For my position on some of the more controversial articles on the Spring 2017 warrant (the “sanctuary community” proposal, a carbon fee, background checks, and the impeachment of the President of the United States) click here. For my position on an important issue that I believe we need to grapple with more effectively, read on.
About 55% of the Town budget goes toward employee salaries and benefits. Amherst has approximately 300 municipal employees not counting our teachers and school administrators. In addition to paying for municipal employees’ benefits while they work for the Town, we also provide health insurance for them after they retire. This would be unusual in the private sector, where only around one-third of large firms (i.e. those with 200+ employees) pay for their retirees’ health insurance. But in state and local government it has become the norm. As a result, retirees’ health benefits (together with pensions) are consuming a growing share of the budget in many communities. Amherst is one such community.
Our recent bond rating from Standard & Poor’s Financial Services, LLC, states:
“A long-term credit consideration is the town’s pension and other post-employment benefit (OPEB) obligation liabilities… The combined pension and pay-as-you-go costs are about 9% of total governmental funds expenditure. We consider the liability large and will rise over time.”
Last year, Amherst spent approximately $13 million for benefits and pensions. In addition, every year we set aside a steadily increasing amount of money to pay for retirees’ health insurance over the longer term. The money we set aside is called the OPEB Trust Fund. The amount we need to pay into that trust fund next year, according to the Town Manager’s FY18 budget, will be $400,000, an increase of $100,000 from the previous year.
These retirees’ health-insurance costs are in addition to pensions. Next year our town’s share of the Hampshire County Retirement System will be approximately $5 million, an increase of 9.3% from the previous year.
To repeat: Approximately 9% of our town spending goes toward retirees’ health-insurance and pensions. In some parts of town government the percentage is even greater. For example, in 2015 public-school expenditures on insurance and retirement programs came to about 19% of total expenditure.
Although this situation is no sense catastrophic, it has the potential to become a problem that could affect our bond rating. So we need to address it, and we need to do so in a way that is equitable and just for employees, retirees, and taxpayers alike. If the cost of health insurance continues to increase, we should examine a range of options, including changes to retirement ages and employee contribution rates. As a Town Meeting member, I would review the budget with an eye to meeting the retiree-benefit challenge.
What do you think?