Controversial healthcare fund for City College retirees – The Guardsman

In the summer of 2020, City College of San Francisco, like many other institutions, anticipated a severe shortfall caused by the global economic fallout from the COVID-19 pandemic. To close the gap, faculty union American Federation of Teachers Local 2121 negotiated a pay cut and college administrators withdrew $21 million from a fund set aside to pay for health care for future retirees. .

Nearly two years later, college watchdogs say that withdrawal was a loan in need reimbursement, the fund is exhausted and the financial management of the college is in question.

The fund is known by the acronym “OPEB”, which stands for Other Post Employment Benefits. It is an important accounting term for health care promised to retired employees. It continues to be a point of contention in ongoing budget debates over the college’s financial future. Over the past three months, this reporter has dug deep into his story, the numbers, and interviewed experts to figure out what’s going on.

Origin

In 2005, headlines warned that these retiree benefits looked like a tidal wave of debt on public sector employers like cities and school districts after the Government Accounting Standards Board (GASB) ruled known as Statement 45 which requires government employers to note accrued future debts as liabilities in the current books each year. This seemingly small change in accounting practices had significant tax implications for government employers, including City College. With a ruling, many balance sheets across the country went from black to looking like they were in the red.

GASB 45 lobbied employers to pay for retiree health care twice a year. A first time for former employees currently retired, a second time to gradually pre-finance the health care of all future retirees by setting up OPEB trust funds.

“In case something horrible happens at City College, a bomb dropped on it or something, then the [health care] funds would come out of it,” said Susana Atwood, CPA, a retired UC auditor and professor of accounting at City College.

Confusing! Imagine two pipes running, one for this year’s bills and the other slowly filling a large bathtub against future disaster.

City College and OPEB

City College’s first attempt to create an OPEB trust fund ended when multiple conflicts of interest were discovered between members of the Accrediting Commission for Community and Junior Colleges (ACCJC) and trustees of the fund, according to 2013 court documents. The money was repaid to the college in 2011.

In 2013, the college joined the San Francisco Retiree Health Care Trust Fund (SFRHCTF), as a sub-trust alongside city employees such as police and Muni drivers, agreeing that no funds would be withdrawn before 2020, SFRHCTF the documents show. Since then, the college has made its regular contributions and, as the public has now learned, has also invested additional money to fill the OPEB “bathtub”.

Withdrawal from OPEB

In September 2020, the City College Board of Trustees (BOT) presented two resolutions, a setting restrictions on disbursements from its SFRHCTF sub-trust and a declaring an extraordinary financial situation and requesting $21 million to pay for retiree health care for fiscal years 19/20 and 20/21. They have not committed to any further disbursements until the sub-trust is fully funded. There is no mention of a loan or repayment.

In preparation, the college’s actuary determined that the move was fiscally prudent and that the college fulfilled its obligations to its future retirees. In his answer, the actuary noted that since 2016, City College had paid $16.9 million more than needed into its OPEB trust, which had generated additional investment income of $5.3 million, which totaled more than the $21 million requested. The RHCTF, for its part, confirmed these additional payments and also approved the withdrawal. Rather than a loan, it was a refund of excess contributions.

City College has shown financial prudence in two ways. First, by setting aside the extra funds from OPEB, and second, by carefully ensuring that the withdrawal of funds does not impair its ability to meet its obligations to future retirees.

In April 2021 letter, the Fiscal Crisis Management and Assistance Team (FCMAT) called City College at the California Community College Chancellor’s office, alleging the college borrowed from its OPEB trust to balance its books from the previous year. and had no intention of repaying those funds. She also claims that in doing so, the college “completely depletes its OPEB fund.”

The FCMAT assertion is false. This chart of college OPEB sub-trust balances at the end of each quarter for the past three years, based on RHCTF investment reports, clearly shows that at no time has the fund been “completely depleted “.

At a recent budget forum, Martin said the college is “committed to returning these funds at an accelerated rate if possible.” A recent budget plan shows that the college plans to make additional contributions to OPEB over the next two years.

“No useless transfers to the detriment of educational opportunity” retorts AFT 2121 in its Alternative budgetarguing against OPEB payments not required at this time.

Atwood says Martin and Dr. John al-Amin, vice chancellor for finance and administration, have admitted in several budget conversations that the funds don’t need to be repaid.

In October 2021, the ACCJC threatens the college with “future adverse action” in part because its “The other post-employment benefit trust is only 18.3% funded.” “Percent funded” is a ratio of the market value of an institution’s OPEB trust assets to its “unfunded OPEB liability” (the tub), a measure of its progress toward its fully funded goal. . The college just has to show that it is on the right track.

The college actuary is the one who really knows, and his calculations revealed that CCSF’s OPEB fund would be fully funded by 2046, 22 years from now, which is in line with the city’s other OPEB funds.

In the timeline below, the “percent funded” number, taken from the ACCJC’s own financial reports on City College, is superimposed on a timeline of OPEB-related events at the college. Viewing the ACCJC values ​​for this measure in the context of the college’s OPEB history reveals a number of serious discrepancies and calls into question the validity of the ACCJC’s critique on this point.

Chronology

“Fight to Keep Them”

Medicare only covers basic medical expenses for seniors and people with disabilities who require additional coverage.

Following the civil rights and women’s movements in the 1960s and 1970s, and a wave of strikes in the public sector, City College employees won the right to collective bargaining in 1975, bargained diligently, and once obtained, fought to keep them. OPEB dues are deducted from employee paychecks, and in 2013 the college’s SEIU and AFT locals waived their own prescription drug plans to contribute to the OPEB fund.

According to Shields, GASB 45 and related pronouncements “armed retiree health,” similar to how the U.S. Postal Service was required to prefund retiree benefits 75 years in advance, a requirement recently rescinded by the US Postal Service. American Congress.

Cindy Young, from the Labor Campaign for Single Payer, said: “Under a single-payer system, health care for all older people would be included in the provision of care for everyone, so that they would no longer appear in the college books.

This article was produced for DAY 35: Data and Multimedia Journalism Spring Semester 2022 with The Guardsman’s edition.

Comments are closed.