CalPERS Approves 99 New Ways to Spike California Public Pensions

CalPERS Headquarters, Sacramento

CalPERS Headquarters, Sacramento

Today, in yet another act of fiscal irresponsibility, the California Public Employees’ Retirement System (CalPERS) approved a list of 99 types of extra pay that can be used to calculate pension benefits for state and local government employees. The supplemental pay includes extra money that public employees earn when they briefly fill higher-paying jobs.

The regulatory decision by CalPERS’ board will allow public employees hired after January 1, 2013, to increase their pension checks by including special pay in their pension calculations. For workers hired after this date, pension checks are calculated using a formula based on a worker’s age at retirement, years of service, and the final three years of salary.

The list of approved supplemental pay includes higher pay for maintenance workers who replace street lamps from an aerial bucket, school district employees who supervise kids during recess, librarians who provide direction or resources to library patrons, and policemen who are good marksmen. Aren’t all cops expected to be good shots? Aren’t all librarians expected to assist the public?

These pay supplements are largely scams to grab more taxpayer money. And CalPERS’ decision to officially recognize these supplements for the purpose of calculating pensions undermines the 2012 pension reform law PEPRA, which disallows “ad hoc” payments being used to calculate benefits. The law states that pensions must be based on “the normal monthly rate of pay or base pay.” This language was intended to end “pension spiking”—the practice of boosting “pensionable” income using supplements such as overtime pay, unused vacation pay, allowances, and bonuses.

The intent of PEPRA was to end these spiking shenanigans, but CalPERS is now attempting an end-run around the reforms by authorizing higher pensions through pay upgrades, which employees can manipulate in the final years of their service. Unfortunately, this type of fiscal irresponsibility is routine for CalPERS.

In 1999, CalPERS’ board told the state legislature and Gov. Gray Davis that a generous pension increase bill, SB 400, could be implemented “without it costing a dime of additional taxpayer money.” The board claimed that “superior” stock market returns would cover the additional cost of the higher benefits for at least 10 years. Relying on this “expert” opinion, the legislature overwhelmingly passed the bill and Davis quickly signed it into law.

But CalPERS’ claims about SB 400 were quickly proven wrong, and the benefit increases blew a massive hole in CalPERS’ finances, which persists today. The Sacramento Bee analyzed data from CalPERS’ internal annual reports and found the average first-month pension payout for new retirees doubled between 1999 and 2012. CalPERS’ deputy chief actuary David Lamoureux has attributed at least 20 percent of the payment increase to the 1999 benefit enhancements alone.

CalPERS has proven to be a partisan political player, advancing public-employee interests instead of acting as an unbiased servicing agency—its true mandate. Today’s decision adds to CalPERS’ credibility gap when it comes to managing the pension fund with integrity and responsibility.

CalPERS’ new regulation is pension spiking by another name—“supplemental pay.” The governor and legislature must act swiftly to stop this abuse. If not, CalPERS will saddle our children and grandchildren with even more immoral pension debt, this time to pay for new pension spiking.

NSA “Fatigue”?

Washington Post: How the NSA is tracking people now

Washington Post: One of the many ways the NSA is tracking you

Last month I saw a New York Times account of the latest interview with Edward Snowden headlined, “Racy Photos Were Often Shared at N.S.A., Snowden Says“—yet not widely picked up elsewhere—and I wondered, “Oh dear, if sex isn’t selling continued interest in NSA spying revelations, we’re in trouble.”

Now, in an in-depth interview in Wired magazine, conducted by James Bamford (for whom we hosted an event in 2003 upon the release of his book, Body of Secrets: Anatomy of the Ultra-Secret National Security Agency), Mr. Snowden himself expresses the same fear:

Another concern for Snowden is what he calls NSA fatigue—the public becoming numb to disclosures of mass surveillance, just as it becomes inured to news of battle deaths during a war. “One death is a tragedy, and a million is a statistic,” he says, mordantly quoting Stalin. “Just as the violation of Angela Merkel’s rights is a massive scandal and the violation of 80 million Germans is a nonstory.”

There’s certainly no reason for such fatigue, as continuing revelations should be building continuing horror in anyone still paying attention.

In the in-depth interview from which the Times story drew, for example, Mr. Snowden provided further details of the programs that drove him to blow the whistle:

the officials who authorised these programs knew it was a problem, they knew they didn’t have any statutory authorisation for these programs. But instead the government assumed upon itself, in secret, new executive powers without any public awareness or any public consent and used them against the citizenry of its own country to increase its own power, to increase its own awareness.

