By: Pauline Marx, City and County of San Francisco
The time has come for me to pass the gavel to the new leadership of CSMFO. At our upcoming 2014 Annual Conference in Palm Springs, Pamela Arends-King will become our new President. Jesse Takahashi will become President-Elect and the Board will have two new members: Marcus Pimentel and Barbara Boswell. Thank you to outgoing Past President Laura Nomura and outgoing Board members John Adams and Teri Albrecht, and to the many dedicated members who contribute time and energy to our organization: the Executive Committee, the Board of Directors, Committee Members, Chapter Chairs, our League Policy Appointees, conference presenters and moderators, and of course, Past Presidents. In addition, we need a shoutout to our wonderful professional staff at Smith Moore & Associates and Meetings & Association Management Services.
Managing our organization is a team effort and as a team we have led the organization through a positive and productive year. The 2013 Annual Report details the organization’s many accomplishments, so I will not list them here.
Our organization provides a forum for us to support one another and to share information critical to both the professional success of our members and the financial success of our communities. In closing, I encourage each of you to become a part of the leadership of CSMFO. There are many ways that you can become involved and the level of commitment is up to you. The experience is rewarding both professionally and personally. I thank you for the opportunity and privilege of serving as your President for 2013.
I leave you with the following “Scottism’s”, developed by our 2011 Past President Scott P. Johnson. Scott has made a list of professional values and attributes that he has collected during his professional career. I believe that this is a list we should strive to follow. You may have seen this list previously in these pages, but it is worth repeating. Thank you, Scott!
Professional Values and Attributes
- Personal integrity – ethical leaders shape organizations – follow the Code of Professional Ethics
- Sense of fairness – treat people fairly and equally
- Sense of humor – when people are happy and having fun, they enjoy their work and are more productive
- Genuine/Care about people – need to nurture and motivate employees
- Know how to cope with difficult people – do not shy away from dealing with difficult people
- Encourage open communication – encourage dialogue, collaboration and sharing of information
- Articulate expectations – this helps people be successful
- “Build the Bench” by mentoring, training, empowering staff and developing succession plans
- Encourage professional development plans for staff
- Praise – make it a habit to praise people in front of others and provide on-going positive and constructive recognition, verbally and in writing
- Good listener – learn to listen carefully, leaders ask good questions
- Visible – get out and connect with the workforce and community
- Trusting and trustworthy – trust is powerful and binds people together
- Measured risk – support innovation and risk-taking and do not punish staff when ideas flop
- Courage to act – leaders need to have a high level of confidence and not shy away from action
- Politically astute, but not political
- Flexible, innovative and adoptive – be flexible, but stand by your principles
- Judgment – use good professional judgment
- Stick to the facts – don’t personalize or react
- Build a solid reputation with peers, administration and elected officials
- Well balanced – emotionally and professionally
- Deliver your best
- First impressions are powerful; project a positive personal and professional image for you and your organization
- Enhance your communication and professional skills
- Study and learn from the best leaders, best practices, and best run organizations
- Delegate when necessary in order to deal with more demanding strategic plans
- Do what you say you are going to do
- Be known for honesty, integrity, accuracy, value-added analysis and excellence in your work and your life
- Be human – we all make mistakes and we need to be open to hearing about and learning from them
- Be patient
Executive Director’s Message
By: Melissa Dixon, CAE
Late January/early February is—hands down, without a doubt—the busiest time of year for CSMFO. Why is that, you ask? Well, I’ll tell you.
Membership Renewals – CSMFO membership is on a calendar year basis, which means membership fees are pouring in for 2014. We’ve processed nearly 1300 membership renewals in the last ten weeks!
Annual Conference – The 2014 CSMFO Annual Conference is this month, February 19-21 in Palm Springs. We’ve sold out two hotels for this event, and the committees have been hard at work to make it both educational and fun! For the meeting planners, this is when the flurry of activity really begins!
Annual Report – Every year CSMFO produces an Annual Report, which details the activities over the previous year for each committee, each chapter, each League Policy Committee representative and our organization as a whole. This document is in the design process, with a goal of distributing it electronically by the start of the conference.
