MOORLACH UPDATE — Get Mad, Get Motivated — October 19, 2018

When I get mad, I get motivated. That’s probably why I’m in public office. When I did a little research and realized what then-Orange County Treasurer-Tax Collector Robert L. “Bob” Citron was doing, I got mad. Mad enough to step out of my comfort zone as a partner in a large local C.P.A. accountancy firm, Balser, Horowitz, Frank & Wakeling, and run against him, unsuccessfully, in the June 1994 primary (see https://www.ronbluecpa.com/location/orange-county).

Well, I’m watching the financial status of California and its municipalities crumble and everyone seems to either be ignoring it or putting their heads in the sand. What to do? There is no singular and accessible public repository to find the Comprehensive Annual Financial Report (CAFR) for every municipality. So, my office decided to create it. We went to every school district website or contacted the districts (two or three still haven’t provided them). We also received exceptional assistance from Marc Joffe at Reason Foundation by helping us track down a few of the stragglers.

Since my stint as Chairman of the Orange County Board of Supervisors in 2012, I’ve been reviewing California county CAFRs and taking their Unrestricted Net (Assets or Deficit) Position (UNP) and dividing it by its population. The per capita UNP is a very reliable indicator of the fiscal status of a municipality and allows us to compare them apples-to-apples (or, in the case below, oranges-to-oranges). The UNP should be positive (net assets), but more than likely it is negative (net deficit).

We reviewed the 482 cities earlier this year because I was mad. I’ve been drafting and presenting pension reform legislation and most of the cities, with the exception of those in Orange County, have been largely disengaged on this ever-increasing millstone. What to do? Show everyone how all of the cities are doing. It’s having an impact. The third and fourth editorial pieces below are recent columns from the Culver City Observer. The columnist gets it. Not only for the city, but for the city’s school teachers (see MOORLACH UPDATE — City CAFR Rankings – Vol. 1 – February 7, 2018). Just wait until the columnist finds out that Culver City Unified is #831 out of 940 — ouch (see MOORLACH UPDATE — California School District Rankings, Group 13 — August 28, 2018).

The second piece below announces our most recent review of the CAFRs for the 944 school districts in California. As a few have combined to save on auditing fees, we have 940 on the list. The Orange County Breeze, in the second piece below, provides the overview from our press release.

I have had the pleasure these past few years of serving on the Senate Budget and Fiscal Review Committee and its Subcommittee No. 1 on Education (see https://sbud.senate.ca.gov/subcommittee1). When I’m told by representatives of our state’s CSU and UC systems that they cannot provide me with a ten-year Strategic Financial Plan, I get mad.

When I hear that teachers in LA voted to go on strike, I get mad. Don’t these people know how desperate their employer’s CAFR is? And, that it will be worse when the June 30, 2018 audits are completed thanks to the now required inclusion of retiree medical liabilities?

So, as an involved and committed elected official, I rolled up my sleeves and, with my staff, started digging. Regretfully, the data we obtained is not encouraging and the trend lines are not going in the right direction.

What to do? It’s time to be proactive! Now! If California’s elected leaders continue to hesitate, then being reactive will be too late and too ugly.

The first piece below is my editorial submission on this most recent school CAFR repository project. To be honest with you, the numbers were so bleak it impacted me emotionally. I was truly saddened to reveal the results of our simple metric. You’ve already seen them by my releasing 14 volumes of data in the month of August. The OC Register gave me an opportunity to expound on Orange County’s 27 public school districts.

If anything, I hope you get mad, too. And, get out of your comfort zone and do something to improve the situation. Volunteer for a campaign. Contribute to a candidate. Put up a yard sign. Even start doing the research to see if you should be a candidate yourself someday. We’re leaving a massive mess to our children, grandchildren and great-grandchildren. Please, get motivated.

 

OPINION

All OC public school districts but one bleed red ink

By JOHN MOORLACH

https://www.ocregister.com/2018/10/18/all-oc-public-school-districts-but-one-bleed-red-ink/

Of Orange County’s 27 public school districts, just one, Fountain Valley Elementary, boasts a positive balance sheet. Unfortunately, the other school districts have balance sheets that have dipped into the red.

The scoring comes as part of my new report, “Financial Soundness Rankings for California’s Public School Districts, Colleges & Universities.” It reviews the financial soundness of all 944 California public school districts. I performed a similar review of California’s 482 cities, including Orange County’s 34 cities, back in March. In that case, 19 O.C. cities ran positive balance sheets, although 15 ran red ink – a much better performance than for the school districts.

