CHARLESTON, W.Va. -- West Virginia's county school boards will get an estimated $1.3 billion break from retiree health care costs after Gov. Earl Ray Tomblin signed legislation Monday shifting that burden to the state.
The new law should also free up at least some of the $20 million that county schools have diverted from classrooms out of fear of the accounting requirements associated with these costs.
The bill signed Monday changes those requirements. It relieves the counties of the share of these costs from teachers and school personnel whose positions are funded through state dollars-at least 80 percent of their total staffs. It dedicates $30 million in annual personal income tax revenues toward those shifted costs. It also endorses a dozen steps proposed by the Public Employees Insurance Agency meant to cut the medical costs of its health care plans.
These and other provisions in the bill target an estimated $5 billion funding shortfall related to other post-employment benefits, or OPEB. A national accounting standard has called on government employers to calculate the gap between on-hand assets and such non-pension retiree costs as health coverage and life insurance.
Tomblin said the new law makes West Virginia a national leader for tackling its OPEB unfunded liability. At least three-fourths of the states continue the pay-as-you-go approach toward these debts that preceded the 2004 accounting standard, according to the National Conference of State Legislatures.
A key measure from Tomblin's agenda session, legislators joined the Democrat at the Capitol reception room signing. In a statement afterward, Tomblin cited specific benefits from the measure: An award-winning graphic art class at Morgantown High can buy new computers; Malden Elementary in Kanawha County can keep its library open throughout the school day; a language arts class can continue to rely on portable computer labs at Marlinton Middle School in Pocahontas County.
Forty-nine of the state's 55 county school boards had unsuccessfully sued over the OPEB accounting requirement. Passed in response to the national accounting standard, it mandated that they and other government employers pay annual amounts toward the funding shortfall or else list those amounts on their books as debts.
The legislation will shift an estimated $820 million previously charged to county school boards for these costs. Tomblin said it will also save the school boards $485 million in future payments.
The bill signed Monday also adds to state law the decision by the Public Employees Insurance Agency to stop subsidizing the health care premiums of retirees. That halt starts with employees hired after June 2010. The measure also reserves $5 million annually to fund a possible future incentive for these post-subsidy hires.
The health insurance agency cut the estimated OPEB shortfall in half, from $10 billion, by agreeing in December to cap the annual growth of premium subsidies at 3 percent. Tomblin's legislation aims to close the remaining funding gap by 2036.
Groups representing employees, including the American Federation of Teachers-West Virginia, supported the legislation. They cited the $20 million that counties rerouted from education to bank against their annual required contributions toward the liability. These groups have also expressed concerns about eventual end of the retiree subsidy, and its effect on recruiting quality teachers and other employees.
Ernie "Spud" Terry lobbies for retired public workers. He said the cap on subsidy growth means that retirees will pay increasing amounts toward their health coverage, given medical inflation. Terry also noted that retirees have long sought cost-of-living increases to their public pension benefits, without success.
"It's going to mean a whole lot more money out of the pockets of retirees," Terry said. "It is getting hard for retirees to survive with any sort of dignity."