MOORLACH CAMPAIGN UPDATE — Likely to be Flat — July 12, 2016

The OC Register is on top of it. As you can imagine, our office tracks the rate of return data that CalPERS (California Public Employees’ Retirement System) provides on its website on a regular basis. I’m very concerned. For the fiscal year that just ended on June 30, 2016, it looks like CalPERS will not achieve its 7.5 percent assumed rate of return.

When you have $400 billion in liabilities, not earning 7.5 percent puts this system behind another $30 billion! Doing simple math, this means that the plan sponsors will have to pay another $1 billion per year over the next 30 years. This doesn’t take into account the 7.5 percent interest rate. So, using a mortgage calculator, you find that the actual cost is 150 percent higher. Municipalities in CalPERS are looking at paying an additional $2.5 billion each year over the next 30 years.

Let’s get to some specifics. Plan sponsors are the state, some 30-plus counties, and cities, maybe yours, that utilize CalPERS as its public employee defined benefit pension plan provider. This means that you, as a resident of your city, will be chipping in to pay this additional cost. It may mean that some of your city services will be cut in order to find the necessary funding within the city’s existing budget.

With interest rates at all-time lows and the stock market at all-time highs, things will get very awkward for CalPERS if interest rates rise and the stock market adjusts downward. It could mean another poor performing year for the fiscal year ending June 30, 2017.

The OC Register provides the news in the first piece below and reminds me that I am proud of my license plate: SKY FELL.

The next three pieces deal with the topic of term limits for the OC Board of Supervisors. The first is from the OC Register and the next two are from the Voice of OC.

On the subject of term limits, I said my peace in MOORLACH UPDATE — Term Limits Plus — January 26, 2012 january 26, 2012 john moorlach. I stated that an elected official is just hitting his or her stride after serving close to two terms, and I have not changed my position. Supervisor Nelson is bringing my 2012 idea back up and it will be voted on at this morning’s Board of Supervisors’ Meeting. I did throw in my two cents and that has me included in this topic. But, as far as I know, neither Supervisor Nelson or myself want to serve additional terms (I am able to serve another two terms under the current law.)

Thirdly, you are invited to attend my District Fund Raiser tomorrow evening at the Pacific Club. The topic will focus on a famous camping trip, one that changed this country as to how it handles public lands. I look out my window for Half Dome on my flights back home to the District. This backpacker has enjoyed numerous backpacking excursions in Yosemite. Get ready for a fun summer reflection. The details are immediately below.

Fourthly, my wife and I now have a daughter-in-law. Our oldest son married his beautiful bride this Saturday and the Moorlach family had a wonderful weekend in Inyo County for a beautiful ceremony in the shadows of the Eastern Sierras. Highway 395 was part of the setting for the destination wedding, and it is filled with wonderful personal memories, making it fun to reflect and share that "life is a highway." Congratulations to Caleb and Monika!

Finally, I want to share my condolences to the Bergeson family on the loss of former State Senator and Orange County Supervisor Marian Bergeson. She played a big role in the journey that I have been on. I want to thank the Bergeson family for allowing Marian to have nine decades of impact in and on our state and county.

You’re Invited to a

Moorlach for Senate 2016 Fundraiser

WHEN:

Wednesday, July 13th

5:30 – 7:30 PM)

WHERE:

Pacific Club

4110 MacArthur Blvd

Newport Beach, CA 92660

SPECIAL GUESTS:

Chris Epting – Author of

"Teddy Roosevelt In California

The Whistle Stop Tour That Changed America"

and

Shaun MacGillivray — Producer of

The IMAX Movie

"National Park Adventure"

Celebrating the Centennial of the National Parks Service

OPPORTUNITIES:

Individual Tickets: $250

Co-Host: $4.200

Gold Sponsor: $2,000

Silver Sponsor: $1,000

Bronze Sponsor: $500

RSVP:

David – (714-824-0256)

david

Paid for by Moorlach for Senate 2016 (ID# 1376462)

WATCHDOG STAFF COLUMNIST
Another tough year for CalPERS
Public retirement fund lost billions. Blip or trend?

