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Financing Retiree Health Care: What Can Memphis Learn from Shelby County?

February 27, 2014

Leaders in both Memphis and Shelby County are searching for savings in bloated government budgets. It’s hard to find the proverbial low-hanging fruit – i.e., easy cuts that are politically palatable.  Joe Saino, efficiency in government advocate and co-blogger, wrote last week about local government expenditures for retiree health care.  Why does Memphis spend approximately $3000 more per retiree for health care than does Shelby County? MLG&W’s cost per retiree is  over $1800 higher than Shelby County’s.

Find out  more below or at www.MemphisShelbyInform.com. And while you’re there, sign up to follow Joe’s renowned watchdog blog.

Add your voice to the debate in our comments section below or on Back in River City’s Facebook page.

memphis shelby inform logoby Joe Saino

February 20, 2014

Health Care For Public Retirees

This is another huge cost area for which the taxpayers are paying. You are paying 70% of the health care cost for City of Memphis and Shelby County retirees and 75% of the cost for MLGW retirees. The bills come each year for medical care for retirees and their families and the current annual bills are paid by the City, County and the MLGW as they occur.

But like pension liability, there is a future cost liability that is supposed to be taken care of by the OPEB funds (Other Post Employment Benefits), mainly future health care costs and life insurance for retirees). This is where the problem lies, mainly with the City of Memphis, and to a lesser extent with the MLGW and Shelby County.

The unfunded OPEB liability for the City of Memphis is $1.29 billion dollars. For the MLGW it is $420 million and for Shelby County it is $305 million. That is close to $2 billion dollars.

In 2012, I calculated the cost of retiree health care cost per retiree paid by the taxpayers. For Memphis it was $8533, for MLGW it was $7440 and for Shelby County it was $5605.

Most of this problem comes from the following practice. When one retiree worked for the City of Memphis, MLGW or Shelby County, the other spouse and any children usually go onto the public plan as it is better and cheaper than any private insurance plan available to those who worked or work in the private sector. This is especially true since public people could retire after 25 years or less and would be well under social security age.

Shelby County recognized this problem in 2007 and required those retirees whose spouses were on Medicare to make Medicare the primary payer and Shelby County secondary. The City of Memphis is only now proposing to do this. Also the County cut back the 70%/30% sharing of cost to less generous sharing if the retiree had less than 25 years of service. The City is only now proposing this.

All in all, the City has dug their own hole and is only now trying to fill in the dirt they ignored. The MLGW has areas also that need reform but it is not yet come to the attention of the public because their finances come from your utility bill, not property taxes and they are on a calendar year whereas the City and the County are on a July1/June30 fiscal year. Also low cost natural gas (due to technological innovation) has worked to keep your utility bills down.

There is so much to be done during this critical budget season and we need the public to let their voices be heard for real reform and fiscal sanity.

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