4/8/10:Officials of Mendocino County's Retirement Board have for the first time disclosed they directly diverted County payments intended for the Pension Fund to pay Retiree Healthcare.

County and Retirement officials have long maintained Retiree Health benefits were paid out of so-called Pension Fund "Excess Earnings". This recent disclosure is the first time the public has heard otherwise.

(See our video here to see First - Do No Harm to learn about our County's disastrous financing of retiree healthcare. Or take a look at this page for a quick explanation - scroll down the page.)

The Mendocino Retirement Board - the separate organization that controls retirement funds - met on 3/17 to discuss their "Excess Earnings" policy. One Trustee - Randy Goodman - demanded it.

Former Retirement Administrator and County Treasurer/Tax Collector Tim Knudsen explained how retiree healthcare has been paid.

He described three funding methods. The first two draw funds from Pension Fund "Excess Earnings".

But the third was a bombshell!

Knudsen said that in early 2004 -

We had no more Excess Earnings but we had health insurance we were paying for.

So - what did they do?

At least $6 million was taken directly out of the County's required yearly pension contributions.

The County only paid what the Actuary said it needed to pay the Pension Fund in those years. By diverting $6 million the Retirement Board directly increased the Pension Fund's deficit.

State law defines the order in which Retirement Boards must apply the County's contributions. An amount equal to what an Actuary determines is the County's required Pension contribution must be put into the Pension Fund before money can go to any other purpose. (Government Code 31587)

The Law also states that the Board of Supervisors must pay the full amount defined by the Actuary each year to the Pension Fund. (Government Code 31584)

According to the Pension Fund's Actuary, the County's contributions from 2004 through 2006 were only 63%, 47%, and 79% of what was required.

It appears that if the County's contributions had been applied to the Pension Fund the County would have been credited for paying all that was due.

4/7/10: YourPublicMoney.Com takes no position about what retiree benefits should be. We absolutely believe they should be properly funded, their true financial impact reported to the people, and should be in balance with the community's needs.

The most spectacular example I know of the result of violating these principles is the City of San Diego.

The City wound up with a $2 Billion unfunded pension debt. Public careers were ruined. A whole city was shocked at what happened and the damage that was done.

If any good came from this it's the best analysis of this kind of disaster - the "Kroll Report" - released in August 2006.

The Kroll Report made these summary statements about the failures that happened and the causes of those failures -

The evidence demonstrates not mere negligence, but deliberate disregard for the law, disregard for fiduciary responsibility, and disregard for the financial welfare of the City’s residents.

San Diego officials cultivated and accepted a culture of financial management and reporting premised upon non-transparency, obfuscation, and denial of fiscal reality.

To read our summary about what Kroll has to tell us, click here to go to our Supplemental Data page.

Or - click here to read the Executive Summary from the Kroll Report itself - an amazing document!

Editorial - There Is No Joy

4/2/10: About 650 Mendocino County retirees are about to have health benefits slashed. Many are elderly people who thought the County promised this benefit for the rest of their lives.

The County laid off 7 people and eliminated 18 vacant positions this week. The County Executive says they need to lay off another 25 soon - and 50 more in the next few months.

I have a soft-spot for the elderly. Whether or not they should have been "promised" this benefit, the fact is many believe they were.

And I hate to see people supporting families lose jobs.

I've been "ranting and raving" about the County's debt for years. Some have said these events make me happy. But this messenger takes no joy in seeing people lose their jobs and elderly lose their health insurance.

As the Kroll Report stated (see above)

What brought the (City of San Diego) to a crisis was a number of completely foreseeable financial challenges to a pension system debilitated by years of reckless and wrongful mismanagement..."

Put the responsibility for what is happening directly on the shoulders of those who are responsible.

And the citizens of Mendocino County should make sure this never happens in our name again.

First - Do No Harm
Nearly 700 Viewers Since December

4/8/10: Another 140 people or so watched First - Do No Harm since our last newsletter - that makes almost 700 since we released the video in early December.

This is the first video of a series that will examine Mendocino County's debt. It's an in depth investigation of the County's deeply flawed funding of its retiree healthcare benefit.

The video shows how the County's approach to funding retiree healthcare -

• Is a Major Contributor to Excessive County Debt
• Significantly Damaged the Pension Fund
• Has Led to Unavoidable Deep Cuts in This Benefit
• Hid the True Source of Funds From the Public
• Was a Hollow Commitment

Click here to see First - Do No Harm.