Response from Sacramento County Office of Education

R1

1 – Recommendation 2.1 - All school Recommendation 2.2 – School Recommendation 2.3 – All school Sacramento County school district districts should have a funding district boards must find means boards should begin serious boards and superintendents, with plan and a schedule of other than pay-as-you-go for negotiations with their employee advice from actuaries and contributions in their 2011-2012 funding these on-going and unions to reduce benefits or accountants, should immediately budgets. increasing expenses. increase contributions. assess and quantify their long-term OPEB obligations and ramifications. District Response 1.1 Response 2.1 Response 2.2 Response 2.3 Arcohe Arcohe has an updated actuarial Arcohe, working with SCOE, has a Arcohe has a funding plan that has Arcohe already has negotiated a (K-8) study in place and accountants funding plan in place for the set aside an amount above the plan to eliminate post continue to monitor. current and future budgets. The pay-as-you-go amount. Arcohe employment benefits. funding plan has set aside an continues to explore all options amount above the pay-as-you-go for funding. amount. Arcohe continues to explore all options for funding. Center The District has quantified its long We are utilizing an annual pay-as- The Board is prepared to work The District negotiates each year (K-12) term OBEP obligation with an you-go approach to date. Plans towards creating a trust during with employee unions to actuary and will continue to assess have been discussed with the the 2010/11 fiscal year. All pay- reevaluate shared expenses. and reevaluate. A funding Board to establish a trust and a as-you-go expenses are in the During the 2009/10 fiscal year we mechanism will be in place within schedule of contributions. budget. established an HSA to save money the next fiscal year. for both the District and its employees. Elk Grove Please see attached letter dated Please see attached letter dated Please see attached letter dated Please see attached letter dated (K-12)(LT) 07/15/10. 07/15/10. 07/15/10. 07/15/10. Attachment A: Sacramento County School Districts’ and SCOE’s Responses to Grand Jury Report on “Unfunded Liabilities for Retiree Health Benefits” Elverta The district provides lifetime District utilizes an annual pay-as- District utilizes an annual pay-as- The district already negotiated a (K-8) benefits to only one person (retired you-go approach which is you-go approach which is cap on benefits at $4800 per year superintendent). No retiree appropriate for a plan with only a appropriate for a plan with only a ($400/mo) for full-time benefits for any other employees. single retiree. single retiree. The District is not employees. This is pro-rated for offering this benefit to anyone less than full-time employees. else. Folsom Cordova Based on actuarial reports updated The FCUSD Board of Education FCUSD does have a plan other The cost of OPEB has been (K-12) every three years, FCUSD has established an irrevocable trust in than pay-as-you-go. Each year, discussed with both employee identified its long term OPEB 2007. The current fund balance is FCUSD deposits the value of .5% - unions and they acknowledge the obligations and ramifications. $5.6 million leaving an unfunded 1% of its payroll into its on-going obligations and funding liability of $18.7 million. Each irrevocable trust to annually plan. year, FCUSD deposits the value of reduce its unfunded liability. .5% - 1% of its payroll into its irrevocable trust to annually reduce its unfunded liability. Galt Galt Elementary has a current Galt Elementary includes the Galt Elementary has used a pay- Galt Elementary currently has a (K-8) actuarial that quantifies its long- retiree benefit costs in each of its as-you-go funding source for many cap on employee health benefits, term OPEB obligations. It is multiyear analysis projections, but years. Given the current fiscal including retiree benefits. currently having this actuarial does not have a long term funding crisis, funding other than pay-as- Changing this cap will involve updated. plan. The creation of a plan will you-go is difficult, if not lengthy negotiations with involve lengthy negotiations with impossible to achieve. This would employee groups and does not employee groups. Due to the need to be a goal once the state look promising for compromise in current fiscal crisis, negotiating a has restored district finances to the near future, due to the current plan does not look promising due 100%, but not in the immediate fiscal crises already taking to the impact of furlough days, future. furlough days, etc. from etc. on employees. This would employees. This would need to be need to be a goal once the state a goal once the state has restored has restored district finances to district finances to 100%, but not 100%, but not in the immediate in the immediate future. future. Galt Does not apply because Galt Joint Does not apply because Galt Joint Does not apply because Galt Joint Does not apply because Galt Joint (9-12) Union High School District does not Union High School District does Union High School District does Union High School District does offer retiree health benefits. not offer retiree health benefits. not offer retiree health benefits. not offer retiree health benefits. Attachment A: Sacramento County School Districts’ and SCOE’s Responses to Grand Jury Report on “Unfunded Liabilities for Retiree Health Benefits” Natomas The Board is knowledgeable about The Natomas Unified School The District has a Negative The District has, and continues, in (K-12) the long-term fiscal impacts, having District has been covering the Financial Certification, and is the process of negotiations with received actuarial reports dated current year annual costs on a facing upward of a $17 million its employer groups for solutions June 2005, October 2007 and April Pay-As-You –Go basis. The district deficit over the next three years in to the budget crisis. 