A Solano County Grand Jury report warned that a benefits package for Vacaville retirees was “not sustainable” and could lead to a loss of employees and services to citizens if not addressed.
According to the report, issued last week and triggered by a public complaint, the city provides lifetime health care to current and retired employees, their spouses and children up to the age of 26 as a retirement benefit known as Other Post-Employment Benefit (OPEB). The current unfunded liability for OPEB in the 2018-19 fiscal year budget is more than $124 million.
The report notes that prior to the renewal of Measure M by Vacaville voters in November 2016, staff had reported that the General Fund reserve was anticipated to be depleted by 2019. However, the report said that paying down OPEB came into conflict with two competing issues: The rising costs of health care and California Public Employees’ Retirement System costs that continued to eat into the budget, and increasing payroll costs that reduced funds available to pay down the OPEB benefits.
These issues demonstrated a benefit cost that was “not sustainable,” according to the report.
“Failure to address this problem could result in loss of employees and corresponding loss of services to its citizens,” the report noted.
In preparation of the report, the Grand Jury had interviewed city staff and concerned citizens, watched numerous City Council meetings that went over retiree health care and the OPEB unfunded liability, and reviewed many past newspaper articles and resolutions.
The city currently has approximately 519 employees and 449 retirees served by the benefits package, which is provided by resolutions adopted by the City Council based on the results of collective bargaining between the city and both represented and unrepresented groups, according to the report.
The report further states that while the city did address the issue with employees hired on or after December, “the cost for current employees and retirees still represents a significant financial threat to the City, which has not been sufficiently addressed.”
This was one of five findings highlighted in the report, all of which received recommendations to address them. The city recommends identifying possible solutions to lowering OPEB costs through updated policies and labor relations strategies, such as negotiating and implementing “a fixed contribution toward retiree healthcare rather than based on a percentage of the Kaiser Bay Area pricing.”
The report also recommends forming a citizen oversight committee to study OPEB and make recommendations to the Vacaville City Council.
Another finding suggests that materials staff provided to the council “failed to adequately address the long-term financial impact on OPEB.”
“The complexity of OPEB hinders the understanding by the decision-makers and stakeholders who may not be subject matter experts,” the report stated.
The jury recommends directing staff to include the fiscal impact of changes as well as the methodology used to determine this impact in an easy-to-understand language.
The report also noted that placing OPEB-related items on the council’s consent calendar alongside other routine items “hinders public awareness of and input to city council decisions” and suggests they be presented as separate items.
Finally, the report found that “changes in health plan rates announced by CalPERS were not brought before the City Council and the public” and recommended that changes in the city’s contribution toward retiree health care and impacts on OPEB liability be placed on the council’s agendas to be discussed in a public forum.
City Manager Jeremy Craig and the city of Vacaville are required to issue formal responses to all of the findings.
Craig told The Reporter that the city is still thoroughly reviewing the document, and the response will go before the council in August. He said that at an initial glance, the report summarizes key points the city has been talking about for decades.
“This retirement benefit started in the 1970s, so this has been a long time that we’ve had this benefit in place,” he said. “It really is an attraction and a retention tool for a great staff.”
However, Craig said the report did not mention that the issue is part of a labor agreement with nine labor groups. Since 2010, he said the city has created a trust with money set aside to help pay for the benefit in the future.
“That trust has over $37 million in it today,” he said.
Additionally, Craig said the city has lowered the Kaiser pay rate from 100 to 85 percent, and all of its union groups except for fire and police management have accepted a Tier 3 benefit.
“We’ve reduced that benefit to a sixth amount,” he said.
Craig said the process to work through the benefit issue is a slow one because it is subject to labor negotiations, but he said the council is very well-versed on the subject with three of its members having served for approximately a decade.
“It took us 40 years to get here, and we have plans to get out of it but it’s not gonna be an overnight fix,” he said. “It’s gonna be steady, slow improvement.”
July 1, 2019
The Reporter
By Nick Sestanovich
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