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Who Is Left Holding LMSV $24 Million Bag?

The La Mesa Citizen Oversight Group strongly advocates that public sector governing bodies practice sound financial management. Among other things that means paying for current services with current revenues. It is far too easy for public officials, when money is tight, to avoid making tough decisions by deferring costs into the future. One instance of this practice is the promise to provide health care for retirees – without setting aside funds to pay for it.

            The La Mesa Spring Valley School District provides full medical benefits to retirees (not families) from the time they retire (as early as age 55) until they become eligible for Medicare at age 65. No money is put aside to pay for this post-retirement benefit so its’ cost becomes an “unfunded liability”. The most recent audit of the LMSV post retirement health benefit account estimates the unfunded liability for post retirement health care to be almost $24,000,000.

            Whether or not it is necessary or appropriate to pay for medical benefits after teachers choose to retire is not the subject here. Rather, our purpose is to make the case that when promises of future benefits – in this case post retirement health care – are made, they are paid for as they are earned and not made the responsibility of tomorrow’s taxpayers.

            The audit mentioned above recommends that LMSV “…consider taking steps to establish a retiree fund … as soon as possible”. It outlines the benefits of doing so: (1) improved return on investments (2) healthier District financial statements (3) lower (payments) in future years (4) more predictable and manageable cash flows and (5) greater economic security for District employees and retirees.  We would add another: it is only fair for those receiving the benefit of a teachers’ efforts pay for them.

            The La Mesa Citizen Oversight Group strongly urges that as long as the LMSV school District maintains a policy of providing post retirement benefits (of any sort), the advice of the auditor – to establish and fully fund an account to pay for them – be followed. It is wrong to leave future taxpayers holding the bag.


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This entry was posted on August 11, 2013 by .
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