The County of Santa Barbara will see some financial relief in the upcoming year as it prepares to lower one of its major expenditures.
The county will reduce the amount it pays toward retirement benefits, known as Other Post Employment Benefits, from 4% to 1.5% beginning in January.
The county also is expected to fully fund the benefits sooner than expected.
The decrease was approved recently by the county Board of Supervisors on a unanimous vote.
The Other Post Employment Benefits, or OPEB, are worker benefits that the county promised to past employees. These benefits were closed to current workers in 2018 to limit future long-term liability.
“The purpose of our OPEB plan is to provide a healthcare benefit to retired employees of the county and their eligible dependents,” Paul Clementi, county budget director, told the Board of Supervisors.
Under the current plan, the county contributed 4% of its pensionable payroll toward funding the past benefits, setting it aside for the future.
The county had planned to fully fund the benefits by 2034, but as of June 30, 2024, the county had met close to 60% of its obligations.
“The plan is anticipated to be fully funded by 2027,” Clementi said. “well before the original target of 2034.”
Due to the new timeline, the county proposed lowering the amount it is paying toward the benefits from 4% to 1.5%. Clementi told the board that even with the lower rate, the county expects to still meet its obligation by 2034.
The reduction in the amount paid will provide the county with savings for its current 2025-26 fiscal year, which ends June 30, and reduce the amount it pays moving forward, according to a county report.
“Anticipated savings in the General Fund are $1.9 million in the current year and $4.2 million in FY 2026-27,” the report said. “The net savings in other funds is anticipated to be $4.5 million in the current year and $8.6 million in FY 2026-27.”
The savings come as the county faces a tough five-year forecast due to losses in state and federal funding. The county is looking at a $23 million deficit in its 2026-27 budget, and it more than doubles the next year to $52 million.
In his comments, Supervisor Bob Nelson said that the current plan should serve as a warning to the public and to the Board of Supervisors. He added they should be careful when thinking of the future and not hand such a large financial obligation to future boards.
Nelson also called the decrease a success story and an example of how the board is fiscally responsible.
“I just wanted to celebrate that,” Nelson said. “But I also just kind of want us all to be aware of what has happened in the past since we need to be very careful about that looks like.
“So that we don’t fall back into those issues in the future and hand a pile of liabilities to the next generation.”