This is continued from part one of LaFleur's interview with Mayor Higgins…
[…]
D: Well, $90,000 is a lot of money, it is.
M: So, remember that GASB 45 requires us to quantify…
D: I’ll look that up.
M: Well, you should think about that because this is where this came from. This is the seed of this policy.
D: What’s it called?
M: GASB 45
D: Could you spell?
M: GASB all capitals, it’s an abbreviation….
D: Oh, that’s B as in…
M: Board.
D: Board.
M: So if you look up…
D: B-I, B-Y?
M: GASB, it’s an abbreviation, so if you look up…
D: B, B-Y? Okay. That’s Massachusetts specific?
M: No, it’s national.
D: Oh, National.
M: So, do you remember how — this is really important to understand this whole thing — You know how the auto companies and the steel companies and everybody else have been totally cutting off their retirees?
D: I’m uh not familiar with the specifics of that issue.
M: This is really important, this is part of what’s driving the interest in health care. There has been for many years employer-based health care, especially in large corporations. [It] was the backbone of our health care delivery system in this country. I don’t know where you get your health insurance, but I betcha it’s based on somebody’s employment in your household. It usually is. But big companies would pay health insurance, and they also had defined benefit pension plans where you get 80% of what you earned in your last three years assuming you are fully vested and have worked the total amount of years you need to work and then you got your health insurance. And actually, before, in the 80's before Social Security was reformed, city employees weren’t even eligible for Medicaid. They didn’t even start paying into Medicaid until the 80's. Okay, so our folks had to find benefit plans just like the big companies, and they also had retirement health insurance just like the big companies, and we were a little loose, I think, with how we defined retirees, so we gave it to everybody. There was no policy. Many of the big corporations now don’t have health insurance for their retirees, and in fact UAW just negotiated with Dana Automotive, one of a big auto suppliers, on the retiree health note obligation to create a trust fund to pay for the health insurance, as opposed to them paying out of their operating so that they’re going to take the money, invest it, and pay for the health insurance.
It’s because the General Accounting Standard Board — I think that’s what GASB stands for — it first required all private sector employers, or companies that are, to show how much their future obligation was on their account balance. What they were doing was shifting that obligation into the future and not accounting for it as a debit. And the cost of retiree health really is a debit against us. We have to pay for that, so we have to show what that’s going to cost. We’ve gone out to bid on an actuarial study to show us what the cost of our retiree health insurance going to be. When we go out to borrow money, if we go out to finance a bond, it’s going to have effect on the kind of interest rate we can get going into the future.
D: Sure.
M: So, because GASB has required us to quantify that, we have begun to look at what our obligations are, and it became clear that we had an open ended policy here.
D: Well, that makes sense to me going forward, but your policy went back to people that left with the understanding that they had this benefit. So it’s a retroactive application.
M: That’s correct, and, and that’s the way we’re doing it, and you know, if people want to criticize me about that, that’s fine. But there was never any written policy that anybody had gotten that said that they did have that. It was really folklore.
D: I’m assuming that there were people that left the city, and came back and re-entered the system.
M: Sure.
D: And I don’t know how many, that would require extra work…
M: Sure, that’s a lot of work.
D: …but they exist, and to retroactively remove the benefit from people who didn’t re-enter the system…
M: mmhm…
D: …it seems to me that you’re treating those people differently. Both sets of people that left the city, one opted to come back already, one didn’t and that seems like not treating everyone the same. And you had said earlier that you have a legal opinion which I’ve asked if you could provide that…
[Question Ten: Could you provide for the Valley Advocate a copy of the legal opinion that you cited during our previous interview that you indicate states that you must treat everyone the same and cannot "grandfather" former employees into eligibility for the city health insurance system?]
M: [The] city attorney is out of town, I have to get it …
D: …because how is that treating someone the same? If you already let these people back on but you’re retroactively removing others.
M: Yeah but, okay. I hear what you’re saying, and I think again, Daryl, with all due respect, and I’m going to tease you a little bit here, you obviously do have a point of view, because you said “it doesn’t seem fair” so that’s an opinion.
D: Well, you can say that all you want, but it doesn’t seem fair, if you say that, “I’m going to remove somebody from eligibility….”
M: Hello: I’m just teasing you, because you’re telling me you don’t have an opinion…
D: No, I didn’t say I don’t have an opinion…
M: You do have an opinion…
D: Everybody has an opinion…
M: Sure…
D: Everybody you speak with, every interview you do with anyone, the other person that you’re talking to has an opinion. Absolutely, that is correct.
M: Thank you, that’s the only point I was trying to make earlier.
