Last July I wrote a blog item commending the city of Lodi for steering clear of the underfunded retirement health benefit mess that Stockton fell into.
Then last past week, I learned the city has a $17 million unfunded benefit for retirees, some of which is for health benefits. Did I get the story wrong?
More likely, I fell into the trap that lies ready to snap on the ankle of anyone who tracks government spending: oversimplification.
Before I attempt to untangle this, let me add that the city brass urged the city council to set aside about a million dollars to reduce the $17 million. The council tied 2-2 and so didn't take its staff's advice.
I'll get back to that tie vote, but first, here are a few things I learned from deputy city managaer Jordan Ayers.
• The health benefit some city of Lodi retirees get applies to people hired after 1995, not those who retiredafter ’95. I didn’t say that back in July, but I thought it and that explains why I was surprised that the unfunded liability is as high as $17 million. Lot's of people might still get a health benefit.
• It's worth noting that some Lodi officials (my sources are Ayers and city attorney Steve Schwabauer) believe Stockton's unfunded retirement liability is in the neighborhood of $500 million — half a billion. Compared to Lodi’s, that’s an overwhelming debt.
• The $17 million is tied to the city’s duty to give retirees a benefit for their unused sick leave. Ayers said all the city’s employee contracts handle this the same way and all give pre-’95 employees a choice of four options for “using” their sick days when they retire.
• All four options convert the sick days to a fixed dollar amount. The three options that allow using the dollars to lower health insurance costs have been negotiated out of the Lodi's employment contracts and any city employee hired after ’95 can only convert the dollars to modestly higher pension payments.
• The $17 million is an estimate of the total of what all future retirees' unused sick pay benefit will come to as the present workforce reaches retirement. An estimate is an estimate.
• It’s a liability that will go on the books in the future, but there’s value in setting aside some of the money today so it doesn’t jump up and surprise future city councils.
• There is also value in giving taxpayers value for their taxes today instead of putting tax money aside for a future benefit.
That’s what the debate was about Wednesday night: What should be done with a little extra cash? Spend it today or set it aside.
I think the council should vote again and I’d urge Bob Johnson to join Mounce and Hansen and put the money aside.
Lodi, like all governments, have plenty of debt. Borrowing money is the opposite of saving for tomorrow. We've spent millions today in hopes that tomorrow will work out.
As the economy recovers, money to restore city services cut in the recession will probably come with it.
But more surely, there’ll be another rainy day.