County is fine, but city is hurting

Locally, there are two very different scenarios regarding the cost of retiree health care among public employment systems:

• Stanislaus County Employees' Retirement Association (StanCERA) — Health care coverage in retirement was never guaranteed as a benefit for Stanislaus County employees and others in the StanCERA system. From 1981 through 2009, StanCERA retirees received a revocable health benefits subsidy. By the end of that period, the maximum benefit was $370 per month. The subsidy was taken by the StanCERA board in 2010 and remains suspended until the retirement system's funding ratio improves.

• The city of Modesto, on the other hand, faces a serious long-term problem with retiree health benefits. City officials estimate the cost of covering retirees and current employees who could claim health benefits after retirement is about $81.3 million.

A big factor in the city's cost is that at retirement, most employees are able to convert most of their unused sick leave to retirement health benefits, continuing in the same health care plans available to employees. Employees can convert up to 2,000 hours of sick leave, at a rate of eight hours for one month of coverage. That's a generous deal — one day's pay buys health insurance premiums currently valued at between $600 and $1,100 per month. Two thousand hours of sick leave could buy 250 months — or 20 years — of coverage.

Some unions have agreed to a much lower retiree health benefit for employees hired after Jan. 1, 2011, but that does little immediately to ease the long-term burden for the city.