The beholden state – how government unions have doomed California taxpayers

Editor's note: The following opinion article is adapted from the new City Journal book, "The Beholden State: California's Lost Promise and How To Recapture It" (Rowman & Littlefield, 2013).  

The camera focuses on an official of the Service Employees International Union (SEIU), California’s largest public-employee union, sitting in a legislative chamber and speaking into a microphone. “We helped to get you into office, and we got a good memory,” she says matter-of-factly to the elected officials outside the shot. “Come November, if you don’t back our program, we’ll get you out of office.’

The video has become a sensation among California taxpayer groups for its vivid depiction of the audacious power that public-sector unions wield in their state. The unions’ political triumphs have molded a California in which government workers thrive at the expense of a struggling private sector. The state’s public school teachers are the highest-paid in the nation. Its prison guards can easily earn six-figure salaries.

Meanwhile, what was once the most prosperous state now suffers from an unemployment rate far steeper than the nation’s and a flood of firms and jobs escaping high taxes and stifling regulations. This toxic combination—high public-sector employee costs and sagging economic fortunes—has produced recurring budget crises around the state.

How public employees became members of the elite class in a declining California offers a cautionary tale to the rest of the country, where the same process is happening in slower motion.


California’s government workers took longer than many of their counterparts to win the right to bargain collectively. In 1968, the state legislature passed the Meyers-Milias-Brown Act, extending bargaining rights to local government workers. Teachers and other state employees won the same rights in the seventies.

These legislative victories happened at a time of surging prosperity which in turn led to rapid growth in government jobs—from a mere 874,000 in 1960 to 1.76 million by 1980 and nearly 2.1 million in 1990—and to exploding public-union membership. In the late 1970s, the California teachers’ union boasted about 170,000 members; that number jumped to about 225,000 in the early 1990s and stands at well over 320,000 today.

The swelling government payroll made many California taxpayers uneasy, eventually encouraging the 1978 passage of Proposition 13, the famous initiative that capped property-tax hikes.

Government workers rightly saw Prop. 13 as a threat. “We’re not going to just lie back and take it,” a California labor leader told the Washington Post after the vote, adding that Prop. 13 had made the union “more militant.”

The next several years proved him right. In 1980 alone, unionized employees of California local governments went on strike 40 times.

Aware that Proposition 13 had shifted political action to the state capital, three major blocs—teachers’ unions, public-safety unions, and the Service Employees International Union, which now represents 350,000 assorted government workers—began amassing colossal power in Sacramento.

Over the last 30 years, they have become elite political givers and the state’s most powerful lobbying factions, replacing traditional interest groups and changing the balance of power.

Today, they vie for the title of mightiest political force in California.

Consider the California Teachers Association. Much of the CTA’s clout derives from the fact that, like all government unions, it can help elect the very politicians who negotiate and approve its members’ salaries and benefits.

Soon after Proposition 13 became law, the union launched a coordinated statewide effort to support friendly candidates in school-board races, in which turnout is frequently low and special interests can have a disproportionate influence.

In often bitter campaigns, union-backed candidates began sweeping out independent board members.

By 1987, even conservative-leaning Orange County saw 83 percent of board seats up for grabs going to union-backed candidates. The resulting change in school-board composition made the boards close allies of the CTA.

But with union dues somewhere north of $1,000 per member and hundreds of thousands of members, the CTA can afford to be a player not just in local elections but in Sacramento, too.

The CTA entered the big time in 1988, when it almost single-handedly led a statewide push to pass Proposition 98, an initiative—opposed by taxpayer groups and Governor George Deukmejian—that required 40 percent of the state’s budget to fund local education.

To drum up sympathy, the CTA ran controversial ads featuring students; in one, a first-grader stares somberly into the camera and says, “Pay attention—today’s lesson is about the school funding initiative.”

Victory brought local schools some $450 million a year in new funding, much of it discretionary. Unsurprisingly, the union-backed school boards often used the extra cash to fatten teachers’ salaries—one reason that California’s teachers are the country’s highest-paid, even though the state’s total spending per student is only slightly higher than the national average.

With its growing financial strength, the CTA gained the ability to shape public opinion. In 1996, for instance, the union—casting covetous eyes on surplus tax revenues from the state’s economic boom—spent $1 million on an ad campaign advocating smaller classes.

Californians began seeing the state’s classrooms as overcrowded, according to polls. So Governor Pete Wilson earmarked some three-quarters of a billion dollars annually to cut class sizes in kindergarten through third grade.

The move produced no discernible improvements in student performance, but it did require a hiring spree that inflated CTA rolls and produced a teacher shortage.

During this contentious period, the CTA and its local affiliates learned to play hardball, frequently shutting down classes with strikes. The state estimated that in 1989 alone, these strikes cost California students collectively some 7.2 million classroom days.

Los Angeles teachers provoked outrage that year by reportedly urging their students to support them by skipping school. After journalist Debra Saunders noted in L.A.’s Daily News that the striking teachers were already well paid, the union published her home phone number in its newsletter and urged members to call her.

Four years later, the CTA reached new heights of aggressiveness after a business-backed group began a petition to place a school-choice initiative on the state ballot.

In a union-backed effort, teachers shadowed signature gatherers in shopping malls and aggressively dissuaded people from signing up.

The tactic led to more than 40 confrontations and protests of harassment by signature gatherers. The CTA’s top official later justified the bullying: some ideas “are so evil that they should never even be presented to the voters,” he said.

Armed with knowledge about the state’s powerful public-union heavyweights, one can start to understand how the state found itself in its nightmarish fiscal situation.

The problems grew intense starting after the 1998 gubernatorial election, in which the unions bet their future—and millions of dollars in members’ dues—on Gray Davis.

The candidate traveled to the SEIU’s headquarters to remind it of his support during earlier battles against GOP governors; the union responded by pumping $600,000 into his campaign.

Declaring himself the “education candidate” who would expand funding of public education, Davis received $1.2 million from the CTA.

Davis’s subsequent victory was followed by a series of breathtaking deals that left California state and municipal governments careening from one budget crisis to another for the next decade.

Perhaps the most costly was far-reaching 1999 legislation that wildly increased pension benefits for state employees.

It included an unprecedented retroactive cost-of-living adjustment for the already retired and a phaseout of a cheaper pension plan that Governor Wilson had instituted in 1991. The deal also granted public-safety workers the right to retire at 50 with 90 percent of their salaries.

When the stock market slid in 2000, state and local governments got slammed with enormous bills for pension benefits. The state’s annual share, estimated by CalPERS back in 1999 to be only a few hundred million dollars, reached $3 billion by 2010. Counties and municipalities were no better off.

Municipalities around the state are also buckling under massive labor costs. Contra Costa’s pension costs rose from $70 million in 2000 to $200 million by the end of the decade, producing a budget crisis.

Los Angeles, where payroll constitutes nearly half the city’s $7 billion budget, faces shortfalls projected to grow to $1 billion annually in several years.

In October 2007, even as it was clear that the area’s housing economy was crashing, city officials had handed out 23 percent raises over a five-year period to workers.

In the past, California could always rely on a rebounding economy to save it from its budgetary excesses. But the current California rebound is limited to areas like Silicon Valley and global centers like San Francisco.

By contrast, metropolitan regions throughout areas like the Inland Empire and Central Valley lag far behind the national recovery. In fact, 11 of the 27 metro areas in the country with double-digit employment rates as of last month are in California.

It will take an enormous effort to roll back decades of political and economic gains by government unions. But the status quo is expensive and ultimately unsustainable.