Schools turn to lawmakers after OPEB ruling

Published: December 6, 2011 9:55 AM
By Lawrence Messina, AP
Schools turn to lawmakers after OPEB ruling
By Lawrence Messina
By The Associated Press
CHARLESTON, W.Va. (AP) -- West Virginia's top legislative leaders consider tackling retiree health-care costs a top priority for the upcoming session, and county school officials say the potential relief can't come soon enough.
All but six of the state's 55 county school boards sued last year over a policy that bills them annual sums toward these costs. They must list any unpaid amounts as debts.
Last month, the state Supreme Court upheld a circuit judge's dismissal of their lawsuit. But that hasn't deterred county officials who say the policy is unfair and threatens their schools' finances. Among other arguments, the school boards say the state should shoulder this liability because it requires the school systems to offer this benefit to their employees.
"Eventually I think it will affect our bond rating. That makes a big difference when it comes to the construction of schools," said Richard Snuffer, president of the Raleigh County school board. "Sooner or later, it's going to affect the children's education, that's the bottom line."
At least one school board member is resigning as a result. Although his term does not end until 2014, Wood County's Richard Olcott will step down at the end of the year because of the ruling.
Olcott said he cannot support the state's policy.
"My continued involvement with this school system under these conditions is more or less an endorsement of this accounting approach," Olcott said Friday.
Olcott was first elected to the board in 2004 and recently headed the state's association of county school boards. He said he regrets having to leave a post that allowed him to serve his community and its children.
"It saddens me that we haven't reached a point of resolution in five years," Olcott said. "They've just been unable to crack this nut."
Officials estimate the budget year will end July 1 with a $10 billion funding gap between available assets and these costs, known as other post-employment benefits or OPEB. A 2004 national accounting standard calls on government bodies to calculate their unfunded OPEB liabilities.
States had followed a pay-as-you-go approach toward these costs, and most still do in the accounting standard's wake. But West Virginia went above and beyond the standard with a 2006 law that charges government units an annual required contribution toward closing this funding shortfall. That law also says that any part of the contribution not paid "shall remain the liability of that employer until fully paid."
The amounts are too large for the counties to pay without gutting their school systems, their officials say.
Snuffer estimated that Raleigh County will owe $30 million by July 1, an amount equal to one-fifth of its annual budget. Olcott said Wood County will owe $35 million, and he put the statewide liability total for all county boards at $835 million. But both counties are also reserving funds toward these costs, each official said: $3 million by Raleigh County, and $1.8 million by Wood.
Senate President Jeff Kessler recently told The Associated Press that he deemed OPEB a top priority of the 2012 session. House Speaker Rick Thompson joined Kessler in echoing that view recently to the West Virginia School Board Association, Executive Director Howard O'Cull said Friday.
The association was not part of the lawsuit but has followed the concerns raised by its members, O'Cull said.
"We as an organization await any recommendations from the Legislature that may come forward," O'Cull said. "We are ready to work with them."
West Virginia's Public Employees Insurance Agency, which oversees retiree health care and bills the annual amounts to the counties, has already taken a major but hotly debated step toward resolving the OPEB quandary in the long-term. It has eliminated the OPEB costs from all employees hired after June 2010 because it will not subsidize their premiums. These employees can still obtain coverage from the agency once they retire, by paying the full premium, officials there say.