South Tahoe grappling with $44.9 million health care bill
By Kathryn Reed
It would cost South Lake Tahoe close to an additional $2 million a year for the next 20 years to fully fund its retiree health care plan. That’s because as of Sept. 30, 2011, that account had an unfunded liability of $44.9 million.
The city currently pays its share plus $400,000 a year. It’s still not enough because for years the full amount was not paid. The more that is paid each year means the projected 6.5 percent return on investment will help defray the deficit.
“We have a moral and legal obligation to make sure the retiree health plan is solvent. This is a time bomb that will go off,” City Manager Tony O’Rourke said.
But the city doesn’t know what it is going to do to fix the problem.
On Feb. 7 the City Council heard the dire news from John Bartel, president of Bartel Associates out of San Mateo.
He called the retiree health benefits “generous”. An expensive component, Bartel said, is also the average age of city retirees. For those in public safety, the average age at retirement is 53.9 years, while for everyone else it is 56.3 years.
“That exacerbates the problem,” Bartel told the council.
With Medicare not being available until one turns 65, it means the city – via the taxpayers – are footing the entire bill. For city employees hired before Jan. 1, 2008, many receive all of their medical care for the rest of their lives, plus for their spouse and dependents.
Fifty-eight percent of the retirees pay nothing for health benefits.
Councilman Hal Cole asked why the premiums don’t significantly drop when retirees start on Medicare.
Bartel said the city’s insurance broker needs to answer that question. But he also said the city needs to make sure retirees are signing up for Medicare so the city’s plan then becomes the secondary policy.
“If you continue this policy, you will pay more in retiree health care than you do in employee payroll for these employees,” Bartel said of the overall retiree health plan.
The staff report written by O’Rourke says, “The city’s retiree health plan liability has grown due to higher than expected claims ($4.3 million), more retirees than expected ($2.4 million), insufficient invest principal and earnings ($3.7 million) projected higher health care costs trends ($8.4 million) and updated CalPERS demographic assumptions ($2.4 million).”
The city pays $1,700 month for active employees and $1,100 for retirees.
The health plan was changed four years ago to be less generous. But it didn’t solve the burden of paying for those in the system before that date. And with stats from the consultant saying the last 90 days of a person’s life are the most expensive in terms of health care, the bills are going to keep accruing.
A higher deductible was put into place for this fiscal year that has an immediate savings of $4.7 million and an ongoing operational savings of $500,000 per year.
While it’s the 134 retirees who are at issue, they receive the same health benefits as the current 139 employees. So, any changes to employee health benefits affects retirees.
This problem did not pop up overnight. It has, though, essentially been ignored by previous councils and administrations. This council on Tuesday agreed something needs to be done. (Councilwoman Angela Swanson was absent.)
“We need to increase the cost-efficiency of the plan,” O’Rourke said.
That will take the six employee groups to come to the table.
Jerry Copeland, who represents the admin-confidential group, said one problem is the isolated location of South Lake Tahoe limiting health care options. But he also said, “It does need to be discussed as an entire budget issue. It needs to be transparent and open.”
In recent years, the whole unfunded liability of retiree health care has not been discussed in the open.
Retirees have not been asked to the table. Nor is the city contractually obligated to invite them. But it is possible some of them might opt for a cash payment instead of being on the health plan.
Mayor Claire Fortier asked what paying down the debt would equate to in layoffs. O’Rourke said the loss of 17 to 20 people. But he also said with departments so thin and employees being tasked with doing the jobs of multiple people, he doesn’t see how cutting jobs is a possibility. Plus, it would mean the reduction in services to the public.
Tuesday’s meeting was a workshop, with no action plan. More definitive ideas are expected to be brought to the council at the March 6 meeting, with the five likely to be asked to take action. However, they will be limited in what they can do based on contractual agreements. But they can direct staff to negotiate for certain things.
Employees can accrue 500 hours of sick time and be paid out when they leave. That could be negotiated.
Councilman Tom Davis would like to work on increasing revenues via special events that would put heads in beds and therefore up the city’s hotel and sales tax collections.
“Revenue is not a real solution. We need to look at the expense side,” O’Rourke said. “The burden doesn’t rest with the retirees; it’s with the current employees.”
Without the typos…
The rip off of America – no private sector rank and file employees get what government employees get. NONE!
It’s a myth/lie that government employees don’t get paid well.
They use to be called the Civil Service.
Now they are the self appointed privileged ’20 percenters’
As a member of the ‘Forgotten 33 percent’ the private sector that produces the value of the nation, I took my business out of California. All the states are bad but most are no where near as bad as California.
It can crash without me.
Well, at least Hal Cole had the nerve to ask why the “premium” cost for retirees doesn’t drop significantly when they go on Medicare. And yes, the City does mandate that retirees sign up for Medicare as soon as they turn 65. The comment that they don’t is false. Also, once a retiree is on Medicare, the City insurance only covers part of the 20% Medicare doesn’t. Their actual liability is significantly lower.
