MOORLACH UPDATE — California’s 482 Cities As Of June 30, 2018 — January 6, 2020

2019 Financial Soundness Rankings for California’s 482 Cities  

Last week, I released the latest edition of my annual per capita review of the Unrestricted Net Assets of California’s 482 cities, from annual reportings as of June 30, 2018 (see  The California Globe provides its take in the first piece below.

Overcorrection Series

ProPublica is back with another segment of its series on the reverberations of the AB 109 realignment mandate by then-Gov. Jerry Brown.  Releasing inmates from state prisons to county jails was a bad idea in 2011, and it’s still a bad idea (see MOORLACH UPDATE — Realignment Reverberations — December 27, 2019).  It’s the second piece below.

25th Anniversary Look Back

Orange County made it to a Congressional Hearing that lasted two days, January 5 and 6, 1995.  The topic: Derivative Financial Instruments Relating to Banks and Financial Institutions. The hearings were before the Committee on Banking, Housing, and Urban Affairs of the United States Senate of the One Hundred Fourth Congress (ISBN 0-16-047320-9).  Pages 148 to 154 provided my “Moorlach Memo” (see MOORLACH UPDATE — Concordia, Second Harvest and Bottom 50 Cities — November 27, 2019, which also provides the links to the nine previous editions).

Orange County also made it to The New York Times, front page, top-of-the-fold on January 5th.  The headline read “Orange County Can Cover Only 60% of Budget Share — Sharp Service Cuts Expected for Affluent Area,” by Leslie Wayne.  Two nice sentences to share:

Mr. Moorlach tried in July [sic] to unseat Mr. Citron, whose management of the investment portfolio led to the $2 billion loss.  Mr. Moorlach “is the only logical candidate” to replace Mr. Citron, Roger Stanton, a county superviser [sic] said today.

This theme was continued by David Evans of Bloomberg News in “Orange County Losses:  Moorlach Agrees to Become Next Treasurer.”  Here are a few selected sentences:

Three of the county’s five supervisors — Marian Bergeson, Roger Stanton and William Steiner — are prepared to support Moorlach for treasurer, staff members said.

Moorlach was widely discussed as the leading candidate for the treasurer’s job, and wasn’t sure he wanted it after receiving caveats from friends.

“People say, ‘You’re as good as gold right now, you’ll only be tarnished by going in there,'” Moorlach said.

Senator John Moorlach (Kevin Sanders for California Globe)
Senator John Moorlach (Kevin Sanders for California Globe)

Sen. John Moorlach’s 2019 Financial Soundness Rankings for California’s 482 Cities

‘There is not much positive news’

By Katy Grimes

Sen. John Moorlach (R-Costa Mesa) just released his new report on the finances of the state’s 482 cities. Gird your loins for more generally bad news – only 43 percent were in positive territory for 2018, down from 46 percent for 2017.

The total combined negative unrestricted net positions* for the 482 cities got worse, going from $22.7 billion in the red in 2017 to $31.5 billion in 2018. That is a 39 percent increase in these unfunded liabilities in just one year. It is also like the 40 percent increase in one year in unfunded liabilities for the state’s 944 school districts, as detailed in my December 11, 2019 School Districts Report. Although for the schools, the total negative number was worse at $70.9 billion.

*Net assets on the balance sheet fall into several categories, including temporarily restricted, permanently restricted and unrestricted net assets. Permanently restricted net assets are funds contributed for a specific purpose. Unrestricted net assets hold no restriction regarding their usage. The agency uses these funds to pay general expenses or to fund specific purposes of the group.

For the first time, new regulations by the Governmental Accounting Standards Board (GASB) required municipal audited financial statements to include retiree medical liabilities. Balance sheets refer to this as Other Post-Employment Benefits (OPEBs).

With the OPEB addition, more cities are seeing their unrestricted net positions (UNPs) dip further into the red, the report finds. “Cities are supposed to provide their financial statements within a reasonable time after the ending of each fiscal year on June 30. For consistency, this report includes the financial statements for June 30, 2018, meaning the cities have had 18 months to complete this essential part of transparent government.”

