Balancing the County’s Budget Deficits
on the Backs of Children By Ray A. March
Part 29
From April 2, 2002 through Oct. 24, 2002
A Consolidation of Maneuvers
Three months after Donna Michelson was fired the state of California encouraged all local Children and Families Commissions to be fully independent of their county treasuries. Although Prop. 10 law mandated there would be no co-mingling of funds at the county level, local records do not show what prompted the state to take this position.
Even with the order Modoc County Supt. of Schools Carol Harbaugh was in disagreement with the state, and reluctantly supportive of the commission establishing a separate checking account from which it could make nominal draws.
Wearing the appearance of a compromise, Harbaugh wrote in an April 2 memo to her fellow commissioners that Auditor Judi Stevens told her the same day the memo was written that a separate checking account -- not a complete removal of Prop. 10 Trust Funds from the treasury -- could be established at a local bank.
“While I may have helped the commission set up the separate checking account for commission business, I want to remind members that I personally do not approve of the use of a separate checking account and the commission ‘removing’ itself from the services and resources of local public agencies and/or already established private nonprofit organizations,” Harbaugh wrote in the memo, taking credit for the partial removal of Prop. 10 funds from the county.
* * *
On April 21 Commissioner Phillip Smith renewed the commission’s intentions of going after Rosemary Nelson with an accusation that she had a conflict of interest stemming from an application for unemployment insurance payments filed by Donna Michelson that according to Smith, was sent to Nelson’s office instead of the commission’s.
“This suggests that there exists a personal relationship between you and our former executive director that may interfere with your unbiased participation in business dealings with her,” Smith charged.
Without the suggestion of a meeting to resolve the alleged conflict of interest, Smith essentially told Nelson in the letter that she should admit her guilt.
“We ask that you acknowledge your dereliction of duty in failing to notify the other commissioners of pending action through the Employment Development Department,” Smith wrote, “and we ask that you declare your allegiance to the stated goals of the entire commission, that being the development of programs that meet the needs of our county’s children above all else.”
In effect, Smith and the commissioners were asking for a loyalty oath in complete disregard for Nelson’s fundamental rights to a presumption of innocence until proven guilty.
* * *
On July 1 Nelson fired back with a two-page single-spaced letter addressed to now chair Mike Dunn, sitting on the commission as a representative of the Modoc County Board of Supervisors. She sent copies to State Sen. Rico Oller, Assemblyman Sam Aanestad, state Children and Families Commission chair Rob Reiner and Attorney General Bill Lockyer.
“It is with sincere regret that I am tendering my resignation effective immediately,” she wrote. “I have given this decision a great deal of thought and believe it would be going against the principles of my conscience to remain as a commissioner.”
As for Smith’s accusations of conflict of interest and assumption of guilt, Nelson was outraged.
“I feel my integrity and principles have been impugned by the assumption of my guilt without even talking with me,” she responded. “This is a violation of my constitutional rights,” she continued. “It sounds like the Wild West when my family had their language beat out of them for no honorable reason, but their survival insures that I have a voice that cannot be arbitrarily taken without proof of guilt.”
She then went on to blast the commission for continuing to keep the majority of Prop. 10 Trust Funds in the county treasury.
“Balancing the county’s budget deficits on the backs of children is not within my realm of principles,” she wrote in answer to the commission’s unwillingness to move Prop. 10 funds.
“We adults have responsibilities that we are woefully failing and I cannot participate in using Children’s Prop. 10 monies to balance budgets. Children do not have a vote nor do they have a voice at the table of business. They depend on our integrity.”
* * *
On July 25, following her resignation from the Modoc County Children and Families Commission, Nelson wrote a personal letter to Attorney General Bill Lockyer reminding him of the Prop. 10 law that “no money’s in the California Children and Families First Trust Fund shall be used to supplant state or local general fund money for any purpose.”
Nelson, as it has already been shown, had copied her July 1 letter to Mike Dunn to Lockyer. The letter in which she went into specific detail exposing Modoc County’s alleged violation of Prop. 10 law.
On Aug. 2 Lockyer’s senior assistant attorney general James M. Humes responded to Nelson with a classic, innocuous and non-committal letter in which he wrote thanking Nelson for her letter.
