There is a special DeKalb City Council/Finance Advisory meeting scheduled in the council chamber room (200 S. Fourth Street) at 6pm Monday, December 7. It has a single item agenda (PDF) — Retiree Health Insurance. Citizen comments will be allowed before the item is discussed.
Click on the image above for an enlarged view. (Opens in new window.)
The City of DeKalb’s post-retirement health plan covers a significant amount of the premiums (approximately 87% of the cost) for health and dental insurance for retired employees for life, starting as early as age 50. The plan also covers eligible dependents. According to the EPI report the current post-retirement health plan has a $29.4 million unfunded liability (as of 7-1-08). EPI believes this unfunded liability is likely understated due largely to conservative estimates of future health care inflation.
Currently the City is not making an annual contribution towards any of this unfunded future liability and is only funding the current annual costs, which were approximately $1 million in fiscal year 2009. In March of 2008 the City’s fund balance for this purpose was at a deficit of around $1 million.
By law and by collective bargaining contract, the City must provide its post-retirement health care coverage for bonafide retirees. According to city administrators it is not contractually or legally obligated to provide, at the current funding level, coverage for non-bonafide retirees or for dependents in either group.
The Insurance Committee of the City of DeKalb, which was formed to evaluate and develop logical and ethical solutions to the issue of supplemental health insurance for retirees, has submitted a proposal that would implement a ten-year phase-out of subsidized health care coverage for early retirees and dependents. Their proposal would reconsider a memo sent, reported in June 2009, that informed all current employees the program would end effective 2010.
EPI’s recommendation was to negotiate a change to all collective bargaining contracts as soon as possible and that the plan be terminated for all non-union employees and retirees. EPI suggested the Council consider a phase-out plan for both active employees and retirees. Under that plan retirees would be required to increase their contribution by 17.4% per year over the next five years until they are paying 100% of the premiums. For example, in FY 2010 retirees would pay 30.4%, FY 2011 47.8%, FY 2012 65.2%, FY 2013 82.6%, and FY 2014 100%. This phase-out plan would save the City $3.2 million over the next five years.
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11 Comments
Mac, this has been an agenda item for at least three months now in the realm of the EPI report meetings. If my questions were not asked directly, they certainly could have been anticipated.
Why hasn't this information been prepared previously?
Why doesn't the assistant city manager understand the types of information which prudent policy-makers need to make intelligent decisions?
Why do such sessions continue to feature embarrassing instances where the entire council and advisory board can't decipher his financial work ups while the assistant city manager insists the reports are perfectly clear to himself?
Why has the council blindly accepted the information presented to it by staff in form and in substance for so long without an appropriately critical eye?
Are those enough questions to suggest why I've adopted the moniker of skeptic?
DeKalb Skeptic, you're pretty much spot on. If the City of DeKalb wasn't so broke I'd be pushing for a forensic audit of the last 15 years. I know some would call me "out there" because forensic suggests criminal behavior. I'm not suggesting any laws were broken but like you I think such an audit would reveal an extended ton of ineptitude.
As I said during last night's meeting I favored an immediate end. The reasons I'd support a 5 year phase out are ethics related. 1) It appears that 6-10 employees were enticed to early retire for budgetary purposes and were told to calculate this deal into their decision. 2) It has been suggested that this insurance deal has been used in collective bargaining and I doubt rank and file were aware of all the details.
Its important to note that no final decision was made at last night's meeting. The council will need to make their final call on this matter on December 14.
Your questions on costs must be answered BEFORE council makes its final decision. To not have cost questions answered this late in the game is unacceptable.
We need fresh eyes across the board at city hall and accountability for a 15-year perpetuation of irresponsibility.
No disagreement here on the accountability statement. And you are also right, imo, about the organizational culture that breeds this. But fresh eyes will only get sucked into the pit until we change that culture. That's how thick it is. This is NOT a Biernacki deal at least exclusively. It appears to have been started by Nicklas and his resignation left a loophole. It doesn't look like Connors lifted a finger to straighten it out. 15 years at 2009 dollars you ask? I don't know but I bet it would more than cover the cost of a new police station.
Mac, any thoughts on why the Daily Chronicle doesn't cover the joint Council-Financial Advisory meetings? They've lagged on the EPI report from the beginning.
