Thursday, March 29, 2012

End of Furloughs Vaults Sacramento County into Top 5 in wage Growth in 2011, 3rd quarter

The BLS just released the Quarterly Census of Employment of Wages for the 3rd quarter of 2011

Sacramento County has been near the bottom of the nations 323 largest counties in this report quarter after quarter.  However, the latest report shows Sacramento vaults to #5 in the nation in average year-year wage growth with 9.8% increase between 2010Q3 and 2011Q3. 

Job growth was still close to zero, but wage growth jumped.  The furloughs definitely had an effect.  Interesting timing how the temporary taxes and furloughs expired at the same time. 

Pacific Moves to West Coast Conference

I am really happy about the University of the Pacific's return to the West Coast Conference

We are finally back in a league with peer, independent universities, rather than being a misfit with large, public universities because of the history of our former football program.

As a big college basketball fan, I am excited for regular match-ups with Gonzaga, BYU, and St. Mary's.  Hopefully, we still keep UC-Davis on the schedule for an easy win.

Sunday, March 25, 2012

Wow, my tax rate really is higher than Mitt Romney

It was an exciting weekend completing my taxes.  I know I am in the 28% bracket, but I have never bothered to precisely calculate my average tax rate before.  Given all the commotion about Mitt Romney's taxes, I thought I would check.

In 2011, my wife and I had an effective (i.e. average) federal tax rate of 14.5%, and we are paying 28% on any marginal gains in income (plus 9.3% for CA).

Mitt Romney's effective tax rate is 13.9%, and he is paying 15% at the margin for his investment income.

I don't see how these relative tax rates are equitable or foster economic growth. 

(Note: My support for at least partial expiration of the Bush tax cuts and equal tax rates for investment and labor income should not be conflated with support of Governor Brown's "millionaire" tax proposal.  That will probably be the subject of longer posts in the months ahead.)

Sunday, March 18, 2012

Six figure firefighters and the Valley Economy

One of the biggest surprises to me moving to California was learning about the compensation of firefighters. 

Every firefighter I know is a great person and dedicated public servent, before and after I moved to California.  Everywhere else I have lived, they have been paid about the same as teachers, and fire captains/chiefs were like principals.  In the Valley, they typically earn double teacher salaries and have better pensions.  In many communities, they are the best jobs in town.  While I value public service greatly, compensation has to be rationally tied to the income and tax base in the community. 

It is a significant economic problem in the Valley, because the deplorable state of many public services in the Valley is directly tied to the unnecessarily high cost of providing those services.  I was glad to see the Sacramento Bee making this connection in an article today:

The (Consumnes Community Service) district, like many others, gave firefighters enhanced benefits during better times so they could retire at age 50 and earn, for life, 3 percent of their salary for every year of service.

Since then, firefighter salaries have risen, increasing pension payouts. CSD firefighters earned, on average, $115,000 in 2010, actuary reports show.

A 2 percent pay raise for a 25-year veteran firefighter making that much translates to an extra $1,700 a year in annual pension payments.

Six-figure firefighter salaries and large pensions today are the norm. Sacramento County Metropolitan Fire District firefighters averaged $121,000 in salary during 2010. About 140 of Metro Fire's retirees draw annual pensions exceeding $100,000.

CSD has recently curtailed capital improvements, funneling more of its revenue toward payroll and benefits, including retirement. Several other fire districts across the region have scaled back spending not related to compensation.

Sunday, March 11, 2012

Could a Peripheral Canal/Tunnel Increase Drought Risk?

If you have been following the Delta Plan and discussions around levees, you have heard the argument that improving levees will actually increase risk by encouraging development.  Improving levees will reduce the probability of a flood, but the argument is that the amount of property at risk of flooding will increase more as a result, thereby potentially increasing total flood risk. 

Last Saturday in Stockton, Jason Peltier said that Westlands farmers planted more orchards despite uncertain water supplies because of the increasing cost of water.  If a peripheral tunnel/canal is built, the cost of water to these farmers will go up a lot, in wet years and dry years.  Thus, his statements suggest they will plant even more of their land in permanent crops to cover these costs, even though a canal won't prevent droughts.  Thus, the consequence of drought will increase, and therefore drought risk increases since risk equals probability x consequences.

Thus, the increasing risk argument is as applicable, if not more applicable to building a peripheral canal as levees.  There are two reasons why it is more applicable to a canal than levees.

First, building is heavily regulated, especially in the Delta, whereas the choice to plant permanent crops is not regulated.  The levees increase risk argument is pretty weak in my opinion, since we can gain the risk reduction benefits of levees and use regulation to prevent any undesirable side effects like urbanization in a flood plain.  The regulations regarding this have been significantly toughened in recent years, and the Delta Plan will tighten it up even more.  There is little prospect of regulations on orchard planting, although some have recommended it.

Second, the canal/tunnel doesn't actually reduce the risk of drought, whereas levees do reduce the risk of flood.  All the analysis I have seen suggests that a canal/tunnel will not increase water supplies in dry years, any increase in water supplies would come in wet years.

In the past, I have blogged about the fact that I don't really believe that almonds were planted on the west side because water got more expensive.  Most of that planting was before the Wanger decision, and I think they were riding the almond wave just like everyone else in the Valley, and if anything got more confident about planting them when they thought their water had gotten more reliable from 2000-2006.  However, I do believe that paying for a tunnel will create a lot of pressure to invest in permanent crops, and the farmers themselves have said this is how they respond to higher prices.  Thus, it seems a canal/tunnel would certainly increase the economic consequences of drought, increasing the risk.

This is not a major argument against building a peripheral canal/tunnel; but I do think it has more merit than the argument that improving levees increases risk.  In both cases, risk is only one aspect of decision making, and is a pretty useless concept if it isn't balanced with a discussion of reward.

Tuesday, March 6, 2012