MOORLACH UPDATE — Sunshine Week — March 16, 2016

Allow me to wish you a happy Sunshine Week and, for tomorrow, a happy St. Patrick’s Day. March 17th is special for me for two reasons. Twenty-one years ago I was appointed to serve as the Orange County Treasurer-Tax Collector by the Board of Supervisors. And on March 17th of last year, I was elected to serve you as the Senator for the 37th District. A fun and action-packed life, to be sure.

The Desert Dispatch, out of the city of Barstow, provides a great editorial on SB 1251 (see MOORLACH CAMPAIGN UPDATE — Don Quixote and SB 1251 — March 15, 2016 march 15, 2016 john moorlach). Its strong endorsement of SB 1251 is deeply appreciated and is the first piece below.

World renowned Sacramento Bee columnist, Dan Walters, provides a contrast to the public employee defined benefit pension plan unfunded actuarial accrued liability discussion (see MOORLACH UPDATE — GASB Gasp — March 9, 2016 march 9, 2016 john moorlach).

The revelation of how underwater most municipalities are, thanks to the recent implementation of GASB Number 68, should be a wake up call for elected leaders to address this concern, and soon. The column is the second piece below.

Our View: Moorlach bill perfect for Sunshine Week

By Desert Dispatch Editorial Board

Orange County Republican John Moorlach is proving to be the kind of state Senator California needs more of. The state Legislature’s only Certified Public Accountant, Moorlach clearly understands budgets, finances and the need to rein in runaway public debt.

On Monday, Sen. Moorlach introduced Senate Bill 1251, which if passed and signed into law by Gov. Jerry Brown would require the state’s updated balance sheet, including accounting for outstanding debts and unfunded liabilities, to be printed in the state’s official Voter Information Pamphlet prior to each election.

This is Sunshine Week, the annual week that spotlights open government, and this strikes us as the perfect bill to be introduced during Sunshine Week. We can’t think of a better way to make state government more transparent than for the legislature to pass SB 1251.

As Sen. Moorlach accurately points out, California has the highest public debt of all 50 states. Given our unfunded pension and retiree medical liabilities of $220 billion or more, the Golden State has really become the Red State.

Yet despite already drowning in debt, California voters can’t get a break. Every election they are asked to approve billions of dollars in new bonds.

“California voters need more information by which to assess and decide on ballot questions,” said Sen. Moorlach.

“We should all be in favor of greater transparency and information for the voters. Providing the state’s balance sheet in the voter information pamphlet is a good first step.

“Taxpayers are being asked to approve more bonds, higher taxes, and more debt.

Before we ask them to make that choice, shouldn’t we let them know what the state’s current fiscal situation is?”

According to Sen. Moorlach, SB 1251 would require that the state’s latest financial numbers, as compiled by the non-partisan Legislative Analyst’s Office (LAO) from the latest Comprehensive Annual Finance Report (CAFR), be printed in the first few pages of the Voter Information Pamphlet. Among that information would be: 1. Immediate past fiscal year state revenue; 2. Immediate past fiscal year state spending; 3. Current unfunded state pension fund and retiree medical liabilities; 4. Current estimated of unfunded transportation infrastructure needs; 5. Current issued bond debt; 6. Current Net Unrestricted Assets or Net Unrestricted Deficit from the most recent Comprehensive Annual Financial Report (CAFR).

This is information that California voters and taxpayers should have easy access to. We urge the state Legislature to unanimously support SB 1251 so that they do.

Dan Walters: California pension debts revealed

New accounting standards require pension debt to be listed

Multibillion-dollar unfunded liabilities are emerging

However, Fresno has state’s only pension fund surplus

By Dan Walters

Thanks to new accounting standards, California’s state and local governments are being forced to acknowledge tens of billions of dollars in previously obscure debt for unfunded pension liabilities.

The Governmental Accounting Standards Board says that “unfunded actuarial accrued liabilities” should be listed on balance sheets along with the more traditional debts.

As those revised balance sheets began to emerge this year, they revealed some hefty numbers – such as Los Angeles County’s $8 billion-plus unfunded pension debt.

A recent report from the state controller pegs “net pension liability” for the state’s public safety and “miscellaneous” employees for the 2012-14 fiscal year at $34 billion on $128.7 billion in pension obligations.

To put it another way, it’s a 26 percent shortfall, and that assumes the state will see a 7.65 percent investment return, which many authorities say is unrealistically high. If earnings are just 1 percentage point lower, the debt balloons to more than $50 billion.

There is one notable, seemingly unlikely, exception to California’s heavy public pension debts – the city of Fresno.

Transparent California, a think tank that tracks fiscal data for state and local governments, declares that Fresno’s pension system “is the only public pension program in California – and one of only a few in the United States – that has a surplus instead of unfunded pension liabilities.”

While Fresno’s pension benefits are still higher than those in local private employment, “they are considerably less inflated than any other pension system in California. They have a surplus, and that’s so different than anybody else.”

Wilshire Consulting, which advises public pension funds, reported last year that Fresno was one of only seven fully funded plans in North America.

The Transparent California report compares the city’s pension situation to that of Fresno County, which has a $980 million unfunded liability. The city’s pension benefits are markedly lower than those of the county. The city’s average nonsafety pension is $39,644 for a retiree with at least 30 years of service while the county’s average is $61,500.

That benefit gap manifests itself in an even wider disparity in costs. The city is paying an average of 16 percent of payroll into its pension fund, while the county is paying 52 percent, Transparent California said.

Robert Theller, Fresno’s pension administrator, told The Fresno Bee that the unusually healthy condition of its pension fund results from a decided effort by city officials and its unions to reach “fair compromises” that keeps costs in check, describing it as “a good balancing act.”

Perhaps California politicians should make educational pilgrimages to Fresno before they are consumed by pension debts that already have been major factors in the bankruptcies of three cities.

Dan Walters: dwalters, @WaltersBee


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