There’s an active discussion regarding Proposition B on the Laguna Honda Neighborhood Association board. Below is our district’s Supervisor Sean Elsbernd’s take on the matter (it’s a bit lengthy, but worth the read):
First off, some basic factual clarification. The City and County, just like
every other public agency in the country, is now required to disclose on its
annual accounting statement, its estimated unfunded liability associated with
retiree health care costs. The City hired Mercer Consulting, a well respected
actuary, to perform our analysis. The result - $4 billion is owed by the City
over the next 30 years. In other words, if City government were to shut down
entirely today, we would still owe $4 billion over the next 30 years. I think
we all know that this is not going to happen anytime soon.
One of the major contributing factors to this unfunded liability is our current
vesting schedule. Right now, a city employee need only work 5 years over the
course of their lives for the City, and then, once they turn 50 years old,
regardless of what they are doing in life or for whom they are working, that
employee receives a full City paid subsidy of their health care costs as long
as they live and one dependent receives a 50% subsidy as long as they live.
The 5 years do not need to be consecutive.
Spelling that out in a real world example, let’s use me. I am 32 years old and
have worked for the City for seven years. Let’s say I left emeployment today,
and went to work for some private entity. Once I turn 50, regardless of
whether or not my new employer provides me with a health care plan, the City
will pay a 100% subsidy of my health plan, and 50% for my wife.
Moreover, in a more ridiculous example, if a City employee formerly worked for
the State of California for 4 years and 11 months, and then came and worked for
the City for a month, that employee would then have his/her vested 5 years.
Proposition B changes this. Should the voters approve Proposition B, all
employees hired after January 10, 2009, will not receive a 100% health care
subsidy unless they work for a full 20 years for the City. Employees who work
15 years will receive a 75% subsidy; employees who work 10 years will receive a
50% subsidy; and, employees who only work 5 years will have access to the
City’s Employee Health Plan, but will receive no subsidy.
Additionally, all new employees will be barred from claiming reciprocity (i.e.
you can no longer work for the State for 4 years and eleven months and then
work for the City for a month) and all new employees must become members of our
Health Service System within 180 days of leaving City employment. In other
words, someone who leaves city employment cannot come back 18 years later, as I
could if I left today.
Finally, all new employees will be required to contribute 2% of their paychecks
as long as they work for the City, to be matched by a 1% contribution from the
City, into a new pension like fund that will be managed and invested and used
to relieve the City’s general fund from the annual obligation.
To put these numbers into perspective, 7 years ago, the City spent $17 million
out of the General Fund to pay for that year’s cost of retiree health care. In
this fiscal year that is about to end, we are up to $135 million. These are
dollars that come straight out of the General Fund, the same fund that pays for
street repair, park maintenance, police, etc.
One of the points that you raise is that this does nothing to reign in on
current employees. True enough. However, by law established and repeatedly
set in place by the courts, once a benefit has been promised to a public
employee, it becomes a “vested right,” and can only be taken away if the
employee agrees to give it up. Thus, there was no way to make these changes
apply to current or retired employees because not one would ever agree to
giving these benefits up. Even if we put together a citizen’s initiative that
changed these benefits, it would be illegal to do so.
Another point of concern seems to be that this does not solve the problem.
Agreed. That being said, this is an absolutely necessary first step. In real
numbers, by passing Proposition B, we ensure that the $4 billion number
mentioned above does not grow in size. We still need to figure out how to
bring that number down and pay that bill, but, at a minimum, we prevent the $4
billion from growing any larger.
Additionally, by creating the new health care pension like funded, that
receives a 2% contribution from every new city employees paycheck, we will be
saving the City’s General Fund billions of dollars over the course of
generations.
In addition to the health care reform, Proposition B also increases pensions
for current and future employees, who are not police or firefighters. You have
not mentioned this point, but it is fundamental to the ballot measure.
Initially this part of the Charter Amendment will cost the City money.
However, the third part of the Charter Amendment mandates an extension of all
non-safety employee contracts for a year, which will amount to a two year wage
freeze. The resulting savings from these wage freezes, allows the City, as an
employer to break even by year 2 of the agreement, and then simply save money,
by year 3 and beyond.
Proposition B is not the answer to all of our pension and retiree health care
problems. However, it is absolutely critical to bringing some semblance of
sanity to our benefits. No other public agency requires its employees to
contribute to a fund for future retiree health care costs as will now be
required by Proposition B. Cities, counties, and states from across the
country have contacted my office asking about this provision.
Far from an obstacle to the reform we need, this is the first step in the
reform we need. Vote Yes on Proposition B!
If anyone else has any questions, feel free to contact me at this address.
All the best,
Sean
sean_elsbernd@yahoo.com
