MOORLACH UPDATE — VOICE OF OC — July 8, 2010

The Voice of OC is responding to the recently released retirement benefits information from the Orange County Employees’ Retirement System, after being asked to provide the details by an Orange County Superior Court Judge.

The new data is being analyzed by all of the local dailies, so more stories are expected on the “OC $100,000 Club.”

Consequently, there will be related stories like those below. 

When negotiating with a public employee union and you come to an impasse, you can impose on salaries, but not pension changes.

This Sunday, at 10:30 a.m., be sure to watch the World Cup Soccer Finals on Channel 7, ABC.  I’ll be rooting for the team in Orange . . . the Netherlands!  The game will be played in Johannesburg, South Africa.

County Seeking State Law That Allows It to Impose Pension Cuts

County officials in recent years have both touted their cooperative work with labor unions to rein in pension costs and criticized unions for pushing for the heightened benefit that has raised the costs of government.

Yet with a statewide election months away, the rhetoric between the two sides seems to be heating up again over the pension issue.

Over the past week, with publication of executive retirees making more than $100,000 a year on their pensions, the debate went red hot.

County CEO Tom Mauk said officials are trying to get Sacramento to change state law so that local governments can simply impose pension contribution changes just like they can with wages and other benefits. Current law forbids any imposed changes to pensions at the negotiating table.

While the county is working on a new tier of benefits for new hires, Mauk said it’s necessary to find other incremental ways to lower annual payments and keep pressure off the budget.

The county’s unfunded liability for Orange County’s retirement system now hovers above the $3 billion mark, and annual payments are spiking because of sustained investment losses. With little ability to change the unfunded liability or Wall Street, county leaders are left with one main option: getting employees to pay more for their pensions.

"You can’t impose that in impasse," said Mauk. "And I invited [Orange County Employees Association General Manager] Nick [Berardino] in Sacramento to change that law."

Berardino — pointing to the publication of the $100,000 executive manager and department head retiree club — said don’t expect rank and file employees to do anything else on pensions until the top tier steps up and accepts changes to their retirement plans.

"We’re not engaging on any more changes until everybody is on a level playing field," Berardino said.

And so it goes…

— NORBERTO SANTANA, JR.

More From Mauk on Pension Changes

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Orange County CEO Tom Mauk, left, and Orange County Employees Association General Manager Nick Berardino. (Photo credit: OCEA)

I got so much response from my first post about Orange County CEO Tom Mauk’s idea to change state law regarding pensions that I decided to hit him with some more questions on the topic.

A quick review: Mauk wants to pursue changes in state law which would allow the county to basically impose pension reform at the negotiating table with employee groups.

Typically, state law precludes any changes to a pension system that would impact benefits, the argument being that the retirement nature of the benefit can’t be fiddled with.

But Mauk feels that the amounts that employees contribute to their pension should be treated like a wage negotiation. The significance being that when negotiating wages, an employer can lawfully impose an offer when talks break down.

"It’s just my idea," Mauk said, "that something ought to be pursued."

Considering that in their latest negotiations with Orange County Sheriff’s Department deputies, county supervisors were only able to get deputies to contribute 1 percent this fiscal year toward their pension, few believe that employee groups — especially those as powerful as public safety — will willingly give away much more at the negotiating table.

Thus, Mauk’s idea.

"It all would be still subject to negotiation," he said. "But if you go to impasse, pensions ought to be like wages. … If you reach impasse, you can impose an offer."

Mauk said unions would still be engaged in negotiations and be able to present arguments and analysis as they do with wages. However, the threat that the county could ultimately impose changes would undoubtedly empower the county’s negotiating position.

"It’s such a huge dollar sum that it shouldn’t be exempt from the same negotiations and the impasse process that other economic issues like wages are," he said.

Mauk said he expects to flesh out the idea with other county officials soon. "I’m thinking fairly broadly and would have to meet with (Orange County Employees Association General Manager) Nick (Berardino) and county counsel (Nick Chrisos) to refine the thought, but it’s definitely in my mind."

