MOORLACH UPDATE — Realignment Reverberations — December 27, 2019

Realignment Off The Rails

Realignment, a process where the state government delegates tasks to local agencies with the promise to also transfer the appropriate funding, is not new.  Gov. Wilson did it in 1993, during a recession, with Proposition 172. More public safety work was delegated to local jurisdictions, and a sales tax increase was approved by the voters to fund the realignment.  As we reflect on the 25th anniversary of Orange County’s filing for Chapter 9 bankruptcy, seeing another sales tax measure on the ballot in 1995, also pushed by then-Sheriff Brad Gates, may have added to the repulsion of Measure R by the county’s voters.

Gov. Brown’s realignment occurred with AB 109, which released inmates to the 58 counties to reduce state prison overcrowding.  As California was still reeling from the Great Recession, the Wilson strategy was reincarnated in a similar fashion. It would not be pretty.  I was Chairman of the Orange County Board of Supervisors in 2012 and also on the Board of the California State Association of Counties. The state was not providing enough funding at the time and the counties had to negotiate amongst themselves how to divide the money, also not pretty.  

The lack of funding started to show up in interesting places, like medical care.  The state gave counties inmates who needed liver transplants and other expensive surgical procedures.

Fast forward to today.  The economy has been performing better and the state has been providing sufficient funding for its AB 109 obligation, maybe even more than necessary. This revenue stream has been steady and unaccounted for, making it ripe for abuse.  Add in ever-growing defined benefit pension plan contribution requirements, and you can see what happens when bureaucrats in Sacramento get sloppy.  ProPublica provides its investigative piece below on this recipe for disaster.

25th Anniversary Look Back

New Supervisors are installed around the first Tuesday in January, so it was time for farewells by the two leaving the Board, Supervisors Wieder and Riley.  In observing the changing of the guard, the OC Register, on December 21, 1994, found Riley using the famous directive from President Reagan in his farewell remarks, “Trust, but verify” (see MOORLACH UPDATE — LOOK BACKS — December 21, 2009).

On December 22, 1994, the LA Times paid me a back-handed compliment by recommending that I be appointed to replace Robert Citron (see MOORLACH UPDATE — LOOK BACKS & OCBJ — December 22, 2009).

December 23rd found USA Today back with another in-depth review of the events leading up to the bankruptcy filing (see MOORLACH UPDATE — — December 23, 2009). 

The month of December found media pieces coming out nearly every day, including Christmas Eve, Christmas Day and following (see MOORLACH UPDATE — Merry Christmas! — December 24-27, 2009).

The front-page piece in the Christmas issue of the LA Times, “O.C. Crisis Transforms Doomsayer to Prescient,” did find me sending a fax to Martin Baron, the editor, about some concerns I had about some segments.  It even garnered an interesting response some six weeks later. But, I’ll spare you the exchange (also see MOORLACH UPDATE — Leap Day Activities — February 29, 2016).

The LA Times had a cover story, titled “Bergeson’s Deregulation Bills Coming Back to Haunt Her,” by Eric Bailey, which failed to fully load on my blog.  Here is the remainder:

Supervisor Thomas F. Riley, whose 5th District seat Bergeson will assume Monday, said Bergeson “doesn’t deserve any blame in this” and he will “say a prayer for her” as she embarks into the stormy days ahead.

Bergeson, 69, acknowledges that she faces the toughest test of her political career, both in helping the county recover and overcoming the growing public anger.

“There’s a lot of outrage out there and a lot of  and it’s not going to get better right away,” she said.  “It’s going to take time. I’m only concerned about establishing sufficient credibility and helping to work things through.  I think you gain the trust of the public through your actions.”

But Bergeson will have to overcome the skepticism of disgruntled Orange County residents who blame the veteran legislator and other Sacramento lawmakers for loosening the leash on county treasurers such as Citron.

Bergeson sponsored at last three bills dealing with local investment authority, including one that permitted local governments to invest in lower-grade, A-rated securities rather than safer AAA-rated offerings.  She also served as Chairwoman of the Senate Local Government Committee, which reviewed and approved many of the deregulation bills.

