ESCONDIDO: Elementary district to look at options for financing retiree health benefits

Escondido district owes about $17.9 million

By SHAYNA CHABNER - Staff Writer | Thursday, August 28, 2008 11:07 PM PDT ∞

ESCONDIDO ---- Elementary school district officials are exploring their options, including using bond financing, for covering a $17.9 million liability for retirees' health benefits, officials said.

At a meeting Thursday night, Assistant Superintendent Gina Manusov presented Escondido Union School District trustees with several possible ways to fund the district's long-term obligation to pay current and future retirees' medical insurance bills.

To date, the district has set aside nearly $2 million in a separate, post-employment benefits fund. Trustees transferred $1 million from the fund this spring to the district's general fund so they could prevent further personnel and program cuts during a tight budget time.

"We are getting prepared to move to the next level," Manusov said, adding that the district is just looking at its options and not making any recommendations at this time.

Manusov emphasized that the district will have to make those decisions, and it will need a more formal plan to cover the obligation in the coming months. Escondido Union will also need to hire a consultant to update the district's actuarial study for the present year.

The actuarial study, last done July 1, 2006, outlines the district's current and future health insurance obligations for retirees and makes projections based on the number of retirees, insurance rates and policies.

One of the two funding plans presented to trustees Thursday called for covering the district's retiree health insurance costs with bonds.

The district would sell bonds and invest the proceeds in a trust to earn enough annual interest to pay off its annual payments for retiree health benefits. The district would then make smaller payments on the bonds out of its general fund.

The only other school district in North County with such a plan is San Marcos Unified. Trustees in San Marcos decided in the spring to finance the district's $54.8 million obligation by selling bonds and investing the proceeds with CALPERS, one of California's employee retirement funds.

The other funding option presented to trustees was that the district could continue to pay off health insurance liabilities as they accumulate and grow, and then store additional funds to pay off previously accrued costs.

According to the district's 2006 actuarial study, if the district was to continue with the pay-as-you-go method, it would need to make annual contributions of roughly $1.32 million from the general fund for the next 30 years. That requirement could change, with updated policy information and changes in rates.

District officials have only recently begun adding up the true costs of retiree health benefits. For years, they only reported the annual cost of benefits.

A federal accounting change in 2004, however, made it a requirement that all districts and other government agencies report and create plans for paying future health care and other benefits for current employees and retirees.

In other action, trustees were reminded about the immediate effects of millions of dollars in budget cuts in the spring, as seven speakers, including library media technicians, parents and teachers, spoke about increased class sizes and reduced library hours.

Each of the speakers asked the board to seriously reconsider cuts that reduced library hours at elementary schools by half and increased kindergarten class sizes to more than 30 students per class.

"Anything you can do would be appreciated," said Stella Bloom, a former library media technician. "Things right now just need to be improved."

Trustees have said they will not discuss bringing back programs or personnel until the state passes a budget for the 2008-09 fiscal year, which began July 1.

Contact staff writer Shayna Chabner at (760) 740-5416 or schabner@nctimes.com.