Providing health insurance to retired Utica teachers will cost taxpayers $189 million over the next 30 years, an amount the school board president calls “scary.”

When it ratified a teachers contract in September 2008, the school board did not know the true costs of expanding retiree health benefits to teachers hired after December 31, 1977 (here).

Now, officials do know–and the price tag is staggering.For its assets to keep up with its added retiree benefit obligations, Utica’s school district should be setting aside $14 million more per year than the $5 million it budgets for retiree health costs now, according to an accounting form obtained by the Observer-Dispatch under the Freedom of Information Law.

The district’s current budget is about $130 million. Technically, covering the retiree benefits in full could mean a 50 percent increase in the tax levy….

It’s impossible to imagine what the board knew when it approved the contract, because a school business official told a reporter a day later that she herself did not know how much package of pay raises, benefits and union concessions would cost over the lifetime of the contract and beyond.

Since then, a Syracuse actuarial accounting firm completed a “GASB-45” (Government Accounting Standard Board) report, which calculated the district’s unfunded liability for the retiree benefit at $189 million during the next 30 years.

Until he reversed his position last week, the school superintendent refused to release the GASB-45 report because “the average Joe” would not understand the negotiating process and would conclude the retiree benefit is too “expensive.” That “average Joe,” who was kept in the dark (here) until after the contract was ratified, will pay for it with higher property taxes.

School Board President Barbara Klein acknowledged GASB-45 numbers are “scary,” but she said givebacks in the teachers contract would offset the added benefit until 2017.

Utica Teachers Association President Larry Custodero agreed with Klein.

“That $189 million number doesn’t make sense,” he said. “We crunched the numbers with the district during negotiations and we both came pretty close. I don’t know how they could have come up with $189 million.”

It’s likely that Klein and Custodero are not considering the hidden costs of retiree health benefits. Utica, like other New York school districts, finances retiree insurance on a pay-as-you basis. It puts no money aside while a 25-year-old teacher is working (as it does for her pension). Instead once she retires, future taxpayers will pay her retiree health benefits.

GASB-45 is intended to show school districts how much today’s promises will cost future taxpayers.

Originally Published: NY Public Payroll Watch