The measures were fueled by a belief that local governments needed more tools to finance services in the aftermath of tax-cutting Proposition 13, Bergeson said.  She suggested that the laws giving county treasurers grater autonomy did not cause Orange County’s problem–that the trouble was public officials who stretched the laws to the limit.

That is a view shared by many investment bankers, including one who was disappointed when Bergeson withdrew her support of Moorlach.

“There’s really nothing wrong with the flexibility added to the investment standards,” said Chriss Street, an investment banker and Moorlach supporter.  “Cars aren’t inherently dangerous, but dangerous drivers are always dangerous.”

Even some critics of the Legislature’s efforts to deregulate public finance do not lay much blame on Bergeson.

Kim Alexander, executive director of the nonprofit California Voter Foundation, characterized Bergeson as “more a victim of the conditions of the Legislative process than a culprit.”

Alexander said the real problem lies in the inability of lawmakers and their overburdened staffs to regularly perform any sort of concise review of the proliferating maze of complex legislation that rolls through the Capitol each year.

Some county politicians remain mildly ruffled over Bergeson’s treatment of Moorlach during his quest to unseat Citron.  Bergeson said she withdrew her endorsement because the race for the nonpartisan treasurer’s seat had become politicized and she worried that Moorlach’s criticisms of Citron’s investment strategy could damage the county’s credit rating on Wall Street.

Insiders say Bergeson “agonized” over pulling her endorsement, and in recent days she has made no secret that she would probably support Moorlach’s appointment as county treasurer in the future.

“I think everybody was kind of asleep at the switch,” Bergeson said. “When John’s warnings were sounded there should have been immediate attention by those who had authority to do so.”

Moorlach has not held a grudge, but he says it was painful when Bergeson pulled her support. “I won’t say it cost me the race, but it sure had an impact.

“I told her that when this thing hits the fan, she was going to find herself on the wrong side of the leadership curve,” Moorlach said. “Now it has hit. Whether it has muddied her, I can’t really say.”

Even so, Moorlach added, “just because she made a tragic error in judgment on my campaign, I don’t see that as being a big enough reason to believe she won’t do a good job.”

Michael Utley of The Bond Buyer provided its perspectives on Treasurer-Tax Collector leadership changes in “Orange County’s Acting Treasurer May Be Forced Out.”  Here are a few selected paragraphs:

[Orange County, Calif., supervisor Roger] Stanton said on a local cable television show last week that he would support the appointment of Costa Mesa accountant John Moorlach, a Republican who ran unsuccessfully against Citron earlier this year and warned of the impending disaster months before the county’s Dec. 6 bankruptcy filing.

Moorlach said last week he has not been approached about the job.  He was a guest on the same call-in cable show on which Stanton made the remarks.

Stanton, who called the show as an unscheduled guest, said he would support Moorlach for the appointment, or campaign for him if the county decides to hold a special election.

Moorlach told The Bond Buyer he has mixed feelings about the possible career change, even though he campaigned for the treasurer’s post in the June election.

“A lot of my supporters are pushing the board of supervisors, and I appreciate that,” Moorlach said.  “But, quite frankly, if we have to push to get through the door, I don’t know if that’s the job I want.”

During the campaign, Moorlach promised that he would unwind Citron’s complex and risky investment portfolio, possibly taking a loss, but avoiding the unprecedented financial crisis that is now confronting the county’s 2.6 million residents.

Since the debacle became public Dec. 1, Moorlach has been interviewed nonstop by the media and others seeking his insight.  He said it has affected his job as a partner in the Costa Mesa, Calif., accounting firm of Balser, Horowitz, Frank& Wakeling.

“I’m going broke, figuratively speaking,” Moorlach said.  “Luckily, I’m with a good firm and my staff is working away . . . but I’ve got tax season coming up and it’s going to be real hard for me to disengage from my client responsibilities in the middle of that.  So the county has got to say something soon about what they plan to do.”

Taylor Callery, special to ProPublica


California Gave Billions in Taxpayer Dollars to Improve Jails. But That’s Not How These Sheriffs Are Spending It.

