Worcester’s OPEB Liability Staggering; Mitrecic Advocates For Payment Plan

SNOW HILL – Concerns regarding retiree health care costs dominated a review of Worcester County’s latest audit this week.

During a presentation of the Worcester County Comprehensive Annual Financial Report for the year ending June 30, 2018, the Worcester County Commissioners focused on rising OPEB (other post-employment benefits) costs. The county’s OPEB liability, between county employees and school system employees, is roughly $350 million.

“In order to look at this, we’re going to have to look at funding mechanisms and we’re going to have to generate more income in the county so we can address this,” Commissioner Joe Mitrecic said.

Chris Hall of TGM Group told the commissioners the county’s financial statements presented fairly. He said a key change in this year’s audit had involved OPEB calculations. He said the rate of return used in calculating the school system’s OPEB liability had changed.

The audit shows the county’s OPEB deficit as $31.7 million. The school system’s deficit is $318 million. While the county has roughly $49 million set aside to go toward a projected $81 million in OPEB liability, the school system has just $19 million set aside to go toward a $337 million projected liability.

“The board of education’s money will run out quicker so they have to use a lower rate in calculating the liability than they do on the county side because it’s going to last longer,” Hall said.

Commissioners were quick to question the school system’s numbers, as projections were less severe during the most recent budget process. Staff explained that those numbers had been based on an old actuarial study.

Phil Thompson, the county’s finance officer, said the changes the county recently made, such as going from paying 90 percent of retiree health care costs to paying 80 percent of costs for those hired after 2015, were starting to have a positive effect on funding levels. Nevertheless, he admitted that the OPEB figures were staggering.

Hall confirmed the commissioners’ suspicion those costs would only increase.

“Unless someone thinks health care trend rates are going to go down, the number’s going to go up,” he said.

Commissioner Chip Bertino pointed out that the county had contributed $5 million — $2.5 million for the county and $2.5 million for the school system — to its OPEB account for the current fiscal year. He said that was a far cry from $300 million.

Hall said that while the county had put $2.5 million toward the board of education’s retiree claims, those claims had cost almost $6 million.

Bertino suggested staff review the new actuarial study with the commissioners so they could better understand the county’s OPEB commitment.

“I don’t know that I’m going to be here in five or six years but by God this is going to be crippling to us if we don’t do something about it,” Bertino said.

Hall pointed out that this was an issue many jurisdictions were facing across the country. Mitrecic agreed and pointed out he’d been concerned about it since he’d been elected. He said in Ocean City, officials had established a 20-year payment plan several years ago to address the resort’s deficit.

“I don’t think we could tackle a 30-year payment plan, to be honest with you, at this point in time,” he said. “We do need a payment plan. We do need to stick to some kind of number that we have to put in every year that is way beyond ‘pay as you go.’”

He said the issue would have to be addressed sooner rather than later.

“We don’t want to leave this as our legacy,” he said, adding that beyond that, officials didn’t want former county employees to be left with nothing. “And that’s a possibility. How many municipalities, states are actually looking at bankruptcy because of this? It’s crazy. It just keeps rising and rising.”

About The Author: Charlene Sharpe

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Charlene Sharpe has been with The Dispatch since 2014. A graduate of Stephen Decatur High School and the University of Richmond, she spent seven years with the Delmarva Media Group before joining the team at The Dispatch.