There
has been much attention dedicated to the recent discussion surrounding
post-employment benefits in the Menomonie Area School District. While
most of the discussion has been quite cordial, there has been some
misinformation shared with parents and community members regarding the
reasons behind possible changes to the structure of early retirement
benefits in our school district and the collaborative process that has
been followed to develop a possible solution. Here are some questions
and answers that might provide a better understanding of the post
employment benefit policies in Menomonie.
What is OPEB?
OPEB
is an accounting acronym used when discussing “Other Post-Employment
Benefits”, which are more commonly known as retirement pensions. The
Menomonie Area School District, like many other organizations, has
benefits available for employees after they retire. The most expensive
OPEB available to some staff members in Menomonie include an annual
stipend (approximately $10,000 per year) paid for five years and 100% of
family health insurance premiums paid for up to ten years. The
projected early retirement benefits expenses for a teacher retiring
after next school year exceeds $350,000, and the latest actuarial study
projects the district’s future liability for providing early retirement
benefits to be more than $20 million dollars.
Why is OPEB a concern for the school district?
When
employees retired in 1990, family health insurance premiums cost our
school district $3,780 per year and OPEB accounted for 1% of the
district’s total budget. Today, annual health insurance premiums in the
school district are $24,672, and OPEB takes up over 5% of the district’s
operating budget. With the cost of healthcare continually increasing at
a rate much faster than the school district’s revenue, it is expected
that in the upcoming years more of the district’s budget will be
dedicated to post employment benefits and less revenue will be available
for providing programming for our children and continuing to offer the
competitive salaries and benefits needed for recruiting and retaining a
highly effective staff.
Why hasn’t the school district already addressed this issue?
The
district has already taken some significant steps to reduce the OPEB
liability. Just a few years ago, the district worked with employees to
establish policies that would phase out defined benefits for newer
employees in our school district and replace them with a more affordable
defined contribution plan. The district also established a trust fund
to start saving for OPEB, and over $1 million has been set aside to help
pay for the benefits that have been legally vested by the staff members
who have already retired.
Why is the district looking at this issue again so soon?
Despite
recent efforts, some of the benefits that are still available for
future retirees are quite generous compared to what is being offered in
neighboring school districts. Nearly all of the district’s OPEB
liability is unfunded, and the landscape for funding public education
continues to change for the worse. While the phase-out plan will
certainly help, the district is on the verge of committing millions of
dollars more in retirement benefits in the next few years as more
employees become eligible to retire. With the governor’s recent budget
proposal calling for more significant cuts to funding for public
education (over $500,000 in reduced funding projected for Menomonie in
2015-2016), it is likely that the district will need to reduce
programming for children, eliminate positions, and possibly freeze or
reduce compensation and benefits for current staff to be able to fund
benefits for employees who retire.
Will our teachers still be able to retire if the retirement benefits are changed?
While
each individual has his/her own personal financial goals and needs, all
regular school district employees also qualify for state retirement and
social security benefits. The amount of state retirement is determined
by various factors, including age at retirement, years of service, and
top earnings. For many SDMA teachers retiring soon, state retirement
benefits alone could exceed $3,000/month for life, but exact benefit
amounts will vary for each individual. Prior to 2011, the school
district contributed both the employer’s and employee’s share of the
state retirement premium. Now, after Act 10, employees are required to
pay half of the required contribution, which is currently 13.6% of
earnings split by the district and employee.
What are the major changes to OPEB being proposed?
No
one in the district is trying to pressure employees to retire. In fact,
the proposal discussed by the board encourages those currently eligible
to retire to continue working. The board even extended this year’s
early retirement deadline so that current teachers would not retire for
fear of losing possible benefits. For those employees closest to meeting
the age and local experience required for early retirement, the
district is asking that they be willing to cover future increases in
health insurance premiums beyond the value of the premiums at which they
retire. For employees that are not as close to retiring, the school
district is proposing to raise the minimum retirement age beyond 55 and
consider a plan that would require future retirees to use their district
retirement benefits to purchase health insurance outside of the
district’s group plan. The district would also like to limit the number
of employees retiring each year, so there will less fluctuation within
the annual budget.
What process has be used to develop solutions for this issue?
This
district has followed a very open and transparent process for dealing
with this issue, and OPEB certainly is not a new concern in Menomonie.
The status of the OPEB liability was just discussed at the annual
meeting in August, and again in September, when the board adopted an
updated financial vision for the school district. The school board
discussed this issue at open meetings held on January 12, January 26,
and February 9, and listening sessions were held for staff members and
spouses before and after school on January 19 and February 3. Several
messages have been sent to keep the staff informed, and staff input has
been encouraged on multiple occasions in public large group settings and
through more private communications. A shared document originally
developed for sharing the details of the proposal with the staff and for
answering a list of questions and answers can found: Here
We
have wonderful employees in the Menomonie Area School District with
whom we entrust two of our greatest assets- our children and our future.
Teachers in Menomonie are well compensated compared to other school
districts in Western Wisconsin, but I think that they are worth every
penny that they have earned. This issue should not be viewed as pitting
the district against employees or the superintendent against teachers.
Especially as we prepare to face more difficult times in funding public
education, if we are going to continue to commit millions of dollars to
be paid out for expenses years into the future, the commitment should be
made knowing the potential impact on our programs, our children, and
the future of our school district.
Should
school stakeholders have any questions regarding OPEB or anything else
in the Menomonie Area School District, I invite you to visit the
Administrative Service Center located on Pine Avenue, or contact me at
715-232-1642. More information about our schools can be found on the
school district website (www.sdmaonline.com) and on Twitter (www.twitter.com/sdmaonline).