Grand Jury Criticizes Tuolumne County’s Unfunded Liabilities, Deferred Maintenance
Sonora, CA — A new grand jury report focuses on concerns related to deferred building maintenance and unfunded liabilities from pensions and retiree healthcare.
The Grand Jury, a government watchdog, has been releasing a series of reports, rather than one document. Click here to view an earlier story about findings related to preferential employee treatment among county administration.
The new report notes, “A large amount of unfunded liabilities can indicate a potential financial strain on a pension fund or government entity, as it means they will need to find additional funds in the future to cover these obligations.”
“After years of kicking the can down the road, rather than aggressively, efficiently, and thoughtfully confronting major financial issues, the County is in a serious financial bind. It is time to address the issues and find permanent solutions.”
For example, it adds that Tuolumne County has an unfunded liability with CalPERS of $150 million. Noting, “Over the last two years, the County has been paying down the debt by approximately $1 million in addition to the regularly scheduled annual payment. Of the fixed regularly scheduled payments, since 2017/2018, the County has made their pre-payments at the beginning of each year saving the County interest of approximately $400,000 in the most recent fiscal year, of which roughly $250,000 came from the General Fund.”
Citing one specific issue that has increased in recent years, “For an employee to be vested in the Retirement program with CalPERS they must have worked for five years. Here lies the rub, the County employs several positions with grant funded dollars. Once the grant runs out and the employee is still with the County, not only does the County now have additional employees, but after five years these two+ year grant positions are now vested with the County; the County then takes responsibility for the retirement contributions for their continued employment. This is not to say grants are bad, it’s just that grants can cause secondary and tertiary impacts to the budget if one is not careful. During an employee’s contract period, they can also apply for any open positions that are advertised and get vested through their new positions as well.”
Over the past five to six years, the Executive Confidential Unit, a classification for high-level management and confidential employees, also saw notable growth in both the number of employees and the associated costs.
Adding, “Although the number of ECU employees was significantly decreased by the recently seated Board of Supervisors as an effort to reduce the budget deficit, it does not relinquish the issues caused by the prior years of mismanagement of this classification.”
“The added employees in the higher-level ECU classification increased by 55% by the end of fiscal year 2023 from fiscal year 2020, which added over $2 million to the annual salary cost plus another $1.5 million for their benefits. This represents 20 additional ECU employees of which 16 were added to the CAO ’s office alone.
The report also raised concerns about the ongoing neglect of many county-owned facilities. Insurance coverage of buildings could be subject to cancellation due to ignored maintenance.
The findings and recommendations are below:
FINDINGS
CalPERS
F-1
It is difficult to predict future costs of pension funds due to being linked to the investment market, causing the risk of a shortfall from what was earned to what we owe.
F-2
Tuolumne County, with the assistance of new state laws and good faith bargaining with employees, has made strides towards reducing unfunded liabilities by paying early, which saves $300K on the annual payment due as well as paying an additional $1M on the principal.
F-3
Periodic comprehensive update reports on pension reform are valuable tools for gauging the progress of reducing the unfunded CalPERS liability, which in turn impacts the budget.
Executive Confidential Unit
F-4
There has been a significant growth in the ECU classification over the last 5+ years, which has caused a significant financial impact on the County’s budget and CalPERS obligations.
F-5
Within Tuolumne County Government there is a lack of understanding as to what defines ECU classification, causing confusion as to whether employees should be in the ECU classification.
F-6
Tuolumne County Government lacks understanding of the fiscal impact an ECU classification has on the County’s budget, thus there is no clear plan to monitor ECU growth.
F-7
There is a perception that the ECU classification has been misused , thus undermining the integrity of the classification.
F-8
Tuolumne County has not filed an Annual Comprehensive Financial Report (ACFR) for the prior three years (2022, 2023 and 2024), causing the County to have a negative credit rating and to lose opportunities for qualifying for future grants.
Deferred Maintenance
F-9
The Tuolumne County Board of Supervisors and Senior County Administration has not developed a plan to finance Deferred Maintenance based on a CIP as mentioned in their FY2022-2023 and FY2024-2025 Strategic Goals, thus not achieving their own goals.
