Health Care Costs Served Up With Chamber Breakfast

POLITICAL NOTEBOOK

November 22, 2009|By Larry Carson | Larry Carson,larry.carson@baltsun.com

One of the most frightening financial burdens Howard County government is facing perhaps gets the least attention - the cost of future employees' retirement health benefits.

Created by a change in federal accounting rules several years ago that require every state and local government in the United States to put aside cash for those costs up front instead of paying them as they occur, Howard's initial estimate of the county government's bill as County Executive Ken Ulman took office in late 2006 was a whopping $477 million.

County Councilman Greg Fox, a Fulton Republican, said at a Chamber of Commerce breakfast Nov. 12 that the debt is now calculated at $826 million, emphasizing his belief that the Ulman administration could have saved more money and used it to pay down that debt.

The estimate gets recalculated every two or three years, said county budget director Raymond S. Wacks, and since the steep recession forced the county to postpone making a contribution to that trust fund in fiscal 2010 and probably will again in fiscal 2011, the projected liability, he confirmed, is now up to $826 million.

But Wacks said the higher figure for retiree health care is also somewhat deceptive.

"Our actuary estimates that we would have to contribute around $460 million into the trust today to eliminate the unfunded accrued liability," he said. That means if the county plunked down $460 million now, that and the interest earnings over time would cover the entire debt.

Without that interest, and without a 2010 contribution or further limits on the benefits, the total bill is projected higher, to the $826 million figure. Once the economy recovers and the county can resume payments, the estimate will change again, Wacks said.

"When we start making contributions again, it will go down. It's an artificial calculation," he said. He noted that the county has taken several steps to limit future costs, such as increasing the eligibility from 10 years to 15 years of service, and allowing workers who retire to defer receiving the benefits since some may have health insurance from a new job.

Howard has saved $20 million so far, Wacks said. The county's original plan was to gradually work up to contributing $53 million a year by fiscal 2016. That annual figure includes the $12 million to $13 million a year the county is paying out for current retirees' health benefits.

Ulman had set aside $10 million to add to the fund this fiscal year, but used it instead to plug budget holes. With the state facing a projected $1.9 billion revenue shortfall for fiscal 2011, the prospects are dim for recovery any time soon.

At the breakfast, Fox criticized Ulman's launching new initiatives such as the Healthy Howard program for the uninsured, Fox's favorite fiscal whipping-boy. The program has received $1 million in county funds over two years.

After listening to council Chairwoman Mary Kay Sigaty, a West Columbia Democrat, praise the slow-starting health program for identifying more than 1,000 applicants who turned out to be eligible for existing insurance programs and for being "innovative" and "fabulous," Fox's retort was a laugh line.

"I guess the Edsel was innovative, but it didn't go very far," he said about the failed 1950s Ford auto. The Republican-friendly business group's breakfast audience had just voted 72 percent to 28 percent against the federal health reform bill approved recently by the U.S. House of Representatives.

Fox pointed out that when state Sen. James N. Robey prepared to leave the county executive's office after two terms in late 2006, he presided over a record budget surplus of $38 million. Robey had recommended that whoever replaced him put $30 million of that away for the health costs. Instead, and despite growing signs of a coming recession, Ulman expanded some environmental programs, and launched the Healthy Howard program. In the fiscal year that ended June 30, the county recorded a $1.5 million surplus, Wacks said, after strenuous cost cutting.

Still, Howard this month won recertification as an AAA bond county, which means the risk to borrowers is the lowest possible, according to all three New York rating houses, which took note of the recession in making their assessments.

Fox said Healthy Howard has enrolled perhaps 25 percent of the number of people originally estimated despite reams of publicity and advertising.

"What we're seeing is people not signing up for the new program. We're not seeing those benefits coming back to the county." People without insurance are treated in emergency rooms, he said, and the health coaches who try to get Healthy Howard enrollees to improve their overall health are expensive and perhaps their jobs should be discontinued.

"Our goal is to get people out of the ER," replied Del. Guy Guzzone, a Democrat and former county councilman who shared the dais with Fox, Sigaty and Republican state Sen. Allan H. Kittleman. Any new program needs some initial investment to get started, Guzzone said.

"Our goal in all of these health care programs [federal and local] is to reduce costs. I'm very hopeful," he said.

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