MOORLACH UPDATE — AB 108 — June 30, 2011

News accounts are still appearing on activities that occured at Tuesday’s Board meeting.  The big news story, however, is Assembly Bill 108 (AB 108).  Hours after the County’s Board approved a balanced budget, the State Legislature voted for AB 108, including two members of the Orange County delegation (according to newspaper accounts).  AB 108 is designed to take the County’s vehicle license fee (VLF) revenues of approximately $48 million per year.  In a move to vacuum up all VLF revenues, Sacramento is also taking those collected in the OC, that are used for our bankruptcy debt repayment efforts (see the LOOK BACK below).  If Sacramento doesn’t backfill this revenue source, which it did for every other county in 2004, then the valiant efforts of the County to “glide down” its expenditures over the past few years will be dramatically harmed.  Reducing our revenues by some $50 million per year is like taking 7.5 percent of our General Fund Revenues.  It’s dastardly.  But, desperate people do desperate things.  And Sacramento is desperate.  If only Sacramento had attacked this economic cycle early like the OC did, then we would not have to endure the Capitol’s dysfunctional behavior now.  If the Governor signs this sudden and unanticipated bill, expect an interesting round of fiscal fun . . . not!

The Voice of OC mentions the continuance of the vote on the Orange County Manager’s Association (OCMA) contract.  Supervisor Nelson had to unexpectedly leave the Board meeting early, so we continued the item until next month when all five of us would be present.  It is a compliment that the MOORLACH UPDATE is quoted.

The Patch news network addresses the 2-to-2 vote on Obamacare educational funding.  Supervisor Nelson also missed this vote.  The article was kind enough to conclude with some of my warped humor.

               

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Managers’ Labor Contract Delayed Again

For the second time this month, Orange County supervisors have delayed approving a labor contract for county executives and managers that would extend bonuses in exchange for higher contributions to pensions by employees.

There is a growing sense among supervisors that the county has not pushed for enough concessions from the management and executive ranks.

"It’s a mistake to adopt this contract. It’s a bad idea," said Supervisor Shawn Nelson in a Voice of OC story earlier this week.

Without discussion Tuesday, supervisors delayed action on the contract until the board’s July 19 meeting.

There is heightened attention on the managers’ contract because it is the first labor since the economy worsened and pension obligations increased. Observers say next year’s negotiations with the Association of Orange County Deputy Sheriffs and the Orange County Employees Association will be tough as supervisors seek more concessions on wages and pensions.

Supervisor John Moorlach joined Nelson in his concern about the labor contract, telling readers of his email blast, "The Moorlach Update," that he wants pensions rolled back.

"Neither Supervisor Nelson nor myself are happy with the negotiated contract, as we believe that it does not go far enough in the areas that we have both staked a position," Moorlach wrote.

"Supervisor Nelson is focused on total compensation — salary, pension, medical, et al. I’m focused on a true rollback of pension formulas back to pre-2001 for deputies and pre-August 2004 for the bargaining units that garnered 2.7% @ 55."

During Tuesday’s budget adoption, Moorlach took aim at public safety employees, saying that their pensions are eating into government’s ability to provide services.

He said that all departments have absorbed another 5 percent cut to operations this and next fiscal year. "To all the nonsafety department heads, I want to say thank you."

But, he added, "my frustration is that of the $30 million you set aside, $20 million goes to public safety," largely to pay for the pension increases of the last decade.

"If we could roll back, truly roll back, on pensions, we might have some relief," he concluded.

— NORBERTO SANTANA JR.

County Leaders Pass Up Chance for Anti-Obesity Funds

Officials say a $10-million federal grant to combat unhealthy eating and smoking would be a waste.

By Paige Austin

Urging the U.S. government to go on a spending diet, Orange County officials turned down a shot at $10 million in federal funds to combat obesity.

Although the gesture was purely symbolic–the healthcare grant will simply go to another agency–county Supervisor John Moorlach said he didn’t want "to encourage the federal government to spend money it doesn’t have." Especially when anti-obesity messages are widely disseminated by the media at no cost, he said.

“Grow up, and let’s address the real issues instead of feel-good nonsense,” Moorlach said by phone after the vote. “There has got to be some financial sanity.”

“Am I tilting at windmills?" he continued. "Perhaps, perhaps.” But Moorlach said he would rather “stand on principle” than be the deficit enabler of a federal financial train wreck.

Two other county supervisors disagreed, arguing it was foolish to reject the grant proposal in a county where 60 percent of residents are overweight or obese (and two-thirds of all fifth-graders recently flunked a statewide fitness test).

"It’s about preventive care," Supervisor Janet Nguyen said at Tuesday’s board meeting, adding that failure to educate people could cost more in the long run. "We’re looking at $800 million in avoidable healthcare costs annually."

The grant would have come from the U.S. Centers for Disease Control, which is awarding $102 million to 75 community programs designed to prevent chronic diseases.

On Tuesday, the Orange County Health Care Agency asked county leaders for permission to apply for $10 million of that money to be spent on campaigns promoting healthy foods, exercise and school physical fitness–as well as anti-smoking messages.

