MOORLACH UPDATE — Pensions and Beds — June 27, 2013

The first article below in the OC Register talks about my pension plan. The opening premise is false. The reporter is new to the OC Register and new to the topic of defined benefit pension plans. Call it an amateur mistake or just biting the public employee union leadership’s hook. Let me make this very clear: my pension is not “entirely funded by taxpayers.” In August of 2004, when the majority of the Board of Supervisors voted to approve “2.7 @ 55,” it was done with the understanding that employees would pay for the unfunded actuarial accrued liability that was created. Consequently, I have paying this “reverse pickup” ever since. Currently it is $548.47 per pay period, $14,260.22 per year, and has a $1,200 per month impact on my household. Multiply that by the passing years and you’ll see that I’ve contributed no small sum to the County’s pension system. (I’ll save you the story of how I tried, repeatedly, to not be included in this formula, as I’ve shared it plenty in previous UPDATES.)

Many years ago, a prior Board of Supervisors negotiated an interesting compensation approach with managers. The offer was to take a raise or have the county pay for the employees’ share of the pension plan contribution. The Orange County Employees Association (OCEA) was offered the same deal, I might add, and decided to take a raise. Not surprisingly, this informative history is often glossed over by OCEA’s leadership because it is inconsistent with the “greedy manager” caricature, but I digress. There are three components to pension plan funding. The employer share, the employee share, and in the case of Orange County, the reverse pickup. As noted, the managers opted for the payment of their pension plan contribution portion instead of a pay raise. Now that pension costs have ballooned, as I have been warning anyone who would listen for the last dozen years, ceasing to pay the employees’ portion has become a critical lever for local governments to pull to address the problem. Negotiating this takeaway has not been easy. However, the Orange County Managers Association recently voted to do so, for which I am very grateful, and I am following suit. No better, no worse has been my theme throughout. This will cost the Moorlach household another $920 or so per month. I worked with County Counsel to find a remedy to address current law and court decisions, and it was approved unanimously by the Board at Monday’s Budget meeting.

Now I understand the leadership of one of the County’s public employees’ unions wanting to focus on a pension formula that he, ironically, put me into. But, when you look at the 2010 Federal Nonprofit Income Tax Return, Form 990, for the Orange County Employees Association, you’ll find that he is pulling in $196,542 in reportable compensation and $146,352 in other nontaxable benefits (of which $119,205 represents deferred compensation and retirement contributions). Being scolded by someone that has a compensation package of almost $350,000 a year, entirely funded by taxpayer money, as it is paid by union dues withheld from employee wages, seems a bit humorous to me (and I’ll avoid using the phrase “steeped in hypocrisy”). Speaking of paying union dues, June 23 to 29 is National Employee Freedom Week (see http://www.employeefreedomweek.com/ and http://www.employeefreedomweek.com/state/california/).

The second piece below is from the Voice of OC and covers a Board agenda item concerning jail beds that was discussed on Tuesday. My inclination was to vote against this extraction of funds. However, arguing over the doubling of a percentage of United States Immigration and Customs Enforcement (ICE) revenues, from 1.5% to 3%, may be for naught if the number of ICE detainees is declining. I still have a bad taste in my mouth over how this was negotiated. And, as the phrase from “Forrest Gump” goes, “that’s all I have to say about that.”

Supervisors may start paying for their own pensions

The county supervisors’ pensions

By KEEGAN KYLE

As county officials have sought to cut pension costs in recent years through labor concessions, the public spotlight has often shifted to criticism of the supervisors’ own pensions.

Labor leaders have repeatedly highlighted how little the supervisors pay for their pensions. Unlike many county workers, the retirement plans are entirely funded by taxpayers.

But this disparity may soon evaporate. The supervisors unanimously approved a policy this week that could even the landscape and save taxpayers a relatively small but symbolic pile of cash.

Nick Berardino, head of the county’s largest labor group, called the development "refreshing" and one he hopeswill usher new opportunity for cooperation between labor and county management. Several unions are currently in contract negotiations with the county.

The core issue of the new policy is how much taxpayers and county employees should pay for pensions. In an effort to cut pension bills and future debts, the supervisors have gradually pushed workers to pay larger contributions.

Now, to labor’s delight, the supervisors have put their own wallets under the same financial pressure. The new policy could cost each supervisor thousands of dollars annually, county records show.

Labor officials have long demanded the supervisors contribute to their pensions as a matter of fairness. However, the supervisors didn’t discuss their motivation for the new policy before voting Monday. It came before the board was approved within minutes.

