Recently our newspapers carried stories about the $200 billion New Yorkers owe to cover healthcare for public sector retirees over the upcoming decades.
Here is the situation in the Irvington school district.
The present value of our school district’s obligation to cover health insurance and Medicare reimbursements—not pensions—for employees once they retire is over $60 million. Because our district has no money set aside to cover the cost of retiree healthcare, we pay-as-we-go. The ultimate payout will be much higher than $60 million.
How did that number get so high? Our school district has many retirees because it’s possible to retire at age 55, after which the retired employee and his or her spouse receive full medical benefits for life. Currently, we are supporting a total of 147 retirees, nearly one retiree for every two active employees, not counting the five teachers who took advantage of two early retirement programs the district offered this past year. The cost of retiree health insurance for the year ending June 30, 2010 was $1.5 million.
We should anticipate more retirements coming up because as of July 2009, 68 people—23% of district employees—were 55 or older. Most retirees make no contributions to their healthcare costs, and those costs are not expected to decline.
To put our $60 million liability in perspective, our long-term debt obligation consists of $51 million in bonds, which many residents think is too high. Yet our healthcare liability is almost 20% higher. Looked at another way, this year’s school tax levy is $45 million, so the retiree healthcare liability is 133% of the tax burden.
Briefly, let me compare our situation with New York City’s. First, Mayor Bloomberg said “no” to the early retirement program that came down from Albany. We said “yes,” and three teachers took advantage of the Albany plan. Second, in what the fiscally conservative Empire Center for New York State Policy described as “breathtaking transparency,” New York City booked its entire retiree medical liability. In contrast, we are phasing ours in over 30 years, which, while permitted, obscures the full picture to the casual reader of our financial statements. Having recorded only two years out of the 30 permitted, the school district’s balance sheet excludes most of the $60 million. Even so, the balance sheet shows net assets (what a company calls its “equity”) of a negative $6.6 million.
Robyne Camp, Irvington