NEWS RELEASE
Contact: Jane Wood, Beloit City Manager, 608-364-6614For Immediate Release
November 1, 2001
City Council to Study Impact of $55 Million Price Tag
for Retired Employees’ Health Insurance Cost
On November 5 the City Council will learn the true magnitude of police and fire health costs during a work session to review the results of a health costs impact study they authorized in August.
The study, conducted by Milliman USA, Inc., a national actuarial firm, projects the City of Beloit will payout over $55.4 million for future lifetime medical and dental costs for its current roster of 397 active and 178 retired city employees.
The study assumed no additional employees would be hired for 10years.
City Manager Jane Wood called the findings sobering, but not unexpected.
"This is a huge financial challenge for the City of Beloit and one that is beyond our ability to fund," she said.
"But this Administration will not bury its head in the sand and pretend this crisis does not exist. The problem was 30 years in the making. We can’t wait another 30 years to find a solution.
"Having facts in hand is the first step to solving the problem," said Wood. "Now we can more effectively work with other communities and professionals in the benefits arena to devise a long-term solution."
No action is expected at the work session. Future sessions will explore possible solutions.
The City’s 2002 budget totals approximately $56 million, including $5,017,751 for health costs for both active and retired employees.
Police and firefighter health benefits account for 94% of the City’s total retirement liability, according to Alan Tollefson, Beloit’s Director of Personnel and Labor Negotiations.
"As a result of unfavorable contract arbitration decisions in 1974 and 1975, the City currently pays 100% of the health benefit costs for all 107 retired police and firefighters."
However, the 71 non-police and fire retirees contribute 100% themselves for retirement health premiums.
In developing their projections, Milliman USA estimated future health premium costs based on data from medical and dental insurers, the City’s recent claim experience and future trend expectations. The study warned, however that a 1% increase in premiums above projections will add another $10.6 million to the City’s total liability, said Tollefson.
Beloit is believed to be one of the first cites in Wisconsin to document the full impact of its retiree health liability, according to Wood.
The City Council authorized the study so they could realistically budget for the future, while staying ahead of new accounting standards that will require governments to fully disclose the actual cost of retiree health benefits in their annual budgets by 2003.
"As the deadline for compliance approaches, cities all over the nation will be facing the true reality of retirement health costs," said Tollefson
"Unfortunately, we think the full impact of Beloit’s liabilities will be larger than other cities because of the current police and firefighter contracts and because we have a relatively small tax base compared to our liabilities," he said.
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