And a recent Washington Post story culminated from a four month investigation of more than 160,000 intercepted e-mail and instant-message conversations, some of them hundreds of pages long, and 7,900 documents taken from more than 11,000 online accounts, mostly held by non-targeted American citizens—all retained by the NSA and released by Edward Snowden to disprove NSA’s claims—frequently repeated by President Obama—that it only retains “meta-data:”

They tell stories of love and heartbreak, illicit sexual liaisons, mental-health crises, political and religious conversions, financial anxieties and disappointed hopes. The daily lives of more than 10,000 account holders who were not targeted are catalogued and recorded nevertheless.

If the knowledge that the NSA collects and stores indefinitely all of your email, cell, online transactions—as well as tracking your whereabouts at any given moment—does the thought of 18 year-old voyeuristic NSA employees leering at pictures of your daughter, and finding their amusement in shared intimacies meant only for the eyes of friends cause you outrage?

Even if not a quote of Thomas Jefferson, the sentiment remains more valid than ever:

Eternal vigilance is the price of liberty.

Having now failed to pay for our liberty with vigilance, each must now decide to pay by being informed, informing others, and protesting loud and long until the NSA and its fellows are dismantled and disgraced forever.

The alternative—fatigue—means the death of liberty. The only question is how soon?

There Is a Market for Human Organs, Whether You Like It or Not

indexThe buying and selling of human organs was in the news this weekend, via an investigative report in the New York Times. People tend to be moved when they learn about someone donating an organ to someone else who needs it, but they also tend to be disgusted by the notion of a market where people can sell their organs to strangers. Naturally enough, this market consists of high-income patients and low-income donors.

The Times profiles an Israeli woman who bought a kidney from a Costa Rican donor, for a total cost of $175,000. A donor gets about $5,500. The rest goes to middlemen and medical staff. It doesn’t sound like a great deal for the donor, does it?

On the other hand, 4,000 people die waiting for kidneys in the United States alone. The only country where there is no waiting list for kidneys is the Islamic Republic of Iran, which allows donors to sell organs. Another way to clear the market is the Chinese way, which consists of harvesting them from prisoners—often sentenced on grounds unrecognizable as crimes by Westerners, such as practicing the spiritual discipline of Falun Gong.

China’s harvesting of human organs—from often living victims—is described in horrifying detail by Ethan Guttmann in his new book, The Slaughter. Outlawing a legal market of willing buyers and sellers will always result in a black market which will be exploited by gangsters. We also see this in the United States when jurisdictions hike tobacco taxes. The response is an increase in contraband.

A solution is a properly regulated market into which people can sell their organs. It’s best described by Sally Satel, MD.

[Editor’s note: Also see the extensive writings on this topic by economist Alex Tabarrok and other fellows at the Independent Institute.]

Prize-winning Mathematician Says Common Core Math Doesn’t Add Up

1922508_10152143072400914_313210801_nLast fall Marina Ratner was helping her grandson with his sixth grade math homework. His Berkeley middle school had just implemented Common Core, which had been touted as rigorous college- and career-ready standards that are internationally benchmarked to standards from top performing countries. According to Ms. Ratner, her grandson’s middle-school math class spent so much time drawing pictures that there was no time for serious instruction in core mathematical concepts. As Ratner explained in her recent Wall Street Journal editorial:

... the teacher required that students draw pictures of everything: of 6 divided by 8, of 4 divided by 2/7, of 0.8 x 0.4, and so forth. ...Who would draw a picture to divide 2/3 by 3/4? This requirement of visual models and creating stories is all over the Common Core. ...A student who gives the correct answer right away (as one should) and doesn’t draw anything loses points.

Here are some more examples of the Common Core’s convoluted and meaningless manipulations of simple concepts: “draw a series of tape diagrams to represent (12 divided by 3) x 3=12, or: rewrite (30 divided by 5) = 6 as a subtraction expression.”

This model-drawing mania went on in my grandson’s class for the entire year, leaving no time to cover geometry and other important topics. While model drawing might occasionally be useful, mathematics is not about visual models and “real world” stories. It became clear to me that the Common Core’s “deeper” and “more rigorous” standards mean ... [s]imple concepts are made artificially intricate and complex with the pretense of being deeper—while the actual content taught was primitive.

