But Plenty of Blah-Blah: Budget Sclerosis

by Mark Scaramella, June 17, 2010

If the Mendocino County Board of Supervisors were a child, the diagnosis would be attention deficit disorder. They can’t deal with the issues, large or small, as the current budget crisis clearly demonstrates.

In 2006 as the housing bubble began to leak and America began its long contraction or, as it has been characterized, The Long Emergency, the Mendocino County Board of Supervisors continued to spend as if there was no crisis, spending tens of thousands of scarce public dollars on, for instance, the massive boondoggle known as General Plan Update. (Much of that money went to outside “consultants.”)

A chart presented by CEO Angelo showed that the board has been spending more than they’ve taken in for several years. Apparently, this came as a surprise to the Supervisors.

The fiscal chickens having arrived, three of the five supervisors are still unable to face the budgetary facts.

At the Board’s June 8th meeting, Supervisor Kendall Smith talked about how she'd attended the State Asso­ciation of California Retirement Systems meeting in Newport Beach. The County’s highly paid Retirement System Administrator Jim Andersen also attended the confab. Smith, whose assumptions are regal, did not mention that she and Andersen made the trip courtesy of the taxpayers of Mendocino County. If they were serious about cutting back on unnecessary spending, or even aware that unnecessary spending should be cut, they would not have made the trip. This was the conference with the picture of Chairman Mao Tse Tung promi­nently, if incongruously, displayed on the cover of the meeting’s announcement. Here at home the County's retirement fund continues to be spectacularly misman­aged.

Smith, who may be clinically remote from reality, free-associated about how well the conference was run, the “excellent workshops,” the debates, the CD she expects to get in the mail one of these days, the market crash and its “negative impact on funded ratios,” the aging workforce, “ways to constrain expenditures,” oblivious that she's a huge part of the local end of the global meltdown.

Among the “ways to constrain expenditures” men­tioned at the conference — all of them self-evident — were freezing or cutting salaries, requiring higher pen­sion contributions, reducing retiree healthcare benefits (Mendo has already cut them off), reducing cost of living adjustments, raising the retirement age, preventing what is called “spiking,” i.e., high-paid bureaucrats jiggering their salaries in the years just before retirement so that their pensions are higher than an ordinary employee’s would be — and creating a new tier of lower pension benefits which, Smith declared, “needs meet and confer for future hires.”

Supervisor John Pinches surprised Smith by suggest­ing that the Board do something.

“We need to start acting,” said Pinches. “Would the board take the initiative to do this or would that come from the retirement system?”

Smith, caught off guard, didn't know what the hell.

“No, that would come from the County of Mendocino and it would be something this board would, um, have to offer to, um, working with the executive office, our negotiators, human resources. I believe that would become part of the meet and confer process.”

Pinches: “So, it's basically, it would have to go through the meet and confer process?”

Smith: “But I think it's, it certainly is fine to talk about it publicly, if that's, that is one, if not one, um, pos­sibly one of many, with respect to, the solvency of the County, and the, the solvency of the benefit promised to the retirement system.”

Pinches: “I think that this needs to happen because even though we have, quote, a hiring freeze, there's actu­ally new employees coming into the system if not monthly, weekly, so what is the… I really feel that there's an urgency on this single issue. We can move forward pretty much immediately. So what is the time frame and the process of moving forward, of creating another tier?”

Smith, her nose literally upturned at Pinches’ imperti­nence, was silent, the idea of actually doing something to address the deficit seeming to offend her.

County Counsel Jeanine Nadel, always quick to com­plicate the simplest suggestions, jumped in:

“Uh, um, actually, I think the time frame would be, probably be, approximately a year or two, to analyze this, to look at the financial impacts, to look at the actu­arial impacts… I mean there are a lot of factors that are involved in this and, um, the CEO and I have just started discussions about, about how to approach this, so I think, it's not on the agenda today for discussion, but certainly we can bring it back to the board with a real clear picture of what the process would be and timeframes.”

Pinches: “Would it be fair to say that the process takes a year, that if we hire new employees, say, from next week on, if we could put a rider in their hiring pro­vision that they would be subject to that new tier?”

