The mother of all haircuts

Today’s news reports the city of Stockton has reached a tentative deal with its retirees in bankruptcy negotiations: the city will pay 1,100 of them a lump sum of $5.1 million.

The lavish and utterly unsustainable free lifetime retiree medical plan, given not only to city retirees but to their spouses, was — depending which actuary you believed — a $540 or $560 million unfunded liability.

By settling retiree claims for $5.1 million, the city has settled for roughly one penny on the dollar.

Another way to look at it is that the medical benefit was estimated to be a $400,000 perk. Dividing $5.1 million by 1,100 retirees averages out to $4,636 per person — again, roughly one penny on the dollar.

That is the mother of all haircuts.

It is worth remembering that Dwane Miles, Stockton’s city manager 1991-2001, negotiated a huge expansion of the lifetime medical benefits. And a city employee could get free lifetime health care – spouse, too! — after only one month’s service.

Milnes also negotiated:

» The unaffordable “3 percent at 50″ pension for police and fire.

» Employer Paid Member Contribution, commonly known as pension spiking.

» 5 percent annual raises for retirees.

» 2 percent at 55 retirement for miscellaneous employees.

After dragging the city up the poorhouse steps, Milnes then became head of the retiree association. That bunch demanded the leviathan benefit be maintained. But first Milnes appeared before the council to say council members were clueless twits being ill-advised by City Manager Bob Deis.

To recap: Milnes did as much to bankrupt Stockton as any official. He was part of the reformers’ problem, not the solution. He acted superior before the council. And, in another tour de force of negotiating skill, he helped to win his group one penny on the dollar.

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  • Blog Author

    Michael Fitzgerald

    Mike Fitzgerald is The Record’s award-winning metro columnist. His column runs in the paper three times a week. Born in San Francisco, he was raised in Stockton. His column covers diverse beats including, sometimes, the offbeat. Read Full
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