Critics say county treasurer used ‘fuzzy math,’ and now is playing politics.
Thursday, February 12, 2004
County Treasurer Lou Solton insists that the public “budget forums” he has conducted recently with supervisorial candidate Steve Collins are not political, in the partisan sense. He says they are simply designed to educate voters.
But politicos in the county see it differently, and now Solton has a fight on his hands.
Union boss John Vellardita and others say that Solton, who has served as the county’s treasurer and tax collector for more than 30 years, should have kept a closer eye on Natividad Medical Center’s growing money troubles. And they say that now he’s using the county’s budget woes—compounded by Natividad’s ballooning debt—for his own political gain.
Solton issued a disclosure this week that Natividad, the county-operated hospital in Salinas, won’t be able to pay back a $30 million debt it owes to the county. But he denies that he deliberately misrepresented the hospital’s problems over the past several years.
The critics say Solton should have known that Natividad would not be able to pay back the money it owed. And they charge that Solton is using the county’s projected $41 million budget gap to stump for Collins, who is running for the District 5 seat now held by Dave Potter.
“We think that if there was a more accurate portrayal of the hospital’s financial situation in relation to the county’s General Fund for the past five years, that the Board of Supervisors would have known, so we didn’t find ourselves facing a cliff in 2003,” says Vellardita, the executive director of SEIU Local 817, the county’s largest employees’ union.
And he said the fact that Solton is now conducting forums with Collins is unseemly at best.
“We think for someone who’s the treasurer at the same time being involved in a political race, we just think there’s something unethical about that,” Vellardita says.
Vellardita and his union have endorsed sitting Supervisor Dave Potter. Solton has endorsed Collins and contributed $150 to his campaign.
“I’m not even going to characterize it as active campaigning” for Collins, Solton says. “I’m supporting what I think is an appropriate and fiscally important thing for the county’s future. If someone wants financial information about the county, I’m going to provide it. That’s the extent of the involvement I have with Mr. Collins. I’ll provide it to anybody else.”
Collins, who’s an accountant, has insisted the talks are not political. He could not be reached for further comment at press time.
Potter also criticizes Solton’s decision to engage in partisan politicking while the county faces dire economic problems.
“I don’t think it’s very smart, in difficult budget times, to be picking sides where we’re supposed to be working together,” Potter says. “By going out on the campaign trail with someone —I don’t see how this would not be seen as political.”
When asked about Solton’s job as treasurer, Potter says, “I certainly question some of the bookkeeping that’s been going on.”
Solton says he kept a close eye on Natividad’s cash situation, but that ultimately that was somebody else’s job.
“The hospital has a financial staff, a chief executive officer, a Board of Trustees, and outside auditors involved,” he says. “I don’t mange the hospital’s finance at all.
“As a cash manager for the county, I have noticed a deterioration of the county’s cash advances to Natividad, and have reported those deteriorating conditions for the past couple years.”
The critics say Solton used “fuzzy math” in the county’s books on Natividad, and then, when things got out of control, blamed the County Supervisors and administrative boss Sally Reed.
In particular, they say, he allowed $30 million in loans from the county to Natividad to be listed as short-term cash advances.
Solton says that for a few years after the completion of the new hospital building in ‘98, when the county loaned Natividad about $28 million, cash advances to Natividad declined. But in 2002 they skyrocketed.
“We went from about $28 million [of debt to the county] in 1998 down to $15 million in 2000,” Solton says. “And, what began to occur after that, increasing costs in the whole health care industry began to manifest themselves.”
Between 2000 and 2001, state and federal programs like Medi-Cal and Medicare began paying less money towards reimbursements. Drug and employee costs rose at hospitals across the US. So did workers compensation and retirement benefits. Natividad couldn’t raise its rates.
In 2002, Natividad’s debt to the county—which Solton refers to as “cash advances”—went from $15 million to $20 million. But the $5 million spike in the hospital’s debt didn’t sound any alarms.
“There’s always been an ebb and flow in the cash advances,” Solton says.
In the fall of 2002, the hospital’s then-CEO, David Small, told Natividad’s Board of Trustees that the hospital was facing an operating loss.
“The hospital staff came forward having set an aggressive budget and said ‘we have a problem and we’re not going to make it,’” says Many Ann Leffel, chair of Natividad’s Board of Trustees.
In 2003, the county advanced Natividad an additional $10 million, raising the hospital’s debt to $30 million.
“So really, in two years, we went from $15 million to $30 million,” Solton says. “On top of that, we had the Chief Executive Operator at the hospital saying the hospital was going to end the year in the red and would take an operating loss of $9 million to $12 million.
“There were too many warning signals. The auditor-controller and I decided to at least sound the warning that things were deteriorating from both an operations point of view and a cash point of view.”
Solton’s critics say he should have sounded that warning at least a year earlier, when costs started to skyrocket and Natividad’s multi-million dollar debt began to rise.
Solton says he couldn’t make that call. “I can’t answer that,” he says. “A year prior there was not the severity of the situation. There certainly wasn’t any operating loss announced by the hospital. All we could do was announce it in 2003. The Board of Supervisors took action, and they stopped the bleeding so to speak.”
Leffel blames the stock market downturn, rising retirement and worker comp costs, and other escalating costs for creating the crisis at Natividad. But she concedes that the treasurer’s office bears some responsibility.
“It’s heartbreaking,” she says, “that they didn’t look at it and see where this was going.”
When asked if Lou Solton should have known, she says, “I think so. He’s the financial guru for this county. That’s the shame of it all. We’re all going to pay for it.”
Vellardita wants to see an investigation into the matter.
“He should be held accountable,” he says, adding that about 100 union workers lost their jobs and Natividad clinics closed because of the budget shortfall.
“We’re not saying Lou Solton is the source of the problems at NMC, but we think he got a free ride of non-accountability for his role, as treasurer, for managing the financial books of the county.”