Supervisor Pat Bates opposed the grant, saying it would duplicate existing educational programs: "You can’t pick up a pack of cigarettes that doesn’t have a picture on it."

With Supervisor Shawn Nelson absent, the proposal died for lack of majority support, as Bates and Moorlach voted against the grant application, and Nguyen and Bill Campbell in favor.

Moorlach said anyone who doesn’t like the decision could get some exercise by coming down to his office and protesting. But they can’t just sit there with signs, he said; they have to march.

FIVE-YEAR LOOK BACKS

July 7

2001

We covered much of the bankruptcy period in the 2009 and 2010 LOOK BACKS.  Martin Wisckol of the OC Register, along with the assistance of Teri Sforza, provided another closing chapter in “Raabe seen as ‘broken man’ – Some critics say he paid enough after the county’s collapse.  Others just want to close the book.”  Because there are many new subscribers, I’m providing the article in full to give you a flavor of that era in our County’s history.

Even some of the harshest critics of Matthew Raabe’s role in Orange County’s bankruptcy didn’t mind seeing the charges against the former assistant treasurer thrown out Friday.

And while the district attorney or state attorney general could refile charges, those critics hope Friday’s ruling is the end of court battles related to the county’s collapse in 1994.

“At the end of the day, (Raabe) has probably already paid his penalty,” said county Treasurer John Moorlach, who believes Raabe is more to blame for the bankruptcy than then-Treasurer Robert L. Citron. “He’s paid more than anybody else. From what I understand, he’s a broken man.

“He’s wasted a lot of our money and a lot of our time. We should move on.”

The county still has about $900 million in bankruptcy debt to pay off, thanks to the risky investment policies developed by Citron and Raabe. Although the county’s bond ratings have been restored to levels attractive to investors, the debt hangs heavily over the county budget. It limits spending and services, and colors debate on everything from the use of tobacco-settlement funds for health care to the sale of county landfill space to trash haulers in San Diego and Los Angeles counties.

“The continuing impact is very real,” said Bill Mitchell, an attorney who has closely followed the bankruptcy in a watchdog role. “There are many services the county doesn’t receive.”

Lawyers claimed Raabe masterminded scheme

Raabe, meanwhile, was the only player to serve time in prison — 41 days of a three-year sentence before being released on appeal in 1997. Immediately after the bankruptcy, Raabe contemplated suicide, was under near-constant psychiatric care, and was taking an antidepressant drug daily, his doctor told the court in 1995. He was declared indigent. He had his driver’s license taken away after leading authorities on a chase through a mall parking lot before his arrest in 1995.

The only other person to serve time related to the $1.6 billion loss, the largest municipal debacle in United States history, was Citron, who served nine months in a work-release program after striking a plea bargain with then-District Attorney Michael Capizzi. The only other person convicted was then-Budget Director Ronald Rubino, who agreed to a no-contest plea in which his record was erased after one year.

Raabe, a 45-year-old graduate of Mater Dei High School in Santa Ana and California State University, Fullerton, now lives in the Northern California town of Greenbrae with his second wife and works for a software company.

The prosecutors’ 1997 case claimed that Raabe masterminded a scheme to skim $89 million from local governments into county coffers, manipulated accounting records to hide diversions, and lied repeatedly to investors.

They presented a mountain of evidence, including two sets of books Raabe kept. One showed the monthly interest rate actually earned by the county investment pool — which was high until the collapse — and the other showed the monthly interest rate reported to the pool’s investors — which was much lower.

Many want to see the case conclude

Raabe maintained that he never fully understood the complicated dealings and that he was simply following Citron’s instructions.

There are plenty who say that Raabe was a scapegoat.

“He was really involved in wrongdoing — he misled other elected officials,” said Mitchell. “But there were many people who knew there was a serious problem.”

Harriett Wieder, a county supervisor at the time of the bankruptcy, agreed with Mitchell that there were other people who should have shouldered more of the blame.

“I never even knew Matt — Bob was the only one I ever saw,” she said. “The county has paid for it, and the taxpayers should not pay for the D.A. to pursue it anymore.”

Bankruptcy-era Supervisor William Steiner, a Raabe defender who said the assistant treasurer was the first to alert him of the bankruptcy, also said he hopes the matter “closes the book on a sad chapter in the history of Orange County.”

But while Moorlach shares that hope, he says Raabe was key to the problems.

“He was not passive,” Moorlach said. “He was more than a co-pilot. I’ve always thought Matt was a little more culpable than Bob. After looking at everything here, that’s what I’ve concluded.”

Moorlach believes that Raabe’s predecessor, Ray Wells, kept Citron “in check.” Wells retired in 1993 and Citron appointed Raabe to the post.

“Matt sort of put the pedal to the metal and was really much more aggressive” with investment risk, Moorlach said. “Citron was not really that bright. You get the sense that (Raabe) was on top of things….

“Being over-ambitious can kill you.”

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