“Please be assured that the commission and its attorneys in this office are aware of the requirements that commission funds are to be used only to supplement existing levels of services and are not to be used to supplant state or local funds,” he replied.
* * *
The Modoc County Children and Families Commission was not finished with Donna Michelson.
On Oct. 10 Supervisor Mike Dunn, still commission chair, somehow sent her a letter with no address on it demanding repayment of $1,256.75 for work she had done that should have been paid -- not to her -- but to the commission.
Michelson replied two weeks later disagreeing with Dunn and referred him to tapes of commission meetings in which it was discussed that she and not the commission was to be compensated for the work she did.
In fact, Michelson added, “I do believe the commission owes me money,” and not the other way around.
Next: Part 30
It’s now 2009 and 2010 and the warnings keeping coming.
16 comments:
Superintendent Gary Jones, Carol Harbaughs County Schools successor and current First 5 Commissioner (for many years now), may not be as benignly uninvolved in this commingling and misuse of taxpayer funds as was once thought.
That's really too bad, if true; it was almost like Modoc was beginning to see honest brokers on the taxpayers behalf peeking out from behind the shuttered windows of Modoc's financial neglect - but most likely the collective denial has gotten to almost everyone now.
Ray,
You keep repeating the falsehood that "Prop. 10 law mandated there would be no co-mingling of funds at the county level" implying that keeping Commission funds in the County treasury was illegal. The law said only that the funds could be used only for purposes under the control of the Commission and could supplement, that is add to but not replace, pre-existing county-funded purposes. That the State "encouraged" commissions to move their funds demonstrates that the law itself did not require it.
As far as you have said so far, no purpose of the Commission was prevented by failure of the Treasury to pay out as requested.
This whole series is primarily about personality conflicts, and Michelson's refusal to accept the Commission's decision to leave the funds in the County Treasury.
Greg Small
Fort Bidwell
Greg, how in the heck do you think that the debt got so high when the County didn’t cut costs over these past ten years - employee cost in particular?
Answer: They used (borrowed) funds from other sources to pay for it - including Prop. 10 funds.
Now for some reason this next part seems really hard for some folks to fathom:
If you borrow money meant for children and use it instead to pay for recurring, escalating, and ongoing costs like county employee and retiree salaries and benefits, it is not only fiscally irresponsible & illegal, BUT YOU WILL GO INTO DEBT.
In other words, all of the pay raises that were given when the county was actually deficit spending (and should have been cutting costs) have grown exponentially because these raises and benefit increases were not supported by any real budget allocations, they were only made possible by the illegally borrowed funds, which were not meant for (and could not support) these types of ongoing expenditures.
Greg, are you saying that even though the county was deficit spending (by its own admission, and now supported by the facts) that it is somehow OK to "supplement" the county employee wages and benefits with these commingled funds?
That supposition is hard to support on several levels.
Firstly, because this "supplementation" of employee raises that took place for the 10+ years the county was deficit spending actually did replace any legitimate raises that they would have received if their program budgets actually could support it - which obviously we know now they could not.
Secondly, in some bizarre fashion in the minds of these First 5 commissioners and the county officials who sanctioned it, this “supplementation” somehow added to the general funds total assets available to spend, which on the whole is what created the horribly dysfunctional fiscal policy which ultimately led to the debt debacle.
And lastly, county taxpayer funded agencies are still being allowed to rely on this broken model of fiscal irresponsibility to deficit spend and yet still justify their dubious expenditures of public funds without any repercussions to those who made the decision – as seen only a few months ago with the county library and its librarian, Cheryl Baker.
Man, oh man. Greg, honestly? Here you take facts (the county commingled and misspent taxpayer funds and therefore went into debt) and somehow say it’s not about the debt, per se, but simply because some of the people involved had personality conflicts?
This is synonymous to saying that because the kids in my house don’t accept the decision of how long their morning showers should be, that it will therefore have nothing to do with having a sky-high hot water bill each month.
What a hoot. It’s called cause and effect, man. Look it up.
