San Angelo City Council Outlasts Budget Commentors

This City Council report is from a concerned citizen who shares my interest in area citizens retaining health insurance coverage.  I've interspersed my comments with their assessment of today's budget meeting:

This was the most discouraging City Council meeting I have attended. The budget discussion did not begin until 3 pm so by that time only the hard-hard-hard core of us was left!

City Council wedged a 90 minute Executive Session between the morning business and the afternoon budget hearing.

On the part of the council members, their total discussion was focused on proposed salary increases for current employees. Staff has proposed percentage increases differentiating between "meets expectations" and "exceeds expectations".   But Dwain M counter with a proposal to take all the funds and distribute then on a per capita basis as a "bonus" not a salary increase. This was of mixed appeal: some viewed it as a plus because it would give greater per centages to lower paid and would not commit that amount to next years budget should it be a bad year. But Harold countered that no salary increase would diminish stated objectives of improving salaries relative to other cities.

And how do those stated objectives relate to the City Manager's bonus pay?
City workers will need increased pay for health care, either increased insurance costs or increased patient responsibility due to poorer benefits. The best option in the health insurance RFP is maintaining the current plan.  The rest are benefit cuts.

In the long run, they (largely led by Alexander and Hirschfeld) put together a mixed proposal: higher % increases possible for "meets expectations" for lower paid folks and with lower rate for higher paid --- then for "exceeds" group a possible bonus payment.

I contacted Rep. Paul Alexander with my recent posts on no budget increases for health insurance and retiree coverage, given the city's inability to file an Early Retiree Reimbursement Program (ERRP) claim.  He never replied.  After meeting face to face with most council members on health care in May, I e-mailed data on other Texas cities getting ERRP money.  Not one e-mailed me back.  Does anyone detect a pattern?

Not one word was spoken about retirees and/or health insurance until I got up to do so briefly -- heads nodded but absolutely nobody picked up and commented on retirees or health insurance. Immediately thereafter they approved the "mixed" proposal.

Silent on retirees?  Harold and Human Resources Manager told Councilman Morrison in June that retiree representatives could be added to the Insurance Advisory Committee.  How many times do City leaders need to ignore retirees before the media or public notice?

The final (budget) hearing will be at 9 am on Sept 6.  The only semi-good news is that Charlotte Farmer asked for an update on the ERRP application/funds. Have you shared any of your data with her on drop outs etc?

Retired Police Chief Russell Smith communicated with Councilwoman Farmer, among other elected officials, on ERRP.

Nearly a year after the City's ERRP application was approved, an elected leader asked about the program "that shall not be named."

If leaders can't talk about this in front of a nearly empty room, my next question is taboo:  How do the city's retiree health insurance moves impact Harold's incentive pay?

I find the City's obfuscation around ERRP and retiree health insurance continually brazen, and frankly, quite sad.

Update 9-4-11:  The above slide was shown during the August 30 Council meeting.  While employee/retiree health care implodes, the economic development kingdom explodes.   Recall the City's $1 million tax break for Ethicon's maintaining employment and improving facilities.

City Wants to Dump Services to Nonprofits

San Angelo's City Council set priorities in their June 28 meeting.  Unfortunately, the meeting wasn't aired on Channel 17, thus city employees and retirees missed council's budgeting no increased funds for health insurance .  Elected leaders prioritized reducing operating expenses and steering savings to capital projects.  Minutes from the meeting state:

City Council suggested the following: taking lower tiered programs, non-public safety involved, e.g. parks and recreation, pulling facilities off line to maintain other facility improvements and recently approved projects; privatization of facilities and programs; reallocating recreation monies, e.g. partnering with school district to utilize their park areas, expending a one-time expenditure for equipment and schools maintain; salary savings for reorganization, and reducing to 4/10 work week. Once the changes and financial savings are determined, such savings may used for street reconstruction.

