Tavares, FL August 22, 2016
Here is a reason to vote out all three incumbent Lake County Commissioners on the August 30 ballot, and vote for Lake County Commission Candidates Wendy Breeden, Josh Blake and Mike Levine by August 30, 2016.
Yesterday, the Daily Commercial published their standard government staff driven “woe is me” article about how funding for roads in Lake County is low. You never see the Daily Commercial asking local business owners how they are coping and spending in comparison.
I contend the shortage of funds for roads is due to Lake County Board actions to keep approving growing budgets for employee benefits and retiree benefits, and wages without any concern about comparing the growth rate to local business spending on the same benefits. Earlier it was the EMS, or the Fire Department, or the Sheriff. The Daily Commercial always takes the side of government staff for increased funding, and doesn’t interview local business owners and taxpayers for their perspective. Keep in mind incumbents Jimmy Conner and Welton Cadwell and Sean Parks (not running for re-election in this election cycle) all approved a 14% property tax increase in 2014.
Government staff seems to believe that if there was a bad economy in the past, employees have to make up the “lost” wages due to the downturn. As a consequence, when tax revenues start increasing as they are now, staff and officials push to increase wages and benefits higher than comparable private businesses and higher than current economic indicators. When staff justifies wage increases to elected officials, they compare the “need” to other government agencies, and NOT to what local businesses are paying or spending per employee.
The chart at left shows how private sector employees view public employee wages and benefits. We need this type of analysis for Lake County that compares local government wages (and benefits of any type) to the private sector. It should be a part of budget presentations on employee wages and benefits.
From the Reason Foundation – 2009
“Employer Costs for Employee Compensation survey from the U.S. Bureau of Labor Statistics, as of December 2009, state and local government employees earned total compensation of $39.60 an hour, compared to $27.42 an hour for private industry workers-a difference of over 44 percent. This includes 35 percent higher wages and nearly 69 percent greater benefits.”
Taxpayers should not have to pay a higher cost for government employee and retiree wages & benefits than local businesses can afford.
This is a great article illustrating how costs for Obamacare required health insurance is going up, and REAL employers who have to compete in the economy are having to reduce employee count or increase employee contributions for health care.
The problem is the County Board is just passing the cost of these increases on to taxpayers without increasing employee contribution rates or reducing coverages to match those required in the private sector.
I saw and watched earlier this year when the Lake County Board passed a budget that increased health insurance and benefits like pensions to the taxpayer at a significant rate while not increasing employee contributions very much. They also agreed to fund a new “free” health clinic JUST for County employees that will operate at a LOSS of $400,000+ per year. If you work in the private sector, do you get free clinics without co-pays? The Lake County School Employees, Mt. Dora and Sheriff employees also have free clinics just for them.
When they do approve these increased benefit costs, they never show comparative health insurance costs for private industry and the contribution ratios of private sector employees vs government employees.
Additionally, a new IRS accounting rule, GASB 68, required the CPA preparing the County financial statements to estimate pension and retiree health benefits based upon MARKET value and not some cooked formula that underestimated the true cost of funding pensions and retiree health benefits. The result was an additional NINETY MILLION DOLLARS FOR LIABILITIES ON THE COUNTY BALANCE SHEET. During the CPA presentation to the County Board on the financial statements earlier this year, the County Board didn’t even question how much more that would cost the taxpayer in increased annual budget allocations for retiree costs, nor did they deal with the problem. I asked the CPA how that happened and he said much of it is for promised health insurance benefits to retirees, because that “pot” is way underfunded. A corporation would reduce coverage or increase employee contributions, but the Board just passed on higher costs to the taxpayer. This is one reason why roads are underfunded.
Lake County has an unpublicized “Citizens Annual Financial Report” published by the Court Clerk. HERE is the latest 25 page version for the year ended Sept. 30, 2015. It is a summary version of the much longer 238 page CAFR (Comprehensive Annual Financial Report) which is HERE. If you look at page 10 of the Citizen’s Report, you will see Total Assets for the County DROPPED from $624-million to $615-million or $9-million. However, if you look at liabilities, you will see liabilities leapt from $170-million in 2014 to $246-million, or about $76-million. Then lower down, you can see the “Total Net Position” on the blaance sheet dropped from $454-million to $367-million or down $87-million. The text explains the “unrestricted net deficit is the result of the implementation of GASB 68”. BUT, the Court Clerk fails to explain what that is. Then on page 11, the gobbledegook text says “The County’s ending net position decreased $82.9 million due to the $89.9-million restatement of net position for GASB implementation.” Again, the Court Clerk, Neil Kelly, fails to explain what the GASB 68 was. He wants to avoid telling you that the cause is due to increased liabilities to fund retiree pensions and health benefits for them. Neither Lake County management or elected officials spent time explaining or acting to explain this $90-million increase in taxpayer liability.