F-10
Senior County Administration has not issued an RFP to develop a CIP, thus not providing feedback for actual costs of CIP to the County for budget purposes.
F-11
Tuolumne County Ordinance Code, section 2.12 .170, requires that the CAO’s office maintain an updated CIP in their possession. Currently, one does NOT exist, therefore violating the ordinance Code.
F-12
The County has a current -Adopted Budget County Capital Projects- document for the current budget cycle which facilitates budget planning.
F-13
The County has a Deferred Maintenance List that is delineated by building and is extensive, but has very little prioritization, no dates or associated costs hence there is no way to properly plan or budget for projects.
F-14
The County lacks any sort of comprehensive project tracking document that includes costs (estimates or contractor bids), thorough prioritization and dates as to when an issue is noted and due dates for completion. Hence there is no way to properly plan or budget for projects.
F-15
The condition of some life-safety equipment in County buildings is potentially inadequate, such as fire alarms, horn strobes (audible and visual), water flow sensors, and emergency signage, thus exposing the County to potential legal and financial liabilities.
F-16
The County’s building insurance coverage was threatened to be canceled if measures weren’t taken to eliminate the causes of previously claimed losses.
RECOMMENDATIONS
CalPERS:
R-1
The Board of Supervisors should, by November 30, 2025, publish a pension reform update and continue to do so annually.
R-2
The County should continue annual prepayments to CalPERS to reduce unfunded liabilities.
R-3
The Board of Supervisors, Senior County Administration and bargaining units should, by June 30, 2026, examine the possibility of providing a 401(k), or similar employer retirement plan in lieu of investing in CalPERS for new employees to reduce future CalPERS liability.
ECU:
R-4
The Board of Supervisors, starting October 1, 2025, should mandate that an annual report be prepared showing all employees and costs of the ECU classification and, during the year, require clearly delineated qualifications and costs of any proposed new hires that may become part of the ECU, prior to their hiring.
R-5
The Board of Supervisors should, starting October 1, 2025, prepare a long-term solvency plan addressing pensions and general fund shortfalls and address the public with this plan each year through a PowerPoint presentation.
R-6
The Board of Supervisors should, by October 1, 2025, clarify and standardize what the ECU is as to definitions, qualifications, etc., and place that information in a document that is available to the public.
R-7
The Board of Supervisors should review all current ECU employees for compliance with the updated ECU definitions and qualifications by November 1, 2025.
R-8
The Board of Supervisors should, by October 1, 2025, implement stronger oversight of hiring practices and require public reporting on ECU staffing and costs.
R-9
The Board of Supervisors, beginning August 1, 2025, should request a monthly report from the Auditor/Controller’s Office on the status of all overdue audits including the ACFRs.
Deferred Maintenance:
R-10
The Board of Supervisors should develop a plan to finance Deferred Maintenance by November 30, 2025.
R-11
The Board of Supervisors should issue a Request for Proposal (RFP) to prospective consultants for a new Capital Improvement Plan (CIP) by November 30, 2025.
R-12
The Board of Supervisors, by May 31, 2026, should choose and award a contract for a consultant to develop a comprehensive Capital Improvement Plan (CIP) that is due by November 30, 2026.
R-13
The Board of Supervisors should, by December 31, 2025, mandate that an alternate in-house version of a CIP be developed and look at using free or low-cost tools and templates available from organizations like Government Finance Officers Association (GFOA ) or the International City County Management Association (ICMA).
R-14
The Board of Supervisors should mandate that the CAO ’s office maintain an updated CIP (or alternate version of the document), beginning November 30, 2025, and use it as a tool for limiting liability and budget planning.
R-15
The Board of Supervisors should mandate that, by May 31, 2026, all County-owned and leased buildings be thoroughly reviewed for life/safety inadequacies and that solutions are developed for any inadequacies found.
R-16
The Board of Supervisors, by Dec 31, 2025, should obtain a report on the state of insurance coverage on all County-owned and rented buildings to verify that there are no outstanding coverage concerns by the insurance carrier.
To read the full report, on unfunded liabilities and deferred maintenance, click here.
