Score: +3
(3/9/0)
Sonoma County Grand Jury
• 2005-2006
The Impact of Yesterday’s Promises June 27, 2006
⚠️ Translation Notice: This content has been automatically translated. The original English text is the official version. Translation may contain errors.
⚠️ Este contenido ha sido traducido automáticamente. El texto original en inglés es la versión oficial. La traducción puede contener errores.
Findings and Recommendations 5 findings
F2
California Public Employees Retirement System (CalPers) is the pension plan of choice. During our interviews it became apparent, that actuarial expertise and plan management were highly respected.
Related Recommendations (1)
R2
The grand jury recommends that the Board of Supervisors and/or City Councils enlist actuarial expertise to audit this asset/obligation disclosure.
F3
Health care coverage costs have doubled in the past five years and are projected to double again in the next five years. Insurance providers blame this on the costs of new technology.
Related Recommendations (1)
R3
The grand jury recommends that the advice of an expert should be solicited to consider the fairest most equitable way to offer health care benefits to public employees. This should be disclosed.
F4
The State of California, as quoted in the Sacramental Bee, sees the way out of this situation of unsustainable health care promises: the solution, “just quit promising health care for life. That’s what the Medicare system is for.”
Related Recommendations (1)
R4
The grand jury recommends to build a secure structure for maintenance of employee benefits should not be deferred.
F5
Reserve funding will be mandatory for all employing entities offering benefits for life. This is nothing new to pension providers, however, it will be new for health care, dental care, life insurance or any other promises for life. A mismatch between assets and liabilities has to be addressed. Full disclosure will provide this information.
Related Recommendations (1)
R5
The grand jury recommends full disclosure of each entities total benefit obligations along with information describing provisions to secure them. We are requesting this information between the end of each entities current fiscal year and December 31, 2006: • Number of employees eligible for pension premiums • Number of retired employees receiving pension benefits • Financial obligation • What reserves are in place to insure these pension obligations • Obligation for health care coverage • Reserve amount in place • Amount required by federal authorities to secure these health care benefits. Required Responses to Recommendations Sonoma County Board of Supervisors
F6
Both current employees and retired employees will benefit from the security of knowing that what they expect and have been promised is not dependent on the whims of the future. Conclusions In the past, employees in the private sector set the standards for the public sector employees in wages, hours and working conditions. In order to attract the most qualified workers, employers often competed with generous benefit offerings. In addition, upon retirement benefits were maintained for life as a way of showing appreciation for their loyalty. These generous offerings have collapsed in the private sector. Public municipalities will have to raise taxes, cut other services and layoff workers, if there are not enough assets or reserves to meet the requirements of the new accounting laws. Reportedly, this has happened in other states. Private sector employees have had to experience sacrifices in companies including, but not limited to Hewlett-Packard, General Motors, IBM, United Airlines, Verizon, etc. Perhaps public employees would not be subject to this, if the problem were addressed now and not deferred to future taxpayers. The grand jury found a bleak outlook for the continuance of generous promises. Actuarial information is that future costs will continue to rise and securing already made promises will likely include higher deductibles from the employee for care along with cost sharing premiums. The impact would be less take home pay. Figures furnished to the jury by providers indicated that driving up these costs are early retirements without Medicare eligibility. Boomers and the age group between 50 and 65 out-spend health care premiums by 164% and the figure for all retirees out-spending health care premiums is 131%. Overhead for insurance companies has tripled since 1993 according to the data furnished to us. This is also a reason for escalating health care benefit costs. Commendations The grand jury would like to acknowledge the City of Rohnert Park for publicly disclosing the findings of a recent actuarial study regarding the City’s financial status. Reports are that the City is currently $52 million short of what is needed to cover health care promises now on the books. They are looking for ways to address this deficit by cutting services and/or asking for an additional sales tax.
No recommendations for this finding
Additional Recommendations 1
These recommendations are not explicitly linked to specific findings.
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R1The grand jury recommends that Supervisors, Council members and financial officers should verify that health or other lifetime benefit promises are secured properly and in compliance with reserve funding standards.
Conclusions 2
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CL1 Page 3In the past, employees in the private sector set the standards for the public sector employees in wages, hours and working conditions. In order to attract the most qualified workers, employers often competed with generous benefit offerings. In addition, upon retirement benefits were maintained for life as a way of showing appreciation for their loyalty. These generous offerings have collapsed in the private sector. Public municipalities will have to raise taxes, cut other services and layoff workers, if there are not enough assets or reserves to meet the requirements of the new accounting laws. Reportedly, this has happened in other states. 3
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CL2 Page 4Private sector employees have had to experience sacrifices in companies including, but not limited to Hewlett-Packard, General Motors, IBM, United Airlines, Verizon, etc. Perhaps public employees would not be subject to this, if the problem were addressed now and not deferred to future taxpayers. The grand jury found a bleak outlook for the continuance of generous promises. Actuarial information is that future costs will continue to rise and securing already made promises will likely include higher deductibles from the employee for care along with cost sharing premiums. The impact would be less take home pay. Figures furnished to the jury by providers indicated that driving up these costs are early retirements without Medicare eligibility. Boomers and the age group between 50 and 65 out-spend health care premiums by 164% and the figure for all retirees out-spending health care premiums is 131%. Overhead for insurance companies has tripled since 1993 according to the data furnished to us. This is also a reason for escalating health care benefit costs.
Commendations 1
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CM1 Page 4The grand jury would like to acknowledge the City of Rohnert Park for publicly disclosing the findings of a recent actuarial study regarding the City’s financial status. Reports are that the City is currently $52 million short of what is needed to cover health care promises now on the books. They are looking for ways to address this deficit by cutting services and/or asking for an additional sales tax.
Agency Responses 4
Government agencies' official responses to this report's findings and recommendations. Click on a response to see the structured breakdown.
No Responses Found 7
Government entities assigned to respond to this report. No response documents have been linked in our database.
Cotati
City
County of Sonoma
Agency
Petaluma
City
Santa Rosa
City
Sonoma
City
Sonoma County Board of Supervisors
Elected County Office
Town of Windsor
Town