Posted on 05/14/2007 8:02:12 AM PDT by SmithL
It's a tale of two budgets -- today's and tomorrow's.
Today's good news: It took Contra Costa County supervisors just 10 minutes this month to pass a balanced budget for the 2007-8 fiscal year with hardly any program cuts.
It was a sharp contrast to last year, when the county was in the midst of cutting $20 million worth of programs and its credit rating outlook was gloomy. Dozens of people were protesting the closing of county pharmacies and slashing of social services programs.
This year "was the easiest budget process I've been involved with and this was my ninth," said Supervisor John Gioia of Richmond. "I think we are heading in the right direction."
Still, it's too early to pop the cork and toast financial fortune.
Here's tomorrow's bad news: The county must find a way to pay off a $2.6 billion liability for medical benefits promised to current and future retirees.
Instead of socking away money for future benefits, Contra Costa is "paying as you go" -- simply funding today's medical costs. Supervisors this year said they could not set aside extra money because that would require the unwanted step of cutting county services.
The liability grows by more than $200 million with each year of inaction.
"The supervisors look at it and say, 'I don't have to worry about it because I'll be gone by the time something drastic happens,'" said Ken Hambrick, chairman of the Alliance of Contra Costa Taxpayers. "They just want to study it further so they can put it off."
Wall Street notices
With cloudy skies in the forecast, the county is enjoying a bright moment of fiscal recovery.
Even county critics contend that the Board of Supervisors has made great strides in the past year to maintain vital services while at the same time building up emergency reserves.
It hasn't always been this cheery.
In 2002, the county began a three-year trend of spending millions more than it earned. Facing protests, supervisors repeatedly backed away from cutting health, mental health and social services programs. Instead, they dipped into reserves, which dwindled from $116 million to $59 million during that time.
Wall Street didn't like the raiding of reserves to cover deficit spending and showed its displeasure by knocking down the county's credit rating.
In response, supervisors last year adopted policies to only spend as much as the county earns and not to let reserves drop below 5 percent of the county's general fund. Those policies were important factors that led two major credit agencies to upgrade Contra Costa's bond rating outlook from negative to stable in recent months.
The changes reward fiscal health improvements and will save the county more than $475,000 in additional insurance costs when it borrows money for construction projects.
"They really were able to put the brakes on a big slide after three years of serious deficits," said Kevork Khrimian, an analyst for Moody's Investors Service. "Financially they are stable again."
'Much better shape'
To get there, the supervisors had to get tough.
Last year, newly appointed County Administrator John Cullen recommended $20 million worth of cuts to balance the budget.
Supervisors followed that recommendation, closing the Summit Center home for troubled youths and public health pharmacies in Richmond, Pittsburg and Martinez. And the county froze most county employees' wages for 21 months.
Eventually in November, the county administration and six labor unions representing 5,800 employees struck a deal that would give workers 2 percent pay raises in both 2007 and 2008 and a one-time $1,500 bonus. Those with at least a decade of experience will receive an additional 2.5 percent raise next year.
In rosier financial times, county employees such as social workers, public defenders and custodians had received as much as 5 percent annual pay increases.
"Thanks to the sacrifices of rank-and-file workers, the budget process this year was much less painful than recent years," said Rollie Katz, business manager of county workers' largest union, Public Employees Union Local 1.
On May 1, supervisors passed a budget that maintains last year's service levels with no layoffs, although the county increased projected vacancies in the Sheriff's Department, essentially taking away funding for 16 sworn positions.
"Compared to three to five years ago, we are in much, much better shape," said Cullen, the county administrator. "But are we out of the woods yet? No."
Paying for later retirees
The long-term financial picture isn't nearly as rosy.
More than 40 years ago, when health care costs were substantially lower, Contra Costa started promising medical benefits to its workers after they retired.
Now, escalating health care costs combined with public employees retiring earlier and living longer have created a perfect storm just as baby boomers are ending their careers. Although nearly all government agencies struggle with this problem, Contra Costa is among the worst off of California's 58 counties. In fact, Contra Costa's liability is at the same level as five bigger California counties -- Alameda, Orange, Riverside, Sacramento and San Diego -- combined.
"Most likely, we're going to have to start funding retiree health care the same way we fund our pensions -- having employees set aside money today for their retirement expenses," said Bill Pollacek, the county's treasurer and tax collector.
If supervisors continue to "pay as you go" -- not making budget cuts or finding increased revenues to fund health care -- the county's liability will grow to $4 billion by 2013, according to a county actuarial report required under new accounting regulations.
The county most recently earmarked $33 million to pay for a year's worth of health care services, but that amount comes up far short of the $227 million of "prefunding" it should be setting aside annually to close the health care gap in the coming decades, according to the report.
