JULY 2005 - With state and local officials becoming increasingly aware of retirees' future healthcare costs, the Public Employees Retirement Administration Commission (PERAC) will be conducting a full-scale forum on this subject at Holy Cross College this June 28.

Local Governments Aware

Newton, which is usually in the forefront of addressing fiscal issues, is aware of GASB 45 and its potential impact.

Last month the Newton Retirement Board met with the city's Finance Committee for its annual budget meeting.

The discussion quickly shifted to healthcare costs. "Once we completed our Board report the Committee members wanted to discuss the healthcare cost situation," said Retirement Board ex officio member Dave Wilkinson.

Wilkinson, the City Comptroller, said that there had been an ongoing actuarial study over the last four years in anticipation of addressing the healthcare issue. "Our liability is over $500 million," he said.

"We have a Aaa bond rating... Newton is a well-run city. Mayor Cohen and city officials have been very supportive of our employees and retirees, while at the same time maintaining the bond rating."

Wilkinson floated the idea of utilizing the Federal Part D refund to help fund future medical costs - a response to the GASB 45 challenge. "This might be a possibility," he said. "Our retirement board members and staff have become very involved in the medical insurance and healthcare issues of members of the Newton Retirement System. I think this is an area that all retirement board members might consider to be an extension of their Chapter 32 (retirement law) duties."

Tackling the liability for future healthcare costs will be especially difficult for older industrial cities such as Lynn.

"We are an old industrial city on the rebound. We have made great strides in recent years," said Lynn Comptoller John Pace. "Our bond rating of Baa1 is typical for a city such as ours."

Pace, who is the chairman and ex officio member of the Lynn Retirement Board, said a failure to address the future liability of employees and retirees' healthcare costs would probably impact on bond ratings.

"I don't think Moody's and Standard and Poors would ignore an expense for future health costs that will show on a city's budget," he said. "There would have to be some recognition and perhaps at least a footnote that the city recognizes the liability and will be attempting to address it."

Pace feels that the burden of adding an appropriation to a city's budget for future healthcare costs could be a heavy burden for many cities. "It will be very difficult, perhaps overwhelming," he said.

Gloucester is another old blue-collar city struggling to make ends meet. Joe Pratt is the city auditor and ex officio member of the Gloucester Retirement Board. Joe feels that GASB 45 reporting requirements will cause severe problems.

"I'm very cautious in attempting to address this issue," said Pratt. "I see severe problems down the road. The people, who look at our finances and are responsible for our bond rating, don't always understand the shape older cities are in.

"At least half of our system's members will be retiring over the next six years, and to add the burden of prefunding insurance benefits on top of our pension funding appropriations would be very tough to handle. I hope that we can get together in this state and find a reasonable solution."