The rankings derive from each district’s latest Comprehensive Annual Financial Report, which you can find on their respective websites. In each CAFR, look for the “Basic Financial Statements,” starting with the page titled “Statement of Net Position.” Look at the top row for “Government Activities.” Then look down the column to where it says, first “Net Position,” then “Unrestricted.” That’s the number you want: the Unrestricted Net Position, or UNP.

The number will either be positive or, with parentheses around it, negative.

I also divide the UNP by the district’s population to get a per-capita UNP. If negative, that’s the amount each person in the district is in hock for, whether or not your children attend school. Citizens should be concerned about the trajectory of these negative balances, which are commonly attributed to unfunded pension liabilities. As school board members are auditioning for their jobs, they need to be held accountable for dealing with these liabilities.

If the negative number runs too high too long, it will mean cuts in teachers, equipment, band and sports, and ultimately calls for tax increases. In the worst cases, takeover by the state, even bankruptcy, is not out of the question.

Fountain Valley Elementary’s positive number clocks at $78 per capita. For comparison, it ranks 102nd of California’s 944 school districts.

It’s all negative after that, with the second and third “best” being Laguna Beach Unified at ($223) and Fullerton Joint Union High at ($344).

By far the worst is Santa Ana Unified at ($1,805), a very dangerous number. It ranks a dismal 901st of California’s 944 school districts.

Oddly, the next two places of financial distress are held by districts in wealthy OC communities, Irvine Unified ($1,115) and Newport-Mesa Unified ($1,089).

Here are the per capita UNPs for all Orange County school districts:

1. Fountain Valley $ 78

2. Laguna Beach Unified ($ 223)

3. Fullerton Joint Union High ($ 344)

4. Huntington Beach City Union High ($ 350)

5. Huntington Beach City Elementary ($ 508)

6. Centralia Elementary ($ 532)

7. Orange Unified ($ 553)

8. Garden Grove Unified ($ 573)

9. Savanna Elementary ($ 589)

10. Cypress Elementary ($ 607)

11. Los Alamitos Unified ($ 619)

12. Anaheim Union High ($ 675)

13. Magnolia Elementary ($ 741)

14. Fullerton Elementary ($ 743)

15. La Habra City Elementary ($ 752)

16. Saddleback Valley Unified ($ 779)

17. Ocean View ($ 813)

18. Tustin Unified ($ 837)

19. Anaheim Elementary ($ 841)

20. Brea-Olinda Elementary ($ 888)

21. Buena Park Elementary ($ 898)

22. Placentia-Yorba Linda Unified ($ 966)

23. Capistrano Unified ($ 967)

24. Westminster ($ 988)

25. Newport-Mesa Unified ($1,089)

26. Irvine Unified ($1,115)

27. Santa Ana Unified ($1,805)

This is part of my effort to track the per capita UNPs of California’s various government budgets. In addition to the city budgets mentioned earlier, I have tracked counties, community colleges, California State University and the University of California as well as all 50 U.S. states.

You can follow all these analyses on my legislative website. The reports will be regularly updated.

Next year is going to be especially revealing – and distressing – as the Governmental Accounting Standards Board for the first time will require balance sheets to include unfunded retiree medical liabilities, which will show even more city and school districts in critical condition.

And when the next economic recession hits, for even those modestly distressed, it’s going to be one big financial train wreck.

Let’s hope our elected school board members and their administrative staff get in front of this serious cash management squeeze on their horizon. It’s time to be proactive, as taxpayers are not very forgiving with those who are reactive. Especially with supposed leaders who only have one solution: raise taxes.

John M.W. Moorlach, R-Costa Mesa, represents the 37th District in the California Senate

 

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Moorlach report finds 2/3 of California’s 944 school districts bleed red ink

http://www.oc-breeze.com/2018/10/05/128366_moorlach-report-finds-2-3-of-californias-944-school-districts-bleed-red-ink/

Sen. John Moorlach released his latest fiscal report, “Financial Soundness Rankings for California’s Public School Districts, Colleges & Universities.” SEE REPORT HERE. It follows his March 2018 reports on the state’s 482 cities that found 2/3 of them in the red; of 58 counties, 55 suffered deficits and only three enjoyed positive balance sheets. His May 2018 report on the 50 U.S. states found only nine were financially healthy, with California ranked among the worst, in 42nd place.

