new positions. The Sheriff's Department currently has twenty-two Patrol Deputies and has allo-

The Glenn County Grand Jury found that R1: The Glenn County Grand Jury recom- all calls to the Willows Fire Department are mends that Willows Fire Department work first received through the Sheriff’s Department with the Sheriff Department and The Board of 911 Dispatch office before being routed to the Supervisors to fund two Dispatchers on each Fire Department. The 911 Emergency Dis- shift to answer all emergency calls as they are patch system has only one Dispatcher to re- received. This would allow the most critical ceive calls on each shift. With the increased emergency to be dispatched as quickly as pos- number of emergency calls received through sible while still meeting the needs of each call. the 911 dispatch system over the past years, these calls have placed the dispatcher in in- tense situations while handling several calls at P AGE | 50 2017-2018 GRAND JURY FINALREPORT | WILLOWS FIRE DEPARTMENT 2017-2018 Glenn County Grand Jury Report | Willows Fire Department the same time, which can cause delays in dis- patching calls to the Fire Department or other agencies.

The Grand Jury found the Willows Fire R2: The Glenn County Grand Jury recom- Department are working actively in an injury mends looking at other dispatch offices in Cal- prevention program by providing exercise ifornia to gather information on current sys- equipment on site at the fire house for all fire- tems used in areas that may help Glenn County men to use at any time. Their yearly physical find a solution for a more efficient working exams and labs screening provide a proactive model meeting our rural needs. Funding is al- approach to monitor and screen any possible ways a problem and especially for the small problems that may occur. county, but our needs for emergency response are equally as important as in the larger coun- ties. COMMENDATIONS The Glenn County Grand Jury commends the Willows Fire Department for having someone on duty to answer complaints that may come to the department. Most complaints or questions are solved on the spot and questions answered to the citizen’s satisfaction. The Glenn County Grand Jury Committee found a clean well-run Fire Department with capable, well trained leadership and staff that are proactive and forward thinking prepared to respond to the emergency needs of Willows and their surrounding areas of service. Thank you for your service to our community. We have only one minor additional suggestion. We feel that a Fire House Dalmatian dog is the only thing needed to make the city Fire House complete. Photo by: Google Images P AGE | 51 2017-2018 GRAND JURY FINALREPORT | WILLOWS FIRE DEPARTMENT 2017-2018 Glenn County Grand Jury Report | Willows Fire Department REQUEST FOR RESPONSE Pursuant to Penal Code section 933.05, the Glenn County Grand Jury requests a thorough and complete response statements from: From the elected officials or heads of departments • Willows Fire Department—Fire Chief From the following governing bodies: • Willows City of Willows • Board of Supervisors Reports issued by the Grand Jury do not identify individuals interviewed. Penal Code section 929 requires that reports of the Grand Jury not contain the name of any person or facts leading to the identity of any person who provides information to the Grand Jury. P AGE | 52 2017-2018 GRAND JURY FINALREPORT | WILLOWS FIRE DEPARTMENT 2017-2018 2 0 G 17 l - e 20 n 18 n G C len o n u C n ou t n y ty G Gr r a a nd n J d ur y J R u e r p y or t R |e Cpaloifrotrn—ia C Pu A b L li P c E E m R p S lo y U ee N s F Re U tir N em D e E n D t S y L s I te A m B ILITY CALPERS AND THE UNFUNDED LIABILITIES A 2017—2018 GRAND JURY FINAL REPORT ABSTRACT California’s public employee pension systems have immense gaps – called “unfunded liabilities” – between what they have paid as “assets” and what they will need to meet their obligations retirees and future retirees. These gaps are now billed back to the cities, counties and other entities that have contracted retirement and medical coverage with CalPERS. Glenn County’s bill for July 1, 2016 through June 2017 according to CalPERS is $5,184,587.89 and from July 1, 2017 through June 30, 2018, $5,701,927.56. Who is to pay for these extra charges? Answer: Today’s employees, employers and all the citizens of the County. P AGE | 53 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES 2017-2018 Glenn County Grand Jury Report | California Public Employees Retirement System The 2017 Comprehensive Annual Report shows Glenn County is facing a long term liability of $63 million to CalPERS Retirement and Health system CalPERS and Unfunded Liability Photo from online images: CALPERS BUILDING, SACRAMENTO SUMMARY CalPERS retirement system has not met their projected investments and are now passing their miscalculations to the very entities that have been sending both employer and employees contri- butions for CalPERS to invest for their employees’ retirement futures. (See Financial Investment Chart, Exhibit D) What does this mean to the county leaders? They will be responsible for trying to find the funding to pay CalPERS millions of dollars on a timely basis; and what happens if they cannot come up with the funds? The citizens of Glenn County will be held responsible for providing the County with these funds or could possibly lose control of our County government as we know it today due to State take-over. At the time of the Grand Jury interview with Glenn County’s Financial Director, this bill was approximately $50 million, payable in five years and increasing per day. According to the Glenn County’s Comprehensive Annual Financial Report of June 30, 2017, the long term liability is listed at $63,635,000 as stated in the Factors Affecting Financial Conditions pages ii. “Economic Challenges: The County continues to face economic challenges as wages and healthcare costs outpace the required revenues to support historical staffing levels. To combat the rising costs of wages and healthcare, the Board of Supervisors has frozen most of the funded vacant positions leaving some departments understaffed on a historical basis. Advancements in technology have mitigated the impact of staffing shortages, but