“Despite that long-time frame, 17 cities have not yet completed their 2018 statements,” Moorlach says. “In those cases, I have extrapolated the data from past statements to produce 2018 numbers for this report. The data for those cities are shown in boldface. The 17 delinquent cities are Adelanto, Amador, Artesia, Blue Lake, California City, Coalinga, Compton, Etna, Fort Jones, Fowler, Isleton, Maywood, McFarland, Riverbank, Sonoma, Westmorland and Windsor.”

Jump to page 11 to see the UNP for each of California’s cities. My own city of Sacramento’s UNP is $6.7 million.

Los Angeles’ UNP for 2018 is $8.022 billion.

The City of Los Angeles

“How does a city with 4 million residents increase its Unrestricted Net Deficit by $1.4 billion in one year?” Moorlach asks. “The net increase in the reported liabilities for pensions and Other Post-Employment Benefits explains $1.2 billion of the 22 percent jump. Although Los Angeles enjoys 10 percent of the state’s population, its Unrestricted Net Deficit’s growth is 16 percent of the combined increase by all of California’s 482 cities.”

Moorlach says on January 10, 2020, Gov. Gavin Newsom will release his preliminary budget proposal for the 2020-21 state budget. “Hopefully, he will take account of the cities and how elected leaders in Sacramento can provide assistance in encouraging strategies to pursue for fiscal relief.”

To read Sen. Moorlach’s entire report, it is available HERE.

Katy Grimes, the Editor of the California Globe, is a long-time Investigative Journalist covering the California State Capitol, and the co-author of California’s War Against Donald Trump: Who Wins? Who Loses?

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Greg Betza, special to ProPublica


California’s Jails Are in a Deadly Crisis. Here’s How Experts Suggest Fixing Them.

An investigation by McClatchy and ProPublica found unchecked violence and inhumane conditions in county jails, but the state’s oversight agency has no power to stop it. Experts say that needs to change.

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

Nearly a decade after California overhauled its prison and jail system, policymakers are considering reforms to the state’s landmark criminal justice transformation, calling for more oversight of county sheriffs and higher standards for inmate care.

Gov. Gavin Newsom has said he is crafting plans focused on local lockups, where homicides have surged, and exploring how to give the state more power to oversee the sheriffs who run them. More details are expected this week when the governor unveils his state budget proposal.

At the same time, state lawmakers are also calling for accountability, recommending audits of how sheriffs have spent billions of dollars in state support and requesting hearings to examine the deadly conditions in some facilities.

The moves follow a year of reporting by McClatchy and ProPublica on the radical shift of California’s prison and jail system known as “realignment.” The law approved by then-Gov. Jerry Brown in 2011 was designed to ease dangerous overcrowding in the state’s prisons by diverting thousands of newly convicted offenders to county jails.

So far, the state has allocated some $8 billion to counties to improve services inside and outside of the facilities. It awarded an additional $2 billion for the construction of new facilities. And it converted an arm of prison bureaucracy into a jail oversight agency that sets minimum standards and inspects the jails.

Those efforts, however, are faltering. The McClatchy-ProPublica investigation found:

  • Violence goes unchecked in many county jails, and homicides spiked in the years after realignment.
  • State jail inspectors are powerless to enforce their own standards and do not even scrutinize life-threatening conditions and deaths inside the facilities.
  • There are no limits on how long sheriffs can hold mentally ill inmates in extreme isolation or any rules governing how county jails care for people at risk of suicide.
  • Sheriffs and other county officials have diverted state realignment money to pay for staff and equipment unrelated to the 2011 criminal justice reform law, in some cases potentially violating the state constitution.

During the reporting, researchers, law enforcement officials, advocates and lawmakers called for changes to California’s loosely connected network of county jails. Many identified the same thing: the outsized power of sheriffs under realignment.

