Secret Sheriff Union Negotiations Endanger Orange County’s Financial Future

The Orange County Board of Supervisors has tentatively approved a transparency ordinance, known as COIN (for Civic Openness In Negotiations) that would require negotiations with government employee unions to be open to the public. Boy, do they need it.

The current negotiations between the sheriffs’ union and the Orange County Board of Supervisors are a perfect example of why COIN is needed. On Friday, after two years of secret negotiations with the Sheriffs’ union, the proposed terms of the contract being offered by the union were revealed to the public for the first time. And now the Board proposes to take a final vote this Tuesday!

That’s right, fellow taxpayers. We get one business day to review the complex business deal that will bind our County for years to come, and then our elected officials will vote.

This not nearly enough time for the taxpayers, who are going to be on the hook for these salaries and pensions, to understand the costs of what is being offered or fully weigh in. Which is, of course, the point of keeping the details secret until the last minute. Secret negotiations, followed by sudden and final votes, is how business has always been done in Orange County and throughout California’s cities and counties. So we should not be surprised that our County again faces grave financial challenges.

The unions do not want those of us who pay the bill to have the time to calculate how much this new contract will add to the current average full time compensation, including benefits, of $186,682 per year for sworn sheriffs, compared to the average Orange County household income, with two wage earners in many households, of $75,566 (ref. U.S. Census).

And the last thing the unions want the public to fully digest is how this deal may affect Orange County’s unfunded pension liability. The officially recognized amount of this debt – that must be paid by taxpayers – is over $5 billion dollars, but it grows to almost $8 billion if you assume a more reasonable 6.2% return on investments rather than the highly optimistic 7.25%. It might have been an impediment to their negotiations, after all, if more people understood how much needs to be paid in order to eventually eliminate this debt. To pay it off in twenty years requires annual payments estimated between $500 million and $800 million, which equates to a $500 to $800 per year payment for each of Orange County’s roughly 1.0 million households.

Pension costs constitute a mortal threat to Orange County’s financial health. The county has already been bankrupt once because of a lack of transparency regarding its finances. The public should have more than a long weekend and contract bullet points to consider so that everyone knows how much our children and grandchildren are going to have to pay to fund this contract.

Here are a few things we know about this proposal thanks to an email from Supervisor Moorlach sent on Friday:

“It adds two new steps to the salary schedule, a thirteenth and a fourteenth. This creates two problems. The first is that it benefits all of those who are at the top of their pay scale (step 12), which represents some 77 percent of the workforce in this union. The second is that the pay increases to these impacted employees would be effective immediately, which is a pay raise, but not implemented until the following year.

The retiree medical strategy for AOCDS [Association of Orange County Deputy Sheriffs] is different than that of the other bargaining units. The County’s assumption of the employees’ portion, the Annual Required Contribution (ARC), assumes that this annual commitment of 3.6 percent will remain flat. That is not the case, as it will most likely continue to increase over time, based on actuarial studies. By the County assuming 2 percent of the cost (more than half), another pay raise, there is a blurring effect that, in future negotiations, could have the County picking up all of the costs. This may subject the taxpayers to an ever-increasing cost that this Board may initiate in perpetuity for subsequent Boards.

Now the costs of the “3% @ 50” pension enhancement have come home to roost and it must be addressed. Consequently, all employees should at least pick up the employee portion that the employer had previously, and generously, subsidized. In 2001, AOCDS determined that a pension increase, retroactive to the date of hire, was more important than salaries. Therefore, dealing with this growing fiscal tumor will require an impact on wages. Every other bargaining unit has stepped up to the plate. This proposal provides an almost full offset for this maneuver, a point that may not settle well with the other bargaining units in future deliberations.”

And it is not just private citizens who should be allowed to digest the agreement. The county only has a limited amount of money, so what is negotiated with the sheriffs union will impact other county employees and vital services. Supervisor Moorlach said it best “This is not an equitable proposal. Someone has to sacrifice to pay the Sheriff Department’s employees, and it would be the employees of all the other County departments.”

Moorlach also made this observation: “The contract cities will have to budget for this proposal. I hope that they have an opportunity to weigh in and provide their counsel before the Board of Supervisors votes on this matter.”

The reality, of course, is that the cities, county employees, and the public will not have an adequate opportunity to understand this proposal and have their voices heard. The vote is tomorrow. The consequences will last for decades.

*   *   *

Mark Bucher is the President of the California Policy Center.

4 replies
  1. Tom Dominguez - AOCDS President says:

    These are the facts:

    We have spent the last two years trying to negotiate a contract with the very real threat of our members losing thousands of dollars a year out of their paychecks hanging over our heads. While other Orange County law enforcement agencies have agreed to positive contracts that include significant pay increases, our Board of Supervisors demanded from the very beginning that every deputy sheriff and district attorney investigator once again pay 100 percent of their employee retirement contribution. Our members have accepted that fact.

    Unfortunately, picking up 100 percent retirement contribution means our members will be forced to pay between 14 and 20 percent of their salary toward their pension by next July – substantially more than any other police officer in Orange County.

