Financiers OK $4.3M to cover retiree benefits gap
Updated 1:52 pm, Thursday, October 6, 2011
Facing a huge gap in covering the town's liability for employee health-care benefits, the Board of Finance voted Wednesday night to endorse a request from First Selectman Gordon Joseloff's administration to allocate approximately $4.3 million this year to fund the town's Other-Post Employment Benefits trust fund.
The allotment includes $3 million in taxes levied this year and a $1.3 million withdrawal from the town's cash reserves. Along with a $750,000 allocation for future OPEB costs already included in the town's 2011-12 budget and a total of approximately $3 million budgeted for current retiree medical costs, the additional funding should enable the town to meets its annual required contribution to the OPEB fund, officials said.
To partially offset the withdrawal from the reserves, Joseloff has forecast the town could achieve $500,000 in budget savings this year
Using a projected 7.5 percent discount rate, or rate of return, on the assets in the OPEB fund, the plan from the first selectman would fully fund the required OPEB contribution this year of $8.2 million. The projected 7.5 percent rate would also yield a total unfunded OPEB liability of approximately $75 million.
However, the reliability of those figures, which were included in an actuarial report released last month, has repeatedly been questioned by finance board members.
"If you really step back and look at it and say, `Is this a fair statement of our liabilities,' any reasonable person would say, `No, they're being understated,' " said board member Tom Lasersohn. "If you come to that conclusion, the inescapable conclusion is that we're not telling the truth."
While Joseloff's administration selected a 7.5 percent rate of return, Pentegra, the firm that produced the OPEB report also worked out alternate liability projections for discount rates of 6 percent and 4.5 percent, with less generous assumptions about the future performance of the town's OPEB fund assets. A 6 percent rate would yield a $93 million unfunded liability, while a 4.5 percent rate would push that obligation up to approximately $120 million.
The skeptical reaction Wednesday night by several board members to Joseloff's OPEB funding proposal is the latest in a series of contentious debates this year between the finance panel and the first selectman. Since they learned earlier this year that a 2008 OPEB actuarial report omitted hundreds of town employees from its calculations, board members have frequently criticized the fiscal policy and management of Joseloff's administration.
On Wednesday, board member Brian Stern was the most outspoken critic of Joseloff's proposed OPEB allocation.
"How are we going to fund this year?" he asked. "We've got $500,000 [in potential budget savings]. $500,000 is just a number. It can't just be, `OK, I've got the number, and I commit to it.' That's not a plan."
Joseloff replied that he had outlined specific measures, such as a municipal employee hiring freeze, at a Sept. 21 finance board meeting.
"It's disingenuous, at the very least, to have you say, `You don't have a plan,' " he told Stern.
Board members have also repeatedly assailed Pentegra Retirement Services, the White Plains, N.Y.-based firm that prepared the town's new OPEB actuarial analysis and also serves as its employee pension fund actuary. Signaling that he may be planning to replace Pentegra, Joseloff announced at the meeting that members of his administration are interviewing representatives from other actuarial firms.
Reached by the Westport News after the meeting, Joseloff declined to comment further on the town's discussions with those actuaries.
Eventually, the finance board voted by a 6-1 margin to back Joseloff's OPEB funding request. Stern cast the dissenting vote.
The OPEB allocation request will next head to the Representative Town Meeting for a final vote.
Beyond deliberations over current-year OPEB allocations, funding for retired town employee health-care costs will likely linger as a long-term fiscal concern for both town officials and residents.
"I've been out on the streets, and I hear some great discontent about OPEB," Joseloff said. "We are taxing, we are paying additional millions into the post-retirement benefits. That's going to be at the cost of services. I have said repeatedly ... we can't afford the obligations that we have already made."
To tamp down costs, both the first selectman and finance board members have indicated that they foresee the eventual restructuring of town employee benefit packages.
"Our liabilities are too high," said Board of Finance Chairwoman Helen Garten. "I think we should get talking about what we are going to do to reform these [employee] benefits in the short-term."