California has given counties more than $8 billion to handle thousands of new inmates. But lax spending rules and limited scrutiny have allowed some sheriffs to use that money for other things, which may violate state law.

by Jason Pohl, The Sacramento Bee, and Ryan Gabrielson, ProPublica

Two summers ago, the board of supervisors in Contra Costa County, California, faced a packed meeting room. On the agenda was a proposal to divert $1.5 million in state taxpayer money intended to ease jail overcrowding to other priorities of the local sheriff’s office.

Without the funds, Assistant Sheriff Matthew Schuler said, street patrols across the county would be sacrificed. “That loss would be drastic,” he told the board.

But about two dozen civic, religious and community leaders pushed back, saying the money was desperately needed for where it had been earmarked: jails, paying for probation and expanding social services.

Moving those funds to pay for patrol officers was “truly insulting,” one speaker said. A reverend called the proposal “morally repugnant.” A woman stood at the podium and said Contra Costa County already gave enough money to law enforcement. The county, she said, was a “candyland for sheriffs.”

“Our sheriff has not served the community well,” Elsa Chinea Stevens, a resident, told the supervisors. “We should not break the law to reward him by misappropriating funds.”

The board then unanimously approved the transfer.

Since 2011, California has sent more than $8 billion to counties to cover the costs of the massive prison overhaul approved that year, known as “realignment,” which diverted thousands of inmates from prisons to local jails.

Though local governments routinely move money from one law enforcement purpose to another, doing so with realignment funds may violate state law. The California Constitution prohibits county officials from using those dollars to cut their own costs elsewhere. But lax spending rules and limited scrutiny from both state and county officials have allowed just that, a McClatchy and ProPublica investigation found.

In Shasta County, for example, the civil grand jury — a group of volunteers that inspects parts of local government — said the sheriff’s office broke the rules when it tapped realignment cash instead of county funds to pay for its entire jail work-release program.

And a civil grand jury in Monterey County found that although the sheriff received funds for a specialist to direct pretrial inmates to education courses, his office instead used the money to cover a guard’s salary.

Both juries requested an audit. Local officials in both counties denied any wrongdoing.

Contra Costa County Administrator David Twa likewise maintains the law gives counties flexibility and allows them to use money for a “wide variety” of public safety needs.

Some lawmakers, however, disagree. Sen. John Moorlach, R-Costa Mesa, vice chair of the state Senate’s Public Safety and Budget and Fiscal Review committees, said Sacramento should audit how each county spends its realignment funds.

“The state should have been asking for supportive documents every year,” said Moorlach, a former Orange County supervisor who has been critical of local realignment spending. “That’s just a simple management program.”

State and local authorities need to scrutinize county sheriffs’ finances, said Assembly Member Kevin McCarty, D-Sacramento, who sits on the state Assembly’s budget oversight subcommittee. While boards of supervisors typically set law enforcement budgets, sheriffs decide how to spend that money within their own operations.

California’s elected law enforcers have often rebuffed independent audits, arguing that voters provide oversight through “the election every four years,” McCarty said. “Even county supervisors have been stonewalled” when asking for information about sheriffs’ budgets or jail practices.

McCarty has pledged to reintroduce legislation next year that would allow county supervisors or voters to create sheriff oversight agencies. The bill stalled in the state Senate this year.

To be sure, many counties have created programs for education, vocational training and addiction treatment with the state funds. Those programs all appear to follow the spirit of the 2011 legislation, which gave county jails and probation departments huge new responsibilities along with the infusion of cash.

But in Contra Costa County, a citizen’s group that makes recommendations about realignment says potentially illegal spending has gone on for years. The group in 2016 said there was no explanation for how any of the outlays improved rehabilitation or reduced recidivism, core tenets of realignment. It called for a formal audit.

No such county-level review has actually occurred, the auditor’s office said.

Phil Kader oversaw distribution of the county’s realignment money as chief probation officer until his retirement in 2016. In an interview, he said he shared the citizen group’s concerns.

“I just didn’t feel this revenue should be used to supplant existing positions or things that the county was already going to spend the money on,” Kader said.

“Why Did the State Let It Get That Way?”