Read online HERE

By TERI SFORZA

Public workers are pumping more money into retirement funds. Public agencies are pumping more money into retirement funds.

Yet the market seems distinctly unimpressed.

The California Public Employees Retirement System – the nation’s largest – lost about 2 percent of its market value in the fiscal year that just ended, according to unofficial numbers published last week on the CalPERS website. This came despite doubled-down efforts to beef up its bottom line.

The value of CalPERS investments was $293.7 billion on June 30, down from $301.9 billion one year earlier, according to CalPERS’ daily valuation report. That number accounts for daily movement of some assets but not others, which are updated quarterly.

Challenges are expected to continue for years, even as the wave of graying baby boomers heads into retirement.

CalPERS is slated to release its official 2015-16 numbers next week, and declined to discuss details with the Register beforehand (though officials noted that the fund’s July 7 value was nearly $295.7 billion.) But last month, Ted Eliopoulos, CalPERS’ chief investment officer, tried to prepare officials for a bumpy ride going forward.

“Last fiscal year, our return was 2.4 percent,” Eliopoulos said during a committee meeting. “And this fiscal year, as we head into July, we’re likely to be flat, which is a nice way of saying zero.”

The next three to five years are shaping up to be “a challenging market environment, not just for CalPERS, but for all investors,” Eliopoulos added. “It’s going to test us.”

Projections from independent third parties are “materially lower” than what CalPERS forecast just two years ago, he said. With its current mix of investments, CalPERS can expect a total return of just 6.4 percent over the next decade.

It has assumed a return of 7.5 percent.

That difference is of great import, because investment income is the bulk of public pension payments. And since pension payments are guaranteed, any shortfall would have to be made up by taxpayers.

‘GREAT ANXIETY’

Whether this represents a bump in the road or a major sinkhole depends on who you ask.

“What this means is simple: employers, employees and taxpayers will pay more to keep CalPERS afloat in the future,” said Joe Nation, a professor of public policy at the Stanford Institute for Economic Policy Research and a former Democratic Assemblyman.

A zero return this year would likely drag CalPERS’ 10-year average rate of return below 6 percent, yet the system continues to assume returns of 7.5 percent per year, Nation said. That means unfunded liabilities grow.

Those unfunded liabilities – the difference between what CalPERS has and what the agency has promised to pay people for work already performed – are about $150 billion, compared with $93 billion just two years ago, Nation said.

And if one assumes “a more realistic 4 percent rate of return” (a “Treasury” or “risk-free” rate) “the unfunded liability for CalPERS alone is now $412 billion, or three state general fund budgets,” Nation said.

David Crane, a research scholar at the Stanford Institute for Economic Policy Research who was an adviser to Gov. Arnold Schwarzenegger, said CalPERS needs to earn much more than that assumed 7.5 percent rate to keep unfunded liabilities from growing.

Public agencies and workers will see their required contributions to pension funds continue to rise, said state Sen. John Moorlach, R-Costa Mesa. His back-of-the-napkin calculations put the hike at an extra $1 billion next year, to try to make up lost ground.

“What has me baffled is that this is causing me great anxiety, but it does not seem to have the same impact on my colleagues in Sacramento,” Moorlach said. “The governor has just signed the largest budget in state history, but he is not making any effort to prepay CalPERS, a 7.5 percent interest-rate charging debt.”

While many on the left attack the big bank bailouts that taxpayers were forced to fund during the Great Recession, these anemic returns will force taxpayers to bail out government pension programs, said Carl DeMaio, a former San Diego City Council member.

“Both bailouts are wrong,” said DeMaio, a Republican. “It is time for action.“

DeMaio and former San Jose Mayor Chuck Reed, a Democrat, have been pushing for a ballot initiative to address the problem.