Robert Weisberg, a Stanford University law professor who has researched realignment for years, compared the local law enforcement officials to prison wardens with broad discretion over state money, creating “widely disparate and unpredictable” policies statewide.

In an interview, he said realignment provided short-term fixes to the state’s overcrowding problem; the statewide prison population is down 46,000 inmates since the federal court order that prompted the reforms. But it has not solved California’s broader incarceration problems, he said. In many ways, it just shifted them to the local level.

With Newsom, a Democrat, and others looking to make their mark on the criminal justice system, here are four key problems and ideas from experts on how to fix them.

Strengthen State Oversight Board

The Problem: The state created an agency to oversee realignment. But its officials do not have the authority to close dangerous jails or make county leaders change their ways — even when they find life-threatening conditions.

Ideas: Lawmakers could increase the board’s authority to compel sheriffs to fix violations and expand minimum standards to cover overall jail conditions, including measures of inmate health and use of force incidents.

When lawmakers passed the law in 2011, they created the Board of State and Community Corrections, or BSCC, and tasked it with collecting jail data, awarding grants and compiling reports about realignment’s effects.

But the board sees itself as a partner, not a regulator.

The news organizations found state inspectors generally focus on paperwork — whether county jail facilities fill out the required daily observation logs, for example — rather than on how sheriffs run their lockups. State inspections are minimal, said James Sida, a jail consultant and former state corrections official. “I wouldn’t call them highly in-depth.”

In 2018, a state inspector cited the Kern County Sheriff’s Office for 27 violations, a majority of them related to the use of extreme isolation. But he could only encourage the sheriff to make fixes. The sheriff refused, saying his office interpreted the standards differently and disagreed with the board’s conclusion.

Critics argue the BSCC needs more power. “California is flying blind without a state regulatory agency that has meaningful enforcement authority,” said Ross Mirkarimi, the former San Francisco sheriff who is now a jail consultant.

Sen. Nancy Skinner, D-Berkeley, chair of the California Senate Public Safety Committee, agreed. “We as the state definitely have to improve our oversight,” said Skinner, who voted for the 2011 realignment legislation when she was in the Assembly.

BSCC chair Linda Penner defended the board at its November meeting. “We absolutely understand that it’s not a perfect system,” she said. But, the board does exert “all of the authority that we have been given.”

Newsom has singled out the state’s jailhouse monitoring as a focus of his 2020 criminal justice plan.

Investigate Jail Deaths

The Problem: Since realignment began, inmate-on-inmate homicides have risen 46% in county jails statewide compared with the seven years before. Killings tripled and even quadrupled in several counties.

Ideas: Give the BSCC the power and staff to investigate jail deaths. The state attorney general and county authorities could also intervene.

The conditions in many jails now mirror those in the once-overcrowded prisons. For example, in the seven years before realignment, only one jail inmate was killed in Fresno County jails. But four have died in homicides in the seven years since.

Fresno County Sheriff Margaret Mims said that the county jails hold many dangerous people, and that awful events, including deaths, are almost inevitable. A few years ago, Mims said, an inmate hid a razor blade in his nasal cavity and cut his co-defendant in court.

“If you wanted absolutely no assaults on inmates, no assaults on staff, no murders, no suicides you would almost have to have a [guard] assigned to every single inmate or continually have eyes on those inmates,” she said.

Neither the county nor the state chose to conduct a comprehensive review of the deaths. Counties don’t notify the BSCC when inmates die, and the board has no authority to investigate even homicides in the jails.

The California attorney general has the power to intervene but rarely uses it.

Separately, McClatchy and ProPublica found suicide death rates have surged in several counties’ jails the past five years, and local officials have said they are unable to explain why.

Other states take a different approach. In Texas, the Commission on Jail Standards sets mandatory rules, performs inspections and tracks all inmate deaths. A law took effect in 2018 requiring an independent agency to investigate all in-custody jail deaths. The commission has the authority to close deficient and dangerous facilities.

