Saturday, May 22, 2010

Sacramento County Grand Jury calls school district’s unpaid health benefits a ‘fiscal time bomb’

By Cody Kitaura - Citizen Staff Writer
Published: Thursday, May 13, 2010 5:02 PM PDT
The Elk Grove Unified School District (EGUSD) and most other districts in the Sacramento area lack funding to pay millions of dollars in retiree health benefit costs and aren’t setting aside money to do so, the Sacramento County Grand Jury claimed in a report issued this week.

The district owes $33 million in retiree health benefit costs and is paying on a year-to-year basis, while its retiree trust fund owes $214 million, the report states.

Grand Jury Foreperson Rosemary Kelley said many Sacramento County school districts signed retiree benefit contracts during better times and are now suffering.

“Unfortunately, most of the districts never actually set aside any money to pay these benefits, believing that their general funds each year would be sufficient to pay the obligations,” Kelley wrote in the May 10 report, which says the county’s 13 districts and office of education are largely ignoring the issue of how they will pay for these benefits in the future.

EGUSD is one of only three groups named in the report that provide lifetime benefits. It only pays direct health benefit costs for employees who retired before July 1, 2000 – a group of 412 retirees that will decrease over time, EGUSD spokesperson Elizabeth Graswich said.

The amount the district pays on that $33 million debt is “reviewed each year,” according to a district statement quoted in the report. The report goes on to criticize that approach.

“The problem with pay-as-you-go is that districts may not have sufficient funds to pay the current year’s retiree health benefits and also pay for necessary school programs,” the report states.

More recent EGUSD retirees’ health benefits are funded by the Elk Grove Benefit Employee Retirement Trust, a separate group with its own board of directors.

There are currently 755 retirees in that group, Graswich said, noting that both retiree groups receive identical benefits. She said the trust fund’s budget comes from employee contributions, and added that in July, retirees will start paying into the fund. Its current expenditures total about $7 million, she said.

EGUSD is far from the only district criticized by the report. The Sacramento City Unified School District has an annual budget of $366 million, and owes $560 million in retiree health benefits. Collectively, Sacramento County school districts have almost $1 billion in un-funded health benefit costs, which the report says could spell disaster.

“School districts have promised benefits that may not be paid or that can ultimately bankrupt the district, especially during the current economic climate,” the report states.

Among the recommendations in the report is to “reduce benefits or increase contributions.”

That topic will be part of the ongoing contract negotiations between Elk Grove’s teacher and education unions and the district.

The report also states many school board members are elected for short terms and aren’t knowledgeable on this issue – a claim Elk Grove school board president Jeanette Amavisca disputes.

“That probably holds true for a lot of boards, but not our board,” Amavisca said. “We’re very much aware of it.”

Amavisca, who has served 28 years on the board, said while she hadn’t had time to fully digest the Grand Jury report, the issue of funding retiree benefits has been discussed for “several years.”

EGUSD Superintendent Dr. Steven Ladd could not be reached by press time. The district is required by law to respond in writing to the report by Aug. 9.

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