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City Officials Announce Health Care Reform To Save $700 Million

City leaders today announced a tentative 15-year agreement with municipal employee unions to reform health care, possibly saving San Diego's cash-strapped government more than $700 million over the next 25 years.

Mayor Jerry Sanders hailed the deal as the biggest cost-saving move in the city's history, which he said was "extremely good news."

"This settlement isn't just a big step, it's a quantum leap," Sanders said at a news conference, adding that the city's retiree health benefit liability has been pegged at $1.13 billion.

The deal calls for employees to contribute to health benefits and for the city's contribution to be reduced.

"This agreement will free-up money for libraries, parks and public services throughout the city," Councilman Kevin Faulconer said. Sanders, however, said the savings won't be seen in the next fiscal year, in which he's proposed halving the hours of libraries and recreation centers.

The City Council approved the deal with the Municipal Employees Association and International Firefighters Local 145 in closed session this morning. Three other unions are expected to approve the agreement next week, but Sanders said the San Diego Police Officers Association is not expected to follow.

The agreement approved today still needs to be ratified by the unions' memberships.

Today's agreement followed a judge's ruling last week that retiree health was not a vested benefit that could not be altered by the city.

City Attorney Jan Goldsmith said the decision gave an opportunity for the two sides to negotiate a settlement on the benefit. He said the deal allowed the city to avoid costly litigation.

But Councilman Carl DeMaio, who said "insolvency is worse than litigation," said the city squandered one of its few opportunities for meaningful reform.

He estimated the city left $340 million to $540 million in savings on the table with the agreements, which he said are still far better for city workers than what private sector employees in the region can expect when they retire.

"A terrible deal is now just a bad deal," DeMaio said.

The terms of the agreements are locked in for three years, but the City Council can make changes beginning in 2014, with six votes.

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