John W. Moorlach, Vice Chairman, Orange County Board of Supervisors, Second District predicted the biggest municipal disaster when OC defaulted on its debt. He talked about what elected officials in California and around the country are facing. The global reality is they are all mired in debt for municipal debt, deferred maintenance, pension funds and more. Although employees are paying more into their pensions, there's no raises and new tiers for retirement (including the ability for a municipal employee to opt out of the retirement plans), we are still mired in debt for the default 20 years ago.
OC reforms helped the county reduce unfunded liabilities, but all of CA is looking at OC to see how they handle the future. The majority of our general purpose revenue, $653 million, 87% of the county revenue comes from property taxes. 2011 was a balanced budget, every year we are laying off more and more municipal employees. But we inherited a retroactive salary benefit, worth $1.5 billion. In a bull cycle we enjoyed amazing growth, but there's a train wreck in slow motion about to hit OC.
OC Pension plans are doing fairly well, investments are bouncing back, but pension costs continue to rise, revenues are flat, and employees on pensions are living alot longer than predicted. The pension burden is $.31.5 per $1 in pension contributions. Irvine's unfunded liabilities alone are $1,823 per capita. We are running on fumes. If we don't see an uptick in the economy we'll run out of cash
What should CA do? Downsize, ratchet back regulations, roll back pension formulas, create hybrid pension formulas, freeze pension plans, privatize, merge and consolidate management, address the underground economy, report all debts, create a moratorium on bond debt and do something with public pensions.
There's a net migration out of CA. Watch what will be happening in other municipalities!
