After four decades of promising Sonoma County public employees generous health benefits upon retirement, the county now is warning thousands of current employees and retirees they face precedent-setting reductions.


A proposal by county administrators that would effectively force many retirees to pay more for their health plans will be presented today to county supervisors.

While it doesn't impose immediate costs on retirees, it does ask supervisors to sign off on a new direction that could shift care to less expensive plans, such as Kaiser Permanente, and that could raise the costs of insuring spouses and other dependents.

The decision could have implications for government employees across the county, from cities to school districts, as they confront mounting health insurance bills for retirees.

"I am a little shocked about this because it could double what I pay now," said early retiree Diane Pizza, 60. "I would have worked another 10 to 15 years if I had known this was coming."

In addition, the administration proposes to dramatically alter health benefits for new hires by, in the future, not funding anything upon retirement. It suggests creation of employer-paid deferred compensation programs, such as a Health Retirement Accounts, that fund with pre-tax money like a 401(k). That would end the government's health care responsibilities upon an employee's retirement.

For years, Sonoma County government workers have been insulated from health premium increases and benefit cuts because of their ability to bargain for lower rates as a large group and to spread rising medical costs over several thousand people.

However, new accounting guidelines are forcing county officials to tally future costs of those benefits, which total $398 million over the next 30 years.

"It's sort of like getting that advice from the doctor on necessary lifestyle changes or suffer the consequences later," said County Administrator Bob Deis.

The proposed changes affect 2,400 retirees who were managers and supervisors or who were represented by unions when they worked for the county. But they have implications for all 5,000 people on the county payroll, who are watching closely because they too will retire someday.

Pizza is worried because she now pays about $90 a month for her PacifiCare plan, and any sizeable increase would eat into her $1,200 monthly pension, the only income she has. If the county limits its health care contribution to $400 a month, her cost would more than double to almost $200 a month.

She retired two years ago, just before the settlement of her discrimination lawsuit against the county for failing to accommodate her disabilities caused by her breast cancer and depression. She had worked 15 years as a counselor with the county Health Services' Drinking Driver Program.

Others, such as Carl Jackson, who retired in 1994 after 35 years with the county Water Agency as assistant general manager, said benefit changes would pinch his family finances.

Jackson, 75, figures the cost of insuring himself and his wife would increase from $113 to $256 a month.

"I could probably survive that, but it will be a sad situation for everyone. I hope existing employees will start thinking about putting more away so they can afford their health care when they retire," he said.

Details on how much more retirees will pay still must be negotiated with unions as contracts come up for renewal. The most notable is the Service Employees International Union, which represents 3,000 county workers and whose contract expires in June.

"We really don't know if this proposal sets the pattern for what we can expect to see at the bargaining table, but our feeling is that they will want to stuff it down our throats," said Tom Drumm, SEIU's work site organizer for county employees.

County administrators, with backing of the Board of Supervisors, indicated last April the direction things would be headed. They told about 650 nonunion employees and 2,300 retirees who hadn't been represented by unions that they'd pay higher premium costs.

Starting in July, the county will pay the equivalent of 85 percent of the lowest cost health premium, instead of 85 percent of the employee or retiree's choice of plans.

The shift in thinking about the way governments view obligations to pay future retirement benefits comes about because the private, independent Governmental Accounting Standards Board in July 2004 ruled public agencies from states to city governments to school districts needed to assess the value of their promises and explain how they plan to pay for them.

The board said it feared public entities were piling up promises of benefits that had the potential of someday overwhelming the revenues they rely on for everything from employee salaries to road repair.

When Sonoma County supervisors reviewed their bill for future health benefits, they found their retirees have been promised about $398 million worth of them over the next 30 years. And they'd cost about $37 annually, almost twice as much as the county has been setting aside.

Supervisors were informed last year that massive job cuts would be the only way to pay for soaring costs of retiree health insurance.

"The alternative is to eliminate 200 to 250 positions, reduce services and leave these positions vacant for 30 years," Deis said. "The Board of Supervisors has made it clear this would be unacceptable. The last alternative would be to go to the voters for help, but I think most people realize what that will result in."

That got everybody's attention.

Demographic trends of people living longer and staying healthier, along with personal retirement goals, have combined with generous retirement public sector retirement packages to force governments to scrutinize the full effect of their promises, according to a National Association of Counties review of the issue.

Deis said doing nothing now, or too little now, would lead to a "fiscal meltdown" and likely would result in supervisors having to eliminate all retiree health benefits.

"The sooner we act, the more we can offer employees and retirees that will meet the long-term fiscal sustainability test," Deis said.

Critics say this tallying of health benefit costs is merely a tool for administrators to force employees into granting concessions.

"They are trying to take advantage of this issue to get concessions out of employees in bargaining," said Tom Robotka, a union leader who attended most of two dozen sessions over the past year on proposed benefits changes. "This forces a bunch of people into a very difficult situation of having to choose Kaiser or using your pension to cover your added health care costs."

In Sonoma County, the issue of unfunded health costs becomes particularly prickly because union officials, former managers and even former county personnel directors say county workers have historically accepted low percentage pay raises in exchange for promises of good health care plans when they retire.

"I know those promises. I made them, and I was authorized to make them by county administrators," said Dick Gearhart, the county personnel director from 1986 to 2000 who has taken a lead role in representing retired administrators opposed to benefit changes. "It is not that retirees don't think we shouldn't pay more, but we should not be the only solution."

Deis responded: "I can find no evidence of this alleged quid pro quo."

In practice, a long line of agreements determined that the county pays 85 percent of employee and early retiree health plans and 85 percent of Medicare supplemental plans for those over 65.

In an effort to limit the costs of promising future health care, county administrators are proposing a system of funding health care premiums for retirees that moves away from paying a percentage of those premiums to one that gives retirees a set dollar amount, regardless of the number of dependents they insure.

It is a system prevalent in private industry and used by several Bay Area county governments. Critics say this often results in retirees seeking the least expensive plan and in retirees using their former employer's coverage for themselves and not dependents. But other experts say retirees often stick with the same plan they had when employed, largely because benefits and costs are better than what they'd get on their own.

To cushion retirees against inflationary medical costs, the administration proposes allowing the Board of Supervisors to grant cost of living increases on retiree medical programs, depending upon available funding.

You can reach Staff Writer Bleys W. Rose at 521-5431 or bleys.rose@pressdemocrat.com.

UNFUNDED

HEALTH COSTS

Here is a sampling of what some governments estimate to be their unfunded retiree health care obligations over the next

30 years:

Sonoma County: $398 million

Santa Rosa: $5 million

Rohnert Park: $27.6 million

Santa Rosa Schools:

$22 million-$29 million

Cotati-Rohnert Park schools: $13 million

Sebastopol: $760,000

How many jobs would have to be cut to save this money:

Sonoma County: 200

Santa Rosa: 5

Rohnert Park: N/A

Santa Rosa Schools: N/A

Cotati-Rohnert Park schools: 13 teachers

Sebastopol: none