September 19, 2007 in City

City OKs retiree benefit

By The Spokesman-Review
 

Fast facts

Last week’s decision affects 132 retired firefighters currently paying Medicare Part B premiums. It also will affect an additional 129 working and retired firefighters who aren’t yet 65. Spokane officials believe the number of premiums the city pays will remain relatively constant in the coming years as some retirees die and others enter the system.

Spokane City Council last week ended a 15-year dispute with retired firefighters over health care benefits. But the same decision renewed another dispute with retired police.

In a decision that is expected to cost Spokane taxpayers nearly $10 million, the council voted 5-0 to join most other Washington cities in paying Medicare Part B monthly premiums for firefighters hired before October 1977. That’s when the state took responsibility for police and fire benefits.

Retired police officers are questioning how the council could have refused a similar request from them last year that was estimated to cost the city about $90,000 a year.

“All of us feel a little bit betrayed on that issue,” said Jim Earle, a retired police lieutenant who testified about benefits last year. “What we’re complaining about is a breach of contract.”

Like police officials, the city firefighters union argued that the city promised them when they were hired that in exchange for lower pay they could rely on the city to fully cover their medical benefits. Although the fire change is expected to require extra payments of tax money to the fire pension fund in 2019 and 2020, they argue it’s a small price considering their service and what they felt was a city pledge.

Medicare Part B covers doctor visits and other care for enrollees 65 or older, for $93.50 a month. Until this week, the city had required firefighters and most police retirees to pay that premium, arguing that skyrocketing health care costs and shrinking city resources meant that retirees should have to pay some portion of their care, just as other city employees do.

“Nothing in life is free,” Councilwoman Nancy McLaughlin said last year, after voting to deny the extra benefits to police retirees.

That stance began to change in June when the fire pension board voted 3-2 to recommend a shift. City Councilwoman Mary Verner, the council’s representative on the pension board, supported the extra benefit, as did two firefighters on the board. The votes against the change came from two city administrators.

Verner, who is challenging Mayor Dennis Hession in the November election, was endorsed last week by the Spokane firefighters union, just a day after the council vote.

Although some have raised questions about the timing of the benefit approval and the union endorsement, Verner dismisses any connection. She points out that at the time she recommended the shift, the union was backing Councilman Al French, who was later eliminated in the primary.

“This has been going on for months,” Verner said of last week’s decision. “This dilemma has been around since 1993. I feel it’s an accomplishment to work our way through this finally in 2007.”

Verner noted that the city saves money by retirees being enrolled in Part B because otherwise the city would have to cover medical bills without Medicare discounts and payments.

However, all of those affected already were required to be enrolled, said Spokane Risk Manager Pam Schroeder. Although about five of the 132 affected retirees were not enrolled about six months ago, the city since has worked to get them into the benefit program.

“We’re getting the savings whether the city pays for the premium or not,” Schroeder said. “What’s really driving this is the fact that other cities are paying this premium. It’s an attempt to be fair.”

Schroeder said Spokane’s decision leaves Bremerton as the last Washington city not paying firefighter Part B premiums.

Spokane Mayor Hession said had he realized the topic was under consideration by the council, he would have testified against it. The mayor said the council didn’t appear to adequately consider the financial impact and noted that the issue has been considered by city leaders for years.

“It’s been rejected every time,” Hession said.

He added that out of fairness, he expects the city to consider increasing police benefits.

“It would be a difficult argument now to say that we should be treating (fire and police) differently,” Hession said.

Before Monday’s vote, the city paid the Part B premiums only of police hired before March 1970.

In a 6-1 vote last year, the council refused to pay the premiums of police hired from March 1970 to October 1977. At the time, council members said the city couldn’t afford the cost. Only Councilman Bob Apple supported the benefit for police.

Last week, City Council members Verner, French, Brad Stark and Council President Joe Shogan joined Apple in support of the fire benefit increase. McLaughlin and Councilman Rob Crow were absent.

Verner said the difference with the fire proposal was that there was more financial information available.

Shogan said his vote was different because the fire pension board recommended the change, while the police pension board had recommended against it last year.

He added that retired police don’t have a pension fund, so all their benefits come directly from city coffers.

“I felt it was another draw on the city’s general fund,” Shogan said, explaining his vote regarding police premiums.

According to an actuarial report, which was given to the council the same day as the vote, city general fund money will be needed to pay for the new fire benefit. But because of the existence of the fire pension fund, the extra tax money needed won’t be collected for more than a decade.

The first year of Part B payments is estimated to cost $155,000. From there, the annual cost rises to a high of $420,000 in 2019, before beginning to fall.

The city’s fire pension fund receives an annual property tax subsidy to keep it solvent.

Because of the benefit change, tax payments to the pension fund will end in 2020 instead of 2019 and the expected 2019 payment will increase by $4.5 million, according to the report. The extra needed in 2020 is estimated at $5.3 million.

“The fund itself will still be sound,” said city retirement director Leo Griffin. “Does it mean that more tax dollars will be needed in the future to realize a fully funded status? Yes.”

The report, conducted by Milliman Consultants and Actuaries, says the change increases total benefits for the firefighters by 7.7 percent.

Shogan, who is on the police pension board, said he expects the group to reconsider the benefit for police.

Greg Borg, president of Local 29, the firefighters union, said the group has been advocating for the change for years. The state began allowing cities to pay for the benefits in 1992, according to city records.

“I just got a council that was willing to listen to the issues,” Borg said.

He added that he believes police deserve the same benefit.

“I think that’s only fair,” Borg said.


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