‘CHICKEN LITTLE’

Dave Low, chairman of Californians for Retirement Security, said he expects critics like Crane, Nation, Reed and DeMaio to be “crying like Chicken Little about how the sky is falling.”

“They were awful quiet when returns were double digits, but now they will raise the same straw man arguments about why pensions are out of control,” said Low, who heads a coalition of public labor unions representing some 1.6 million people.

Investment returns are by nature volatile, Low said, and the impact on Joe Citizen is minor for several reasons.

“When returns exceed expectations, they are folded into the fund and smoothed over a funding period. When returns are below expectations the same process occurs. Therefore, they generally balance out over time,” he said.

CalPERS’ average return over time has been pretty much right on the projected mark, and expectations have been lowered over recent years; employers and employees continue to make contributions to the fund; and just as citizens don’t see changes when CalPERS earns double digits, they don’t see changes when returns are down, Low said.

“Maybe we should also think about how everyone’s 401(k) plans did this past year and what that means for retirement security,” he said.

An independent report from Wilshire Associates in Santa Monica, a CalPERS consultant, warned that forward-looking assumptions are quite low but cautioned CalPERS against taking chances to try to regain ground.

“While the reduced portfolio return expectation vs. three years ago could encourage additional risk-taking in an attempt to maintain a higher expected return, such action would seem contrary to the committee’s long-term plans for portfolio de-risking,” it said.

Eliopoulos, CalPERS’ chief investment officer, was optimistic and stressed teamwork while delivering his sober news last month.

“Of course we can’t predict the future,” he said. “And we hope we’re surprised by the upside.”

Contact the writer: tsforza

Orange County supervisor proposes change to term limits

Read online HERE

By JORDAN GRAHAM

An Orange County supervisor has proposed a countywide initiative for the November ballot that would change term limits for him, his colleagues and future board members.

If approved, supervisors would be allowed to serve a maximum of three four-year terms in their lifetime and could serve all three consecutively. They are currently limited to two consecutive terms, but there is no lifetime limit.

“Is 12 years lifetime better than an eight-year revolving door? That’s the issue,” said Supervisor Shawn Nelson, who proposed the initiative this week, saying he wanted to give supervisors enough time to become experienced but not allow the same faces to repeatedly return to the board. “Under this, you could serve three terms in a row, and then you’re done forever.”

However, the new rules could let some current supervisors stay longer. The initiative cannot count past board service, according to state law, potentially allowing Supervisors Nelson and Todd Spitzer to serve consecutively well beyond what current term limits allow.

Nelson said he doesn’t plan to benefit from his proposed change, saying, “I don’t plan to seek another term on the board. I intend to run for judge.

“There’s never a time to propose it where it won’t look like someone might benefit, but right now you have three people on the board in their first term,” he said. “Now is the best time to do it, because it changes the least.”

Supervisors Andrew Do, Michelle Steel and Lisa Bartlett are in their first terms. Under the proposed change, Steel and Bartlett could each serve two more consecutive terms. Do, who was elected in a 2015 special election, could serve three more full terms.

Spitzer – who previously served six years on the board before being elected to the Assembly and then returning in 2012 – could serve an additional 12 consecutive years. And Nelson, who will be termed out in 2018 under the current rules, could run for an additional two terms.

According to county records, Spitzer is the only county politician ever to be termed out as supervisor, leave for another office, then return to run again. The county’s term limit rules were passed in 1996, and before that some supervisors served as long as two decades.

However, a local campaign account titled Friends of Supervisor Janet Nguyen 2020 had $261,621 at the start of this year in support of the current state senator should she decide to run for supervisor again. Nguyen served on the county board from 2007 to 2014.

Nelson said the impetus to alter term limits came from state Sen. John Moorlach, R-Costa Mesa, who wrote the board asking supervisors to change the rules. He proposed a similar change as a supervisor in 2012, but the board rejected it by a 3-2 vote.

Supervisors will vote Tuesday whether to place the initiative on the Nov. 8 general election ballot. Supervisors Spitzer, Do, Bartlett and Steel did not immediately respond to requests for comment.

