The lead editorial in the OC Register provides a perspective on a topic that will only grow more serious once taxpayers grasp its magnitude. And they will by the end of this year. Municipalities will have to add unfunded pension liabilities to their balance sheets. Audits of cities, counties and states should be completed by December, or shortly thereafter. The topic of public employee defined benefit pension plans will dominate the news from Christmas to the end of March, 2016. Don’t say to me I didn’t tell you so.
Once the real numbers are put out there, the voters will gasp at how upside down their local cities just may be. I was honored to be mentioned for my efforts to address this major fiscal issue while a County Supervisor.
On the State Senate front, today I was asked to lead the pledge of allegiance at the beginning of today’s Senate Session. The warm welcome continues.
O.C. puts pensions front and center
At 20 years since Orange County’s 1994 bankruptcy, county and city budgets face a new threat: public pension liabilities. The causes are several. Contract negotiations long have been held out of the public eye, lacking scrutiny and oversight from all but the most dedicated reformers.
Pension promises are fulfilled in the future, encouraging a lack of accountability today from temporary representatives tasked with spending other people’s money.
Public employees also enjoy disproportionate power because they occupy privileged positions. We often consider their services essential – policing, fire prevention, teaching – so we’re less inclined to be critical of their compensation and benefits.
But negligence hurts. The Orange County Employees Retirement System estimated last year its unfunded liability at almost $5.4 billion. Add to that over $400 million in unfunded health benefits, according to the California Policy Center.
The approved budget for funding the entire county government in fiscal year 2014-15? Also $5.4 billion.
Orange County’s cities have individual unfunded liabilities that, taken together, total $3.07 billion. Countywide, our cities have funded only 71.8 percent of their pension promises – eight points short of what is recommended by the California Public Employees Retirement System. Only six cities in Orange County exceed an 80 percent funding ratio.
This creates multiple problems in both the short and long run. Today the indulgent promises and optimistic projections of CalPERS dating back to 1999 are requiring cities to increase their annual contributions by 35 to 50 percent, as reported by the Register. That means tens of millions of dollars leaving city coffers that might otherwise fund infrastructure projects or allow for a reduction in fees and taxes.
The budget shortfalls hurt. Just last November, Stanton voters passed Measure GG, a sales tax increase called necessary for “public safety.” But as we noted in an editorial in oppostion, the money can be spent on anything, such as the city’s generous benefits, including pensions.
Voters gave a different result last month when they sent former Orange County Supervisor John Moorlach to the state Senate. He first made a name for himself in the county by warning of the impending county bankruptcy. Later, first as county treasurer/tax collector, then as supervisor, he worked for increased transparency and fiscal accountability – particularly for pensions. He was instrumental in the introduction of a county Civic Openness In Negotiations ordinance, which, if it jumps current legal hurdles, will require documentation and transparency during talks with unions.
“We’ve got to do it at the bargaining table,” Sen. Moorlach told the Register’s Editorial Board, to hammer out more fiscally responsible contracts with public employees.
Costa Mesa Mayor Pro Tem Jim Righeimer, who won re-election last November, has been “credited” by union leaders with creating “Wisconsin in California,” referring to that state’s restriction on collective bargaining by public-employee unions. Not quite. But his city is faced with nearly $230 million in unfunded liabilities and the worst funding ratio – 65.1 percent – of any O.C. city.
Mr. Righeimer joined in advancing a COIN ordinance for his city forwarded by Mayor Steve Mensinger to deal with about $40 million in annual unfunded liabilities by 2030.
The aim of reforming the negotiation process? To enforce more realistic employee contribution levels. As it stands, most of the “employee contribution” to pension plans actually comes from city taxpayers, not the employees.
“They need to lower what they’re taking. Period,” said Mr. Righeimer.
High-profile reformers have shown some of the steps to be taken. What remains is finding the will – city by city – to make the necessary changes.
This e-mail has been sent by California State Senator John M. W. Moorlach.
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