Pensions Are an Increasingly Perilous Perk for Supervisors

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 Orange County Supervisor John Moorlach (Photo by: Violeta Vaqueiro)

As Orange County supervisors increasingly call on public employees to pay more into their pensions, the effort is beginning to trigger uncomfortable questions about their own pay and perks.

And no one is coming under the microscope more often than the county’s best-known public pension critic: Supervisor John Moorlach.

Moorlach, a Republican, was appointed treasurer-tax collector in 1995 and has held elective office ever since. Earlier this month, he announced a run for Congress but is in an uncomfortable position, because given his long tenure at the county, he sits atop the most generous public pension benefit of any county supervisor.

Supervisor Pat Bates, who also was elected to her first term in 2006, and Chairman Shawn Nelson, elected in 2010, don’t take a pension.

Supervisors Janet Nguyen and Todd Spitzer participate in the pension system but at the lower rate imposed by voters last year by Measure B, which amended the county charter to force supervisors into a lower pension benefit tier.

And like all county supervisors who take a pension, Moorlach doesn’t pay a dime for it.

Ironically, the only pension-related payment Moorlach does pay into the Orange County Retirement System finances the retroactive pension increase, called "2.7 @ 55," that supervisors granted in 2004.

The 2.7 @ 55 benefit allows a worker to retire at age 55 with 2.7 percent of pay for each year worked.

Public safety workers receive a more lucrative benefit that allows them to retire at age 50 with 3 percent of pay for each year worked.

Moorlach strongly opposed the 2.7 @ 55 enhancement before it was approved and based his successful 2006 campaign for supervisor largely on that controversy.

Yet once in office, Moorlach took the benefit and signed up for it again when re-elected in 2010 despite calls that he refuse a pension altogether.

There’s another irony sure to be highlighted by his opponents in the upcoming battle for the 45th Congressional District seat.

Moorlach led the charge for the 2007 county lawsuit against the county’s deputy sheriff’s union to reduce what he termed an unsustainable “3@50” retirement benefit.

However, by some estimates (figuring his pension plus a taxpayer-funded 401(k)-type retirement account since 1995), he is likely to end up with a retirement payout eerily close to what a public safety officer would receive after a three-decade career.

A Political Problem

While all these factors present Moorlach with the most financially lucrative retirement package of any county supervisor, they have also created a significant political liability given his position as the county’s loudest voice for reigning in public-sector pensions.

And he knows it.

“People would rather talk about their personal sex lives than their personal finances. That is a fact,” Moorlach said during a recent interview.

This month, Moorlach moved to blunt that political liability by spearheading a plan encouraging county supervisors like himself to pay into their own pensions and take a tax deduction for the payment

While his colleagues unanimously adopted the plan without comment earlier this month, it blew up once those who take a pension realized that what would benefit Moorlach’s immediate political position would also likely affect their take-home pay.

County Supervisor Todd Spitzer took direct aim at County Counsel Nick Chrisos over the pension payment initiative for supervisors, saying it was “snuck” onto the agenda without a proper briefing for supervisors and approved only because he misunderstood its implications. Spitzer said he had thought the initiative covered just charitable donations to the county.

After being instructed by Spitzer to call a reporter, Chrisos told The Orange County Register he had made a mistake.

Although Moorlach also said he was surprised by the appearance of the item on the agenda, he voted for it.

Moorlach noted that it's illegal under state law to forcibly change an elected official’s compensation package once elected. As he researched ways for supervisors to pay for their pensions, Moorlach concluded that the tax deduction route was the most effective.

Given that he had met several times with Chrisos on the issue and had received an informed legal opinion that the tax deduction was proper, he was comfortable, Moorlach said.

Spitzer said his research shows otherwise and is urging further consideration. He said that paying into a pension and taking those payments as a tax deduction isn’t legal, based on his research.

