Council, Retirees Decry Lack of Funding for Health Care Trust Fund

Council, Retirees Decry Lack of Funding for Health Care Trust Fund

County executive’s proposal to shift benefits allocation questioned

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County Budget director Rich Madaleno speaks to the board of the Montgomery County Retired Employees Association Tuesday

Dan Schere

The county executive’s $5.7 billion proposed budget isn’t sitting well with County Council members who are worried that the county won’t be able to meet long-term obligations for funding a health-benefits trust fund started nearly a decade ago for retirees.

“I gotta tell you, I could pass a lie detector test. This is the worst budget I’ve ever seen,” Council Vice President Sidney Katz said.

Katz and his eight council colleagues met Tuesday with the board of the Montgomery County Retired Employees Association to discuss concerns over a budget decision by County Executive Marc Elrich that shifted nearly $90 million in funding from the Other Post-Employment Benefits trust fund for the current fiscal year.

Elrich’s budget proposes funding the trust fund for fiscal 2020. The benefits program covers employees of county government, the school system and Montgomery College.

County Budget Director Rich Madaleno, who attended Tuesday’s meeting, said the trust fund is 27 percent funded, and that no county retirees were in danger of seeing rising health care costs.

Madaleno said the county’s actuary has said the county need only achieve a 50 to 60 percent funding level for the trust fund. He added that the trust fund might not be needed if the cost of healthcare were to decrease under a single-payer health care system — an idea that has been embraced by a number of Democratic candidates running for president in 2020.

“There are lots of candidates out there running for all levels of government talking about a national single-payer system. That is part of the national conversation. I’m just saying that if that came to pass in the next decade, everything that we’ve set aside for… you don’t need that [OPEB],” he said.

But council member Andrew Friedson, a former employee in the state comptroller’s office, dismissed the prediction by Madaleno, a former state senator who represented Montgomery County before he ran for governor last year.

“I have tremendous respect for Senator Madaleno, and we’ve worked together, and I think of him as highly as anybody who has served, but hope is not a strategy,” Friedson said. “If we are depending on the federal government to change policy in order to save us from our obligations, we are in for a really tough sled.”

Friedson said the county needs to be prepared for the possibility of increasing health care costs, and that fully funding OPEB is an “obligation, not an option.

“We’re not fully funding their benefits,” he said.

Elrich has said he was forced to cut funding for the retirement trust fund largely because of an $80 million revenue shortfall that the state comptroller’s office announced just weeks before the release of his budget on March 15.

Funding the health fund, he said, would result in two additional rounds of budget cuts in the current fiscal year. Elrich has said that in the event of a recession, he could draw from the county’s reserve fund as an emergency source.

Councilmember Hans Riemer, a frequent critic of the Elrich administration, said he understood the fiscal constraints, but worries about the constant cycle of mid-year savings plans that will result if a recession occurs, as has been predicted.

“This habit of not fully funding OPEB has got to end. I’m concerned that we’re making these dramatic moves fiscally at what should be the best of times. And if these are the best of times, what’s ahead of us?” he said.

Council member Craig Rice said that he too worries that the only way to fund OPEB going forward could be by raising taxes or finding other places in the budget to make cuts.

“Once the county executive frames his budget, it puts us in a very tight corner,” he said.

John Hansman, a county retiree who worked in the Office of Management and Budget and helped develop the Capital Improvements Program in the 1960s, said the county needs to get out of the habit of cutting funding for programs in the middle of the budget year.

“The best thing you could do for the county is to get out of that. If the budget could be done once … people could go forward and do the best they can,” he said.

Hansman said he understands the difficult financial constraints that Elrich and the council are under.

“It’s a hard slug. I have a lot of sympathy for elected officials. It’s a tough job, and in a way, it’s not our job to make it easy for them,” he said.

Asked whether he felt that Elrich’s raises of almost 10 percent for some 2,000 county union employees could be better spent elsewhere, Hansman said he saw both sides of the issue.

From the outside it looks a little one-sided, but as a county employee I would want any increase, so I certainly understand that pressure,” he said.

The retirees’ association took no formal position on the foregoing of funding for fiscal 2019, but in a letter to the council Monday, OPEB Board President Sara Harris urged them to fully fund the trust fund in fiscal 2020.

“We recognize the competition for resources is fierce in a tight budget year, but OPEB funding is a cornerstone of sound long-term financial planning which has always been the hallmark of the county’s philosophy and one of the keys to our AAA bond rating. OPEB represents a good faith commitment to retirees that must be honored and respected,” she wrote.

Dan Schere can be reached at Daniel.schere@bethesdamagazine.com

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