Contact the writer: jgraham or 714-796-7960

Nelson Draws Flak for Proposing to Extend Supervisors’ Term Limits

Read online HERE

By Nick Gerda

Orange County Supervisor Shawn Nelson has proposed an extension of term limits for county supervisors, prompting criticism from prominent fellow Republicans who claim it’s a last-minute deceptive move to benefit himself.

Nelson’s proposal, which was revealed last week and is up for a vote by supervisors Tuesday to place it on the November ballot, would extend supervisors’ term limits from two four-year terms to three four-year terms and impose this as a lifetime limit.

The county’s current law allows a termed-out supervisor to run again for the office as long there’s a gap in which he or she is not on the Board of Supervisors.

Nelson is in his second term and will be termed out in late 2018 under the current law. But if his proposal goes to the ballot and voters approve, Nelson’s term limits clock would reset to zero, giving him up to 12 extra years as a supervisor.

Nelson says his proposal is rooted in a similar effort in 2012 by then-Supervisor John Moorlach. Both Nelson and Moorlach argue that it takes years for supervisors to get up to speed in understanding the complexities of county government and policy.

“Forcing an individual out of office after eight years of service (as is current practice) only diminishes a Supervisor’s and his/her staff’s ability to capitalize on the years of education and experience to achieve significant and sustained reforms on behalf of Orange County taxpayers,” wrote Nelson and his chief of staff, Denis Bilodeau, in a staff report on the new proposal.

Nelson has also said recently that he isn’t planning to seek another term as supervisor in 2018, instead aiming to run for a judgeship.

But some of his colleagues, as well as a prominent local Republican activist, are crying foul.

“With no conversation about this, there are a lot of frustrated people that are very angry…this thing came out of nowhere,” Supervisor Todd Spitzer told Voice of OC on Monday.

“He’s made campaign promises [before], and then he’s figured out how to get around those campaign promises. He unequivocally said he wouldn’t take the pension” but created a ballot initiative “that required him to take the pension,” Spitzer added.

“It’s rushed, there’s been no dialogue, no transparency, and it’s completely self-serving…the whole thing is just crazy to me.”

Local GOP activist Jon Fleischman railed against Nelson’s proposal in a blog post last Friday.

“Nelson’s cynical ploy – if he can grab two co-conspirators – would create an entire board of career politicians, taking in their big paychecks and building up massive pensions, while avoiding a return to private life,” Fleishman wrote.

“Nelson’s proposal also cynically is framed to ask voters if they want a three term-limit for Supervisors, without making it clear that there is already a two-term limit in place!”

Fleishman also wrote that Supervisor Michelle Steel, a close ally of Fleishman’s, “strongly opposes” placing Nelson’s measure on the ballot. A spokeswoman for Steel didn’t dispute the characterization.

Nelson didn’t return a phone message seeking comment for this story.

Spitzer said he’s not opposed to having a conversation about term limits, but that it should be done in a way that invites public input and isn’t led by someone with a direct interest in the outcome.

“The Board of Supervisors today are still being punished [through the current term limits] for the sins of the 1994 supervisors that created the bankruptcy,” Spitzer said.

“I think it would be helpful to have a conversation about term limits in general, but not in a rushed fashion when it affects Nelson and he’s the one leading the conversation, and he’s not included the public at all.”

Nick Gerda covers county government and Santa Ana for Voice of OC. He can be reached at ngerda.

Santana: It’s Time to Talk Change for OC Government

Read online HERE

By Norberto Santana, Jr.

It might actually be their most honest moment ever.

Supervisor Shawn Nelson and state Sen. John Moorlach – two conservatives who often talk about how much they miss the private sector – apparently want to stick around public life a bit longer.

Tuesday they’ll propose that the county supervisors’ term limit be extended by one term, allowing a supervisor to serve three consecutive terms for a total of 12 years in office.

