Earlier this week, County Executive Laura Neuman sent a
letter home to employees saying the county's retirees
were being underfunded by about $1.3 billion.
By Neuman's math, the county needs to fund its employee retiree healthcare plans about $110 million annually, though it's only paying about $70 million currently.
County Council Chairman Jerry Walker (R-7th District) called this, "the most serious long-term financial issue facing the county."
"The problem is only getting worse the longer we delay," Walker said.
To overcome that gap, a new fund would combat long-term liability costs while officials tighten who gets access to these benefits. New legislation being introduced this month will pave the way for that shift.
What does that mean for the average taxpayer by budget season? Not much, Walker said. Rather than piling additional money toward the problem, councilmen have a plan to rearrange funds to create a path to solvency, Walker said.
Lock Box Builds Capital
To start, a new "lock box" fund
would be created to build capital to offset employee liabilities as they
occur, something Walker said the county has never done reliably. Money budgeted
for the lock box fund could only be used for that purpose.
The lock box ensures a better rate of return, which will help lower the county's long-term liability by half. But those savings only begin once money is stored in that box. That starts this year, Walker said.
Adjustments to the current healthcare plans would be made as a cost-savings measure. Then, money saved would be put into the fund, Walker said.
The lock box idea takes advantage of a charter amendment approved by voters in the November 2012 general election, allowing for the creation of "a separate fund to be used explicitly to accrue employee retiree healthcare benefits."
Who Gets Benefits?
The other end of the issue is the ease at which many
employees can get access to retiree healthcare benefits.
As it stands, one need only work for Anne Arundel County for five years before qualifying for retiree healthcare benefits. Those employed in public service work, such as the police and fire departments, must wait 20 years to qualify.
Walker said that would likely change with the new plan.
In her letter to employees, Neuman called the current retiree benefits "unsustainable," and called for change.
Solution May Be Bitter Pill
Serious talk on solving the problem first began
between councilmen last year. Three members, including Walker, Councilman Jamie
Benoit (D-4th District), and Councilman Dick Ladd (R-5th District), teamed
up with representatives of the county's employee unions to hash out the details.
The fruits of that labor could come in the form of one—or two—pieces of legislation. Ladd said Benoit and the county administration are penning dueling documents, which he said could create undue complexity. Ladd said he'd rather get a solution in place rather than argue between two.
Ladd said this has been on his to-do list since taking office. Benoit has also planned for such legislation for years. But getting anything this large moving takes time, Ladd said.
It won't be easy, and it won't please everyone, but it's worth fighting for, he said.
"There's probably never a good time to do
this, and odds are we'll get a few things wrong along the way, but
I wanted to at least start early, because letting it languish would serve
no one," he said.
Walker said the new legislation would likely be introduced at Monday's County Council meeting, scheduled for 7 p.m. at the Arundel Center in Annapolis.