Start planning now for future retiree benefit costs
Published: April 1, 2006
With costs of retiree benefits escalating at an alarming rate and new accounting standards that will require local education agencies to recognize the cost of retiree benefits during the working years of employees, the state Legislative Analyst is warning districts and county offices of education to start planning now for ways to finance these costs.
CSBA’s GASB45 Solutions program, named for the Government Accounting Standards Board’s rule that tightens accounting requirements for retiree benefit costs, can help.
About 60 percent of districts who responded to a state survey said they provide some retiree health benefits. Of these, 102 districts reported cumulative liabilities of $3 billion. Those figures did not include the Los Angeles Unified School District, which recently disclosed that an actuary estimated their GASB 45 liability to be $10 billion as of July 1, 2005.
In media briefings on her annual analysis of the governor’s budget proposal, Legislative Analyst Elizabeth Hill stressed her concerns about looming costs for public sector retirees’ health care costs at all levels of government, including schools. The state government, may face $40 billion to $70 billion in unfunded liability as baby boomers retire, Hill warned, and other levels of government could face similar budgetary strains.
CSBA’s GASB45 Solutions program can help soften the financial impact on future district/COE costs. Qualified actuaries work with the district to assess their retiree obligations and consultants can recommend strategies to mitigate the liability including pre-funding future obligations.
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