OCTOBER 17, 2006: The House Committee on Ways and Means has taken a significant step forward in addressing the new accounting standards that require municipalities, as well as the state, to disclose the future healthcare costs for their retirees. It has reported out favorably H4887, which would allow communities to prefund these costs.

H4887 will now be placed on the House calendar, where it can be voted on and eventually passed into law before the current legislative session ends on January 2, 2007. Once the House acts, the bill will then move on to the Senate. Even though the legislature will not be meeting formally before the session ends, H4887 and other legislation can be passed and sent to the governor until then.

“Beginning next July, the state and large municipalities must begin to disclose, in their financial reports, the unfunded liability associated with the healthcare costs for current and future retirees, according to Legislative Chairman Bill Hill. “For some time, we’ve been reporting on the standards issued by the Governmental Accounting Standards Board (GASB), as well as their impact, and now the deadline for complying with GASB (July 1, 2007) is upon us.

“Remember GASB does not mandate that a community show how it plans to pay the healthcare unfunded liability. That being said, it’s expected that there will be communities that determine they must address the funding issue to maintain their fiscal status.

“H4887 is significant since it offers to a municipality, that also plans to pay for future healthcare costs, a way for doing just that. By prefunding in a manner similar to what is currently done with pension costs, a community may be able to reduce substantially its overall total liability, which serves its best interests, as well as those of retirees.”