services P AGE | 54 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES 2017-2018 Glenn County Grand Jury Report | California Public Employees Retirement System have been or will need to be reduced or eliminated as costs rise and positions remain frozen.” CalPERS actuaries have determined that there is not enough investments in the system to pay current and future retirement benefits; therefore, increases to employer monthly and annual con- tribution payments is needed to cover the costs for payments to current retirees and future retirees. Based on CalPERS Actuarial Valuation 2016, ( ), “The unfunded liability contribution for the (gain)/loss during the year prior to the valuation date is 20 percent of the full annual require- ment due to the five-year ramp, which increases the amortized payments.” Chart taken from CalPERS Miscellaneous Valuation Report, 2016, Many cities and counties are finding they cannot pay the costs calculated by CalPERS actuaries and are asking voters for sales and or property tax increases. Our county is in the same financial crisis. P AGE | 55 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES 2017-2018 Glenn County Grand Jury Report | California Public Employees Retirement System As reported to the Grand Jury, the Board of Supervisors has not paid any of the future costs as billed by CalPERS. Our Board of Supervisors is faced with a hard decision: How to raise the funds to pay the $63,365,143 long term liability under the terms set by CalPERS. PURPOSE Through an interview with Glenn County Finance Officer, Grand Jury was informed that CalPERS Retirement and Health system is passing on a huge debt to California counties to fund the future retirement and health benefits for employees. The Grand Jury wanted to know how this occurred; how much the County was being billed; and what the possible effects were to the citizens of Glenn County if the Board of Super- visors could not come up with the funds to pay. GLOSSARY CalPERS -- California Public Employee Retirement Sys- tem Unfunded accrued liabilities -- The amount of assets needed to pay the current employees and retirees for re- tirement and health care. Actuaries: persons who compute premium rates, divi- dends, risks, etc., according to probabilities based on statistical records. PEPRA--Public Employees' Pension Reform Act of 2013 (PEPRA) alters the way CalPERS re- tirement and health benefits are applied. Normal Cost Rate (NCR) Percentage-- The percentage rate calculated on total yearly payroll. This is calculated and paid to CalPERS by counties, cities, school districts and municipalities at the end of the reporting year. BACKGROUND In a letter to the citizens of Glenn County, the 2016-2017 Board of Supervisors Chairman wrote, “In accordance with Government Code Section 29064, also known as the County Budget Act, the Board of Supervisors within the State of California must approve a recommended budget with all revisions they deem necessary, by June 30 of each year. In order to meet this requirement, the Glenn County Board of Supervisors provided guidance to its Budget and Finance Committee to find ongoing savings instead of the previous one-time funding solutions. Using revenue and appropriations estimates provided by both the Department of Finance and Department Heads, there was a projected General Fund shortfall of $2,183.827 that excluded $940,837 of requested enhancements. The Board of Supervisors provided further direction to its P AGE | 56 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES 2017-2018 Glenn County Grand Jury Report | California Public Employees Retirement System committee to evaluate the department head’s budget proposal without any enhancements. A bal- anced budget was approved at their regular meeting held June 20, 2017 with a commitment to continue to look for long term solutions.” See copy of Letter with this report. The total of the combined County budget for operations, capital facilities, and debt service was stated at $129.7 million, or $15.4 million more than 2016-2017 budget. To continue to maintain levels of service in all departments, the board was forced to use all budget carryover, freeze certain vacant positions, and use $1,089,643 of one-time monies. After the passing of the County’s 2017-2018 budget, in August the County received notice that the payment to CalPERS is approximately $50 million plus for future costs of employees’ retirement and health benefits, payable in five-years. According to Glenn County’s Financial Officer, in February 2018, CalPERS actuaries made several changes to their formulation, raising the cost of what Glenn County must pay. According to the June 30, 2017 Comprehensive Annual Financial Report showed the long-term liability to be $100 million dollars and the liability to CalPERS to be at $63,365,143. The report continues to identify the need for Glenn County to pay down their long term liability. METHODOLOGY ● Interview with Finance Director ● Interview with Board of Supervisors ● Chief Actuary, 2016, Public Agency Actuarial Valuation Reports CalPERS Glenn County, https://www.calpers.ca.gov/page/employers/actuarial-services/employer-contri- butions/public-agency-actuarial-valuation-reports ● Review of CalPERS contract with the county ● CliftonLarsonAllen LLP and County Director of Finance, 2017 Comprehensive Annual Financial Report, December 2017 https://www.countyofglenn.net/sites/default/files/Fi- nance/2017%20Comprehensive%20Annual%20Financial%20Re- port%20%28CAFR%29.pdf ● Newspaper Article: Dowell, Scott. “Pension costs are city finance director’s nightmare”, Chico, CA, Enterprise-Record and Mercury Register, February 24, 2018, , “News” ● Letter from 2016-2017 Chairman of the Board of Supervisors ● Memorandum to notify public agencies of change in billing formulas. (see document placed behind this report) ● Internet Research: 1. https://www.calpers.ca.gov/page/employers/actuarial-services/employer-contribu- tions/public-agency-contributions 2. https://transparentcalifornia.com/salaries/glenn-county/?page=8 P AGE | 57 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES 2017-2018 Glenn County Grand Jury Report | California Public Employees Retirement System 3. Ortiz, Jon. “Stockton Bankruptcy plan sets good precedent for