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Other Post Employment Benefits

The Far-reaching Effect of OPEB

OPEB, the new acronym that will affect virtually every county taxpayer, stands for Other Post Employment Benefits. A new accounting rule (GASB 24) requires that the present value of those post employment benefits go on the bottom budget line of counties as of FY2008, one year from now. Why and how will this obscure-sounding accounting rule affect you and me? Because there is a huge difference between the annual cost of these benefits, the current budget line, and the full cost, and that difference is a multi-million dollar budget liability.

In the recent past, Calvert County budgeted $500,000 each year for the annual cost of retiree pensions and insurance. Under the new rule, that liability grew $2.2 million to a yearly total of $2.7 million. While the employees of the Board of Education (BOE) get their pension funding from the state of Maryland, the county picks up the cost of retiree health benefits. Until about two years ago when a new health plan was adopted, those retiree health benefits, as negotiated in the teacher contract with the elected Board of Education, were liberal. Additionally, the greatest cost of running an educational system is labor. The educational labor force is aging to and through the Baby Boomers, with many educators retiring in the next five years. All these facts mean that the OPEB benefits for which the BOE is liable will be in the millions. I say “will be” because as I write this news clip, actuaries are still crunching the complex numbers to arrive at the precise cost to fund GASB 24.

Since the BOE does not have unused millions laying around and they can not cut costs through a massive teacher layoff, their option is to turn to the county general fund for relief, at a time when construction and energy costs have risen dramatically, already wreaking havoc on the BOE planning process.

Prudent management requires that the Board of County Commissioners (BOCC) plan for this major assault on the budget. We have by setting aside the first 3 years of additional liability for county staff in this budget year that begins July 1st (+$6.6 million). The disappointing result is that I can not vote to reduce the property tax rate until I know the OPEB amount for the BOE and have a clear picture of how the general fund will cover it into the future.

Oh, yes, I could take the expedient road and vote to reduce the property tax rate (which hasn’t been raised since 1987 and is one of the lowest in the state) in this election year, then vote to raise it again after the election and claim that I had voted to address rising assessments (see Homeowner Tax Credit from the last issue). That kind of political expediency does not fit with my philosophy. Should you have questions or comments, please contact me at (410) 535-1600 ext. 2205 or at: shaws@co.cal.md.us. Working together, we can fund all our responsibilities, hold the line on taxes, and still maintain and augment the quality of life that Calvert citizens enjoy so much.

Susan Shaw,

Calvert County Commissioner

Submitted to Calvert Life Monthly