MOORLACH UPDATE — Leap Day Activities — February 29, 2016

The Managed Care Organization tax, SBX2-2, passed the Senate today with a vote of 28 to 11. All of the Democrats were in support, while two Republicans also voted in favor of the bill. The Governor is sure to sign the bill. For more, see MOORLACH UPDATE — SB 1273 and MCO Tax — February 27, 2016 february 27, 2016 john moorlach. Breitbart made one last appeal this morning in the first piece below, to no avail. I am honored that my referenced UPDATE was quoted.

The Academy Awards of last evening has a local connection, as the OC WEEKLY points out in the second piece below. This is ancient history, but for those who were around twenty-two years ago, this will bring back a lot of memories. I could give you a few references to Martin Baron in my UPDATES documenting this era, but I won’t rain any further on his parade.

And CalPensions and PUBLIC CEO provide the third piece below. It seems that Judges can sue for pay increases. Go figure. This publication does scholarly work on California pension systems. It’s a long read, but closes with the glaring conflict of interest concern that I raised years ago.

8 Reasons for the GOP to Reject Jerry Brown’s Health Care Tax

In early January, Governor Jerry Brown called on legislators to approve a revamped multi-billion dollar tax on healthcare organizations (the “MCO” tax). Surprisingly, some Republican legislators are considering casting a vote in support of this healthcare tax. It is very likely that the vote on the Governor’s proposal will take place today in Sacramento.

Here are eight reasons why GOP legislators should vote against the tax increase:

1) With record-sized mega-budgets, California’s government is not suffering from a revenue problem. The reality is that there are more than enough tax revenues currently to fund programs for developmentally disabled persons — but once again the majority party is using that important issue as political football (as with transportation infrastructure funding), choosing not to fund something unless Republicans prostrate themselves.

2) This managed care organization tax is the poster child of a tax that should end. Its current iteration was authored for three years in 2013 on a party line vote. Not one Republican legislator voted for it. If there were more Republicans it wouldn’t have passed at the time. It stands to reason that with Republicans picking up seats in the 2014 election it should go.

3) Tax dollars should be used responsibility, whether they reside in the state or federal treasury.The federal government is offering money to California if it passes this tax, which would continue to fund the expansion of Obamacare in California. That’s against the original intent of the Framers of the Constitution, and bad policy.

4) The process is rushed and the consequences unknown. As State Senator John Moorlach (R-Costa Meas) says:

Unfortunately, we have not been provided with the details on how the bill will impact the for-profit health care providers. One problem is that their tax information is proprietary and unavailable. The other problem is that no one can predict what their premium taxes and taxable income will be for the next two years. Consequently, no one knows if the bill is good for consumers, the for-profits or the State of California’s net tax revenues. I know it is nice to assume that it will all work out. But, this is a very complex arrangement that deserves a less rushed analysis.

5) There is nothing more credible than an insurance company executive “promising” insurers won’t use the new tax as an excuse to raise rates. (Apparently, such assurances have been given.)

6) There is something particularly unseemly about a deal that involves the approval of a lift of pork barrel spending in order to secure the votes of particular members – ranging from fire mitigation funding of over $100 million for some rural counties, to big bucks for a medical school at U.C. Merced. There are also millions for the Labor Institutes at U.C. Berkeley and U.C.L.A., and a cool million for the Wildlife Health Center at U.C. Davis. And the list goes on…

7) As President Reagan was famous for saying, “When you are explaining, you are losing.” — Regardless of whether you choose to think of this as a tax increase or not (it has been portrayed as a mere replacement for a tax that already exists and is expiring), that is exactly how it is and how it will be portrayed. Will you have twenty minutes with a white-board with each of your constituents to explain your vote when the rates go up?

8) This is as simple as it gets. The current multi-billion dollar MCO tax will expire in just a few months. There’s only a new health care tax if you vote for one.


Jon Fleischman is the Politics Editor of Breitbart California. A longtime participant, observer and chronicler of California politics, Jon is also the publisher at jon.


Issue #2 of the Weekly. Baron (L) and former Register editor Tonnie Katz, who doesn’t like the Weekly haha
OC Weekly archives

Yesterday, Spotlight won the Academy Award for Best Picture for its retelling of how the Boston Globe broke the story of the Catholic Archdiocese of Boston sex-abuse scandal in the early 2000s, thereby unleashing a tidal wave of outrage and lawsuits that has fundamentally changed the Catholic Church. It’s a great film, one that captures a golden era of print journalism long gone in this age of page cutbacks, layoffs, and an emphasis on listicles and Twitter-comment aggregation.

The original Globe staff has taken a much-deserved victory lap around the country, none more deserved than then-editor Marty Baron, now the head of the Washington Post and played by Liev Schieber in Spotlight. Indeed, Esquire’s November profile of him asked, "Is Martin Baron the Best News Editor of All Time?" with the answer a resounding, "Yes, Cerritos!"