Also, as pointed out many times while many of us were still working, the City deliberately & wilfully failed in it’s obligation to fund the health benefits at the required level. They chose instead to use the money for other things.
Now O’Rourke is talking “more efficiency” which will, no doubt, equate to yet more massive reductions in the benefits available to retirees & another whopping increase in cost. With many retirees having pre-existing medical conditions, the idea of just handing out a small amount of cash & dumping us is untenable. Many of us wouldn’t be able to get other insurance.
Jerry Copeland also made a valid point when he said health care options are limited up here. In our case, our primary doctor who is in our PPO is only available 2 days a week. If something comes up other than those 2 days, we have NO medical care other than the ER. The specialists my husband needs aren’t even available in Tahoe so we have to drive to Reno or Truckee to see them.
The City needs to find a way to honor its obligation without further harming the retirees who gave years of their lives serving the City. When we were working, it was civil service as the wages were a small fraction of what they are now so our retirement is not as generous as many might think.
Another X, are you ignorant, or selfish? Because as usual, for the government workers and retirees its about me me me me me me . What about those who pay your way 100% ? Why shouldn’t we be able to say, me me me me me ? Why do I have to pay so you can quit working at 50 or 55 years old ??? Why do I have to keep working so other people can quit working and collect FREE medical care for the REST OF YOUR LIFE? Are you kidding me ?
I don’t give a flying flip that somehow you so-called retirees negotiated a salary cut to have a benefit that now is costing us a fortune. Look around folks, we ALL have lost what we negotiated with our employers, or our business is suffering.
To the City, I would support a ballot measure stripping retirees of these ridiculous benefits. They have have 50/50 health plan like the rest of us, pay for their premiums , after all its’ also tax payer money that pays your retirement salary.
In fact, if I get this straight, we pay your salary while you are working , very fat ones at that, we pay to allow you to keep your salary when you are NO LONGER Working, and we pay your health care before and after, and we pay
Sounds like in short, WE PAY for you while nO ONE Is paying for us.
Vote for no more retirements at 50, you can work to 65 like us, no more ‘generous’ health benefits, no more no more!
$1,00 a month for retirees and $1,700 for employees? THAT”s the problem! I live at Tahoe, I’m semi-retired and buy my own insurance. It’s $330 a month. Before I owned a 500-person engineering company and we didn’t pay $1,700/mo for anyone, including myself as the CEO.
Fixing typo…
$1,100 a month for retirees and $1,700 for employees? THAT’s the problem! I live at Tahoe, have the same limited options, I’m semi-retired and buy my own insurance. It’s $330 a month and also covers my daughter in college. Before retirement I owned a 500-person engineering company and we didn’t pay $1,700/mo for anyone, including myself as the CEO.
The hub and I are self employed and both over 50. We pay over $3,000 quarterly for a 70/30 insurance plan with a $3,600 deductible. Meaning they pay nothing till we’ve paid 3.6K out of our own pocket each year, and then they pay 70% while we pay 30%. That include prescriptions as well. Each time the younger of us hits a 5 year milestone, the premium goes up guaranteed, not to mention the 4 hikes we’ve had in the years since Obamacare passed and they’ve been raising our fees in anticipation of having to pay for those added requirements.
Free medical coverage from a city job after 20 years would be nice. . .
What did the city do with all the money. We went through the largest increase in revenue history. Look at price increases in property and sales tax during the bubble.
They didn’t even fix the pot holes or fund the medical/retirement funds for the employees.
How much money did they waste on studies for LED lights and side walks.
Mark Smith – government employees get the Cadillac Plans – tax payers get the bill.
Didn’t your company retirement plan cover your health insurance for you and every other employee for the rest of their lives???
What’s up with that?
What kind of a company retirement plan did you have?
Tongue in cheek. No private sector firms that I knew of did.
Elected policy makers allowed these benefits to occure and the city workers took advantage of every loop hole they could find to max out their pay and bennies. Over 50% of city workers that retire today after 25 years of service get over 100 GRAND in pay and benefits. Not bad for public servents. They get 90% of their highest year of pay after 30 yr. in public safety jobs and 90% after 34 years for all other jobs.
A continuation of inflated Government and give aways that are out of control!
I can’t add much to what has already been said except that I couldn’t agree more.
The first thing the City better do is stop these out of control benefits for current employee’s and any new hires. Stop adding to the problem.
While I hate the fact that the Government is so out of control with benefits I am a believer in “a deal is a deal” as painful as that is. So the current retired people, at no fault of their own, have a deal with the City and it needs to be honored. If some of them would perfer a buy out, great, it’s up to them though. If they are smart they will take it as the way things are being run nationally, I wouldn’t count on a life time of anything.
