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Helping Citizens Understand Mendocino County's Debt and Finances
 

Supplemental Information

Reports, videos, audio, key data sources, No on C Campaign (Pension Reform Before Taxes), etc. You can get a free copy of Acrobat Reader by clicking here. For audio and video files you will need appropriate programs to play them.

Click the section you want to go to under "Contents Below".

Contents Below


California "Pension Reform Law"

New Pension Reporting Rules

Moody's Adjustments of
Government Pension Finances

Videos

Other Reports

City of San Diego Pension Crisis

Grand Jury Reports

IRS Voluntary Correction Program

Peer Review

No on Measure C Campaign

Data Sources

 

California's Public Employee Pension Reform Act (PEPRA)

PEPRA was signed into law in September 2012. Although it does some good things, compared to the scale of the problem it's trivial.

One Page Abstract: (10/12/12) (138KB)

Eight Page Summary: (10/12/12) (670KB)

Full Report: (10/12/12) (1.54MB)


Moody's Investor Services - Adjustments to Pension Finances

Moody's is one of the nation's major credit rating agencies. They think government financial reports don't "tell the truth" about the great risk of unfunded pension debt. They are going to make major adjustments in setting ratings.

Moody's Investor Service's Proposed Changes in Analyzing Government Pension Data: (1/11/13 (939KB)


Memos and Reports

YourPublicMoney.Com produces memos and larger reports from time to time about the issues addressed in this website.

County Comparisons: California County comparative debt measures, rank ordering, and graphs based on the Annual Counties Report from the State Controllers Office - pdf files

How Pension Funds Work : (8/4/10) Actuaries plan and analyze pension funds. You can't know how our County got this deep in debt or what needs to be done about it if you don't understand what they do. This is my best effort to explain the basics as simply as I can. For concerned citizens who want to and officials who need to understand. Be prepared to spend a few hours. It's important. - 35 page pdf file (658KB)

Mendocino County's Long Term Debt: (8/31/11) This is the third major revision of my comprehensive analysis of our County's debt. 26 page report with a 3 page summary - pdf file (1.17 MB)

The "CSAC Affair": (5/23/11) County officials didn't attempt to refute any of my findings until they wanted voters to approve a sales tax increase. They asked the California State Association of Counties (CSAC) if my finding that our County is the most indebted per capita in California is correct. The first report from CSAC said I was wrong - real wrong. Supervisors started waving the report around. I challenged the CSAC analysis on his data. A week later he admitted he "couldn't replicate his results" - and it look like I was correct (with a qualification or two). After that - not one peep from County Supervisors. - pdf file (204KB).

BOS Debt Actions: (UPDATED - 4/26/11) A Sampling of Board of Supervisors actions regarding debt since 1996 - 15 years of deeply flawed financial management of retiree benefits - pdf file (210KB).

Two Huge Financial Threats - County of Mendocino - Next Five Years: (4/5/11) A two page summary of the report below.pdf file (164KB)

Two Huge Financial Threats - County of Mendocino - Next Five Years: (4/5/11) Two major financial threats are likely to push Mendocino County into insolvency within the next five years - more than doubling of debt payments within 3 to 4 years and a loss of ability to borrow short term operating loans.19 page report with 2 page summary - pdf file (902KB)

Bad News Just Got Much Worse - Pension Fund Payments to Double: (2/28/11) In January 2011 Mendocino County's Pension Fund's Actuary - Buck Consultants - admitted they made very serious errors in their analysis of the Pension Fund over many years. As a result they recommend the County's payments to the Pension Fund increase from $9 million to $13 million. This was the same error discovered 2 years ago in Stanislaus County. One year ago Supervisor Smith strongly assured the public Buck hadn't made the same mistake here - but it did.9 page pdf file (496KB)

Mendocino County's Financial Time Bombs - In Place and Lit: (8/5/10) A month ago I saw what I'm afraid is the specific path that will lead Mendocino County to financial disaster. - 6 page pdf file (467KB)

Unfunded Pension Payment Schedules (Amortization) : (6/21/10) The County of Mendocino was required to begin to make Unfunded Pension Deficit payments in fiscal year 2010-11 on top of its normal yearly contributions. This paper describes how payment schedules developed by the County's Retirement Association are deeply flawed, and presents corrected schedules. The method being used by the County to determine annual payments doesn't even pay interest expense for the first 12 years and therefore increases the County's debt.- pdf file (401KB)