CalPERS, credit firm says,” http://www.sacbee.com/news/politics-government/the-state-worker/article3583953.html . html SacBee, 2014 4. Ring, Edward. “Under recognized, undervalued, underpaid unfunded pension liabilities” https://californiapolicycenter.org/underrecognized-undervalued-underpaid-unfunded-pen- sion-liabilities/ California Policy Center, March 2018 5. Mendel, Ed, Capital Press Reporter, Calpension.com website. https://calpen- sions.com/2016/05/02/why-bankrupt-san-bernardino-didnt-cut-pensions/ DISCUSSION Based upon what the Grand Jury has learned through interviews, CalPERS Valuation Reports, 2017 Glenn County Comprehensive Annual Report and web page data, the Grand Jury believes that the following information will provide an understanding of how the County of Glenn is facing a fiscal crisis unlike any previously experienced. Unfunded Pension Liability: The largest factor contributing to the net deficit is the unfunded pension liability. The unfunded pension liability is an estimate of how much it will cost the County to fund its pension obligations over time. The County pays benefit payouts as they become due but does not set aside funds for future and past pension costs, providing adequate funds for current retirees and future retirees. This liability is triggered by the requirements recently levied upon Glenn County by CalPERS addressing unfunded future pensions and retiree medical and health benefits as required by the CalPERS programs. Multiple agencies throughout Glenn County participate in CalPERS medical and retirement systems and are finding these rising costs difficult to meet. This report is going to show CalPERS data for the Cities of Orland, Willows, and County of Glenn and the approximate payments associated with CalPERS as provided in the 2016 Public Agency Actuary Reports. The 2016 CalPERS Actuarial Report lists the Funded Status of various plans the Cities of Orland, Willows and the County of Glenn are currently enrolled. The chart below shows the measure of Funded Status CalPERS uses as an assessment tool for needed employer contributions based on the selected actuarial cost method used to fund the plan. Local Government Funding Status as of 2016 Orland Willows County of Glenn Miscellaneous 70.6% 68.7% 62.5% PEPRA Miscellaneous 88.7% 91.0% PEPRA Safety (Police) 92.3% 87.4% 92.02% P AGE | 58 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES 2017-2018 Glenn County Grand Jury Report | California Public Employees Retirement System Safety 72.1% 65.9% 60.9% PEPRA-Safety (Fire) 90.3% Safety-Second Tier Plan 95.3% An explanation of how CalPERS billing works. Actuaries: According to the City of Chico Administrative Services Director, “CalPERS is the organization that California municipalities have contracted to provide retirement benefits for em- ployees. CalPERS administers these plans and assesses municipalities the costs of these benefits for retirees. CalPERS employs actuaries that calculate how much an agency must pay to fund the future re- tirement benefits of employees. There are many factors that actuaries use to determine how much the system will need to pay current and future retirees. These include: Benefit formula: An agency chooses a benefit formula for their public safety em- ployees (police and fire) and their miscellaneous employees (non-safety employees.) For example, a benefit formula might be “2 percent at 55.” This means that a retiree will get 2 percent of their annual salary for every year they were vested in the CalPERS plan upon retirement after age 55. Someone who retires with 25 years of service at 55 would receive 50 percent annual compensation. Discount Rate: CalPERS takes contributed funds and invests them. The investment return is called the discount rate. Some years the actual investment rate is higher and sometimes it is lower than the actuarial projected discount rate. Net Pension Liability (NPL): This liability represents the future retirement benefits owed to current and future retirees from the plan that exceed the plan assets. CalPERS calculates and reports each agency’s NPL in its annual actuarial reports. Contributions: Both the agency and employees make a contribution to the retirement plans. Em- ployees contribute a fixed percentage of their salaries to cover the employee’s share. In addition, employers pay an annual lump sum to reduce the NPL and a percentage of current employees salaries to CalPERS for their future benefits. A change in any one of those factors may require larger annual contributions to CalPERS.” (“Pension costs are a city finance director’s night- mare,” Chico, CA, Enterprise-Record and Mercury Register February 24, 2018, , “News”). As per the Glenn County Director of Finance, CalPERS formula calculations can change at any time. Benefit Formulas: Based on the above explanation, employer contributions are determined by periodic actuarial valuations. These valuations are based on the benefit formulas the agency pro- vides and the employee groups covered. The figures shown in the chart below for the Cities of Orland and Willows and the County of Glenn are the minimum required employer contributions before any cost sharing for three years. The employee portion is in addition to the employer's cost. The minimum required employer contribution includes the sum of two components: P AGE | 59 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES 2017-2018 Glenn County Grand Jury Report | California Public Employees Retirement System 1. Normal Cost Rate (NCR), which represents the annual cost of service accrual for the upcoming fiscal year for active employees. Normal cost is shown as a percentage of payroll and paid as part of the payroll reporting process at the end of the year. 2. Annual payment on the Unfunded Accrued Liability (UAL) is the amortized dollar amount needed to fund past service credit earned (or accrued) for members who are cur- rently receiving benefits, active members, and for members entitled to deferred benefits, as of the valuation date. The UAL is billed monthly. The Public Agency Required Employer Contributions shown are of July 1 of each year. They may not reflect changes in plan benefits, changes to contracts, prepayments, or lump-sum payments. The figures shown are the minimum required