Double Dippers

Yesterday’s posting to the OC WATCHDOG at the OC Register is in today’s dead tree edition.  Below is the Blog posting.  It may be different than the printed version.

In my long battle against public defined benefit pension plan abuses, I have been frustrated that the system allows for egregious double-dipping opportunities.  In fact, the Sacramento Bee also pointed out that some retirees were even triple-dipping—by also filing for unemployment benefits!

But, in my efforts to address this issue, I’ve been more focused on a system that encourages good people to retire at such a young age.  We see people retiring in the public sector at 55 years of age.  Why not?  Stay at work, earn 100% of salary.  Stay at home, earn 80% of salary.  So they put in 40-plus hours for that additional 20%?  No wonder they say, “Why work for free?”

Many retire and realize that they still want to work.  Why develop all the experience and knowledge, only to let it sit on a shelf?  After all, some of us Type-A people don’t do well sitting around the house.  I also know that many love their careers.  We literally force Police Chiefs out because they can’t explain to their spouses that for the long hours they put in, they are only earning an additional 10 to 20 percent in wages.  Of course they retire.  And, of course they work for another city.  After all, that city just lost their Police Chief for the same reason.  Are the Chiefs bad people?  Of course not.

The answer?  Raise retirement ages.  This is low hanging fruit.  This is what the County of Orange just did with its largest employee bargaining unit.  New hires will not automatically go into a “2.7% @ 55” formula.  They will adopt a “1.62% @ 65.”  They will be able to adopt the higher benefit, but they will be paying the higher withholdings in order to do so.  Senate Bill 752 also lets those employees currently in the higher tier drop down to the lower one.  This will be tempting as it provides the elimination of the related withholdings, thus providing an increase in their net paycheck.  For many, this may be a raise opportunity they cannot turn down.

The big news?  This was a strategy that was negotiated and approved by our largest bargaining unit.  And the enabling legislation (co-drafted by our office) passed almost unanimously through a labor-dominated state legislature.  This is an amazing story.  This is a good first step.  And we’re at the forefront of addressing legacy costs.   These pension and other post employee benefit costs are boat anchors dragging every municipality in the state down the path of insolvency. 

(Sorry.  I had this ready this morning, but failed to hit the send button before all of my appointments.)

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O.C. double-dippers rake in nearly a half million a year

Jennifer Muir

There’s nothing like sticker shock.

That’s just what The Watchdog gets looking at the total amount of dinero county bigwigs like CEO Tom Mauk and Sheriff Sandra Hutchens collect each year.

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When you add up the pensions they collect from their previous place of employment, and the salaries and benefits they accrue in O.C., they’re raking in nearly a half million bucks a piece. (More specifically, Hutchens earns $492,243 a year from her pension, salary and benefits, and Mauk gets $487,805. We’ll break down those figures later in this post.)

Mauk and Hutchens are among the other type of double-dippers working in Orange County. You might remember that the Watchdog wrote a couple weeks ago about Orange County employees who retire, start collecting their pensions, then come back to the county to work part-time.

At the time, many of you asked about double-dippers such as Hutchens and Mauk: People who simultaneously collect a pension check and paycheck because they’ve retired from one government agency, then gone to work for another.  The Watchdog heard your whistle.

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The practice is common among government employees with pension deals that allow them to retire young with nearly the same pay they made during their working years. And it presents prickly ethical questions for the agencies trying to fill their top leadership positions with the most qualified employees while also advocating for pension reform.

“People are gaming the system clearly,” says Orange County Supervisor Chris Norby. “But they’re not the ones at fault. The system is at fault. If we’re incentivizing people to retire early and get a pension, then incentivizing them to get a job with a full-time salary, it’s hard to blame them as individuals.”

Supervisor John Moorlach, the county’s resident pension watchdog, agrees.

“Double dippers aren’t necessarily bad people, it’s just the system has almost forced them to do it,” Moorlach says.

Moorlach says chipping away at changes to the pension system is the answer. He pointed to legislation the governor signed late Sunday night that establishes a second pension tier for many county employees, creating an older retirement age of 65 for folks in that tier.

Still, the Watchdog wanted to find out just how much double-dippers can make under the current system.

Here’s why we care: While many employees pay into their pension funds during their working years, they get a taxpayer-guaranteed check every month once they retire–even when the economy tanks and the pension funds no longer have enough cash to pay for all the pensions they’ve promised. In Orange County, the gap between the cost of funding pensions over the next few decades and the revenue set aside to cover those costs is $3.1 billion. The same situation is playing out across the state.

Double-dipping is a symptom of the broken system.

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So, we looked at Hutchens and her two recent hires from Los Angeles: Assistant Sheriff Mike Hillman (pictured left) and Undersheriff John Scott. And we ran the names of top Orange County managers through The Register’s database of public retirees who are collecting $100,000 or more through the California Public Employees Retirement System. Mauk and the county’s Chief Financial Officer Robert Franz popped up.

The Los Angeles County Sheriff’s Department refused to provide pension figures for Hutchens and Scott. So the Watchdog asked if they’d like to volunteer how much they collect in pension. Hutchens offered up the amount she was paid in 2008. Scott refused.