Far from being a barbarian at the gate, Ratner is a prize-winning mathematician from UC Berkeley who, like a growing number of opponents, has legitimate concerns about the so-called rigor of Common Core. Ratner explained:

As a mathematician I was intrigued, thinking that there must be something really special about the Common Core. Otherwise, why not adopt the curriculum and the excellent textbooks of highly achieving countries in math instead of putting millions of dollars into creating something new?

Reading about the new math standards—outlining what students should be able to learn and understand by each grade—I found hardly any academic mathematicians who could say the standards were higher than the old California standards, which were among the nation’s best. ... The Common Core fails any comparison with the standards of high-achieving countries, just as they fail compared to the old California standards.

Moreover, Ratner concludes that parents who believe Common Core math will help prepare their children for college-level work will be sorely disappointed because “the new standards represent lower expectations and that students taught in the way that these standards require would have little chance of being admitted to even an average college and would certainly struggle if they did get in.”

In the final analysis, Common Core is a nearly $16 billion step backward for American taxpayers who could have adopted high-octane standards similar to California’s that were more rigorous, less expensive, and did not involve all the unconstitutional overreach from the federal government.

Patent Trolls: Their Threat to U.S. Innovation—and the Solutions

"Thoroughly researched and documented, this book should be read by all who are concerned about the decline in America's competitiveness in the world market." —Alex Kozinski, Chief Judge, U.S. Court of Appeals for the Ninth Circuit

“Thoroughly researched and documented, this book should be read by all who are concerned about the decline in America’s competitiveness in the world market.”
—Alex Kozinski, Chief Judge, U.S. Court of Appeals for the Ninth Circuit

A menace is threatening technological innovation in America: the menace of patent trolls. Their modus operandi: Patent trolls make money—big money—through litigation, rather than by creating and selling products or services themselves. Typically, they acquire an overly broad patent and then lie in wait as the market for the patented product or service develops and becomes lucrative. Then they threaten legal action against firms they claim have violated their patent rights, often the most innovative companies in America. The cost to the U.S. economy is staggering, as Independent Institute Research Fellow William J. Watkins, Jr., explains in his new book, Patent Trolls: Predatory Litigation and the Smothering of Innovation.

From 1990 through October 2010, lawsuits initiated by patent trolls destroyed wealth valued at more than $500 billion. One cause of the problem is that trolls have discovered a jurisdiction where it’s especially desirable to file a patent lawsuit: the Eastern District of Texas, where the local rules are plaintiff friendly, the rocket docket keeps defendants on their heels, and an undereducated jury pool leads to Texas-sized damage awards (judgments in the hundreds of millions of dollars are not unheard of). But a more fundamental problem that patent trolls exploit is the outmoded nature of the U.S. patent system: the United States Patent Office issues patents for a uniform term of 20 years, even though the pace of technological innovation is faster in some industries than in others.

How might we slay the patent troll and thereby spark a renaissance of innovation? Reducing the patent term in sectors with shorter product lifespans, such as computer hardware and software, would help by denying trolls the use of older patents to shake down new inventors, Watkins explains. In addition, policymakers should consider creating a patent court system that would weed out junk claims. Watkins also recommends that we learn from the example of Europe, where laws restrict the number of product categories eligible for a patent. If and when lawmakers and courts adopt the numerous sensible reforms that Watkins proposes, the U.S. economy will become a much more welcoming place for the world’s most creative and productive minds, enabling the pace of innovation to quicken and greater prosperity to follow.

* * *

Patent Trolls: Predatory Litigation and the Smothering of Innovation, by William J. Watkins, Jr.

Exposed: How the Explosion of Patent Litigation Threatens the U.S. Economy In the New Independent Institute Book (Bloomberg BusinessWeek; Yahoo! Finance; others, 8/18/14)

Audio Interview: William J. Watkins, Jr. on Patent Trolls, (XMSatellite’s “Innovation Navigation” 6/18/14)

[A slightly different version of this post first appeared in the August 19, 2014, issue of The Lighthouse. For a free subscription to this weekly newsletter of current affairs, public-policy analysis, and event announcements, enter your email address here.]

Walmart Shakes Up Primary Care—and the Whole System

fastcareWalmart has a new take on retail clinics. These newly launched clinics will charge patients $40 for a visit—but only $4 for Walmart associates. Anybody, with or without insurance, can go into one of these clinics and be seen by a qualified health professional, without the usual paperwork. Although the mega-retailer has operated clinics in its stores for a few years now, the new ones are different in a couple of ways.