In addition, we’ll be welcoming in new leadership with the start of the conference! A huge thank you to Laura Nomura (outgoing immediate Past President), John Adams (outgoing Southern Board member) and Teri Albrecht (outgoing Northern Board member) for all their hard work on behalf of CSMFO. It’s volunteers like you that make this organization!
I hope to see everyone at the Annual Conference!
As this MiniNews is posted on the 5th of the month, the deadline to register for the Annual Conference online has passed. But you can still attend! Onsite registration is available ($475 for government members). We’d love to see you there!
For those of you who have already registered, the breakout sessions have been posted on the CSMFO Conference website. Please take a few moments to review the outstanding sessions.
Catch an additional session before the official start of the conference (Included in your registration fee) – Wednesday, February 19th – (9 am to 11 am)
Early Bird Session: The California Municipal Fiscal Health Diagnostic presented by Michael Coleman – A must for every public agency.
The California Municipal Fiscal Health Diagnostic is an essential new tool from the League of California Cities. Developed by Michael Coleman with the advice of a number of experienced finance professionals, academics and in depth research into other similar tools, this pragmatic financial assessment tool will help you:
- Add credibility to your fiscal evaluation
- Validate areas in which your agency is fiscally healthy
- Identify areas that need improvement
- Act to remedy problems before they become worse or unmanageable
- Avoid being blind-sided by problems
- Be prepared for questions from city council, candidates, citizens, media, a new city manager, etc.
- Help others (labor associations, taxpayers and other interested parties) understand your financial position
Sample of some of the breakout session topics:
- Are CFDs the Solution to Jumpstart Housing in your City?
- “Fairness & Equity” in Water and Recycled Water Rates: What’s Behind the Curtain?
- How the Affordable Care Act Is Currently Affecting Cities and Other Governmental Agencies
- Regulatory Update, the Impact on Issuers and Other Issuer Obligations
- Presenting Financial Information During Good Times and Bad
- The Accounting and Auditing Year in Review
- Fiscal Crisis? – A Current Update from San Bernardino and Stockton
- Emerging Economic Development Trends: Best Practices for Municipal Finance
- GASB Update – The Blue Covers
- Public Agency Bargaining Cost-Cutting Under Attack
- Pension Retirement and OPEB: What Comes Next in California?
- Maximizing Your Leadership Skills: Successful Leadership Skills, Traits and Characteristics or Successful Delegation: Seven Steps for Building Skills & Getting the Job (With our ever engaging presenter Neil Kupchin)
Join us Thursday evening for the SUPPER CLUB, featuring the Wayne Foster Music and Entertainment Group. Dress in your best Rat Pack/Mad Men era attire while you enjoy an elegant dinner, and then off to the mock casino, dancing or just the quiet club lounge area for conversation with friends.
The CSMFO Annual Conference and tradeshow provides a great opportunity to connect with other CSMFO members and exhibitors. The upcoming 2014 Annual Conference promises to be a premier event, so do not miss “Playing the Next Round,” February 18-21, 2014 in Palm Springs, California.
Preparation is Key to Health Care Reform
By Steve Gedestad, Executive Vice President, Municipalities Employee Benefits Practice
The Affordable Care Act (ACA) will introduce some of the most sweeping changes to employee benefits in decades and it will impose significant compliance and reporting responsibilities on employers beginning this year. Preparation for the financial impacts and potential tax implications will be critical for California cities to maximize their employee benefits budgets.
While there was a one-year delay in the implementation of some of the employer provisions under the ACA, the best approach for public agencies is to use the compliance delay to gather necessary data and put systems and procedures into operation. Use this time to get ahead of the requirements. Now is the time to improve processes, develop strategy and implement cost saving programs.
Addressing ACA compliance should be a systematic process based on the facts and circumstances about your workforce. The chart below illustrates the overall process for understanding workforce analysis to respond to the ACA requirements:
In the process of gathering the data to do compliance testing, some cities are encountering challenges with payroll and HR systems and reconciling benefit eligibility for job classifications. While employers use many ways of classifying benefit-eligible employees, ACA recognizes only two classifications for ongoing employees: full-time employee (works at least 30 hours per work or 130 hours per month) and not full-time employee (works less than 30 per week or 130 hours per month.)
