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Show Me the Money: Mendocino County Budget Dispute

January 11, 2009

Is Mendocino County in trouble because of secret, unfunded liabilities? I don't know. Yet.

During the 2006 elections for county supervisors, this issue was raised. I asked 5th district supervisor David Colfax about it. He said it was right-wing malarky (my choice of terms).

Do Mendocino County government budgets hide real problems? I had no problem finding the 2008-2009 Mendocino County budget online. As you might expect, it is large and complex, but not as large and complex as California's or the national budget. There is a $17.8 million dollar line item in Schedule 1, the summary document, called "Pension Obligation Bonds Fund," which I take it is the focus of the problem.

The allegation is basically that this Pension Obligation Bond Fund will explode at some point in the future, eating up a great deal of the county budget.

Will it? It is too early for me to judge, but I hope to find out and share with you. I do know how this kind of thing can happen. Unable to give employees all they want in the present, the are offered generous pensions in order to get contracts signed. To keep the pensions from cutting into the current budget, they are unfunded or only partially funded. The funding only comes when the pensions are actually paid. Current pensions were negotiated long ago; today's generous (if they are) pensions will require massive funding ten and twenty years down the road (or even sooner).

Another key question is how much revenue will come in. Revenue has grown rapidly in Mendocino County for the past two decades. Most comes from the real estate tax, which is 1% of the assessed value of your property [so in 100 years the government gets the full value of your property. Interesting.] 30% of that goes to the county, with the rest going to fund public schools and special district needs like firefighting. The county also gets some funding from the State of California (which gets its from sales and income taxes), but usually that just covers items that the State of California requires.

As long as a sufficient number of people keep moving to Mendocino and building on undeveloped lots, tax revenues will keep growing. Perhaps the unfunded liabilities are not impossible to fund if you factor in some particular rate of growth. If, on the other hand, real estate values go down and owners ask to be assessed at a lower value, revenues could actually go down.

The State of California is in a major budget crisis. The public schools are going to see cutbacks. Mendocino County is going to have a hard time keeping up services even without this unfunded liability issue.

Much as I like to see government workers well-paid, there is also only so much taxation a people can take and still prosper. The Board of Supervisors is responsible for keeping the balance between these two opposing realities. The public needs to know what is really going on with taxpayer money. If the county has been wrecked by the lack of foresight of the supervisors, then even the remedy of throwing the rascals out in an election may do us little good.

William P. Meyers