MOORLACH UPDATE — Riverside County School Districts — October 31, 2018

Happy Halloween!

Allow me to provide you with more scary data. This year I’ve already given you the following frightening financial details for Orange County:

* MOORLACH UPDATE — Facing Fiscal Realities — October 30, 2018

* MOORLACH UPDATE — Trick or Treat? — October 26, 2018

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

* MOORLACH UPDATE — LAUSD vs. OC School Districts — September 18, 2018

* MOORLACH UPDATE — Measure It, Improve It — March 14, 2018

* MOORLACH UPDATE — City CAFR Rankings, Vol. 10 — February 27, 2018

Now I’m providing the results of our Unrestricted Net Positions (UNP) research just for the 23 school districts in the county of Riverside. My submission is provided below in the Inland Valley Daily Bulletin and the Redlands Daily Facts.

OPINION

Riverside County school districts are deep in red

By JOHN MOORLACH

https://www.redlandsdailyfacts.com/2018/10/30/riverside-county-school-districts-are-deep-in-red/

https://www.dailybulletin.com/2018/10/30/riverside-county-school-districts-are-deep-in-red/

Of Riverside County’s 23 public school districts, just one, tiny Desert Center Unified, 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 back in March.

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.

Desert Center Unified’s positive number clocks at $3,055 per capita. For comparison, it ranks 38th of California’s 944 school districts, an exemplary performance. Yet I must point out it teaches just 23 students with a staff of two.

It’s all negative after that around here, with the second and third “best” being Perris Union High at ($528) and Perris Elementary at ($556). At least they were in the top half of California districts, although that’s not saying much.

The worst are Coachella Valley Unified at ($1,946) and Romoland Elementary at ($1,864), ranking 904th and 903rd of the state’s 944 districts. They languish in the bottom tenth of districts.

Among the largest districts by population, Corona-Norco Unified ranks 820th at ($1,359), Riverside Unified 727th at ($1,089) and Moreno Valley Unified 745th at ($1,118). In terms of the raw totals of how much these districts are underwater, the numbers are: ($380 million) for Corona-Norco, ($291 million) for Riverside and ($204 million) for Moreno Valley. That’s a combined deficit of almost $1 billion for just three districts.

Overall, just five Riverside County districts ranked in the top half of California’s districts, but 18 ranked in the bottom half, a truly alarming performance.

Here are the per capita UNPs for all of Riverside County’s school districts:

  1. Desert Center Unified                      $3,055
  2. Perris Union High                             ($528)
  3. Perris Union Elementary                ($556)
  4. Beaumont Unified                            ($590)
  5. Menifee Union Elementary            ($695)
  6. Palm Springs Unified                       ($760)
  7. Palo Verde Unified                           ($773)
  8. Temecula Valley Unified                 ($857)
  9. Banning Unified                               ($916)
  10. Hemet Unified                                   ($922)
  11. Desert Sands Unified                       ($947)
  12. Lake Elsinore Unified                   ($1,103)
  13. Riverside Unified                           ($1,089)
  14. Moreno Valley Unified                  ($1,118)
  15. San Jacinto Unified                        ($1,150)
  16. Val Verde Unified                           ($1,205)
  17. Nuview Union                                 ($1,265)
  18. Corona-Norco Unified                   ($1,359)
  19. Murrieta Valley Unified                ($1,380)
  20. Jurupa Unified                                ($1,631)
  21. Alvord Unified                                ($1,642)
  22. Romoland Elementary                  ($1,864)
  23. Coachella Valley Unified               ($1,946)

The tallies are part of my effort to track the per capita UNPs of California’s various government balance sheets. In addition to the city balance sheets 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 staffs 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 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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This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District. If you no longer wish to subscribe, just let me know by responding with a request to do so.

Also follow me on Facebook & Twitter @SenatorMoorlach

MOORLACH UPDATE — San Francisco County #56/57 — March 20, 2018

In 2006, former city council member Carl DeMaio successfully authored a ballot measure for the city of San Diego that required voter approval for any future negotiated public pension plan improvements that create an immediate liability (debt).

In 2008, I did the same thing in the County of Orange. Measure J passed overwhelmingly (see the LOOK BACKS in MOORLACH UPDATE — Social Host Ordinance — November 6, 2013 and MOORLACH UPDATE — Conditions of Children — October 24, 2013). And, we both stole the idea from the city and county of San Francisco, which had the same requirement in its charter for more than a century.

In the first piece below, CalPensions starts off with this little tidbit of trivia, because this provision helped garner San Francisco a rating upgrade. Who would have thought?