employer contributions before any cost sharing. The employee portion is in addition to the employer's cost and is not shown. With this year’s change in transferring the Willows Police Department to the Sheriff’s Department for the 2017-2018 fiscal year, and current raises provided to all employees, it is expected to change the NCR and UAL amount Glenn County will owe to CalPERS. Also, with the understanding from the Board of Supervisors and the County’s Finance Director, the future payments in NCR and UAL have not been paid for 2016-2017 fiscal year, which has put the County of Glenn at risk to be charged 10 percent late payment charge as stated in the Actuary Valuation Report. Salary, percentage and UAL Payments: All data used in the table below was gathered from the latest CalPERS Valuation Reports. The total salaries reported were multiplied by the NCR per- centages. The NCR is the amount owed to CalPERS at the end of that fiscal year, and the UAL can be paid monthly or annually due on June 30 of each year. As reported to the Grand Jury, the County has not paid any UAL payments or NCR percentage for 2016-2017. See below in blue shading. Projected and Current CalPERS UAL and NCR Charges for the City of Or- land, Willows and County of Glenn Nom. Cost Rate UAL Pay- Nom. Cost Rate UAL Pay- Nom. Cost Rate UAL Payment ment ment City of Orland FY 2018-2019 FY 2017-2018 FY 2016-2017 PEPRA Misc % 6.842% $240 6.533% $71 6.56% $25 due $20,139.19 15,307.41 $15,358.95 Miscellaneous % 7.92% $190,972 11.04% $161,645 11.008% $136,443 Due 111,016.59 $110.550.88 $108,986.69 0 PEPRA Safety Po- 12.141% $1,626 11.99% $3 N/A N/A lice $28,227.10 $6,715.60 Safety 19.416% $119,545 18.615% $93,546 18.428% $75,232 108,134.50 $111,990.63 118,699.91 Total $267,498.75 $312,383 $244,564,52 255,265.00 $124,345.64 136,468 City of Willows FY 2018-2019 FY 2017-2018 FY 2016-2017 P AGE | 60 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES 2017-2018 Glenn County Grand Jury Report | California Public Employees Retirement System PEPRA Miscellane- 6.842% $479 6.533% $4 N/A N/A ous $20,136.62 $2,207.37 PEPRA Safety Fire 12.141% $760 11.99% $7 N/A N/A $10,808.24 $5,563.60 PEPRA Safety Po- 12.141% $1,764 11.99% $72 12.082% $20 lice $13,948.98 $11,706.96 $8,393.40 Miscellaneous 12.760% $243,107 12.036% $210,755 11.995% $188,003 $37,553.83 $86,331.34 $98,146.93 Safety 19.416% $336,977 18.615% $293,566 18.428% $260,888 129,655.30 $45,272.80 $136,634.77 TOTAL $242,750.75 $583,087 $151,081.06 $504,404 $243,175.10 $448,911 County of Glenn FY 2018-2019 FY 2017-2018 FY 2016-2017 Miscellaneous 7.924% $3,582,140 7.672% $3,114,295 7.89% $2,662,963 $1,777,369.84 $1,618,446.12 $1,624,122.26 PEPRA Safety 12.141% $851 11.99% $13 12.082% $0 Peace Officer $28,224.77 $16,521.62 $11,568.09 Safety Second Tier 17.614% $631 16.842% $0 16.656% $0 17 $42,455.60 $23,207.43 $11,568.09 Safety 19.420% $699,448 18.615% $604,591 18.428% $531,273 $298,895.74 315,304.41 $346,270.23 TOTAL $369,576.11 700,930 $1,973,470.58 $3,718, 899 1,990,351.89 $3,194,236 The above chart was taken from CalPERS Actuarial Valuation Reports. The total of the 2016- 2017 various plans for Glenn County is approximately $5,184,587.89. The CalPERS Actuarial Valuation Reports dated June 2016, details each of the four areas listed in the chart above in different sections. (See Appendix) Each subtopic in the Actuarial Valuation Reports identifies required contributions, future projected employer year’s valuation, future costs, changes since the prior year’s valuations, as well as the (gain)/loss analysis along with other infor- mation. In early 2018, CalPERS made several policy changes that will take effect in the 2017-2018 fiscal year. CalPERS lowered their expected investment earnings rate from 7.5 percent to 7 percent as well as changed the period for recouping future investment losses from 30 years amortization to 20 years. This change dramatically increased the projected future pension plan contributions for agencies. These new changes are not reflected in the above chart showing UAL and NCR pay- ments or the chart below showing future projections. The County could easily owe more than $70 million in back, current and future payments based on new actuary calculations. The “5-year” ramp started in the 2016-2017 Fiscal Year. Based on the Valuation Reports a 10 percent charge is ap- plied when a contracting agency fails to remit the required contributions when due. Many cities and counties have decided not to react to the rising debt from the “5-year ramp”, in favor of waiting for a hopeful realignment from CalPERS. A majority of counties are in the same position as Glenn County as the cost of CalPERS doubles and triples. P AGE | 61 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES 2017-2018 Glenn County Grand Jury Report | California Public Employees Retirement System Glenn County citizens need to be aware that many lives will be changed with this financial burden placed on our County. CalPERS is in survivor mode to remain financially solvent, and their ac- tions are threatening local governments solvency. The CalPERS Actuarial Valuation Report, which shows projections for the next six years, could not all be shown within the limited space of this report. This report shows the projection for the next four years: 2018-2019 through 2021-2022. Projected Employer Contributions based on Normal Cost Percentage of 2016 Total Payroll Normal Cost UAL Payment NCR UAL Pay- NCR UAL Pay- NCR UAL Pay- Rate % = $$ ment ment ment City of Orland FY 2018-19 2019-2020 FY 2020-21 FY 2021-2022 PEPRA Misc 6.842% $240 6.8% $500 7.1% $890 7.1 $1300 % due 20,119.17 $19,995.67 $20,877.83 $20,877.83 Miscs 11.569% $197,889 12.1% 240,,000 13.2 272.00 13.30 313,000 % Due 111,016.59 $116,122.13 $126,678.68 $127,638.37 PEPRA Safety 12.14% 1,626 12.49% $1,900 12.10% 2,100 13.1 2,400 Police 28,227.10 $28,828.26 $27,899.28 $30,456.71 Safety 19.416% $119,545 20.3% $149,000 22% $172,000 22.0 200,000 108,134,50 $113,057.81 $122,525.70 $122,525.70 Total Cost $267,487,86 $319,300.00 $278,004.86 $391,400.00 $287,981.50 $175,262 $301,498.62 $516,700 Payment Due $586,797.86 $669,404.86 $473,243.50 $818,198.62 City of Wil- lows PEPRA Miscel- 6.842% $479 6.80% $500 7.1% $560 7.1% $620 laneous $20,136.62 $20,013.01 $20,895.94 $20,895.94 PEPRA Safety 12.141% $760 12.40% $810 13.1% $940 13.1% 11,100.00 Fire $10,809.13 $11,039.72 $15,052.03 $11,662.93 PEPRA Safety 12.141% $1,764 12.40 $1,900 13.1% $2,300 13.1% $2500 Police $13,950.13 $214,247.72 $15,052.03 $15,052.03 Miscellaneous 12.759% $243,107 13.3% $280,000 14.5% $311,000 14.5% $350,0003 $94,703.04 $98,718.59 $197,625.53 $107,625,53 Safety 19.416% $336,977 20.30% $387,000 22.0% $425,000 22.0% 473,000 129.628.58 $135,530.51 $146,880.36 $146,890.36 TOTAL $269.227.32 $583,087.00 $279,549.56 $670,210 $302,116.79 $739,800 $302,116.79 $837,220 Payment Due $852,314.52 949,759.36 $1,041,916.79 $1,139,336.79 County of 2018-2019 2019-2020 2020-2021 2021-2022 Glenn Miscellaneous 7.924% $3,711,882 8.4% 4,391,000 9.3% $4,882,000 9.3% $5,509,000 $1,777,369,94 $1,884,137.64 $2,086,009.53 $2,086,009.53 PEPRA Safety 12.141% $851 12.40% $900 13.1% $1.200 13.10% $1,200 Peace Officer $28,227.10 $28,829,26 $30,456.71 $30,456,71 Safety Second 17.614% $631 18.40% $760 19.90% $1,100 19.90% $16,000 Tier 17 $42,465.24 $44,360.19 $47,976.51 $47,976.51 Safety 19.416% $699,448 20.30% $808,000. 22% $891,000 22% 996,000 $298,834.18 $312,439.84 $338,604.86 $338,604.86 TOTAL 2,146,896.36 $4,412,812.00 $2,269,767.03 $5,200,660 $2,503,047,92 $5,775,300 2,503,047.62 $6,522,200 P AGE | 62 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES 2017-2018 Glenn County Grand Jury Report | California Public Employees Retirement System $6,559,708.36 $7,470,427.03 $8,278,347.62 $9,025,247.62 *Normal Cost Rate is equal to the 2016 Payroll as reported by CalPERS Valuation Reports 5-year ramp: The County leaders reported to the Grand Jury that as of February the County has paid the statutory minimum contribution amount prescribed by Government Code Section 22892 directly to CalPERS. The additional UAL, future costs and accrued costs have not been paid. If the calculations in the chart above are relatively close for the next four years, the amount owed to CalPERS will be approximately $79,510,531.48. By adding an additional year of rising costs, the amount owed to CalPERS could be well over $85 million payable.. With the costs rising at such an alarming rate, multiple news reporters following the CalPERS rates are predicting that for the year 2022-2023 the percent increase could rise by 65 percent, this could amount to 30 to 40 percent of the General Fund revenues to cover pension costs. What is the solution? In the article by Chico’s Administrative Services Director, it states that without change, the rate increase impacts on future budgets will be devastating. Future services may need to be reduced or eliminated because funds are allocated to pay the pension liability instead of services like police, fire, community development, and public works. Other municipalities throughout California have acted on or are considering: ● Asking employees to pay more of their share of pension benefits ● Request increases in sales and property taxes ● Advocating at CalPERS board meetings requesting relief from the projected future rate increases ● Set aside funds to pay future contributions ● Looked at leaving the CalPERS retirement system ● Opting to do nothing but wait and see what happens ● Filed Bankruptcy Employees asked to pay more: If the Board asks current employees to pay more into their retire- ment and health benefits and raise the benefit rates to new hires, the amount gained would still not be enough to pay the current UAL and the NCR percentage rate charged at the end of the year. All in all the issue is money and where it is going to come from. Sales Tax/Property Tax: According to the Glenn County Chief Financial Director, if the County is to pay this as net money, the County would need to raise approximately $294 million based on the fact that $0.17 on the dollar stays in the County. This collection of funds creates the potential for the State to receive approximately $264 million during the same time the County is meeting the $80 million owed to CalPERS. P AGE | 63 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES 2017-2018 Glenn County Grand Jury Report | California Public Employees Retirement System Leaving CalPERS: Other counties have tried to leave CalPERS for other retirement and health coverage, but CalPERS has effectively been able to block the entity from leaving through court proceedings as well as through legislative laws that were placed to protect CalPERS from losing any members. When a pension plan is closed to members, state law requires that the plan be terminated. Termination triggers a fee large enough to pay the pensions promised to remaining plan members for decades into the future. The big fee is needed because employers and em- ployees no longer pay into a terminated plan. Each CalPERS Actuarial Valuation states the cost per each account, should the County want to end the contract with CalPERS. For Glenn County to terminate the Miscellaneous Account, which is the largest account, the County could be facing an $90-100 million termination fee. When Stockton was going through bankruptcy, the presiding judge ruled a termination fee would need to be paid by the City of Stockton that boosted the Stockton pension debt or “unfunded lia- bility” from $370 million to $1.6 billion if the city tried to move to another pension provider. Other cities have tried to leave CalPERS system with much of the same consequence. Setting aside funds: Glenn County Board of Supervisors recently changed the policy that allowed employees to receive monetary funds to “opt-out” of the County’s Health Plans. Through the sav- ings of employee “opt out” plan, the County saved approximately $800,000 after providing raises to current employees. Please see the attached document, Exhibit A Summary of Benefits-Group Insurance Coverage, for complete explanation of benefits offered to County employees. Currently, without knowing what the Board of Supervisors will do, the Grand Jury has found that they are actively discussing this issue with the County’s Heads of Departments and Finance Com- mittee. This is in the beginning stages of discussion and a resolution to this issue will not come easy. How is the County going to do this? The Grand Jury has thought of six options, but the County may be