The can sat there in plain sight during the budget hearings and
the San Benito County Board of Supervisors tried not to look at it;
eventually they could not ignore it because it was stuffed with
IOUs. All they had to do to help balance the budget was kick the
can down the road until it became someone else’s problem to pay
those bills. The can had the acronym
”
OPEB
”
marked on it. That stands for Other Post Employment Benefits. It
usually refers to healthcare costs that are, or will be, owed to
retired employees on top of their other benefits.
The can sat there in plain sight during the budget hearings and the San Benito County Board of Supervisors tried not to look at it; eventually they could not ignore it because it was stuffed with IOUs. All they had to do to help balance the budget was kick the can down the road until it became someone else’s problem to pay those bills. The can had the acronym “OPEB” marked on it. That stands for Other Post Employment Benefits. It usually refers to healthcare costs that are, or will be, owed to retired employees on top of their other benefits.
Some previous boards had kicked the OPEB can down the road before and now it was theirs. Ask a typical politician about any well-kicked can; the response will be, “I wasn’t there when it happened.” The obvious follow-up questions are, “Didn’t you know you’d be responsible for this problem when you ran for office?” and “How many cans do you plan to kick down the road and leave for your successors?”
The government likes to see these types of retirement add-on accounts funded to 80 percent of the estimated costs, but our OPEB account is “nowhere near that,” according to County Auditor Joe Paul Gonzalez. The can has been growing and the looming costs threw a good scare into the county so they devised a multiyear catch-up plan that called for the county to contribute $2.6 million next fiscal year. Now, with a $33 million budget and only $25 million in revenue, kicking the can once more would help close the $8 million gap.
Our planned $2.6 million catch-up payment is as big as the total for Monterey’s 4,038 county employees. They pay $596 an employee and we were scheduled to pay $6,212 an employee. The difference is the cost of kicking the can down the road and not sticking to a pay-as-you-go strategy.
The OPEB can is always available for kicking because the board has complete control over that decision; just pass the bill to someone else at some other time and hope it does not come back while you are in office. OPEB is actually the smallest payment of the ever-growing benefit packages that include $5.7 million in CalPers retirement premiums, $4.2 million in health insurance costs, and $5.5 million in accrued vacation and sick time, but the board cannot kick those cans because those entities demand payment. We have self-funded OPEB and, like the IOUs in the Social Security Trust Fund, we keep forgiving ourselves the debt – someone else at some other time will pay for it with taxes or reduced services.
At this point, the board has decided to kick the can only if they get in trouble. After three days of the typical push-pull budget process they arrived at contingency funding – money put aside for unforeseen expenses such as settlements or retirement cash-outs. The budget committee recommended a very low contingency fund of $200,000 for the year; typically, it has been $1 million. If the $200,000 proves to be insufficient, the board plans to kick part of the OPEB can down the road once again; one of the liabilities that got us in so much trouble is now looked upon as our escape hatch because we can pass it on. But this is far from finished. After rolling over this year’s projected fund balance and doing some budget maneuvers, the board still needs to find $4 million to close the remaining gap and the OPEB can of liabilities is just sitting there waiting to be kicked again.