This piece also commends the retiree medical reforms that were implemented by San Francisco. For more fun on this subject, see the reforms I assisted in implementing in Orange County back in 2006, a dozen years ago, at MOORLACH UPDATE — Retiree Medical Reform — March 3, 2014.

While I was a County Supervisor, I also made requiring all employees to contribute toward their pension plans a high priority (and there are plenty of links to this effort–but I’ll spare you). This is another initiative that San Francisco implemented and now garners it some well deserved praise. So, now you know why the OC also enjoys higher credit ratings.

Moody’s Investor Service is the best of the main credit rating agencies. So, after giving San Francisco such praise on its retiree funding management, it had to scramble when asked about the city’s low standing in my city ranking. It’s nice to receive a professional explanation. But, we may hear more of them in the coming months and they may just sound like sad excuses. Many cities in the 400 range are surfacing in articles, like Compton and Santa Cruz. At least you now know why.

As 17 percent of the residents of California live in unincorporated areas, I’m providing the ranking of California’s 58 counties in the second piece below. I did this with the June 30, 2010 CAFRs, when I was Chairman of the Board of Supervisors in 2012. In that list, San Francisco placed 57th. It’s the third piece below.

But, seven years later, San Francisco is still at the bottom of the list. There were some surprises. Modoc County jumped up 56 places. It’s CAFR was nonexistent seven years ago, and the current one is being criticized by the Controller’s office. Monterrey County moved up 31 places. Seven other counties moved up more than 20 places, and four moved up more than 10. Sixteen counties moved up 1 to 9 places and sixteen others moved down 1 to 9 places. Two counties held their positions. Five dropped more than 10 places, two dropped more than 30, and four dropped more than forty places.

Now that defined benefit pension liabilities must be included in the balance sheets, the rankings have seen some interesting movement. It’s like a game of 52-Card Pickup. Check it out below.

California will be announcing its June 30, 2017 CAFR soon. When the Controller releases it, I’ll provide the updated rankings of all 50 states.

Pensions help San Francisco earn top bond rating

By Ed Mendel

https://calpensions.com/

Tight pension management helped San Francisco get an upgrade this month to Moody’s highest general obligation bond rating, something many might not expect in a city known for liberal-leaning politics.

A distinctive feature of the San Francisco system — requiring voter approval of pension increases — was adopted by more conservative voters for the San Diego pension system in 2006 and the Orange County pension system in 2008.

The San Francisco public pension system was regarded as a well-funded model, the recipient of good management awards that had gone eight years with no annual payments from the city.

It was a sharp contrast to the lingering scar of an Orange County bankruptcy in 1994 and a multi-year “Enron by the sea” pension scandal in San Diego, which in 2006 featured indictments of five city officials and an SEC sanction for faulty retirement debt bond bond disclosures.

Now San Francisco is the epicenter of a high-tech boom generating high household income, property values, tax revenue and presumably bondholder security. Moody’s also praises its retirement debt management.

“The upgrade to Aaa (from Aa1) reflects the material strengthening of San Francisco’s credit, underscored by its effective management of pension and retiree health liabilities, particularly in contrast to other large cities,” said the new Moody’s bond rating.

Moody’s Investor Service has been a leading critic of public pensions, using its own lower bond-based earnings forecast to calculate debt and its own “tread water” analysis to calculate whether employer-employee contributions are high enough to pay down debt.

The new rating said the upgrade reflecting the long-term strengthening of the city’s economy, tax base and socioeconomic profile could have been “negated” without proper debt management.

San Francisco Mayor Mark Farrell said in a statement the upgrade to Moody’s highest credit rating “justifiably” recognizes the city for its effort to “become a national model of responsible fiscal governance.”

Moody’s mentions two factors: a retiree health reform that takes longer to earn benefits and aims for full pre-funding, and pensions with higher employee payments and lower police and firefighter formulas than one widely adopted after a CalPERS-sponsored bill, SB 400 in 1999.

The upgrade makes no comparisons. But the San Francisco pension system takes a smaller bite out of the general fund than some other big-city retirement systems, leaving more money for basic services and programs.

“Over the last decade, the City’s General Fund expenditures related to employer (pension) contribution has gone from 2.5% of General Fund spending to over 7% of General Fund spending,” an update of the San Francisco five-year financial plan said in December.

San Jose retirement costs are nearly 23 percent of the general fund this fiscal year, up from 6.5 percent in fiscal 2001-02. Los Angeles spends about 20 percent of its general fund on pension and retiree health care, up from 5 percent in 2002.

San Francisco voters approved a retiree health care reform, Proposition B in 2008, that increased the generous vesting period from five years (some of which could be served at other employers) to a sliding scale beginning at 10 years and increasing coverage until 20 years.