    This contract was negotiated under the same rules that every other county bargaining unit negotiated its contracts. The proposed contract in its entirety was available online on the County’s website for the required seven day public review period, not on Friday as Mr. Bucher inaccurately states. The public review period is the same for every proposed labor agreement.

    A single vote by the board of the Orange County Employees Retirement System – led by four of its members who are appointed by the Board of Supervisors – increased the unfunded liability by nearly a billion dollars which once again unnecessarily and artificially drove up total compensation – the costs taxpayers must pay for county employees.

    According to the most recent OCERS Comprehensive Annual Financial Report, the system’s annualized return over the last 20 years has been 8.22%, well exceeding the assumed earnings rate over the same period. It is ludicrous to exaggerate the unfunded liability based on an artificially low 6.2% assumption rate when the system’s historical performance has proven otherwise.

    There are 40,000 active, deferred and retired members of the OCERS system. It is misleading to infer the 1,950 members who we represent are responsible for OCERS’ entire unfunded liability.
    Orange County taxpayers are forced to pay nearly double what taxpayers in Los Angeles County pay toward their county employee retirements because of the decisions the OCERS board majority has made to needlessly drive up costs.

    Your deputy sheriffs and district attorney investigators have not had a pay raise or a cost of living adjustment since 2008. Two lower salary steps were adopted for incoming deputy sheriffs as a cost savings to the County.

    The Board of Supervisors has been paying all the cost of retiree medical for every county employee except the deputies, deputy district attorney investigators and law enforcement managers for years. Even after this contract, our law enforcement officers will still be the only county employees who will be paying for retiree medical.

    Your deputy sheriffs and district attorney investigators paid the employee share of their retirement costs from this association’s first contract in 1979 until 2001 when the County proposed to pick up the employee share because it was more cost effective for the County.

    Your deputy sheriffs and district attorney investigators were the last in Orange County law enforcement to negotiate the 3 @50 retirement formula, the first to once again pay into their pensions after adopting the new formula, and the first to adopt a lower tier retirement formula. This contract forces every employee to pay their employee share of their retirement costs, will help preserve our ability to recruit and retain quality law enforcement officers and will continue to provide quality law enforcement to our residents all at a minimum cost to taxpayers.

  2. Mark Bucher says:

    Tom –

    What if a group of taxpayers and the Supervisors spent two years coming up with what they believed was a fair contract with the sheriffs, and then announced it and gave you 3, or even 7, days to review it before they voted on it. Would you consider that enough time for you to evaluate it?

    Your contention is essentially that this is a fair deal. All the more reason then to let the public evaluate it for 30 days, or, better yet, adopt COIN so that all offers and counter offers are public, along with the cost implications of the contract, so that we can understand the give and take that goes on in any negotiation.

    You talk about cost savings, sheriffs paying for their pensions, new salary steps, etc. The negotiations are obviously very complicated, which underscores the need for COIN transparency. Agreements like this have many facets which the public has a right to understand and weigh in on, something that is not possible when it is negotiated in secret.

    For example: How much will the current average sheriff’s salary and benefits of $186,000 go up or down under this new contract? What is the starting pay? What is the maximum per sheriff? How much will this contract cost the county over the next year, 5 years, 10 years? How much will the county’s unfunded liability for pensions and health care increase (or decrease) as a result of this contract?

  3. John C White retired says:

    Salary, Retirement and life time medical benefits are a wonderful security blanket. However it allows us to become lazy. Somewhere along the line each of us has to bear part of the burden for own sake. Mother county will not do it for you. I agree our job bears risk and we deserve all the benefits we can get, but within prudent guidelines.

    In 1979 I retired with multiple comp injuries. At my retirement hearing one of the Board Members thought I was to young to retire and passed me over. At my next hearing I was retired but, without medical benefits. Over the last 35 years my medical insurance alone has cost me over $200,000.

    Fortunately for me I was able to cover my family with private insurance and good retirement planning. My Orange County Pension of $659.00 a month wasn’t quite enough to live on. So, the two sedentary jobs that I qualified for made ends meet.

    As a founding member of AOCDS, which i am no longer a member, apparently due to retirement. I will tell you that you should support the Association and it’s endeavors, but most of all protect yourself and your family with additional Life Insurance, Long Term Care and IRA planning. This will get you thru tough times and it won’t break the bank. Good Luck!

  4. Ed Ring says:

    John – According to Transparent California you worked 11 years for Orange County, retired in 1979, and collected a pension of $10,554 last year.

    You retired before benefits were enhanced in 2001.

    If you retired today, with 11 years of service, with a final pensionable salary of at least $70,000, you would collect a pension of $23,100, more than twice what you’re getting. Pension benefit enhancements, applied retroactively, are what have gotten the pension funds into financial trouble. And either way, that is a pretty good retirement benefit for 11 years of work.

    The average Social Security benefit for people who work 40 years or more is only $15,000, and self-employed people are required to turn over 12.4% of their total career earnings to the government in return for this amount of retirement.

    http://transparentcalifornia.com/pensions/2013/ocers-orange-county-employees-retirement-system/john-white/

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