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Home My WebLink AboutMINUTES - 06082004 - C.139 Grand J725 Court Street Contra P.O.Box 911 Costa Martinez, CA County -RECEIVED l �\ MAY 2 5 2004 May 25, 2004 \�o SER ��,�'P>F.D C::I SUPERVISORS Sl: j",r,'`, coli Board of Supervisors 651 Pine Street Martinez, CA 94553 Dear Board of Supervisors: Attached is a copy of Grand Jury Report No. 0404, "Take Action Now to Reduce Costs of Retiree Health Insurance"prepared by the 2003-2004 Contra Costa County Grand Jury. In accordance with California Penal Code Section 933.05, this report is being provided to you at least two working days before it is released publicly. Section 933.5(a) of the California Government Code requires that(the responding person or entity shall report one of the following actions) in respect to each finding: (1) "The respondent agrees with the finding." (2) "The respondent disagrees with the finding." (3) "The respondent partially disagrees with the finding." In the cases of both(2) and(3) above, the respondent shall specify the portion of the finding that is disputed, and shall include an explanation of the reasons therefor. In addition, Section 933.05(b) requires that the respondent reply to each recommendation by stating one of the following actions: 1. The recommendation has been implemented, with a summary describing the implemented action. 2. The recommendation has not yet been implemented, but will be implemented in the future, with a time frame for implementation. 3. The recommendation requires further analysis. This response should explain the scope and parameters of the analysis or study, and a time frame for the matter to be prepared for discussion. This time frame shall not exceed six months from the date of the publication of the Grand Jury Report. Board of Supervisors May 25, 2004 Page 2 4. The recommendation will not be implemented because it is not warranted or is not reasonable, with an explanation thereof. Please be reminded that Section 933.05 specifies that no officer, agency, department or governing body of a public agency shall disclose any contents of the report prior to its public release. Please insure that your response to the above noted Grand Jury report includes the mandated items. We will expect your response,using the form described by the quoted Government Code, no later than Aujzust 23, 2004. Sincerely, A. W. Ronat, Foreman 2003-2004 Contra Costa County Civil Grand Jury cc: John Sweeten, County Administrator s A REPORT BY THE 2003-04 CONTRA COSTA COUNTY GRAND JURY 725 Court Street Martinez, California 94553 Report No. 0404 "TAKE ACTION NOW TO REDUCE COSTS OF RETIREE HEALTH INSURANCE" APPROVED BY THE GRAND JURY: Date. ARTHUR.W. RONAT GRAND JURY FOREMAN ACCEPTED FOR FILING: 1 Date. O Y RICHARD S. FLIER. JUDGE OF THE SUPERIOR COURT CONTRA COSTA COUNTY GRAND JURY REPORT NO, 0404 "Take Action Now to Reduce Costs of Retiree Health Insurance" TO: Contra Costa County Board of Supervisors BACKGROUND In October 2002 the Contra Costa County Board of Supervisors (BOS) approved more expensive pension benefits for county employees. It appears that there has been little attention paid to a related topic: The increasing costs of health insurance coverage for retired employees. FINDINGS 1. Contra Costa County(the County) continues to provide health insurance for County employees, and dependents, after they retire. The County pays the major part of the premium cost, contributing 75%to almost 100%, depending upon the health plan selected and the retiree's age and family size. 2. The"health insurance"referred to herein includes dental insurance. A number of plans are available. 3. All retirees pay some share of the premium cost,but several plans have a retiree payment of only one penny per month. 4. The cost of the retiree health insurance is not paid out of the County pension system. It is a separate cost paid from the County general fund, except for the cost for certain retirees who worked in departments where enterprise funds or grants are used to pay the cost. (Enterprise funds are the operating funds of a government operation that is expected to be profitable or self-supporting). 5. Retiree health insurance cost has increased dramatically over the past four years. Those costs, and the percentage increases from year-to-year, are as follows: Fiscal Year Cost per Year Percent increase 0 over prior year 1999-00 $105907)981 2000-01 $12)3291907 13% 2001-02 $145583,396 18% 2002-03 $18)7975678 29% 2003-04 $241836,229 32% (The cost for 2003-04 is the County's budget figure. Actual expenditures for the first six months of the fiscal year indicate this budget prediction is substantially accurate.) 6. As shown, the budgeted cost of the health benefits increased in 2003-04 by 32% over the preceding year. 7. The County's cost for retiree health insurance is likely to increase rapidly in the future, even if costs for medical services and drugs increase at a lower rate than in recent years. The 2002 pension benefit increases encourage earlier retirements for all groups of County employees. More county retirees will increase County costs because more people are on the retirement rolls. 8. Younger retirees will remain on the rolls for a longer time before they qualify for Medicare. Medicare offsets a portion of the county premium cost for most of the retirees after age 65. 9. Currently, the County's financial statements account for retiree health costs on a pay-as-you-go basis. Each department is currently charged for the health care costs of its retired employees. Future costs,beyond the current fiscal year, are not treated as an unfunded liability. An unfounded liability can affect the County's credit rating. 10. The Government Accounting Standards Board(GASB)recommends that, by 2006, retiree health costs and other non-pension benefits be treated as unfunded liabilities in lieu,of pay-as-you-go treatment. The new treatment, which is expected to be adopted, will result in a new liability on the County's balance sheet. 11. The increased cost of retiree health insurance paid from the County's general fund reduces the funds available for county services. In past years, shortfalls in the general fund, from other causes required threatened reductions in law enforcement, library hours, animal control services and other activities which directly affected citizens. RECOMMENDATIONS The 2003-2004 Contra Costa County Grand Jury recommends that: I BOS promptly reduce the costs of the future County paid health insurance for retirees who were not covered by an MOU(Memorandum of Understanding, a labor contract) during their employment by: • increasing the share paid by the retirees. • reducing health plan benefits. • capping health costs to the County. • adopting some combination of these. 2 2. BOS promptly reduce the future costs of County paid.retirees health insurance by changing the terms and conditions of employment of current employees who are not covered by an MOU to reflect the cost saving changes adopted for the former employees who are'already retired. 3. BOS require County negotiators to obtain similar reductions in the contract (MOU) commitments for retiree health insurance applicable to future retirees who are now union members. If these reductions cannot be negotiated at this time, they should be a primary goal of future labor contract negotiations occurring before expiration of existing MOUS. 4. BOS determine the best means of reducing costs of Countyp aid health insurance for those current retirees who were union members while employed. 5. BOS adopt a schedule for compliance with GASB recommendations regarding the method of accounting for the costs of post-retirement health and other non- pension benefits. , 6. BOS obtain an evaluation of the impact on the County credit rating of compliance with the GASB recommendations on retiree health costs. 3 Honorable Federal Glover,Chair March 8,2004 Page 2 - cc: Members of the Concord City Council Members of LAFCO Congressional Representative Ellen O. Tauscher Congressional Representative George Miller Andrew M. Richards,Manager, Airports District Office,Federal Aviation Administrati on Woody Woodward, Associate Administrator for Airports, FAA,Washington,D.C. Senator Tom Torlakson Assemblymember Joe Canciamilla Nicholas Virgallito, Pres. & CEO, Greater Concord Chamber of Commerce John Sweeten, County Administrator Keith Freitas, County Director of Airports Dennis M. Barry, County Community Development Director- Pat Howlett, Concord Representative, County Aviation Advisory Commission