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MAY 1999 - Move Underway At Local Level - Back some 6 years ago, we reported on legislation, by then House Public Service co-chair Kevin Blanchette, to allow funding of health insurance costs for public retirees (July '93 Voice). "As Public Service co-chair, Kevin was a good friend of the Association," according to Legislative Liaison Shawn Duhamel. "He was also very pro-active when it came to safeguarding retiree benefits over the long term."

Funding health care costs is similar to the pension funding currently underway in the retirement systems. Instead of reducing the pension liability to zero, the municipality attempts to reduce to zero the liability that it has assumed for the health care costs of its retirees and survivors and to stabilize these costs in the future (i.e., maintain costs at a fixed ratio of the town's current and future payroll).

Since our '93 article on the subject, there has not been a strong push to fund health care costs in the public sector until recently. Last year, two towns, Arlington and Brookline, had separate laws passed that allow them to set aside funds in a special trust account in order to fund health costs for their retirees and survivors.

While the Arlington and Brookline laws do not mirror each other exactly, they both allow for appropriations to, and expenditures from, the trust fund at the annual town meeting. Expenditures will be made according to an actuarial schedule, developed by the town and approved by the state.

Funding Begins In Arlington and Brookline

According to Arlington Town Manager Donald Marguis, "Last month, the town meeting appropriated $100,000. to the Retiree Insurance Liability Fund." This money has been in prior years appropriated to the town's special stabilization fund but for Fiscal 2000 Arlington voted in favor of its first payment to the retirees' insurance fund.

"With this first appropriation, Arlington has begun to address its unfunded liability for retiree healthcare costs," continued Marguis. He believes that the state could offer an incentive to communities, by matching their local appropriations to health care trusts.

This month the Town of Brookline will be voting to make an appropriation to its Retiree Healthcare Liability Trust Fund. "We're confident the town will appropriate $35,000 for the fund," reports Director of Finance Harvey Beth. Before the town meeting, the proposal had been approved by the Board of Selectmen.

The $35,000 appropriation represents the reduction in the town's pension payments for its non-contrib retirees who have passed away since last year. According to Beth, "As we did for this budget, Brookline hopes to appropriate these 'savings' each succeeding year into the Trust Fund." It should be noted that non-contrib pensions are not paid by retirement systems but by municipalities.

Debate Continues

To avoid a piecemeal approach on this issue, the Mass Municipal Association filed a bill (H-1632) for all communities that wish to follow Arlington/Brookline's lead. At the Public Service Committee hearing on H-1632, no objection was raised to the bill, excepting a recommendation that retiree/employee representatives participate in the funds investment.

While there appears to be a general consensus in favor of health care funding, the debate on this issue continues. Some would argue that funding should not be undertaken because it drains away money from other essential local services. Others in the public retirement arena believe it is in the best interests of both retirees/survivors and their communities.

"As we reported back in '93, health care costs continue to go up," comments Duhamel. "Funding these costs should have no adverse impact on retirement systems or municipalities and the revenue sources, adopted by Arlington and Brookline for their programs, support that finding."

As then Representative Kevin Blanchette predicted, the funding of pension systems will prompt retirees, employees and municipal officials to scrutinize other retirement issues with substantial fiscal implications. Health care costs are naturally one at the top of the list.

"Plymouth has shown it can tackle big issues like pension funding for its retirees and employees," states Tom Kelly, who sits on the town's retirement board. "Future health care costs is another and deserves thorough analysis as we approach full funding."
 
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