MOORLACH UPDATE — AB 109 & CalOptima — December 12, 2011

The Public Safety Realignment Act (Assembly Bill 109) of 2011 is described by Sacramento as “historic legislation that will enable California to close the revolving door of low-level inmates cycling in and out of state prisons.”  Now they will be cycling in and out of county jails.  This bill became effective on October 1, 2011, and transfers responsibility to counties for the custody, treatment and supervision of offenders convicted of specific non-violent, non-serious and non-sex crimes.  The hope is that California will save money by using probation and parole instead of building new prisons.

Orange County has approved its Public Safety Realignment and Post Release Community Supervision 2011 Implementation Plan, as developed by our Community Corrections Partnership.  It does not include charging inmates for their daily stay in one of our county jails.  The New York Times covers this topic by addressing what neighboring Riverside County is doing.  It is the first article below and was in yesterday’s edition.

At last Tuesday’s Board of Supervisors meeting, I clearly asked Ed Kacic, the current Board Chairman for CalOptima, about the performance of this County Operated Health System (COHS).  I also asked him if an internal investigation was being pursued.  I specifically asked this question as a result of the following article quotes in MOORLACH UPDATE — Voice of OC — October 26, 2011:

Nguyen added yet another concern in a telephone interview last week, saying, "There is an internal investigation going on at CalOptima that I can’t discuss." She said the probe is being conducted by an outside law firm, involves "legal issues, compliance issues, operational issues" and "should be finalized soon."

"These are all accusations," she added. "I can’t tell you if they’re factual or not" because they are still being investigated.

Other public officials didn’t have much to say about the investigation. Supervisor John Moorlach, who is Nguyen’s alternate on the board, said he was unaware of it.

Apparently, Mr. Kacic declined to respond to my question because there is something going on, but due to the Brown Act, he was not permitted to comment on it.  All he communicated was the fact that no organization is perfect and every company could improve.

Somehow, the confidential investigation report was released to the OC Register.  This may also be a violation of the Brown Act.  To my knowledge, I still have not seen the report or recall receiving it in printed form.  But, it does address the issue that Supervisor Nguyen has been raising about complaints.  The complaints are not external, but internal.  Consequently, it explains the following quote in the Voice of OC of November 7 (9:14 a.m.):

Nguyen never has explained what is driving her efforts to change the composition of the CalOptima board. At one point she said she’d received numerous complaints about the program. Statistics kept by CalOptima, however, showed only five complaints were submitted during the past four months by all five supervisors, plus members of the state Legislature and House of Representatives.

Regretfully, the confidential report is one-sided and does not appear to include management’s response.  Usually, when a self-assessment is performed, there is an opportunity for management to say “concur” or “disagree.”  As the saying goes, “there are two sides to every story.”  Let’s hope that the Board and management of CalOptima provide some illumination on this matter before the OC Board of Supervisors makes its second and final vote on the expansion of the CalOptima board.

It is not clear that adding two additional members to the CalOptima board will remedy these alleged deficiencies.  Referring back to MOORLACH UPDATE — Voice of OC — October 26, 2011, we find the following quote:

Yet one reason for several restrictions, according to the task force report, is to protect the county from legal liability. The report and county ordinance try to make it clear that county government isn’t legally responsible for medical errors or other mistakes by providers.

Adding more supervisors or county departments, like the Social Services Agency, to the CalOptima board could imply more direct county involvement in operations and increase liability, some critics worry.

If there really are serious issues, why should the Board of Supervisors edge closer to assuming more legal liability?

The OC Register article on this topic is from yesterday’s edition and is the second piece below.

BONUS:  In response to the December 8th OC Register editorial, Chair Campbell provides the following response (see MOORLACH UPDATE — CalOptima, et al — December 7, 2011):

The recent editorial in the Orange County Register (“Board Sets Bad Precedent on Bonuses) completely misses the mark and is simply inaccurate. The Register misleadingly states that the Board of Supervisors privately approved retroactive raises for members of the Orange County Managers Association (OCMA) prior to voting down in public a new contract which included increases.