Excerpts from First Mendocino County Debt Report dated 10/16/08 (NOTE - zip file link below): (2/4/10) The purpose of this excerpt from the original 45 page report is to show Mendocino County citizens the breadth, depth, and extent of this report that County officials have not made even one attempt to refute in the 16 months since it was published. - pdf file (915KB)

Excerpts from First Mendocino County Debt Report dated 10/16/08 (NOTE - zip version): (2/4/10) A "zip version" of the report above - should download in 1/3 less time, but you have to be able to "un-zip" the file. pdf file (656KB)

The 800 Pound Gorilla: (8/27/09) A 1 page summary of the paper below - pdf file (296KB)

The 800 Pound Gorilla: (8/27/09) 6 pages - The Market Value of the County's Pension Fund is about $113 million less than it needs to be to pay all the pensions it owes in the future. County officials are focusing on trying to reduce payments to the Fund over the next few years to help get through the current budget crisis. But they are ignoring the "800 Pound Gorilla". - This debt will grow 8% a year until it is eliminated. This is a very dangerous situation and there are no good solutions - pdf file (367KB)

Questions for 3/18/09 Meeting: (3/12/09) Memo for meeting arranged by 2 Supervisors with me and Retirement Association officers - questions, data, analysis. Retirement officers did not prepare for these questions and for the most part have made no attempt to answer them. pdf file (398KB)

Two Stories: (5/10/09) These narratives give a sense of how the County Board of Supervisors has approached issues relating to its debt including telling the people the truth - web page in new window.

Retiree Healthcare Debt Brief: (10/8/08) Analysis of Mendocino County's Retiree Healthcare debt-with AON consulting valuation attached - pdf file (519KB).



Grand Jury Reports

The Mendocino County Grand Jury has produced three reports regarding Mendocino County's unfunded pension debt and the Mendocino County Employees Retirement Association (MCERA) in the past decade.

2010 Grand Jury Report - Unfunded Liability - Our Children's Inheritance: (6/7/10) The most recent Grand Jury report. "MCERA neither reflect(s) realistic possibilities for financial growth, nor demonstrate(s) transparency in their reporting". " Mendocino Countyís short term thinking has resulted in the real possibility of financial disaster including bankruptcy". "Major cuts in personnel, salaries and services are necessary ...". "Several past GJ reports ... have been ignored ... Current criticism by community members cannot be easily ignored. The questions raised need to be answered." "Communications with the public must be transparent and accurate". "Basic assumptions of MCERA need to be examined". "The citizens of Mendocino County need to hear truth, not rhetoric.". pdf file (140KB)

2006 Grand Jury Report - Dollars and Sense: a Report on Retirement Funding: (6/1/06) pdf file (399KB)

2003 Grand Jury Report - The Mendocino County Employees Retirement Association: (6/30/03) pdf file (366KB)



Peer Review Group

Three financial professionals reviewed our analysis of Mendocino County's debt with a focus on the cause of most of that debt - unfunded retiree obligations. The group was organized at the end of 2009. In early February 2010 the Group published a letter in the Ukiah Daily Journal and provided the County Board of Supervisors with a more detailed report about their findings. Both are available below.

Video of 2 Peer Group Members "stirring up" County Supervisors: Financial Pros deliver bad news to the Board of Supes - some get excited (video - 24 minutes).

Letter to BOS and Citizens: This is the text of the article that was published in the Ukiah Daily Journal on 12/2/10. (pdf file - 92KB).

Report to Board of Supervisors: This is a more detailed report of Peer Group findings and recommendations that was provided to the Board of Supervisors. (pdf file - 37KB).



Data Sources

These are some of the more important sources of data and information we used in our analysis of Mendocino County's debt.

General List: A pdf file with many of the important data sources - pdf (321KB)

County of Mendocino Audit (Financial Statements) Reports: Available online for 2000 forward. Previous year audit reports available in the County Auditorís Office at 501 Low Gap Road, Ukiah.

County of Mendocino Final Budgets:Some online. Previous year budgets available in the County Auditorís Office or County Chief Executive Office at 501 Low Gap Road, Ukiah.

Mendocino County Employees Retirement Association Audits, Valuations: MCERA began putting these and other reports on line in 2009. Previous reports available at MCERA office, 625-B Kings Court, Ukiah

Counties Annual Reports: State Controllers Office website page listing all publications - choose the Counties link.

Public Retirement Systems Annual Report: State Controllers Office website page listing all publications - choose the Public Retirement link.

Actuarial Valuation - Retiree Healthcare: (8/21/08) First report County ever received about its Unfunded Retiree Healthcare debt - pdf file (323KB).

