We were skeptical that Mendocino County’s freshly appointed Retirement Administrator Richard White needed a highly paid assistant given Mendo’s sorry fiscal state the day it was put on the Supes’ agenda for last Tuesday.
White, a retired Sheriff’s Sergeant from Orange County said he had to have a $93k (including full benefits) financial investment advisor to “prepare and maintain reports such as annual financial statements, the annual Comprehensive Annual Financial Report (CAFR), Popular Annual Financial Report (PAFR), and annual State Controller’s Office report; coordinate with the independent financial auditor; monitor investments; assist the Retirement Administrator with development of financial and accounting policies and procedures; etc.”
The request appeared on last Tuesday’s Board of Supervisors Consent Calendar as if it was so routine that there was no need to even discuss it.
Supervisor John Pinches, however, pulled the item for individual consideration and a vote.
“I have a real problem with this,” explained Pinches. “I'm not going to get into the issue of whether the retirement system justified this position. Although in the documentation I have for the retirement system, they presently have something like 33 different consulting firms and whatnot directly or indirectly. So to add another position— These are tough times, especially in the retirement system. I just can't believe— The retirement system is a three-legged stool: it’s investment income, the employee contribution and the employer contribution. Right now with the investments at an all-time low, probably, the biggest portion of the costs is the burden of the County. The County's having a hard time meeting its contribution obligations and we have to meet that contribution rate. I just don't think this is the time to be spending more on the administration side of the retirement system. You look at the job description here; it's basically sharing work for other people who are already in the retirement system so I have to oppose this. The return on the investment in the retirement system is at an all-time low and the projections of investment returns look like it's going to be even lower than what it is. I just cannot go for this at this time.”
Supervisor Carre Brown said if Pinches hadn’t pulled it, she would have. “I was taken aback. But I wonder if Supervisor Smith, who represents us on the retirement board, has comment that might change my mind.”
Supervisors Kendall Smith and Dan Hamburg think White needs an assistant.
“First of all, investments are not an all-time low, that is absolutely not the case if you've been following the stock market, especially the increases in the last 18 months, it's been significant increases actually in the investment portfolio. (Investing retirement money in the stock market is like taking it to Vegas and putting it half down on the black. If Smith and Hamburg were any kind of liberals, much of the money could be invested in Mendocino County to create work and steady returns right here.)
But that whole issue aside, this is a management question. This has been very carefully vetted through the retirement staff beginning with [former retirement administrator] Mr. Andersen and now with the new tenure of Mr. White and I think he can do a good job of letting you know why this specific position is needed to do the internal management, so I think he can cover that very well but it has been very carefully reviewed, it's been discussed at the retirement board level, it really is a management function in getting the appropriate position to do the appropriate internal work and so supervisor, the question about investment advisors is really another issue but this actually is trying to grow the expertise of the management capabilities in an internal fashion within the organization so that's why the retirement board is in support of this. It's been carefully reviewed as to the appropriateness of the classification, and I think it would be good to hear from Mr. White.”
White, of course, was ready with carefully prepared remarks.
“I appreciate the opportunity to discuss the financial investment officer position with you this morning. I would like to point out to Supervisor Pinches a clarification that MCERA does not have 33 consultants, we have investment managers. There may be some confusion about what their role is. We do have a number of managers that are institutional money managers that manage the funds, trust fund assets for MCERA. There are a number of those. We only have a limited number of consultants, an actuarial consultant, an investment consultant, things like that.”
Pinches: “Let me stop you right there.”
Board Chair John McCowen: “Well, if you have a question.”
Pinches: “Yes. I do have a question.”
McCowen: “Okay.”
Pinches: “What's the difference between a consultant and a manager?”
White: “Well, I would say the consultant is giving us advice, giving the board of retirement advice on how to make decisions. The investment managers are charged with actually executing a particular strategy inside an investment asset allocation strategy so they are actually managing money making decisions and reporting back to the board on what their performance is. The consultant is the one who's taking that performance and reporting out to the board, whether or not the manager is qualified to be retained, whether a new manager should be hired and whether there are changes, say, in the asset allocation. So there are some differences in that. But they are as you point out overall hired by the board of retirement to do different things within the system.”
