Life-Time health benefits cost taxpayers $130 million

By Bruce Paterson | June 16, 2011

Union County freeholders voted in February to give “free” lifetime health benefits to the families of 650 union county government workers. This was in exchange for 3 years of 0% raises. When the freeholders were questioned on the costs of this they noted that they voted without having done a study to see if there was a savings but they felt there surely would be.

The studies are now out, 3 months late, and guess what? There is no savings. But the damage is already done to the taxpayers to the tune of approximately $100 million tax impact over 25 years.

I reviewed the study and this is what I found. First in my opinion, the study by O’Sullivan Associates can be loosely described as fraudulent and misleading. Many numbers and assumptions of theirs may be questioned but here is my highlight. The one important page for understanding what travesty the freeholders committed is page 13 Table B2. The 0% raises they crowed about saved the county $3 million over 3 years. However, from column 6 the “free” lifetime health benefits will cost the taxpayers $102 million by year 2036. The deceit in this report is in column 2, where O’Sullivan allegedly shows the 0% raises for 3 years offsets the $102 million tax impact. I say deceit because of 3 issues: 1) the savings is only gained in 3 years not over 25. It is only a one time benefit. The balance of this column O’Sullivan is identifying as “intangible” accrued interest savings which they use to try to offset the real “tangible” costs of their free health benefits. 2) After 3 years, the workers start getting raises again so there is no further savings. 3) If O’Sullivan wants to identify intangibles in his cost tables he should also list the lost investments and dividends of the residents when the $102 million is removed from their collective pockets as taxes instead of the residents putting it toward their retirement. That would fully offset any contrived interest “savings” on payroll listed in column 2.

Bottom line, $3 million cost us $100 million. In fact that $3 million savings is used up in 4 years. But I have been attending freeholder meetings for 8 years and I found there is nobody intelligent on the board to understand this. Hence the unanimous vote for it without a study. This is the result of having an inexperienced county manager whose only claim to fame is that he is Senator Lesniak’s nephew; and the freeholders are only selected by being good political soldiers to their political bosses, not that anyone is required to have business and financial acumen. So instead we hear the freeholders talk about draining bird baths, planting trees and calling boards of education terrorist organizations. The only freeholder that had financial experience was Freeholder Mapp, but he started to ask questions a few years ago and voted no on financial matters so he was not selected by the political boss to run again for re-election.

Director of Finance Caroselli, who retired just this May, now receives these “free” lifetime health benefits. He stood at the microphone one meeting and supported the freeholders’ action and said “they were ahead of the curve” on this. The Finance department directorship is now replaced by someone who only has 1 ½ years financial experience, so she has no idea what mess was left her with the health impacts. The system is in shambles, the taxpayers are screwed.

In reality, you and I, dear readers are the ones to blame for allowing this. It is time to stand up and stop this corrupted system that is hurting all of us. A suggestion would be to go to your council meetings and tell the governing body you are outraged and to stand up and fight for you against the county. There needs to be fair representation at the county government and one way is for districting of the county instead of just at-large representation. If you are an elected official reading this, we suggest you form a coalition with the other towns to start talks with the county to change what is happening. 14 of the 21 towns do not vote for the incumbent freeholders so you do have solidarity. Vote to hold back the county portion of your taxes if need be. Heroic actions need to be taken. The county acts like they own us all, but it needn’t be that way.

16 Responses to “Life-Time health benefits cost taxpayers $130 million”

  1. Mary Ellen Taylor says:

    Wow, great job Bruce ………. they all should have free healthcare for life and their families but benefits for the ill disabled and elderly should be cut …….. the very people who are being severely penalized must pay for this and incurr more cost for their own care.

  2. Mary Ellen Taylor says:

    Every taxpayer has to pay and they may not be able to afford healthcare themselves …….they can either pay their taxes and have a roof to put over their family or chose to pay for healthcare.