There is no doubt that this debt crisis was due, not to personality conflicts as portrayed by Mr. Small, but because of fundamental differences in how taxpayer funds should be accounted for and spent.
On the one hand, we have the majority of officials from agencies throughout the county of Modoc with the opinion that taxpayers funds, whatever their initial source - be it local, state or federal - can be allocated, spent, and lent without regard to providing the reasons for the spending, with no need for any accurate accounting of the payments, without having any pay-back provisions for such expenditures, and no repercussions for any individuals involved in such unexplained uses of taxpayer funds.
Conversely, there have been a minority of county and contracted staff and independent auditors over the years that go along with the idea that taxpayer funds must be safeguarded and spent according to the individual grant, contract, and program guidelines under which they were procured, all while providing adequate accounting procedures and public scrutiny and input into the process of expending those funds.
Mr. Small, rather than continuing to call Mr. March a liar on purely semantic grounds, and yet offering nothing to bolster your claims, please disregard the "personalities" that you say are the actual story here, and focus on the actions taken and the subsequent results instead.
Dismissing the events chronicled (after the facts took place) by Mr. March and the subsequent outcome of the actions taken by these county officials (millions of dollars of misspent funds and therefore debt for every taxpayer in Modoc County) based solely on the idea that these were simply “personality conflicts” is tantamount to looking at the world with blinders on.
What really happened was that some people misappropriated taxpayer’s money with little regard for the original intent of its use, nor were they concerned with the eventual effect that this misspending and borrowing would have on their neighbors in the future. They, along with the local newspaper, also had little regard for keeping the public informed about the real disposition of the taxpayer funds in our county for almost 20 years.
Others wanted to follow common sense accounting practices, conform to each specific programs guidelines, allow for public input, and, in short follow the intent, if not the specific requirements of the laws regarding their fiduciary duties towards the taxpayers.
The former remained employed, got raises, and were able to retire comfortably.
The latter were chastised, threatened, blacklisted, fired, and/or run out of town.
Come on all of you, your arguments have little to do with what I said. I know we are all concerned about the County deficit problem but we need to stick to the facts in order to understand and act correctly. Just because the County acted improperly in specific instances does not make their every action illegal.
These articles apply up to 2002. Many of your comments apply much later. In 2002, the Hospital debt and the County deficit were about $ 3 million, and had been about the same since 1998 (the Hospital debt started about 1996). All small, rural hospitals were running deficits due to rising costs, declining Medicare/Medical payments, and increasing, unpaid use of Emergency service. Many if not most failed and went out of business. Modoc had the only surviving small county hospital.
In 2002 is unlikely that the County had tapped "restricted" funds yet, and so had not done anything "illegal" as we understand that to mean today. It seems likely that the County may not have used the proper procedure to account for the deficit, but probably no more illegal than a parking violation. It was assumed that the Hospital would pay their debt back. Probably that was an over optimistic judgement, but no different than such judgments made by other counties and the State. Such choices and borrowing between department funds are within the legal discretion of the Board.
The comments by the various persons reported in this article series up to 2002, were mostly just personalities haggling. Much of what they said had not been properly researched, as Ray has previously commented, and frequently they were just plain wrong because of it. So I would argue that our current problems may in part be due to personality conflicts wasting valuable time and obscuring the real work of serving the community.
Some of you are concerned that County staff got paid and therefore were benefiting from the increasing deficit. This is technically true and probably the County should have cut back expenditures sooner. But we also benefited. Did you call to complain that a road had been plowed or repaired unnecessarily? When the Hospital saved your life did you say no? Did you complain that there were too many Deputies in your area?
Greg Small
Fort Bidwell
Greg, you say it is "technically" true that employees got raises that we couldn't pay. Does technically mean true or not true? or maybe sort of true? Sounds a bit like saying someone is technically pregnant. You put up a good smoke screen but that's all. They were intrusted with funds to use for a restricted purpose only, they chose to ignore those instructions. If this were private business they would all be in jail long ago. They lied to us, cheated us and took care of friends and relatives with our money. It's really that simple.
Greg, your point regarding taxpayers benefiting (without their knowledge and consent) from the unlawful expenditures and therefore not complaining about getting road or law enforcement services because of the deficit spending is one of the largest red-herring arguments yet.
