Funding Change Will Save County Millions : Finances: Board of Supervisors approves a proposal to reduce government’s contribution to retirees’ health care benefits.

Facing a $93-million shortfall for the fiscal year that begins July 1, county officials said Tuesday that they have found up to $55 million per year in potential savings by restructuring the way government funds medical benefits for retired employees.

The Board of Supervisors approved a plan Tuesday that would reduce government’s contribution to retirees’ health care benefits by $40 million. Most of the financial burden will be shifted to the Orange County Employee Retirement System, which finds itself with a newly available pool of $300 million.

The new funding arrangement also provides a 1% salary increase to all 17,000 county workers to reimburse them for contributing 1% of their salaries to help fund the retiree medical plan.

County Administrative Officer Ernie Schneider said the cost of providing raises as reimbursement--about $6 million annually--would be more than offset by the savings resulting from the county’s reduced contribution to the medical plan.

“We’re talking about quite a bit of savings here,” Schneider said.

As a result of the surplus in the retirement system’s investment fund, officials said, retired employees will for the first time be eligible for as much as $250 per month to help defray the costs of medical insurance premiums.

Schneider and other officials said the additional benefit, never before available to retired county workers, is expected to provide incentives for at least 400 county workers to apply for early retirement.

County Personnel Director Russ Patton said it is estimated that half of those early retirement positions would not be filled, saving the county an additional $15 million.

Supervisor William G. Steiner, who supported the proposal in the board’s 3-2 vote, said the plan helps solve one of the biggest worries retired employees face: providing for continued health care. At the same time, he said, it could mean “huge savings” for the county. “This restructuring of county benefits greatly reduces our costs,” Steiner said.

Bob MacLeod, spokesman for the Orange County Deputy Sheriff’s Assn., which represents 1,300 local officers, said the savings and new benefits can be attributed to the retirement system’s successful investment program, which produced the mammoth $300-million surplus.

“The retirement board has done an amazing job with its investments,” MacLeod said. “The retirement board created this opportunity. We’ll be closely monitoring the fund to ensure that it stays healthy.”

For the supervisors, the most contentious point of the plan was to extend the 1% salary increase to slightly less than 1,000 executive and management-level non-union employees.

Supervisor Roger R. Stanton said he could not support the increase for executives after he and fellow Supervisor Gaddi H. Vasquez proposed in March to pare management costs by 10% in an effort to help ease the shortfall. Vasquez joined Stanton in opposition to the plan.

Board Chairman Harriett M. Wieder said that denying executives the pay increase would amount to “penalizing leadership in the county.”

“This is not a raise,” Schneider said after the meeting. “It amounts to a wash.”