considering other options than listed: Option 1- Increasing sales and property tax to the citizens of Glenn County. To provide this option, the voters of Glenn County will need to approve additional taxation for five years or the time it takes to remedy the PERS costs. Option 2- Establishing a reserve account Option 3- Bankruptcy-Chapter 9: This would have four requirements : (1) authorization to be a debtor by state law; (2) must be insolvent as defined in the bankruptcy code; (3) the entity must accept a plan to adjust its debts; (4) the entity must obtain the agreement of the creditors and be willing to negotiate in good faith. P AGE | 64 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES 2017-2018 Glenn County Grand Jury Report | California Public Employees Retirement System Under Chapter 9, filing entities must come up with their own debt restructuring plans and courts approve or reject it with input from other stakeholders. Bankruptcy would be the last resort, but it does give policymakers time to restructure and relief from creditors, such as CalPERS. The prob- lem with filing bankruptcy against CalPERS is how it is going to affect current retirees, as their benefits would be reduced drastically. Another problem would be the degradation of the counties and cities core services, including police and fire departments already struggling to hire and retain workers. According to the article Stockton bankruptcy plan sets good precedent for CalPERS, credit firm says, “...the judge’s decision was ‘somewhat of a surprise,’ given his earlier comments, and would discourage other contracting employers from using bankruptcy to cut their growing pension liabilities.” http://www.sacbee.com/news/politics-government/the-state-worker/arti- cle3583953.html Option 4 - Meet with the State of California fiscal entities, including CalPERS, in confidential discussions with Glenn County’s leaders, asking the State to provide an alternate solution. This would include allowing the County more time, reduced UAL allocations, and reduced NCR per- centage rate for the County to afford the extra costs associated to CalPERS, or to prepare for the State to take over the assets and, selectively, some of Glenn County essential employees. Califor- nia State would run it themselves or get another county to take over. This action would be the first in California to have a county turning over assets to the state. Option 5 - Contact other counties to collaborate with Glenn County to convince the State and/or CalPERS that the present increase is not doable. Option 6 – Consider the implication of going out of business. The people of Glenn County need to be informed of the consequences of going out of business. FINDINGS and RECOMMENDATIONS Findings Recommendations

It was found that the CalPERS UAL R3. As a policy-directed body, the Grand Jury rec- and NCR rates will be significantly in- ommends the Board of Supervisors create, update, creasing in the years to come, causing cur- or amend financial policies and procedures that will rent financial policies to become outdated. guide future Boards in managing financial issues such as Glenn County is facing today.

The Grand Jury found that several de- R4. The Grand Jury recommends the Board of Su- partments realigned and reclassified em- pervisors have an outside auditor provide a non-bi- ployees’ positions, granting the positions ased report in recommending areas throughout the large percentages of raises. With the addi- County where financial savings are possible. tional spike in pay, results were an increase in CalPERS payments. COMMENDATIONS The Grand Jury commends the Cities of Orland and Willows for addressing the CalPERS unfunded liability in their budget. CONCLUSIONS It is believed by the Grand Jury that the Board of Supervisors and other County leaders need to team with the citizens of Glenn County to answer the question: How is the County going to meet the financial obligations; provide services for the public good, both local and state mandated levels of service; and do so within its limited revenue generating capability and cost sharing with the State? P AGE | 66 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES 2017-2018 Glenn County Grand Jury Report | California Public Employees Retirement System *Although this is an extensive researched report, there may be omission and errors that were not identified. REQUEST FOR RESPONSES Pursuant to Penal Code section 933.05, the Glenn County Grand Jury requests a thorough and complete response statements from: From the following individuals: Glenn County Director of Finance ■ City of Willows Manager ■ City of Orland Manager ■ From the following governing bodies: Board of Supervisors ■ Invited responses Anyone who wants to respond to this report. Reports issued by the Grand Jury do not identify individuals interviewed. Penal Code section 929 requires that reports of the Grand Jury not contain the name of any person or facts leading to the identity of any person who provides information to the Grand Jury. P AGE | 67 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES 2017-2018 Glenn County Grand Jury Report | California Public Employees Retirement System Letter from the 2016—2017 Chairman of the Board of Supervisors to the citizens of Glenn County. P AGE | 68 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES 2017-2018 Glenn County Grand Jury Report | California Public Employees Retirement System Letter from the 2016—2017 Chairman of the Board of Supervisors to the citizens of Glenn County. P AGE | 69 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES 2017-2018 Glenn County Grand Jury Report | California Public Employees Retirement System Memorandum to all public agencies notifying the change in billing practices. P AGE | 70 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES 2017-2018 Glenn County Grand Jury Report—Orland Unified School District Glenn County Grand Jury Report| Orland Unified School District Orland Unified School District A 2017—2018 GLENN COUNTY GRAND JURY REPORT ABSTRACT Three years ago, Orland Unified School District found itself in financial trou- ble due to not following their own policies and procedures. The Orland Uni- fied School District responded without addressing the 