Arundel council poised to tackle retiree health benefit bill

Officials say county can't afford existing plan

January 06, 2014|By Pamela Wood, The Baltimore Sun

Anne Arundel County is poised to drastically change the health benefits it offers county workers when they retire, a move designed to keep the government on sound financial footing.

After months of debate, the County Council plans to vote Monday on a new package of retiree health benefits, even as employee unions already are considering challenging the bill in court.

County Executive Laura Neuman said curtailing retiree health benefits is a necessary step to keep the county government financially healthy.

"We're trying to solve the problem to save county government," said Neuman, a Republican who introduced her own bill but withdrew it in favor of the one under consideration, drafted by Councilman Jamie Benoit, a Crownsville Democrat.

Though Benoit sponsored the bill, after dozens of amendments, it now bears fingerprints from multiple council members, the county executive and the unions. Under the measure, most current workers and all future hires would have to work longer to earn health insurance after retirement, and many will have less of that cost paid for by the county government.

"I think we've done it in a thoughtful and conscientious way … In the end, I'm pretty confident that as far as the employees and retirees are concerned, this is a very fair bill," Benoit said.

Employee unions are OK with some of the changes aimed at saving money. But they're concerned that the bill strips future rights to negotiate retiree health costs, a provision they may challenge in court, said Officer O'Brien Atkinson, president of FOP Lodge 70.

"This bill, as written, takes a lot of bargaining ability away from the employees," Atkinson said. "Traditionally, the county will take away whatever it can to maintain its position as one of the lowest-taxed counties in the state."

Though a decision whether to challenge the bill hasn't yet been made, Atkinson predicted it would eventually wind up in court.

The reason for changing benefits comes down to money. Under the county's current plan, most employees only have to work five years and can get 80 percent of their health care costs in retirement paid for by the county, as well as for their spouses and dependents.

For years, the county has known that it may not be able to afford to pay that level for employees — all told, it will cost more than a billion dollars to provide those benefits for current retirees and current employees. At the same time, new reporting requirements require local governments to tally those long-term costs, which can affect the governments' credit ratings, and thus the rates they pay when they borrow money.

All local governments are dealing with this issue, said Andrea Mansfield, legislative director for the Maryland Association of Counties.

"All of them are struggling now that the liabilities are being reported differently," Mansfield said.

Annapolis changed its retiree health plans when it renegotiated union contracts in the fall. Future hires won't get health insurance in retirement. Instead, they'll be given money in a special account that they can use to pay for health care in retirement.

In 2008, Anne Arundel started putting away money toward retiree health insurance, but the fund was drained in 2010 during the recession.

In 2011, the County Council set up a committee to study the issue, and a year ago former County Executive John R. Leopold's administration was drafting a bill to revise the retiree health insurance. That effort was derailed by Leopold's trial on charges of misconduct that led to his resignation.

Once Neuman replaced Leopold, she picked the issue up and warned county employees in September that changes would be necessary. Neuman introduced her bill but later withdrew it in favor of Benoit's, saying it would be better for the council to consider just one bill.

"The intention was never to have competing bills," Neuman said.

Another proposal was offered by council members Richard Ladd, Derek Fink and John Grasso, but it was defeated in December.

As it stands now, the cost of paying for retiree health care for current retirees and current employees stands at $1.2 billion, according to John Hammond, the county's budget officer. If the county started putting away money to pay for retiree health benefits, $104 million per year would be needed, he said. The county government now spends $24 million per year.

By trimming the benefits offered, the bill would cut the overall cost from $1.2 billion to about $900 million. Or, on a year-by-year basis, the cost would go from $104 million per year to about $75 million per year, Hammond said.

Under the bill, the county executive would have to submit a plan for how to start coming up with that $75 million per year.

"Obviously, we're not going to dump $75 million in this plan right away," Hammond said. "We're just going to have to grow our way into it."

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