By Nels Johnson, Marin Independent Journal -
City, county, school and special district agencies across Marin have mounted a $522 million debt for retiree health care, jeopardizing employee benefits and posing a fiscal calamity for a future generation of taxpayers, a grand jury investigation concluded.
In a detailed review of the cost of retiree health care benefits approved by the county and 39 other local agencies, the Marin County Civil Grand Jury urged officials to pay down liability, cut benefits and require employees to share the cost.
Most agencies do not fund the future retirement health benefits they promise, but merely pay the current year's medical premiums for retirees, allowing the tab to increase as more people retire and health costs soar.
Jurors said agencies may be unable to pay for benefits they have promised.
"If the liability problem is not addressed within the next few years, each Marin County household will be assessed significant additional taxes or will see a dramatic reduction in services," the panel warned.
After reviewing unfunded health liabilities for the county and Marin cities as well as key school and special districts, the jury found that 26 agencies have set aside no funding at all for future health benefits promised employees — and only 12 have set aside more than 5 percent of the current liability.
"The county was short about $293 million or about $2,627 per county household," the jury said, noting the tab at Civic Center accounted for the bulk of a "looming financial burden" countywide that faces future generations. The jury noted the county pays $12 million a year to pay for health benefits for 1,400 retirees, or about $8,600 per year per retiree. In 2008, officials capped costs at $3,000 for new employees.
But the jury found that county supervisors have funded only 8.2 percent of a $319 million tab for the retiree health benefits they have promised. "The county's retiree health care unfunded retiree health care liability is far more alarming than the county's pension funding inadequacy," the jury reported. "This is because the county's retiree health care liability is 92 percent unfunded. ... In contrast, its pension liability is about 25 percent unfunded."
What's more, "the county's unfunded liability is among the highest for any of the county's 11 cities and towns," the jury said.
San Rafael, however, was singled out for praise at the top of the funding list for taking "important steps" and "significant movement to control costs" while paying for 30.9 percent of its $35.2 million retiree health liability.
County Administrator Matthew Hymel, who regards the county as a regional leader in pension reform, said the grand jury had made "significant efforts to research this issue," and added the county agrees that retiree health care is a "serious issue that needs to be addressed." He also cited a series of "aggressive actions" the county has taken, including cutting benefits for new hires and paying down $26.5 million of health care liability this year.
The jury faulted liability repayment schedules employed by most, including the county, that use an "extreme" 30-year amortization period that enables agencies to minimize annual payments.
Other agencies that have paid down or set aside some funding for future health benefits, with liabilities followed by the percent they have been funded, include: Tiburon Fire Protection District, $3.1 million, 26.7 percent; Fairfax, $1.28 million, 19.8 percent; Marin Municipal Water District, $44.77 million, 19.4 percent; Tamalpais High School District, $6.54 million, 19.3 percent; Central Marin Sanitation Agency, $3.55 million, 19.1 percent; Kentfield Fire Protection District, $2.39 million, 16.2 percent; Mill Valley, $28.1 million, 12.9 percent; Las Gallinas Valley Sanitary District, $2.15 million, 12.5 percent; Ross Valley Fire Department, $5.12 million, 6.1 percent; Novato Fire District, $17.71 million, 5.4 percent; Southern Marin Fire Protection District, $5.49 million, 3.6 percent, and Corte Madera, $11.83 million, 0.3 percent.
The jury reported that some agencies, including Mill Valley and the Marinwood Community Services District, provide generous benefits. Mill Valley's health tab last year, covering retirees and their spouses, was $14,000 per retiree, although costs fall to about half that for those eligible for Medicare.
Mill Valley City Manager Jim McCann, who had not yet read the jury report, said the city has cut benefits for new hires, set aside $4 million to help pay for retiree health, and is studying ways to do more. The city has a stellar record of paying its pension liability, with a 90 percent funding level as detailed in a recent actuarial study.
And in the Marinwood district, where employees may retire at 50 after only five years of service, a rich benefit "unique among the entities the grand jury studied," no provision has been made for future health funding of a $4.74 million liability. Marinwood has cut benefits for future employees and trimmed other payments but the unfunded liability per district household is about $2,750 or "four times that of any other special district the grand jury surveyed."
The jury also found agencies that provide far more modest payments, including Novato, where retirees get a health benefit of about $1,314 a year, and the Dixie School District, which caps benefits at $425 a month for five years "and thereafter provides retirees a mere $7.50 a month toward their health care coverage costs." The jury noted that "some employers offer substantially lower benefits and yet are able to attract and retain employees."
The jury focused on several agencies facing funding hurdles, including San Rafael city schools, which have set aside no funding despite a $10.4 million liability. With a wave of retirements due, the city schools face "substantial future outlays" for benefits.
At $12.03 million, the Marin/Sonoma Mosquito and Vector Control District posted the highest unfunded health liability among those with no payment program. Other agencies with no payment plan, despite unfunded retiree health liabilities of about $1 million or more, include:
Larkspur, $7.49 million; Twin Cities Police Authority, $7.49 million; Sausalito, $6.63 million; Novato Sanitary District, $6.11 million; Marin Community College District, $5.69 million; Sewerage Agency of Southern Marin, $4.11 million; North Marin Water District, $3.07 million; Reed Union School District, $3.04 million; Tiburon, $2.9 million; Mill Valley School District, $2.16 million; Ross School District, $2.14 million; San Anselmo, $1.94 million; Ross Valley School District, $1.84 million; Novato, $1.8 million; Shoreline School District, $1.8 million; Kentfield School District, $1.43 million; Dixie School District, $1.06 million; and Novato School District, $820,000.
Solutions, the jury concluded, include "accelerated funding" and capping benefits and higher retirement ages. Generous benefits are not needed to attract employees and "for active and newly hired employees, the benefits should be trimmed and costs should be shared."
The panel requested responses from the county and all cities, the College of Marin, 12 school districts and 14 special districts.
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