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You may not have heard yet that the county of San Diego did end up suing its employee pension board the other day. The county is upset that Supervisor Dianne Jacob has been barred from participating in pension board discussions about whether to facilitate the county’s decision to stop paying health care benefits to retirees.
I was intrigued by a passage in the actual lawsuit filed by the county. I don’t know if county officials have ever formally laid out the stress they’re feeling about the looming liabilities posed by retiree health care costs as starkly as they did in this lawsuit.
Check out this passage wherein the county expresses its worry about new accounting regulations that will require it to disclose the anticipated costs of paying retiree health into the future:
This is a major change for counties and cities nationwide and particularly for public agencies with a “pay-as-you-go” retiree health insurance program such as is the case with the County. It is estimated that the total amount the County would have to invest today to cover the costs of non-vested retiree healthcare, or the “actuarial accrued liability,” is $640 million. The estimated Annual Required Contribution (“ARC”) that the County should make for SDCERA to continue providing retiree health benefits at their current levels could be as much as $60-70 million a year and will increase in the future. When added over a 20-year period, the amount of the County’s ARC payments is estimated to be $1.8 billion. … It is reasonably expected that if the County merely accounts for the liability imposed by the health care costs as required by GASB 45, but does not fund the liability, such action will result in a negative effect on the County’s bond rating and substantially affect the County’s ability to fund other programs unless measures are taken to reduce the financial liability imposed by the health insurance program.
So there it is, on the record, how much the county’s thinks it would have to pay to keep up with health care bills and how much it doesn’t want to do that.