How Much Bad News About Our County's Finances Can You Stand?

3/2/11: My January newsletter was a brief review of how Mendocino County's unfunded pension created debt developed and where we're at today. In a "Good News - Bad News" section one of the "Bad News" items was ...

• We found out a year ago another County claims Mendocino's actuary cost them tens of millions. Our officials say it didn't happen here but have provided no proof. (An audit may shed light soon.)

We found out - and the news is very bad!

In January 2011 the Mendocino County Employee Retirement Association’s Actuary – Buck Consultants – admitted they had made a very significant mistake in its Actuarial Valuations of Mendocino County’s Pension Fund. As a result the County’s payments to the Fund will have to increase from $9 million this year to $13 million next year.

In February MCERA received an Actuarial Audit performed by EFI (another Actuary) on Buck’s Valuation for 2009. EFI found that "the actuarial assumptions used by Buck are seriously flawed". EFI identified several errors beyond those admitted by Buck the month before and state they believe the County’s payments to the Pension Fund need to increase by $8 million –nearly double.

MCERA is recommending the County’s payments to the Pension Fund increase from $9 million to $13 million next year. MCERA will probably fire Buck and its new Actuary will perform the Valuation as of 6/30/11. If that confirms EFI’s findings we can expect the County’s payments to the Fund to increase to about $17 million the following year.

This shows the impact on our County's payments to the Pension Fund:

Praise where praise is due. "Reformist Trustees" on the Retirement Board demanded this Actuarial Audit be produced. It isn't an accident Buck fessed up the month before the Audit was released.

The Stanislaus County Employees Retirement Association learned in December 2008 that Buck made exactly the same error re their Pension Fund as they made here in Mendocino County. There are many ways County and Retirement officials could have learned about this. In fact, it's clear they did.

I told two Mendocino County Supervisors about it in January 2010 – they had not heard of these problems before. One month later (2/2/10) I told the full County Board of Supervisors about Buck’s problems in Stanislaus. Supervisor Kendall Smith told the audience that "Mendocino County doesn’t have any flawed data relative to that earlier issue discovered in Stanislaus County". We now know Buck made precisely the same mistakes.

Click here or on the picture to see a video of me telling the Board of Supervisors about the problem in Stanislaus and Supervisor Smith's denial of the problem.

Over the past 2 years our County cut about 350 jobs to eliminate $8 million of budget deficits. (I think those are the right numbers.)

Where’s the County going to come up with another $8 million over the next two years? Barring a miracle it’s going to have to come from the same place – more staffing cuts.

How far can the County cut staff before whole functions disappear? I fear we’re going to find out.

I thought our County's debt payments were going to double in five years. Now because of these two "bombs" they'll double in two.

I thought we might have a year or so of relative quiet before we really started heading down. I hoped County officials might grasp the degree of change thats coming - and just maybe try to get out ahead of it and direct it.

This is my current "best effort" projection of our County's total payments to the Pension Fund and debt payments over the next 5 years.