Grand Jury

MARIN COUNTY CIVIL GRAND JURY REPORT SUMMARY 5 MARIN COUNTY CIVIL GRAND JURY 2014-2015 • AUGUST 2015 RECOMMENDATIONS R1. e Employers develop, adopt and implement a policy and procedures (including staff training) to prevent future violations of the California Government Code when increases in pension benefi ts are proposed. e Employers should consider making their legal counsel responsible for ensuring compliance with the Government Code. R2. e Employers develop, adopt and implement a policy for "reporting out" to the public regarding the employment and pension costs in terms of the amount and the Employer's ability to pay on a current cash fl ow basis. R3. Each Employer establish a Citizens' Pension Oversight Committee comprised of resident tax payers who would: 1.) review pension funding levels in light of the Employer's ability to pay; 2.) review proposed pension changes before fi nal Employer approval of any collective bargaining agreement; 3.) review the Employer's compliance with Government Codes related to pensions; 4.) develop written quarterly reports for the public as to the fi nancial security of the pension fund. rights of the citizens of Marin County. One result of these pension enhancements is that they contributed to the increase of the unfunded pension liability of MCERA; this unfunded liability increased from a surplus of $26.5 million in 2000 to a defi cit of $536.8 million in 2013. is increase may expose the citizens of Marin County to additional tax burdens to cover the unfunded costs and may place the future fi nancial viability of the pension plans at signifi cant risk. Additionally, such an impact may impair the governments' ability to provide the broad range of essential services that citizens are expecting; instead those funds may be used to pay for employee pensions. e Grand Jury recommends that the Employers adopt policies and procedures to ensure further compliance with legal requirements, with legal counsel responsible for ensuring compliance with the Government Code, and to establish a Citizens Pension Oversight Committee. is report is limited to those employers who participate in MCERA. It is beyond the resources of this Grand Jury to investigate all other Marin public employers (cities, towns, special districts) who participate in the California Public Employees' Retirement System (CalPERS). Given the pattern and practice by the Employers who sponsor MCERA, the Grand Jury expects that such an investigation might result in the same fi ndings and recommendations as found in this report. FINDINGS e Marin County Civil Grand Jury fi nds that in connection with thirty-eight pension enhancements from 2001- 2006, the Employers appear to have repeatedly violated Cal. Gov't Code § 7507, 23026, 31515.5, and 31516. Specifi cally: F1. e Employers appear to have repeatedly violated Cal. Gov't Code § 7507 by using the same actuarial evaluation report for many diff erent pension increases and by failing to publicly disclose those increased costs before adopting them. e evaluations did not review the proposed increases for each individual bargaining unit; the Employers continued using the evaluation a! er years had passed. ese factors appear to have contributed to the current unfunded liabilities of MCERA. F2. e County appears to have violated Cal. Gov't Code § 23026 by (a) failing to make the pension increases public through a "regularly scheduled meeting" of the Board, including through the use of consent agendas; (b) failing to provide public notice of that increase on a board agenda; (c) failing to provide a public notice of the "fi nancial impact" that the increase would have on MCERA. ese violations excluded the public from examining the fi scal impact of the pension increases and from participating in the board's decision process. F3. e County appears to have violated Cal. Gov't Code § 31515.5 by (a) failing to make the pension increases public through a "regularly scheduled meeting" of the board, including through the use of consent agendas, (b) failing to provide prior public notice of that increase on board agendas, and (c) failing to provide a public notice of the "fi nancial impact" that the increase would have on MCERA. e public appears to have been excluded from examining the fi scal impact of the pension increases and from participating in the approval process. It also appears that the public was unaware of potential future fi nancial obligations. F4. e County appears to have violated Cal. Gov't Code § 31516 by (a) failing to secure an actuarial statement that explains the fi nancial impact of the specifi c pension increase on MCERA and by (b) failing to make that actuarial report public at least two weeks prior to the adoption of the increase of benefi ts. is appears to have excluded the public from examining the fi scal impact of the pension increases, from participating in the board's decision-making process, and from understanding their potential future fi nancial obligations. F5. If the pension increases were not made in accordance with the California Government Code, the citizens of Marin County were never given proper notice about pension increases that are now costing them millions of dollars. ese increases and associated liabilities are a contributing factor to why MCERA has a collective unfunded pension liability of approximately $536.8 million. F6. Because there appear to have been statutory violations, the future pension benefi ts provided for by the enhancements may not have vested as rights of the public employees under California law. Pension continued from page 4

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