 

New Pension Finance Reporting Rules - Summer 2012

The Governmental Accounting Standards Board (GASB) adopted huge changes in how state and local governments must report pension finances were on June 25, 2012. The rules are known as "GASB Statement No. 68".

Public Pension Fund financial statements will change in 2013-14, and government financial statements will change in 2014-15.

The new rules will hit thousands of local and state governments in the US like a ton of bricks.

I developed a model that estimates what recent financial statements for the 21 California counties that have their own Pension Funds would have been had GASB 68 been in effect. I applied that model to show the impact on my home county - Mendocino.

Major Pension Financial Reporting Reform = Major Hit on Mendocino County: (8/8/12) The impact of the new rules on Mendocino County - 11 pages. pdf file (654 KB)

Very Short Description of My GASB 68 Predictor Model: (8/8/12) A short description of my model - 2 pages. pdf file (164 KB)

Summary Description of My GASB 68 Predictor Modely: (10/16/12) A somewhat longer description description, summary of a more complex paper not posted here at this time - 8 pages with 5 pages of quotes from GASB 68. pdf file (790 KB)

Video - New Pension Financial Reporting Rules: (8/23/11) My video explaining why GASB's reforms are so important in "non-technical" lingo - for Concerned Citizens. - Windows Media file (12 minutes)

"Official Comment Letter" to GASB on New Rules - : (9/27/11) GASB received hundreds of letters reviewing their proposed standards. This is my comment letter. It's a case study of Mendocino County. Would the new rules have helped? What do they miss? - 17 pages. pdf file (703 KB)



Videos

Click here for a list of video programs you need to view these videos.

These are best viewed on high-speed internet connections.

Some people can't pause the videos or rewind - most should be able to. If you have that problem, you may want to download the video. Windows users - right click- then "Save Target As" - give it a name and browse to the folder to which you want to save it.

Supervisors - "What's Wrong With our County Pension Fund?" 12/12/11: Supervisors each saying what they think is "wrong" with the County's Pension Fund and what "Pension Reform" means to them at the end of a joint session with the County's Retirement Board. (video - 16 minutes, 53 seconds)

"I Can't Have Trust in Retirement Association Reports" 12/12/11: First District Mendocino County Supervisor Carre Brown explains why she doesn't trust financial information about the County's Pension Fund. (video - 1 minute 50 seconds).

What are Mendocino County's Legal Options in Changing Pension Benefits? 12/12/11: Report from County Counsel and CEO to joint session of County Supervisors and Retirement Board about what the County's legal options and constraints are about changing pension benefits.

BOS Being Told of Buck Error in Stanislaus - Supervisor Smith's Denial - released 3/2/11: Snippet of me telling County Supervisors on 2/2/10 that an "Actuarial Audit" in Stanislaus County in December 2008 reported that their Pension Fund's Actuary - Buck Consultants - committed very substantial errors that will force that County's payments to its Pension Fund to significantly increase. As of the date of the release of this video Buck has been our County Pension Fund's Actuary for well over 10 years. The video shows Supervisor Kendall Smith flatly denying Buck made the same mistake here - which we found out one year later they did. (video - 3 minutes 46 seconds).

Bill Gates on Public Pensions - released 8/14/10 - "Gates interviewed at the July 2010 Aspen Ideas Festival - asked about if the US has a problem with unfunded state and local government pensions - Gates states "only fradulent accounting" allows governments to pretend they have balanced budgets. (video - 5 minutes).

Comments on Grand Jury Report on Retirement Association and Violations of Law - released 6/20/10: My comments to County Supervisors on 6/9/10 (the day after the County Grand Jury released its third report on our County's Retirement Association in the decade) focusing on very possible violations of law (video - 5 1/2 minutes).

Retirees at Board of Supervisors 4/2/10 - "We've Been Betrayed": Mendocino County Retirees tell Board of Supes how they feel about termination of County funding of retiree health benefits (video - 16 minutes).

First Do No Harm - 12/9/09: The video that exposed the "political fraud" of funding Retiree Healthcare with so-called "Pension Fund Excess Earnings". Since this video was released the County abrogated its previous commitment to pay for this benefit, and as of mid-2011 this benefit is no longer being paid by the Retirement Association. Our problem wasn't that retirees were getting healthcare benefits - it's the fact it was paid for by increasing the County's long-term debt. (a serious video - slightly over 50 minutes).

