Last week's Manhasset Press contained an advertisement stating that the school district has incurred a $280 million liability for unfunded health benefits for retirees and current employees. The ad further stated that an intelligent budget vote is a "no" vote, implying that there is a direct connection between the two topics. We believe this is misleading and incorrect.
The implication in the ad is that the $280 million liability has been recently "incurred" by the district. In fact, each year the district has been responsible to pay for, and has paid for, post-employment benefits such as health care benefits that are due to retirees in that year. The ad does not disclose, but presumably is referring to, the new accounting standards promulgated by the Governmental Accounting Standards Board (GASB) for all governmental entities including school districts that would impact the calculation of and accounting for these benefits. The school district has fulfilled, does fulfill and will continue to fulfill all legal and fiduciary obligations connected with employee and retiree benefits. In full compliance with GASB's present phase-in requirements, the Manhasset School District would implement the standards beginning in 2008-09.
At the present time, non-pension post-employment benefits (such as health care benefits) are paid by the district each year on what is commonly referred to as a "pay-as-you-go" basis. That means that each year the district includes in its annual budget, and pays out, an amount for the benefits distributed or claimed in that particular year. The GASB standards do not affect how these benefits should be paid for, but rather affect how these benefits should be accounted for and reported in the financial statements. Although the GASB statements are accounting standards, they require a significant number of actuarial calculations including what in finance is referred to as an "actuarial present value calculation" - stated simply, a determination of what is the amount that is expected to be sufficient, if invested now, to finance the benefits for employees over the entire time of their retirement years. The new standards mandate the calculation of this amount be accounted for and reported in the audited financial statements, but do not mandate that the estimated amount of these benefits be funded in their entirety in advance.
The mere adoption of the standards does not have a direct impact on the 2006-07 budget. Importantly, there is no logical direct connection between the calculation or the funding of health benefits that will be paid well into the future and a "no" vote on the 2006-07 annual operating budget.
We urge you to become informed about the budget before you cast your vote by reviewing the budget book and budget brochure (available at all schools, the library and online at www.manhasset.k12.ny.us), and attending coffees with the superintendent and the upcoming budget hearing on Thursday, May 4, or by emailing the board at email@example.com.
We urge you to read this week's Superintendent's Column for a more complete discussion of these post-employment obligations. We hope to see you at the polls on Tuesday, May 16.
Manhasset Union Free School District Board of Education
Cindy Cardinal, President
Aline Khatchadourian, Vice President