Published: May 09, 2008 11:14 pm         

Raleigh has eye on the future

County being ‘smart’ with post-employment account

Ultimately and unavoidably, old Father Time is going to catch up with West Virginia counties, wielding not a sickle but a list of bills from their former employees.

Four years ago, the Governmental Accounting Standards Board imposed Statement 45, a rule known simply as GASB 45, and it obligates local governments to start underwriting the cost of future post-employment benefits, largely in the realm of medical treatment and health insurance.

“It’s going to be a bigger issue in some counties than in others,” says Vivian Parsons, executive director of the County Commissioners Association of West Virginia.

“All counties are going to have to account financially for whatever benefits they’ve chosen to give. At this point, it is accounting, but it could turn into a huge number in the future.”

With an eye to the future, Raleigh County has set aside an account in escrow.

“In the event somewhere down the road we have to pay that money, we would have it,” county commission president Pat Reed said.

That means for about a year now Raleigh County has been building a nest egg with a monthly deposit of $12,000.

“We are covered,” Reed said. “It’s to protect us in the event that down the road we have to pay it.”

Money placed into the account cannot be spent for any other purpose, Reed emphasized.

As Parsons understands the matter, counties for now are only required to financially report the accumulation of post-employment benefits but not, at this stage, is there any obligation to actually set up a special hands-off account to pay for them.

Raleigh County, she says, has taken a wise step to get ahead of the game.

“Raleigh County is to be commended for, in fact, trying to look ahead and put that money into that account and accrue some interest on it, based on the benefits that they’ve given,” Parsons said.

Just how many counties have leaped out to get ahead of the curve isn’t known.

Last fall, however, the issue was discussed at regional meetings as counties began to get some guidance from the Public Employees Insurance Agency as to figures accruing on a monthly basis.

“What I was hearing was that counties were leaning toward something they could maintain control of and accumulate their own interest,” she said.

Counties may choose to create their own escrow accounts, but the state also has set up a trust fund. So far, there is no obligation for counties to pay into that.

“I don’t know of anyone who has opted to pay into the state trust fund,” Parsons said. “To my knowledge, there isn’t any county actually paying into the state trust fund, because once they do, the control of that money and any interest it makes is lost — it’s part of the trust fund.

“But eventually, somewhere along the way, they’re going to be paying out those benefits. But as far as any mandate coming down to pay into the state trust fund, the best that I know is that would have to be something legislatively mandated and has not been at this point.”

Sick leave accumulation accounts for the post-employment benefit state employees are entitled to collect, which means if there is no cap, county employees can convert this service credit time once their work days are finished, she said.

“I’m sure it’s going to be a financial burden — benefits given today that are paid for tomorrow, like so often happens,” Parsons said.

“A lot of it depends on how many people you have retiring at one time. You’ve got the baby boomers’ thing looming ahead, and so some counties could, I guess, see some financial crunch from it eventually. I think that’s what GASB is looking at when they’re requiring it to be recorded as part of their (counties’) financial statement so they are more aware of what those benefits actually mean to them in dollars.”

Which explains why some counties are leaving nothing to the last minute. Rather, she said, the wise ones are trying to build an account to get ready for crunch time.

A government parable of the old story about ants and grasshoppers. One plays, the other works for the future.

“Hopefully, the smart ones will do what Raleigh County has done and start to look at what the accruing obligation is and set aside an account with some monies to start accruing the interest,” Parsons said.

Understandably, some counties caught up in the squeeze of making ends meet today cannot afford to lay aside any cash now, she said.

“You might have some small counties that realize their obligation, but they’re just, you know, doing the best they can with what they have right now,” she added.

“Still, they’re recording it financially on their financial statements. On paper, they’re keeping track of that under the GASB obligation, and at least they will know what they’re dealing with. I would never want to suggest that some commissions are not just looking toward the future. I think the issue more is, we all have to look at it and face it. GASB says we have to. And some are fortunate enough to have the resources to start to meet the obligation to put some away.”

— E-mail:

mannix@register-herald.com