Bluefield Daily Telegraph, Bluefield, WV

State News

October 24, 2011

Capital Focus: Fight continues over West Virginia retiree health costs

CHARLESTON (AP) — County school boards are warning that West Virginia’s plan for tackling retiree health costs threatens to derail the state’s education system. Defenders of the plan say the boards are overreacting and must share the burden of closing a significant liability.

All but six of West Virginia’s 55 county boards asked the Supreme Court last week to declare that the plan violates the state constitution’s mandate for a “thorough and efficient system of free schools.”

The boards have sued the Public Employees Insurance Agency over monthly billings for the future health care coverage of their teachers and other employees, for when they retire.

Howard Seufer, a lawyer for the boards, told the justices that these monthly charges will total $200 million this budget year. Amounts left unpaid become debts of the school systems.

“We have administrators and school boards that feel paralyzed. They don’t know what’s coming in the future,” Seufer said. “They know their books show millions of dollars of liability, and they’ve been told that ultimately they’ll be responsible for it.”

The billings are part of a 2006 law targeting a funding shortfall for non-pension benefits promised to public workers once they retire. PEIA recently estimated an $8 billion gap between on-hand assets and these future other post-employment benefits, or OPEB. The legislation, proposed by then-Gov. Joe Manchin, responded to a national accounting standard that called on government entities to start calculating the size of this unfunded liability.

The school boards have been covering the health coverage as employees retire. That pay-as-you-go portion of the monthly billing equals $167 per employee, Seufer said. But PEIA has also begun charging the boards for the estimated future liability, and that portion equals $794 per employee, he said during last week’s argument hearing in the case.

“We have school boards that are reserving money that could be spent and should be spent to educate children,” Seufer said.

Most states have stuck with the pay-as-you-go approach. West Virginia went above and beyond the standard with the 2006 law, but failed to increase the state’s share of the funding for public schools accordingly, Seufer argued.

While other county and local government bodies face monthly billings for their PEIA-enrolled employees, they have options such as shopping for health coverage elsewhere, Seufer said. When it comes to teachers, school boards must participate in PEIA, he told the justices.

“We’re just asking the court to declare that it is unconstitutional to place the liability upon the county boards of education in a situation where they’re not also given the funds with which to pay these hundreds of millions of dollars of liability for this unfunded OPEB benefit,” Seufer said.

But lawyer Ned Rose, representing PEIA, told the justices that the boards have exaggerated the consequences of leaving OPEB billings unpaid. The state’s elected auditor, for instance, can’t consider these liabilities when checking school boards for budget deficits, Rose said.

“I think it’s important and it’s vital for the court to appreciate that while the liability resides with the county school boards, they are never required to spend any money to pay off that liability,” Rose said. “While the liability continues to be booked, they have no obligation to fund that liability.”

The threat to the constitution’s education mandate, Rose suggested, comes from boards overreacting to the OPEB legislation.

“It is arguable that if a school board in 2011 diverts funds from other classroom needs to reserve for this problem, I think that they’re violating the constitution because they’re not spending money in the classroom but rather for a contingent liability that is probably never going to cost them any money,” he said.

Rose said the 2006 legislation sought to spread the burden of the OPEB funding gap so entities across government would have a stake in closing it. The law also recognizes that county boards have always been liable for the benefits of their teachers and other employees, Rose said.

“The state has never, never adopted a position as the employer of school teachers,” Rose said. “If it were to do that today, it would unleash any number of issues that go well beyond the question of this unfunded liability.”

The boards are appealing a Kanawha Circuit Court ruling that had dismissed their lawsuit as posing a political question better answered by the Legislature. The county boards have been urging lawmakers to revisit their 2006 measure. A special Senate panel has been pursuing a measure that would attack the OPEB liability while also easing the burden on school boards.

Some legislators have proposed taking the step that Rose warned against. Seufer argued last week that the justices could reach that conclusion without interfering with that branch’s powers.

“If the state of West Virginia acknowledges in the law that it is responsible for this OPEB liability, over and above the pay-go amount, then the county boards don’t have to show it on their books,” Seufer said. “They are free of these apprehensions about the future, they don’t have to plan around this liability.”

Lawrence Messina covers the statehouse for The Associated Press. Follow him at http:// twitter.com/lmessina.

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