But lost in the hubbub and love is when Baron flat-out failed in one of the biggest stories in Orange County history: our 1994 bankruptcy.

From 1993 through 1996, Baron was in charge of the Orange County edition of the Los Angeles Times (Yes, kids: Times were when the Times had a full, huge office just to cover OC, with a staff of over 200). He was brought in during a newspaper war between the Times and the Register, one which the Reg handily beat the Times due to the latter’s arrogance and dismissal of us as a backwater. The Esquire profile only spends two paragraphs on this part of Baron’s career, mostly to burnish him as a rising star who was already transforming reporter lives.

"Baron immediately made his presence felt," wrote Esquire scribe Baxter Holmes. "’I wanted to impress him,’" says Matt Lait, a reporter under Baron then and now The Times‘ city editor. "’I wanted him to think I was a serious journalist, like he was. He made me better. He just made you want to be better.’"

But Baron’s inspirational tactics and vision only went so far. As Chapman University journalism professor Susan Paterno laid out in a devastating 1995 examination for the American Journalism Review (a version of the story which ran as the OC Weekly‘s second-ever cover story), the Times OC blew the 1994 bankruptcy despite reams of paperwork and evidence provided by John Moorlach and Chriss Street, two guys then just dismissed as Chicken Little quacks but now regarded as prophets (Moorlach went on to serve as county treasurer-tax collector, OC supervisor and is currently a state senator; Street replaced his mentor as treasurer-tax collector before falling into his own scandal).

You should read Paterno’s piece in its entirety, but telling is Baron’s no-f***s-given quotes to her then about his paper blowing the bankruptcy story. Here’s one passage:

Editors at the Times and the Register make no apologies for their coverage. "You dig wells all the time. You don’t always hit oil," says Martin Baron, editor of the Times Orange County Edition. "The question is, how long do you want to keep digging the well before you want to try a different field?"Baron says the Times took the story seriously from the moment investment banker Chriss Street walked into the Orange County office in 1993 and immediately assigned a reporter to look into Street’s allegations. "One of our reporters spent a fair amount of time researching that," he says. "She had it on her story list for some time."

The Times published no stories, Baron says, because at the time Street’s complaints seemed to be old news. "This was something that had been publicly debated at all the school districts and there had been some controversy on the boards," Baron says. "..It’s not like it was some sort of new discovery." And, Baron says, the paper talked to a lot of people but "we didn’t find people who were quite as vehement as [Street]. You can’t write a story on just what Chriss Street says."

Moorlach, in particular, chided the Times for their laziness (while blasting the Register for sheer stupidity):

Moorlach says, "The reporters didn’t do the heavy lifting. Any business reporter would understand [it]."Times editor Baron disagrees. "We don’t have an expert on every subject. We’re constantly assigning good reporters to go cover things they’re not an expert in," he says. "What we do is talk to the experts. We got the names of people we thought were experts in the field. Any business reporter would have done the same thing."

One more passage:

Orange County Editor Baron says he feels the coverage was "the best we could [do] at the time with the resources available.

"It’s easy to look back in retrospect and say had [we] asked this or that we would have come back with something different," says Baron. "Our stories outlined generally the principle and the risk and dealt with the issue seriously. We didn’t say the fund is on the verge of collapse. I’m not sure it was on the edge of collapse. All the participants said they were delighted with the fund."

And, says Times reporter Jeff Brazil, what might have happened if the media exposed Citron’s gamble and caused a run on the fund? "The newspaper…has a responsibility to the community," he says. "Just because you know something doesn’t mean it should go in the newspaper."

Baron deserves a permanent exhibit in the Newseum, and a seat next to St. Peter Damian up in heaven. But let’s not forget that even saints were once mortal.

Judges win lawsuit as pension conflicts continue

A superior court judge has awarded judges back pay and a pension increase, ruling that a five-year freeze on their salary did not keep pace with average increases in state worker pay, a requirement under state law.

But the state has not agreed to the amount owed judges in the class-action suit filed by a former court of appeals presiding justice, Robert Mallano, shortly before he retired two years ago.

In a filing last week by Mallano’s attorney, Raoul Kennedy of Skadden Arps in Palo Alto, a consultant calculated that superior court judges are owed $14,664, appeals justices $16,782, associate justices $17,898, and chief justices $18,763.

Total back pay for the 1,700 active judges listed last year would be roughly $25 million, which includes 10 percent annual interest awarded by Los Angeles Superior Court Judge Elihu Berle in a decision last December.

The state disagreed with the judgment, arguing that the award of specific salaries and pension amounts is “akin to an award of damages” and that ordering the state to pay Mallano’s attorney fees is “procedurally improper” and “unwarranted.”