Nadel: “Uh, no. At this point if you hire any new employees they would be subject to the retirement proc­ess that's in place currently.”

Pinches: “And there's no way to make a provision that…”

Nadel: “No.”

Pinches looked around for at least one ally. There wasn't one.

Smith came back on line.

“But I think you're right, Supervisor. It was timely and at a point in the conference it was mentioned in more than one session, and this Supervisor did actually bring it forward in a number of settings, probably about a year ago, so it isn't, this isn't a new concept, it's been out there for a while, and it's unfortunate, because I did bring it forward previously, probably a year ago.”

Oh really? We checked the County's on-line board minutes. The earliest mention of a two-tier retirement system was in March of this year, not last year, and that mention occurred only in the limited context of a routine report on a variety of “reforms” being considered by the California State Association of Counties, not as a pro­posal by Smith for consideration by the Mendocino County Board of Supervisors.

Pinches: “Yeah, but if it takes a year to get it going, we need to get it going today.”

Smith leaned way back in her chair and, confident that nothing could or would happen, said “Okay.”

Pinches tried yet again: “Can we have some kind of Board chair's direction on that?”

Board Chair Carre Brown shuffled: “Um, Ms. Angelo?”

CEO Carmel Angelo came to the rescue: “As Ms. Nadel said, we have started this process and we are talking with Human Resources and involving them, and we will be bringing information back to this board. We are working on this.”

Brown: “Thank you very much.”

None of the other Supervisors, lame-duck David Col­fax and John ‘Last Word’ McCowen, said anything.

And there it ended, right down the dumper, never to be heard from again — certainly not in time to do any budget good. There may well be pros and cons over the idea of a two-tiered retirement system where newer employees get annuities rather than guaranteed pensions although lots of other counties are already doing it. But this Board can’t even get their CEO to set a date for dis­cussion of two-tier!

* * *

This same stuck-in-neutral approach to local govern­ment prevailed during the “Phase II” layoffs and approval of the “Phase III” cutback plan.

Nobody can predict revenues anymore. It’s hard to decide how many people to lay off when you don’t know how much (or how little) money you’re going to be get­ting in the next few months.

When asked by Supervisor Pinches how reliable the revenue projections are, County Auditor Meredith Ford said that the projections are basically her “best guess” about what they’ll be.

Ms. Ford’s projections have proven to be too optimis­tic for the last couple of years as tax revenues from all sources continue to be lower than expected. The result is that every time the Board thinks they’ve taken steps to close the budget gap, revenues are down and the deficit pops back up.

Lots of people were on hand last Tuesday to decry the current round of proposed layoffs and cuts. The board listened to the impassioned pleas and made the obligatory “feeling your pain” statements about how dif­ficult the budget problem is.

This round of cuts involves cutting the pay of the already overworked and underpaid in-home support services people, closure of the nearly essential Fort Bragg Animal Shelter, severe cuts in the Solid Waste transfer station staffing (and service hours), and elimina­tion of several important line worker services — the County’s only painter, the backup mail deliverer, the computer tech who handles the payroll system, veterans assistance services, a fleet mechanic and so on. As supervisors Colfax and Smith steadfastly resist whacking their own compensation in solidarity and the County continues to pay bloated administrative salaries which, if cut a mere ten percent would go far to balancing the budget.

All the cuts were approved without discussion. The Sheriff’s Department and Management, however, went untouched, as did the Executive Office and clerk of the board, Auditor, Treasurer, County Counsel or Human Resources (aka Personnel), Juvenile Hall and the Public Defender’s office, because, CEO Angelo said, they had already taken “severe reductions,” and more cuts “could take service below mandated requirements.”

But the Sheriff’s budget reprieve was short lived.

The Board also gave CEO Angelo authority to pro­ceed with another, even more severe, cut next month — including in law enforcement — as “Phase III” while revenues continue to decline. And this is after Ms. Angelo “borrows” the last of the County’s $3 million emergency reserve. This is euphemistically called “inter­nal borrowing,” but it’s not really borrowing because there’s no plan to pay it back. Ever. No more emergency reserve.

