California Issues 23,255 Pink Slips
During the evening news on March 15, 2010, KTVU (Channel 2) in the San Francisco Bay Area reported, "State of California issued 23,255 pink slips to CA teachers." The state is required to notify teachers no later than March 15th if they might be terminated and not teaching the following fall semester. It's a sad reality becoming all to common in America.
This doesn't mean all 23,255 teachers will be laid off, but merely the state has to make notifications in case they need to make head count changes prior to the fall semester for budgetary reasons. It's highly unlikely the state will eliminate all 23,255 recipients of those pink slips. However, given the massive budgetary short falls in CA. it's quite feasible that a large portion of those notified will not be teaching next fall.
The Bubble State continues to highlight some on going issues in this country. At the fore front, the Bubble State's budgetary issues are forcing very tough decisions at every level of government.
One of the issues I discussed a few weeks ago is how wage deflation will continue in this country for the next several years, and the next segment of society facing this risk just might be the public union worker. In fact, the 23,255 pink slips were only sent to teachers, and did not include reductions that are most likely coming for CA policemen, firemen or other municipal workers.
The total number of CA public union workers getting laid off in the near future could be quite large. Now factor that across the country. There are over 20,000,000 municipal workers across this country. A mere 5% reduction equals a head count reduction by 1,000,000 nationally. Add that to the current unemployment, and well, that's a large number in aggregate.
It pressures the very issues we have today of lower consumer spending in the future, which pressures lower tax revenues for state and local government through lower income taxes and consumer taxes. It also pressures real estate values via lower incomes.
Another issue that might come from this battle is something I predict will happen this year, that another municipality (Vallejo, CA and Pritchard, AL being the first to the BK scene) will file bankruptcy this year. And we might see some much larger cities go this year.
The budgetary issues around this country are gaining no real ground in resolution because the unions aren't coming to the table, in fact, many are holding out for contractual raises in a declining tax revenue environment. That's nothing short of laughable when considering raises.
The battles around this county just might force some municipalities to file bankruptcy, especially if they can't bridge this years gap and foresee a continued gap into the next fiscal year starting 7-1-2010. It's just math and the numbers have to equal themselves on both sides of the income/expense statement. It's that simple.
Lastly, the main issue this story highlights is just how blind are the public unions. KTVU reported the teacher union's recommendation for solving the problem included increasing class size and using furloughs. Class sizes in CA are already too large and we'll be forced into larger classes with teacher layoffs.
Notice how the union did not suggest taking salary and benefit cuts across the board for all union members. This is the only solution that allows for no or minimal layoffs and providing a similar service to the public.
In fact, the union would rather sacrifice younger union members who don't have seniority and vulnerable to lay offs, so senior members can maintain their compensation levels.
Just who are the unions loyal too? It's not the public! It's not the kids! It's not junior members! It seems like the senior members of the union are all that count in this nightmare. When, just when, are the unions going to understand? It's simply a mathematical equation forcing expense reductions, and you don't need to be smarter than a 5th grader to understand it.
In the immediate future, the resolution of municipal budgets and the public union compensation and benefit package issue is the hottest financial issue of the day. The relative importance and immediacy of this issue nationally has surpassed that of failing banks, the commercial real estate correction, and the insanity of our federal government.
The clock is ticking with a deadline of this fiscal year ending 6-30-2010. Changes (reductions of some kind) have to be made, and since the cuts need to be deep and painful, expect the situation to get more confrontational and heated as these battles brew.
The situation in CA is a perfect example of what's going on around this country. More layoffs are coming, and union arrogance and/or ignorance continues to be a major problem. Unions have the wrong mentality.
The innocent victim in this particular situation is obviously the children. The CA educational system has fallen to the bottom of the ranks in the United States. The CA budgetary issues will continue to suppress the state's educational rankings. Not because we are not spending enough. No, studies show that has nothing to do with quality education. The problem is the current system forces inefficiencies in spending coupled with no effective way to eliminate ineffective teachers based on seniority within union rules.
This issue also goes to showcase what I feel is the beginning of the next great bubble in our society, SOCIAL UNREST. This very issue pits young and against old, by pitting students against adults, by pitting younger union members and against senior members. As we continue in this country with wage deflation and layoffs, we create a divided America on the "Age Front." In addition, the lines in the sand being drawn between the public's best interest and public unions are growing deeper and deeper. As it grows, I expect a back lash of negative sentiment against all unions. Both of these social unrest issues are simply cause and effect.
Hope all is well.