Orange County Board Candidates Weigh In on Unfunded Pensions

March 4, 2021 Updated: March 5, 2021

Several candidates running in the upcoming March 9 special election for a seat on the Orange County Board of Supervisors say that reducing unfunded public employee pension liabilities should be a top priority for cities throughout the county.

John Moorlach, Kevin Muldoon, and Janet Rappaport all agree that unfunded public pensions in the county, where many civic entities don’t currently have sufficient assets to pay for retiree benefits and are forced to borrow to make up the difference, continue to swallow huge portions of county and city funding. Based on the latest available data, in 2018, public employee pension debt for each Orange County, California, household was $31,438, according to Pensiontracker.org.

Rappaport, a lawyer from Corona del Mar, told The Epoch Times that unfunded pensions are a countywide problem, regardless of a voter’s political party.

“We are all from Orange County, and we all sink or swim together,” Rappaport said.

She said party politics don’t belong in local government, and would prefer not to see Orange County cities divided into red and blue camps.

“I’m dismayed and disappointed that we are colorizing our county like this. The only color in Orange County should be orange,” she said. “I’m running as a nonpartisan and for a nonpartisan seat, and I firmly believe that this is the only way municipal politics should run.”

Rappaport cited a 2014 Orange County Grand Jury report that looked at pension liabilities. The report concluded that budget transparency was “critically needed.”

“The 2013–2014 Grand Jury is very concerned that although cities have somewhat improved the transparency of their budgets, … members of the public of Orange County cities will still find it difficult or impossible to understand the current and changing impacts of unfunded pension liabilities on their city budget,” the report stated.

The report specifically noted a “special concern” about the lack of traceability of unfunded pension liabilities for certain agencies—including the Orange County Employees Retirement System, the Orange County Sheriff’s Department, and the Orange County Fire Authority—to the budgets of cities that outsource to them.

“It was impossible even to know the extent of these unfunded accrued liabilities due to inadequate reporting,” said Rappaport, an attorney specializing in international business, tax, and finance.

“Obviously, oversight and full disclosure on these budgetary matters should be in place, and would probably lead to a greater understanding of how these issues can be solved.”

Aggressive budget-balancing, using surplus funds to pay down liabilities, spending cutbacks to local services, increasing revenue, and getting employees to pay a larger portion of their own pension contributions are some of the possible solutions, Rappaport said.

“These pension liabilities are going to severely impact the budget going forward. Even as tax revenues come back, those are going to be largely impacted and used to pay these liabilities. So what that means is belt-tightening … by all the parties at the table, and that means the employees and the taxpayers. That’s it,” she said.

The county doesn’t have an “unlimited bucket of funds. It’s finite,” she said.

Rappaport said she’s a fiscal conservative, and she’s registered as a Democrat. But with a third of the voters in Orange County listed as No Party Preference (NPP), it’s clear many Democrats and Republicans “are disaffected at this point, and not really happy to participate in party politics,” she said.

“I don’t think that political party agendas are relevant or important at this level. I think what is important is the residents and the voters having a voice at the table.”

Past Experience

Former Orange County supervisor and state Sen. John Moorlach is no stranger to controversy when it comes to negotiating public employee pensions. Over the years, he’s become accustomed to resistance from labor unions and attack ads, he said, and is now facing them again.

Moorlach told The Epoch Times that he significantly reduced unfunded pensions during his previous eight-year stint as supervisor, from 2006 to 2014. But his stance alienated some agencies, including the Orange County Employees Association (OCEA)—the largest public-sector union in the county.

“When I was supervisor the last time, I worked really closely with OCEA. We renegotiated their retiree medical plan, which affected retirees more than current employees,” Moorlach said. “We were able to reduce the unfunded liability by $1 billion. It went from $1.4 billion to $400 million, a 71 percent reduction in the liability.”

He suggested a reduction of employer contributions at the time, he said, which upset some OCEA members. “I also had them pay their portion, and not have the employer pay their portion which was occurring for years. But because these costs were getting so high, the employees should appreciate what they have,” he said.

“So I just did a lot of things there the last time. I’m not so sure that there’s a whole lot left to do, but obviously they still remember that I was a pretty tough negotiator.”

Moorlach suggested that if California Gov. Gavin Newsom “could negotiate something like that with his unions” statewide, it would clear up tens of millions of dollars in funding “to do things like pay for schools and prisons.”

The negotiating process left some members of OCEA unhappy. When OCEA discovered that Moorlach, a Republican, was once again running for a seat on the board, the union released a political ad accusing him of smearing the character of a sexual assault survivor to protect a political ally.

Moorlach noted that even though “it is the campaign season,” OCEA “have kind of taken it to a different level.”

“I served as a supervisor for eight years. I got a lot done, and they don’t want me back,” Moorlach said. “They have embellished some things that have some sort of truth and facts … but that’s the way this game works. This is not bean bag.”

OCEA President Lezlee Neebe wrote an open letter to union members on Feb. 5, saying that “OCEA Stewards, Board members or staff will never tell you how to vote.” However, the letter goes on to say that OCEA opposes Moorlach and supports candidate Katrina Foley, a Democrat.

“Former Supervisor and defeated former State Senator John Moorlach wants his old District 2 seat back and we can’t let him have it. Moorlach’s persistent attacks on your pensions is a wedge issue he uses to turn the public against its own workers,” the letter stated.

“We endorse Costa Mesa Mayor Katrina Foley, who has stood by our members’ side for the past decade. She has fought tirelessly to restore takeaways imposed by City Council members allied with John Moorlach.”

Moorlach also challenged the legality of giving benefits to employees retroactive to the date of hire and sued the Association of Orange County Deputy Sheriffs, another organization opposed to his candidacy.

An Aggressive Plan

Newport Beach Mayor Pro Tem Kevin Muldoon told The Epoch Times that his city has taken an aggressive approach to pay down its pension liabilities by 2036.

Muldoon was elected to Newport Beach City Council in 2014. At the time, the city’s debt load “was the highest per capita in the county, or close,” he said.

Muldoon pegged his city’s debt at about $300 million, plus another $240 million for the Newport Beach Civic Center. Unfunded pension liabilities were a big part of it, he said.

“Unfortunately, we can’t pay off the Civic Center early. There are prepayment penalties,” he said. “So that’s why we’re on a 15-year aggressive plan for the pensions—because we can pay that down sooner.”

Muldoon’s council campaign hinges on getting the city’s spending and debt under control, and he’s fought to make sure the city pays “above and beyond the minimum CalPERS [California Public Employees’ Retirement System] payment every year.”

“When I was first elected to City Council, my colleagues and I made changes to more aggressively pay down the unfunded pension liabilities inherited from prior councils,” Muldoon said.

“Our current plan puts us on track to have it paid down by 2036, making our debt policy payment plan one of the most aggressive cities in the county. Newport Beach is coping well due to disciplined spending and steady property tax revenue.”

The Epoch Times attempted to contact Costa Mesa Mayor Katrina Foley and Fountain Valley Mayor Michael Vo for their comments, but neither campaign responded prior to publication.