My Fundamental Criticism of "Pension Fund Excess Earnings" - released 10/15/09: I laid out my analysis of why the County and Retirement Association's use of so-called "Pension Fund Excess Earnings" is so deeply flawed for County Supervisors in their 9/9/09 meeting (2 1/2 minutes).

Board of Supervisors - 9/15/09 - Part A: Good discussion of changes needed in County Planning process (planning for the County, not the Building Department). You see frustration at the lack of County Executive leadership. 15 minutes.

Board of Supervisors - 9/15/09 - Part B: Supervisor Colfax gets very angry at another Supervisor - mostly uncut. 20 minutes

Board of Supervisors - 6/3/09: Working on fiscal year 2009-10 budget. Issue - layoffs in Sheriff's Department. You will see for yourself the desperate situation. - 8 minutes.


City of San Diego

A pension scandal blew up in the City of San Diego in 2003. It was the first big media story in what has today become a nationwide pension debt crisis. Many officials lost their jobs, some were prosecuted, and the City was hit with numerous penalties and judgments. Voters restructured the Retirement Board and kicked all the incumbents out.

The most penetrating analysis I've yet read about any local government pension crises is the "Kroll Report" about this City issued in 2006. The Executive Summary is an amazing document - if you are concerned about local and state government financial crises you should read it. There are issues specific to the City of San Diego - but its analysis of the City's systemic and government cultural problems is painfully relevant to thousands of local and state governments across the US.

Our Summary of the "Kroll Report" : (4/7/10) The Kroll Report is the most comprehensive analysis of a case of terrible mismanagement of the funding of local government retiree benefits. There are very interesting parallels with Mendocino County. - pdf file (194KB)

The Executive Summary from the "Kroll Report" - dated 8/8/06 : This is the Executive Summary of the Kroll Report. They summarize what went wrong and why, why it took so long to get to serious effective reform, and a list of powerful recommendations highly relevant to just about all local and state governments. - pdf file (260KB)



IRS Voluntary Correction Program

After voters threw the old City of San Diego Retirement Board out the new Board initiated whatís called a ďVoluntary Correction ProgramĒ (VCP) with the IRS. Under that program retirement systems identify violations of law and other requirements that could jeopardize the Pension Fundís tax advantages with the IRS, calculate the monetary damage thatís been done and if it is significant how the damage will be "fixed", and commit to make whatever changes in laws and ordinances and procedures are necessary to make sure they donít happen again.

The San Diego Pension Fund's first VCP filing identified 1 "failure" that could jeopardize its tax-advantaged status. Its last filing 2 and a half years later identified 14. Most were "dotting i's and crossing t's" - not all that big a deal. Two were very big deals - one of which is extremely relevant to Mendocino County - the use of (phony) "Excess Earnings" to pay retiree healthcare benefits that resulted in more and more long term County debt.

All 20 independent County Pension Funds in California organized under the "County Employee Retirement Law" (CERL) are going through this VCP process today (Spring 2012) and reports should begin to come out fairly soon. I expect some shocking disclosures.

Legal Analysis of Voluntary Correction Plan Settlement: (3/27/08) If you want to see the breadth of complexity of the San Diego VCP - this is for you. Outside counsel analysis of final agreement, the final agreement itself, and the comprehensive "Compliance Strategy Report" that guided the City Retirement Board through the process - pdf file (6.2 MB!!!)

Extract from Legal Analysis - the Final Agreement and Surplus Earnings-Healthcare: (3/27/08) An extract from the much bigger document above. This has the complete final VCP Agreement (11 pages) and some excerpts of the analysis regarding the use of "Surplus Earnings" to pay retiree healthcare - pdf file (490KB)

Pension Board OKs Adoption of IRS Plan: (12/22/07) An article in the San Diego Union Tribune describing the agreement - pdf file (115KB)

Remaining Balance in the Retiree Health Insurance Reserve - Letter from Mendoicno County Retirement Association to County: (12/22/07) This letter from Mendocino County's Pension Fund to the County describes why the Fund will not continue to pay retiree healthcare costs as a result of its participation in the VCP process. - pdf file (115KB)



No on C Campaign

The County of Mendocino put Measure C on the November 2010 ballot attempting to raise the county's sales tax one-half percent for 10 years. County officials said "Measure C will preserve vital public services during these difficult economic times". We demonstrated the money would be consumed by increasing unfunded pension payments within 3 years. Measure C lost by a 70% No v. 30% Yes vote.

This link opens a page that explains the campaign and its results - and provides examples of print and radio ads.

The Measure C Campaign

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