MOORLACH UPDATE — Little Hoover Commission — August 24, 2010

A subcommittee of the Little Hoover Commission met with Supervisor Campbell and me on Friday morning (more than two Board members would have presented a possible Brown Act violation).  The meeting was covered by the Voice of OC (below) and the OC Register’s “Watchdog” website module; see http://totalbuzz.ocregister.com/2010/08/23/commission-gets-an-earful-on-pension-reform/39689/.  The OC Register’s blog may be printed at a later date, so I’ll leave most of my observations for that time.  However, there is an interesting quote:

Unfortunately for a plan that has been hailed as “groundbreaking,” it has had virtually no impact and produced nearly no cost-savings as of yet, but county movers and shakers say just give it time and the savings will start rolling in.

We’ll believe it when we see it.

It looks like we have a new reporter to train.  We’ve always stated that new tiers were a long-term solution, not a short-term one.  The pig still has to go through the python, but it’s a start – and one that our Governor is following.

BONUS:

Image001

If you read the Watchdog link, a reference is made to my “San Diego-themed shirt.”  Every year at the OC Fair I visit the OC-based High Seas Trading Co. vendor booth (http://www.highseastradingco.com/) and purchase the latest shirt in its “California Days” theme.  This summer it was “San Diego Reflections.”  Here’s how the High Seas Trading Co.’s website describes it: 

A celebration of San Diego landmarks featuring the Presidio, Star of India, Point Loma Lighthouse, Star of India, Midway, Zoo, and much more.  This shirt is made of 100% combed cotton and is made in the USA. It features matched pockets, real coconut buttons, double-stitching, and side vents so shirt can be worn outside or tucked in.

(It even includes the hotel tower that I stayed in over the weekend!)

OC Touted for ‘Level-Headed’ Pension Reform

It was a rare sight.

A group of county supervisors and labor leaders sitting across the table from each other at a public meeting having a calm discussion, even offering each other complements. There was no shouting, no finger pointing and even the posturing was kept to a relative minimum.

What made it even more remarkable was the topic: public pensions.

They were together at the behest of the Little Hoover Commission a statewide grand jury of sorts that is looking for solutions to the most vexing of public policy conundrums — providing public services amid a fiscal environment dominated by shrinking revenues and ballooning annual pension payment obligations.

Orange County has become a darling of late among those who study public pensions.

One of the nation’s most politically conservative counties has actually achieved something that looks like progress by — get ready for this one — cooperating with labor.

The results?

Landmark deals that radically lowered the public unfunded liability on retiree medical costs and ushered in a new tier of public-sector retirement offering lower benefits to workers.

"Orange County has done a better job of addressing issues proactively," said Little Hoover Commission Chairman Daniel Hancock after visiting Friday with a host of county supervisors and labor leaders to hear about Orange County’s reform efforts.

Now, perhaps everyone was on their best behavior because of the audience and the place settings trumpeting the OC as a statewide leader on pension reform. The mood was so cooperative and complimentary that some members from the Hoover panel privately wondered whether they’d just been snowed by a dog-and-pony show.

To be sure, there are those who say that Orange County’s newest pension reform proposal isn’t reform at all, and could end up costing taxpayers more. Newly elected county supervisor Shawn Nelson — who, curiously, was not at the meeting — is in that camp.

But, then again, maybe a corner has indeed been turned.

After numerous years of battling each other on the pension issue through a host of controversial and costly election campaigns, as well as through tough labor contract negotiations, the two sides seem to have gotten to know each other.

And a light seems to have come on.

Both sides seem to be reacting to poll numbers that indicate an increasingly angry electorate over public sector pensions. And as the unfunded liability continues to swell, so does voter anger.

At both sides.

Last week, county elected officials and labor leaders publicly acknowledged those harsh realities to state commissioners. During what at times seemed like the start of peace talks in a conflict, both combatants agreed that they had battled themselves to stalemate.

And after reaching stalemate, the two sides told state commissioners they found that nothing cures an unfunded liability better than open communication.

"It requires a lot of trust," said Orange County Employees Association General Manager Nick Berardino.

Sitting across from Berardino was Supervisor John Moorlach, who basically agreed. Moorlach said he’s tried just about every approach in the book — ballot initiatives, legislation and even lawsuits — but none work as well as the negotiating table.

However, both sides acknowledged that there are still battles to be waged. And the stakes are astronomically high.

Orange County faces a $3.7 billion unfunded liability for its pension system, one that was largely triggered after large benefit increases in 2001 (for public safety) and 2004 (for general employees). Investment losses and actuarial changes also keep fueling the unfunded liability, which has driven up annual payments considerably and put major pressure on public sector budgets.

Last week, Hoover Commission members got the lowdown on the plan Orange County leaders crafted that allows new hires, and potentially existing employees, to choose to participate in a less expensive pension system.

That plan — which would allow workers to retire with 1.62 percent of pay for every year worked at age 65 instead of the current 2.7 percent at 55 — is still awaiting approval from the Treasury Department and may even require an act of Congress.

Since the lower-tier retirement plan was instituted in May, a few new hires have opted into it. However, the majority of hires still appear to elect the 2.7 percent at 55.

