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May 20, 2008

Funding Mechanism Could Help State & Local Governments
Save Billions in Future Years

Local Government Organizations Praise DiNapoli Plan

State Comptroller Thomas P. DiNapoli announced legislation to authorize the creation of trust funds to help the State and local governments plan for the cost of Other Post Employment Benefits (OPEB), which is comprised largely of health care coverage for retirees. Under DiNapoli’s plan, local governments would have the option to invest their assets individually or participate in either a state-administered investment fund or pool assets with other local governments for investment purposes.

“The State faces $50 billion in OPEB liabilities, and New York City is looking at $58 billion in similar obligations,” DiNapoli said. “Add that to tens of billions more in OPEB liabilities from local governments around the state, and the numbers are daunting.

“We’re facing difficult times, and the impulse may be to push this issue aside. But almost two million working New Yorkers are counting on these benefits. The responsible thing to do is to start preparing for the future in order to protect health care benefits and save tax dollars. If we started this fund today, State government alone could save $22 billion over the next 30 years.”

GASB 45, a recent ruling by the national Government Accounting Standards Board (GASB), focuses on disclosure of OPEB related liabilities. Previously, there was no requirement for the State and local governments to report or fund these liabilities. GASB 45 does not require funding of OPEB, but DiNapoli said his proposal for an OPEB investment fund is an essential part of managing these long-term costs.

Under DiNapoli’s plan, the local governing board – or a designated chief fiscal officer – would be the trustee of any locally-established OPEB trust. The State Commissioner of Civil Service would be the sole trustee of the State’s OPEB trust, authorized to manage the trust and invest assets in the OPEB investment fund. The State Comptroller would be the sole custodian of the OPEB investment fund and manage fund assets.

“The Conference of Mayors appreciates Comptroller DiNapoli’s efforts to highlight the issues surrounding OPEB liabilities and the increasing costs of retiree health care benefits,” New York Conference of Mayors Executive Director Peter Baynes said. “While most local governments do not currently have the fiscal capacity to set aside funds for this purpose, it is important that they first be given the ability to create a local trust or to participate in a statewide trust. The State and its local governments must make every effort to work together to address these staggering fiscal obligations.”

"The New York State School Boards Association is once again pleased to work with Comptroller DiNapoli to improve the fiscal administration of school districts,” Timothy G. Kremer, Executive Director of the New York State School Boards Association said. “Though it has not yet captured the public imagination, the issue of retirement benefits looms large in the financial future of our schools. This legislation would allow districts the opportunity to meet future obligations in a cost effective manner."

“We thank Comptroller DiNapoli for taking the lead to create a working group of the various local government organizations, including NYS GFOA, to develop mechanisms for the State and local governments to be proactive in the management of post employment liabilities, such as retiree health insurance,” Brian L. Roulin, CPA, Director of Finance, City of Rochester, and President, New York State Government Finance Officers’ Association, Inc., said. “This legislation is consistent with our Association’s mission of enabling government finance professionals to effectively manage public funds and, in this case, to address known future financial commitments with solutions today.”

Deedrick Bertholf, Executive Director of the New York State Association of School Business Officials (NYASBO), said, “We commend Comptroller DiNapoli and his staff for taking the lead on this very important issue. For over a year, NYSASBO has advocated for State action to allow school districts the statutory ability to properly manage their post-employment benefits.”

Click here for a copy of the Comptroller’s report on OPEB liabilities.

Click here for additional information concerning GASB 45 and OPEB: GASB 45 FAQs.

Click here for other Post-employment Benefits: A Plain-Language Summary of GASB Statements No. 43 and No. 45.

Click here for Government Finance Officers Association: RFP Checklist for OPEB Actuarial Valuation



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