City Council will vote Aug. 23 about whether to place a Memorial Health System ownership question on the November ballot, and the biggest factor in the vote is how much Memorial will pay to exit the Public Employees Retirement Association.
PERA has calculated it will cost $246 million, a figure that derailed progress toward the ballot last spring, and kept the issue off the April ballot.
Memorial estimated it would pay between $25 million and $50 million to exit the plan.
PERA officials say their figures are based on state law and that there is little wiggle room.
“There’s not much room for discussion in the way it’s handled. It’s pretty strictly laid out by state law,” said PERA spokeswoman Katie Kaufmanis. “Our actuaries have to determine the future benefit both of retirees, and of people who are fully vested in the program.”
The program must cover all workers — those who currently work at Memorial, as well as those who worked there in the past, she said.
The actuaries determined future benefit based on the number of vested employees, their average age, how long they worked at Memorial and how long they are expected to receive state benefits.
That’s now how Memorial calculated.
“We assumed it would be handled as if the employee had just left Memorial completely,” said Brian Newsome, spokesman for the hospital system. “So we estimated we would only have to pay to maintain benefits for current retirees.”
Officials from Memorial and PERA have been in negotiations since this spring, but no results have been released, and no one is sure when an agreement will be reached.
Memorial COO Carm Moceri told the task force last Friday that he hopes to have numbers this week, but Newsome said that couldn’t be confirmed.
“We hope to have something — we just don’t know when that might be,” he said.
Even as the task force nails down the ballot language for the Aug. 23 vote, and prepares the details of the lease agreement, the PERA number hangs over its head.
“It’s disappointing that we’re down to the wire again on the PERA number,” said Jan Martin, city council member heading up the task force.
The proposed ballot language repeals several city ordinances, including one that says City Council must levy a tax if Memorial’s finances falter.
“I’ve looked at it, and I think the closest we’ve come to that is 2008,” said city attorney Pat Kelly. “It seems the past administrations of Memorial have really worked hard to keep from having to levy a tax.”
In 2008, the bottom dropped out of the auction rate securities market, leaving the hospital responsible for millions in interest payments alone. That year, the hospital lost money as it struggled to refinance the securities, but the hospital is now on more firm financial footing.
“No matter what happens to Memorial, you need to get this ordinance off the books,” Kelly said. “The question of the day is, do you let the citizens vote on no longer being the backstop (for the hospital).”
Currently, the ballot doesn’t include specifics: There are no numbers about what Memorial will pay the city under a lease agreement expected to last between 40 or 50 years.
The subcommittee working on that number is expected to report today. Also, another subcommittee is working on benchmarks to make sure the hospital remains successful and still provides the same type and quality of care it does under city ownership.
“In many ways, that work is important as any other decision,” said Larry Singer, the Chicago-based consultant hired to help the city with the process of determining Memorial’s future. “That’s a step in the right direction, no matter what you decide.”