What is GASB 68? You have to read the footnotes in the much larger CAFR. If you search in the above CAFR on the term “GASB 68” you will find NINE places where it describes the deficit caused by the restatement of pension liabilities. You can also read an official summary of GASB 68 on the GASB.org website HERE. It replaced an outmoded Accounting Statement 27.
On page 33, it says Lake County’s “amount of unrestricted net position is a NET deficit (LOSS) of $62,366,878. The net deficit is the result of the implementation of Government Accounting Standards Board Statement No. 68 (GASB 68), Accounting and Financial Reporting for Pensions, which required employers particiapating in cost-sharing multiple-employer defined pension plans to record their portion of the net pension liability of the plan.” You see, before, they were using older made up formulas to set aside funds for pension and retiree health insurance costs, but this GASB 68 made them estimate pension liability using REAL market data, thus the huge change. Basically, prior estimates were bad estimates, and now the estimates are based upon actual data.
What is the true effect of GASB 68?
The County must set aside MORE MILLIONS each year to start reducing the increased pension liability. On page 38 of the CAFR, it says that public safety expenses alone went up $5-million due to GASB 68. Page 39 of the CAFR clearly has a line “Restatement for GASB68 showing a 2015 total reduction of “Net position” asset values of $90.8-million.
It is not clear to me without much more analysis what the annual cost is for implementing reductions in the GASB 68 pension liability. This is what should be explained by staff in public hearing.
Keep in mind Lake County government takes SIX MONTHS to produce an audited CAFR, when public corporations usually produce audited financial statements in ONE month. Thus this CAFR was not released to the public until about after March of this year.
This is a sham, and taxpayers should not have to bear cost increases for GASB 68 or other increased compensation and benefits alone. If the cost of pensions and health insurance are going up drastically, the Board should be reducing coverages or increasing contributions from employees.
The soon to be elected County Commissioners (i.e. candidates) need to commit NOW to requiring a public hearing and workshop on employee health care costs, retiree pensions and retiree health insurance liabilities.
Taxpayers need to vote out incumbent Commissioners Jimmy Conner, Welton Cadwell and Tim Sullivan for avoiding the issue, not having public hearings, budgeting much more for employee and retiree health benefits and then complaining they don’t have funding for roads. It is going to benefits, not roads. They should have an objective analysis to compare actual benefit and retiree costs for local businesses vs local government costs. My wild ass guess is that we may be paying 20% more for government employees due to lack of visibility, and it is soaking up funds that should be for roads.
The Lake County Board should have a public hearing and workshop NOW and prove me wrong. Make the analysis objective, detailed with references, public, open to public inspection and feedback. Do a survey of the 100 largest businesses in Lake County and find out their allocated budget for benefits for employees and retirees. For instance, I know Eustis has moved to 401k type programs where the City pays a standardized match to employee contributions, and doesn’t keep making taxpayers pay more than local employers for similar benefits.
As a consequence, vote for Wendy Breeden, Mike Levine and Josh Blake for County commissioners. Ask them to commit to having public hearings comparing private sector compensation and benefits to Lake County employees, and adjust them to match local employers.
Share this with others who may be concerned about tax increases to pay for this new liability.
PS: I just looked at the CAFR for the Lake County School District and GASB 68 forced them to post a $115-million drop in asset value to their unfunded liabilities. So when they say they don't have enough money to build schools one reason is this $115-million unfunded liability, and their need to pay more each year to the retirement system for wages and benefits to make up for the unfunded liability. I don't know how much a year that could be, but I bet it is over $10-million.
If anyone has information to clarify, agree or disagree with this, post it in the comments of this blog posting or email it to me at [email protected] .
PS: Did you notice how the elected Constitutional officers are endorsing incumbents? That is after the County Board incumbents pushed through the Penny Tax increase and then approved drastic increases in facilities and wages for Constitutional Officers in the last two years. AND, there are no Florida legislated requirements for public budget hearings, required performance audits or published detail budgets for the Constitutional Officers.
You can see my other recommendations for elected officials at my homepage at www.fiscalrangers.com .
Vance Jochim
FiscalRangers.com