Pinches: “You agree that there's 33 of them?”
White: “Actually, there's probably a little bit more of the investment managers than 33. Yes, I would agree with that.”
Pinches: “There are more than 33.”
White then launched into a Smithian-like monologue heavy on acronyms and jargon mystifying to the general public and references to a debatable grand jury recommendation: “The responsibilities of this position are primarily accounting functions that are unique to MCERA. The position is mission-critical for MCERA. How critical was described by the Mendocino County civil grand jury in their report of April 18, 2012 which was titled MCERA Evaluation: Time to take the next step…”
And so on.
Sergeant White was using what we used to call “boring the boss into submission” back in my corporate days. Frequently, if you just blather long enough with enough bureaucratic bullshit, bosses will give you what you want just to shut you up.
When White finally wound down, Pinches said, “You spoke of the position being part time out of the Auditor's office for 20 hours a week not being available when the MCERA's auditors came in. Don't you think that's more of a management issue of scheduling rather than a budgetary issue? Couldn't that person, 20 hours a week have been scheduled when the auditor was here and not have those days off or something? I don't see that as a budgetary issue, I see that as strictly a management issue.”
White tried again: “The part-time accountant is here 20 hours per month at this stage. Not 20 hours per week. The part-time accountant who is an employee of the county made previous arrangements to be on vacation which the employee is entitled to do. As the administrator of the system I do not have control over the employee's vacation schedule and I am unable to coordinate the part-time employee's schedule with the needs of the external auditors. The schedule of the external auditor was only recently determined. It had to fit into some of their obligations and their schedule as well. As a full-time employee that would be something that would be managed, I agree with you, would be managed and supervised in a fashion as a full-time employee when they work at MCERA. In this case I have access to that accountant for 20 hours per month. So it was not possible at this point.”
Pinches: “Is it going from 20 hours a month to a full-time employee? That's a pretty big step in the workload, right?”
White, trying to contain his irritation: “For the previous year, Supervisor Pinches, you may be aware that the MCERA board of retirement hired this part-time employee for 20 hours per week, which was under an MOU for one year. It ran last fiscal year—”
Pinches: “That was Tim Knudsen, right?”
White: “No sir, that was Randy Goodman with the Assessor's office. It ran 20 hours per week from July of 2011 to June of 2012. In July of 2012 the position was amended to a part-time position, 20 hours per month, and that expires in September 2012.”
Pinches: “I don't really believe as in all areas of government right now that this is about justification. I know that the County of Mendocino could probably justify another 200 positions. I'm sure Howard [DeShield, Transportation Director] in his department could justify another 50 employees and keep them busy. But the problem is there is no money there. And the retirement system is facing the same dilemma. Maybe the book value of the investments hasn't dropped, but the investment returns— I'll stand by my comments that since the time that the retirement system was formed, the returns are at an all-time low. And the projections are that they will go to even lower levels. We have to face the reality. This is not the time to be adding administrative costs. This is a time to be curbing administrative costs. So I stick with my position.”
McCowen: “I agree with Supervisor Pinches that it is not an issue of justification. I think Mr. White clearly made the case for this position being justified. However, and Mr. White also cited a report by the grand jury. I frankly don't agree with every finding that the grand jury makes and I don't take every finding at face value. But I think that same grand jury report highlighted that there has been a somewhat dramatic increase in retirement system staffing costs over the last several years…”
Supervisor Dan Hamburg (to Smith): “Was there any opposition on the retirement board for this position?”
Smith: “I don't believe so. This was very carefully vetted. We had a quite a bit of internal discussion...."
Hamburg: “Was this item unanimous?”
Smith: “I believe it was.”
McCowen: “However, I believe it's also true that this didn't come to the board as a stand alone item. It was part of a larger budget discussion.”
Smith: “That's true. I think that's correct. I think it would be good to have Mr. White comment again on some of the follow-up discussion that the board has been having.”
White went into robocrat mode, repeating his pitch for help to do the work he's being paid mightily to do. He also mistakenly referred to Mendocino County as Orange County, his previous employer and a county that went famously bankrupt before everyone began going bankrupt.
