Debt liability solution hailed by Tomblin
By Phil Kabler
CHARLESTON, W.Va. -- When he first became Senate Finance Committee chairman in 1987, Earl Ray Tomblin said Monday, he could not have imagined a day when the state would have all its long-term debts in order.
"When I started out as Finance chair, we had so many liabilities, it was hard to think past the next day," Tomblin, now the state's governor, said Monday after signing into law a bill (SB469) that sets up a payment plan to pay off the state's $5 billion unfunded liability for future health care benefits for retired state and public school employees.
In the intervening 25 years, the state has come up with funding plans to fully fund pension plans for teachers and public employees, to privatize workers' compensation and pay down nearly $3 billion in previous workers' comp debts, and on Monday, to fund the liability for other post-employment benefits, or OPEB.
"Today, we take the last step in ending our long-term debts," Tomblin said during a bill signing ceremony at the Capitol.
"This is the state's last outstanding liability, and it will be gone by 2036," he said.
The legislation redirects $30 million a year of personal income tax collections into a fund to pay down the long-term liability up front. Without the fund, the pay-as-you-go cost for retiree health benefits was projected at one point to grow to more than $600 million a year.
The fund is the last piece of a plan that included actions by the Public Employees Insurance Agency Finance Board to eliminate state subsidy of retiree health care for all state and public school employees hired after July 1, 2010, and in December, to cap the state's overall contribution to retiree health benefits at current levels, with no more than 3 percent growth a year.
The legislation also will put $5 million of year of personal income tax collections into a trust fund to help post-2010 hires buy health insurance when they retire
For Sen. Brooks McCabe, D-Kanawha, the bill signing was the culmination of more than three years of efforts to get the long-term liability under control.
"By putting this behind us, we are in a position to do some heavy lifting in the future, whether it's roads and infrastructure, or salaries and benefits," McCabe said. "Hopefully, we will see the benefits of this in the years ahead, as we are better able to invest in opportunities ahead."
He noted that the governor's office, Legislature and representatives of public employees and teachers' unions were able work out a compromise -- in contrast to a number of states, where state officials and public employees unions are at loggerheads over efforts to rein in state budgets.
One of those union leaders, West Virginia Education Association President Dale Lee, said the legislation should benefit public education in both the short- and long-term.
The law immediately takes about $485 million of OPEB liability off the books of county school boards, and frees up about $20 million in funds that some school boards had set aside in the event they were held liable for the long-term benefits.
"That's money that can be put into the classrooms for the kids," Lee said.
"West Virginia being willing to be the first state to address this issue shows the fiscal responsibility we've employed," he said. "It also tells me we need to make an additional investment in the state, to continue to invest in education."