SAN MARCOS: Board to advance retiree health benefits financing plan
By SHAYNA CHABNER - Staff Writer | ∞
SAN MARCOS ---- The San Marcos Unified School District is moving forward with a plan to invest money from bonds it plans to sell in January so it can use the interest to pay off both the bond and future retiree health insurance bills.
Assistant Superintendent of Business Gary Hamels said last week the district hopes to sell about $54 million in 35-year bond measures, called "other post-employment bonds."
The bond proceeds will then be invested and the accrued interest over 60 years will be used to pay off $58.4 million in health insurance bills the district projects it will owe nearly 1,300 retired employees during that period, Hamels said.
Hamels said district trustees will be asked Monday to approve several procedural issues, including the formation of a trust for the bond proceeds and an updated actuarial study that outlines the district's current and future health insurance obligations for retirees as of July 1, 2008.
The actuarial study includes several dozen employees who retired at the end of the school year in June and updated health benefit rates.
Previous actuarial studies concluded that the district would need to have $75.1 million today to be invested over time at an interest rate of 5 percent to meet its long-term obligation for health insurance bills for retirees. The latest study indicates the district would need only $58.4 million today to be invested over time 60 years at an interest rate of 7.75 percent.
Hamels said the district is using a different interest rate in its calculation in the latest study because CALPERS, the California Employee Retirement Fund the district will invest in, requires the higher rate.
He said fund managers have said the higher interest rate is closer to what the district can expect to earn, reducing the amount of bonds the district will need to sell to cover its retiree debts.
In the last two decades, CALPERS' investment fund has averaged an annual return of about 11.7 percent.
"We think that's very conservative," Hamels said of the 7.75 percent interest rate. "I feel very, very secure with this plan."
District officials have only recently began adding up the true costs of retiree health benefits. For years officials only reported the annual cost of benefits.
But a federal accounting change in 2004 made it a requirement that all districts and other government agencies report and create plans for paying off the future cost of health care and other benefits for current employees and retirees.
In addition to outlining a plan for paying off its current and future health benefits, district officials adopted rules last year that eliminated health benefits for employees hired after July 1, 2007 and placed a cap on the district's maximum contribution.
San Marcos Unified reportedly is the first school district in San Diego County to move forward with a plan that would finance health benefit debts with bonds.
The San Marcos Unified School District board meeting is at 6:30 p.m. Monday at the district office, 255 Pico Avenue, Suite 250.
Contact staff writer Shayna Chabner at (760) 740-5416 or schabner@nctimes.com.
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Funny wrote on Aug 25, 2008 4:14 PM:When corporations run low on money they cut benefits and lay-off. When the greedy Civil Servants run low they go to the taxpayer welfare line regardless of the economy or need. Time to get responsible accountable managers.
Where did all the money go wrote on Aug 25, 2008 5:23 PM:Didn't San Marcos already pass a school bond a few years ago, that we will all be paying for many years to come ? Now we have ANOTHER bond issue, but this time to fund the retirement benefits of the teachers and administrators. We should borrow money so that the failure to budget these expenses corectly gets a quick fix ? I say no !.. Enough is enough. These expenses are part of the General Fund and the money should be there. Where is it ?
Amazed wrote on Aug 25, 2008 7:10 PM:Passing a bond to fund capital improvements is not the same as selling bonds that are purchased by investors. We need a bond primer for those who need an education.
To Funny wrote on Aug 25, 2008 10:24 PM:What about those corporations that get bailed out by the government? Isn't that taxpayer money as well? Whether it's blue collar welfare or white collar welfare, it's still taxpayer funded.
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