Supervisor Smith took well over 600 words to say that White should get whatever help he asks for.
Hamburg, a master of passive-aggressive manipulations characteristic of Mendolib, remarked, “I really respect the comments made by all the board members on this. I certainly share the concerns that Supervisor Pinches raised about the overall situation of the retirement fund and the concerns about where we are with investments going forward and we all remember that the retirement board lowered their expectations on return of investment by a quarter of a point this year down to about 7.75 number from 8% and I think that's indicative of where the overall retirement system is going and we are all very familiar with how this is one of the major elements of the county budget that is kind of driving us toward the cliff, so I definitely share those concerns. I share the Chair's concerns which seem to be that we will be sending a message that this is a time when we can afford to expand budgets in various departments and that that is clearly not where were going. But I do intend to vote in favor of this motion and in terms of sending a message, I think we would actually be sending the wrong message in not approving this and I think that message would be that we don't have full trust in MCERA, that we don't really believe that they know what's best for them. They are managing a $300-million-plus fund and they're talking about a relatively small expenditure of money for a position that I think all of us know is needed. I also think we would be sending the wrong message to Rich White who has just come on to be our retirement administrator and is obviously very strongly urging the board to follow the advice of the retirement board and approve this position, so I will be voting, I don't know if I'll be voting for the motion or against the motion, but I do support the recommended action.”
Translation: Give this guy the money or we'll look bad.
Pinches: “There is no motion.”
Hamburg: “I understand that, that's why I said it the way I did.”
Pinches: “Mr. White talked a lot about the accounting function of this position. But if you read the job summary of this position, it says that it recommends cash positions and investment strategies. I don't know if you put that in the category of the consultants or the money managers, but it just seems like that adds on to what he said was more than 33. I think that the retirement system hasn't done a good job of controlling their administrative costs. For example, when there was County space available the board elected to go out and buy their own building. That took over $300,000 out of money that could have gone toward investments. That decreases the amount that the investments make and whenever the investments go down in the retirement system the bill gets larger that comes to the County for its retirement contribution. The County's retirement projections in the future are that the cost, within three years may be in excess of $5 million more! I don't know where this county is going to come up with that kind of increase. That will probably devastate our Sheriff's department. So it's getting really serious. There has to be a real serious effort to control costs! Maybe that means that the people who work for the system or in the system have to work harder which we have asked our more than 1000 or so employees in this County to do. That's just the way it is. But administrative costs — every dollar you put in administrative costs is a dollar you don't have to put in the investment side so that keeps it down and every branch of government, including the retirement system, has to be controlled…”
Amen, bro.
It's revealing that Pinches would even have to make this argument. Smith and Hamburg are simply irresponsible much of the time, especially on fiscal matters.
Pinches continued: “I am not here arguing about the justification of this position. I'm sure they can probably keep two accountants busy in the retirement system doing graphs and studies and making investment scenarios [waves his hand] and things like that. But it's about looking at the future and what's going to happen and we have to somehow control these costs.”
Hamburg: “I move the recommended motion” [to approve the new position].
Smith: “Second.”
McCowen: “Supervisor Brown, I'm curious if you have heard anything—”
Pinches: “Mr. Chair, we have a motion and a second. You should act on the motion.”
McCowen: “If the motion were actually going to carry then I would recommend that if nothing else we stipulate that hiring be deferred until we have implemented a new retirement tier which I believe we may shortly be in a position to do.”
Hamburg: “I think I would have to consider that an unfriendly amendment.” [Laughs.]
Brown: [Laughs.]
Hamburg: “That really isn't the direction that I'm moving.”
McCowen: “All right. With that we have a motion on the floor.”
The motion failed with Brown, who apparently wasn’t swayed by White’s roboblather, McCowen and Pinches voting for fiscal sanity.
The next day White announced that he would be asking his captive retirement board to authorize hiring a contract-consulting accountant, and that he had directed MCERA staff to work with the Mendocino County Counsel's Office and County CEO Carmel Angelo to “resolve the matter.” Since such contracts do not require Board of Supervisors approval (only personnel changes do), White may end up costing the County more than the $93k he wanted for his assistant.
This guy just got here and he's already outta control.
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