California Should Listen To John Moorlach
He warned Orange County before its bankruptcy. Now he sees the same refusal to confront financial reality across California.
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⏱️ 4-minute read
He Saw It Coming
I first met John Moorlach when we served together on the board of directors of the California Republican Assembly in the early 1990’s. He later left the private sector and his own CPA practice for public service, serving as Orange County Treasurer-Tax Collector, a county supervisor, and a California state senator.
John has forgotten more about municipal and local government finance than I have ever known.
Many Californians first heard his name in 1994, when he warned that Orange County’s investment strategy was dangerously unsound. The county’s political establishment dismissed him. A few months later, Orange County filed for bankruptcy.
John had done the math.
I thought about that history while watching his recent appearance with Siyamak Khorrami on California Insider. Once again, John is asking questions that California’s elected officials would rather avoid.
Look Beyond The Budget
Most arguments about California’s finances focus on the annual budget: how much revenue came in, how large the deficit is, and which programs will receive more money.
John looks at a government’s overall financial position after its assets and liabilities are considered. Using unrestricted net position per resident as his yardstick, he estimates that California moved to approximately 42nd among the states for the fiscal year ending June 30, 2024.
John points out that Silicon Valley and its major companies have generated enormous personal-income-tax revenue for California. He believes the artificial-intelligence wave is providing another boost.
The trouble comes when revenue surges and Sacramento expands programs or assumes new continuing expenses. When revenue falls, those expenses do not fall with it. California has repeated this pattern for years, and eventually the bills must be paid.
Promises Have A Price
California’s 2024 financial report removed a previously reported $46.2 billion unemployment-related liability. The California State Auditor says the adjustment corrected an accounting error. John told Khorrami that he tried to research the explanation but did not find the documentation he was looking for.
Taxpayers should ask how an error of that size survived earlier financial reporting.
John also discussed public employee pensions and retiree medical benefits. In 1999, California increased pension formulas for many government workers. An employee receiving 2 percent of final salary for each year of service could suddenly receive 3 percent, a 50 percent increase in the promised benefit.
The state did not set aside enough money to cover that increase, so taxpayers are still paying for it.
Employees naturally seek better compensation. John’s criticism is directed at powerful public-employee unions that press for commitments governments cannot afford—and at elected officials who approve those demands.
Open The Books First
John compared these obligations to a python slowly tightening around a city budget. Officials leave positions vacant, keep vehicles in service longer, and postpone maintenance on streets, pipes, and public buildings.
Residents usually notice the problem only when a road goes unrepaired, a position remains vacant, or a new fee appears.
Californians are increasingly asked to approve new taxes, fees, bonds, and assessments. Cities warn that public safety will suffer without another sales-tax increase.
A tax increase may occasionally be justified, but only after a government has explained its hiring, compensation, and pension decisions. Officials should disclose what reductions they considered before asking residents for more.
That requires accurate and timely financial reporting. John has found apparent errors in audited reports and has asked the Governmental Accounting Standards Board to require clearer disclosures showing how key figures were calculated.
If officials want more money, producing current and understandable financial statements is not too much to ask.
So, Does It Matter?
Orange County shows that these problems can be corrected.
As chairman of the Board of Supervisors during the Great Recession in 2008, John approved approximately 1,000 layoffs. Even after those difficult reductions, Orange County ranked 46th among California’s 58 counties when John conducted his 2012 review.
According to John, continued changes to staffing, pensions, and retiree medical benefits subsequently helped move Orange County into the top 15 counties in the state.
Those numbers affect far more than an accounting ledger. When government promises more than taxpayers can sustain, residents pay through higher taxes, new fees, fewer police officers and firefighters, and infrastructure that is repaired only after it begins to fail.
Fiscal responsibility is not simply an accounting preference. It is an obligation to taxpayers, residents who depend on public services, and future generations who had no voice when today’s promises were made.
That is also why transparency matters. Voters cannot hold government accountable if audited financial statements arrive late, contain unexplained errors, or conceal the long-term cost of current decisions.
John warned Orange County in 1994, when its political establishment preferred reassurance to arithmetic. California can address its obligations while it still has choices, or wait until financial necessity makes those choices for us.
The next time your city, county, or school district asks for another tax increase, ask to see its latest audited financial statements. Ask how much it owes for pensions and retiree medical benefits—and what elected officials have done to control those costs before asking taxpayers for more.
Watch The Interview
Below is Siyamak Khorrami’s full interview with John. I encourage you to watch it. Few people understand California’s public finances as thoroughly, or explain the consequences of avoiding them as plainly, as John Moorlach.