  3. Mark Boehme says:

    When the county says they provide a lot of services, I guess they mean it. Unfortunately the services appear to be for the employees not for anyone else.

  4. G. Albritton says:

    Thanks to Mr. Paterson (and Mr. Buettner who filed the OPRA request) for making public this sham of a report, which is undated, unsigned, and not even proofread (“forego” means to go before, to precede – try “forgo” next time.)

    Following the Union County Freeholder tradition of vastly overstating “savings” and fraudulently minimizing “costs”, this report outrageously and improperly assumes its way to the Freeholders’ desired result. Take the first assumption on page 5, a salary increase of 3% per year. How can it be validly assumed that there could be such an increase each year, in excess of the State-mandated property tax cap of 2%? Where else would the assumed funds to pay the assumed 3% increases be assumedly coming from if not an assumed 3% tax increase? (Unless of course they are foolishly prepared to assume that ALL other County expenses will either stay the same or actually fall during the same period.) Better go back and recook these numbers, gentlemen.

    Mr. Paterson rightly zeros in on another major but absurd assumption – the 3% compounded interest assumed to accrue annually on the “Accumulated Savings” of a year or two of forgone 3% salary increases. How can they assume this interest would be earned and accumulated with all of the annual “savings” for a period of 25 YEARS, presuming further that such a high rate were somehow available in the market? These “savings”, even if they were real, could not and would not be taken up and put in an interest-bearing account somewhere. Such claimed “payroll savings” are only saved in the sense that the County doesn’t have to pay out the cash, but at the same time the County doesn’t have it to spend or actually sock away, and it never will over the period. So there is no valid basis for this assumption of interest, and without it the numbers turn out many, many millions of dollars short of vindicating the County Manager and the Freeholders.

    The sooner this report makes it to the recycle bin the better.

  5. Javagold says:

    when people start getting foreclosed on for failing to no longer have the ability to pay their property taxes JUST MAKE SURE YOU CLEAN OUT YOUR BIRD BATHS BEFORE YOU ARE THROWN OUT INTO THE STREET

  6. Peter Scull says:

    Great analysis. Anybody at the State level this info can be sent to? Christie seems to be interested in health care costs that taxpayers are footing the bill for.

  7. Make M. Esick says:

    You and the rest of the watchers are lifeless losers…Consider this, the raises given up affect the employees for the remainder of their years of service. It’s not just a loss for the 3 years as you imply. Second- you keep saying life-time benefits, this is untrue. The benefit lasts until age 65 when the employees convert to medicare. Get your facts straight….Oh & get a life!!!!!!!!!!!

  8. John Bury says:

    And in the 25th year there will be a savings of $4 million? How is that possible when everybody affected would have retired?

    It’s sloppy actuarial work that is designed exclusively to provide the answers paid for – $9,000. (That being the cost of the study not the savings).

  9. bpaterson says:

    Mr MeSick, free lifetime health benefits is the terms the freeholders and copunty manger used, and that is how the driector described it when we asked if it is just up to age 65 which then would be similar to the prosecutors agreement. He said it is not similar to that prosecutor program.

    If it makes you sick you should go to the doctor, after all you now have basically free lifetime health benefits. Make good use of it before the collapse.

  10. Anthony Nardiello says:

    It is painfully obvious that Union County cannot be redeemed. By the middle of the decade, maybe 14 0r 15, the whole thing will go belly up and the New World Order will begin. The party is over except for the shouting!!

  11. county worker says:

    ya know whats really sad is that all these non union political appointed employees make more money than most of your hard working laborors park maint workers crafts people basically all the people who really keep union county running

  12. Make M. Esick says:

    Dear Bruce Pater Son of a B,

    The benefits were not ” FREE “, I and many like me toiled for decades serving the good people of UC. Most never made alot of money. I graduated each step of my career through civil service promotional guidelines. And after all the years of service my employer is kind enough to grace me with benefits for my golden years then what is wrong with that? Most of us are not polically involved. You and you cronies are just hell bent on offering negativity to satisfy your own insignificant existances. I pity all of you. Any of you who have ever had an aging loved one become ill with inapropriate health care should be thankfull that this administration had the foresight to aid us in the future. Oh and by the way, not all county employees are paid through tax dollars…

  13. bpaterson says:

    Mr Sick Son of a B. We of course appreciate your hard work for the residents of the county if you did apply yourself. However, when you mention the term “my employer” do you actually know who you are referring to?