The fact is that these payments are being made in compliance with a previously negotiated contract. The County began negotiations with OCMA in November 2010 as their employment contract was due to expire on January 14, 2011 and as part of the negotiations, the County included in the discussions significant changes to the Pay for Performance award program contained in the existing contract.

OCMA agreed to defer the 2010 performance award that was due to be paid to eligible managers on or around January 5, 2011, until a new contract was hammered-out. After considerable effort, OCMA and the County failed to reach agreement on a new contract.

After determining that the County is legally bound to fund and award performance increases as outlined in the existing contract with the Administrative Managers employed by the County of Orange, the Board made the prudent decision to honor that legal obligation and thereby save the County the costs associated with unnecessary litigation. The Board has directed staff to continue to work with OCMA to reach an agreement which is fair to the County’s managers and is good for the taxpayers.

As the saying goes, “there are two sides to every story”. I would hope that in the future, the Register will put in the effort to gather all of the facts prior to printing their editorials.

Bill Campbell

Chairman, Orange County Board of Supervisors


In California, a Plan to Charge Inmates for Their Stay


RIVERSIDE, Calif. — A one-night stay in this city’s finest hotel costs $190, complete with sumptuous sheets and a gourmet restaurant. Soon, a twin metal bunk at the county jail, with meals served on plastic trays, will run $142.42.

With already crowded jails filling quickly and an $80 million shortfall in the budget, Riverside County officials are increasingly desperate to find every source of revenue they can. So last month, the County Board of Supervisors voted unanimously to approve a plan to charge inmates for their stay, reimbursing the county for food, clothing and health care.

Prisoners with no assets will not have to pay, but the county has the ability to garnish wages and place liens on homes under the ordinance, which goes into effect this week.

As the county supervisor who pressed for the ordinance, Jeff Stone, likes to put it: “You do the crime, you will serve the time, and now you will also pay the dime.”

While a few other local governments have tried similar ideas, Riverside is by far the largest to enact what many call a “pay to stay” plan. Mr. Stone estimates that about 25 percent of the county’s prisoners would be able to pay something and that the county could collect as much as $6 million a year.

But the county attorney cautioned that the move was unlikely to bring in significant revenue, because many inmates were destitute and because convicts would be expected to pay restitution and other fines first.

Like all counties in California, Riverside is in the midst of accepting a new influx of inmates who would have normally gone to state prison. Faced with an order from the Supreme Court to shed 30,000 prisoners from state prisons over the next two years, the Legislature approved a plan to shift thousands of prisoners to local jails.

Many local leaders and law enforcement officials are skeptical of the plan and say the state is unlikely to cover the counties’ costs for the new inmates. In many counties, including Riverside, the jails are already near capacity, and officials worry about being forced to release some inmates before their sentences are complete.

Under California law, counties are allowed to collect money as a condition of probation, but only after a judge determines that the inmate can afford to pay. And counties are the last in line to get money from a convict.

A similar plan has been floated in Kern County, north of Los Angeles. But the sheriff there, Donny Youngblood, has opposed the idea, saying it could cost more than it would bring in.

“I’m not against it, believe me. I think in a perfect world, if all of them could pay, I would be in favor of it,” Sheriff Youngblood said. “It’s not so much that I am concerned about the fairness, although there is an aspect of that. It’s simply not a road I think is worth going down right now.”

But, he added, “If it’s successful, there will certainly be others who follow, because we are all looking for more money.”

With five jails spread throughout the county, Riverside, which is east of Los Angeles, has already reached 93 percent of its capacity, up from 85 percent before the state began moving prisoners in October. Those inmates have much longer sentences — they will stay in county jail an average of two years, more than double the length of stay for typical county inmates.

“Overcrowding is one of my top concerns,” said Jerry Gutierrez, a chief deputy at the Riverside County Sheriff’s Department who oversees the jails. “You have an overcrowded facility, and it just builds up the tensions. It becomes a longer wait for the showers — not everybody is going to get in there. There’s less time outside of cells, and it demands more resources we may not have.”

