The topic of retiree healthcare benefits may sound like snoozefest. But these funds, if left unrestrained, have the potential to grow into a larger and larger portion of a city’s general fund spending until there’s no money left for parks, police officers, libraries or road repairs.
The City of Sacramento’s Department of Finance is trying to prevent this. It presented an Other Post-Employment Benefits (OPEB) Funding Policy to the city council Tuesday night.
The department of finance wants to replace the city’s pay-as-you-go system that puts the burden of funding these benefits on current workers. Instead, the city would build up a trust fund over the next 30 years that will ultimately pay the cost of these benefits without being a burden on current workers or the general fund.
This trust fund would also save the city money over time. Pay-as-you-go funding is significantly more expensive than prefunding since you can’t invest the money and earn returns. City of Sacramento Finance Director Leyne Milstein joins Insight to explain what this new policy does for the city.