The Risk Management Division of the City of Santa Monica compiles its Workers’ Compensation Annual Report every year in an effort to provide local stakeholders with information and statistics related to the city’s medical and indemnity payments, claim settlements as well as general claim and cost trends.

As it has every year since 2009, the city’s Workers’ Compensation Program once again saw an increase to its total program liabilities, according to a report recently presented to City Council.

“In summary, in FY 2018-19, medical and indemnity payments increased 23% from the prior year, claim settlements were up 53% over the prior year and total program liabilities – the total value of all open claims from 1979 forward – grew to $32.6 million by June 30, 2019,” Risk Manager Oles Gordeev said in the report. This was an 8.3 percent or $2.4 million increase from the prior year.

“The lion’s share of this increase was attributable to the Police Department and reflects the impact of an aging workforce,” Gordeev said. “Fortunately, first-quarter data from (this fiscal year) shows that total liabilities are again on the decline,” and staff is hopeful this trend will continue.

The city settled 150 claims with a total value of about $4 million during the 2018-2019 fiscal year, which was up from the 98 claim settlements that were worth a total value of $2.3 million the year before. City staff said the increased number of settlements in FY 2018-19 represented an improvement over the past year and reflects the city’s commitment to resolving claims in a timely manner.

“Further, there were two significant and positive trends that emerged in FY 2018-19,” the report states, before addressing the “impressive results” of the Big Blue Bus’ Third-Party Administrator pilot program.

“In short, the TPA’s efforts have resulted in a significant reduction in BBB’s total program liabilities – the single most important financial performance measure for a workers’ compensation program,” Gordeev said in the report, describing how the three-year pilot program came to fruition back in 2017. Despite a 28% increase in claim frequency since its inception, the pilot has resulted in a reduction of total program liabilities from $7.44 million to $6 million.

The key challenges the City faces are steep increases in pension costs over the next seven years as the effects of the California Public Employees’ Retirement System (CalPERS) discount rate decrease from 7.5% to 7.0% impact pension contribution rates starting in FY 2018-19, and continued increases in workers’ compensation costs and healthcare costs, all of which are outpacing revenue growth.

Even without an economic downturn in the next two years, the report warns that the “City will face increasingly hard choices in the next budget cycle.”