For new employees, two additional categories are “variable hour” employees, who may work more or less than 30 hours a week; and “seasonal employees” who are expected to work for a limited period during the year. This means that tracking actual hours worked is more relevant to ACA requirements than job classifications, and most payroll and benefits eligibility systems are not set up this way.
This is also the time to make decisions about the method you use to determine the full-time/not full-time status of your workforce. While tracking hours and determining status on a monthly basis is one method, it is administratively complex. Most employers will want to use the look-back method in which employee hours are evaluated over a 3 to 12 month timeframe (“measurement period”) and then benefit eligibility is applied going forward for a specified period (“stability period”).
The one-year delay is an opportunity to proactively approach compliance testing and tracking work hours by reviewing job classifications, eligibility criteria and benefit philosophy based on the result of a preliminary analysis of your workforce. Because employer penalties begin in 2015, now is the time to make decisions on your measurement period and policies relating to employee work hours.
Another big issue for cities will be to look at and implement systems for tracking employee hours and translating that data into the reports that will have to be filed with the IRS in 2016. This could prove to be administratively burdensome; therefore, IT resources for these functions will be critical.
The timing of ACA regulations limited employers’ preparation for the changes in health care. The one-year reprieve from the reporting and penalty provisions is a new opportunity to develop and implement strategy based on the results of your workforce analysis. There is a wide range of approaches for optimizing costs, simplifying benefit program administration and maximizing employee health management you may want to consider. Naturally, some strategies will need to be implemented in coordination with your represented groups.
Plan design and contribution strategy are somewhat dictated by the ACA’s Minimum Essential Coverage (MEC) and affordability requirements. But you may still want to look at the value of your plan offerings, especially as the so-called “Cadillac Tax” comes into play by 2018. While that seems like a long way off, the planning and negotiating needed to avoid the non-deductible 40% excise tax is significant. Some public sector employers are already closing in on the threshold cost of coverage to trigger the Cadillac Tax.
Programs that will impact rising health care costs will be long-term strategies. For instance, employee wellness and condition management programs have the potential to reduce the rise of health care costs, but the effects are realized over a period of years. Employers need to implement such programs now if they are to see lower utilization and impact chronic conditions that account for a large portion of their medical claims in the future. The ACA allows more flexibility in the types of wellness programs that can be offered, but the regulations are more complicated. The challenge is in designing health management programs to properly incentivize employees to improve their health and keep them engaged over time.
Learn the latest about the ACA
We invite CSMFO members to learn the latest developments on the ACA by attending our upcoming Keenan Summit, March 25, 2014 in Burbank and March 26, 2014 in Oakland. You will hear directly from the leaders on the front line of the ACA, including Peter Lee, Executive Director of Covered California; John Chiang, California State Controller; Bill Lockyer, California State Treasurer; David Saÿen, Region IX Administrator of the Centers for Medicare and Medicaid Services; and Joseph Paduda, Principal, Health Strategy Associates. There is no cost to attend this educational event. For more details and to register for the Keenan Summit, please visit www.keenan.com/keenansummit.
The regulatory requirements and the strategic opportunities of the Affordable Care Act can be complex and you probably have a lot of questions about them. Keenan & Associates is prepared to answer your concerns about Health Care Reform and assist you in finding ways to achieve your objectives. Our specialized approach for California municipalities is sensitive to your budgetary and employee relations considerations. If you would like more information about our Health Care Reform Solutions, contact me at firstname.lastname@example.org.
Underfunded Pensions – The Warning Signs
(Part One of Two-Part Report)
By: Corey Lee Wilson
The gap between what California governments owe workers and retirees for pensions—and what they actually have—is a sobering $240 billion to half-trillion dollars, depending on who you ask and what accounting method is used.