(For the record, Scott earns a total of $313,298 a year from Orange County, including $108,624 that goes toward his second pension in Orange County’s system and $7,491 toward his 401A retirement account.)

Here’s a breakdown:

  • Sheriff Sandra Hutchens earns a total of  $354,236 per year from the county for her salary and benefits, including $115,669 that goes toward paying her pension in Orange County’s system, and another $16,638 toward her 401A retirement account. Meanwhile, in 2008, she collected $138,007 from the pension she earned working for the Los Angeles County Sheriff’s Department. That brings her total annual compensation to $492,243.
  • County CEO Tom Mauk earns a total of $367,541 annually from the county, including $63,882 that goes toward funding his pension in Orange County’s system and $23,546 toward his 401A. Meanwhile, he collects $120,264.60 per year from the pension he earned working for the city of La Habra, bringing his total annual compensation to $487,805.60.

(Note: Figures for Mauk and Hutchens do not reflect the five percent cut to their base pay that they voluntarily took a couple months back.)

  • Chief Financial Officer Robert Franz earns $290,038 per year from the county, including $57,288 that goes toward funding his Orange County pension and $12,027 for his 401A. Meanwhile, he collects $133,744.56 annually from the pension he earned while working for the city of Glendale. That brings his total annual compensation to $423,782.56.
  • Assistant Sheriff Michael Hillman earns $302,438 a year from the county, including $102,967 that goes toward funding his Orange County pension and $7,101 for his 401A. Meanwhile, he collects $150,157 annually from the pension he earned while working for the Los Angeles Police Department. That brings his total annual compensation to $452,595.

INVITATION

OCTOBER 17 — SATURDAY

Enjoy a guided tour of Fairview Park in Costa Mesa, located at 2525 Placentia Avenue.  We’ll meet at 9 a.m. at the park’s new interpretive area, near the west parking lot. 

Costa Mesa’s Carol C. Proctor and Robert Staples will be leading the tour.  The flyer, an invitation letter and the latest map of Fairview Park are attached.

We’ll learn about recent additions, improvements, restoration projects (with which the County and the Army Corps of Engineers has been assisting), and future projects. 

Please RSVP by responding to this e-mail or contacting Carol Proctor at 714-754-5688 or CProctor@ci.costa-mesa.ca.us.

FIVE-YEAR LOOK BACKS

October 14

1999

After the National Tobacco Settlement was reached and a revenue stream to states and the counties in California and New York was to become a reality, Wall Street jumped in.  The mantra became “securitize (hypothecate) the income stream by selling bonds and get the money now.”

Chris Reed of the OC Register shared my concerns with this proposal in “Treasurer:  Bond plan like Citron deal—County:  Top officials want to use tobacco settlement funds to retire debt.”  My preference.  Use the proceeds to fund an endowment, address bankruptcy-related debt and fund health care.

Orange County Treasurer John Moorlach has a message for county leaders who next week will propose using the county’s cut of the 46-state tobacco settlement to float a huge bond:  Don’t do it.

“If you’re right, you’re a hero.  If not, whoops, you’re back to the Citron game,” Moorlach said.

The county expects to receive $30 million to $38 million annually over the next 25 years as its cut of the $206 billion settlement.  [Gary] Burton [, the county’s chief financial officer,] wants the money to be formally dedicated to repaying a bond of up to $400 million.

But Moorlach, board Chairman Charles Smith, Supervisor Todd Spitzer and health advocates all expressed concerns about the plan – raising the prospect of a stinging rejection of a cornerstone of Burton’s and County Executive Officer Jan Mittermeier’s fiscal strategy for the county.

Moorlach said the uncertainties facing the tobacco industry – including a new lawsuit recently filed by the federal government and the prospect of much more litigation – made it an unreliable source for bond payment.Health advocates criticized the administration’s decision to disregard their pleas to use settlement proceeds for health programs.

2004

George Skelton, columnist for the LA Times, decided to address Proposition 71 in “Is Stem Cell Research the Next Big Thing for California?”  In my humble opinion, Proposition 71 is the poster child of ballot measure abuse.  The private sector was unwilling to commit resources on stem cell research.  The state’s retirement systems (CalPERS and CalSTRS) were not invested in this niche.  The University of Wisconsin already held most of the patents.  So, what is one to do to raise funding?  Do a ballot measure requesting $3 billion in bonds and put all of the stem cell researchers on the oversight committee and include provisions that do not allow the Governor or state legislature to meddle.  Brilliant.  Make the ads very emotional and you have a winner.  George quoted many on both sides of the issue.  Below is my quote and his closing paragraph.

Orange County Treasurer John Moorlach:  “I see it as another financial boondoggle.”

State government already is screwed up fiscally.  This may screw it up more.  But at least it’ll be for a good cause, one that can make us proud.  We’re buying dreams – that may come true.

Ironically, this ballot measure has done virtually nothing for stem cell research in California.  It has not helped our economy.  And, the Little Hoover Commission, Sacramento’s equivalent of a Grand Jury, just released a report confirming the concerns I raised in 2004 about its governance structure (see http://www.lhc.ca.gov/studies/198/report198.html).  But, Californians love to vote for bond measures.  Translated:  the voters are also responsible for the sorry fiscal shape of our state.  I was honored to be a signatory in opposition to this statewide ballot measure.

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