Retroactive Pensions

The retroactive pension benefit lawsuit is the last editorial in today’s OC Register.  My discussions with constituents finds consensus on a point raised in this editorial:  “This is a compelling legal argument that needs to be hashed out in the courts.”

The Look Backs will remind you that dealing with public pension issues has been a long-time passion

Editorial: Retroactive pensions

Supervisor Nguyen puts union support above taxpayers’ interest in opposing sensible lawsuit appeal.

The Orange County Register

The Orange County Board of Supervisors wisely voted to continue the board’s lawsuit against an unconscionable, pension-spiking giveaway approved by a previous board. Supervisors voted 4-1 – with only Supervisor Janet Nguyen dissenting – to appeal a superior court ruling against the lawsuit.

The board action appears to be based on strong legal reasoning, and all too often superior courts are loathe to rock the boat. Any such precedent-setting action will be appealed to the highest court.

The county and the state are struggling under an enormous amount of unfunded liabilities caused by an unsustainable level of pension and health-care promises made to government employees. Essentially, pro-union legislators have raided the treasury on behalf of their allies and haven’t worried too much about the costs to the future.

In 2001, the O.C. board voted 5-0 to retroactively increase pensions for long-serving deputy sheriffs, allowing them to retire at age 50 with 90 percent or more of their final year’s pay. Even those deputies who were ready to retire were given the pension boost for past years’ service. As Girard Miller of Governing magazine has pointed out, “the practice of awarding pension benefits on a retroactive basis is the devil’s doing. … They serve no purpose except to buy favor with incumbent union members … at the expense of future taxpayers who don’t even know what hit them.”

While three members of that board faded into the political sunset, two of them – Jim Silva and Todd Spitzer – went on to the California Assembly, and Mr. Spitzer hopes to one day be the Orange County district attorney. The current board’s lawsuit questions the constitutionality of retroactivity – calling it a gift of public funds for past service. This is a compelling legal argument that needs to be hashed out in the courts. The deputies union, which has never seen a tax dollar it hasn’t wanted to spend, is all of a sudden outraged by the $2 million legal tab for the lawsuit. These strike us as crocodile tears. It’s too bad Ms. Nguyen is siding with special interests on this one.

It’s nice to see four supervisors – Pat Bates, Bill Campbell, John Moorlach and Chris Norby – siding with the taxpayers these days.

FIVE-YEAR LOOK BACKS

September 6, 2004

The Orange County Business Journal had a commentary column by Rick Reiff that covered “random observations on recent news,” titled “Convention, Pensions, Injections.”  For clarification sake, I did support the petition drive to recall Armando Ruiz.  Here’s where he included me:

Public officials exploit pension rules. If money talks, then Santa Ana Police Chief Paul Walters isn’t a good public servant, he is a GREAT public servant. Taxpayers, give thanks that Walters is remaining on duty, collecting a $157,000 annual salary while also drawing a $142,000 annual pension. Santa Ana’s city manager is tickled that the city gets to keep Walters but no longer has to kick in $50,000 a year in benefits.

By this logic, I suppose taxpayers are likewise blessed that Armando Ruiz is expected to parlay his $10,000-a-year part-time job as a trustee of the Coast Community College District, into a $50,000-a-year pension—without really retiring. A grandfather clause in state law provides this quirky windfall to Ruiz and others who have served a long time on a public board while also holding a full-time state job.

To make it work, Ruiz is expected to relinquish his board seat the same day he retires from his day job with Irvine Valley College (which will provide another pension estimated at $65,000 a year). Running unopposed on the November ballot, he then is expected to be re-elected to the board just days later. So after a brief absence, he will return to public service, as a triple-dipper.

Get used to it. With government bodies caving in to public employees’ unions, such outrages will become increasingly commonplace. More ominous, the sheer size of new pension commitments threatens the solvency of government entities.

But it’s expedient for politicians to cut deals now and throw up their arms in exasperation later, when the bills come due. Among county officeholders expected to run again, only Supervisor Chris Norby and Treasurer John Moorlach appear willing to challenge this charade.

September 7, 1994

Iris Yokoi of the Daily Pilot covered an interesting pension-related decision the Costa Mesa City Council made in “Costa Mesa police, firefighters to join state benefits program—Safety personnel were previously covered by city plan.  Officials say move will save money.”  The public safety unions convinced the Council to drop the City’s own managed pension plan, the Costa Mesa Safety Employees Retirement Plan, and join with the California Public Employees Retirement System (CalPERS).  Why?

                The benefits provided to retirees are . . . better under PERS, according to Bob Crogan, a representative of the Costa Mesa Police Officers’ Association.

One Costa Mesa resident, former Orange County Employees Retirement System Director Tom Lightvoet, objected.

                PERS has a deficit of $2.9 billion and . . . the system assumes investments will earn 8.75% annually.  Such an elevated return estimate is unrealistic in this economy, he said.  PERS earned only 2% last year and has no surplus to cover this drop, Lightvoet said.

Only $2.9 billion?  Oh, to go back 15 years in time.  And to show you that I’m not a recent new-comer to pension issues, even I jumped in at the time.

                Accountant and political activist John Moorlach, meanwhile, warned the council that going to PERS for police and fire employees would mean relinquishing “control” to the state.  Moorlach pointed to problems with pension spiking in Huntington Beach as an example of how cities can lose control.

 1999

Nancy Hill-Holtzman of the LA Times did a piece on the difficulty for Republican Legislators to get bill passed in “GOP Lawmakers’ Session of Discontent—Democrats have the governor’s office and majorities in the Assembly and Senate; Republicans have . . . very few bills with a chance.”  However, if you’ve been reading the Look Backs, AB 343 was approved by the Legislature and signed by the Governor.  This article even noted it.

                 One of [Assemblyman Bill] Campbell’s successful bills, requested by Orange County Treasurer John M. W. Moorlach, give counties more leeway to invest in short-term corporate notes issued by financially healthy corporations.

September 8, 2004

 Norberto Santana, Jr. addressed an issue that contributed to my running for Supervisor in “County debt for retiree medical plan soars—It has ballooned in the past three years to $1.3 billion, and reserves are low.”  It has been my pleasure to participate in addressing a reduction remedy for this unfunded liability.

                 Treasurer-Tax Collector John Moorlach says Orange County has scant wiggle room to absorb the extra debt because the county already is contending with $800 million in debt left over from the government’s 1994 bankruptcy and a pension debt crossing the $1 billion mark.

                “And now you have another billion for retiree medical liability,” Moorlach said.  “That’s $3 billion dollars.  You’re talking $1,000 of liability per resident of the county.”

                 Some supervisors also question why the spike in retiree medical costs was not disclosed during their August debate regarding a new labor contract that expanded retirement incentives.

                 “We should have had that information prior to voting because it puts the county in this situation of an unfunded liability that future boards will have to deal with,” said Supervisor Chuck Smith, who was in the minority when supervisors approved the contract 3-2.