The reform began pre-funding retiree health care, setting aside money to invest like pension funds. New hires contribute 2 percent of their pay and employers 1 percent. Employees hired before the reform began contributing in 2016 and will reach 1 percent of pay next fiscal year.

San Francisco will be decades covering a retiree health care debt or unfunded liability estimated at $4 billion in 2008.

“For fiscal year 2014, the City’s pay-as-you-go expense was $160.7 million and contributions to the Retiree Health Care Trust fund were $5.9 million,” Controller Ben Rosenfield said in a 2015 report.

The San Francisco Employees Retirement System combines police and firefighters with other or “miscellaneous” employees, unlike some large cities, and has a low employer rate reduced by raising employee rates.

A cost-sharing provision approved by voters, Proposition C in 2011, requires employees to pay part of the net employer contribution rate, depending on pay level and employee group. (see chart)

An anticipated decline in employer rates “was reversed significantly starting in 2016 due to the loss of the supplemental COLA lawsuit, employees living longer, and lower than expected investment returns in 2015 and 2016,” said the five-year financial plan update.

An appeals court overturned part of Proposition C that ended higher payments to retirees when investments have “excess earnings.” A retiree group successfully sued to overturn part of a measure backed by all 11 county supervisors, business and labor, and 69 percent of voters.

The San Francisco contribution rates, 11.08 percent of pay for employees and 19.81 percent for employees, are still far below the rates for the two troubled San Jose retirement systems.

The San Jose Federated City Employees Retirement System rates for employees are 15.36% of pay (pension 6.60%, retiree health 8.76%) and for employers 103.45% of pay (pension 94.04%, retiree health 9.41%).

The San Jose Police and Fire Department Retirement Plan rates for employees are 21.12% of pay (pension 11.38%, retiree health 9.74%) and for employers 106.68% of pay (pension 96.06%, retiree health 10.62%).

Last June the San Francisco system had 86 percent of the projected assets needed to pay future obligations, using a 7.5 percent earnings forecast to discount future costs, according to an annual actuarial report.

The funding level would be lower, and contribution rates higher, if the system used a 7 percent discount rate like the California Public Employees Retirement System and the California State Teachers Retirement System.

And also last June, a San Francisco Civil Grand Jury report concluded that most of the debt of the system, which has been underfunded for more than a decade, was approved by the voters who in theory are a safeguard.

“There are several causes for the underfunding of the Retirement System, but the main underlying cause is the retroactive retirement benefit increases implemented by voter-approved propositions between 1996 and 2008,” said the report.

Last week state Sen. John Moorlach, R-Costa Mesa, known for issuing a warning before the Orange County bankruptcy, issued a report on the “financial soundness” of the state’s 482 cities, saying some face insolvency mainly due to pension debt.

Dividing their “unrestricted net position” in annual financial reports by their population, he ranked San Francisco at 474 with a negative UNP per capita of $2,929. He said San Francisco, a combined city and county, also ranked near the bottom in his similar study of the 58 counties in 2010.

Asked for a response, Moody’s said San Francisco is a large issuer of general obligation bonds repaid with voter-approved property tax revenue, the UNP may mask revenue programs like building inspection that pay pension costs, and a per-capita metric may miss revenue not paid directly to the city from businesses, commuters, and tourists.

“Long-term projections indicate that expenditure growth will outpace revenue growth,” said the Moody’s upgrade, “but this is mitigated by the city/county’s demonstrated record of conservative budgeting and financial management practices.

“Here in particular, the charter amendments governing pension and health care benefits and funding are critical tools that should enable San Francisco to maintain its currently very strong credit position.”