Nonetheless, Moorlach said he remains comfortable with Chrisos' opinion and started this month paying into his pension. Moorlach, a certified public accountant, said he’s confident he can take the tax deduction but has no objection to studying it further.

“I didn’t mean to get everybody else upset,” Moorlach said. His proposed change in policy regarding supervisors’ pension contributions was an “innocent request,” he said.

For his part, Moorlach said he is moving to do what he always said he would do: pay more into his pension when every other employee group did.

“I’m moving along with everybody else,” Moorlach said.

Nelson, who doesn’t take a pension, argued that supervisors who receive a pension should pay into it. It’s absolutely legal to have supervisors voluntarily pay into their pensions. “It’s appropriate to lead by example,” Nelson said.

'I'm Volunteering to Do This'

County supervisors as a group have argued that any salary adjustments for themselves should be done in a fair manner.

“I don’t want to be double taxed,” said Moorlach. He noted that county workers' pension payments are deducted from paychecks and are not considered when calculating tax wihholding. Not allowing a county supervisor to do the same would be a potential pay cut, he said.

“I’m volunteering to do this,” Moorlach said. These kinds of decisions affect an entire family and those impacts should be considered despite popular desires to reign in elected officials' salaries and perks, he said. “My wife and I are making a $16,000 decision here.”

Nelson also said supervisors' total compensation should be reviewed and most likely equated to that of a county judge. “You have supervisors making less than many of the people they are dealing with,” he said.

Spitzer, who said he also supports paying into his pension, insisted that any change to an elected official’s salary must be done in a more thoughtful way. “It seems like it’s been peacemeal, sporadic and political,” he said.

Indeed, ever since Moorlach was elected in 2006 on a vocal and aggressive pension reform platform, there has been a heightened focus on supervisors' pensions and a seeming inability by supervisors to address it effectively.

Moorlach was immediately questioned when he accepted the 2.7 @ 55 benefit he campaigned against. Yet, he asserted, county Human Resources officials would not allow him to refuse the benefit. “They wouldn’t let me out,  and I asked,” Moorlach said.

It is clear, however, that the state allows an official upon election to refuse a pension altogether.

Nelson was elected in 2010, also running on an aggressive campaign against public employee pensions. Yet when he sat down to fill out his benefits card as a county employee, he also opted into the 2.7 @ 55 plan.

When his conservative supporters reacted, Nelson complained that the Human Resources forms are misleading and effectively quelled the furor by insisting that county officials allow him to opt out of the pension because of the confusion.

“I don’t want to be in it,” Nelson said. “Being out gives me the freedom to be a critic and not be accused of anything.”

Yet while Nelson solved a political problem by opting out, the move also potentially created a tax problem for him. As are many county workers, Nelson isn’t in the Social Security system.

Nelson said he still wonders whether when he retires he’s going to get a big tax bill for the years of not contributing.

When Nelson tried to address that concern, his proposals met staunch opposition from his colleagues, including his main ally, Moorlach.

Nelson initially proposed to have supervisors forgo a pension and opt into Social Security. Another attempt to swap a pension for a 401(k)-type retirement plan also was voted down by his colleagues.

Nelson finally became so frustrated that he introduced a ballot initiative last year to force supervisors into a lower pension tier when they are elected. Voters overwhelmingly supported the plan, which later affected Supervisors Spitzer and Nguyen in the 2012 election cycle.

And this year, just as Moorlach announced his run for Congress, supervisors endorsed the plan allowing them to pay into their pensions in exchange for a tax deduction.

“We’re like a smorgasbord of salary and benefits,” said Spitzer, who is urging a complete review of county supervisors’ total compensation. “It’s like everybody is picking off a Chinese menu. That’s not how you run a county.”

Clarification: A previous version of this story incorrectly spelled County Counsel Nick Chrisos' name.

Please contact Norberto Santana Jr. directly at nsantana@voiceofoc.org and follow him on Twitter: twitter.com/norbertosanana.

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