Finally, it is simply amazing how Government can spend without having a clue what the long game is financially. They would last 2.3 seconds in the private market.
This is what happens when clueless politicians and bureaucrats give the store away.
But only after making sure they are on the receiving end, too.
How do you think these tax debts will effect real estate prices over the next several decades?
Should these unfunded tax liabilities for the government be required disclosures to anyone buying real estate?
If I was a city employee I would have my union get behind the efforts to reform the MDL and BMP’s costs.
Feeding this Green Pig will surly force the City into chapter “9” BK.
SLT and many other towns and counties are in for tough times. Too bad they didn’t make the needed cuts back in 2008.
Property tax receipts will continue to decline as assessed values are adjusted down to reflect current market prices.
Try to explain this to people who thought spending $50,000,000 on the high school would bring new jobs and people to town.
Now play field lights will bring people to town.
Just like the global warming scamm anyone who wants their pet project funded claims it will bring jobs to town.
Hold it !! Unfunded liability of $44.9 Million ? had to be during the Cole/Davis years.
Was the act on not funding this liability against the law or just plain negligence? Why aren’t the individuals who caused this being identified and held responsible?
Hell Alex, they been there too frigging long,take a look back at the old photos in the paper,once upon time they were young with nice hair, now take a look at new photos!
How can anyone listen to old reptiles?
THE WHOLE CITY BEEN MORE THAN FANGED BY THESE POISONS,BAD IDEAS.
Take a ride during the week from one end town to the other……it’s Bleak!
Could someone give Lou a dictionary?
In addition to the unfunded retirees insurance program – how much is the city pension plan underfunded?
30 million dollars – 40 million dollars – 2o million dollars?
Anyone got a guess?
Asking again !!! Professional Pols!!! Like John Upton from the city to the county back to the city. Does he have a pension and or pensions ?
Wow. Sounds like an episode from one of the ‘ol Laurel and Hardy shows. If it wasn’t so funny I’d cry.
Current employee healthcare 1700$ and its a high deductable plan.
Whomever purchases and runs the city healthcare should be replaced. The plan employees now have is no more than 400$ on the open market.
Maybe new healthcare ran and organized by someone competent is in order.
Blame this on collective bargaining and elected officials who think their job is to appease unions. Well, this house of cards will eventually collapse, as will our our public school system, prison system, and all other institutions controlled by union bosses and workers who place personal entitlements above the public good. The seeds for this catastrophe were sown by socialists (Democrats) in the 1930s and 1960s. What amazes me is that so many people are surprised by this slow motion train wreck. The truth is economists have been warning about this for decades but have been brushed-off by politicians on both sides of the aisle. What happens to all those pensioners when the city falls into financial insolvancy? Look at the enormous financial crises in Britian in the late 1960s when it’s economic system collapsed from excessive entitlement programs brought on by post war socialist “reforms.” Remember when the British pound was the world’s reserve currency?
In the 1930s it was 10 to 20 cents an hour. Hookers were 10 cents a dance.
Bushie Boo Enron,Halliburton Cheney and their recession Too.
Are the city council members provided with health insurance – and is it just while they’re on the council? To be able to retire at 53 or 54 years old, and have insurance for family for life, is unsustainable financially for the rest of taxpayers to have as a burden.
The city seems to be constantly planning a return to the glory years of the 70’s, and not putting serious thought into different options.
The big businesses that drove earlier prosperity…the Casino’s..are a vanishing thing and were Nevada based anyway. The city has never been much other than a service provider to Nevada businesses and their employees.
Tahoe survived for years on the discretionary income of outsiders. That source of revenue is obviously in short supply country wide, and even the few “new” jobs being created are lower paying than the ones before and much less certain to survive.
If I am wrong, somebody please give me a list of good California based full time, permanent jobs, that have not been government service.
The city needs to be run like a business which must sell something at a profit to survive. I believe the taxpayers are tapped out, especially the ones in Tahoe who can barely feed themselves on the local job market, which seems to diminish daily.
Face the facts as did all the small cities all over the country in the past that were based on railroads, mines,grainaries, farms and all the other things that were temporary or ran their course: they evolved to a different focus, or they died. Darwin economics, if you will.
There will likely be enough people trying to live here to keep it from becoming a ghost town, but looking at the commercial vacancy rates, it is going to get worse before it gets better.
Energy and real estate costs alone will curtail many endeavors that might otherwise fit here.
We’ll see if the signs on busses 200 miles away pushing “young,fun high octane and Dare to have a wild Summer” do anaything. Do that many people, especially families, really have sufficient discretionary income to come here and be wild?
Personally, I agree with several folks in the paper’s comments, the advertising is confusing, is not sending a broad, or even a good message. Example: What does “plank in a casino” mean anyhow?
The middle class has truly been gutted, and until it returns to health, all of us will continue to see a decline in our standard of living.