By contrast, California lawmakers last year shelved a bill that would have allowed counties to create oversight groups with subpoena power over county sheriffs. Local law enforcement was opposed. The California State Sheriffs’ Association, which wields significant influence in public safety legislation, called the measure “unnecessary,” saying the BSCC and the state attorney general already provide oversight.

The bill’s author, Assembly Member Kevin McCarty, D-Sacramento, vowed to try again in 2020, citing the McClatchy and ProPublica investigation. “This type of lax oversight results in lawsuits and settlements where taxpayers continue to foot the bill and pay for the misconduct of our sheriff’s departments across California,” he said.

Overhaul Standards for Solitary Confinement

The Problem: Best practices say solitary confinement should only be used in extreme circumstances, but several county sheriffs in California lock people in closet-sized rooms for hours, days and even weeks on end.

Ideas: Strengthen state standards on isolation to match national guidelines.

California jail standards place no limit on how long inmates can be held in extreme isolation. In 2016, the BSCC rejected a proposed 12-hour cap on inmates’ time in safety cells, rooms with four rubberized walls and a grate in the floor for bodily fluids. Board officials argued that limit was too short. Lindsay Hayes, a national expert on correctional suicide prevention, said the state’s minimum jail standards are “pretty antiquated.”

For inmates, the consequences can be severe.

Each year, for example, the Kern County Sheriff’s Office sends hundreds of people it considers to be suicidal into “suicide watch” isolation. Inmates awaiting trial can spend months in solitary, according to state and county records. When those cells fill up, deputies lock people in safety cells. They receive no mental health treatment and, until recently, just a yoga mat to rest on. The sheriff’s office said its isolation practices save lives, removing hazards and increasing monitoring of vulnerable inmates.

Hayes maintains state corrections boards should base their jail standards on the National Commission on Correctional Health Care’s model standards, which strongly discourage prolonged solitary confinement and prioritize mental health care.

When inmates are suicide risks, jails often respond by inflicting “really heavy doses of punishment, humiliation,” said Homer Venters, former chief medical officer of New York City jails. “Then we just keep doing it for longer and longer periods of time. We drive this mental health crisis.”

Audit Counties and Curb Illegal Spending

The Problem: California law prohibits local governments from using realignment dollars to save county tax dollars that would otherwise have been spent on jail or other law enforcement programs. But the McClatchy-ProPublica investigation found that lax spending rules and limited scrutiny from state and county officials have allowed sheriffs to use money ticketed for programs and services made necessary by realignment for basic operations and side projects unrelated to California’s criminal justice overhaul.

Ideas: State and county finance officials could audit local governments and sheriff’s offices, which receive the largest share of realignment money. When abuses are found, the state controller could take back money spent illegally.

Since realignment, state taxpayers have paid more than $8 billion to counties, where officials have decided how to split it among sheriffs, probation and community programs. The state constitution promises the annual payments in perpetuity to help counties shoulder the additional people previously sent to prison. But the money isn’t always spent on realignment-related items.

In Contra Costa County, for example, the sheriff used $1.5 million to help pay for existing street patrols after other funding fell through. David Twa, the county administrator, maintains the law gives counties flexibility and allows them to use money for a “wide variety” of public safety needs.

Local oversight groups across California have raised concerns about such spending, with some saying it is potentially illegal. County boards of supervisors, who have the final say, have repeatedly denied their realignment spending has violated the law.

The state, at the direction of the governor, can audit how local governments have used the realignment cash. However, it has not done so in the eight years since the reforms began. That kind of accounting, officials say, would amount to second-guessing local leaders.

Sen. John Moorlach, R-Costa Mesa, vice chair of the state Senate’s Public Safety and Budget and Fiscal Review committees, said the state should scrutinize each county’s realignment spending.

“The state should have been asking for supportive documents every year,” Moorlach said. “That’s just a simple management program.”

Jason Pohl reports on criminal justice for The Sacramento Bee. He has reported since 2011 on public safety, mental health and disasters for newspapers in Colorado and Arizona.

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