This public letter was contributed by retired county employees Mandy Rose and Margie Riopel. The opinions expressed do not necessarily represent BenitoLink or other affiliated contributors.
Rose and Riopel v. County of San Benito: Case No. CU-17-00151
Superior Court, State of California, In and For the County of San Benito
To the Citizens and its Taxpayers in the County of San Benito:
Most of you will have never heard of the lawsuit noted above, but you should have as it effects how your public money is being spent or shall we say, wasted. In 1973, the San Benito County Employees Association (SBCEA) now known as SEIU (Service Employees International Union), negotiated to have 100% of their health care premium paid for by their employer, the County of San Benito[i][ii]. In addition, a portion of any dependent costs were covered as well. The County also offered to pay the employees share of the CalPERS pension which was 7% of your wages. This agreement arose because the County was not paying comparable wages as surrounding Counties and to make up for it, they offered ‘as part of a compensation package’ 100% paid health care now and in an employee’s retirement, as well as paying the employee share of the CalPERS pension contribution.
Various providers, including CalPERS PEMHCA, were the vehicle through which the 100% health care promise was met, but in 2013 after 42 years, everything changed. Despite the fact that retirees and employees, who had been hired under this ‘compensation package,’ were receiving what had been promised in retirement.
In 2013, the County placed a ‘cap’ on its contribution to health care premiums, no longer paying the 100%. This health insurance contribution reduction came about through a County mandated “Impasse” with the SEIU employees.[iii] The Board of Supervisors also mandated that employees start paying their share of the CalPERS pension. Two years later in 2015, the Board went further providing that if you were of Medicare age, you would receive only 70% of that ‘cap.’ The ‘cap’ was set at $550 from the previous year of $649.78[iv] for an individual plan—with that $100 moving to subsidize the family plan in the SEIU negotiated contract. The subsequent change to reducing retiree coverage to 70% of the ‘cap’ came with a further subsidy to active employees, not raising their premium contributions and putting the full burden of premium increases on the retirees. The County paid only $385 a month for retiree only coverage for those 65 years and older. Which does not cover the monthly premium cost. But that wasn’t the agreement we made when we were hired: to repeat, 100% paid retiree health was part of our compensation package and we accepted less salary because of it.
We do not begrudge the Board of Supervisors for looking for a means to bring health care costs under control. We applaud and expect the Board to be a good fiduciary of public funds. However, there is more to the story than simply negotiating with the recognized bargaining groups and imposing this decision, without warning, on other unrepresented employees. But suffice to say, the Board could have honored its promise to its long-standing employees, with the 100% health care coverage by tiering employee groups—just like they have done for pension and now new hires for retiree health care. Meaning, if you are hired before a certain date, your retiree health benefit is different than those hired after that date.
Back in June of 2007,[v] Clerk, Auditor, Recorder Joe Paul Gonzalez, began informing the Board of Supervisors about the liability associated with these health care costs and an upcoming change in how the County’s financial statement were to be prepared. GASB (Government Accounting Standards Board) 45, promulgated in 2004 and to be phased in, required government employers to measure and report the liabilities associated with (other than pension) postemployment benefits (or OPEB). What this meant was the County and all other governments would now have to display the accrued amounts that were owed employees for medical retirement benefits and the County balance sheet would not look quite so rosy—but understand, the benefit was owed all along, but it was not required to be accounted for as private businesses had to in the past. A subcommittee of Supervisors De La Cruz and Marcus were to look into future funding options for this obligation. It is important to note that Mr. Gonzalez, in this Staff Report to the Board at this meeting, makes a point of telling the Board that both pension and medical benefits are a form of ‘compensation’ as stated above.
It is fortunate that prior Boards of Supervisors had begun setting aside funds but not enough to cover the liability at that point. And so, it was again in 2009, [vi] the Clerk, Auditor Recorder Joe Paul Gonzalez rang the alarm with the Board of Supervisors about the burgeoning liability of both employee pension and OPEB. Gonzalez suggested that the Board appoint a Subcommittee to begin studying this issue and develop some strategies to address these costs. A second part of the recommendation at that time was to set up an “irrevocable trust” to begin setting aside from current employee’s budgets, past and future amounts to cover this impending liability. The Board of Supervisors at the time, consisting of Pat Loe, Reb Monaco, Margie Barrios, Jaime De La Cruz, and Anthony Botelho, did just that. That fund has now grown, according to the latest Actuarial Report (2019) [vii] to over $28 million with the County being funded at 87%—needing $33 million to be 100% funded. This is not monopoly money but dollars that belong to San Benito County retirees as part of their compensation. Recall again, that this is in an irrevocable trust-which is held by CalPERS and is known as CERBT (California Employer’s Retiree Benefit Trust).[viii] Supervisors De La Cruz and Botelho were appointed to the Subcommittee to oversee the OPEB liability.
