In tough economic times and reductions in vital public services, I hope this budget report will help identify where the county is doing well financially, and where we continue to struggle.
When I was sworn in to serve on the Board of Supervisors in January 2005, the county was facing significant increases in Workers' Compensation fees due to significant claims by employees. We were also faced with identifying our unfunded Retiree Health Care Liability under the Government Accounting Standards 45 (GASB) requirements. Lastly, we knew we had significant impacts coming in pension liability cost increases.
This huge financial burden could not be tackled all at once. The pieces fell into place with the board focusing on addressing the Workers' Compensation fee increases first. By working with our employees, developing workplace safety standards and ultimately reducing claims, we reduced our annual liability. Therefore, our contributions to cover costs were reduced saving taxpayer dollars.
With those financial savings, the Board tackled the county's OPEB (Other Post Employment Benefit) liability, the county's long-term retiree health care liability debt. This debt accrued over decades of time with multiple labor negotiated contracts and employee benefit agreements.
The Board of Supervisors secured an actuarial study in 2006 that identified this liability at $2.6 billion dollars. Significant dollars and twice the county's total annual budget.
While the GASB report only requires local governments to identify their OPEB liability, the Board of Supervisors knew this was not enough. We needed to lower this liability and build a funding mechanism to fully fund it over its lifetime. We have done this.
With the identification of the county's OPEB liability, we started working with our employees, educating them on what this debt meant to them, to the county, and to our taxpayers. With no action, this debt could ultimately eat up county revenues to a level that forced significant reductions in our workforce, and ultimately devastate county service delivery. Through a long and difficult process, and significant trust building, we built a plan, and implemented it.
We developed an OPEB Trust Fund, put in some early dollars, and then went to work in renegotiating our labor contracts and sharing the health insurance premium costs with our employees.
In June of 2010, the date of our last Actuarial Study, and four years after the initial report regarding the County's OPEB liability, the Board of Supervisors has achieved unprecedented results. Continual implementation of the strategic recommendations has allowed the Board of Supervisors to meet or exceed all of our goals.
The County's Unfunded Actuarial Accrued Liability (UAAL) has declined by 60.3 percent (from $2.57 billion to $1.02 billion); the normal cost has declined 78 percent (from $130.6 million to $29.2 million); the Annually Required Contribution (ARC) has declined by 70.7 percent (from $216.3 million to $63.3 million); the results reflect negotiated changes to the health care plans, caps on the County's contributions and the cooperation of the County's bargaining units; and the County has also pre-funded 2 percent of its OPEB obligation by depositing funds in an irrevocable trust fund.
With recently negotiated labor contracts, this liability has been reduced even further. The Board of Supervisors remains committed to meeting the goals and objectives of our OPEB Funding Plan as outlined in 2006.
The significant economic downturn of the last few years threw the County another challenge as the County was already struggling to meet expenditure demands with annual revenues. Not only did our annual revenues stop increasing, they went backward. This placed an extra immediacy on the Board of Supervisor's focus on lowering our expenditures and restructuring our employee labor contracts.
Today, we are not out of the woods yet, but we can see the horizon. With significant efforts of the Board of Supervisors and our employees, we are learning to do more with less. We are all working harder to preserve and protect the vital county services you expect to receive when you pick up the phone to call Contra Costa County. As we approach what is likely to be one of the most fiscally challenging years ever for Contra Costa County, we continue to take a hard look at our cost of doing business, and not spending more than we receive in revenues.
If you have any questions on this or any other County matter, please contact my office in Brentwood at 925-252-4500 or Dist3@BOS.CCCounty.us.
Mary Nejedly Piepho is chair of the Contra Costa Board of Supervisors, District 3.