Dukes County Charter Study Commission
Thursday, March 20th, 2008
Oak Bluffs Senior Center
5:00-7:00 p.m.
Draft Minutes
I. Call to Order
Vice-Chair Paddy Moore called the meeting to order at 5:00 pm.
Charter Study Commissioners in Attendance:
Tad Crawford, Mimi Davisson, Dan Flynn, Carlene Gatting, Tristan Israel, Jeff Kristal, Les Leland, Paddy Moore, Nora Nevin, Jim Newman, Linda Sibley, Ted Stanley, Holly Stephenson, Paul Strauss, Roger Wey
Charter Study Commissioners Absent:
John Alley, Tim Connelly, John Early, Art Flathers, Lenny Jason, Richard Knabel, Bill O’Brien, Woody Williams
Guests: Dan Cabot, Noreen Mavro Flanders, Carol Grant, Margaret Logue, Michael McCormack, Julia Rappaport, Russell Smith.
II. Approval of Minutes
February 28th, 2008 approved as written; Abstain: Dan Flynn, Roger Wey, Paul Strauss, Jeff Kristal, Carlene Gatting
III.House Bill 4498 – Noreen Mavro Flanders, Sheriff Michael McCormack
Michael McCormack – To understand Bill #H4498 need to understand the background of what brought us to that point. The seven County Sheriffs have been experiencing a structural budget problem for the last several years. It is a structural problem because of the inability to annualize supplemental budgets: supplemental budgets for operating costs, bargaining agreements. They haven’t been annualized, and therefore when you go into the next fiscal year you’re starting off in the hole.
Sheriffs receive funding from three major sources: the maintenance of effort (the County’s contribution to the Sheriffs operation); deeds excise tax; and the State appropriation, which is given in a line item in the State budget (8910-0000). The budget process that the Sheriffs go through is to submit, in January of each year,a spending plan to House Ways and Means, Senate Ways and Means, the Administration and Finance, and the County Government Finance Review Board. That spending plan is analyzed and talked about with budget analysts and Sheriffs and County staff. Then near the end of the fiscal year the budget is passed, around June 30th or July 1st. There is a line item, the 8910 that has an amount of money in it. That amount of money is the State appropriation for, collectively, the seven County Sheriffs. That appropriation is never sufficient for the twelve-month period, so we sit down and submit a new spending plan with reduced numbers, knowing that those numbers are not going to get us through the year. The only way to get an approved budget by the County Government Finance Review Board is to have revenues match expenses, so we just reduce the expenses. Sometime around October 1st, the County Government Finance Review Board approves the budget with a wink and a nod knowing that these are not the real numbers. Sometime around May we start running out of funds. We start talking about deficit numbers and submit a supplemental budget proposal to the Commonwealth. In the last several years they’ve honored that supplemental request, and given us sufficient monies to get through the year.
The process that we go through and the funding sources that we rely on are convoluted at best, confusing and unreliable. It is unreliable because one of the major sources of revenue is the deeds excise tax. We never know what that number is going to be. Because the housing market has bottomed out, deeds excise taxes have been drastically reduced, putting us further in the hole. This year, FY08, collectively the seven County Sheriffs are going to have a budget deficit of somewhere between 37 and 40 million dollars. For the last several years we have been reaching out to the Administration and saying we need some help. The response was House Bill 4498.
We are pleased we got a response from the Administration. Whether or not House Bill 4498 is the proper response is something we are currently debating. Even among the seven Sheriffs there is not a unified voice. The Sheriff on Nantucket just wants to be exempted out of the whole process. The Sheriff on Nantucket does not receive any funds from the Commonwealth of Massachusetts. It is logical that he is separated out, as he doesn’t have a jail, a communications center, or any of the other major functions that the other Sheriffs have. Of the six other County Sheriffs, there are three that are very willing to go over to the Commonwealth of Massachusetts: Plymouth, Barnstable, and Norfolk. The other three Sheriffs, Suffolk, Dukes and Bristol, are saying we came to the Commonwealth with a budget issue, and that is all we want resolved. We are not necessarily willing to be State offices. However, if House Bill 4498 were the only vehicle where we can solve the budget process, then Sheriff McCormack would personally acquiesce to that.