For municipalities’ financial officers, they’ve no doubt read the papers, seen the reports, and heard the news about the mounting pension crisis. The crisis has already hit the bankrupt cities of Vallejo, San Bernardino, Stockton, and now Desert Hot Springs. Will it affect your municipality? Or has it already? The warning signs are ominous and the cost of ignoring them will become one of the defining policy issues of this decade.
The first major warning sign is the growing portion of the budget pie being allocated to pension costs and their obligations. In a 2010 report, Joshua Rauh, of the Kellogg School of Management at Northwestern University, and Robert Novy-Marx, of the University of Rochester, estimated the entire US states’ pension shortfall may be as much as $3.4 trillion and their municipalities’ portion is $574 billion. Mr. Rauh calculates that seven states will have exhausted their pension assets by 2020—even if they make a return of 8% that is a common assumption that looks wildly optimistic. Meredith Whitney, an analyst who made her name forecasting the banking crises, believes these states, like California, could be the next source of financial risk.
California’s problem goes back to 1999, when Governor Davis and lawmakers from both the Democratic and Republican parties approved SB400, giving state workers enhanced benefits on the assumption that the cost—around $600 million a year—would be covered by investment gains. SB400 paved the way for public safety employees to retire as early as 50 with 3 percent of their highest annual salary multiplied by the number of years they served. CalPERS and labor unions including the California State Employees Association and the California School Employees Association sponsored it. The “3 percent at 50” formula enables highway patrol officers, firefighters, and prison guards to receive up to 90% of their pay for the rest of their life with health care benefits included. Civil state workers could retire at 55 with 2% of annual pay, up to 2.5% at age 63. In addition, public employers made a range of poor policy decisions that helped create the pension mess, including shortsightedly enhancing benefits and raising pay, making perks retroactive, and not paying into the retirement system for years.
The halcyon days from the dot.com and housing booms of the late 1990’s and early 2000’s, when most of the over optimistic pension fund returns were based—are gone forever. Even the latest surge in the stock market will not generate the kind of growth needed to cover this gaping shortfall. After the stock markets crashed in 2008 and brought about the Great Recession, the overly optimistic investment gains of the past proved unsustainable. Because of this and generous pension benefits, on average, California cities can now expect to see their pension contributions rise another 50% in the next few years in an attempt to fill the $240 billion to half-trillion dollars spending gap between what governments currently owe workers in retirement benefits, and what they have in the bank. Don’t count on unrealistic pension fund performance estimates used in the past to cover the shortfall.
With the increase in pension costs and obligations, plus the number of early and recent retirees and their ever increasing life spans—these commitments will increase as time goes on. As they do, they will consume a larger and larger percentage of the budget that will in turn crowd out essential public services. Sooner or later, either taxes need to be raised to cover the growing pension burden or government services will be cut or scaled back—both unpleasant options that will most likely generate a taxpayer revolt of epic proportions. If pension promises are to be kept, this will place immense strain on taxes, so several states have promised annual payments that will absorb more than 30% of their tax revenues after their pension funds are exhausted to honor their obligations. Mr. Rauh calculates that California’s pension fund assets will run out in 2030.
To help address these issues, Governor Brown initiated a 12-point pension plan approved in 2012. To gain approval by the state legislature, he abandoned his proposal for “hybrid” pensions combining features of traditional pensions and 401(k)-style retirement accounts. Furthermore, CalPERS said this legislation would save $42 to $55 billion over 30 years. However, Stanford University public policy expert Joe Nation, who has calculated CalPERS long-term unfunded liability at close to half a trillion dollars, said Brown’s plan, did little to solve the problem.
Although a step in the right direction, stronger measures are required and what these are will be covered in Part 2: Pension Reform – The Sacrifices Needed of the March issue.
Join the discussion with Corey Lee Wilson at email@example.com or provide your own comments for his upcoming book titled Pension Madness!
‘Like’ Us on Facebook!
Want to see pictures of you and your colleagues at the CSMFO Annual Conference in beautiful Palm Springs? CSMFO’s conference photographer will be posting pictures to our Facebook page throughout the week of the conference, February 18-21. Don’t miss out!
