City of Duluth wins latest round in retiree health-care case

• Don Ness

Duluth Mayor Don Ness (Photo courtesy of the City of Duluth)

Talk about it

The city of Duluth notched yet another victory last week in a case involving the health-care benefits of its retired employees.

St. Louis County District Court Judge Gary Pagliaccetti dismissed a case filed on behalf of retired city workers and to declare the matter “concluded.”

Duluth Mayor Don Ness said the decision “appears to be the final chapter” of a 4-year long legal dispute pitting city retirees against their former employer. The decision comes on the heels of a November 2011 ruling by the Minnesota Supreme Court that the city had not committed a breach of contract by modifying the medical benefits it offers to retirees.

But Eli Miletich, a retired Duluth police officer who was a plaintiff in the class- action suit, said he and other former city employees still plan to meet with their attorneys to discuss other possible recourse.

“I’m not buying the honorable judge’s decision,” he said of Pagliaccetti’s ruling.

The retirees had sought a trial to argue that the city had failed to maintain a long-standing commitment made to its former employees on health-care benefits. But in dismissing the case, Pagliaccetti said the claim was outside the scope of the class-action motion that had been filed.

The retirees may have few remaining options, Duluth City Attorney Gunnar Johnson said.

“I thought the case was over when the Minnesota Supreme Court ruled. But they tried to take one more swing at it, and they were not successful,” said Johnson of the latest decision.

The retirees’ attorneys, Don Bye and Shelly Marquardt, did not return phone calls Monday afternoon.

While making the call to reduce the medical benefits offered to retirees was difficult, Ness said: “There is no question in my mind that this decision and the actions we took made the difference between the city’s financial solvency and potential bankruptcy.”

“It was a difficult path, but we understood that the impact of these changes was critical to the future of our city,” he said.

In 2005, when the city

appointed a task force to look at the cost of providing life-time health-care benefits to former employees, the unfunded liability associated with that commitment was estimated to be $280 million, and it was forecast to swell to $378 million by 2012.

By switching retirees to the same health plan the city provides to current employees, Duluth was able to rein in those costs, and Ness said the city’s unfunded health-care liability is now estimated to be about $192 million —nearly half of what had been forecast and 31 percent less than in 2005.

“It will still be a big challenge to address that $192 million liability over the next 30 years, but it’s much more manageable than it would have been if we’d done nothing,” Ness said.

City employees previously had been entitled to ongoing lifetime medical coverage of the same kind they were receiving on their last day of work. In changing that policy, Miletich said Duluth reneged on a commitment it had maintained for 23 straight years.

Miletich said the valuable retiree benefits influenced past contract negotiations and prompted city workers to accept lower rates of pay than they might otherwise have sought.

“That’s what collective bargaining is about. We gave up something of value to get something else of comparable value,” he said.

“A promise made is a promise to be kept,” said Miletich.

Ness said the city had been left to cope with a legacy of about 100 different health-care plans, leading to burdensome administrative costs. He explained that by switching retirees and current employees to the same plan, Duluth was able to reduce its costs and improve efficiency.

While Ness concedes that many retirees now receive more conservative coverage they previously did, he said: “It’s still a very generous benefit. It may not be exactly what they had in the past, but it’s far better than most Duluthians probably have.”

Tags: city of duluth, news, health, courts