The town has had Stone Consulting produce an actuarial valuation, as of 10/11/2013, of the town’s Other Post Employment Benefits (OPEB), which was just received and shows that the present value of what the town owes is $42m.
The OPEB are the cost of medical care in the future for current and retired town employees, that has already been earned by them, but mainly has not yet been funded by the town. In other words, the town contractually committed to provide the future medical care for its town employees, but just never set aside or paid any monies to cover those future costs.
The General Standards Accounting Board (GASB) only recently required government entities to both figure and report on OPEB, and as a result we have now learned that the town has a $42m. financial obligation for which it has made little preparation.
The facts:
- The valuation is figured assuming a 4% discount rate, and other assumptions greatly change the amounts owed.
- $18.9m. is the present value of the total amount that will be paid in the future to current employees.
- $23.9m. is the present value of the total amount that will be paid in the future to current retirees.
- $3.5m. per year would be required to be paid for 26 years to fully fund OPEB.
- $1.7m. is the cost to pay OPEB benefits incurred in the current year on a pay as we go basis.
- $400,000 (from memory) is the amount that we funded OPEB in our budget this fiscal year, and we have only funded OPEB for 2-3 years and not at that level.
- By not fully paying for the current year obligations to OPEB, we are making the total owed even larger, this year adding another $1.3m.
The size of the OPEB problem appears to be so large that to me it appears we would all have to pay double real estate taxes for one year to fully fund it. The town needs to make some hard choices as to how to deal with this looming financial problem created by the past promises the town made to its town employees. To me it no longer makes sense to merely mostly ignore the dilemma, as we have been doing.
Stone Consulting will be at the Selectmen meeting on July 7 to present this new valuation report.
Medfield02052's Blog 