First, Walmart’s previous clinics were collaborations with local hospitals, which had “mixed success.” So, it appears to have decided to go it alone. I am not surprised. Can you imagine a company like Walmart, which succeeds in an unregulated industry with ruthless price competition, trying to negotiate a deal with hospital executives? The communications challenges must be almost insurmountable—sort of a Mars and Venus situation.

When hospitals acquire primary-care medical practices, they don’t end up reducing costs and increasing transparency. On the contrary, they use the acquisition to charge higher, hospital-sized fees to patients and insurers. That is exactly the opposite of what Walmart is trying to achieve.

Second, Walmart looks to be rolling out these clinics in states that have not expanded the number of residents dependent on Medicaid (such as South Carolina). Obamacare itself is not responsible for the growth of these clinics. Rather, the failure of Obamacare to significantly reduce the number of long-term uninsured Americans is a cause of renewed investment in these clinics.

Insurance is irrelevant to these clinics, which post and accept cash payments directly. Walmart and other businesses outside the government-medical complex increasingly understand that there are opportunities outside those bureaucracies, and healthcare enterprises that operate free of the dead hand of Obamacare can take care of their customers without getting bogged down in the old system.

* * *

For the pivotal alternative to Obamacare, please see the Independent Institute’s widely acclaimed book: Priceless: Curing the Healthcare Crisis, by John C. Goodman.

California Lawmakers Mandate Students Study about Obama

ObamaClassroomYou know your presidential popularity must be tanking when a state legislature has to pass a mandate requiring students to study about you in school.

Recently the California State Legislature passed a new law (AB 1912) requiring the Instructional Quality Commission, which helps oversee the state’s Common Core standards, to consider revising the social studies framework to include a section on the significance of President Obama’s election in the context of voter discrimination. Co-sponsor Sen. Holly Mitchell (D-Los Angeles) explained that it’s important for students to learn about “overcoming our nation’s past to elect our first black president.”

In spite of its back-to-school timing, this new law likely has a lot more to do with future elections than ones in the distant past. Throughout the summer the president’s job approval ratings hit all-time lows hovering around 40 percent nationwide (here, here, and here). In California, Obama’s approval rating slipped 10 points overall to 52 percent since the beginning of the year. The declines were even deeper among his base who’ve given him high approval ratings in the past: down 15 points among women, 14 points among registered Democrats and voters under 40, and 12 points among nonpartisan voters. Meanwhile the approval rating for the State Legislature is inching its way back up to roughly 42 percent according to some polls, 35 percent according to others.

If elected officials in California really wanted to overcome the past, they’d give students of all backgrounds better education options today. Consider grade four reading proficiency. Researchers pay particular attention to student proficiency in this subject because if students cannot read well by this point they will continue falling farther and farther behind in this and other core subjects.

According to the latest data from the National Assessment of Educational Progress (NAEP), also known as the Nation’s Report Card, just 53 percent of California White, non-poor fourth graders (those not eligible for federal free or reduced-price lunches) scored proficient or better in reading. That figure drops to 31 percent among non-poor Hispanic fourth graders, and plummets to a shocking 14 percent among non-poor African-American fourth graders —just one percentage point higher than their peers who are from impoverished families.

Thus large majorities of California students are not proficient in elementary reading in spite of spending well over $10,000 per student.

If California lawmakers were serious about helping students overcome the past, then today they’d enact statewide parental choice programs that empower parents to choose the public, private, virtual, or home school of their choice. More options—not more mandates—are what California students and families really need.

What Is to Be Done with Health-Insurance Exchanges, Post-Obamacare?

Money-Spiral-Image-for-PostAny time a Republican politician suggests that there is anything positive in Obamacare, the media are eager to declare that this means the Republican establishment is backing away from repealing the Affordable Care Act and wants to “fix” it instead.

This, of course, is what most businesses and their lobbyists would prefer take place. They would agree with what the Kaiser Family Foundation insists in its consistent drumbeat of monthly polls, including its latest finding that “over half the public has an unfavorable view of the Affordable Care Act (ACA) in July, up eight percentage points since last month,” but that a “majority continues to prefer Congress improve ACA rather than repeal and replace.”

The latest exhibit is a report in the Wall Street Journal that U.S. Senator Bob Corker (R-TN) thinks that “we could build on the exchange concept.” What? Build on a legacy of bloated and broken IT contracts, which swallowed up billions of dollars (including $655 million on three state-based exchanges that shut down after a few months of operation) and failed in so many different ways to enroll people properly?