DA Meredith Lintott repeated her dire predictions about how the cuts will affect her office and limit the number of prosecutions as listed in her letter to the Board (published in last week’s letters to the editor).

Sheriff Allman pointed out that this Phase II round of layoffs was far from the end.

“I’m glad the Sheriff’s Office is not on the current cut list,” said Allman. “But the train is on the tracks absolutely, systematically, to take apart the Sheriff’s Office with the CEO’s recommended budget.” Allman claimed that “other people” were blaming the Sheriff’s Office for eating up too much of the available general fund dollars: “We are everybody's enemy now because of the budget. Other people say we're the cause of this. We are not the cause of this.”

Allman said the problem was that “the County has been very generous with its employees,” and that there’s nothing he can do about the pay rates or pension benefit contribution levels that come out of his budget. Allman also said that the County was asking for unrealistic salary reductions from some bargaining units, presuma­bly the deputy sheriffs and MCLEMA (Mendocino County Law Enforcement Management Association) — his own staff. “I beg you to ask your negotiators to ask for realistic cuts instead of out-of-the-ordinary cuts in the area of 25-30%. Those cuts will not happen. All that will cause is the County in court with the bargaining units, spending money on attorneys instead of on County operations.”

Allman, incidentally, has whacked his own pay nearly 20% overall.

A confusing and ultimately unsatisfying exchange between Allman and Angelo over what Allman wants, and what Angelo is proposing ensued, as if the Sheriff were being totally unreasonable. Allman insisted that all he wants is to retain the 154 employees he’s down to now, half of which are mandated jail staff. Ms. Angelo says that stance puts the Sheriff more than $700k over budget for the next fiscal year. Perhaps as much as $2.6 million over, depending on what baseline is used.

Allman said if he is forced to live with less he’d have to cut patrol, starting with 24 hour coverage in the Ukiah Valley, then the resident deputies in perennially under-patrolled, crime-ridden Covelo, the South Coast, Lay­tonville and Anderson Valley, plus the K-9 units and the Sheriff’s contribution to the Major Crimes Task Force and the Marijuana Eradication Team.

“This calendar year we've had raises to unions that the unions have contacted the CEO’s office to say, we'd like to talk about foregoing the raise in a few weeks and the negotiator has not met with them to forego the raise,” complained Allman. “So the raises keep happening and the costs go up and the titanic is sinking.”

Angelo disputed that County negotiators are not meet­ing with bargaining unit reps, but County Employ­ees rep Jackie Carvallo jumped up to agree with Allman that she's also having trouble setting up meetings with the County negotiators.

Board chair Carre Brown agreed with Pinches that there’s just no money.

“We have to make some choices,” said Brown. “Do we just take the route of bankruptcy? We're looking at closing whole departments.”

After describing his efforts to apply for grants but then having them undermined by staff cuts so that they can’t be carried out, and lack of support from the Board, a frustrated Allman commented, “Sometimes I feel like I'm in a ship rowing by myself trying to get money for this county.”

During DA Lintott’s presentation Supervisor Kendall Smith repeated her call that law enforcement get together and propose a consolidated budget that all criminal jus­tice departments agree on.

Lintott said that couldn’t be done.

“We're adversaries,” said Lintott. “It's your job to deal with this, not mine. We don't want the other departments cut. But there's a reason for what we ask for. You have to decide. Public safety is the top priority according to State law. We can't stop prosecutions. We have outsiders coming in causing crime. You don't just find a high level prosecutor for one case with no benefits to hire from the streets.”

We wonder about that. Any attorney ought to be able to bring a prosecution. We have a whole office of law­yers in the DA's office who can't competently prosecute?

The Board of Supervisors has a “criminal justice com­mittee,” which you’d think would deal with issues across the criminal justice system, but since the com­mittee was formed several years ago, all it's done is talk about marijuana, an insoluble local problem short of decriminalization. The committee produced the laugha­bly impractical County Code 9.31, Marijuana Regula­tion. The committee has never invited law enforcement and the judges to discuss budget difficulties.