Nelson opted for the 2.7 percent at 55 formula and said his own example shows that workers won’t opt for something that nets them a smaller retirement payoff.

He’s also publicly questioned whether the new formula negotiated by his four colleages — Supervisors Moorlach, John (sic) Campbell, Pat Bates and Janet Nguyen — might cost taxpayers more because of retirement gaming by senior employees. County officials are now studying actuarial assumptions of the new deal and will report back.

Yet the new formula in Orange County is still one of the first approaches that commission members said they have heard from anywhere in the state that can begin to shave off some of the county’s unfunded pension liability.

Neither side tried to shy away from the fact that they view the world in radically different ways and often clash verbally at the negotiating table as well as in the press.

"As we work toward policy results, it’s a bumpy road," county Chief Executive Tom Mauk said.

Yet the key to getting something done in Orange County seems to be the fact that there are always open lines of communication.

Political leaders on both sides of the aisle need to cool their rhetoric, Berardino said, and figure out realistic policies that can bring the long-term pension liability down.

That means putting a muzzle on the Republican folks who talk about a world without unions, or pensions, or shifting to 401(k)s. And it means sidelining union leaders who don’t want to admit there’s a problem with pensions that are too generous, he said.

Hoover Commission member Marilyn Brewer, a former state legislator and inhabitant of Orange County’s fifth floor, asked Berardino how such a program could take hold at the statewide level, where one meeting participant described unions as "standing in the corner with their arms crossed."

"Continue to build on small successes," he replied. One jurisdiction at a time with solutions that match conditions on the ground.

Supervisor Campbell, who was a key negotiator on the new pension benefit, reiterated the point that each jurisdiction has to create the right set of policies and incentives that match their own realities.

For example, the new tier in Orange County has a chance to work because supervisors and labor already agreed to a key point back in 2004: Employees must pay out of their paychecks to help fund their pensions.

That key point is what may make the new tier more attractive to new hires because having the 1.62 percent formula leaves more in their paycheck, Campbell said. Other incentives, such as capping retiree medical benefits, also helps to encourage people to stay on the job longer, Campbell added.

Little Hoover Commission members left the meeting noting that they are likely to continue hearings throughout the fall and prepare a report on what they heard across the state by early next year.

The most appealing thing about what they heard in Orange County, Hancock said, was a "level headed" approach to start chipping away at the problem.

Please contact Norberto Santana, Jr. directly at nsantana@voiceofoc.org, and follow him on Twitter: twitter.com/norbertosanatna. And add your voice with a letter to the editor.

FIVE-YEAR LOOK BACKS

August 25

2000

The Orange Unified School District just kept resurfacing in the news.  In April of 2000, I did an editorial for the Foothill Sentry (see MOORLACH UPDATE — Costa Mesa — April 10, 2010).  Here is a portion of my opening remarks:

The amount of misinformation coming out of the union’s printing press is deplorable!  It gives “new math” a whole new meaning.  One missive makes the following statement, underlined for emphasis in the flyer, about the district’s mandatory reserve requirement:  “Even the reserve is supposed to be fully expended by the end of the fiscal year.”

This is so patently false, and the sentences that follow this premise are also sadly incorrect.

This is just one of many questionable assertions made in the heated debate on the printed page.

You can’t have a reasonable dialogue if you are disseminating information that isn’t factual.  Please, let’s get on the same page.  It is time to compare oranges to oranges.

By August 11, the LA Times, in a piece by Alex Katz, stated:

[James W.] Tamm [, an administrative law judge for the Public Employment Relations Board,] harshly criticized [John] Rossman [the union’s president] for what he called "deceitful and manipulative" behavior during the ongoing conflict between the union and the district over teacher salaries.

The judge also wrote that Rossman’s testimony was "so lacking in credibility that much of it appears to be deliberately untruthful."

Tamm agreed with the school district’s allegations that Rossman misrepresented facts about the negotiations to union members and made obvious threats of legal action against individual school district negotiators.

It was nice to see some vindication and validation of my observations.

In May, Orange County Auditor-Controller David Sundstrom and I submitted an editorial to the OC Register regarding the union negotiations at Orange Unified (see MOORLACH UPDATE — LOOK BACKS — May 10, 2010).

The battle was still raging in August, as can be seen by this Letter to the Editor in the OC Register, titled “Chamber has no role in Orange schools fracas.”

It is inappropriate and a conflict of interest for the Orange Chamber of Commerce to get involved in the local teachers’ union salary dispute with the Orange Unified School District Board.  Barbara deBoom, Chamber president, is not fooling anyone when she claims her organization is trying to help find “common ground” between the two groups.

Her hidden agenda is to oust the fiscally responsible school board and push union-controlled puppets into the board seats, where district funds (from the taxpayers) would be at the mercy of the money hungry teachers union.  A tax increase (school bonds) and possible district bankruptcy could soon follow.  The fiscal policies of the OUSD Board regarding the teachers’ salaries have the support of two high-ranking Orange County officials, John Moorlach (treasurer) and David Sundstrom (auditor-controller), as being “prudent.”  Our community doesn’t need or want the kind of “help” deBoom is offering.

Sophia Kuo

Orange

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