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Old Mendocino County Courthouse Around 1915

California County Pension Debt

 

Stories & Evidence



Chaotic Staffing - Salaries & Compensation



Stories and Evidence


Choices -

Who Done It?

'98 Retiree Healthcare - '02 Board Policy 40 - Diversion of County Contributions - Part 1

'98 Retiree Healthcare - '02 Board Policy 40 - Diversion of County Contributions - Part 2

'98 Retiree Healthcare - '02 Board Policy 40 - Diversion of County Contributions - Part 3

San Diego - IRS - Excess Earnings

Increase Pensions When Already Deep in Debt

Staffing & Compensation Chaos

Deeply Flawed Pension Fund Financial Statements - Part 1

Deeply Flawed Pension Fund Financial Statements - Part 2

Deeply Flawed Pension Fund Financial Statements - Part 3

Retiree Healthcare

Assumed Investment Profits Too High

Plans to Increase Debt

County Puts Off Bad News

The Myth of 80% Funding

Numerous Financial Errors

 

The "Slavin Study"

In the late 1990's the Board of Supervisors approved contracting with Slavin Management Consultants located just outside Atlanta, Georgia to produce a "Classification and Compensation Study" for the County. Slavin analyzed the County's staff structure and proposed a number of changes. They also compared the County's compensation structure (salaries & benefits) to a number of "comparable" organizations - mostly other similar governments but also some non-profit organizations.

The County began to implement the "Slavin Study" in 2000. Slavin stated the County paid less than the average in the Counties and other organizations in the "comparables" group. Slavin recommended that the County increase total payroll for its current staff between 5.5% to 7.7%. That would have caused salaries to increase from $2.4 to $3.4 million beginning with the 2000 - 2001 fiscal year, depending on which of 3 options the County selected. Instead, over the next two years, total salaries increased nearly $12 million - 4 times more than Slavin had projected.

The Slavin Study had a major fatal flaw - it completely disregarded the capacity of the county's citizens to pay for it. Some specific issues not addressed -

• Can our County pay the same as other counties if private sector employees make significantly less?
• Can our County rapidly expand its staff if we lose jobs in the private sector as happened during this period?
• Can our County match other counties' payrolls if it doesn't match their programs for job creation and economic development?
• What is going to happen to related expenses such as pension costs if salaries are raised?

The answers to these questions can be seen in what happened. Over the last 7 years the expanded staff and payroll recommended by Slavin was completely wiped out.

Significant Staff Increase On Top of Compensation Increase

Number of Mendocino County Jobs 1996 - 2014

Full Time Equivalent Jobs*
Mendocino County

This shows the number of "full-time equivalent" ("FTE") "funded" Mendocino County jobs from 1996 through 2014. (Note 1 below)

Twenty years ago Mendocino County had a little more than 1000 full-time equivalent employees. Today it has a little more than 1000 full-time equivalent employees.

But - from 1996 through 2002 Mendocino County's Board of Supervisors approved an increase of over 400 full-time equivalent employees - a 40% increase! That Board set the stage for the chaos and pain that followed.

Over the next 12 years the County terminated the number of full-time equivalent positions added from '96 through '02. Further they cut all employees' salaries by 10% (some of which has been restored).

Percent Change Number of Mendocino County Compared to County Population 1997 - 2014

Annual Percent Change
Mendocino County Employees & Population


This shows the annual percentage change in the number of County FTE jobs and the County's population over those years. The County changed the number of its FTE staff at a rate 10 times faster than the change in the County's population over these nearly 2 decades.

Think about the impact on an organization of this kind of rapid and rather chaotic change in its workforce. A major focus during the rapid build-up of staffing from 1997 to 2002 - a 40% increase - had to be defining what those new jobs would be, recruiting candidates, hiring, training, integrating new employees into existing work flows, redefining jobs for current employees ...

Then consider what happens when an organization has to rapidly reduce its workforce such as from 2008 into 2013. It's the opposite. You have to lay people off and restructure the smaller workforce. During the rapid expansion many older employees would have moved up to middle-management positions but now the new staff they had been directing is gone what does that mean about their jobs (and pay)? Perhaps you're forced to "outsource" important functions - and that takes time and imposes new requirements on the system.

A tremendous amount of the County's staff resources must have been consumed in this roller coaster. Those were staff resources the County didn't use to provide public services and infrastructure because it had to be "inward" focused on itself. And - as it turned out - much if not most of that significant effort and staff cost wound up being "wasted" by this "boom and bust" cycle.

Slavin in Context - Pension Bonds and Pension Increases

Slavin Study - Pension Bonds - Pension Benefit Increases

Total Compensation Per Full-Time Equivalent
(Salary - Other Benefits - County Pension-Related Payments*)
Timing of the Slavin Study - 2nd Round of Pension Bonds -
Pension Benefit Increases

This shows four things:

Implementation of the Slavin Study: The County began to implement a number of the Slavin Study's recommendations in 2000.

Total Compensation PER FULL TIME EQUIVALENT EMPLOYEE: the graph shows a significant increase in compensation per employee immediately after Slavin was implemented. The table below shows the percentage change in elements of "compensation" paid to employees in the four years before Slavin was implemented and the four years after.

  96-00 00-04
Salary 6% 34%
Other Benefits 16% 76%
Pension Related 22% 53%
Total 10% 47%

Total Compensation increased 470% faster after Slavin than before. The County really stepped on the gas as a result of Slavin.

Pension Increases for All Employees: The Board of Supervisors approved increases in the pension benefits for all current employees between January 2002 through July 2005. Deputy Sheriffs received those increases back to the date they were hired. However, those who had already retired by that time did not receive increases in their pensions. (For more on this see Pension Increases.)

2nd Round of Pension Obligation Bonds: The Board of Supervisors directed staff to prepare a second round of Pension Obligation Bonds (POB) in July 2002. They approved the sale of $92 million of Pension Bonds in December 2002. Some was used - in essence - to pay off some of the POB sold in 1996. So - the net increase in POB debt was about $76 million.

The Board borrowed $76 million to shore up the underfunded Pension Fund one year after they began to grant very significant increases in pension benefits to all the County's employees - even though the financial position of the Pension Fund was rapidly deteriorating.



 
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