CHICAGO - Wayne County, Mich. has reached a settlement with a chunk of its retirees that will save the junk-rated government around $20 million a year.
That puts a big dent in the county's annual $52 million deficit, officials said.
The deal, which ends a five-year-old lawsuit filed by 5,000 retirees, calls for the county to provide monthly stipends of $130 to each Medicare-eligible retiree and his or her spouse in lieu of health care benefits.
The deal is one of a series of moves by County Executive Warren Evans to stave off a state takeover of the county, Michigan's largest with 1.8 million residents.
Evans' recovery plan eliminates health care benefits for future retirees.
Under the deal, the county's annual health care costs for those retirees will drop to $10 million from $30 million.
It's similar to a retiree health care deal reached in Detroit, Wayne's county seat, as part of the city's bankruptcy.
In both cases, the monthly stipend is intended to subsidize the former employee's cost of purchasing insurance on the national health care exchange.
"It was difficult to ask this large group of retirees to agree to reduce their health care benefits this drastically," Evans said in a statement. "Unfortunately given the county's financial condition there was no choice."
Members of 14 different unions representing 5,000 retirees who retired before 1990 filed the lawsuit in Wayne County Circuit Court in 2009 after the county reduced their benefits. About 80% are eligible for Medicare, according to the county. The remaining 20% will receive a monthly stipend based on their income level.
"If we didn't come to a settlement, we would probably be litigating this thing for another four or five years," Evans said during a press conference Wednesday morning announcing the deal. "If the county would have lost, its exposure would have been in the tens of millions in damages and hundreds of millions more in future health care obligations."
The circuit court and the Wayne County Board of Commissioners still need to approve the settlement.
In related news, Evans has said he would veto a county commission vote that rejected a property tax increase to pay off a $49 million payment into the county's pension fund. The board on June 4 voted instead to dip into the county's delinquent tax revolving fund to make the court-ordered payment.
After the veto, Evans said he would impose the one-time tax increase on the summer tax rolls to raise the money.
The county also announced June 9 that it is considering a sale of the Guardian Building, a historic building in downtown Detroit that houses the commission, the executive's office, and other county departments.
In late April, Evans unveiled a restructuring plan that, in addition to eliminating future retiree health care benefits, raised the retirement age, reduced future pension benefits and imposed 5% salary cuts on most employees.
Evans in February released an audit that showed Wayne was quickly burning through its cash and could be in a negative liquidity position by next summer. He warned of a state takeover or bankruptcy without major changes.
All three major ratings agencies have junk ratings on the county.
