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The truth behind the city’s ‘found’ money

POSTED May 21, 2010 10:14 p.m.

Turlock’s residents and our city employees deserve to know the truth about the millions of general fund dollars “found” stashed away in a series of special holding funds that covers the city’s state unemployment, workers compensation and health insurance costs. In reality, the money was never “lost” to begin with. There are individuals within city staff who knew the funds existed and that they held millions in excess reserves. Those same individuals chose not to disclose the facts about these funds to the city council, budget subcommittee or the interim city manager in the face of city employees losing their jobs last year.

So why has the money been “found” now? The money was not found but rather its existence divulged by members of city staff just ahead of being publicly “discovered” anyway. As a member of the budget subcommittee I was already on the trail of the money because of very direct questions being asked of department heads about why there were eight fold increases in State Unemployment Insurance (SUI) charges and in some cases a doubling of health insurance costs showing within their departments budgets. I was also asking what funds the monies were being transferred to. When department heads were unable to answer the questions themselves, they began asking finance staff for the answer. Everyone involved knew the game was up at that point and suddenly had an incentive to “find the money.”

My first thoughts were when did we begin to build this hidden reserve? Who gave the direction to do so and why? The answers that followed are shocking and only further confirm the pattern of corruption that myself and others have been trying desperately to root out of Turlock City Hall for more than three years.

The excess funding in the SUI and Workers Comp funds began in the 2005-2006 budget year, prior to my term on council. The time period also coincides with Tim Kerr’s hiring as Turlock’s city manager. While millions in reserves were being built in those accounts without council’s knowledge, records show staff clearly already knew the health insurance fund was showing signs of being in deep trouble financially. Upon investigation of the special holding funds history we know, and staff has confirmed, that they have in the past transferred funds from the over-funded accounts to the health insurance account to keep it solvent.

The problem that arises from this type of fraudulent accounting is its effect on the city’s ability to calculate our true costs to provide services to our residents and our ability to conduct effective labor negotiations. In two sets of labor negotiation under former city manager Kerr, council was repeatedly told how healthy our self-insured health fund was and that we could continue to offer our employees wonderful benefits with no cost to the employee. In the end, council’s negotiators were directing the cover-up of the funds while receiving the benefits as employees. The long-term result is detrimental to our community who will have the ability to hire fewer employees in the future due to unsustainable benefit costs.

The truth is that the increasing fraudulent SUI and Workers Comp charges would have been used to cover up the health insurance funding shortfalls if not for an overly aggressive bite at the funding apple. Because of the eight percent increase in health costs that occurred last year and another 15 percent increase expected this year, there was the need to get a head start on saving the sinking health insurance fund. The resulting eight fold increases in SUI charges intended to be the salvation of the health fund resulted in a red flag that led to the divulgence of the funds existence.

If a Fortune 500 company hid its sinking employee health fund from its board of directors and shareholders by redirecting dollars it claimed to have spent on research and development to the health fund, somebody would go to jail. In Turlock, some believe it’s just the way things always have and always will continue to be done. Not on my watch!

Ted Howze

 

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