    Since, you noted you worked your whole life in the public sector, obvously you are not aware how the private sector works expecially with financials. First in your sector, the govt, it is a monopoly so the residents just can’t go to a competitor’s product if this county govt gets too expensive. When one has a monopoly, it is easy to just give benefits away to workers and just pass the costs along onto those under the monopoly by way of ever higher taxes, the county’s doubling of taxes since 10 years ago! In the private sector there is no monopolies, therefore competition in the marketplace keeps the price of products and services down, the employer has to keep an eye on all costs, material and labor, and as such cannot just give “free” lifetime health benefits away like the county. If that was to happen the cost of whatever product would then cost more and the consumer can just go buy the competitors and we go out of business. And you may not know, but many years, many employees get no raises in the private sector. They sure don’ty get free health benefits for life in exchange. They are lucky to keep their job. Plus again you note you worked all your life at the county, thats another bonus is job security that you enjoyed. Private sector again, economic downturn, people get laid off. No jobs, no income, no health benfits free or otherwise unless one pays the extravagance for it.

    The cruxt of your problem is that you have no idea where the money is coming from to pay for all your largesse. It is coming from US, the taxpyers, the ones who may be laid off, hours cut, working 2 jobs to pay the nearest highest taxes in the nation, maybe one of the 20% of residents whose homes mortgages are underwater or whose home is being foreclosed on. And on top of that no one out here gets FREE health beneifts for life, nor comes even close to the security and pension that you in govt get.

    Yes you are right that we have “insignificant existances”, while the royalty at union county govt can receive all these great perks without worrying about costs.

    As to your note about a loved one becomes ill, I am sorry if that is the case on your part but yes you should be lucky the freeholders gave FREE health insureance so the loved one can be taken care of. But did you ever think about the rest of the residents and their loved ones or only of yourself. If you worked in public service you should have been involved in helping us out here in the horrendous reality. You in county govt are simply much better off than we are, and the terrible thing is the system that the county political bosses created here in union county is just to help the workers, cronies and relatives while making us insignificant worker ants pay the way no matter how bad it is out here in reality or how expensive it is. Thats a fact, no ifs ands and buts. Now I would like an apology for the insults you made, preferably to my face since you know who I am and I go to every freeholder meetings. I’d like to see you there.

  14. bpaterson says:

    Mr Sick, let me tack another tack- i would like to see everyone receive great health benefits for their lifetime. That removes a lot of worry. But when so many people don’t even have this or have to pay 50% or more, and they are the ones who have to foot the bill, and have no say in it, then it is wrong.

    This was almost slipped through under an ordinance for golf fees but luckily the public caught it and asked questions about it. If you note there is public backlash. If its so wonderful, why didn’t the freeholders handle these benefits as a separate resolution and actually bring it up in public? They didnt, they hid it with no comment from them until the public uncovered it. There is something seriously wrong with the system in place, when small factions are granted a lot better than the rest of the people, and the rest of the people either aren’t even aware of this happening or can’t change the deliterious system in place. Under cover with no public input is just plain wrong.

    Yes, enjoy your free lifetime health benefits, it is now water under the bridge and hope your loved one gets the care she needs and without worry.

  15. Make M. Esick says:

    Mr. P….