CSMFO MiniNews Committee Member Feature
Name: Brenda Charles
Agency: City of San Jose
Committee Chair of: Membership Benefits Committee
Q: How long have you been in the municipal finance profession? Why did you choose this profession? Though I have been in the financial industry for years, I am relatively new to the municipal finance profession. It sort of found me when I was hired by the City of San Jose. I enjoy this profession because it is so multi-faceted and allows for career growth in payroll, accounting, investments and revenue disciplines.
Q: How long have you been a CSMFO member? Served on a CSMFO committee? I have been a CSMFO member since 2007 and have served on the Career Development and Membership Benefits Committees. I have also been a Budget Reviewer for the annual awards program since 2009.
Q: What committee are you a part of now? Why did you become involved with CSMFO’s committee(s)? I currently serve on the Membership Benefits Committee and became involved starting with the 2008 conference in Anaheim by registering attendees and serving as a room monitor. I became involved to both learn about topics affecting local government and to contribute to achieving the goals set by the Board of Directors.
Q: How did you come to be involved in the leadership of CSMFO? As a determined newbie, I quickly became a member of the Career Development Committee through former Committee Chair, Dennis Danner. For both the Career Development and Membership Benefits Committees, I participated by writing a series of articles to attract students and non-members to the profession. I wrote the student outreach brochure, “How to Boost Your Career Assets” (January 2011 MiniNews) and “Boost Your Network (ism)” (October 2012 MiniNews).
Q: What are your goals for the committee for the coming year, and how do they relate to the overall organization’s goals? Committee goals will continue to focus on increasing memberships and evaluating how to best provide services to members. Goals include the use of social media to keep moving forward and sharing knowledge through the listserv. I would like to see continued growth in classes and webinars to train up-and-comers into government finance and to recruit current members to become more involved in the organization.
“Expanded CSMFO Webinar Schedule Begins – Register Now”
Here are the next scheduled CSMFO webinars provided without charge as a service for CSMFO members. You can click on the advance registration link for each session.
“Effective Ways to Increase Revenues” (cosponsored with Cal-ICMA)
1-2:30 p.m., Wed., March 19
1. What are successful ways for local governments to gain more revenues from existing sources (e.g. recovery of service costs, marketing expertise to others, etc.)?
2. How can economic growth help revenues and what’s working best now?
3. What are voters willing to support in new revenue measures and why?
Presenters: Michael Coleman, Fiscal Policy Advisor, League of California Cities and other national experts
“Successfully Navigating a CalPERS Audit”
2-3:30 p.m., Wed., April 23
1. What are the critical issues that CalPERS looks at in an audit?
2. What are effective ways to address them?
3. How can you learn from the experience of others?
Presenter: Margaret Junker, Chief, Auditing Services, CalPERS
Commentator: Scott Catlett, Asst. Finance Director, Riverside
“Latest Accounting Updates–What You Need to Know”
10-11:30 a.m., Wed., May 22
1. What do you need to know about latest accounting changes for your agency’s reporting?
2. How can you address these before your year-end close?
3. What are useful resources to learn more?
Presenter: Eric Berman, CPA, CGMA, author “2014 Governmental GAAP Guide”
Are you a member of CSMFO and want to earn CPE credit for participation in a webinar? Note the requirements at registration.
Do you have suggested topics for future webinars? Send them to CSMFO@DonMaruska.com. Thank you.
Don Maruska, Master Certified Coach
Director, CSMFO Coaching Program
See “Coaching Corner” at www.csmfo.org/coaching
Welcome New CSMFO Members!
