The City of Sacramento does not have the money to pay the retiree medical benefits it will likely be required to pay over the next 30 years.
The city recently created a fund to pay retiree medical benefits. It has $7.5 million in it.
According to a recent study, the city has $363 million in liabilities.
Leyne Milstein is the Department of Finance Director. She says the current funding mechanism is only a short-term solution.
"We are doing what's called 'pay-as-you-go' funding for our retirees. The problem with that, eventually, as more people retire, and costs -especially for our fire retirees- continue to rise, the cost of those benefits will continue to increase using up more of our operating budget to pay for those benefits."
The department is asking the city council to adopt a policy of narrowing the gap.
"The policy is that we will try to get to the place of either reducing our costs and/or adding to our contributions or perhaps employees helping to pay for part of the costs over the next ten years and phase that in."
Full funding would be reached in 30 years.
The Finance Department has presented the city council with four strategies to achieve this.
They include elimination of medical benefits for current employees, creation of employee health savings accounts, and a cap on firefighters benefits.
With the exception of Sacramento's firefighters, the city has already removed retiree medical from the benefits new employees will receive when they retire.
The city did receive some good news regarding its unfunded liabilities. The city contracted with Bartel Associates to study the problem. The contractor found the city's previous estimation of $466 was inaccurate -due in large part to city employees with spouses -employed by the state- choosing state government retiree medical benefits.