Noreen Mavro Flanders – House Bill 4498 was released and read in the House on January 23rd. It has been moving quickly. We learned of the Bill from Barnstable County on January 24th. On February 15th the County Commissioners met with Sheriff McCormack to find out what the Bill was about and how it was going to affect us. As the Sheriff explained, it was because of the budget process -- not necessarily because of the lack of funds -- because in the end they get funded. It’s the process that is the issue. At the end of that meeting the County Commissioners voted to support Sheriff McCormack’s solution, which is to fully fund the Sheriffs through line 8910 of the Commonwealth budget, which would solve his planning problems. But there does not seem to be any need for him to become a State Sheriff to do that. We sent a letter at that point to A & F Secretary Leslie Kirwin, Senate President Theresa Murray, Speaker of the House Salvatore DiMasi, Senator O’Leary and Representative Turkington.
On March 3rd, Senator O’Leary and Representative Turkington invited us to a meeting in Barnstable to discuss this and to see what our concerns were. The Sheriff (McCormack) was there, Sheriff Cummings from Barnstable, a couple of Barnstable County Commissioners, two County Commissioners from Dukes County, Legislative liaison Russell Smith, Treasurer Flanders, and the Legislative liaison from Nantucket. We voiced our concerns at that point. Sheriff McCormack talked about a memo that he had written to Secretary Leslie Kirwin (attached) to get some necessary language in the Legislation, as well as a list of questions that all of the Sheriffs had about the Legislation. Commonwealth Administration is saying there are going to be savings if the Sheriff’s employees go to the State health plan or are part of the State Retirement system. Noreen does not think so. We talked about those things and the Sheriff has written to Secretary Kirwin because all of the Sheriffs had questions.
What we talked about a lot were the unfunded liability issues. On one of the sheets of paper that Noreen handed out tonight(attached), it talks about the unfunded liability, both retirement and other post-employment benefits (OPEB). What is referred to in this Legislation from the Governor is Chapter 34B, which is the abolition chapter. It refers to how things will be disposed of and how liabilities will be calculated. What would happen, although it does not say so in the Legislation and the Sheriff was not convinced at the beginning, is that the State would take real estate. Sheriff McCormack has been assured that that is their intention. Their intention is to take the real estate that the Sheriff occupies. Those four parcels are listed on the top of the sheet (handout attached), which shows what they are assessed at. The State will give us a credit of 75% of the assessed value. Against that credit you apply the liabilities for unfunded retirement, unfunded OPEB. Scenario one shows the lower of two estimates for the OPEB side if all of the employees and retirees are added, the Sheriffs department, active employees, about 50% of our active and current retirees together. As a rough estimate, 50% of the retirement unfunded liability of $3.7 is $1.849 million. 50% of the OPEB shows $2.7 million. This shows a net liability of $2.9 million. What Chapter 34B says is that when there is a net liability it gets billed back to the towns. If we were to talk about the maintenance of effort amount, which is what the House Bill is saying will go away, the maintenance of effort for FY09 would be $501,000. That amount would continue to be charged back to the towns for 5.7 years. If we were to use the higher of the two estimates, doing the same calculations, that charge back amount would continue for 12 years. That is with our assets being taken. The back of the handout shows that if for some reason they decide not to put in the OPEB calculations, it is pretty much even.
We talked about these liabilities with Senator O’Leary. Barnstable County’s Administrator was there. Barnstable’s Charter basically says that they want the Sheriff to go to the State, but they want the Sheriff to go to the State only if they are going to take the liabilities. At the hearing last week, the Secretary of A & Fsaid that the State would take some of the liabilities for the employees who would be going to the State. All of the liabilities for the retirees from the Sheriff’s Department stay with the County, because they were County employees at the time. That was a real problem for Barnstable also, and for all of the Counties. Nobody has the exact calculation on that because nobody has the exact language.
One thing that Noreen did was to look at the GIC (group insurance commission) insurance plans. She compared those plans that are available in Dukes County that our employees would have access to, and compared them to what they have currently through the Cape Cod Municipal Health Group. They do not have any Blue Cross/Blue Shield plans, but they do have a Harvard Pilgrim Plan that is a PPO, which she could put right beside each other. As you look at it, because we pay 90/10 they would be paying more for their health insurance and getting less. Their co-pays would be higher, their deductibles would be higher, and their prescriptions would be higher. The Commonwealth pays 85/15. In Barnstable County they pay 75/25 so their employees would be paying less of a share, but they will have the same issues with co-pays. Norfolk County is self-insured, and they have retirees from their hospital that they have closed down. If Norfolk County Sheriff’s department goes to the GIC, they are not going to have a viable group within their health plan. It is going to be an issue if they are going to have to go back out into the open market for health insurance. These are things that we talked about with Senator O’Leary, things that we brought up last Wednesday at the hearing at the StateHouse, and again last Friday at the Massachusetts County Commissioners Association meeting.