Some key findings from the new education report:

  • About two-thirds of California’s 944 public school districts run negative balance sheets. These statements show the most distressed districts could soon reach a tipping point into insolvency and receivership.
  • Of the state’s large school districts, those in severe distress include Los Angeles Unified School District, with a negative $10.9 billion balance sheet; San Diego Unified at negative $1.5 billion; Fresno Unified at negative $849 million; and Santa Ana Unified at negative $485 million, the worst in Orange County.
  • Of Orange County’s 27 public school districts, only one, Fountain Valley School District, is in positive financial territory.
  • One bright spot is the 58 county boards of education. At least 51 of them have manageable per capita unrestricted net deficits of -$159 or less, with 14 in positive territory.
  • Of the state’s 72 community college districts, only one enjoys a positive unrestricted net position (UNP).
  • Cal State University’s balance sheet is negative $3.66 billion.
  • The University of California’s balance sheet bleeds red ink all over the state, at negative $19.3 billion. Worse, that will double next year, to $38.6 billion, when retiree medical is included.

The Moorlach Report is a flashing caution light to almost every public education budget in California. Unless things can change quickly, taxpayers can expect new levies, and post-secondary students and parents should fear higher tuition.

This article was released by the Office of Senator John Moorlach.

Editor’s Note: Los Alamitos Unified School District is ranked 426, Savannah Elementary School District is ranked 408, Cypress Elementary School District is ranked 423, and Anaheim Union High School District is ranked 463.

Teachers Pensions Beat Others by 3-1 Margin

By Neil Rubenstein

https://www.culvercityobserver.com/story/2018/09/20/opinion/teachers-pensions-beat-others-by-3-1-marginby-neil-rubenstein/7761.html

In an ironic twist, a recent study by the nonprofit Bellwether Education Partners has found that the rising costs of teacher pension plans are starting to eat into their own salary hikes.

Teachers, and their unions, often complain about low salaries. The research from Bellwether shows that, since 1994, teacher salaries have failed to keep pace with inflation.

But total compensation for teachers has risen faster than inflation when non-salary benefits, such as insurance and retirement, are included.

Chad Aldeman, an associate partner at Bellwether, says lack of money isn’t why teacher salaries aren’t rising.

“Even after adjusting for inflation and rising student enrollment, total school spending is up,” Aldeman reports.

“It’s not for lack of money spent on teachers, either. Districts are allocating about the same portion of their budgets to instructional costs – including salaries, wages, and benefits for teachers – as they did 20 years ago.”

Aldeman notes that teachers have the highest retirement benefits of almost any profession.

“While the average civilian employee receives $1.78 for retirement benefits per hour of work, public school teachers receive $6.22 per hour

in retirement compensation,” Aldeman’s report says.

To be fair, teachers pay part of their salary into a taxpayer-backed pension fund.

When the fund does well, retired teachers do too.

But when the fund doesn’t make its financial goals, a deal that California lawmakers signed years ago essentially requires other state residents to make-up the difference—usually through higher property- or sales-taxes, like the ones that Culver’s government officials and its employees want you to approve in November.

Senator: Culver in Bad Financial Shape

Culver City is listed by State Sen. John Moorlach as being in one of most egregiously worst financial positions of the 482 cities that recently filed documents with Sacramento.

Meantime, our Council just moved $10 million from the City’s reserve fund, setting aside those funds by placing them into an irrevocable trust and making them only available to pay for City employees’ retirements.

This financial move should reassure City employees nearing retirement that their hefty pensions will be paid.

But what does the Council’s newly formed trust really do to alleviate the almost $4,000 tax burden for every man, women and child in Culver City who don’t work for our local government?

This commentary does not necessarily reflect the opinion of the Observer. Previous columns by Neil Rubenstein can be found at http://www.culvercityobserver.com

After November, Even More Tax Hikes May be Needed

By Neil Rubenstein

https://www.culvercityobserver.com/story/2018/09/27/opinion/after-november-even-more-tax-hikes-may-be-needed/7779.html

Can little Culver City continue to pay super-large paychecks and pensions to current and former City employees?

If so, local taxes will need to continue to rise.

No, I’m just not pointing the finger at our Police and Fire departments, but other City agencies as well. Our City Manager’s total of money and benefits is now over $400,000 annually, and some local government employee’s will never see the inside of a discount store because they’re collecting more than $175,000 in retiree pensions.

On Nov. 6, Culver City voters will be asked to approve another $187 annual property-tax to fund the School District plus a sharp increase in the City’s sales tax.

If our local government can’t reign in its spending now, it’s a safe bet that there will be more taxes to come in future years.

Time for a Culver Firewoman

I just guess I would feel better if we had a better system. After all, it’s been more than 100 years that Culver City has been functioning but has never had one lady in the firehouse.