As a taxpayer, had I known they were deficit spending for years (let's use the library as an example, since it is the most recent) I would most certainly have wanted the librarian and the BOS to implement cost cutting measures and potential revenue enhancements years ago in order to keep services as much as possible.
What I do not condone is this idea that you can be a county taxpayer funded entity like the library (and most other departments), and deficit spend while still giving raises for years, and then (as Cheryl Baker did) just show up at a BOS meeting with a request to fire an individual, reduce other employee and library hours (and therefore the services to the taxpayers) and then still allow this BOS or any department head that permitted such careless and slip-shod accounting practices to still keep their raises and benefit increases.
This is just one example of the rampantly poor performance by our public employees and officials, plain and simple, and it has been the “standard of mediocrity” and fiscal irresponsibility in our community for entirely too many years.
Greg, just how in the hell can you rationalize that being $20 million dollars in debt is somehow a "benefit" that the taxpayers should be thankful for because the county deficit spent public funds?!?
On the one hand, Gary Jones, Modoc County Superintendent of Schools, threatens to sue the County of Modoc because they are using (borrowing) the schools funds (that are commingled with all of the other funds in the treasury) and gets the county to stop illegally using the schools money – funds which are meant for the children of Modoc County, and not for balancing the county budget.
So far so good.
However, paradoxically, Gary Jones, Modoc County First 5 Commissioner, stays completely silent regarding the exact same commingling and borrowing which has been occurring with the Prop. 10 funds – funds which are also meant for the children of Modoc County and not for balancing the county budget.
Which begs the question: Mr. Jones, why this principled stand for fiscal responsibility in safeguarding the schools funds, and nothing concerning safeguarding the Prop. 10 funds?
Chester Robertson, Auditor Darcy
Locken, Treasurer Cheryl Knoch, Supervisor and BOS Chairwoman Pat Cantrall, Supervisor Geri Byrne and County Counsel John Kenny are all traveling to Sacramento to present our save ourselves plan to the powers there for aproval.
At a time when we are all hoping to save money Cantrall sends a small army to Sacramento when two people would be apropriate. Just the travel miles compensation for the five will be over $1500.00 and then there's meals and possibly hotel costs. Don't even want to know how much we'll pay that worthless lawyer to go. What is this going to cost us? All because they don't trust each other. Maybe we'll get lucky and they'll all decide to stay there.
Ironic that 2 of the architects of the illegal borrowing, Supervisor Cantrall and Treasurer Knoch, are going to present this "new" pay-ourselves-back plan to the SCO.
Wasn't this plan put forward by CAO Charlton and rebuffed by the state?
County Counsel Kenny was likely as knowledgeable and complicit as the rest. Wonder if there are any closed session minutes to see what advice he gave the supervisors over the years?
You will NEVER see any closed session minutes with County Counsel advice. However, online you can hear his advice which sometimes bears no resemblance to the laws or anything that can be understood. And if it makes any sense, the BOS just ignore it anyway.
Within the mob going to Sac I see no name to take minutes or notes of this meeting with state officials. Looks like another meeting to remain secretive. How about a recording of the meeting or meetings? They'll come home, each with a different story and we'll never know what really occurred. We will probably never be told the cost of this mob going to Sacramento.
There seems no practical reason for so many people being sent except they can't trust each other. We can be pretty sure Cantrall will take over the meeting and we all know how she controls a meeting. In fact why is anyone other Cantrall going? She will control everything and make all decisions as to what to report. After all they are just going to deliver a plan. They probably won't get any decision at that time and it could have all been done with a fax machine and a video conference call with nobody leaving town. We have all of the equipment to have video conferences so why not use it?
A few weeks ago the BOS ordered our auditor and treasurer to stop making calls to the lawyer because telephone calls cost too much. Now they send a mob to Sacramento when a conference call would be appropriate. Looks like saving money had nothing to do with restricting the auditor's and treasurer's calls. They simply wanted to restrict a source of information. Like all tyrants, they must control information to retain power. We, the people, still don't get a report from the budget committee as we were told we would get at every BOS meeting.
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