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HUSD considers funds for retiree benefits
School district looking to find longterm solution to unfunded liability
By Ryan Rudnansky
Staff Writer
The Healdsburg Unified School District is looking for new solutions to a problem that has plagued the district, and many other public entities, for years — an unfunded liability due to retiree benefits.
The district is considering putting money it makes from the Foss Creek School lease agreement with the city into an irrevocable trust, which would draw interest, and allow the the district a consistent revenue stream for retiree benefits.
At its next meeting, the board may authorize the establishment of a program that is designed to help tackle the issue, beginning with GASB45, a statement that is required under California law for districts such as Healdsburg’s.
The statement, issued by the Government Accounting Standards Board (GASB) in 2004, requires districts that offer “other post-employment benefits” (OPEB’s) to retired employees to report their costs and obligations to the state. OPEBs include benefits such as: medical, dental, vision, hearing, life insurance, long-term care and long-term disability.
Currently, the HUSD is one of these districts that offers OPEBs and is required to report its costs and obligations. The District’s obligation is that it must complete an actuarial evaluation to determine the amount of unfunded liability to disclose in its financial statements and to assess its funding needs. Depending on the liability, the District’s ability to seek outside sources of revenue could be drastically impacted.
Thus, the District is considering implementing the GASB45 Solutions Program, developed by the California School Board Association (CSBA), which establishes a multiple employer trust for districts to pre-fund their OPEB liability through an irrevocable trust.
The key reason the district is considering implementing the program is that it will permit the district to look at a diverse selection of investment strategies and choose which one will be best for the next 20 years under an actuarial consulting firm’s guidance.
If the GASB 45 Solution Program passed, the District would put income it accrues from the rental of Foss Creek to the City into the irrevocable trust every month, drawing interest.
“This is long-term planning to address a problem that has been in the District for a long time,” HUSD Superintendent Jeff Harding said.
The problem, Harding said, has been that for so many years the District has pulled money solely out of its General Fund to pay for retiree benefits, which led to “competing interests for money” and “conflict.” Putting the money into an irrevocable trust would allow for the District to pull funds from Categoricals as well, or money with a specific purpose that can’t be used for anything else.
“When we do it as a trust, it allows greater flexibility in how we direct our funds,” Harding said.
At the HUSD Board of Trustees meeting on Nov. 19, board member Mary Burke said she had concerns about selecting investment strategies that would include stocks given the current economic condition.
However, Harding later indicated that the HUSD would most likely use a “money market” investment strategy, one that uses only cash.
In a phone interview after the Board meeting, Burke said she would be comfortable with a money market strategy and “in the long term could be very beneficial and very low risk.”
She also mentioned at the meeting she was a little uncomfortable with the “fact that my decisions would impact an employee’s retiree benefits” when “investing people’s (benefits) is normally something school board members aren’t put on the board for.
“Where I am now is comfortable that our (actuarial) consultant to the school board is going to make a very safe proposal,” she said.
“If our investment is conservative, I don’t see how you can argue with that not being appropriate,” Burke added. “My concerns have been addressed. In terms of what my fiscal responsibility is going to be and I how I feel we’re proceeding, I feel we’re using a careful approach.”
An actuarial study presented to the Board on August 20, 2008, determined the District’s annual required contribution is approximately $1,153,000. This amount would be placed in the irrevocable trust each month to pay OPEBs for retirees in the future.
An annual administration fee of 0.75 percent will be paid from plan assets from the Program.
CSBA partners with PARS and US Bank to provide the trust administration and trustee services for the program.
Harding said what really allowed the District to consider the plan was the Foss Creek rental.
“The Foss Creek lease, that was gigantic,” he said. “It was a win-win for us and the City.”
The Board will vote on establishing the Program at their next meeting on Dec. 3 or on Dec. 17, Harding said.
For more about CSBA’s Solutions Program, go to www.csba.org/ds/gasb45. htm. The site also has a link to a “GASB45 Fact Sheet.”
The district is considering putting money it makes from the Foss Creek School lease agreement with the city into an irrevocable trust, which would draw interest, and allow the the district a consistent revenue stream for retiree benefits.
At its next meeting, the board may authorize the establishment of a program that is designed to help tackle the issue, beginning with GASB45, a statement that is required under California law for districts such as Healdsburg’s.
The statement, issued by the Government Accounting Standards Board (GASB) in 2004, requires districts that offer “other post-employment benefits” (OPEB’s) to retired employees to report their costs and obligations to the state. OPEBs include benefits such as: medical, dental, vision, hearing, life insurance, long-term care and long-term disability.
Currently, the HUSD is one of these districts that offers OPEBs and is required to report its costs and obligations. The District’s obligation is that it must complete an actuarial evaluation to determine the amount of unfunded liability to disclose in its financial statements and to assess its funding needs. Depending on the liability, the District’s ability to seek outside sources of revenue could be drastically impacted.
Thus, the District is considering implementing the GASB45 Solutions Program, developed by the California School Board Association (CSBA), which establishes a multiple employer trust for districts to pre-fund their OPEB liability through an irrevocable trust.
The key reason the district is considering implementing the program is that it will permit the district to look at a diverse selection of investment strategies and choose which one will be best for the next 20 years under an actuarial consulting firm’s guidance.
If the GASB 45 Solution Program passed, the District would put income it accrues from the rental of Foss Creek to the City into the irrevocable trust every month, drawing interest.
“This is long-term planning to address a problem that has been in the District for a long time,” HUSD Superintendent Jeff Harding said.
The problem, Harding said, has been that for so many years the District has pulled money solely out of its General Fund to pay for retiree benefits, which led to “competing interests for money” and “conflict.” Putting the money into an irrevocable trust would allow for the District to pull funds from Categoricals as well, or money with a specific purpose that can’t be used for anything else.
“When we do it as a trust, it allows greater flexibility in how we direct our funds,” Harding said.
At the HUSD Board of Trustees meeting on Nov. 19, board member Mary Burke said she had concerns about selecting investment strategies that would include stocks given the current economic condition.
However, Harding later indicated that the HUSD would most likely use a “money market” investment strategy, one that uses only cash.
In a phone interview after the Board meeting, Burke said she would be comfortable with a money market strategy and “in the long term could be very beneficial and very low risk.”
She also mentioned at the meeting she was a little uncomfortable with the “fact that my decisions would impact an employee’s retiree benefits” when “investing people’s (benefits) is normally something school board members aren’t put on the board for.
“Where I am now is comfortable that our (actuarial) consultant to the school board is going to make a very safe proposal,” she said.
“If our investment is conservative, I don’t see how you can argue with that not being appropriate,” Burke added. “My concerns have been addressed. In terms of what my fiscal responsibility is going to be and I how I feel we’re proceeding, I feel we’re using a careful approach.”
An actuarial study presented to the Board on August 20, 2008, determined the District’s annual required contribution is approximately $1,153,000. This amount would be placed in the irrevocable trust each month to pay OPEBs for retirees in the future.
An annual administration fee of 0.75 percent will be paid from plan assets from the Program.
CSBA partners with PARS and US Bank to provide the trust administration and trustee services for the program.
Harding said what really allowed the District to consider the plan was the Foss Creek rental.
“The Foss Creek lease, that was gigantic,” he said. “It was a win-win for us and the City.”
The Board will vote on establishing the Program at their next meeting on Dec. 3 or on Dec. 17, Harding said.
For more about CSBA’s Solutions Program, go to www.csba.org/ds/gasb45. htm. The site also has a link to a “GASB45 Fact Sheet.”
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