“Other Post Employment Benefit Costs” and Impact Withdrawing from SEDOM Will Have on School Districts

Cary Grade School Board President Scott Coffey suggested looking at the Woodstock School District’s “Other Post Employment Benefit Costs” in a comment under Susan Handelsman’s cost-benefit analysis of keeping Clay Academy, a special education facility, open.

I asked for an explanation and got the following:

They relate to a series of benefits paid to or on behalf of employees that have retired from district service.

These benefits are typically oriented to maintaining ongoing participation in the district’s Health Insurance program/Life insurance/dental/vision/etc.

Typically, they last until they are eligible for Medicare/etc at age 65.

Some districts, like Cary D-26 do not offer these programs and therefore do not incur any expense.

Some districts, do offer these programs and may be a part of a collective bargaining agreement with one of the unions or with administrators.

I would doubt that most board members in some of these districts know how much they are spending on these programs or even that they existed in their own district.

The part of his comment that led to my inquiry follows:

As to OPEB costs, it might be interesting to have the finance staff breakout the $546K in OPEB costs.

Based on the audit report, it looks like D-200 pays the insurance costs of retired administrators until they’re 65 and other insurance costs for IMRF retirees.

A quick check of other districts’ OPEB costs shows:

  • Huntley D-158 at $0,
  • Cary D-26 at $0,
  • D-155 at $41K, and
  • Crystal Lake D-47 at $567K

$546K seems like an awfully expensive, unnecessary benefit.

As to SEDOM, many districts are pulling out and SEDOM will be dissolved/reorganized in some manner.

At the August SEDOM Board meeting member districts voted on the upcoming Budget submission which reflected a deficit.

I argued rather sternly against approving another deficit.

I believe I only convinced 1 other district to vote No.

SEDOM has a significant unfunded IMRF liability of $3.4 million with a like amount remaining in Fund Balance.

I thought it might be a great idea to preserve that fund balance to cover the unfunded liability during the dissolution process.

Because that liability just doesn’t go away once SEDOM dissolves.

The IMRF lawyers are already trying to determine how portions of that liability get pushed back to the member districts.

So, Susan, when you look at D-200’s reported IMRF unfunded pension liability number of $10.6 million, it will likely go higher once D-200 eats their allocated share of SEDOM’s number.


Comments

“Other Post Employment Benefit Costs” and Impact Withdrawing from SEDOM Will Have on School Districts — 4 Comments

  1. Some units of government hand out generous retiree healthcare benefits of various sorts, and these are classified as Other Post Employment Benefits (OPEB).

    These benefits are generally less funded (in many cases 100% unfunded) than pensions.

    The government accounting standards board (GASB) has financial disclosure recommendations for OPEB that take effect in the next few years.

    Such recommendations took effect for pensions a few years ago.

    But one has to read the audited annual financial report or comprehensive annual financial report (CAFR) to become informed.

    The units of government do not go out of their way to explain pensions and retiree healthcare to taxpayers.

    The OPEB is as a whole (considering state and local) a very significant amount.

    It is less than pensions, but still significant.

    There is not nearly enough money to fund pensions and OPEB given today’s taxation and services, coupled with other debts such as unpaid bills and bonds.

    There will be major problems in the future.

  2. As long as we keep electing State Legislators and a governor willing to waste time on passing laws such as the ‘Trust Act’ while ignoring the fact that this State will never recover until we remove the public sector pension guarantee from the Constitution, you will continue to see all kinds of discussion around the problem but no solution.

    The exodus will continue.

    You will see more and more courts ORDERING tax increases to fund public sector pensions.

    Have you seen the blow-up rats the unions use to bring attention to non-union workers?

    Those rats should be placed at the offices of every State Legislator and the governor until we have full repeal of the following: ““Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.””

    In this County we have an elected County Board Chairman who spent 18 years in Springfield doing absolutely NOTHING to stop the Pension Ponzi scheme which is forcing businesses and their employees to leave.

    What is his solution now? Lower your property taxes. Want to know why?

    He (and his daddy) knows that if there is not enough money to cover the pensions, THE COURTS WILL ORDER A PROPERTY TAX INCREASE!!!!

  3. OPEB cost obligations seem similar to Capital Appreciation Bonds ( CABs).

    The costs and obligations grow and accrue unknown and unseen by current taxpayers.

    The ability to defer the ballooning costs and obligations affords school budget officers an opportunity to evade statutory tax rate caps on current expenses allowed in Education Fund or other Funds. ( Much like CABs have allowed D200 school administrators to borrow more than Staturory debt caps).

    In the case of D200 Clay Academy, 59 tuition students and 11 D200 student are enrolled.

    There are 35-40 employees.
    Tuition charged is $29,000. $15,000 is reimbursed by Illinois.

    (Allendale said to charge $45,000 before $15,000 reimbursement).

    Out-of-district tuition students’ taxing districts are spared the future obligations of funding OPEB and new 2017 school funding formula law pension-shifted obligations of pensions and insurance premiums for all eligible D200 employees.

    D200 Superintendent has repeatedly refused to quantify the actual cost per student attending Clay from D200 (which includes ALL costs which operating Clay makes necessary as a burden to D200 taxpayers).

    He insists that “Clay operates around break even”.

    He stated that Clay program cannot be run for 11 D200 students in an empty wing of one of two had empty high schools, or in rented MCC space, or in a portion of a 60% occupied grade school.

    He does not include $2 million of life& safety costs for Clay building nor the remaining portion D200 taxpayers are still paying off from 2010 bond debt $10.5 million for building improvements largely to Dean and Clay… buildings he claims have zero market value.

    So D200 taxpayers have a large, unknown, burgeoning debt to a great many employees who are owed pension and insurance premium debt by D200, and all to educate children from other districts.

    What can we do?

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