The CalPERS LTC Fund is in serious financial trouble. The LTC Board has determined that swift action to improve the fiscal health of the Long Term Care Program is imperative.
Two actions will take place immediately, the first being that there will be no open enrollment program, nor will any new policies be issued until the fund conditions improve. The second will be an increase in rates of 15% to 20% for current policy holders next year.
CalPERS will be sending this information to CalPERS members this week.
The response of government to its spending habits during this Great Recession is disappointing to say the least. The State of California and local government entities throughout California are grappling with history budget shortfalls. Quarter after quarter financial experts report to these government entities that their tax revenues are falling short of expectations. The government responds with a series of shortsighted actions such as pay cuts and furloughs of its workforce and the reduction of services to some of California’s most needy residents. While these cost saving measures may get the government temporarily through those short term budget periods, they have obliterated the productivity of the employee workforce, aggravated existing social problems while only temporarily solving their financial problems. The leaders of these government entities have lost sight of a fundamental question. That question is as follows: “Why are we here?” Put another way, government leaders for the most part have refused to focus on the fundamental reasons their government entity exists in the first place. What are the indispensable services and protections that each government entity must provide California?
The reason our elected officials have not publically asked these questions, let alone taken action on them, is because to do so would produce a clear but painful solution for California’s elected officials and its managers that run California governments. The solution is clear: Dismantle the massive bureaucracy that strangles government and prevents it from carrying out its mission.
HOW DID WE GET HERE?
There are several reasons the government finds itself in its current financial mess. First, the government has grown to an unsustainable size. Between 1998 and 2008 California State and local governments have grown exponentially. In fact, this ten year period has produced five times faster growth in government than any other previous decade. Governments have added a myriad of programs and specialized jobs. They have also added massive numbers of employees at all levels.
Term limits for California politicians is another significant problem. In another glaring example of why the California ballot initiative process rarely works, the legacy of term limits will be the growth of government without leaders. From the minute a state politician is elected to office he or she immediately begins planning for their next political job. After all, they will only have a limited number of years in their current position. Therefore, politicians are afraid to make tough decisions. They are driven by public perception and polls. In short, they are incapable of being leaders. They are not vested for the long term. They are a group of yes men and women, who never want to be the bad guy, and never want to say no. Consequently, on both sides of the aisle they have said “yes” to a massive buildup in government bureaucracy.
Macro-economics is another very important factor that has led to California’s government malaise. Apparently, California’s leaders have chosen to ignore or simply do not know some basic laws of economics. The economy of the United States and California is driven by consumer spending. According to the Department of Consumer Affairs, almost 70% of the nation’s gross national product is now consumer spending. Compare that with the 1950’s whereover 2/3rds of the GNP was manufacturing. For today’s economy to grow, consumers must always spend in increasing amount of their money. In other words, for the economy to grow consumer spending must grow. Consumers long ago exhausted any surplus income they might have had. For the last 20 years, consumer spending has been driven by the credit market. Whether it be credit cards or home refinancing consumer spending, especially on big ticket items, was only possible because of the credit made available to consumers. Well, as we know, the credit house of cards has collapsed and will not be coming back.
Another significant factor causing government’s current problems was the assumption that the taxpayer could always pay more to government. All government is supported by the taxpayer–the private sector taxpayer. Taxes paid by government employees only support a fraction of government operations. The private sector taxpayer has always funded government. Today, in many sectors, the private sector has been radically reduced if not completely wiped out. In most cases, the taxpayer is not available to bail out government this time.
WHERE DO WE GO FROM HERE?
The starting point for any solution is that government managers and elected officials must ask the fundamental question: Why are we here and what are the fundamental and indispensable services we must provide California? If those managers and officials answer that question honestly they will recognize that large pieces of the bureaucracies they have created simply are not necessary.