Upon hire, employees were told, including us, (Normandy Rose in 1999 and Margaret Riopel in 1986): The County will pay your portion of the CalPERS retirement (7%), you will receive 100% paid health care for yourself and this 100% covered you while an active employee and for your lifetime through retirement. Wages were lower but you had a healthy retirement package. This was a recruiting and retention tool of the County’s. The 100% health care benefit for retirees had been consistently paid since 1973.
We were retired (Margie Riopel in December 2012/Mandy Rose in January 2015) when the cap on the County contribution as opposed to paying 100% of the premium, went into effect for unrepresented employees, without notice.
The law firm of Renne, Sloan, Holzman, and Sakai held sway in the Labor and Employment Law area and made themselves available in some form to local governments over these issues. This law firm has subsequently morphed into other LLCs, and now is under contract with the County as Renne Public Law Group. They became the architects of the blueprint to exit CalPERS PEMHCA health, in order to escape the ‘once equal, always equal provision’ for actives and retiree premium contributions; mandate a flat rate for active employee and retiree health, and further reduce retiree health contributions.
In May 2013, the County not only hired the Renne, Sloan, Holzman, and Sakai law firm as negotiators, but also embedded one of its employees as the County Director of Human Resources.[ix] What ensued was removal of anyone with institutional memory from the HR Department.
New language with reference to retiree health insurance was drafted into this SEIU agreement for 2013-2015: active employees and retirees in SEIU would now only receive a “capped” health insurance premium contribution of $550 for employee only coverage—not 100% of whatever the premium amount was, as had been the case since 1973. And yes, this was “imposed” not negotiated with the Union membership through the Impasse noted above. The unrepresented employees (Confidentials and Appointed Department Heads) had no knowledge of this change and were not initially impacted by it.
The unrepresented employees (Confidentials and Appointed Department Heads), again, were never told that these changes would affect us! This unilateral action by the Board of Supervisors to lower our retiree health benefits changed the terms of our employment. See Resolutions 2015-87 (Confidentials) and 2015-93 (Appointed Department Heads) for changes made after our retirement.[x]
Upon exiting CalPERS PEMHCA (employee health care) in 2016,the Board imposed CSAC-EIA (California State Association of Counties-Excess Insurance Authority) effective January 2017. [xi] They matched CalPERS current rates and promised there would be no increases for two years, although that promise too was not kept. Part of the justification for exiting CalPERS was a large increase in premiums in one year—it turned out to be a ‘catch-up’ year. And it justified the Board doling out “signing bonuses” masquerading as a health care premium off-set to employees.
In addition, beginning in January 2017—it was the first year that retirees from 5, 10, 15, 20, 25, 30 plus years ago had to pay for their health insurance. The County cap for retirees of Medicare age set at 70% of the active employees, was just enough to cover those Medicare supplement premiums so no one noticed that a cap had been imposed a couple years earlier. Dozens of former (now retired) employees wondered what happened to the ‘promise’ of 100% paid health care in retirement.
The CSCA-EIA rates have doubled every year since the initial 2017 year. CalPERS rates have been less in that same period—The Board knew when it exited CalPERS it was subject to a mandatory five-year ‘lock-out’ from returning to CalPERS, so that relief is not possible for another year even if the Board would consider it given CalPERS contractual terms and that the County broke its word to its employees/retirees.[xii]
As things went from bad to worse, in terms of out-of-pocket costs, we, the unrepresented employees, were told we would never have to pay, we decided something had to be done on behalf of all affected employees. It took some digging to find an attorney versed in Public Employee benefit law and one who represented employees, not the local government. With the assistance of the California Retired Public Employees Association (RPEA), we found Christopher Platten. By the time we contacted Mr. Platten we had a couple three-inch binders full of documentation to offer as back up to our claim. That claim being we were ‘promised’ 100% paid health care for our lifetime as part of our compensation and were no longer receiving it at that level. In 2017, mostly in response to the Board’s actions regarding retiree health insurance, we and several others started a San Benito County Chapter of the RPEA to keep our retired employees informed as to what the County was doing. The Chapter is alive and well to this day and currently has a membership of over 100.