Isn’t it possible to create a separate classification for paramedics, like so many other departments throughout our country have done? Surely, our Council should wake-up and change this poo-poo policy before our City is sued.

More on City Finances

Continuing the Culver City’ Observer’s policy of informing the public of our dire financial situation: State Sen. John Moorlach, R-Costa Mesa, has listed all 482 cities in California based on their current financial situation and outlook for the next few years.

Culver City ranks 478, just five up from the bottom. With 40,000 residents, every man, woman and child in our community would have to pay $3,979 each to pay our City’s expenses.

Sen. Moorlach’s comprehensive study found that Culver’s financial position today is even worse than that of Bell and Maywood—and most of us know how those two cities turned-out.

Moorlach has already gained the support of several anti-tax groups, including the Howard Jarvis Taxpayers Association, which grew out of the 1970s property-tax revolt, and the National Tax Limitation Committee.

For additional information, visit Sen Moorlach’s web site at http://www.moorlach.cssrc.us or call his Orange County Office, (714) 662-6050.

Yee: More ‘Transparency’ Needed

California State Controller Betty Yee spoke on Sept, 22 at a South County Labor meeting that I attended. A group of about 400 activists from several trade unions and candidates for political office were there.

Yee and I had a long conversation on my suggestions to continue to improve financial transparency in California cities and counties. It’s probably only a matter of time before improvements will be mandated by Sacramento.

At our table were Veronica Sauceda, candidate running for L.A. Superior Court Judge No. 4 (www.Saucedaforjudge.com) and Patricia Hunter (www.pattihunter4judge.com/), candidate running for L.A. Superior Court Judge, office No. 16.

Please vote for both Hunter and Sauceda. In my opinion, they will be fair and have integrity.

Rank City Population UNP (thousands) UNP per Capita Year of CAFR

482 Vernon 209 ($101,678) ($486,498) 2017

481 El Segundo 16.717 ($86,756) ($5,190) 2016

480 Richmond 111,785 ($508,981) ($4,553) 2016

479 Oakland 426,074 ($1,789,831) ($4,201) 2016

478 Culver City 40,103 ($159,584) ($3,979) 2017

477 Cathedral City 54,557 ($181,885) ($3,334) 2017

476 Berkeley 121,238 ($394,430) ($3,253) 2017

475 Patterson 22,730 ($71,034) ($3,125) 2016

474 San Francisco 874,228 ($2,560,735) ($2,929) 2017

473 Santa Fe Springs 18,291 ($49,235) ($2,692) 2016

Culver City: Financially, 5th worst city in State of California

UNP: Unrestricted Net Position, in thousands of dollars

UNP: What each Culverite owes in future payments

Year of CAFR: Latest year the City reported

New Teachers, Same Budget Woes

With so many dozens of brand-new teachers with little or no real classroom experience having been hired by the Culver City Unified School District in the past three years, one would think that the district’s average cost of its teaching staff would be much lower.

But, if you check out the CCUSD/CCFT negotiated Collective Bargaining Agreements on the district’s website covering this school year and the last one, you’ll find that the average compensation cost (combined salary and benefits) per teacher is $91,775 and under the CCUSD/CCFT collective Bargaining Agreement on Health and Welfare, it shows that the average cost of a teacher’s health and welfare is $5,222.

To find the teachers’ average salary, you would simply have to subtract the district’s average health and welfare costs from the teachers’ average compensation. In doing the math, you would come up with $86,553 as the teachers’ average salary–not the ridiculously low figure that Bruce Lebedoff Ander gave in his recent letter that was printed in the Observer.

His is almost $20,000 off- the-mark. It may have been $67,270 at one time, but that was probably a long time ago.

Wasn’t it five years ago when some current board members agreed to a five-year plan to give district-wide staff a raise that, at the time, was of an unknown size?

They helped pay for it by taking millions of dollars out of our School District’s reserves, and that, its final district costs turned out to be almost $20 million. That was the equivalent of giving district staff an unprecedented 30 percent salary increase.

But, that’s not even counting the district’s annual Step & Column’s increases of 3 percent to 4.1 percent for teachers with less than 10 years of service in the district. For those fortunate teachers, their salary increases could well have been between 45 percent and 50 percent over the last five years.

Now, Bruce Lebedoff Ander certainly has the right to express his own opinion of me. But hopefully, next time when he tries to throw around monetary figures, he will check the accuracy of his sources before putting out such wildly untrue and misleading information into the public discussion.

This commentary does not necessarily reflect the opionion of the Observer. Previous columns by Neil Rubenstein can be found at www,culvercityobserver.com

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