“Building” on those failures would be a strange way to “fix” Obamacare. Fortunately, a member of Senator Corker’s staff has told me privately that the senator meant nothing of the sort.


Taking Offense at Every Word or Phrase?

politically_correct-194x300A recent news item suggests that if offense possibly can be taken, it will be taken.

We have just been treated to studied outrage at the nicknames of the NFL’s Washington “Redskins”, Florida State University’s “Seminoles” and MLB’s Cleveland “Indians.” As my friend and colleague Randy Holcombe reminds us in a recent blog, the moniker of the “New York Yankees” may be more offensive to southerners than any of those names.

News reports now suggest that a small cadre of faculty members at the University of Mississippi want to ban the use of “Ole Miss” as the school’s nickname owing to its “racist” origins. Never mind that a survey conducted by the university itself found that a majority of respondents reported that “Ole Miss” was nothing more than convenient shorthand for “The University of Mississippi” (and it fits better on football helmets and baseball and basketball jerseys).

What is the origin of “Ole Miss”? Slaves coined it, in reference to the wife of the planter to whom they were bound. If the planter and his wife had a daughter, she was called the “young miss.” The term, hence, did originate in the slave culture of the cotton south, but its racist connection is indirect insofar as it grew from the linguistic usages of the slaves themselves. (Truth in advertising: Until 2011, I was on the faculty at the University of Mississippi for 23 years; I am a Rebel as well as an Aggie.)

Slavery and “Ole Miss” are anachronisms, but history happened and cannot be expunged by linguistic revisionism, unless we are willing to establish an Orwellian Ministry of Truth that erases our collective memory. Ole Miss already has banned the Beauregard (“Rebel”) flag and “Colonel Reb” as its on-field mascot, substituting for them a black bear having no historical context other than a possibly apocryphal bear-shooting visit to the state by Teddy Roosevelt.

The University of Utah just reached an agreement with the “Utes” allowing the school to continue to use its nickname in return for a promise of college scholarships earmarked for members of that tribe of Native Americans. I suspect that a payoff in cash or in kind likewise is the underlying goal of individuals and groups opposed to “Ole Miss.”

Obamacare Threatens Free Clinics

in-line-for-obamacareObamacare’s most significant effect is an expansion in the number of people dependent on Medicaid, the joint state-federal welfare program for low-income people. Kaiser Health News points out that this expansion is threatening the existence of free clinics. Some clinics are signing up for Medicaid, while others are closing:

“We used to say ... ‘wouldn’t it be great if we no longer had uninsured and we could close our doors and go out of business,'” said Michelle Goldman, CEO at the Eastern Panhandle Care Clinic in Ranson, W.Va., which is one of the free clinics now also taking Medicaid. “But the truth is we like the work we do and enjoy helping this population and believe we still have a lot to offer them.”

While a few free health clinics have shut their doors in Arkansas and Washington, most expansion-state non-profit free clinics are reassessing their business strategies. Medicaid offers the potential to give their patients better access to specialists, diagnostic testing and hospital care, and that’s created a sense of unease for operators of the clinics that for decades have played a key role in the nation’s health-care safety net.

“These changes have caused some real disruption in the free clinic sector trying to anticipate what it means for patients who continue to need our services, and how we can sustain ourselves,” said Marty Hiller, senior consultant with Echo, a consulting firm that works with free clinics. “It’s been a tremendous upheaval.”

The nation’s loosely organized network of free clinics have come a long way since the 1970s when most were made up of volunteer doctors and nurses working a day or two a week in church basements. Today, about 1,200 free clinics serve about 6 million patients, according to the National Association of Free and Charitable Clinics. Their increasingly modern facilities look much like private medical offices that serve patients with insurance. They often use electronic medical records, pay administrative staffs and nurse practitioners, and run their own pharmacies.

Unlike the nation’s community health centers, which receive billions in federal funding and are a key part of the health law’s push to expand access to health care, free clinics have traditionally relied on private donations, and state and local assistance. Community health centers, which also treat poor patients, charge patients above the poverty level on a sliding fee scale and are paid a higher Medicaid fee than private physicians.

The assertion that Medicaid dependency increases patients’ access appears unfounded: Medicaid patients have terrible access to physicians. It does not appear that access to care has changed for these patients—at least in the short term. However, the change in cash flow means that the clinics are now more accountable to the federal government than private donors and local government. That will likely increase the bureaucratic burden and decrease quality of care in the long term.