It’s no secret that Sonoma County is in about a $250 million financial hole in terms of meeting all the promises made to current and former employees in retirement.
But that hole could get significantly deeper following a state Supreme Court decision that severely limits the ability of counties to unilaterally cut health care benefits for retirees – as Sonoma County has already done.
First some background: In an effort to rein in soaring costs of health care benefits, Sonoma County in August 2008 significantly rolled back contributions for premiums for retired employees. Previously, the county had paid just about all the costs for medical benefits. Under the new plan, the county is cutting contributions 20 percent a year over five years until 2013 when it will reach a flat $500 a month per retiree, regardless of the number of dependents.
The fact is, if county supervisors hadn’t made those reductions at the time, Sonoma County would be in a far greater mess with its unfunded liabilities.
But the rollback was a bitter pill for those retirees who were not yet eligible for Medicare and were counting on those health care benefits for themselves and/or their dependents. As a result, the Sonoma County Association of Retired Employees sued in 2009 claiming the county had broken its implied contractual promise to retirees.
The retirees lost in federal court exactly a year ago this week when a federal judge ruled that retirees had not shown “any specific Sonoma County resolution or ordinance that granted its members this purported vested right” to these benefits.
But that case could be revived following a state Supreme Court on Nov. 21.
While reviewing a similar suit involving retirees in Orange County, a federal court asked the state Supreme Court “Whether, as a matter of California law, a California county and its employees can form an implied contract that confers vested rights to health benefits on retired county employees.”
The court answered that, yes, in some circumstances retirees could have a vested right to benefits even if the contract is an implied one. In its unanimous opinion, the high court said the right to such benefits could be conferred from something such as a county ordinance or a resolution.
In Sonoma County, retirees would still have to produce evidence of such an implied contract, evidence that U.S. District Court Judge Claudia Wilken ruled a year ago doesn’t exist.
Nevertheless, this could be a significant setback for Sonoma County as well as other counties who are seeking to control the costs of retirement benefits – especially if they’re to required to retroactively reimburse retirees for lost benefits. Needless to say, it would be a sizeable sum.
- Paul Gullixson