2014-2015 Recom- mendations. P AGE | 71 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES Glenn County Grand Jury Report| Orland Unified School District A look at changes made since the 2014-2015 Grand Jury Report call- ing for compliance to the policies and procedures set by Orland Uni- fied School District A follow-up to Findings and Recommendations SUMMARY Through education in governance best practices, public meeting laws, personnel, finance and cur- riculum as well as reviewing the policies and procedures, the Orland School District has made transparent their errors of 2014-2015 to better their decisions of tomorrow. GLOSSARY OJUSD: Orland Joint Unified School District GCSS: Glenn County Superintendent of Schools PURPOSE The Orland Unified School District Superintendent replied without addressing the recommenda- tions set by the 2014-2015 Grand Jury. These Recommendations are important for the operation of the Orland Unified School District. Due to the position change of the Glenn County Superin- tendent of Schools, the 2014-2015 Recommendations were not responded by the new Superin- tendent. GLOSSARY OUSD: Orland Unified School District GCSS: Glenn County Superintendent of Schools BACKGROUND The 2014-2015 Grand Jury was instrumental in the resurrection of the policies and procedures followed by the School Administration and Board of Trustees. Previously the policies and proce- dures had not been adhered to, monitored, or complied with causing a financial burden for the local School District. METHODOLOGY The 2017-2018 Grand Jury requested meetings with the OUSD Superintendent and a member of the OUSD Board; reviewed policies and procedures; and the 2014-2015 Grand Jury Report. FINDINGS Several areas were listed in the 2014-2015 report that have not been addressed by previous Grand Juries. The following is a listing of the recommendations and effects from the 2017 – 2018 Grand Jury investigation. P AGE | 72 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES Glenn County Grand Jury Report| Orland Unified School District 2014-2015 Recommendation: 2017-2018 Results • The Board of Trustees be edu- • The Board members and Superintendent have attended cated in the Fiscal, Admin- training and participated in the California School Boards istration and policies and pro- Association (CSBA) Annual Educational Conference, a cedures as stated by the previ- conference for elected Trustees to become educated in ous report. best practices in school governance, public meeting laws, personnel, finance and curriculum held in Sacramento. The Superintendent will participate and encourage all members of the Board of Trustees to participate in the Masters in Governance program (a year-long seminar), particularly newly elected Trustees and future Trustees. Board workshops and study sessions will be utilized as a forum for deeper training and exploration of complex fi- nance, personnel and governance training topics related to the 2014-2015 Grand Jury’s Findings. • Time sheets are not being used § All time sheets are now being required of all participants in a functional manner. in the school district. They are reviewed and signed off by a Supervisor. The Administration personnel time- sheets are reviewed and signed by the Superintendent and the Superintendent’s timecard is reviewed and signed by the Board Chairperson. Time cards are kept as required by the Education Code. § The Director of Personnel is responsible for the calculat- ing and recording all timesheets including the Superin- tendent’s staff. The Director also calculates accrual of va- cation time, sick leave, and comprehensive time off. • The Policy and Procedures • All grievances/complaints are held in strict confiden- Manual provides a griev- tially. ance/complaints form for eve- • Training of personnel is held monthly on policy and pro- ryone’s use. cedures. A different topic is covered each month. • The Board Policy and Admin- istration Regulations are posted on the Orland School District’s website. • All employee’s Form 700 • All Board members, Superintendent and Financial Per- (Fair Political Practices Com- sonnel’s Form 700 are sent to the Glenn County Office of mission Statement of Econom- Finance. ics Interest) are completed P AGE | 73 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES Glenn County Grand Jury Report| Orland Unified School District 2014-2015 Recommendation: 2017-2018 Results yearly in January. They are available for public viewing. • Create a manual for the han- • A manual on financial operations (handling of any and all dling of all monies throughout funds/money) was created and is available at all school the school district. sites and the District office. • Provide a procedure for gas • Gas cards are no longer provided to anyone unless a ve- cards and other expenditures. hicle is requested and checked out for school use and ad- ministration purposes. All receipts must match with the vehicle request form that identifies the place, location of the event and signed by the requested persons involved. It is reviewed and signed off by the Superintendent and/or the Board of Trustees. The District does not provide any stipends for personal use of vehicles, and any personal expenses for gas, mile- age, cell phones etc. • The full Board of Trustees must sign off on any extraor- • A policy is established for ex- dinary expenses. penditures outside of ordinary and customary operations. • Bond/Building/Real Estate • Restrictions have been put into placed for all contracts Projects and purchases. All contracts and purchases must be ap- proved by the Board of Trustees and no longer by the Su- perintendent alone. • Any purchase over $50,000 has to be approved by the Board of Trustees. (Purchases of books, equipment can run above the allotted amount) • All documents pertaining to the purchase of the new Dis- trict Office is contained in a folder at the new district of- fice location. • All lease/lease-back building projects are in safe keeping at the District Office. • An appraisal for the new district office was received for $480,000 with purchase price being $410,000. • As per the Superintendent, all real estate transactions are filed and recorded at the County of Glenn with the origi- nals filed at the District Office. P