This isn't new given the decade long decimation of the City Health Department.  It's down to an Immunizations/Sexually Transmitted Diseases/ Tuberculosis Clinic and food permitting/inspections.  The City shed a Pediatric Clinic, AIDS Clinic, Pharmacy, Pharmaceutical Assistance Program, and Social Services. 

Next up for disposal to the private sector is Animal Services.  Anyone in discussion with the City, regarding taking over the Animal Shelter, should take their time evaluating any offers/commitments.  Harold needs to close deals before October 1, when the new budget year begins.

As for what they're taking over, here's a hint from the July 21 minutes of the City's Animal Service Board:

Susan – I was going to ask – on the statistics report – can we add a percentage? I think that would be helpful to know. That way we could have a goal to work toward

Julie – I honestly don’t know if our program can do that.

A manager doesn't keep reports showing volume and percentage changes?  That seems a basic managerial skill.  The City used to have it, when Harold was Assistant City Manager (click on the image to make it larger):

Any nonprofit group expecting long term funding from City Council should review the City's treatment of early retiree health coverage and Hickory Aquifer water fees.  This council reneged on promises made by their predecessors.  That could be the future for San Angelo's animal service community.

The City needs financial savings to lower taxes and build roads.

That comes on someone's back, given old plans aren't enough, once again. Texas Government Insider offered in January 2009:

Under the new plan, the city will issue about $13 million in bonds in October 2009, which will move the projects forward without increasing taxes, Dominguez said. In the past, the city issued a series of three six-year bond issues that expire every two years. Now the city will pay off those bonds over the next five years without renewing them. That revenue then will be directed into two city funds, a new capital fund to pay annually for road improvements and a second fund to pay for the bond issue for renovating the city hall and build the fire stations. The city's architect advised that doing the city hall renovations all at once rather than in phases could save as much as $1.74 million.

The City discussed getting more out of nonprofits in the June meeting, specifically through increased franchise fees.  How many ways can they tap nonprofits before the new budget year?

It remains to be seen.

COSA Health Insurance - Draft Budget Priorities

City of San Angelo leaders sought feedback from City Council on the 2012 budget in June.  As a result, I asked city staff:

What are the city's budget assumptions for health insurance for 2012?

The reply by HR Manager Lisa Marley on June 13 indicated:

Budgets for 2012 are still being prepared. Nothing will be firm on health insurance until the RFP is completed. 

The City later posted a draft budget on their website.  FUND 310 includes COSA's self-insured health benefit.  The budget includes revenue and expenses.  The revenue picture shows:

Self Insurance - Revenue

FY 10 - $5,955,062
FY 11 -  $7,226,044 (budget)
FY 12 - $7,917,129  (budget)

The draft budget shows insurance premiums rising nearly $700,000 or 10% overall in 2012.  City Council directed no increase in health insurance costs in their June 28 meeting.  Thus, the city's portion is targeted at $7.2 million.

Other aspects of the draft budget are of interest.  One is the treatment of retirees and employees with dependents.  Draft budget numbers indicate these groups will take a beating for the second year in a row.  (Click n the image below to make it larger)

Savings from 45 city workers dropping health insurance for 2011 can be seen in the Premiums/Employees number.   Marley spoke to this in her June e-mail:

The annual savings in premiums for those 45 people is $189,603.96, which simply remains in the self-insurance fund and is used to either pay for claims or for new employees who enroll during the year.

Draconian premium increases of 34 to 58% for retirees and dependents sent 147 people off the city rolls.  It's not clear how many of the 147 losing city coverage remain uninsured.  If they can't afford subsidized city coverage, they likely can't pay for individual health plans in the open market.

What happened to Early Retiree Reimbursement Funds, expected to make benefits better or lower premiums?  The feds approved the City's ERRP application one year ago.  City staff struggled to complete claims forms, eventually farming out the project to BC/BS.  Yet, nary a claim has been filed, meaning the City received none of the expected $300,000 reimbursement.

