Sacramento County may owe $2 million more in retiree health costs

Published Monday, Aug. 24, 2009, Sacramento Bee

In an effort to reduce costs a couple of years ago, Sacramento County officials cut a health insurance subsidy to county workers who retired after June 1, 2007.

A state adjudicative body, however, recently ruled that the officials had no right to unilaterally do away with the long-standing benefit and ordered the county to "make whole all those affected by the June 5, 2007, changes in eligibility for lost benefits, monetary and otherwise, plus interest at the rate of 7 percent per annum."

The ruling, issued in June, means the county might be required to repay anywhere from $1 million to $2 million to workers who retired after June 1, 2007, of which between $230,000 and $420,000 would come from the general fund, said Wanda Dark, a spokeswoman for the county's Internal Services Agency.

The costs could be even higher.

The county could be on the hook for the medical expenses of retirees affected by the cut in the subsidy, said Margot Rosenberg, an attorney representing the United Public Employees Local 1 in the case.

"If we can prove members forewent health insurance because of this change, then certainly we'll seek all of the damages as a result," Rosenberg said.

Since 1980, the county has provided its retirees with access to the county's medical and dental plans along with a monthly subsidy to help with the cost, according to county documents.

From 1993 until 2003 the county funded the subsidy with "excess earnings" from the pension system. In 2003, the cost shifted to departments.

The subsidy – as much as $244 a month for retirees – has proved controversial in recent years as the county's budget has struggled to stay in the black.

In March 2006, the Board of Supervisors approved changes that limited eligibility for workers retiring after Jan. 1, 2007.

The unions filed unfair labor practice charges, claiming the county couldn't unilaterally change workers' benefits without negotiating. The board effectively rescinded those changes in September 2006.

"We were facing a challenge from the union," said Krista Whitman, supervising deputy county counsel. "A decision was made not to fight it."

Almost immediately, however, officials started working on another, similar change and on June 5, 2007, the board voted to do away with the subsidy for anyone who retired after May 31, 2007.

Again, the unions filed complaints.

The county tried to argue that "it's nonnegotiable because it has to do with retirees," said Gary Messing, the attorney who filed the original complaint on behalf of two employee groups.

The unions argued that because the change affected current employees who would one day be retiring, such a change needed to be negotiated, he added.

An administrative law judge agreed with the unions and issued a proposed decision in their favor in June 2008. The Public Employment Relations Board sided with the unions in its decision of June 30 this year.

"This is something that could have been avoided had they had fruitful discussions back in 2006," said Ted Somera, UPE Local 1's executive director. "Basically they violated the law."

On July 28, the county filed an appeal with the state's 3rd District Court of Appeal.

If the appellate court sides with the unions, it could be a big blow to the cash-strapped county.

Not only might the county need to shell out money to people who have retired in the past two years, but it also means the county would have to carry funds on its books to cover projected future costs, according to Dark, the county's Internal Services Agency spokeswoman.

"When you look at the liability we have to carry on our books, it's significant," she said.

During budget hearings in June, the board voted to cut the retiree health subsidy as a cost-saving measure. Dark said officials are still trying to determine what impact the rulings might have on that decision.

Rosenberg said the unions have six months to challenge the new changes and attorneys are evaluating the county's actions.