School district facing retirement shortfall

2010-07-22T00:00:00Z School district facing retirement shortfallBy Nick Gevock of The Montana Standard Montana Standard

The Butte school district will have to find ways to save money on labor costs for future employees to help plug a projected $13 million shortfall in its budget for retiree health insurance benefits.

That sobering news was delivered this week to trustees by J.R. Richardson, district business manager. He said the unfunded obligation would be a red flag for a bonding agency if the district had to borrow money.

"They'd just say no, we're not going to back those bonds, or the interest rate would be astronomical," Richardson told the board.

The issue arose during the district's regular audit. New regulations require that local governments and school districts consider not only the cost of pensions, but also other benefits when calculating what district's financial obligations.

That is almost entirely made up of health insurance payments for retirees, Richardson said. For the Butte district, he said the actuarial study is incredibly complicated because it has numerous union labor contracts that have changed over time.

"Every one of our contracts has differences in how much they get, what they get, for how long and the type of coverage," he said. "There is no consistency among our various employment groups."

Some district retirees get contributions for health insurance of $500 per month, in some cases higher. Richardson said for some retirees, the payments are made even if they have health coverage from another source, such as a spouse.

For most contracts, district contributions for retirement end when they become eligible for Medicare. But a handful of benefits continue beyond that age.

The district several years ago ended the contributions for employees hired after a certain date. Richardson said he is not suggesting cutting the benefits for current retirees and any other employees who have worked under contracts guaranteeing them.

"Legally you'd have some problems if you tried to take away some benefits that they've been working under," he said.

But, he said in order to help make up for the projected shortfall, the district will have to trim benefits for current employees. He said Butte public schools spends nearly $1 million per year in general fund money for retiree benefits.

The district will need to show progress toward reducing the unfunded obligation, but Richardson said that takes time and shouldn't be done overnight.

"It's a long-term process and it pretty much has got to be dealt with through labor contracts," he said.

- Reporter Nick Gevock may be reached at nick.gevock@mtstandard.com

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