The effects of the state’s transfer plans are not limited to the jails. For years, the state has relied on inmates convicted of nonviolent crimes to join crews that fight wildfires across the state. But because of the shift of so many prisoners to county jails, the firefighting force will begin to shrink this year. (Counties can send prisoners to the fire camps, but the state will charge those that do about $46 per prisoner per day, reducing the incentive.)

Mr. Stone, a Republican who has been so critical of the Democratic-controlled Legislature that he has called for the secession of the eastern part of the state, said the state’s plan amounted to a “partially unfunded” mandate. Riverside officials have said they were getting enough money from the state now, but they worry about next year, when the guarantee for a financing source expires and voters will be asked to approve tax increases to ensure that services do not erode.

“We need to be looking for revenue wherever we can for ourselves,” Mr. Stone said. “There are people who have the means and who get into trouble with the law. Why should the citizens of this county with other struggles be forced to pay for that? The Lindsay Lohans of the world can certainly pay for it themselves.”

Sharon Dolovich, a law professor at the University of California, Los Angeles, said the county faced a “tremendous blood-from-a-stone problem” and called the plan an “illogical, ill-thought-through response” to the state transfer of prisoners.

“If our goal as a society is to rehabilitate people who have been in jail, then burdening them with another thing to pay when they are released is not the way to do it,” Professor Dolovich said. “It could also create an incentive to deny bail just so that the county could be bringing in more money.”

For now, most neighboring counties are watching what happens with a skeptical eye.

“Sometimes you attack the absurd with the absurd,” said John M. W. Moorlach, an Orange County supervisor. “We’re all messaging to Sacramento that the state has do more than just take our money and download prisoners to us. We’re all finding different ways to scream.”


Report criticizes health agency

Tony Saavedra Register Writer

CalOptima – Orange County’s $1.3 billion health care plan serving low-income families, children, seniors and persons with disabilities – has significant organizational and management flaws that could be disastrous for the agency, according to a confidential review obtained by the Watchdog.

The report advises CalOptima to order a full audit of the operations, which the agency’s board of directors recently attempted to do, the Watchdog has heard.

But the directors apparently took the vote in closed session, in violation of state open-meeting laws. A new vote is being planned.

The apparent voting gaffe puts an exclamation point on a Nov. 30 report by consultant Arthur S. Shorr showing several deficiencies in key areas of an agency that serves 430,000 people:

CalOptima doesn’t do an adequate job of ensuring that billings and reimbursements are in compliance with state and federal regulations, placing “management and the board at risk of criticism and the organization at risk of disaster.”

The CEO, not the board, is in control of executive pay, which could be used to suggest the board is being manipulated. It is “likely to produce embarrassment, if not worse.”

The organization is dysfunctional and not large enough to support 32 executives, which slows down the agency and complicates compliance with policy.

There is no process to inform new executives of their responsibilities.

Federal exclusion lists are not being checked, which could force the agency to reimburse the government for the costs of some contracts.

The relationship is poor between the legal and executive departments, creating the risk that legal advice will be ignored by management.

Neither management nor the board has held personnel accountable for operations.

The report was ordered for CalOptima through attorney Todd C. Theodora so that it could be considered confidential under attorney-client privilege. This tactic often is used to keep troubling reports from being made public.

Meanwhile, county Supervisor Janet Nguyen last week won her fight to secure at least another year on the CalOptima board and potentially extend her influence over the agency.

The Board of Supervisors voted 3-2 to increase the board’s appointment to the agency from one year to two years. The vote also gives more authority to the entire Board of Supervisors in selecting the appointment, which previously had been made by the chair.

In the same vote, the board also increased the size of the CalOptima panel from nine members to 11 – splitting the seats between government officials and representatives for doctors, hospitals, pharmacies, consumers and nonprofits.

Supervisors John Moorlach and Shawn Nelson dissented, portraying Nguyen’s actions as a power play to insulate her from potentially being removed after one year.

