MOORLACH UPDATE — H.R. 205 — August 28, 2013

The Orange County Breeze announces my appointment of Stacey Berry to the Orange County Transportation Authority Special Needs Advisory Committee in the first piece below. It’s hard to recall when one of my appointments to a board, commission or committee garnered media attention. Ms. Berry came at the high recommendation of Cypress Mayor Pro Tem Leroy Mills, so it seems appropriate that they both be mentioned in the piece.

The Voice of OC provides an update on H.R. 205, a bill that the County has been supporting, in the second piece below. In 2009, the Orange County Board of Supervisors negotiated a one-time option for current employees to drop down to a “1.62% @ 62” defined benefit pension formula. It also provided for an employer funded 2% defined contribution plan, similar to a 401(k). This combination of defined benefit and defined contribution plans has been referred to as a hybrid. Unfortunately, Internal Revenue Service Revenue Ruling 2006-43 has obstructed its implementation, because it does not allow for a change in defined benefit formulas. This Revenue Ruling can be modified by changing the Federal tax code through legislation, which U.S. Representative Loretta Sanchez is carrying. Regretfully, national public employee unions have a stronghold on the Treasury Department and members of Congress, and have held up this matter for nearly four years, as this piece clearly points out.

Cypress PD Shines at Cypress City Council meeting

The Cypress Police Department was the star of the Cypress City Council meeting on August 27.

Chief Jackie Gomez-Whiteley announced the promotion of Lead Patrol Officer Greg Faessel to the rank of Sergeant. Sgt. Faessel has served in SWAT, as a motorcycle officer, and lately in the Criminal Investigations Bureau as a financial crimes investigator.

It was in this last capacity that he gave a very well-received presentation on fraud to the Cypress Chamber of Commerce at a networking breakfast earlier in the year.

“I’m humbled by the opportunity,” Sgt. Faessel told the City Council. He has been assigned as a Watch Commander in the Operations Division of the police department.

Shortly after this, Chief Gomez-Whiteley herself received an award, an Executive Certificate from the Commission on Peace Officer Standards and Training (POST). Robert Stresak, the executive director from POST in Sacramento, praised Chief Gomez-Whiteley for her remarkable achievement, as only 1,500 Executive Certificates have been awarded to peace officers in the entire state over the agency’s fifty-four years.

Chief Gomez-Whiteley thanked the City Council for their support, and gave special praise to the men and women of the Cypress Police Department: “This job is a challenge, but it’s much easier with the staff standing behind me.”

Cypress Mayor Pro Tem Leroy Mills and Stacey Berry, his nominee for OCTA Special Needs Advisory Committee.

Also of note at the Council meeting was Mayor Pro Tem Leroy Mills’s announcement that Stacy Berry had been appointed by Second District Supervisor John Moorlach to the Orange County Transportation Authority’s Special Needs Advisory Committee, which advises the OCTA on transportation services for those on a fixed income or with disabilities. It is an important position that affects a large number of residents every year.

An avid volunteer, Ms. Berry is the Past President of the Cypress Women’s Club and served as the Volunteer Chair for the Cypress Community Festival.

AFSCME Opposition Blocking Federal Action on OC Pension Bill

By NICK GERDA

A key piece of federal legislation that could lower Orange County’s unfunded pension liabilities, by allowing current employees to opt-in to a lower benefit tier, has been facing a strong challenge from one of the country’s largest employees unions.

Just outside the Orange City Council meeting on Tuesday, Rep. Loretta Sanchez (D-Santa Ana) said the position of national unions like the American Federation of State, County and Municipal Employees are a key hurdle in moving forward with H.R. 205, which would resolve tax implications for existing employees who opt-in to a lower benefit as part of the “hybrid plan.”

“They haven’t been real thrilled with that bill,” said Sanchez, adding that she hopes AFSCME drops their efforts against it.

Meanwhile, the union – which represents about 1,200 social service eligibility workers at the county – says the changes would adversely impact rank-and-file workers who already face the lowest retirement packages among county labor groups.

AFSCME Local 2076 President Sandra Fox says that if workers opted into that pension plan, they’d have a lower benefit formula than Social Security.

“We are the bargaining unit that has the lowest retirement,” Fox said Tuesday evening. “We would lose even more.”

“The way that it stands right now I don’t see us supporting it,” she added, pointing out that AFSCME is fighting the bill at the federal level.

The county’s largest labor union – the Orange County Employees Association – and the county Board of Supervisors see it differently, placing their support behind the hybrid plan as a thoughtful approach to dealing with the county’s growing unfunded liabilities.

Sanchez emphasized that it’s important to move forward for the sake of the county’s finances, citing recent municipal bankruptcies.

“We don’t want to end up like Detroit,” said Sanchez, who added that she’s been meeting with AFSCME as part of her efforts to pass the bill.

This all comes amid a backdrop of significant pressure on public pension plans, including Orange County’s, where the unfunded liability has soared from just over $1 billion in 2004 to more than $5 billion today.

Over the last decade, a combination of benefit increases, market losses and changes in actuarial assumptions have all contributed to the skyrocketing of unfunded liabilities.

Many Republican leaders, like County Supervisor John Moorlach, have argued for an aggressive approach to paying down that liability — in some cases pushing to shorten some amortization schedules from a 30 year payoff down to 15 years.

Others, including city officials like Stanton’s Republican mayor Dave Shawver and many labor groups – like OCEA, the OC Professional Firefighters Association and the Association of Orange County Deputy Sheriffs – support speedier amortizations – such as 25 years – but argue that 15-year goals are too aggressive.

That debate exploded this summer, with county Treasurer-Tax Collector Shari Freidenrich casting the deciding vote on the issue, summing up the aggressive amortization plan supported by supervisors’ appointees to the local retirement board as “too dramatic of a step.”

