Outside of Orange County, John Moorlach is not a household name. That’s about to change.
Moorlach, who first warned about OC’s 1994 bankruptcy, now is a county supervisor spearheading a drive to reduce the pensions of sheriff’s deputies. The five-member board has voted unanimously to consider cutting the deputies’ pension package that the board had approved six years earlier, which included a retroactive benefits increase for earlier retirees. By one county estimate, that increase–critics unfailingly call it a “spike”–blew a $184 million to $550 million hole in the county budget over 30 years. The board plans to make a final decision in September.
“This is all about a fiscal issue. This is about my concern for the finances of this county. That’s my passion. That’s why I ran against [Robert] Citron in 1994, and now we have a debt that’s twice the size as when he was treasurer, so you bet I’m going to try and figure out what we’re going to do,” Moorlach said. Moorlach lost the 1994 election, but his prediction that the county was going belly up later proved true–to the tune of a $1.7 billion bankruptcy, the largest municipal insolvency in the nation.
Moorlach, later appointed treasurer and ultimately elected on his own, played a pivotal role in the county’s bailout. His admirers–and he himself–describe him as the Cassandra of Orange County fiscal problems, after the truth-teller whose predictions were ignored. It’s hard to see how Moorlach, however, could be ignored: The bearded, 6-foot-5 Moorlach–the OC Metro paper described him as “Grizzly Adams with a calculator”–lives in Costa Mesa and commutes to the Civic Center in Santa Ana, where he typically works punishing 12-hour days.
The dispute is being followed closely by others, especially by public employee unions, who see Moorlach and Orange County as the Great Satan and his sidekick, simplifying and twisting numbers to reflect personal political agendas.
“Counties can do whatever they want, and state law allows them to implement the agreements,” said Ryan Sherman of the California Correctional Peace Officers Association, which represents some 30,000 state prison officers. But for the county “to unilaterally rescind the earlier contractual arrangement would be a clear taking under the U.S. Constitution, and illegal. If the board revokes this contract, I imagine there will be a lawsuit.”
Moorlach said the board’s action is fundamentally an Orange County issue driven by local circumstances. At issue is the board’s 2001 decision to approve, following negotiations with the sheriff’s deputies’ bargaining unit, what is called the “3 at 50” pension plan, in which deputies can retire at age 50 with 3 percent of their highest annual salary, multiplied by their years of service. Earlier, the pension had been a “2 at 50” plan. The latest pension plan, which took effect in 2002, resulted in an average pension of $70,000 annually for those who retired after 2002.
But the plan also granted the “3 at 50” status to earlier retirees, a move that Moorlach contends is unconstitutional because it is a gift of public funds, creates an unfunded debt and pushes the county’s total unfunded liability for public pensions to $2.4 billion.
Moorlach says the earlier retirees should retain the “2 at 50” formula, and that only those retiring after the new agreement was approved should receive the higher benefit. He estimates the disputed formula affects about 2,800 employees and 500 retirees, or perhaps a fourth of the county workforce. The other workers have a “2.7 percent at 55” program, which does not fit the challenged formula.
But whatever the numbers, labor-backed critics are openly hostile to Moorlach: They have bankrolled the political campaigns of his opponents, and they angrily note that Moorlach is pushing, along with former Assembly GOP Leader Keith Richman, a statewide ballot initiative to make across-the-board pension cuts. The plan puts him on a collision course with some of the state’s most powerful political players, including the unions representing teachers, prison guards, engineers and others. They believe Moorlach is using the hot-button issue of pensions to develop a statewide political base on the backs of government workers, including some 220,000 state employees.
There are “potentially huge ramifications outside of Orange County if they were to prevail,” said Dave Low of the California State Employees Association. “It’s not uncommon at all for agencies to provide retroactive benefits and spread the cost over 30 years.”
“[Moorlach’s] rationale is that you cannot encumber a benefit retroactively to an employee extended to its logical conclusion nullifies existing benefits,” Low added. “His rationale would nullify all existing pensions. It’s an illogical argument.”
But Moorlach doesn’t agree, saying that making the taxpayers responsible for the increased benefit requires a two-thirds vote of the electorate–which the 2001 board decision failed to do. “The big issue is how can you encumber the taxpayers overnight without getting a two-thirds vote.
“It could be a statewide issue, but that is going to be the second round,” he added. “If there is a statewide ramification, it’s going to be case by case, and we haven’t yet gone into that level of detail.”