Sacramento City Hall could start making a small down payment on a huge debt it owes for retiree health benefits -- if the City Council goes along Tuesday evening.
As the city balances its books, it has found $9.3 million in departmental savings and one-time revenues in its general fund for the budget year that ended June 30, 2012.
Of that relatively paltry windfall, city officials are recommending that $2 million go to establish a trust fund for retiree health care costs. That would be the proverbial drop in the bucket compared to the $440 million liability over the next 30 years.
But it would set an important benchmark that the council is taking the issue seriously, as The Bee's editorial board called for earlier this month.
Investment returns from the trust fund would generate cash to help pay the annual costs of the benefits. The city is budgeting about $11 million a year, but would have set aside $43 million a year.
The other needed step is to roll back the benefits for future and current workers in the next round of union negotiations. Under pacts from 20 years ago, most city retirees get $300 a month to help pay their costs in the city's insurance plan. Firefighters have an even sweeter deal -- $750 a month.
The $440 million for retiree health benefits is nearly half the city's unfunded liabilities for retirement and pension costs, which in turn is nearly half of the city's total liabilities. Of the $9 million windfall, another $4.2 million would go into the city's rainy day fund and $1.4 million would cover shortfalls in other departments. For the fiscal year that starts July 1, the city is facing a $9.5 million shortfall.