MOORLACH UPDATE — OC Register — January 21, 2010

It’s nice to see that the media reads my Updates, as the January 16 edition on the negotiations is mentioned in the OC Register article below.

The negotiations were to have been concluded by last October.  The union negotiators for AOCDS (the Association of Orange County Deputy Sheriffs) started the process in a slow and methodical manner, which may be a major reason for why they are finally coming to a close in January.

Finding agreement on key issues may have been the other reason for the extension in the length of time.

I will reiterate that I was hoping to obtain more concessions. 

The county is giving a generous 18.5 percent increase in the per member cost for medical insurance.  There will be 6.5 percent increases in the next two subsequent years.

AOCDS members will begin contributing one percent on their employee pension plan costs in the first year.  This is a start toward a 5 percent employee withholding, but it is far below the average 13 percent that the county is paying for AOCDS members. 

By contrast, non-safety members pay all of their employee withholdings and also pay additional withholdings for their recent August 2004 retroactive enhancement relating to the unfunded actuarially accrued liability (which will be rising).

Imposing a lower tier on new hires is a move in the right direction.  Unfortunately, going from “3% at 50” to “3% at 55” is not significant.  Having new hires go back to the original “2% at 50” would have been a more satisfactory resolution.

Nevertheless, the reality is that this lower tier will have no fiscal effect for many years because it is a futureward solution that only takes effect slowly as new employees are hired and work a significant period of time.

Currently, the county is not hiring new employees.  Therefore, there are no significant savings for the foreseeable future.

But, except for our legal efforts to rescind the retroactive pension increase, this is probably the only solution going forward in addressing these runaway pension costs.

On the plus side, as with the other unions we have recently concluded negotiations with, there are no general salary increases.  The method of how overtime is computed has also been properly resolved.

However, due to the severe budget cuts the Sheriff’s Department and the District Attorney’s Department are facing, salary reductions would be a better solution at this juncture in history.

A salary reduction may be a solution that must be implemented across-the-board if this economic cycle doesn’t conclude soon.

Deputies approve new pension deal

By JENNIFER MUIR

Sheriff’s deputies have agreed to start paying for a share of their retirement costs and reduce the lucrative “3 at 50″ pension benefit for new employees.

Members of the Association of Orange County Deputy Sheriffs voted overwhelmingly to approve a tentative  three-year contract agreement with the county, union spokesman George Urch said Wednesday night. About half the union’s members voted, and 86.5 percent — or 766 members — approved.

Union’s President Wayne Quint declined to comment until after county supervisors vote on the agreement.

Supervisor Pat Bates touted the vote as a step forward toward pension reform.  “I think we set a new bar for negotiations in other employee pensions.”

The tentative deal marks the first time that the union has been willing to back off its “3 at 50″ pension formula, which allows members to retire at age 50 with 90 percent of their salary.

New employees would not be able to retire until age 55, when they can collect 3 percent of their annual pay for each year they worked at the department, according to details released Wednesday by the union. New employees also would contribute 6.6 percent of their retirement costs.

Existing employees would contribute 5 percent of their retirement costs by January 2012. Currently, deputies don’t share the cost.

Supervisor John Moorlach has called the deal a step in the right direction but said more needs to be done.

“The Sheriff’s Department will be facing more layoffs if we do not receive more concessions” he wrote in an email to constituents last week. 

The county sued the deputies union to undo the retroactive portion of the “3 at 50″  benefit for police, saying the  plan violated state law because retired public safety employees were paid extra for work they had already done. The county also argued that the plan was illegal because it spent general fund money without voter approval.

A judge rejected the county’s arguments, but the county is in the process of appealing the case — and has so far spent more than $2 million on the legal battle.

FIVE-YEAR LOOK BACKS

January 21

2000

An odd pairing occurred when both I and State Treasurer Phil Angelides agreed on opposing a legislative proposal.  Meg James of the LA Times covered it in “Finance Report Backers:  Remember O.C. – Angelides, Moorlach defend requiring counties to submit investment data to Sacramento.  Others say the rules are costly.” 

When I served as Treasurer, I was providing monthly reports to the State Treasurer’s office, even though it was only required quarterly.  We were preparing reports for the Supervisors and the participants, what was so difficult about doing one more?  And why the state thought that it cost so much is a topic for another discussion.  But, the extra set of eyes made sense to me. 

What was awkward is that Phil Angelides recommended that we do a joint editorial on the topic.  I forwarded him a draft proposal and never heard back.  But, I did see one of his staff quoted on the matter and that staff member used a line that was lifted from my draft.  Awkward.

            State Treasurer Phil Angelides is opposing a plan to scrap a 5-year-old law requiring counties to send quarterly investment reports to the state, and questioning whether lawmakers are ignoring the lessons of Orange County’s bankruptcy.

"Those who forget history are doomed to repeat it," Angelides said Wednesday after a legislative analyst recommended that California abandon its stepped-up reporting requirements, adopted in the wake of Orange County’s fiscal meltdown.

The cost of the requirements, estimated at about $3.5 million a year, is "significantly more than the Legislature anticipated," analyst Elizabeth G. Hill wrote Tuesday in a seven-page report to the Senate Local Government Committee, which requested the review last summer.

Hill’s analysis is certain to rekindle the debate over whether the state should be a watchdog over local government, as well as the relevance of reams of financial data that counties must compile.

An Inland Empire lawmaker contends the reports would do little to prevent another bankruptcy like Orange County’s. Instead, he said, the paperwork is simply filling space in some warehouse.

"We’re paying a lot of money for very little," said Assemblyman Bill Leonard (R-Rancho Cucamonga). "We may have been overreacting to require the counties to submit so much data that is just filed away in Sacramento."

Angelides says the reports play an important role by shedding light on local investment practices. Angelides and Orange County Treasurer John M.W. Moorlach called the program an "inexpensive insurance policy." Based on the documents, Angelides’ staff finished a report earlier this month that found that California’s county treasurers have about $32 billion invested, most at low risk.

"I still see a need for this disclosure," said Moorlach, who was elected after Orange County’s bankruptcy. "It doesn’t hurt to have another set of eyes looking at these reports."

State officials have gone back and forth over the necessity of making counties file the documents. The state has demanded since 1933 that county treasurers make public filings. Sixteen years ago, the requirements were bolstered after San Jose had problems with its investments. In 1990, then-Gov. George Deukmejian persuaded lawmakers to relax the requirements. The Legislature did, only to quickly restore the rules after Orange County’s bankruptcy.

The exact cost of the program was difficult to determine, Hill wrote. However, last year, the state set aside $15 million to reimburse local governments and school districts for complying with the reporting requirements since 1995.

The laws have forced counties to adopt policies to guide their investment decisions, and some treasurers have even placed the reports on county Web sites, Hill wrote. But other reforms have gone further to improve the climate for making sound investments. Now counties are legally required to diversify their portfolios and avoid the risky schemes employed by former County Treasurer Bob Citron.

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