On October 11, 2017 we filed suit against the County (Rose and Riopel V. County of San Benito, CU-17-00151). Over the next two and one half plus years, there were requests for document after document from the County to bolster our case. Due to the lack of institutional memory at the County, nearly no one knew where to find past records. We ended up passing on information as to where to locate the documents we sought. The County fought us on our requests for documents from the 1970’s—the very time the 100% ‘promise’ of paid retiree health care premiums was implemented. We were emboldened by the fact that ‘everyone’ knew of this ‘promise,’ so, how hard can this be? We even went to visit every former Supervisor, well every living former Supervisor, to ask what they remembered about the ‘promise.’ Much to our amazement, they each (with only two exceptions) not only remembered but were quite animated about not understanding why the County was fighting us—they each agreed to testify or provide a declaration on our behalf. Even with this knowledge, and even after both of our Depositions were taken and we both asked their outside Counsel, who by the way is Renne Public Law (coincidence, we think not) why the County would not entertain the idea of settling with us—when the amount they were spending on these outside counsel fees (Approximately $700,000) was more than enough to cover our lifetime health insurance costs—No response was forthcoming—then or ever.[xiii]
Barbara Thompson, the former Deputy County Counsel, became County Counsel, after the vacancy left by Matt Granger’s retirement and untimely death. Granger made it possible for the Board to hire Ray Espinosa, the IT Manager, and a high school graduate to be CAO. Ray had lied on his application for the CAO job, and stated he had a bachelor’s degree as required, but in fact he had ‘purchased’ one. When he was ‘outed’ for lying on his application, the Board didn’t fire him, but had County Counsel change the Ordinance that specified the CAO had to have a minimum of a bachelor’s degree with a master’s degree preferable, to ostensibly only requiring a high school diploma and some County government experience. [xiv]
In January of 2018, the Board of Supervisors hired the Renne Law firm to fight our lawsuit. At the time, Supervisor De La Cruz said, “oh they want their 100%.” [xv] Supervisor Botelho said, he knew both of us (Mandy and Margie) and said, “it’s a disgrace.”
It is also important to take note of the group of retirees who made a presentation and submitted a Petition to the Board of Supervisors on February 18, 2020, and the 68 retirees who signed the Petition asking for consideration of the ‘promise’ they made regarding paying lifetime medical insurance premiums.[xvi] No response from the Board at this time either.
Our trial took place on February 24-26, 2020. Our witnesses included the following former Supervisors: (Mike Graves, Richard Place, Pat Loe, Reb Monaco, and Don Marcus), a former CAO (Dave Edge) and former Human Resources Analyst and Technician (Jacki Credico), (Elsie Marshall) and the former Clerk of the Board ( Denise Thome). The trial took the first two-and-one half days. The County’s defense took one afternoon with four witnesses: Georgia Cochrane, the former embedded Human Resources Director, former Supervisor Margie Barrios, current Assistant CAO Edgar Nolasco, a year in the position, and former Supervisor Anthony Botelho.
Basically Ms. Cochrane, former Supervisor Barrios and current Assistant CAO Nolasco testified they had never heard of such a ‘promise.’ This after former Supervisor after former Supervisor recalled the ‘promise’ of lifetime health insurance (and some but not all of them were receiving the County health insurance). But it was Supervisor Botelho’s testimony, which you can read for yourself from the court transcripts that was most telling. When asked by the County Attorney: What would happen—to your understanding, what would happen if the County was required to contribute the full amount of the retiree’s health insurance premium for all retirees?
Supervisor Botelho answered: “It would actually put the County in a financial strain that we would not recover from. We would have to lay off people, we would have to shut down services that are non-mandated. It would–it would be irresponsible for a Board to adopt–something that would be–you know lifetime benefits for something that as a–how would you say it–fluctuating as health care.” (Trial Transcript Day Three page 134).[xvii]
So there you have it, Supervisor Botelho, who as you recall from earlier statements was on the Board in 2009, when the irrevocable trust was set up [xviii] to pay down and pay current OPEB/ health care costs and who was even on the Subcommittee to oversee this Trust and, as Chairman at the time, signed the irrevocable trust agreement with CalPERS (CERBT)—stating, under oath, that the County would basically lose employees, and the community lose services when in fact there is money set aside for this exact purpose, ready to be used as intended. It is a “disgrace” that he would misrepresent the County’s financial position, with over $28 million set aside, which will more than cover these costs—no additional charge to the taxpayers. The costs to the Taxpayers lie in Supervisor Botelho and the other Board members voting to sue instead of settle. Those County Attorney’s fees that now number just below $700,000, could have been avoided. Even more telling is the County’s financial report required to be prepared by the State of California Controller’s office: the CAFR (Comprehensive Annual Financial Report). [xix] Check the Auditor’s website for these Reports going back over a decade—under Notes to the Financial Statements you will find ‘Contingencies.’ The first Contingency is litigation and its states for the years that include when our lawsuit was filed through the present: There are many lawsuits pending in which the County is involved. Some of the lawsuits have been filed solely against the County, while in others the County is one of a group of defendants. The County Counsel has indicated that the potential uninsured claims against the County resulting from such litigation would not materially affect the financial statements of the County. Did Supervisor Botelho not read this report?