- Shelley Almgren, Utilities Senior Analyst, Inland Empire Chapter
- Richard Arrow, Interim Finance Director
- Nathan Bagwill, Finance Analyst, Sacramento Valley Chapter
- Clarinda Bareng, Accountant, Central Los Angeles Chapter
- Henrik Beijar, Regional Manager, Peninsula Chapter
- Sheryl Bennett, Director of Admin Services, San Diego County Chapter
- Gaylynn Brien, Finance Director, Channel Chapter
- Darrylenn Brockington, Supervising Accountant, Inland Empire Chapter
- Robert Burkholder, Accountant, Coachella Valley Chapter
- Yulia Carter, Administrative Services Director, Peninsula Chapter
- Georgia Chamberlain, Accountant III, Inland Empire Chapter
- Willliam Clayton, Senior Accountant, Orange County Chapter
- Stacey Dabbs, Accounting Supervisor, Inland Empire Chapter
- Mitesh Desai, Assurance Senior, Unknown or Unassigned
- Steven Diels, City Treasurer, East Bay Chapter
- Stanley Ellicott, Senior Analyst: Budget & Planning, East Bay Chapter
- Terri Escolar, Principal Accountant, South Bay Chapter
- Frank Fields, Accounting Manager, Sacramento Valley Chapter
- Roy Given, Director of Finance, Northwest Counties Chapter
- Dawn Glaze, Accountant III, Inland Empire Chapter
- Teresa Gonzalez, Accounting Manager, Orange County Chapter
- Renee Gordon, Vice President, Central Los Angeles Chapter
- George N. Harris, II Director of Admin & Comm SVC.
- Wendy Howard, Acting Deputy Finance Director, North Coast Chapter
- Xiaoning Huang, Accountant II, East Bay Chapter
- Nicholas Johnson, Senior Accountant, East Bay Chapter
- Kim Juran-Karageorgiou, Administrative Services Director, Sacramento Valley Chapter
- Saleha Kazmi, Sr. Accountant, Inland Empire Chapter
- Daniel Krautim, Management Analyst II, San Gabriel Valley Chapter
- Cierra Lewandowski, Accountant, Sacramento Valley Chapter
- Mimi Ly, Finance Analyst, Sacramento Valley Chapter
- Oralia Macias, Accountant, Inland Empire Chapter
- Debbie Malicoat, Director of Administrative Services, Central Coast Chapter
- Barbara Martin, Budget & Treasury Manager, Sacramento Valley Chapter
- Tatevik Martirosyan, Accountant, Inland Empire Chapter
- Suzanne McDoanld, Interim Financial Operations Manager, East Bay Chapter
- Dana McMillen, Revenue Compliance Inspector, San Diego County Chapter
- Elaine Mcmurry-Kuck, ACCT CLERK II, Northeast Counties Chapter
- Lane Millar, Accountant I, North Coast Chapter
- Edid Molina, Finance Manager, San Gabriel Valley Chapter
- Andrew Mowbray, Budget Officer, San Diego County Chapter
- Anthony Nguyen, Purchasing Agent, San Gabriel Valley Chapter
- Roxane O’Neill, Budget, Audit & Revenue Supervisor, Coachella Valley Chapter
- Jonathan Palmer, Accountant II, East Bay Chapter
- Brianna Pascoe, Accountant, Inland Empire Chapter
- Roberta Raper, Finance Director
- Paul Rodrigues, Finance Director, North Coast Chapter
- Sara Roush, Accountant, Sacramento Valley Chapter
- Cynthia Saks, Finance Manager, Inland Empire Chapter
- Jay Schengel, Assistant Finance Director, Central Valley Chapter
- Kyle Solberg, Senior Accountant, Monterey Bay Chapter
- Jim Stretch City Manager, Northwest Counties Chapter
- Susan Taylor, Accounting Supervisor, Channel Chapter
- Brad Welebir, Audit Manager, Inland Empire Chapter
- Renee Young, Partner, Central Los Angeles Chapter
- William Zenoni, Retired, Sacramento Valley Chapter
Sacramento-Valley Chapter Meeting– February 6
– Speaker: Kristen Spears, Placer County Assessor
Nate Levine from OpenGov.com
Orange County & CMTA Division 9 Meeting– February 27
– Speaker: Mary Beth Redding – Bartel Associates, LLC
Orange County & CMTA Division 9 Meeting– April 10
– Speaker: Paula Cone & Andy Nickerson with HdL Companies
Intermediate Governmental Accounting, Pasadena, CA
– February 28, 8:00 a.m. – 5:00 p.m.
CSMFO provides government finance professionals with numerous resources for enhancing and advancing their careers. Visit the job opportunities page of the CSMFO website for a list of current job openings.