Ted Stevens, a Santa Rosa-based financial consultant who lives in Yorkville, and John Dickerson (www.yourpublicmoney.com, of Ukiah) repeated their calls for honest pension fund accounting. Stevens pointed out that the County’s reported return on invest­ment was calculated before money was diverted into paying for retiree healthcare (which has now been dis­continued, forcing non-Medicare-eligible retirees to pay very high premiums or go without), making the County’s true rate of return much worse than it was reported to be. Stevens said that because of this miscalculation, the County’s pension contribution was too low, placing it in jeopardy.

Dickerson went even further. He said that the Retire­ment Board was planning to use an accounting trick to make up for the shortfall — something the retirement board calls “actuarial value of unrecorded earnings.”

“I believe this is a claim against future excess earn­ings,” said Dickerson, “if and when they occur, uncertain both in time and amount. If I'm right, there's a $9.5 mil­lion phantom asset on the retirement board's financial statements. It isn't real. Am I wrong? It appears that many laws have been broken producing tens of millions worth of damages. If you don't start asking hard ques­tions and demanding answers, at some point people are going to be asking you those hard questions and you won't have the legal right to ignore them.”

Supervisor John ‘Last Word’ McCowen felt com­pelled to respond with a typically pompous dismissal of the critics’ remarks: “What we've heard is a very sim­plistic summation of a very complicated topic. Most of the facts are pretty well known at this point of what hap­pened with the retirement system. What I have not yet heard anyone say is what is the simple fix to it. The stark reality is we have dug ourselves a very deep hole and in that regard we're not that different from other retirement systems across the length and breadth of the United States. Nobody is ignoring the severity of the situation. Coming up with a solution is not as simple as some peo­ple would have you believe.”

What Stevens and Dickerson are asking for, though, is not a “simple fix,” but honest accounting. Nobody can come up with proposals to address McCowen’s “simple fix” if the County’s jiggering the numbers. Stevens and Dickerson are right to demand accurate and realistic projections before any proposals are drafted. And where was McCowen when Pinches tried to get the two-tier pension system onto the Board’s near-term agenda?

Anderson Valley Animal Rescue honcho Cheryl Schrader pointed out that the County can probably do without some animal control officers.

“You can cut animal control officers,” said Schrader. “I know it’s a sacred cow. But they are spending time catching feral cats and taking them to the shelter. We could do this. We spayed 1200 cats last year, kept them and re-homed them. Plus many pet cats were spayed and neutered. If the animal control officers have time to spend tracking cats, that budget can be cut. I was extremely upset when down in the Crestview area [south of Ukiah near the Airport] the other day there were two county traps put there by officers. There was one AV Rescue trap. The AV Rescue trap had a cat in it. Officer Torson was there. We had a volunteer from SNAP [a spay-neuter organization] there. Officer Torson was so upset that he let that cat out of that trap. He could have taken that cat, had it spayed or neutered so it wouldn't be reproducing even more cats and either returned it to where it was with the permission of the landowner or gotten it a new home. I think you can look at these offi­cers. They seem to have time to be doing jobs that no other county is doing. And no other city in the State of California pays officers to trap feral cats. It is absolutely ridiculous to be spending money on this when 1. We will do it, and 2. You have other areas in the budget like car­ing for old people and people that are in wheelchairs.”

The Board of course ignored Schrader, voting 4-1 (McCowen dissenting) to approve CEO Angelo's budget recommendations calling for about ten immediate lay­offs, seven permanent vacancies, an additional 10% across the board cut and closure of the Fort Bragg animal shelter.

Allman said based on Angelo’s recommendation his department will still be short about $3.6 million, the equivalent of 32 deputies.

To balance next year’s budget — even after all the pre­vious cuts that were supposed to bring down the defi­cit and assuming some optimistic revenue levels and after the $3 million of internal “borrowing” — the Board still has to close the remaining (estimated) $4.8 million deficit.

Even the Titanic had a captain. The SS Mendocino has no one at the wheel and all the windows are closed. Sheriff Allman was wrong. Two people are paddling the lifeboat — him and Pinches, but maybe not in the same direction. ¥¥

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