School district could sell bonds to fund retirement benefits
The District 192 School Board has cleared the way to sell as much as $12 million in bonds to cover the costs associated with paying health benefits for retired teachers.
In the past the district has paid those benefits on a year-by-year basis but federal General Accounting Standards Board rules that go into effect next year for ISD 192 mean the district will have to include in its financial statements an estimate of how much those benefits will cost the district.
On Sept. 8 finance director Jeff Priess pegged that figure at $11.87 million.
In other words, if every district employee currently eligible for health benefits receives all of the benefits to which he or she is entitled it will cost the district nearly $12 million over the next 40 or so years.
Currently the district pays about $300,000 a year in post-employment health benefits. In 10 years that is likely grow to $1 million.
"It gets as high for us as $3 million (per year)," Priess said. "That's about 20 years out."
The district has been removing post-employment health care from contracts in recent years -- Priess said it's a benefit that was common when health care costs were much lower than they are today -- but many current employees still have the benefit available to them.
In the 2008 session Minnesota legislators passed a bill giving cities, counties and school districts an opportunity to sell bonds to cover that expense.
On Sept. 8 Priess presented school board members with a pair of potential bonds. A 20-year, $12 million bond would raise 2009 taxes by $51 for the owner of a $200,000 home and by $128 for the owner of a $500,000 home. A 16-year, $6 million bond would raise 2009 taxes by $25 or $62 on those same homes.
Either bond sale would establish a trust fund the district could use to pay benefits. Because the district is removing health care for retirees from its contracts the district should no longer have to pay those costs after 2048.
Without the bonds the district would continue to fund retirement benefits out of its general fund. Priess said that could mean cuts down the road as health care expenses grow.
"You know how health insurance premiums are increasing each year," he said. "We don't think funding keeps up with that, so it will mean reductions in programs."
Board members had mixed feelings about the bond. Tim Weyandt said rejecting the bond proposals could put future boards in a difficult situation."
"I'd feel a lot better if this was a boom going on instead of a bust," board member Tim Weyandt said. "This is a tough pill to swallow."
Monday's vote means the district could sell bonds worth up to $12 million and that is the number that will go on residents' Truth in Taxation information. Board member Ann Manthey, who cast the only dissenting vote Monday, said she would like to sell only $6 million in bonds.
The board will make its final decision on the amount of the bond sale in December.
For a full story see this week's issue of the Independent