The Morning Report
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County Supervisors Dianne Jacob and Pam Slater-Price just unveiled an aggressive plan to eliminate health care funding for many county retirees. If it goes the way the two supervisors plan, all future county retirees would have to pay for their own medical costs as well.
Practically, this means an immediate hit to some retirees’ pocketbooks of up to $400 per month. It’s a move that would protect the county from having to pay about $40 million a year to conform to new accounting standards and fully fund the health care benefits it currently provides retirees.
It’s kind of complicated but here’s how the plan works: Jacob and Slater-Price will ask the Board of Supervisors to sign onto a resolution.
The resolution will recommend that the county’s retirement system stop paying for the health care of its so-called Tier A members.
The county has two basic types of retirees: Those who retired with pre-2002 benefit levels – known as Tier I and Tier II – and those who retired after the Board of Supervisors granted a massive pension enhancement that year: Tier A.
If the Board of Supervisors approves the resolution, all eyes will turn to the retirement system – ostensibly an independent body – to see if it acquiesces. But Jacob and Slater-Price built in what appears to be a brilliant little insurance policy. If the pension board rebuffs the Board of Supervisors, the county’s chief financial officer will employ an accounting mechanism to stop health care funding for all retirees. That includes Tier I and Tier II, who are the oldest and potentially most vulnerable retirees. They retired at lower benefit levels and with much lower salaries than more recent retirees.
Are you with me so far? In other words, the supervisors hope to cut funding for retiree health care for some current retirees. If the pension board doesn’t follow the lead, the county will cut health care for all current retirees.
If you want my short version there’s this: Jacob and Slater-Price have taken an impressive and strong stance to protect taxpayers from the rising health care costs of county retirees. I have no qualm with a government paying for the health care of its retirees. But the county, like many local governments, had not set aside the money properly for this benefit. Its retirement board for years has been siphoning money off of its investment earnings to pay for the benefit, which Jacobs and Slater-Price claim is not vested, or benefit.
The county had two choices: come up with a significant amount of money – as in billions – by raising taxes, or cut the health care benefit for retirees.
Too often, in California, people who call themselves fiscal conservatives pretend that there’s a third way: that you can give benefits like health care for retirees without paying for it.
Kudos to Jacob and Slater-Price for choosing a tough option, preparing to take the criticism that will inevitably come and plotting to cut a benefit they may have been planning on for their own personal security in the future as well.
Much much more on this on the way. Let’s just say that when they called me to tell me they had something in the works, I knew it was about retiree health care, which is a looming liability for many governments in many regions of this country.
But I couldn’t have imagined they’d have a sweeping reform like this in mind.
The retirees are going to flip out. I can’t imagine current employees won’t as well. Stay tuned.