There are issues in the bill itself that are inconsistent and during Noreen’s testimony she made the comment that she thought it was poorly crafted and not well thought out. There are some places where it says the County Government Finance Review Board will include a Sheriff. If the Sheriff has gone to the State why would it include the Sheriff? At another point it says it does away with the County Government Finance Review Board. At last Friday’s meeting of the Mass County Commissioners there were also Registers of Deeds there, because they are concerned that the transfer of the Sheriffs will make the Counties no longer viable, and that would mean the Registers of Deeds will have to go to the State. Those Registers of abolished counties that have gone are not particularly happy. The Registers of Deeds would like to stay as County employees.
One of the sheets Noreen handed out was the talking points from last Friday’s meeting, and the other was how they broke down the different sections of the Bill itself. They were trying to be unbiased. At the end of that meeting it was voted that the Mass. County Commissioners’ Associations opposed House Bill 4498, andsupported to fully fund the Sheriffs through a line item in the Commonwealth’s budget. They have been asking that people call and write the Committee members and Legislators. The County Commissioners are hoping that the Bill will go to a study committee. Most of them feel that if it is something that needs to happen, the Legislature should take their time and work it out. The fact that it has an emergency preamble is also a problem because it would have to be transferred by July 1, 2008. There are too many unanswered questions.
Questions:
Carlene Gatting – If the Sheriffs department were to remain with the County, what would happen to the unfunded retirement and OPEB liabilities?
Noreen Mavro Flanders – It would be charged to each department within the County. The retirement system is 65% funded. What 34B says that they will do is take an active employee, figure out the 65% funding of that person, and take assets equal to that amount. They will take what they have put in themselves, with the interest on it, and what the towns and County have put in to equal 65% of that funding.
Carlene Gatting – So the towns would have to pay a lot more if the Sheriffs department goes to the State?
Noreen Mavro Flanders – I think what you are talking about is the difference between the 65% and the 35% and that is going to have to be made up as well. This is the issue that we are having. We are not getting enough details from the Commonwealth to make good comparisons about how it is going to work. The handout shows three possible scenarios.
Michael McCormack – The unfunded liabilities are mandated to be fully funded by a particular year. There is an assessment that comes from the Treasurer’s office to every department in the County that goes a little bit beyond the actual costs. That extra goes towards funding the unfunded liability. If the Sheriffs employees go to the Commonwealth of Massachusetts the Treasurer will no longer be able to assess the Sheriffs office for that unfunded liability, and so somebody else has to pick that up.
Dan Flynn – The County of Dukes County has unfunded liability for retirement and other post employment benefits, is that correct?
Noreen Mavro Flanders – Yes.
Dan Flynn – Whether or not this bill is passed that liability is still going to be there for the voters or taxpayers of Dukes County. Is that correct?
Noreen Mavro Flanders – Some of it will be. Some of it will be offset with the assets.
Dan Flynn – The taxpayers of Dukes County are responsible for the liability and the State wants to collect it over a shorter period of time than what the Treasurer is currently collecting. In the short run the taxpayers will get hit hard. The Sheriff’s budget, that the County is responsible for, is that going to stay with the County, or is that amount of money going to go to the State to fund the Sheriff’s Department?
Noreen Mavro Flanders – If it is not going to be there at all, what they are saying is that the town’s assessments will be reduced by the amount of the maintenance of effort. The money won’t be there to go to anybody.
Dan Flynn – So it’s a balance. If the assessments to the towns are going to be reduced in the left hand, it’s going to be taken away for the unfunded liability in the right hand. In all actuality it could be a balance. It could be zero for the taxpayers.
Noreen Mavro Flanders – That’s what I was showing in scenario one. If it would be the same amount as the maintenance of effort it would be continuing to pay something like the full assessment for 5.69 years, scenario two an amount similar to the assessment for 12 years. But the retirement system would not have the asset.
Dan Flynn – That is just for the Sheriff’s Department not all County employees. You would still be chipping away at the unfunded liability. Could you identify the parcels of real estate that you have listed here? I believe they are all in Edgartown on Main Street, is that correct?
Noreen Mavro Flanders – Yes, they are all on Main Street. The jail and the land behind it.
Paddy Moore – On the left hand side these map and parcel numbers include the jail and the lots?
Noreen Mavro Flanders – The jail and four lots behind it.
Dan Flynn – In all of these meetings that you’ve been to, can you say right now that financially it is going to be a benefit if the Sheriffs go to the State or not?
Noreen Mavro Flanders – It is not going to be a benefit.
Dan Flynn – How can you explain that, because right now it doesn’t compute to what you’ve said?
Noreen Mavro Flanders – Do you mean to the County or to the taxpayers?