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7499Re: Our school district's healthcare costs

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  • Patrick Gilmartin
    Oct 27, 2013
      The details of the School District's unfunded health costs are given on pages 37 and 38 of its Audited Financial Statements as of June 30, 2013. The audited statements are available on the District's website


      If the children knew the amount of debt that their elders have piled up for them to pay, they would -- or should -- be appalled. The facts:

      The District provides health insurance coverage for retired employees "and their survivors" for life. "Substantially all the District's employees may become eligible for this benefit if they reach age 55 and retire with 10-20 years of service to the District." There are about 98 retired employees currently eligible to receive benefits. "...there are no assets legally segregated for the sole purpose of paying benefits under the plan."

      At June 30, in each of the years 2011, 2012, 2013, the amount actuarially determined in accordance with generally accepted accounting principles that the District was contractually obligated to pay for the future health benefits of retired employees was as follows:

      June 30, 2011 $16,857,318.
      June 30, 2012 $22,056,552,an increase of 30.84% in one year
      June 30, 2013 $27,784,130, an increase of 25.97% in one year and 64.82% in two years.

      As noted, as these benefits accrue there is no money set aside to pay them when they become due. All the District does is pay current health care obligations. The annual expense of what has been promised retirees was $7,558,928 for the year ended June 30, 2013. Of this amount, the District also actually paid only $1,831,350, the costs actually incurred during the year by retired employees and/or survivors. The difference of over $5.7 million was added to the unfunded liabilities of the District.

      Another note in the Audited Financial Statements, while not totally clear as to its methodology, says that the total unfunded liability of the District's health care plan at July 1, 2012 was 319% of the payroll for its covered employees.

      Did I hear somebody mention Detroit?

      Patrick Gilmartin
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