And I hear what you’re saying about fairness, and I don’t necessarily disagree, except that the conditions that existed earlier are not the same as the conditions that exist now. The conditions that existed earlier was that we weren’t being required by an outside body to now account for retiree health going into the future and that, so that changed. So lots of things that we used to do, we don’t do any more. We used to pay for 90% of our health insurance, we now pay 80%. We told the retirees when they left that they were going to pay 90%, when somebody retired they paid 90%, that was their expectation when they retired, we changed it to 80% because we, because the conditions changed. Even though it may not be totally fair in some folks eyes, I can’t guarantee that we’re not going to make changes in policies based on conditions that change. The biggest one of those conditions changing is the GASB 45.
D: In answer to the question, that I just raised: The people that left and came back on to the system, will they now lose their eligibility?
M: No. No.
D: So these people that left…
M: No, that’s right…
D: …will retain their insurance, but the people that left that didn’t opt back in will lose the eligibility, retroactively?
M: That’s correct.
D: And you think that’s fair?
M: I didn’t say that it was the fairest thing in the world, but I said that the conditions on the ground had changed, and sometimes…
D: And you’re basing this on a legal opinion that says you can’t grandfather past employees…
M: We haven’t been able to get the state under Chapter 32B to allow us to grandfather anybody, but you know I will say to you that we’re looking at individual cases as they come forward and if there is an individual case that seems like they didn’t quite understand it, we’re going to look at that and try and make it fair.
D: I guess that was the question: you mentioned it during the city council meeting, you’re working with how many employees or past…
M: I can’t, it’s hard to quantify that because some of them are simply an inquiry and some of them are presenting a problem, but I will say to you that if somebody comes forward saying, “We retired and were given this and then this happened and so on, we’re going to work with them. But I’m not going to necessarily work with somebody who worked for the city ten years. We’re not going to say to somebody who worked for the city ten or twelve, fifteen years “just go work someplace else for twenty years and then come back,” that they are necessarily going to get on our health insurance.
D: Right.
M: I would say that’s primarily the group that we’re aiming at in this change of policy. And I don’t think that that’s particularly unfair.
D: Well that’s your opinion of course.
M: Right, of course.
D: Uh, so, here’s a situation where, I’ll bring it up because you brought up that example, if somebody works for the city from the age of 18 to 64 and then they work somewhere else for a year, if they don’t continue their health insurance, if they don’t retire, if they work, like I said, just somewhere maybe…
M: But you know what, I hear, and you’re right, theoretically that would seem unfair to me. I don’t disagree with you on that but as a practical matter anybody who’s worked here from 18 to 64 that I know never goes somewhere else for a year and comes back and retire because they know exactly what they’re, they know the moment…
D: So that would be the follow up question, as we’ll use the example if somebody could work here from twenty to thirty…
M: We’ve had…
D: …and then go somewhere else for thirty-five years, how many people have actually done that?
M: We’ve had people who’ve done that.
D: Twenty, ten, five?
M: Let me answer the question more accurately. We know that when we sent the letter out saying to people who had ten years in, we know that some of them had the expectation after working here for only ten years that they could come back and many years later and get the health insurance because they communicated that to us. So can I tell you of anybody that actually did it? No. But I know that there were people who had that expectation.
D: Right. So I guess…
M: And the other thing is, you know, there is one thing about those individuals, but there is another thing about the way you do an actuarial table, it’s not based on individuals. It’s based on looking at the potential liability, whether or not they are planning on doing it, under the previous practice, we would have, under the GASB 45 we would have had that, that expectation would have been there that we would have needed to capitalize for that. So, can I name you people, no, not necessarily. But I know that we have to, if we are required, and as we may be required over the next few years to actually fund retiree health, we would have had to take them into account, even if they never had planned to come back.
D: So, part of the purpose of this set of questions was to try to get some specifics on the comments that were made, from our prior interview, from your comments at city council, and you’re making a policy change, and at this juncture, there aren’t any specific hard numbers…
M: But…
D: You can’t say how many people this effected, how many thousands of dollars this is costing the city. There isn’t anything concrete.
M: Right. Because, I’m trying to make it clear to you that, that we made the decision based on a regulatory change.
D: Right.
M: Quite frankly, it doesn’t really matter whether it’s one or a hundred. If we have to fund that going on into the future, we have to fund that going on into the future…
D: I understand that you’re saying that now.
M: …and that’s what I meant earlier, and I’m sorry if it wasn’t clear because this is based primarily on the change in GASB 45.
D: Because that hasn’t been mentioned throughout your comments or prior interviews….
M: Well, it’s…
D: …now I’d be happy to go and look into this as well.
M: Well that’s the primary driver.