AGE | 74 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES Glenn County Grand Jury Report| Orland Unified School District 2014-2015 Recommendation: 2017-2018 Results • Co-Star Grant • The people involved in giving stipends to preferred per- sonnel are no longer with the Orland School District. • To retrieve these stipends, it would require the District to file in Small Claims Court. Filing and court costs could be more than the stipend given. • Those receiving a stipend did so in good faith. • In a new Co-Star Grant received this year, it is required that an approved receipt (approved by the Superinten- dent; in his absence, the Board of Trustees) be presented for payment. CONCLUSION It is determined by the current Grand Jury that all of the previous Findings have been met. Regarding the response to the 2014-2015 Grand Jury report, a belated response letter received November 2017 from the Glenn County Superintendent of Schools stated: “The efforts put forth to benefit the OJUSD were exhaustive: the result of these ef- forts being the district was able to restore themselves to a status of fiscal solvency.” And “Given a thorough analysis of fiscal issues have been performed, the issues dis- covered had been addressed, that matter of potential fraud and/or misappropriation of funds had been pursued to the fullest extent possible, and revenues were handily covering expenses, the GCSS renders the matters considered at that time closed.” (See full response letter in the Response section of this report.) REQUEST FOR RESPONSES Pursuant to Penal Code section 933.05, the Glenn County Grand Jury requests a thorough and complete response statements from: None Any and all persons involved in this report are invited to respond. DISCLAIMER Two Grand Jury members recused themselves from this investigation. Reports issued by the Grand Jury do not identify individuals interviewed. Penal Code section 929 requires that reports of the Grand Jury not contain the name of any person or facts leading to the identity of any person who provides information to the Grand Jury. P AGE | 75 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES Glenn County Grand Jury Report| Orland Unified School District This page left intentionally blank. P AGE | 76 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES Glenn County Grand Jury Report| Orland Unified School District 2017-2018 Glenn County Grand Jury Report—Orland Haigh Field Orland Haigh Field A 2017—2018 GLENN COUNTY GRAND JURY REPORT ABSTRACT The airport at Orland Airport, Haigh Field, industrial park is seeking renters to start their business. The airport is advertising through internal County sources, but should they solicit using outside vendors? P AGE | 77 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES Glenn County Grand Jury Report| Orland Unified School District The Orland Airport Industrial Park southeast of Orland, Haigh Field is self-sustaining and ready for business growth to add value to the air- port Orland Airport, Haigh Field SUMMARY The 2015-2016 Grand Jury investigated and reported on the airport’s 65-acre industrial park lo- cated at the Orland Haigh Field. The response document was received and misplaced by the 2016- 2017 Grand Jury and because of this the 2017-2018 Grand Jury decided to request a new response and reinvestigate the Orland, Haigh Field Airport for the 2017-2018 Grand Jury Report. BACKGROUND The 2015-2016 Grand Jury prepared a report with regard to the findings of their inspection of the Orland Haigh Field Airport. A recommendation was made: “The Industrial Park at the Orland Haigh Field Airport be marketed to increase revenue and to create a cash surplus for replacement of old equipment and repairs.” The 2016-2017 Grand Jury requested that a new Response be drafted and included in the 2017- 2018 Grand Jury Report. Due to the amount of time that had lapsed since the original investiga- tion, the 2017-2018 Grand Jury performed a follow-up investigation with regards to the revenue and any changes made to the conditions of the buildings at the airport and Industrial Park. METHODOLOGY An interview was conducted with the acting Deputy Director and the Facilities Maintenance Su- pervisor of the Glenn County Planning and Public Works Department. DISCUSSION The acting Deputy Director provided budget information which indicated they receive their money through grants from the FAA, and to a lesser degree, from the State, requiring matching funds by the Planning and Public Works Department. The airport also receives revenue from the sale of fuel, rental of hangars, and the leasing of other airport property. It was reported that all of the hangers were rented. These funds have been used as matching funds for the FAA and State grants received. Thus, the airport is self-sustaining on a basic level. It was explained for the purpose of business park leasing and economic growth; the County cur- rently employs an agent working to market Glenn County and serve as a liaison officer between the county and prospective businesses looking to settle in Glenn County. Currently, there is one renter at the Industrial Park and one warehouse available for rent. The possible reason that there is a lack of renters may be because the lessee would have to build first before they could occupy the site, with the exception of two buildings, one which is currently P AGE | 78 2017-2018 GRAND JURY FINALREPORT | CALPERS AND ITS UNFUNDED LIABILITIES Glenn County Grand Jury Report| Orland Unified School District rented and another which has been leased in the past. The remaining three lots in Phase I have paved streets which include curbs, gutters, storm drainage, street lights and fire hydrants. They also have access to sewer, water, power and communications. Incentives are provided for new renters who have to put buildings on lots that don’t currently have a building. The Grand Jury members were given a tour of the office/warehouse in the Industrial Park that has been leased in the past. A tour of the airport showed improvements made in one of the restrooms and the outside entrance area of the lounge building. More changes will come with more construc- tion to update and comply with ADA requirements. FINDINGS AND RECOMMENDATION Findings Recommendations