Anyone have any thoughts on why they have seeming made this editorial decision?
Too complex for their reporters to understand?
Too many variables to report so they'll just wait until final action is contemplated?
Reluctance to sound critical of city hall?
Because it's the Chronicle?
Mac's story suggests a five-year phase-out will be "saving" the city millions. That strikes me as a little like the compulsive shopper who comes home from the department store raving about how much they "saved" instead of revealing how much they actually charged up on the plastic.
There is no legal obligation to continue to pay another premium unless the insureds reimburse the city coffers. For individual cases where a hardship would be presented, a "widows and orphans" support fund can be established.
How much is this COSTING us in FY2010? What is the proposed COST if the 5-year phase out is adopted?
This is a 15-year mistake perpetuated by an organizational culture which repeatedly covers up its incompetence. The phrase "that's the way we do it here" trumps common sense, innovation or best practices.
A forensic accountant could have fun answering this one: what is the total COST of the 15-year mistake in 2009 dollars?
We need fresh eyes across the board at city hall and accountability for a 15-year perpetuation of irresponsibility.
My neighbors across the street are in a TIF and yes, mine went up a higher and I have a smaller house.
That is correct — the portion over the baseline EAV (AKA the "increment") goes to the TIF fund, not to the pensions, unless a surplus is declared in any given year. Any property tax hikes = windfall for TIF.
And now, the Econ Development Committee seems to be pushing to form a new TIF for the South 4th Street Corridor. I suspect this is, at least in part, an attempt to get the "old" high school into a TIF. The timing could not be worse — I keep thinking about all the attention given the "early" closing of the County Farm TIF, perhaps to help counter the inevitable unpopularity? Sorry, but I can't help thinking sometimes that it seems like they are playing the Chronicle like a fiddle.
Correct me if I am wrong but the city will raise property taxes to help fund the pensions. In reality the only people's taxes that go to pensions are those living outside a TIF district so the only city property taxes going to the pensions are from those people that live or own outside of TIF. I wonder if a tax increase for the pensions would really be needed if so much money was not diverted from these pesions to TIF over that past decades. It appears the property taxes in DeKaln are becoming real unfair. They only ones funding the pensions are those living outside of the TIF's and not everyone as declared by the CC.
OK, so my timing is off.
I posted the public hearing announcement at citybarbs, all the while wondering what the point of having a City of DeKalb website is, if they won't post their own legal notices there.
They will raise taxes on December 14th. See the printed paper for the public hearing announcement.
OK, I haven't had my coffee yet but if memory serves, the only significant action taken on the EPI report so far is the wage freeze? The report was released to the public in May and the wage freeze was supposed to buy a year of time to aid the city's getting its act together on the financial issues, first and foremost on the post-employment health plan.
We still haven't a formal debt policy in place and we can't afford the premium on catastrophic liability coverage. Also, revenues are falling significantly behind projections again this fiscal year.
Seems to me the clock is running out.
Here's my prediction: Because the people who've got theirs must keep theirs, the city will continue business as usual and hit full-on red-light crisis mode once again in a few months; it will raise taxes and fees and make further deep cuts in personnel (public safety, not admin of course).
Because what we've got here is a one-trick pony in a sad, sad circus.
And the consequences of years of this trick will reach a crescendo.
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There's not a single question you've asked that's out of line, skeptic. You probably digest the agendas, minutes and back-up material as much as I and those muckraking bloggers do. The council members get a lot of reading material every Thursday before their regular meeting (plus more). Too much of it, to these eyes anyway, should be classified as promotional collateral material and way too little of it provides that "which prudent policy-makers need to make intelligent decisions."
Far too often the financial charts and spreadsheets given either contain errors or are lacking substance. Example: The analysis spreadsheets for the City Insurance Committee proposal on the retiree insurance issue did not factor costs of current employees soon to enter the retirement system. The rationale given was that current employees are subject to collective bargaining. Well… then why bother with any cost analysis in the first place?
The council shouldn't blindly accept anything but I agree with those who say they must be able to rely on staff analysis/reports being objective, accurate and complete. There should be little tolerance for if or when the administrative staff, the highest in the food chain, does not provide such reliable information. That's about as fair and efficient we need our council to be.
But we'll always need skeptics, too.