STOCKTON – The federal judge overseeing the Stockton bankruptcy on Monday released an opinion that ultimately frees the city from paying for the medical coverage of about 1,100 retirees.
U.S. Bankruptcy Judge Christopher Klein ruled that he does not have the power to decide how the city spends its money.
Klein was ruling on the Association of Retired Employees of the City of Stockton’s request for a temporary restraining order and preliminary injunction to order the city to continue paying the full health care premiums for a total of about $9.2 million this fiscal year. Either that or allow the group to bring a lawsuit against the city in another court. Klein declined all of the group’s requests.
“The decision confirms the city’s position that while the bankruptcy court has exclusive jurisdiction over the restructuring of the city’s debt, it cannot direct how the city uses its property and resources, including spending its money, while the bankruptcy case is pending,” according to the city’s statement on Klein’s opinion. “The city prepared and submitted a pendency plan that acts as the financial operational plan and the budget during the Chapter 9 case. Judge Klein’s decision confirms that the bankruptcy court does not have the authority to determine what services are essential to the health and safety of the community.”
City leaders filed for Chapter 9 protection June 28. They had blamed financial situation on past city councils and administrators, the housing boom and bust, years of fiscal mismanagement and devastating debit, and generous employee pay and benefits. Part of that involved agreements with labor groups that provided for lifelong, fully paid generous health care for retirees and one dependent.
The city had been paying those retiree health care costs from its general fund, which is now insolvent.
The city’s health care plan was restructured last year to require employees and retirees pay about 20 percent of services provided with the health plan covering about 80 percent of the costs. The changes, according to the city, brought the plan more in line with what is typical for public agencies and private companies.
There are about 2,400 city of Stockton retirees, with 1,100 retires participating in the city’s health care plan. The cost of the retiree health care plan would have been $9.2 million this fiscal with the cost doubling within the next decade.
The pendency plan has the city paying a stipend toward the health care premium for retirees with more than 10 years of service. The retirees would pay the full premium beginning in July 2013. That would be a cost of nearly $1,580 for a retiree and one dependent. The cost drops to $772 for retirees and one dependent over 65 who are eligible for Medicare. The city is working with Kaiser Permanente to develop a lower costing plan.
Visit www.stocktongov.com/chapter9 for more on the city of Stockton’s bankruptcy.