I find it hard to believe retirees and dependents can pony up the $940,000 projected in the draft budget.   As the city expects no health insurance increases and sought no ERRP aid, retirees and dependents would shoulder higher insurance costs or get dramatically lower benefits.

Insurance premiums generally exceed self-insured expenses by 6-7%.  Projected expenses in the draft budget are:

Self Insurance - Operating Expenses

FY 10 - $5,644,153
FY 11 -  $6,755,672 (budget)
FY 12 - $7,399,096  (budget)

There are four major components of health insurance operating expenses.

Two of the four, Special Services and Administrative Services, are projected to rise a combined 97% in two years.  Expected Claims Liability is projected to rise by 9% next year. 

This budget is only a draft, but it does indicate management's expectations and reflects their priorities.  If anyone feels otherwise, they'd best attend one of the next two City Council meetings, which will also serve as public budget hearings.

The picture shows more uninsureds in the retiree-dependent arena or significantly poorer coverage.  It remains to be seen where employees fall on that continuum.

Update 8-29-11:  While Harold was Assistant City Manager, the 2004 budget stated: "To administer the employee and retiree health benefit program in a professional manner and to contract for these services at a reasonable economic level for both the City and its employees and retirees."  The pendulum swung fully toward the City.

Zero New COSA Health Insurance Funds for 2012

A critical San Angelo City Council meeting did not air on public television due to technical problems.  An audio feed failed, making the June 28 meeting a silent, six hour movie on Channel 17.  Oddly, enough audio channels worked for the DVD to play on a computer, however citizens needed to request a copy.

While minutes summarized the discussion, they left out critical guidance for the 2011-2012 budget.

Discussion was held on a proposed stratified pay plan and related percentages, proposed percentage salary rates for employees making less than $50k, proposed innovations for better services and efficiencies, health insurance premium contribution rate and percentage, employee health committee, the percentage allocation for salaries from the general fund, decreasing the property tax rate, and increasing franchise fee rates.

While Council talked health insurance, there was no discussion of the "premium contribution rate and percentage," only a "desirable" budget increase.  The following summary did not make the minutes.

At the 4:36 minute mark with public seats virtually empty, Council heard staff's health insurance proposal.  CFO Michael Dane described the work done to date, much of it by Human Resources and an Insurance Review Committee appointed by City Manager Harold Dominguez.   Councilman Morrison asked if any retirees were on the committee.  The answer was no, but staff indicated they could be added.  Dane suggested the city increase the health insurance budget by $250,000 for 2012.

Councilman Kendall Hirschfeld quickly indicated his expectation that there be no increase for health insurance for the coming year.  He referred to meetings in January and February where he thought this expectation had been shared with city staff. 

Dane and Human Resource/Risk Management Director Lisa Marley explained why the city thought it should do something to help employees.  Marley said renewal under the current plan design would require a 35% increase, 24% relative to the existing plan and 11% due to health reform requirements.  The $250,000 proposal amounted to 5%, which would leave employees and retirees to pick up the other 30% or $1.5 million.

Last year's increase, roughly half that amount, drove nearly 200 from the city's health insurance rolls, 47 city workers and 147 retirees or employee/retiree dependents .  Marley stated the city solicited bids with specified changes to the plan.  She discussed eliminating the Low, Medium & High designations, i.e. offering one plan with large deductibles like the Low option.  Committing to a single provider, Shannon or Community, would result in savings.

Marley cited the need to cut benefits by increasing copays and deductibles.  While she used the language of cutting costs, a better description would be cost shift.  The city will simply pass more costs to the employee.

Council budgeted for a 4% pay increase for staff, but decided on no increase for health insurance.

How much of employee salary increases will be eaten up by higher health insurance or medical care costs.  Retirees won't have an increase to apply. Their voice wasn't at the table, given their lack of representation on Harold's Insurance Review Committee.  This appears to be a pattern, given City leaders kept retirees out of the communication loop on a number of health related issues the last few years. 