Exactly how the supervisors may now contribute to their pensions is unusual. The board essentially created a loophole using the county’s nonprofit status to avoid legal concerns about modifying their own benefits.

The legal issues stretch back to 1980, when the state Supreme Court prohibited reducing a currently elected official’s benefits. The court said benefits were contractually protected throughout an official’s term.

To skirt the rule, the supervisors authorized themselves to make charitable donations from their salaries back to the county. The amount from each paycheck would vary by person and cover a section of pension bills known as the employee share.

Last year, county data show, the employee share for three Orange County supervisors equaled about $50,000. The county paid an additional $82,000 to cover a section of pension bills known as the employer share too.

The new arrangement would make the supervisors’ benefit more akin to other county workers, who already must pay the employee share. There is one key exception though: Contributions from the supervisors will be optional until another recently approved policy takes effect in 2015.

Currently, three supervisors are enrolled in the pension system and could elect to begin making the donations: Janet Nguyen, John Moorlach and Todd Spitzer. The other two supervisors, Patricia Bates and Shawn Nelson, have declined to receive a pension.

Among the three with pensions, Moorlach has received by far the most criticism to date. Though one of the county’s loudest voices on rising pension costs, he has the sweetest benefit on the board. His colleagues must wait a decade longer before receiving a pension and the amount will depend on a lower percentage of their highest earnings.

In an interview, Moorlach said he plans to start making voluntary donations under the new policy next month. Nguyen and Spitzer did not return several messages this week seeking comment.

Berardino, a frequent critic of Moorlach on pensions, heralded the supervisor’s decision to donate but also questioned why the board didn’t take this step years ago when it pushed labor for concessions.

"He (Moorlach) has used the pension issue as political leverage that until now has been steeped in hypocrisy, and it’s only after years of pressure has he finally decided to do it, to contribute," Berardino said. "He has tried to fool the public that he is somehow a pension reformer when in fact he has been taking money from the public to fund his own private pension plan, which is different than the rank and file."

Moorlach brushed the criticism aside, now armed with some new ammunition about how his pension compares, and urged organized labor to consider further cost-cutting concessions.

"I’m not being treated any differently than the rank and file," Moorlach said. "Maybe it’s time to let go of their grip a little bit."

Contact the writer: kkyle

Orange County Board of Supervisor, second district, John Moorlach in Santa Ana.

MINDY SCHAUER, THE ORANGE COUNTY REGISTER

County supervisors’ pensions

The supervisor’s pensions vary due to a number of factors, including time of employment, changes in available plans and opportunities to decline a pension. These are the pension plans of each supervisor, according to the county’s retirement system.

Pension plans are typically described with two numbers. The first number indicates how much a retiree will receive for each year of employment. The second number is the earliest age the person can begin receiving the benefit.

An example: John Doe earns $100,000 annually and he retires after 20 years of service. His pension plan is 2% at 65. Once John Doe turns 65, he is eligible to receive $40,000 a year for the rest of his life. Our calculation: 2% x 20 years x $100,000.

Janet Nguyen, 1st District: 1.62% at 65

John Moorlach, 2nd District: 2.7% at 55

Todd Spitzer, 3rd District: 1.62% at 65

Shawn Nelson, 4th District: opted out

Patricia Bates, 5th District: opted out

Source: Orange County Employees Retirement System

County to Get Less ‘Beds for Feds’ Cash

By NICK GERDA

As an influx of new inmates fills up local jails, Orange County officials say they’ve been forced to cut a deal that lowers the county’s share of revenue from housing federal immigration detainees and gives more money to the city of Orange.

The agreement, approved unanimously Tuesday by the county Board of Supervisors, gives Orange twice as much of the county’s share as it was getting before in exchange for allowing an extra 331 jail beds within existing buildings at the Theo Lacy jail, which is in the city.

The city’s cut of the so-called "beds for feds" deal with U.S. Immigration and Customs Enforcement or ICE increased from 1.5 percent to 3 percent, which amounts to about $340,000 annually.

The extra beds in Theo Lacy are needed to accommodate an influx of prisoners to the county level from the state’s prisoner realignment program under Assembly Bill 109. Both AB 109 and a recent judge’s ruling regarding state prisoners have prompted concerns by local officials that county jails, already approaching capacity, will run out of space.

Sheriff Sandra Hutchens explained to supervisors that the state-level issues are also putting the county’s ICE revenues at risk.

“My concern is that AB 109 will push out ICE” detainees, Sheriff Sandra Hutchens told supervisors this week when recommending the new agreement. “That will have a severe financial impact.”