“When term limit policies are brought forward, many times public officials must learn on the job and are forced from office before attaining the knowledge and skill set required before they can make substantive positive changes,” wrote Moorlachlate last month in asking supervisors to consider the idea.

Now while some conservatives, like Flash Report Publisher Jon Fleischman, are raging hot over the idea – as term limits have now become a Republican mantra – it is important to listen to what Moorlach and Nelson are really saying.

Most supervisors don’t know what they are doing.

And just about when they figure out the job, it’s time to move on to the next electoral office.

That creates a dangerous trend.

It’s a fact that Orange County residents are now governed by the most politicized board of supervisors in history.

You get crime victims’ monuments at Irvine Regional Park for Supervisor Todd Spitzer (who is vying for DA) and statues to a Vietnamese general, a Mexican hero and Ronald Reagan for County Supervisor Andrew Do (who is up for re-election in November) at Mile Square Park.

Meanwhile, Supervisor Michelle Steel has produced a dog beach area and Supervisors’ Chairman Lisa Bartlett has become an expert at pet events.

Nelson is still working on getting a bike lane loop finished after nearly eight years in office.

All fluff. All the time.

Meanwhile, our supervisors ignore the real problems they were hired to fix, like homelessness, civilian oversight over police, infrastructure spending, social services and health care.

All these agencies run on auto pilot.

That is until it’s time to publicly embarrass a county department head at the weekly supervisors’ meeting, complaining that government doesn’t work.

Now keep in mind that old-time supervisors didn’t have term limits.

They got elected. And then did what they thought was right.

That ended when they bankrupted the county in 1994.

Ever since then, supervisors have been talking about reforming local government here in Orange County.

Term limits is basically the only reform they ever get to.

Debating what else to do has become a bit of a sport with no game day.

Nearly twenty years after the anniversary of the bankruptcy and the reform panel anointed to plot out solutions, the best supervisors can do is to try to figure out how to stick around longer for a job they say they hate.

We need a real discussion about how our local government should be working.

We are, after all, driving around a car – county government – built in 1889.

Ironically, this week, I’ll be joining Rick Rieff, the Orange County Register’s opinion Guru Brian Calle and Common Cause’s Bill Mitchell on Inside OC, broadcast on PBS so Cal, to talk about what kinds of structural changes are really needed in local government.

Here’s a tip.

We need much more complex fixes than term limits.

We need a public that is engaged because while you weren’t watching, your politicians – Republicans and Democrats – gave you a police state out of simple inertia.

Most of your cities are increasingly moving to have their discretionary budgets primarily focused on police and fire services.

That is what offers key political endorsements for politicians so that’s where the discretionary budget focus in local government has increasingly moved in recent decades.

With tight budgets and given what’s happening across our nation on police relations, many politicians at the city level – note Santa Ana and Westminster most recently – have said they will cut every other service rather than police.

At the county level, the sheriff’s department and the district attorney’s office are already taking up an increasing portion of the discretionary budget.

Which prompts the question, what do we need county supervisors and council members really to do if so much of our discretionary budget spending is public safety and the rest is pass-through mandates from the federal and state government?

At the county do we need all five supervisors and their million dollar staff budget each?

Is there a better way to spend $5 million?

Most entitlements for residential development in county areas are done.

Supervisors now only meet on average, a few times a month.

Should they be part-timers? Do we need a countywide elected CEO?

Most importantly, state policies like ballot initiatives like Prop 47 and legislation like AB 109 have changed how we jail residents – mainly because of the costs of jailing them.

Yet we can’t expect to put police officers in the midst of social upheaval and just ask them to keep things calm by themselves.

Instead of complaining about new approaches like Prop 47 and AB 109, local politicians need to get to work and actually turn on the other levers of government – things like social services, health care, parks, open space and libraries – in order to turn things around in problem neighborhoods, where we are spending so much of our public safety budget.

Getting at root problems actually solves things.

The rest, like talking term limits, is deck chairs.

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