BURKEonBOARD

(Sept. 9, 2008) – Hold on to your shorts Farmington school district taxpayers. The deck has been stacked for another tax increase and the board could vote on it Sept. 22.

Here’s the deal. Pay attention. This is bit complicated

According to a new actuarial study, the school district has an $11.8 million unfunded liability for retiree health insurance. This is not something to blame on the school board, it’s not new and it’s not a particularly big number given the number of district employees and the decades over which this liability will be paid out.

What is fairly new is a state law that says school districts and other local governments need to calculate this unfunded liability and declare it on their financial statements.

This liability has always existed but was not calculated. School districts (and other local governments) just paid the health insurance premium each year from general operating revenue funds. The new law doesn’t change how these premiums have to be paid, but it does make the future liability reportable.

So where does the potential tax increase come from?

Now that the unfunded liability is a known number, there will be pressure on local governments to fund the liability. There is fear that unfunded liabilities could negatively impact bond ratings and cause the cost of future bonds to rise.

There are two ways to fund that liability which involve putting money into a trust fund to payout the future retiree health insurance premiums.

Option one is to take extra cash out of the operating budget each year and put it into the trust fund, building it up over time.

Option two is to sell a bond for all or a portion of the unfunded liability and put that money into the trust fund and then pay future retiree health insurance premiums from the trust fund. This is the option that would result in higher school property taxes to make the bond payments.

A third possibility is to do a combination of the two.

At Monday night’s school board workshop meeting, these options were explained to the board. I may be wrong, but it seemed to me that for most of them, this was the first time they were given such a detailed explanation of the issue.

Some board members, notably Tim Weyandt, acknowledged that Farmington school district taxpayers already pay the highest taxes around and that another increase would be a bitter pill.

Others noted that to take cash out of the operating budget to feed the trust fund would pressure other district programs.

But the one issue they didn’t discuss was why this issue was being presented publicly for the first time at this late date.

Because the board was also told last night that if they choose to go with a bond sale, they have to approve it at the next board meeting on Sept. 22.

That leaves precious little time for the public to learn about this complex issue and then let board members know what they think.

By the way, you didn’t get to hear this discussion yourself yesterday because the school board doesn’t allow its work sessions on cable TV.

Other issues you didn’t get to hear about last night included discussions about nearly $60,000 in new change orders for the new high school project, a lame explanation by Community Ed director Heidi Cunningham about the district’s takeover of city recreation programs and board member Tim Weyandt’s unkind comments about yours truly.

More soon on what to do about the case of the unfunded liability.