    Your ingorance, prejudiced and obvious jealous opinions are obvious in your retort. Never did I state my life was spent in the public sector. I and many, many, many public employees worked and continue to work (moonlight to meet expenses 2+ jobs) in the private sector to make ends meet, like everyone else. Oh…and guess what….you may not believe this when I tell you but alas…WE PAY TAXES TOO…Maybe you could put us all in for a tax exemption so you have something else to grumble about. I also have witnessed many county employees laid off and positions eliminated and the work load increased for those lucky enough to hang on. So don’t preach security to me either. I’m aware of many people in the private sector being rewarded with severances, health benefits, etc. So please don’t tell me that I’m ill informed. I’m aware of the public funding of taxes for necessary services and programs as well as funding from road fines to fund those type of services.

    I’ll agree to disagree with you as to the term Free Benefits, you may consider them free though we pay our share and are being offered an opportunity retain our health package (dental & Rx not included) at retirement should we meet the required obligations as is offered in many other organizations. Although I believe there is a provision that any costs increases post retirement then the recipient is to pay the difference in that cost. We’re not criminals!! So what if it was mingled with another resolution it was posted publicly was it not? You should really try to pursue something more constructive than trashing fellow citizens who are just try to earn an honest living. It’s getting old and so are we…hopefully. But then again if we expire earlier that’s a savings for you right??

    MONOPOLY!!!! Are you for real??? When’s the last time you filled your gas tank, paid your cable, credit card or phone bill—costs have risen everywhere, we’re all paying and sacrificing, Please remove your shoes from our backs? If you made these efforts on something positive you could really help someone in need, maybe volunteer at an assisted living facility or the YMCA?

    There’s always been public outlash and always will. Everyone wants services but nobody likes paying the bills. I’ve heard the same negative comments for as long as I can remember. It’s no picnic working at a job where everyone and their uncle believes they’re your boss and they feel the need to remind you. Though they forget we’re paying too.
    Why not offer positive suggestions for cost cutting instead of the same old tiresome rhetoric…we’re not the problem!

  16. bpaterson says:

    Mr Sick, we appreciate the dialoque, and after my few comments, can leave it at that. You tossed in the word jelous for some reason. The “jelousy” I feel is to what the person feels as he looks down the gunbarrel of the person robbing him…thinking… Boy,I wish I had that gun!

    You noted about filling a gas tank as an ever increasing expense. Be aware that gas is a commodity and as such can go up and down. If you have been around along time I am sure you experienced gas going over $5/gal then going to below $2/gal. Will it go down again to $2, who knows but surely there will be ups and downs. When have taxes ever gone down even 1%? As to services and paying the bills, I note that the govt has way overstepped their true purpose and now provides so many services that everyone pays for but not many use. The useless Musicfest comes to mind.

    As to your statement about “tired rhetoric”, be aware consistancy of facts of just how bad the system is, since you are wokring and living it daily, may bore you but the public is becoming aware of it as time goes on, thats why you are seeing an ever increasing backlash,a s you put it “the shoe on your back”. I do feel for you because the public is one messed up bunch made of so many different factions, and can be demanding and unforgiving. You have to have a special tolerance for performing public service.

    You say do something positive and since you don’t know me, I will tell you I do. Ask around GW to find all the activities I volunteer for if you like. Plus unfortunately, since you are on the target end, poltical activism is a definite positive thing to do. What would washington, jefferson and adams say, if you told them that?

    As to my suggesting of cost cutting, this is what this specific thread is all about. if the freeholders really care about the taxpayers which is proven they don’t, all they have to do is rescind this “free health benefits for life” ordinance and they would save $102 million over 25 years. Again you would not agree because you are the target. You say you are not the problem, but you are part of teh govt we are trying to correct, and if you support or even enable this bad system, then, my friend you are indirectly included as the problem. If you don’t support what is going on in UC govt, then you should be an activist and change it from the inside while we try to change it from the outside. All you have to do is start documenting the abuse and waste and get the info out to the public and proper authorities. Not so simple, but stopping a runaway, corrupted system of govt never is.

    One last note-bear in mind that you are a tax consumer, we are the taxpayer. there is a major difference.