Getting to that $227 million level immediately would no doubt mean massive layoffs and the crippling of county services. That would make up 18 percent of the county's entire general fund budget -- the equivalent of laying off 2,000 of the county's 8,600 full-time employees.
"You may not be able to prefund the entire contribution now, but it's best to ramp up to that level of spending over the next several years," said Jason Dickerson, a retiree health care specialist with the state's Legislative Analyst's Office.
"The downside is every year it makes the job of balancing the budget a little harder, and that money then is not available for other programs."
Working on solutions
Gioia, who is serving his third term on the Board of Supervisors, said he'd like to see more retiree health care funding, from both the county and employees, as early as the 2008-09 budget. Employees currently pay nothing toward their own retiree health bills, but do pay part of premiums during retirement.
"I think most employees understand if they want to have health care when they retire, setting aside some money today is the right thing to do," Gioia said. "The more we can have some cost-sharing with employees, the less cuts we'll have to make."
Reducing benefits for new hires and possibly current employees will also be looked at, Cullen said.
Those statements don't sit well with union members who are still venting about smaller-than-normal pay increases, said Katz, the union representative.
Public Employees Union Local 1 will hire an actuary to make its own assumptions on inflation, life spans and health care needs -- all factors that went into the county's $2.6 billion estimate.
"These are at best educated guesses because of the assumptions," Katz said. "The solution is not to undercut the middle class and create more and more uninsured people."
Finding a solution won't be easy. Indeed, the supervisors' toughest decisions are still ahead.
Problems from another ‘welfare state’. I guess the country has to go broke, before these idiot pols quit giving away the farm, for these municipal and corporate welfare states. They just don’t care.
Just following in the footsteps of the Federal government's Social Security program.
Similarly, both pretend to show a much better budget situation than actually exist -- Contra Costa County's actual defecit is shown here as $2.6B; the Fed's actual SSI defecit is many hundreds of billions, at least.
And do you have medical insurance by your employer? Is it your opinion that Government employees should not have the same benefit? Quit looking at the Government cost when you should be looking at the huge increase these HMO now charge. Like gasoline, everything cost more today.
Another problem is the Unions, of which many County employees belong to. Those that don't are governed by memorandum of understand which is nothing more than keeping those that are not governed by union contract will be at par. No County is giving away the store, just matching what you get in private industry to compete for employee hiring and retention.
There is more to this that I am sure the outsider will never understand. But I will guarantee you that the normal Government employee does not get anything more than you in private industry.
I call Barbara Streisand!!! They are not talking about paying health insurance costs for active, working employees. They are talking about paying health care expenses for every retired, non-working employee. From the article:
Here's tomorrow's bad news: The county must find a way to pay off a $2.6 billion liability for medical benefits promised to current and future retirees.
Sorry, I forgot to mention that there is no separation from current employees and retired. The HMO contracts are based on volume of employees, both working and retired. The contracts entered into are based on this volume. Does not the private industry have similar agreements, and if not SS and Unions take up much of the slack. I would like to see the breakdown between this cost as to working vs. retired. Then I would like to see what the cost would be if the retiree was eliminated.
Well the typical employee + spouse health insurance payment up here in Oregon is around $900 per employee through PEBB (Public Employees’ Benefit Board) plus another $100 for dental. So basically $1,000 a month per retired employee X baby-boomer generation=insolvency.
And do you have medical insurance by your employer? Is it your opinion that Government employees should not have the same benefit?
:::
My employer pays HALF of my insurance premium, and when I leave that company MY BENEFITS STOP. Not so with the big corporate and country welfare state — their benefits continue after they no longer are working. This was one of THE MANY corporate errors that biggies like GM and Ford made — by setting up lifetime welfare. And at last count, as GM was going broke and into bankruptcy, in the retail price tag of every car was $1600 WHICH HAD TO GO TO PAY FOR BENEFITS FOR PEOPLE THAT DID NOT EVEN WORK FOR THE COMPANY ANY MORE.
Don’t even begin to compare “normal companies” and “normal benefits” with the huge mistakes the pathetic management made to their employees AND THE UNIONS. I have friends that worked for a while for the state of California, and now the taxpayers have to pay their medical and other benefits that mortal workers like myself, will NEVER see — the only thing I will get is MY OWN MONEY BACK in the form of Social Security if that does not get hosed by our corrupt and incompetent government.
Just more to this than it is worth discussing. Such as County general funds are vested. Medicare contributed for certain conditions. If the employee was in service during the years that he was forced to contribute to SS, then the picture more closely mirrors private employees. Some retirees that have less than 25 years service pay a copay fee to the County. It goes on and on, and no intelligent answer can be had unless full disclosure of the entire retirement plans are totally explained. It is complicate, but to project this 2.6 billion future crap is just that.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.