What does it cost? That is a complicated question. However, if current employees are offered future benefits then the present value of those future payments should be recognized in the period they are incurred. If the present value of those future costs are not included in current period or, at a minimum in the financial cost analysis, then the Tuition Student rate for another Town could be well below the true cost.
This is exactly what happened with our Medicare system when congress granted additional benefits but failed to pay for them, thereby leaving them for their children – us!
A few nights ago I said there might be “. . . the potential for another $900,000 or more of savings . . .”. This came from my preliminary review of the Audited Annual Financial Statements and a precursory reconciliation to the School Budget Form that lead me to believe the School Budget Form included Depreciation Expense as well as Debt Service. With quite a bit of patience and some additional information from the District Staff, I am quite pleased that I was mistaken. Good news that the School Appropriation has not double counted capital recovery.
I had more time to read the Notes to Financial Statements (Footnotes) in their audit report. Footnotes 14, 15 and 17 deal with unfunded post retirement benefits, I am waiting on a response from the District Staff as I attempt to gain a clearer picture of the current and future implications that these Footnotes have on the School Appropriation which ultimately becomes our tax bill.
Other Post-Employment Benefits (OPEB) include everything other than Pensions. As of 1 July 2011 the Unfunded Actuarial Accrued Liability was $3,426,456 and the current balance of unfunded liability could exceed $4,000,000 assuming that we have not included funding in any School Appropriations. My reading of Footnote 14 implies the Annual Required Contribution (ARC) covers the normal annual OPEB costs plus an amortized portion (over 30 years) of the unfunded liability. However since 2011 the School Board has opted to only fund about 51% of the ARC.
I am waiting for clarification from District Staff, however it appears that we may have a current total unfunded liability in the neighborhood of $4,000,000 and that since designing an ARC to eliminate the unfunded liability we have underfunded that by $959,494. The School Appropriation must increase to accommodate this situation, the question is when and by how much. The longer the School Board kicks the can down the road the larger the appropriation.
More bad news is that they are also under funded on the Pension benefit. However, they participate in a State managed plan and the State has implemented increased employer contributions that will eliminate the unfunded liabilities over 30 years. I do not know what the breakdown is between funding the current Pension benefit and the unfunded Pension benefit but the School Appropriations include the State mandated amounts. Absent changes in the State mandated rates and/or increased Pension benefits, I would not expect seeing additional Pension funding requests in School Appropriations.