California lost its decades long legal fight on prison overcrowding in May 2011, when the U.S. Supreme Court required the state to reduce its prison population by 46,000 inmates. Lawmakers decided to do so by diverting people to county jails.

Then-Gov. Jerry Brown promised counties billions of dollars in state tax revenue to cover the incarceration costs. Legislation provided money that local agencies can spend on modernizing facilities and improving medical care, addiction treatment, education and job training.

In the two years after realignment started, the average daily statewide jail population surged by 10,000 people, to more than 80,000, state data shows. Run-down jails became more deadly. As McClatchy and ProPublica reported in June, inmate-on-inmate killings increased 46% statewide, primarily in San Diego, Riverside, Fresno and Merced counties.

Proposition 47, a 2014 ballot measure that downgraded an array of drug and property crimes to misdemeanors, released much of the growing pressure. The average daily statewide jail population fell, to 73,121 the following year, when the changes took effect. (That was still higher than before realignment.)

But while sheriffs’ overall workload shrank, their cut of the state money did not.

In the four years since Proposition 47 passed, sheriffs in the 15 largest counties have received nearly $2 billion in realignment funds. That equates to 47 cents of every realignment dollar, according to a McClatchy and ProPublica analysis of budget data. Meanwhile, probation departments in those counties, which have seen an uptick in cases, have received roughly half what sheriffs have.

Those allocations stem from county committees created under realignment legislation. The so-called Community Corrections Partnerships, made up of leaders from departments in each county, field budget requests, sometimes debate them and forward their recommendations to county boards of supervisors.

The committees were supposed to limit the influence of elected sheriffs and district attorneys, and to encourage spending on social services and alternatives to incarceration, said Craig Cornett, former budget director for the California State Senate. “We set up certain walls within it, partly in order to just keep the law enforcement crowd in check.”

Critics said those barriers proved insufficient. Boards of supervisors have the final say, but they often defer to requests by sheriffs, who wield significant political power in their counties.

The state can audit how local governments have used the realignment cash, but it has not done so in the eight years since the reforms began. H.D. Palmer, a spokesman for the California Department of Finance, said officials crafted realignment to ensure the decision-making authority rested with the counties, and a state-level examination would amount to second-guessing local elected officials.

But some state lawmakers say such an accounting is long overdue.

“Why did the state let it get that way?” asked Moorlach, the senator who sits on the upper chamber’s Public Safety Committee. “Why weren’t they requesting an annual financial statement or a report that showed where the money was going or why it was justified?”

Counties release broad outlines of how they parcel the money out every year, but their disclosures provide little to no detail on how agencies spent the funds and whether they’ve reduced recidivism or improved social services. State finance officials said anyone can read those summary documents and raise questions themselves.

Matt Cate, who was California’s corrections secretary at the launch of realignment, said sheriffs are powerful political figures in the state and Brown was working to win their support for his plan.

But there was another purpose behind the decision to give county officials full control over the state cash: No one knew precisely what would happen when tens of thousands of people were diverted from the prisons.

“To Gov. Brown’s credit at the time, he decided to give locals the discretion to allocate the money,” Cate said, “because we were certain that we were going to get some things wrong.”

Fewer Inmates, More Money

Contra Costa County is among the wealthiest counties in California. Its 1.1 million residents have seen an economic boon in recent years, as more and more well-heeled tech workers spread across the San Francisco Bay Area. Its strong tax base is charting a “steady, sustainable path,” according to the county’s recent budget analysis.

It has also been a hub for some progressive criminal justice reforms.

Notably, the courts have long used something called split sentencing, which shortens offenders’ time in jail and instead places them on community supervision with probation. When the number of inmates diverted from prisons to county jails peaked, the county’s use of split sentences prevented it from facing the dangerous overcrowding seen elsewhere in the state.

Supervisors have nevertheless continued to award a third of the county’s realignment money to the sheriff, who has used large sums to boost his office. In 2015, Sheriff David Livingston spent $650,000 in state funds to purchase a bus to transport inmates, just as the realignment population dwindled.

