1/07/13: County's Long Term Retiree Healthcare Insurance Liability Declines by Nearly $190 Million

Modified: January 23, 2015 3:11pm

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Recently Released GASB 45 Actuarial Report Indicates Substantial Savings

Report Confirms Fiscal Importance of County Executive’s Determination to Settle Union Contracts with Concessions on Health Insurance

ERIE COUNTY, NY— Today, Erie County Executive Mark C. Poloncarz announced Erie County (“the County”) is poised to save nearly $190 million in long term insurance liability costs, according to the most recent actuarial report issued pursuant to Government Accounting Standards Board (“GASB”) Pronouncement 45 (“GASB 45”). As of January 1, 2010, the County’s Actuarial Accrued Liability for future post-employment healthcare benefits was estimated to be $977,525,903, while as of January 1, 2012 that number had dipped to $789,754,865, a reduction of $187,770,948.

This reduction is attributable to previously ratified union contracts (AFSCME Local 1095) and employee reductions in head count, and does not take into account substantial savings that will result from the recent ratification of contracts with the CSEA Local 815 Erie County Corrections Officer (“CO”) Unit and Teamsters Local 264 (“Teamsters”). The CO and Teamsters contracts require current employees to pay a portion of their post-employment healthcare, thereby significantly reducing the County’s future post-employment benefits liability even more.

“As I’ve noted before, providing 100% County-funded health care to retirees places a huge strain on County finances and is unsustainable in the long run, resulting in spiraling costs without relief. As we see in this report, when contracts are settled in a way that’s fair to all involved and recognizes the fiscal realities facing the County, there is an immediate positive impact on County finances,” said Poloncarz. “This significant decrease in liability further demonstrates the long term savings to taxpayers from settling union contracts, and reaffirms the importance of sharing the costs of retiree health insurance, as we will see savings going forward as well.”

A significant negative, but not unexpected finding of the report is the expected growth of annual cash flow to maintain post-employment health care benefits for retirees for the next decade. The report notes the County’s cash flow for retiree health care is expected to grow from $20,463,354 in 2012 to $40,201,070 in 2022. The cost for Erie Community College (“ECC”) is expected to grow from $2,626,261 in 2012 to $7,168,903 in 2022. The cost for the Buffalo and Erie County Public Library System (“Library”) is expected to grow from $895,805 in 2012 to $2,216,432 in 2022. Most of the rapid growth is attributable to the expectation of many retirements during the next ten (10) years due to the advanced age of the County, ECC and Library’s workforce.

Poloncarz further noted, ”Even though the long-term liability amount is shrinking, the projected growth in the next decade for post-employment healthcare costs is growing substantially and will continue to be a significant budgetary concern for many years to come. Nevertheless, the actions we take today will provide significant savings for the County in the long run and I commend the members of the Teamsters, CSEA Correctional Unit and AFSCME for recognizing this fact and ratifying fair contracts which address this situation.”

GASB is a national body that sets the standards for governmental accounting and reporting. Under GASB 45, public entities must account for, and report on their financial statements, the annual required contribution (“ARC”) for post-employment benefits (“OPEB”) in the same way they report pension contributions. The annual OPEB amount reported by employers is based on actuarially determined amounts, rather than a “pay as you go” model that defers the liability to future generations. Public entities must use actuarial valuations to determine the accounting and reporting amounts expected in the future, and liabilities may be amortized for up to 30 years.

For more information on GASB and GASB 45, visit:  http://www.osc.state.ny.us/localgov/pubs/opeb45faqs.htm