Auditor: School Board Unfunded Group Health Liability Over $120 Million

The subject of Unfunded Accrued Liability (UAL) – the gap between promised retiree benefits and what money will be available to pay – came out of the blue at last night’s meeting of the Lincoln Parish School Board (LPSB), as Allen, Green & Williamson’s Amy Tynes presented the district’s annual financial report.

Tynes said that per new requirements of the Governmental Accounting Standards Board (GASB), the audit must include an accounting of what is actually owed.

Said Tynes, “The GASB standards changed, and said OK, even though you offer these benefits to employees when they retire, we want to see what benefit in dollars are you actually offering.”

Tynes said the deficit in the group health fund, which is used to pay health benefits to present and future retirees, would grow to $121 million, if present trends continue. Also, she said, the funds that pay retirement benefits could be facing a similar situation, and that unfunded amount could be another $100 million or more.

“If it ever got to this point of the school system having to close their books, if you take your investments and you take all your buildings, and you sell them off, you’re not going to have enough money to cover all these promises, so to speak, that you’ve made to your employees in the school system,” Tynes said.

Tynes said this issue was facing many governmental agencies. However, she said, the accounting standards change help quantify the magnitude of the monetary shortfall, so that solutions can be explored.

See here the audit notes pertaining to the issue.

Several cities have gone bankrupt, partly because of generous retiree health and pension benefits. Detroit, MI, is but one the more infamous examples.

During the Building & Grounds Committee meeting, architect Mike Walpole reported on the ongoing projects throughout the district. He reported that almost all were on time and on budget.

Superintendent Danny Bell reviewed the five year capital expenditure plan for the district. He noted that while all the interested parties had input, the plan is subject to modification as circumstances dictate. The expenditures highlighted in yellow represent projects that are funded by recurring taxes, and those in green are for the Ruston District, funded by a bond issue passed a couple of years ago.

See here the plan.

January sales taxes collections were above projections, and Business Manager George Murphy said that year-to-date, collections were about $2 million (24%) above the same period last year.

See here the report.

Finally, several change orders for the construction projects were approved.

See here the memos.

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17 Responses to “Auditor: School Board Unfunded Group Health Liability Over $120 Million”

  1. Anonymous Says:

    Generous? You could just as easily (and perhaps more accurately) characterize the failure to budget for these commitments as irresponsible.

  2. Vee Says:

    The report shows “January sales taxes collections were above projections, and Business Manager George Murphy said that year-to-date, collections were about $2 million (24%) above the same period last year.” Did that much increase come out of taxpayers pockets? If so, every future tax should be defeated until government downsizes. Our government, at all levels, has grown too big and the poor taxpayer is getting poorer.

  3. RealityBites Says:

    Don’t worry about what it costs: that $180 million or so local government in Lincoln parish spends each year is Magic Money: it just shows up somehow.

    • Mr. E Says:

      There’s nothing magic about it. It comes out of our pockets! Government produces nothing and creates nothing. It takes from the productive class to fund its operations.

  4. Cowboy Says:

    This exact scenario is why private industry changed from defined benefit retirement plans to defined contribution plans beginning back in the 1980s. The burden of paying for retiree benefits was shifted from the companies under the old pension system (defined benefits), to the employees in the form of 401(k) plans (defined contribution). Government at all levels refuses to see what private industry figured out years ago, partly because they aren’t forced by hard realities like earning a profit, and partly because they continue to skim larger amounts from us taxpayers. This is true from Social Security at the national level all the way down to the local Lincoln Parish government employee retirement programs.

    No one is saying government workers don’t deserve retirement benefits, but we are saying that there is a way to provide these benefits without breaking local governments. Start new workers coming into the system on defined contribution plans and gradually wean the rest off of the defined benefit plans. A broke retirement system benefits no one, especially those older workers who have come to depend upon it and don’t have the luxury of getting another job to make ends meet. Generous plans may make the workers happy in the short term, but they won’t be so happy if those generous benefits end up bankrupting the system and leaving them out in the cold!

    • Dawg85 Says:

      Well said Cowboy. At this point I’d say, “You need to run for office” but you sound way too intelligent.