The following year, he spent an additional $3.7 million in realignment money to upgrade the security hardware in the county’s largest jail, a relatively modern facility on the shores of the San Francisco Bay, according to county budget and bid documents. Workers replaced the locks, installed an infrared alarm system, painted the cells and renovated the visiting space.

At the time, however, the facility housed just three dozen inmates, county records show. The rest of the jail’s population consisted of roughly 200 federal immigration detainees, who were being held under a partnership with U.S. Immigration and Customs Enforcement.

The sheriff ended the contract with ICE last year after a political uproar, but not before negotiating with the county board of supervisors, which pledged more realignment money to make up for the lost revenue from the federal agency. Livingston, who is also president of the California State Sheriffs’ Association, declined to be interviewed for this story and did not respond to written questions.

At the July 2018 board of supervisors meeting, residents protested the proposal to transfer state funds to the sheriff, but the county administrator, Twa, disputed allegations of misappropriating money. He said realignment was about more than rehabilitation, that the funding was to offset new costs that shifted from the state to the county. “Essentially,” Twa said, “this falls within the realm of that.”

Before the vote, each supervisor talked about the need to increase street patrols. They said it made sense to balance the budget with the state dollars. “Damned if you do, damned if you don’t,” Supervisor Federal D. Glover said.

Board Chair Karen Mitchoff said if they didn’t move the money, they would lay off patrol deputies. “I appreciate what you are telling us about reentry,” Mitchoff told the room, “but we also have to protect the rest of Contra Costa County.”

The board unanimously approved the transfer. In an interview this year, Mitchoff defended the vote. “We’ve got a very ethical county administrator,” she said. “He would never recommend something to the board that was illegal.”

Others, however, are still fuming.

“It was supposed to be supporting community members and reducing incarceration,” said Melvin Willis, a city councilman in Richmond, “not supporting the incarceration business.”

Probation Departments Struggle

Under realignment, probation departments took on additional work, with the goal of advancing rehabilitation and reintegration for offenders. That pressure has only grown in recent years; the number of new realignment-related probation cases has increased 7% statewide since sentencing changes kicked in in 2015, according to data from the Chief Probation Officers of California.

And yet, probation’s share of realignment funds has barely changed.

In California’s 15 largest counties, probation chiefs received roughly 27 cents of every realignment dollar, a McClatchy and ProPublica analysis found. In Contra Costa, it’s just 15 cents.

Different counties have different needs, said Stephanie James, president of CPOC, the state’s probation lobbying group, but paying for probation instead of incarceration is what is necessary for success.

A study published in June by the Public Policy Institute of California shows recidivism rates declined during the four years after realignment began, particularly for people sentenced to probation.

“The local jurisdictions who have invested in probation and the services we provide have seen the type of progress envisioned under realignment,” James said in a written statement.

This year, in Contra Costa County, probation received close to $4 million, mostly for probation officers, with the remaining money for basic necessities like bus tickets and group meetings. The sheriff’s office got twice as much, budget records show.

County officials who focus on reentry for inmates say they need to add significantly more job training, housing and inmate transition programs, according to their five-year plan.

The county’s Department of Education started a program in 2016 that prepares jail inmates with job and life skills before their release from jail. The pilot project, funded without realignment money, saw quick success. But the lone reentry specialist quickly became overwhelmed with more than 100 cases at once.

“It was a big job for one person,” said Lindy Khan, senior director of student programs with the county Office of Education. The jail education program struggled, until the probation chief pitched in money. In 2018, the department began paying for another reentry counselor and a part-time assistant to work in the jail. And after years of accumulating surpluses, the sheriff has also requested this month to fund an employment specialist.

“There’s a lot more that can be done,” Khan said. “There’s a lot more people that we could reach in a more timely fashion.”

Patrice Guillory, managing director of Contra Costa County Programs and Services, serves as an adviser to the county on realignment spending. The county doesn’t track whether its spending is accomplishing what it needs to, she said. That has concerned her for years.

“These dollars aren’t always going to be plentiful,” Guillory told the county’s realignment committee this month, before it recommended giving the sheriff more money. “We have to be very cognizant about whether or not we’re making the kind of impact that we say we want to make.”

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