What happens when you run up a credit card but only make the minimum payment? It never works out very well. But that’s how Fullerton is handling $30,000,000 in retiree health care commitments.
http://www.youtube.com/watch?v=ntIaUiv9seUJack Dean passed along this unfortunate piece from the OC Register which exposes over $1 billion in unfunded retiree health commitments for Orange County and its cities. Fullerton’s spending problem is summarized here:
City | Fullerton |
Population | 138,610 |
Unfunded costs | $29,986,735 |
Unfunded cost per capita | $216 |
Maximum benefit (per year) | $9,744 |
Paid in 2009 | $1,927,528 |
Does the agency pay only the minimum cost? | Yes |
Is a lifetime benefit offered? | Fire employees |
Source: Retiree health costs and other retiree data from local cities and the county; population statistics from the California Department of Finance |
Retiree health benefits are negotiated between our city council and the public employee unions during contract renewals. Supervisor John Moorlach says they are an easy squeeze for unions because boosting benefits for employees requires no up-front cost to the city.
Much like exorbitant pensions, these benefits are a long-term commitment where the future costs are impossible to calculate at the time the entitlements are given. Ultimately, taxpayers are responsible if costs “unexpectedly” spiral out of control. And of course, they always do.