City Budget Shell Games Revealed: Health Insurance

The City is planning to raise an additional $10 million in revenue by taxing property owners with a new “fire fee”.  City leaders continue to claim that the private economy must sacrifice $10 million to the local government to avoid a “deconstruction of 20 years of progress”.  The fact of the matter is that local citizens are being asked to transfer $10 million of their hard earned money for more government waste and irresponsible policies.  To justify this tax hike, the Mayor and the City Council are claiming they have “cut spending as low as possible”, yet an examination of their health insurance spending for government workers reveals some misleading information from the politicians.  For instance, the city claimed that for 2012 it “decreased” health insurance costs by about $1.4 million by self-insuring, rather than paying premiums to United Health Care.  It turns out that the city actually spent an additional $800,000 on health insurance costs in the 2012 budget!  This is about a $2.2 million deception! shell_game3  A more important question arises:  if the city could “save” millions every year on health insurance by “self-insuring” why did it take until 2012 to do so?  Why did the politicians not make this move in 2007 when all-time high property tax revenues were bleeding the economy to the point that we are now in a recession? In addition, health insurance costs are proposed to be an additional $2.5 million in the 2013 budget (25-40% lower costs are possible as described below)!   These are the kinds of deception that should alert taxpayers to a “hoax in progress” and prompt them to tell these politicians to really cut spending instead of playing numbers games to justify tax hikes.  You can email them at council@stpete.or or to tell them “No more taxes or fees”! The city could easily find most the $10 million phony “shortfall” by merely modifying the health insurance plans as described below.

The City of St. Petersburg’s health insurance spending bears further evaluation. For instance, the city is continuing to run up large bills for health insurance to give a privileged few city employees and retirees Cadillac insurance coverage that ordinary folks can’t afford.  It turns out that only 3,531 city workers and city retirees are benefitting from city health insurance benefits.  The benefit for workers includes 75% of the cost of family members of government employees as well –all paid for by the taxpayer.  That’s right, not only do government employees get top-notch health insurance at very little cost to themselves, the taxpayers pay most of the cost of their spouses and children too!  

 The total cost for health insurance benefits of all active and retired government workers was budgeted at $34 million for 2012 (it will be $36.59 million in 2013). The amount of spending on health insurance is actually going up even while the number of active employees is going down (2733 in 20011 to 2691 in 2012). Active city employees are therefore receiving $22,197,000 in health insurance benefits in 2012, or about $8,248 per employee. In addition, the city has had to retain four workers to manage the self-insured health plan, when it used to have United Health Insurance pay this and will retain a fifth in 2013.

But what is even more interesting is that the cost of retired city workers is even greater for the taxpayer than actual working employees. To add insult to injury, there are no savings to pay for it! In 2011, 1113 retired city workers received $13,247,000 in health benefits, or about $11,902 per retired worker.  The total number of retired workers receiving health benefits in 2012 is budgeted for 1196, an extra 83 people and there is NO money saved for these retirees. The taxpayers are on the hook every year for increasing health insurance costs for retirees, estimated to be a total $177 million unfunded liability.

The fact of the matter is that spending can be cut even more.  The city could save 25-40% in health insurance costs every year by converting their employees to a health savings account model linked to a high deductible health plan.  However, what is more likely is that the City politicians will continue to demagogue and mislead on saving money while they demand more out of private citizens through taxes.  They won’t care if they hurt the economy, because they will blame that on something else as well.