“The salary amounts cannot be accurate because the salary adjustments, if any, that would be made to judges in accordance with the court’s judgment will vary among individual members of the plaintiff class,” the state said as quoted in Kennedy’s filing. “It is impossible at this point to calculate what those individual figures would be.”

The state filed objections to the court’s draft judgment, and a hearing has been set for March 9.



Changes in pay can affect not only employer and employee contributions to the California Public Employees Retirement System, but also the amount of the pension paid to retirees.

The Mallano decision is briefly mentioned in the annual CalPERS valuations of the two judges retirement systems issued this month for the fiscal year ending last June 30.

“The increases and amounts owed have not been calculated yet,” said CalPERS. “We anticipate the impact of this lawsuit to be reflected in the June 30, 2016 valuation (issued next year).”

An old retirement system for judges hired before Nov. 9, 1994, has an unusual provision. Annual pension increases for retirees are based on pay increases for active judges, not inflation up to 3 percent a year as in the new system.

But it’s another unusual provision in the old retirement system that is a continuing conflict between CalPERS, acting on behalf of the judges, and the Legislature and the governor.

The old system is pay-as-you-go, operating mainly with a state contribution large enough to pay retiree pensions each year and a much smaller amount from active judges (8 percent of pay). No additional money is invested to “pre-fund” future pension costs.

“Although it is unlikely the State would fail to pay ongoing benefit payments, as they are due, the lack of pre-funding means there is no benefit security for members of this plan,” said a CalPERS staff report with the new Judges Retirement System valuation.

“It also means the total cost is higher to the State since there is no accumulation of assets and, consequently, little to no investment earnings can be used to defray costs.”

CalPERS expects investment earnings to pay 65 percent of future pension costs, the rest coming from the annual contributions of employers, 22 percent, and employees, 13 percent.

In a routine annual letter to the governor and Legislature this month urging pre-funding of the old judges system, Rob Feckner, the CalPERS president, said “the board has considered the System’s funding deficiency to be a serious matter for many years.”

CalPERS estimates that doubling the state $227.3 million pay-as-you-go contribution next fiscal year to $448.6 million would save $1.3 billion over the remaining life of the plan, dropping the projected $5.6 billion pay-as-you-go cost to $4.3 billion.

In one of the minor instances of the mismanagement of state pension funds (see major examples in a previous post), the legislation that created the new judges system repealed a requirement that the old system be fully funded.

A legislative analysis of SB 65 in 1993 gave no explanation for the repeal of a requirement that the old system be pre-funded with a target of eliminating its pension debt or “unfunded liability” by 2002.

But a likely explanation for leaving the old system with pay-as-you-go pensions that deliberately pass debt to future generations would seem to be avoiding the cost of pre-funding: an estimated $100 million a year to reach full funding by 2002.

Now the old Judges Retirement System has a debt or unfunded liability of $3.3 billion. The dwindling number of active judges in the system, 231 in the new valuation, are outnumbered by the 1,924 retirees and beneficiaries receiving pensions.

In contrast, The new Judges Retirement System II for those appointed or elected after Nov. 9, 1994, has no debt or unfunded liability. It’s 100 percent funded in the new valuation, down from a surplus of 107 percent the previous year.

The 1,470 active judges in the new system outnumber the 96 retirees and beneficiaries. The employer contributions is 23.2 percent of pay. Judges hired before a reform on Jan. 1, 2013, contribute 8 percent of pay, those hired later 15.25 percent of pay.

Two years ago, pre-funding the old judges retirement system was on Gov. Brown’s to-do list when he proposed a funding solution, later enacted, for the California State Teachers Retirement System.

“We still have retiree health,” he said then, before following up last year with a plan to bargain changes with state worker unions. “We still have the judges retirement system. We have got lots of other stuff here, and we will handle it.”



Another continuing conflict is judges ruling on issues that affect their own pensions. In the Mallano decision, Judge Berle presumably is included in his decision awarding back pay and a pension increase.

What some pension reformers think is a key way to reduce unaffordable pension costs, cutting pension amounts current workers earn in the future, is prevented not by legislation but by a series of state court decisions often called the “California rule.”

California judges have rarely if ever recused themselves from ruling on pension issues that might benefit them. In Arizona, four supreme court justices recused themselves from a current case to overturn a pension contribution increase for judges and others.

The case is being heard by other Arizona justices in a new pension plan not affected by the outcome. Some recent California retiree health care cases have been heard in federal court. But whether that is an option for pension cases is not clear.

Meanwhile, the conflict of interest continues. When Orange County unsuccessfully tried in 2011 to overturn a retroactive pension increase for deputy sheriffs, an attorney arguing the case for the deputies emphasized the point.

“Miriam A. Vogel, a retired Court of Appeal justice, clearly told her former colleagues that the court’s decision would affect every pension in the state of California: ‘(I)t would affect yours, it would affect mine,’” former Orange County Supervisor John Moorlach (now a state senator) wrote in the Orange County Register.

Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at


This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District.

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