Supervisors John Moorlach and Janet Nguyen questioned why the city felt it was entitled to the extra cash.

“I feel like we’re somehow being taken advantage of,” said Moorlach, adding that it reminded him of the city’s request for $500,000 in services when the original ICE deal was made.

The county’s ICE revenue “has actually decreased, but yet we’re [giving] more money to the city,” said Nguyen.

Hutchens replied that the city’s approval is required to expand the number of beds and accommodate the ICE detainees. The city’s role dates back to a 1995 court judgment and subsequent agreement that limited the number of Theo Lacy inmates to 2,986.

Supervisor Spitzer, meanwhile, considered it fair to increase Orange’s share.

“We’re giving the host city additional revenue to offset the impacts of what that means to their city,” said Spitzer. He cited county payments to Brea for expanding the Olinda Alpha Landfill.

Orange County’s jail space issues are another example of California’s ongoing problems with its overcrowded and expensive state prison system.

In 2011 the U.S. Supreme Court ordered the state to cut its prison population by more than 30,000, ruling that conditions were causing “needless suffering and death.”

Also looming over Tuesday’s discussion was another federal court order, issued last week, mandating that the state reduce its prison population by another 9,600 inmates this year.

The county’s ICE contract is a significant revenue source for the Sheriff’s Department and was approved in 2010 to help fill budget gaps and prevent layoffs.

Orange County expects to bring in nearly $34 million from the contract this fiscal year, with $27.1 million for the Sheriff’s Department and $6.6 million for the county Health Care Agency. ICE pays the county $94.15 per day to house each inmate, plus other expenses such as guard services and transportation.

Orange County houses a mix of immigration detainees, including those whose status is undecided; those who have completed prison or jail time after various convictions and are challenging deportation; and those who may be seeking asylum.

Theo Lacy houses high-security immigration detainees, and the Musick Facility near Irvine houses minimum-security detainees and women.

The sheriff also said she expects the county to receive fewer ICE detainees and therefore less revenue. The federal agency is turning to the privately-run Adelanto Detention Center in San Bernardino County amid fiscal belt-tightening brought on by federal budget cuts known as sequestration.

“What we do have is a very attractive facility” for ICE, the sheriff said. “We’re just more expensive than the private alternative.”

Given that the county expects to take cuts to its ICE revenues on two fronts, Supervisor Janet Nguyen asked whether the federal contract should simply be eliminated altogether.

“Is it better for us to just do away with the ICE contract at this point or at some time?” asked Nguyen. “Because it doesn’t seem financially beneficial.”

Hutchens stressed that the revenue is critical to her agency. “I will have a $30-million hole in my budget if we eliminate the ICE contract,” she replied.

You can reach Nick Gerda at ngerda, and follow him on Twitter: @nicholasgerda.

FIVE-YEAR LOOK BACKS

June 27

2003

When you purchase a residence in Leisure World Laguna Woods, you purchase into a co-op and buy shares instead of real property. You then pay the co-op your real property tax payments and they forward it on to the County Tax Collector. A co-op had never been late on its property tax payment and the County’s software issued late payment notices to the underlying owners. This infuriated the owners and they were very disappointed in the managers of the co-op. The co-op managers, who felt that the owners would have never known about their administrative error, decided to scold the Tax Collector over the software deficiency. You’ve got to love dealing with people who find themselves embarrassed over their own mistakes. The OC Register had been covering this episode in the “Our Towns” section earlier in June and provided this update by Cheryl Walker in “Error.” (Recommendation: Don’t wait until the last day to pay your property taxes.)

Orange County Treasurer-Tax Collector John Moorlach said a software program is at fault in the issuance of more than 600 late-payment notices to Leisure World residents. The notices should have been sent to the management company of United Mutual, one of the retirement community’s governing organizations. The property-tax payment of nearly $100,000 was late and a fine of about $9,600 was assessed.

Disclaimer: You have been added to my MOORLACH UPDATE communication e-mail tree. In lieu of a weekly newsletter, you will receive occasional media updates, some with commentary to explain the situation, whenever I appear in the media (unless it is a duplication of a previous story).

I have two thoughts for you to consider: (1) my office does not usually issue press releases to get into the newspapers (only in rare cases); and (2) I do not write the articles, opinions or letters to the editor.

This message should appear at the bottom of every e-mail you receive. If these e-mails should stop arriving in your mail box, it will be because your address has changed and you did not provide a new one. If you do not wish to receive these e-mails, then please e-mail back and request to unsubscribe.

Advertisements