Beyond the issue of expanding pension liabilities, there seems to be consensus among OCEA and Moorlach that workers should have an option to opt into a lower benefit tier.

Typically it’s younger workers who choose lower retirement benefits in order to get higher take-home pay while working.

AFSCME, which is one of America’s largest unions at 1.5 million members, is on the other side of the issue.

They argue that the 401(k)-style approach of the hybrid plan puts the workers’ financial futures at risk.

“Let’s say you do the wrong investment. What happens? You lose everything,” said Fox. “Again, it’s the county employee that has dedicated their whole life to servicing the public.”

Even with bipartisan support from Rep. John Campbell (R-Irvine) and Rep. Ed Royce (R-Brea), the bill faces an uphill battle in Congress.

So far this year, the House Ways and Means Committee has had 650 bills referred to it – including H.R. 205 – with three of those signed into law so far.

During the last Congress, from 2011-13, the committee saw 2,503 bills, of which 30 were signed into law.

Sanchez was in Orange on Tuesday as part of her regular Congressional updates throughout town.

In her presentation, she mentioned bills she’s co-sponsoring to revise requirements for restaurants to disclose calorie counts and help science and technology graduates who are on student visas gain permanent residency while they’re working.

Sanchez also said she’ll be hosting an informational workshop for veterans at Santa Ana College on Sept. 27th to help them understand their GI benefits, which include support for college tuition and books.

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

FIVE-YEAR LOOK BACKS

August 28

1998

Husein Mashni of the Daily Pilot provided an economic update in “Analysts: Market drop brings opportunity – But county Treasurer John Moorlach says foreign problems should not be ignored.” With the recent rumblings concerning the country of Syria, this headline would work today. Many saw a buying opportunity, but I concluded the piece as the contrarian. My concerns were confirmed when the Dow Jones Industrial Average would incur a 513-point loss, 6.37%, a few days later, on August 31st, one of the biggest one-day declines in the Dow’s history. In fact, the market would see a 19 percent drop in the Dow in the two months of July and August. Fortunately, the Dow would eventually calm down and recover. On May 6, 1998, the Dow was trading at 9,033.23, by year end it was back to 9,181.43, but there was a lot of action in between. Here are the opening and closing paragraphs:

For amateur investors, Thursday’s 357-point stock market drop, which came after Russia devalued the ruble 50%, may look daunting, especially because it is only one in a series of sizable, so-called market corrections this year.

But to Orange County Treasurer John Moorlach, who predicted the county’s bankruptcy in 1994, the Russian, Asian and South American economic woes should not be ignored or taken lightly.

“I have a real nagging concern that we haven’t really seen deflation in our lifetime,” Moorlach said. “I’ve been saying publicly that we have to keep our eye on the Asian crisis. It’s like a flooding river, and we have to at least make sure we have enough sandbags in place.”

2008

Stuart Pfeiffer of the LA Times provided his perspectives on what would be a Performance Audit Department priority in “O.C deputies still rack up high level of overtime – In one pay period under an audit, 61 exceeded the limit of 48 hours. Employee burnout is a concern.” For the LA Times story referred to in the piece, see MOORLACH UPDATE — My Seat — May 16, 2013

Despite an ongoing audit of overtime spending within the Orange County Sheriff’s Department, deputies continue to work exorbitant amounts of overtime and county and department officials remain concerned about employee burnout.

The Times reported in May that two-thirds of Orange County deputies — boosted by thousands of dollars in overtime pay — earned more than $100,000 in 2007.

Acting Sheriff Jack Anderson ordered staffers to identify employees working excessive overtime, and John Moorlach, chairman of the county Board of Supervisors, called for an audit of sheriff’s overtime spending.

In the two months that followed, employees exceeded the department’s overtime limit more than 100 times, according to department reports. Department policy limits employees to no more than 48 hours of "planned overtime" per two-week period, with exceptions for breaking crime or important investigations.

No deputies have been disciplined for working excessive overtime, a department spokesman said.

During the two-week period that ended July 17, 61 sheriff’s employees worked more than 48 hours of overtime, running up a combined 594 hours above the limit.

Deputy Troy Feely, assigned to the Lake Forest station, worked 76 hours of overtime during that two-week period, filling in for colleagues on vacation, injured on duty and in training.

At the Theo Lacy Jail in Orange, Deputy Jerrald Van Wyke worked 62 hours of overtime while filling a vacant position and covering for a deputy on vacation. One wing at Theo Lacy, budgeted for 40 employees, is staffed entirely by deputies such as Van Wyke working overtime.

"It’s something we’re concerned about, obviously, because of the fatigue factor and the burnout factor," said sheriff’s spokesman Damon Micalizzi. "Overtime is something that’s a necessary component in the business of public safety. . . . You don’t just punch out because you’re at 48 hours of overtime."

Last year, 27 deputies were paid more than $75,000 in overtime, a figure that could have been reached only by exceeding the overtime limit every week of the year. The top overtime recipient, investigator Theodore R. Harris, was paid $221,000 in 2007 — $120,000 of that in overtime.

Concerned by those figures, Moorlach asked Steve Danley, the county’s performance audit director, to study whether the department should hire more deputies to reduce the amount of overtime that deputies work. Danley said Wednesday that he expects to finish that report next month.

Mario Mainero, chief of staff for Moorlach, said his office hopes that Sheriff Sandra Hutchens takes steps to reduce the number of deputies working extreme amounts of overtime.

"We would certainly hope that the current sheriff’s administration takes a look at the data with an eye toward seeking a resolution as soon as possible," Mainero said. "Excessive overtime over the standards can affect job performance, and this is an issue of mutual concern to the Sheriff’s Department and to us."

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