play below for more, including a short interview with AFPNC state director Dallas Woodhouse.