Thursday, October 1, 2015 Panel Presentation Followed by Q & A

Transcription

1 Thursday, October 1, 2015 Panel Presentation Followed by Q & A

2 Panel Discussion Facilitator Bill Kampe, Mayor, City of Pacific Grove Open, conclusion, call to action and Q & A 1. Confronting the OPB Reality Nancy Kerry, City Manager South Lake Tahoe Sharing process & results: OPB reduced by 73% 2. Case Studies Steve Gedestad, Keenan & Associates Municipality Practice Leader Sharing specific examples from other cities reducing OPB 3. A Tale of Two (or More) Cities Vanessa Burke, Managing Principal, Urban Futures Former City of Stockton CFO Sharing knowledge and experience from bankruptcy proceedings Impact of pressures on City s finances due to increasing costs of health & pensions & unmet needs

3 Nancy Kerry City Manager, City of South Lake Tahoe

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5 City of South Lake Tahoe Confronting OPB s Reality Keep the Citizenry in Focus PMCHA/Non PMCHA Discussion Agenda Our City Before the Change Old Plan Design Structural flaws are the Tiered benefits Tackling the OPB Issue Begin with the end in mind results Affordable Care Act as Foundation for Solution Culture Does Matter Practical Recommendations

6 OPB must be reduced Confronting the Reality

7 Confronting the Reality Keep the citizenry in focus Residents simply cannot afford $150 billion dollars Cost is already evident in the loss of public services and of public investment in streets and capital projects There is a measurable cost to each resident: $5k per resident in SF; $1,900 in San Jose; $3,000 in SLT Add to the City OPB liability, County, State and it s $10k or more pp Keeping the citizenry in focus shapes the discussion After all, what we do is for the citizens, is it not?

8 PMCHA / non PMCHA Agencies In PMCHA or Out: It s immaterial to the fact a solution is required It is material to how a solution can be constructed There s a calculable cost/benefit More options are available outside of PMCHA although PMCHA agencies often provide more health care plan options Calculate the cost/benefit be realistic about the benefit options Obligations under PMCHA may increase OPB GASB 75 (Steve and Vanessa will delve into this point)

9 Old Plan City of South Lake Tahoe One medical plan for all employees and retirees Retirees receive same medical plan as employees (contractual language) Over the years, medical plan changed significantly: up and down Tiered Benefits Tired benefits create a design flaw: All for me, none for you Keeping the benefits for those at the table, reducing benefits for those Not yet hired Tiers divide the organization and benefits SLT: 2008 (aka the O8 ers ) all retiree medical eliminated resulting in near zero benefit compared to $300k benefit for others

10 Medical Plan pre 2001 Pre 2001, equal program All mployees and Retirees have same coverage, same plan, all eligible

11 Medical Plan 2001 Cuts pre , active employees agreed to eliminate coverage for retiree spouses, but future employees only; creating different benefit packages resulting in competing interests

12 Medical Plan 2007 cuts pre , more significant cuts. Active employees completely eliminated retiree benefits for all future employees.

13 Tipping Point Post 2008 pre 200 No benefits become the dominate group; their salary and benefit options reduced to fund benefits for others

14 Begin with the nd in Mind Our Goals: Reduce OPB Liabilities Reduce Retiree Health Benefit annual costs Resolve or mitigate exponential rise in health care costs Strove to be factual and direct Clear about goals to be achieved, no gamesmanship OPB liabilities were not fundable xpectations with employees were clear and accountable Current structure of plan was not sustainable mployees and Management were not in agreement Agreement by itself not necessarily the goal It was and remains a desired outcome

15 Let s Talk Results OPB Before Change: City s OPB Liability would be $53 million dollars today, of which 92% unfunded OPB Today: $19 million of which 58% is funded (immediate change) xpect to be 95% funded in 10 years At that time, the OPB Trust will take over annual payments alleviating the General Fund completely Annual General Fund expenses reduced by 35%

16 Solution Oriented Collaborating Collaborating with Labor Groups We sought their ideas We were open to various paths toward the achievement of goals We were direct, honest and confronted reality Invited the public to become engaged in the process Brought in experts and hired new broker Workshops, meetings (retirees and employees) Demonstrated SLT is not unique Skyrocketing medical costs is national issue Solicited advice, expertise, listened to unique solutions

17 Affordable Care Act as Solution The Affordable Care Act can be a solution Customized self insured plan mirroring ACA Covered California is here to stay Our City s 5 Step Medical Insurance Keenan designed a 5 step medical plan (A through ) City pays for high deductible option (Plan A) mployees can buy up to lower deductibles/oop mployees have complete control and choice Annual savings offered to each labor group Most labor groups chose Section 125 contributions mployees made variety of choices Retirees also able to buy up

18 Reducing OPB valuate what contractual changes are available to your city / organization for retiree health Our retirees receive the same medical plan as employees, if a medical plan is offered Our retirees receive various contributions for medical plan premium coverage (eg: from 100% to 50%) The new Plan A, is a lower and more stable cost mployees not yet retired, no longer eligible for RHB we eliminated the tiered structure

19 Total Compensation Government employees often disengaged from retirement investments concerns, rising health costs Total Compensation (TC) packages require employees to become more informed and participate in decision With TC, employees make more of the decisions Designing our self insured medical plan provided cost savings, some of which were directed into TC mployee labor group could choose investing (457), section 125, cash out, and salary increases

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21 Culture We need to improve the government culture We need to share in the responsibility to fix the system Government Managers & Leaders must help to change the culture Model sacrifice, model service, model leadership Too often government managers /leaders are unwilling to sacrifice their own benefit packages for the greater good SLT was in the right moment a specific point in time City Council was strong and committed to fixing the issue City Council and xec Team was willing to lead by example, they sacrificed their benefits shoulder to shoulder with employees

22 In 1936, Franklin Delano Roosevelt gave an impassioned speech, entitled A Rendezvous with Destiny, during which he said, There is a mysterious cycle in human events: To some generations much is given. Of other generations much is expected. This generation of Americans has a rendezvous with destiny.

23 Recommendations Confront the Reality & Be Creative with Solutions Solutions are numerous; an employee committee is valuable Tiered benefits create extreme structural differences in benefits Tiered benefits lead to resentment within organization Tiered benefits have a tipping point Conduct a realistic Cost/Benefit valuation In/Out PMCHA Self Insurance vs a traditional Benefit Plan Involve employees in decisions and creative solutions Total Compensation Benefit Packages Involve the employees in all compensation decisions Increase ee s understanding of retirement, investments, risks & costs

24 Nancy Kerry City Manager, City of South Lake Tahoe