  5. NoOldTaxes Says:

    People need to understand that money has to come from somewhere, nothing is free.
    when employees are morimsed somethign of vaqlue in the future, like a retirement benefit, governments must now consider that promise like a debt: eventually someone will have to come up with the money.
    People like employees also need to understand when they are being promised something that may not show up when they need it, and prepare as much as possible for their own needs.
    What’s worse than being old and sick, and Poof! no retirement because government is broke?

  6. Anonymous Says:

    But didn’t they prepare for their own needs by agreeing to work under the terms that were offered? Changing those terms after the fact is breaching the contract. And not planning to meet those terms is not the fault of those who agreed to those terms. It is the fault of those who failed to plan.

    Do you get to walk away from your debt because you failed to plan accordingly?

    • Walter Abbott Says:

      It happens every day. It’s called bankruptcy.

      • Mr. E Says:

        Well said.

      • Anonymous Says:

        Perhaps. But then the assets become the property of the creditors. Are we going to liquidate the property holding of the school board? Will we auction off Ruston High School?

        Foolish, I know. But government is not like individuals; it is a sovereign contract. When its terms are violated, its corporate capacity technically dissolves.

        • Mr. E Says:

          No. The difference between private debts and government debts is that private individuals declare bankruptcy while governments raise taxes…but that’s not the question you asked.

          You attempted to excuse government debt by asking if private individuals get to walk away from their debt if they fail to plan accordingly, and Walter Abbott correctly informed you that they do it every day and it’s called bankruptcy. You now attempt to backtrack your original comment by making a false presumption about government bankruptcy. There’s no perhaps about it, Walter is correct. And in the case of government bankruptcy, the bondholders are left holding the bag. For an explanation of government bankruptcy, see: http://www.foxnews.com/opinion/2013/04/04/when-government-goes-bankrupt-what-stockton-plight-means-for-america/.

          For the record, my comment above was directed to Walter Abbott and not Anonymous. Walter Abbott’s comment was well said, not that of Anonymous.

          • Anonymous Says:

            No. I asked if government can properly be thought of as an individual. You and he seem to think that it can, but I fail to see how that accords with our self-professed understanding of government as a contract of, by, and for the people. I am fully aware of what is called “government bankruptcy.” What I am unsure of, however, is the extent to which you understand how un-American that idea truly is.

            • Mr. E Says:

              And, once again, you you both change the subject and misconstrue my comments. No, government is not the same as an individual, and I never implied it was. I’m at a loss as to how you derive the idea that bankruptcy is somehow American or un-American be it individual or government.

              America was founded upon the free enterprise system under which entrepreneurs employ capital assets in productive means to produce profit. A poorly planned and/or poorly executed business idea may result in bankruptcy whereby the entrepreneur risks the loss of his capital.

              On the other hand, government is not an entrepreneur and does not produce anything. It skims money from the productive entrepreneurial class to funds its operations. As such, it is incumbent upon government leaders to be as conservative as possible in executing the necessary functions of government and not risk failure making promises that can’t be kept.

              Those leaders who make unrealistic promises unnecessarily risk the full faith and credit of their government operations, and those workers who willingly participate in these schemes bear some responsibility when they fail. Taxpayers are not some group of rubes to be robbed by those in power to give to those who work for government in a quid pro quo whereby those workers then support those in power. The only un-American part of the present equation is the collusion between our leaders and public sector unions to defraud the taxpayers who no longer have a seat at the negotiating table and no longer have any representation.

  7. NotAgain Says:

    especially when those making the promises (i.e. politicians) don’t especially care if the system collapses, as long as it does not happen on their watch.
    No one gets voted into office by bearing bad news. Average people don’t live in nor like Realville; they want Fantasyland.

  8. Anonymous Says:

    Where is the Tax and Spend crowd ? Hmmm, No one want’s to challenge the good guys !

    • Oldman Says:

      I bet the people on all the Gov. entitlement programs will have something to say.Take away welfare,food stamps,housing payments,then you will have a lot of people challenging you.

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