Supervisor John Moorlach said such a change "would be nice."

And it’s the kind of thinking on pensions that Orange County has led the state on, Moorlach said, stressing the cooperation of groups such as OCEA.

"That’s why when you see us adding new tiers (of retirement benefits), getting AOCDS (the Association of Orange County Deputy Sheriffs) starting to withhold (paying more into the pension), it’s actually a big thing," Moorlach said.

Yet Moorlach is doubtful that the Sacramento Legislature, dominated by Democrats, will listen to Republicans in Orange County.

"We know who runs Sacramento," he said.

For his part, Berardino asked that Mauk be reminded that he could get the ball rolling on this issue with or without union support. He can impose such standards immediately on upper level executives because they are at-will employees.

The same executives that – as last week’s release by the Orange County Employees Retirement System showed — will be very well compensated by taxpayers in retirement.

"If the county is genuine in their interest, they can lead by example and have the executives paying the same amount as OCEA members, which can be done at the next board meeting," Berardino said. "Let the executives show that it’s more than an idea."

— NORBERTO SANTANA, JR.

FIVE-YEAR LOOK BACKS

2005

July 4

Michael Lyster of the Orange County Business Journal started his Editor’s Notebook column with an interview.  Five years later, the topics are still very vogue.

                I talked pensions, politics and public TV this past week.

                After reading the grand jury’s report on the fallout from the county’s sweetheart pension deal, I called Treasurer-Tax Collector John Moorlach.

                I’m embarrassed to say the last time I talked to Moorlach was a decade ago, when he was an accountant crying foul about the county’s investment pool.  Back then, I went to his modest Costa Mesa office to pick a snapshot of him for the Business Journal.

                He ribbed me a bit about the time that had passed since I last called upon him as a young reporter.  But his humor turned to frustration when we started talking about the county’s pension plan.

                For months, Moorlach has been saying that more generous retirement benefits approved by the supervisors last year and formalized last week could be just as devastating as the county’s bankruptcy a decade ago.

                With the grand jury’s “Another County Crisis” report out last week, he had someone else echoing his warnings.

                The added benefits, as well as higher healthcare costs and lingering bankruptcy debt, could end up leaving the county $4.4 billion short of its obligations, the report said.

                “You bet I’m saying, ‘I told you so,’” said Moorlach, who could end up wrestling with the issue if he runs—as expected—for a supervisor seat in 2006.

                As for fixes, none of them are pretty.

                One is raising taxes.  But getting county voters to back higher taxes to bail out the supervisors—forget about it.

                The other is cutting services.  This I likely, but unfortunate and fundamentally unjust.  The poor who rely on county health and other services will sacrifice so a county worker can retire at 55 with benefits unfathomable to most private-sector workers.

                The way Moorlach sees it, there could be hope in bankruptcy.

No, not Orange County’s, but San Diego’s.  The troubled city could opt to declare bankruptcy, which could force public employee unions to the table to rework San Diego’s pension plan, just like United Airlines did.  (Although, unlike United, San Diego won’t be able to heap its ailing plan on to the federal Pension Benefit Guaranty Corp.)

Another bankruptcy for OC?  Maybe not.  A San Diego filing alone could force reform of OC’s pension plan, the thinking goes.

All of this has Moorlach saying he plans to support the so-called “paycheck protection” ballot measure in November.  Something needs to be done about the power of public worker unions, he said, since the supervisors are afraid to take them on.

“Where do I sign up?” he said.

July 7

The OC Register had the following Letter to the Editor, titled “Sold out by the O.C. supervisors,” that stays on theme.

The public-sector unions and their members continue pretending that they have earned their ill-gotten gains.  They are like the professional pickpocket who smiles at you, stealthily reaches into your pocket and robs you of your wallet.  Somebody had better inflame the public or after our estates are confiscated, they’ll go after the gold that’s left in our teeth.

The O.C. supervisors who sold us out began this fraud.  County Treasurer-Tax Collector John Moorlach was right before, and he’s right now, but is anyone listening?

James Homer Russell

Rancho Santa Margarita

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