“It just seems this is a solution looking for a problem,” Moorlach said during last week’s supervisors meeting. “This organization is working like a watch.”

Nguyen said she had received scores of complaints about CalOptima.

“There is a time when change is healthy, and this is a time for that change,” Nguyen said during the meeting.


December 10


In the Sunday Commentary of the OC Register there was this editorial:  “Open the books of deputies’ health plan – Supervisors’ calls for minor adjustments and an audit have been rebuffed by the union.”  Just a few days into the new job and the game was on.  The editorial is provided in full.

What are the leaders of the Association of Orange County Deputy Sheriffs union hiding from Orange County taxpayers and from their own membership?

That’s the obvious question as the union continues to fight a proposal that would bring them in line with other unions nationwide and with basic standards of accounting practice.

County supervisors, led by John Moorlach and Chris Norby, want the union to let the county audit its multimillion-dollar, taxpayer-funded health plan. In the past the union had agreed to provide such an audit, but never provided a thorough one.

The county has provided the union with more than $12 million in tax dollars, and it lets the union completely run that health-care trust. There is no outside oversight, which raises questions about whether the dollars are being used properly.

There needs to be an outside check to assure that there’s enough money to cover the long-term health-care promises the county has made to these public safetyemployees, to make sure the money isn’t used inappropriately for, say, political purposes, and to assure there are no questionable broker fees or commissions – a problem that has plagued other similar plans.

That issue became contentious last week when newly inaugurated Supervisor Moorlach called for such an audit. In the past Supervisor Norby and former Supervisor Chuck Smith had called for the same thing, but they couldn’t get a third vote. That seems to be changing. Supervisor Bill Campbell told us, "We need complete transparency. … We need to have every bit of data available to our auditors so they can do the appropriate audit."

The current closed-door negotiations involve health care benefits for retirees. In September, the board voted on a contract with the largest county union that will rein in the unfunded health-careliabilities – the county’s long-term debt – by slashing about $600 million in costs from the retiree benefit program.

Other county unions have agreed to similar terms, except for the deputy sheriffs, who don’t want to accept a few minor tweaks in the program, even in the interest of assuring the long-term viability of their generous benefits and even in the interest of helping taxpayers.

The union did not return our call for comment.

The main reform sought by the board: splitting the health-care pool between retirees and current workers, so the current workers are not forced to subsidize the retirees. But before the board can even get to the point of negotiating with the union over modest benefit changes, it needs to know the fiscal details of the health care plan.

"I want to be able to compute properly what the costs are going to be," said Mr. Moorlach. "This is just good policy."

Let’s hope the board keeps up its firm stance.

December 11


Sarah Stirland of The Bond Buyer did a lengthy technology piece, titled “User Profile – Fiscal Crisis Forces Orange County to Relearn Computer System.”  The MOORLACH UPDATE – Seal Beach Sun – August 12, 2011 provides a similar perspective on the SunGard topic.  Here are a few paragraphs from the middle of the piece:

                Moorlach said he received his first look at the treasurer’s computer systems when he was campaigning against Citron in 1994, just a few months before the Chapter 9 filing.

                When Moorlach asked for the county investment pool’s financial statements, county auditor-controller Steven Lewis told him that no consolidated record for the pool’s transactions existed.

                “He told me that if I wanted it, I could go to building A for X, building B for Y, and building C for Z,” Moorlach said.

                As a certified public accountant, Moorlach said he found the situation “incomprehensible.”  He assumed that every business keeps its records in one place so that all transactions can be immediately reconciled.

                What he found instead was a system that did not account for the county’s investment pool transactions at all.

                “Nowhere on the general ledger of the county were the investments – they were off the books, so as a CPA I was going a little bonkers,” he said.

Frustrated and initially under the impression that the county treasurer’s computer system upgrades hadn’t even been delivered, Moorlach threatened to fire Sungard when he became treasurer last year.

“I just asked them why I should keep them, and the, when we went through the request for proposals process, they gave us a very competitive bid – they responded with a bid for all of $1.”