On September 9, 2020, Judge O’Farrell ruled in our favor. [xx] The ruling states that we are entitled to 100% of what the active employees receive as a contribution to their health insurance premiums, not the current 70%, for our lifetime. But most importantly, the Judge ruled that the County entered into an implied contract with its employees and we have a vested right to this benefit.
The County, after losing this lawsuit, and not reporting this out to the Public we might add, has filed an Appeal. [xxi]
To summarize: we have a clear “promise” by the Board of Supervisors, used as a recruitment and retention tool, to provide 100% paid health care in retirement. We also have a spurious imposition of impasse on the SEIU group, that initiated the cascade of changes to how health insurance is provided to active employees and retirees. We have an imposition of these health care insurance changes imposed on unrepresented retirees without their knowledge, culminating in unanticipated costs. But probably most importantly, we have an irrevocable trust with over $28 million in it, yielding 87% funding for these retiree health care insurance costs, ready and available to pay these benefits as intended. Yet, we have a County intent on spending your General Fund dollars on outside attorneys’ fees.
We wrote this so you the Taxpayer would know the truth about why we filed our lawsuit. We also wrote this so you the Taxpayer would know how your tax dollars are being spent. The Attorney’s fees are General Fund dollars/your tax dollars. You have three new Board members seated this January—wouldn’t it be appropriate to see if they have educated themselves on this and other lawsuits. Where is the cost/benefit analysis on ours and other lawsuits? Isn’t it about time you asked?
And now you know the rest of the story…and you can compare that to the San Benito County Mission Statement (2005-2020): The County Board of Supervisors will recognize the public trust it holds, will on all occasions conduct business with honesty, integrity, and respect for the individual and will hold the organization of the County Government to that same standard.
Not so much. It is no wonder the Mission Statement has been changed.
The new Mission statement that came with the Strategic Plan in 2020, interestingly, no longer mentions integrity.
P.S. That next group of affected retirees has just filed their claim for reinstatement of health benefits. The question now becomes, will the County waste another $700,000 on this action coupled with who knows how many tens of thousands of dollars on the appeal of our lawsuit?
[ii]Minutes of June 6, 1973 Board of Supervisors Meeting
[iii] SBC Board of Supervisors Meeting of January 21, 2014; Agenda Item # 14 Consideration of Non-Binding Fact-Finding Recommendations: Discussion of Impasse and Unilateral Implementation of Changes in Wages, Hours, and Terms and Conditions of Employment…SEIU
[iv] Resolution # 2013-3 and Resolution # 2014-22 displaying $100 contribution transfer from E1 to E3.
[v] SBC Board of Supervisors Meeting of June 5, 2007 Presentation of County of San Benito’s Actuarial Report…/Actuarial Report by Total Compensation/Minutes of June 5 , 2007 Meeting
[vi] SBC Board of Supervisors Meeting June 23, 2009, Item #34, Implementation of GASB 34 for OPEB, Entering into Irrevocable Trust with CalPERS (CERBT) and Accepting Actuarial Report by Brickmore Risk Services
[vii] San Benito County Actuarial Report by Nyhart, dated June 30, 2019
[viii] See Footnote #5
[ix] Board of Supervisors Meeting of May 7, 2013, Resolution #2013-31
[x] Resolution 2015-87 and Resolution 2015-93
[xi] Board of Supervisors Meeting of August 9, 2016, Agenda Item #23; Receive Report re; Health care providers for County employees and retirees, take action…select or provide other direction to staff. Note: Agenda does not state County may exit CalPERS PEMHCA health!/Minutes of August 9, 2016 BOS Meeting
[xii] Chart displaying CSAC-EIA v. CalPERS PEMHCA retiree health care premium rates.
[xiii] County document outlining Rose and Riopel v County of San Benito lawsuit costs.
[xiv] County Code, County Administrative Officer; Link to Hollister Freelance article: https://sanbenito.com/updated-board-makes-cao-pick-without-reporting-action-lowers-qualifications/
[xv] Link to Benitolink article https://benitolink.com/supervisors-approve-150k-to-hire-law-firm-to-fight-lawsuit-by-two-retired-employees/
[xvi] Board of Supervisors Meeting of February 18, 2020, Agenda Item # Presentation of Petition on Retiree Health Care/ Minutes of Meeting
[xvii] Transcript of Botelho Testimony at Trial (partial)
[xviii] See Footnote 5
[xix] CAFR (Comprehensive Annual Financial Report) for 2019
[xx] Final Judgment in Rose and Riopel v. County of San Benito
[xxi] Appeal Filing