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Monday, July 18, 2005 | Sometime soon, the county of San Diego is probably going to find itself fighting a legal battle against its retirees. The tension between the pensioners and county government is reaching a climax, and Thursday the county’s pension board will meet with one last chance to either defuse the tensions or fire the first shot.
If it turns into an all-out legal war, you can bet that a lot of government bureaucrats from many different communities will be watching how it plays out.
The issue is health care. The county’s retirees believe they were promised health care after they served for a certain amount of time in county government. County leaders say they never promised retirees health care.
Lurking over everything in the discussion is the fact that the county has been paying most of the medical costs of its retirees for more than 30 years. It plans to continue to do so for the indefinite future.
So what’s the problem? The county’s pension board is going to consider a proposal Thursday that would effectively end its practice of putting aside money for the retirees’ health care costs. The county’s pension staffers included a contingency in the proposal that if the county’s pension system reaches a healthier status, it will start to pay those health care bills again. But, at least for the next couple years, the $1.2 billion shortfall in the county’s fund is only expected to get larger.
There’s still money saved from past years in a special reserve fund to pay for retiree health care needs, but if that money runs out, the retirees will have to pay their own medical bills.
That’s a big deal.
The county is far from the only entity facing the specter of rising health care costs, an aging population and increasingly stringent government accounting standards. But it may be one of the few organizations that has taken the bold step of declaring, without hesitation, that it simply is not obligated to pay its retirees’ medical bills even though it has been doing it for decades.
And the retirees, as will be seen on Thursday, are not happy about that stance at all.
A little background: While you can get into some very ugly arguments trying to compare the city of San Diego’s pension mess to that of the county’s situation, one thing that is undisputable is that they both have saddled their pension systems with the increasingly heavy burden of paying for retirees medical bills on top of regular pension benefits.
From 1997 until this year, the city, like the county, allowed its pension system to bear the brunt of not only the retirees’ pension benefits but their health care costs as well.
That didn’t work out so well. Every time the pension’s investment fund earned a healthy return, a large part of it was not reinvested to protect employee pensions, it was lopped off and spent on retiree health care. As everyone in the city clamors over the cost of basic pension benefits, the complex and almost equally stressful burden of retiree health care has been a lesser priority.
But it’s no less a problem. So, this year the city paid the health care bill for its retirees out of the general fund. The move allowed the pension system to, for once, actually keep a good portion of the investment earnings it made. The next step for the city would be to figure out how much they are going to have to pay in the future and start saving for it today.
The county, as we pointed out, is taking a different route. Although it agrees with the city that the pension fund’s investment earnings should not be siphoned off to pay for separate benefits like health care, the county has no plans to pick up the tab and pay it from the county’s general fund.
The county claims that, unlike the city, it has not made any legal promises of guaranteed health care to its employees. The retirees are scrambling to dig up old contracts with labor organizations and other documents that may say otherwise, but the main argument they have is that the county can’t simply stop paying these benefits after so many years of doing so.
“The retirees feel that even if it’s not an absolutely legal obligation at the very least the county has a moral obligation to maintain health benefits for retirees,” said Skip Murphy, a member of Retired Employees of San Diego County, Inc.
But, Doug Rose, a member of the county’s pension board made a statement more than a year ago that still rings in the ears of everyone involved in the current discussion.
With his eye on the fact that the county’s pension fund is almost certainly going to slip below an 80-percent funding level – and enter the so-called “red-zone” – when the next accounting cycle is finished, Rose said that all available assets need to go into the pension fund.
Rose represents county employees on the pension board.
“We were only guaranteed a pension, we were not guaranteed medical benefits,” he said at a board meeting in June 2004. “To the extent that somebody says that the county guaranteed them that benefit, then their lawsuit should be against the county.”
It will be interesting Thursday to see if the retirees show any sign of a willingness to take that advice to heart.
Scott Lewis is a former reporter at The Daily Transcript. You can e-mail him at