The meeting punctuated many things for city workers and retirees.  City Council prioritized capital items, property tax cuts, roads and storm-water drainage over health coverage.  It shouldn't be a surprise.  This is the same organization that qualified for federal funding to help pay for retiree health insurance.  A year later the city is yet to file a claim, while other Texas cities were able to do so.  This raises serious doubt about Lisa Marley's August 2010 health claim:

"It will either be a better benefit or their premiums can be lowered." 

Sorry, city workers and retirees.  It's clearly neither.  This was the meeting to be seen and heard.  It set the agenda in motion.  The axe will fall in early October when the city brings its recommendation to Council.  I bet the seats are full.

Update 8-26-11:  Council direction supersedes the draft budget, but that document has stories to tell.  Search "FUND 310" if interested.  Also, the City scheduled two public hearings on the budget, which take place during regularly scheduled City Council sessions.  Council meetings and public budget hearings will begin at 9:00 a.m., Tuesday, August 30, 2011, and September 6, 2011, at the McNease Convention Center, South Meeting Room, 500 Rio Concho Drive.

Update 9-1-11:  COSA accepted an extra $640,000 from Texas Department of State Health Services for a capital projected, renovating WIC facilities.  DSHS is funding $1.6 million in renovation costs.  Despite this gift, City Council squeezed city employees and retirees for more capital.

ERRP: Pardon Bernie

Senator Bernie Sanders (I-VT) identified ten companies not paying their share.  It turns out six of the ten have their hand in Uncle Sam's wallet, specifically the Early Retiree Reimbursement Program (ERRP).  As of June 10: 

GE was paid $38.5 million
Boeing - $34 million
Bank of America - $4.4 million
ConocoPhillips -  $5.5 million
Citigroup -  $4 million
Valero Energy - $1 million

These are checks, that come with few strings attached. 

Employers to Jettison Health Insurance Benefit Come 2014

Health reform set the stage for employers to slowly shed that pesky health insurance benefit.  The pace is projected to pick up in 2014, when health exchanges come to life.  The AP reported:

Nearly one of every 10 midsized or big employers expects to stop offering health coverage to workers once federal insurance exchanges start in 2014, according to a new survey from a large benefits consultant.

Towers Watson also found in a survey completed last month that an additional 20 percent of the companies are unsure about what they will do.

This raises questions regarding CBO projections for health reform (PPACA).  As depressing as they are, employer estimates may be overly optimistic.  An earlier McKinsey study revealed more employers ready to ditch health coverage for workers. 

It's hard to trust those leading the health reform charge, the wolf in sheep's clothing and the conflicted PEU designer. There's lots of pain between now and 2014, when many workers get a long foreseeable kick in the teeth.

Update 12-2-12:  Walmart plans to jettison workers from their employer health insurance plan in 2013.  Lots of health care pain looms before, during and after PPACA as employers shift responsibility to workers and the government.  .

Quake Under Nuclear Plant

The epicenter of today's 5.9 earthquake was Mineral, Virginia.  It's the home of the North Anna Nuclear Project owned by Dominion Resources.

Who knew a fault line sat under a Virginia nuclear power plant?  Even environmentalists, opposing expansion at the site never cited earthquake risks.

Bloomberg reported power failures at the plant, requiring emergency generators to kick in.  The article addressed seismic concerns, given the lack of earthquake design:

A study by North Anna of the plant’s fire and flood protection structures had identified vulnerable areas that were “not seismically designed.”

“The licensee will evaluate the issues above in order to determine if additional mitigation strategies are required,” the letter stated.

When North Anna was built, some of these systems were not required to be designed to seismic standards, a Dominion spokesman said.

Power to the plant needs to be restored. That's the short term solution.  Who knows about the long term? 

Update 8-29-11:  Virginia's power needs shrunk precipitously after Hurricane Irene left hundreds of thousands without power.  Only one disaster behind, the feds boosted inspections of the North Anna Nuclear Project.