That meant that the treasurer’s office could keep using Sungard’s portfolio management and accounting system in 1996 for just $1, instead of paying the monthly $20,000.


The OC Register provided the following Letter to the Editor, titled “Strong-arming the union,” that would be submitted by someone related to an AOCDS member.

O.C. Supervisor John Moorlach
is no fiscal hero ["Moorlach takes aim at union," Local, Dec. 7]. He is a fine example of a politician using his new position to punish, retaliate and intimidate those who serve all citizens equally, usually at great risk to themselves. I suggest he walk a mile in officers’ shoes.

Mark Bergquist
Lake Forest

The Orange County Business Journal  provided a “Year In Review” feature.  The piece by Rick Reiff was titled How We Did – The Business Journal Assesses its 2006 Picks to Watch – Person to Watch: John Moorlach.”  Here it is in full.

John Moorlach lived up to the billing of politician to watch in 2006. He ran for Orange County supervisor and won, trouncing labor-backed challenger David Shawver, a Stanton councilman.

Moorlach has been one of the county’s most popular politicians ever since he warned in 1994 about the impending county bankruptcy.

After 11 years as county treasurer, Moorlach said he wanted a more direct role in shaping county policy and reforming the budget. So he gave up the relative security of treasurer to run for the lower-paying, term-limited seat on the Board of Supervisors.

Moorlach worries that pension and benefit hikes granted to public employees in recent years aren’t sustainable. He says the county “dodged a bullet” this past year only because a third straight year of double-digit growth in property tax revenue offset spiking pension costs. With the housing market softening, another windfall is doubtful.

“I won! Now I’m ready to save the pension plan as priority one,” Moorlach said.

Moorlach, along with another newcomer to the board, former Assemblywoman Pat Bates, and the re-elected Chris Norby, are expected to form a solid majority for reform.

Labor tensions lie ahead. A conciliatory sounding Nick Berardino, labor rep for rank-and-file employees, cited “harsh reality” in negotiating retiree health-benefit givebacks even before Moorlach’s swearing in. But Moorlach’s first move as new supervisor to similarly rein in the deputy sheriffs’ benefits already has prompted threats of a job action.

December 12


Michael G. Wagner of the LA Times provided the following legal update, “D.A. Seeks Rehearing on Charges Against Stanton, Steiner.”  Here are three selected paragraphs to give you a feel of the effort.

                The Orange County district attorney’s office asked the 4th District Court of Appeal on Wednesday to review its recent decision dismissing the willful misconduct charges against Supervisors Roger R. Stanton and William G. Steiner in connection with the county’s bankruptcy.

                On Nov. 26, in a blunt 23-page ruling, the three-judge appellate panel threw out the charges, saying that without evidence of corruption or criminal acts, only voters should remove elected officials.

                The court wrote that the district attorney “apparently concedes” that warnings by current Treasurer-Tax Collector John M. W. Moorlach and others “do not constitute allegations of knowledge.”


The fun in the new role continued with another Letter to the Editor in the OC Register, titled “Letters: Who is really in control of county leadership?”

What a surprise, the union leadership that administers the Sheriff’s Department health-care pension benefits is calling foul when an elected official, O.C. Supervisor John Moorlach, wants an audit of the health-care pension plan. It’s just another example of what’s clearly wrong at the top ["Open the books of deputies’ health plan," Commentary, Dec. 10].

Sheriff Mike Carona has his own legal team paid for by the taxpayers, and now it’s learned that the sheriff’s department health care benefits are managed by the union. Bob Macleod, who represents the union, says the supervisor is "using the power of the elective office to retaliate against individuals who did not support him" when Moorlach called for the audit because the union did not support Moorlach in the recent election.

The union boss is clearly out of line to say that "your security and that of your family is being attacked." What is the union going to do if the audit takes place, create a work stoppage or do less to contribute to the safety of our county?

The county has the ability to manage the health care pension fund that the union now handles. Just as there is no reason for the sheriff to have t


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