The Press Enterprise, 1/21/15.
Most cities in California have been notably derelict in properly planning and paying for public employee retirement benefits.
Not only are these benefits expensive, but they also yield benefits that are either not measurable or unseen.
More pressing and tangible areas of spending, from taking care of streets to funding city libraries or police departments, have often taken precedent over funding employees’ retirement benefits.
While there undoubtedly remains a pension problem in the state, lawmakers in state and local government have been able to defer further action through tepid reforms.
One major area of government mismanaging has been the related package of retirement benefits known as Other Post-Employment Benefits, or OPEBs.
Benefits may include varying degrees of health insurance coverage, life insurance and other such benefits.
Like pensions, OPEBs have been offered with little regard to funding, as government officials who approve them likely won’t be the ones taking responsibility 20 to 30 years down the line when its clear money hasn’t been set aside to pay for them.
The four largest cities in Riverside County offer OPEBs alongside pensions and all have large unfunded liabilities, according to recently released Comprehensive Annual Financial Reports for fiscal year 2014.
The city of Riverside offers one of the most conservative OPEB packages, in the form of city-subsidized, lower rates of health insurance, which terminates either when the retiree becomes covered under another employer’s health plan or when the retiree turns 65. Despite this conservative benefit, the plan is only 26 percent funded, with an unfunded liability of $47 million.
The city of Moreno Valley offers OPEBs to employees hired before Sept. 30, 2011, in the form of subsidized health insurance. In recent years, the city has failed to make more than 72 percent of the required annual contributions to fund the plan. While closing the benefit to employees hired after Sept. 30, 2011 helped improve funding prospects, the plan is less than 50 percent funded, with a $21.6 million unfunded liability.
The city of Corona offers employees up to full health insurance coverage and a $50,000 life insurance policy until age 70. While the city has been diligent in making full required annual contributions to the plan of more than $6 million, the plan is only 21.2 percent funded and has an unfunded liability of more than $75 million.
The city of Murrieta offers a predetermined subsidy (of varying amounts) to retirees, depending on when they were hired and whether they were public safety employees or not. In the past three years, the city has only made 22.74 percent to 32.88 percent of the annual required contribution. As of July 1, 2013, the plan is only 10.7 percent funded, with an unfunded liability of $18.2 million.
Going forward, it is clear that the best way of curbing costs is to stop promising benefits that evidently aren’t top budget priorities.
Partial contributions result in larger costs, yielding unfunded liabilities that put excessive strain on budgets down the road.
The sooner city and union officials face up to this, the better.
Link to original article: http://www.pe.com/articles/city-758645-benefits-percent.html