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

No. County Population Unrestricted Net Position (Thousands) UNP Per Capita 2010
1 San Mateo 770,203 $1,032,917 $ 1,341 6
2 Modoc 9,580 $8,040 $ 839 58
3 Alameda 1,645,359 $115,106 $ 70 24
4 San Benito 56,854 -$6,157 $ (108) 8
5 Napa 142,408 -$20,269 $ (142) 5
6 Ventura 857,386 -$198,202 $ (231) 15
7 Imperial 188,334 -$46,205 $ (245) 28
8 Tulare 471,842 -$151,683 $ (321) 33
9 San Diego 3,316,192 -$1,151,817 $ (347) 31
10 Monterey 442,365 -$157,830 $ (357) 41
11 Marin 263,604 -$101,488 $ (385) 19
12 Stanislaus 548,057 -$250,776 $ (458) 36
13 San Bernardino 2,160,256 -$1,004,921 $ (465) 39
14 Lake 64,945 -$34,337 $ (529) 13
15 Kings 149,537 -$79,544 $ (532) 22
16 Placer 382,837 -$212,323 $ (555) 10
17 Solano 436,023 -$287,818 $ (660) 12
18 Amador 38,382 -$25,539 $ (665) 11
19 Lassen 30,918 -$21,243 $ (687) 16
20 Riverside 2,384,783 -$1,689,770 $ (709) 9
21 Tehama 63,995 -$46,632 $ (729) 14
22 San Luis Obispo 280,101 -$226,970 $ (810) 4
23 Santa Clara 1,938,180 -1,586,614 $ (819) 37
24 Calaveras 45,168 -$37,912 $ (839) 44
25 Sonoma 505,120 -$457,536 $ (906) 30
26 Shasta 178,605 -$167,268 $ (937) 18
27 Fresno 995,975 -$939,690 $ (943) 21
28 Orange 3,194,024 -$3,074,958 $ (963) 46
29 Butte 226,404 -$226,249 $ (999) 32
30 San Joaquin 746,868 -$780,575 $ (1,045) 38
31 Sutter 96,956 -$102,750 $ (1,060) 25
32 Nevada 98,828 -$106,804 $ (1,081) 27
33 Contra Costa 1,139,513 -$1,245,474 $ (1,093) 51
34 Merced 274,665 -$305,870 $ (1,114) 26
35 Yolo 218,896 -$250,551 $ (1,145) 48
36 Santa Barbara 450,663 -$532,968 $ (1,183) 43
37 El Dorado 185,062 -$223,360 $ (1,207) 45
38 Santa Cruz 276,603 -$363,118 $ (1,313) 35
39 Plumas 19,819 -$27,628 $ (1,394) 3
40 Madera 156,492 -$221,281 $ (1,414) 34
41 Humboldt 136,953 -$202,284 $ (1,477) 23
42 Sacramento 1,514,770 -$2,351,925 $ (1,553) 42
43 Del Norte 27,124 -$43,006 $ (1,586) 47
44 Alpine 1,151 -$1,887 $ (1,640) 1
45 Colusa 22,043 -$36,256 $ (1,645) 29
46 Inyo 18,619 -$32,530 $ (1,747) 2
47 Los Angeles 10,241,278 -$18,728,499 $ (1,829) 52
48 Tuolumne 54,707 -$100,120 $ (1,830) 50
49 Mendocino 89,134 -$163,487 $ (1,834) 54
50 Kern 895,112 -$1,713,301 $ (1,914) 49
51 Mono 13,713 -$27,331 $ (1,993) 7
52 Yuba 74,577 -$152,148 $ (2,040) 56
53 Mariposa 18,148 -$37,710 $ (2,078) 20
54 Siskiyou 44,688 -$101,642 $ (2,274) 53
55 Glenn 28,731 -$65,897 $ (2,294) 40
56 San Francisco 874,228 -$2,560,735 $ (2,929) 57
57 Trinity 13,628 -$54,192 $ (3,977) 55
58 Sierra 3,207 -$17,191 $ (5,360) 17
No. County 2010 UNP
1 Alpine $ 5,022
2 Inyo $ 1,198
3 Plumas $ 1,065
4 San Luis Obispo $ 757
5 Napa $ 717
6 San Mateo $ 714
7 Mono $ 668
8 San Benito $ 664
9 Riverside $ 652
10 Placer $ 614
11 Amador $ 533
12 Solano $ 487
13 Lake $ 479
14 Tehama $ 479
15 Ventura $ 476
16 Lassen $ 419
17 Sierra $ 415
18 Shasta $ 350
19 Marin $ 303
20 Mariposa $ 282
21 Fresno $ 259
22 Kings $ 234
23 Humboldt $ 213
24 Alameda $ 209
25 Sutter $ 203
26 Merced $ 200
27 Nevada $ 193
28 Imperial $ 188
29 Colusa $ 175
30 Sonoma $ 174
31 San Diego $ 166
32 Butte $ 160
33 Tulare $ 142
34 Madera $ 140
35 Santa Cruz $ 136
36 Stanislaus $ 102
37 Santa Clara $ 96
38 San Joaquin $ 88
39 San Bernardino $ 87
40 Glenn $ 67
41 Monterey $ 63
42 Sacramento $ 53
43 Santa Barbara $ 38
44 Calaveras $ 28
45 El Dorado $ 23
46 Orange $ (3)
47 Del Norte $ (103)
48 Yolo $ (125)
49 Kern $ (146)
50 Tuolumne $ (191)
51 Contra Costa $ (195)
52 Los Angeles $ (204)
53 Siskiyou $ (271)
54 Mendocino $ (557)
55 Trinity $ (573)
56 Yuba $ (963)
57 San Francisco $ (1,241)
58 Modoc (Estimate) $ (1,432)

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