Cohasset’s $38 Million health care obligation

Almost miss-able in the pageantry that was last night’s Cohasset Annual Town meeting was the triple reference to the town’s $38 million obligation to pay health care premiums for our retirees.

First, advisory committee chair Peter Pescatore took great pains to bring us up to date on not only the size of this unfunded obligation but its alarming growth rate of over $2 million/year just to meet current obligations.

Acting town manager Mike Milanoski also referred to the emergence of this issue as he spent over 20 minutes reading us bedtime stories in the form of financial reports heralding his accomplishments, as if watching the very same presentation at the BOS meetings wasn’t enough for any mere mortal and in spite of warnings from the town moderator that time was fleeting.

When Pescatore returned to the mike to complete the troika of warnings, holding forth the shining example of how Hingham alone amongst our neighboring and peer group towns had fully funded its obligations in this particular regard, he gave us no clue as to just how we might do the same (Hingham took out a loan.)

It didn’t take a genius to figure out that Milanoski’s budget increase for funding this commitment was to rise to $300,000 this year to “make a start in the right direction” was the proverbial pea hole in the snow.  A more realistic contribution would at least have matched the annual growth of this obligation, the $2 million plus cited above, and started to pay significantly into the principle.   This, of course, is undoable in any budget plan as it would eviscerate town services.

Clearly, any reality with regard to this issue is way, way too toxic for political consumption at this time, as was demonstrated in Wisconsin, Oakland, Stockton, Rhode Island and a growing list to government units who have had no choice but to face reality.

One might search for a parallel between this ostrich-like approach and passage of the Town Manager’s Act that featured the dumbing down of the entry requirements for the job seemingly at just the time when it looks like we’re going to need a Nobel Prize winner in economics to unravel the Gordian Knot of our financial future. That is, notwithstanding, if we can escape the tsunami of dominating financial problems which threaten us from above at every level.

Here’s the bottom line, business types; there is no dealing with reality here, so we will now proceed to deal with the unreal plans and posturing of individuals who are more concerned with where their next paycheck (or vote) is coming.

Certified Public Account reports on financial statements have been required to disclose unfunded pension obligations for about 20 years and retiree health benefits for the last 5 or so years.  Only in the last two years have these unfunded obligations come into the public conscience.

The public unions don’t really want to talk about them and the politicians don’t want to deal with them because they’re essentially unsolvable without drastic action.

Trying to be a responsible “21st century” manager with “proper practices and procedures” may in fact be for the birds.

 The OPEB regulation (Other Post-Employment Benefits:  Basically, governmental agencies are required to calculate the value of their commitments to provide health insurance to their employees when they retire.  Towns are supposed to create an annual funding schedule to pay the liability off over time. Communities should create a Trust Fund and annually deposit the money into the Trust Fund until the liability is satisfied.

Towns like Lowell, Lawrence, Pittsfield, Springfield and Lynn will go to bankruptcy in the next 0 to 10 years.  That will force the state to entertain the issue.  At that point defined benefit plans and other unrealistic promises, i.e. retirees’ health care, go out the window.

We think all defined benefit plans will be or should be converted to 401(k) plans that in government are called 403(b) plans. There will probably be some cutoff to “protect” those that are nearing retirement.

 

© Copyright 2013 Tanna K, All rights Reserved. Written For: Tinytown Unleashed
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