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The Employers Council of Mendocino County released a report in early August about County debt. We wanted the public to have it before the County's Budget Hearings. Before release we met with a County official to discuss our analysis, but the meeting was too short. Several County officials object to some of the report and even more to how we made it public. They feel it is unduly inflammatory, simply wrong in some aspects, misleading the public, and creating an unproductive environment.
We'd prefer to sit down with County officials and go through everything carefully. But County Budget Hearings are right now. The Proposed Budget will probably be passed Monday 8/29. The County belongs to the citizens. We believe these issues are too important for the people to not know about them during the Budget Hearings. We're not trying to distort anything; we're telling it as we see it. If we are proven wrong we'll admit it and apologize.
We believe these are verifiable facts:
Our County today owes at least $132 million. We think that's 8 times more than 10 years ago. We'll pay $10 million this year in principal and interest. We'll pay a total of around $235 million over the next quarter century to pay off this debt. The County borrowed a combined net of $105 million in 1996 and 2002 because its pension fund didn't have enough money to pay pensions that had already been earned. County taxpayers will pay $190 million over a quarter of a century just to pay these Pension Bonds.
County staff increased 39% between 1997 and 2002, 10 times faster than our population. In 2000 the County's average salary and benefits were $43,800. This year it's over $70,000 ( NOTE: We were originally told by County budget officials that the County developed its Proposed Budget assuming a "status quo" staff level – no change. However, turns out that an additional 27 positions were added. That means the average salary and benefits are planned to be $68,608, not over $70,000.) Comparing all California counties from 1997 through 2002 by dividing numbers of staff and payroll by number of residents, we were 5th per capita in increasing staff and 4th in increasing payroll. In those years payroll went up 67%, and if the Proposed Budget is adopted it will be up 108% over 10 years.
For 30 years proportionally we've lost higher paying goods producing jobs in the community and gained lower paying service jobs. We lost 650 private sector jobs from 2000 through 2004; local governments added 1200.
These are some of our analysis and implications:
Pension Obligation Bonds are the biggest part of our debt. Pension funds all across the country are in trouble. It's very difficult and complicated to understand. But we believe the $105 million in Pension Bonds is evidence that the great growth in numbers and payroll of County staff was unaffordable. If it had been, why are we in debt? We believe it still is unaffordable, and could lead to more debt.
That $10 million in debt service this year could have provided services to working families, repaired our roads, supported our library, funded economic development, built a new jail. Instead, the money will go to banks and bond investors, and the people will pay it.
We believe by having to pay $190 million over a quarter of a century to pay Pension Bonds, we are forcing future generations to pay our expenses.
We believe the County should have helped defend and create good high paying jobs. That was the right thing for the people, and would have generated taxes to pay the County's expenses. Instead, the County nearly doubled payroll while jobs and income in the community was melting away. The result is that County taxpayers will now pay $190 million over a quarter of a century to pay Pension Bonds.
We have several recommendations; here are three.
First, in this situation, why is the Proposed Budget 9% higher than last year's Final Budget? Has the population grown 9%? If we have new discretionary revenue, pay down debt.
Second, implement a plan in the next budget to get us back to normal debt. Future generations should not pay our expenses. You can't avoid looking at the numbers and payroll of staff.
Third, make the Pension plan affordable, pay its expenses as we go, and don't borrow to do it.
See our full report.
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