2010. had a partial funding plan, and the General Fund. The District will was contributing $638,000 in develop a funding plan for retiree 2006-07 and 2007-08, even benefits within the greater plan to though it was recognized that this solve the General Fund’s fiscal was not as much as the Actuary crisis. recommended. Due to the severe budget crisis the District is facing, the District discontinued the annual contribution as of 2008-09, and transferred most of the balance, $1,892,560 out of the Special Reserve Fund for Postemployment Benefits to the General Fund. River Delta In 2006 the District contracted with PARS provides a plan for funding The District does have a plan to The District has negotiated this (K-12) Public Agency Retirement Services the current and future liability. fund beyond the “pay-as-you-go” issue with the following results. (PARS) to assist with the The District contributes 1% of but due to the severe revenue The District’s health benefits are implementation of GASB 45. A few employee’s salaries to the plan reductions, the District does not capped at $400 per month and the of the services include maintaining and funds the current obligations have the resources to contribute District does not plan to increase a current actuarial study and on a “pay-as-you-go.” Due to the additional funds to the plan. As this cap. In addition, the post managing the trust. As information budget reductions, the District is funding permits, the District employment benefit is only is updated, reports are presented unable to fund above the current intends to fund above the “pay-as- available to qualifying retirees as to the District’s Board of Trustees obligations. The 1% contribution you-go.” follows: $300 per month, must and disclosed in the annual is included in the District’s budget have worked last 10 consecutive financial audit. The recent and treated like any other years for the District, and have actuarial report presented was for statutory benefit. reached age 55 or older. Finally, the period ending July 2008. The retirees will not receive this next report is due July 2010. The benefit beyond age 65. Therefore, District is in the process of updating the District’s costs are controlled the actuarial study as required. and not escalating. Attachment A: Sacramento County School Districts’ and SCOE’s Responses to Grand Jury Report on “Unfunded Liabilities for Retiree Health Benefits” Robla The Board has reviewed and The Board has discussed options The Board is currently exploring The District has negotiated health (K-8) discussed the actuaries as well as for the funding plan. These options to fund the outstanding benefits and currently offers had discussions with the District options are currently under OPEB obligation. This plan is sufficient, but not excessive, external auditors. They understand consideration and it is expected expected to be implemented by benefits to retirees. There are no the extent and obligations of that implementation will be 2011-2012. current year or future retirees unfunded OPEB as well as available in 2011-2012. eligible for lifetime benefits. understand that the District is Retiree benefits are capped at the currently “pay as you go”. Current rate the retiree was entitled to on consideration is underway for the last day of employment. resolution to fund future liability. SCUSD Already Implemented. The Will be implemented in the future. Will be implemented in the future. Agree. Implementation in process. (K-12)(LT) Sacramento City Unified School The District agrees that a funding Through the collective bargaining The District has recently reached District has been discussing the plan is necessary. One component process, the District has recently an agreement with its largest impact of the unfunded liability for of the funding plan will be reached an agreement with its union, the Sacramento City a number of years. In 2005-06, the employee contributions and this largest union, the Sacramento City Teachers Association, which will Board made a decision to set aside component will begin with the Teachers Association, under which result in a significant reduction of funds to contribute towards the start of the 2010-11 school year – the District and the union agree to the District’s OPEB liability. Under liability even though the District based on a recent agreement with “work together to create a Trust applicable provisions of the was faced with financial SCTA. The District begins the to administer and fund the GASB- Education Code, the agreement constraints. While the funding budget process for its 2011-12 45 liability.” The District has five with the teachers association was stream was not on-going, the budget in January. Given the different bargaining units that are reviewed and approved by the Board took the liability seriously instability and uncertainty in state each represented by different Sacramento County and took early steps to begin funding of education and the unions. The District will be Superintendent of Schools. This addressing it. The District conducts record budget cuts that the working with each of these agreement will lower health care an actuarial study every two years District has been forced to absorb, bargaining units to reach costs for both current and retired to quantify and project liabilities additional funding commitments agreement on a Trust under which employees by making the related to the District’s other post- by the District in its 2011-12 the District can pre-fund its OPEB following changes: employment benefits (OPEB) budget will depend upon obligations. Under an agreement a) Change in Health Net obligations. The most recent, additional agreement and changes with the District’s teachers, prescription program to December 1, 2008, actuarial study with our collective bargaining current certificated employees will increase co-pays. was presented to the Governing partners and the amount of new be making contributions towards b) Change in the out-of-area Board and the public on March 4, funding the District receives, the cost of their retiree health coverage for retirees over 2010. The next actuarial study will through COLA to the District’s care beginning with the 2010-11 65 - to bring in line with be conducted as of December, apportionment, grants or other school year. These pre-funding costs for the District’s in- 2010 and the results of that study sources. contributions must be placed into area program. will similarly be presented to the a Trust that will be jointly c) Extending in the vesting Governing Board and the public. In administered. period to qualify for addition to conduction periodic retiree health benefits Attachment A: Sacramento County School Districts’ and SCOE’s Responses to Grand Jury Report on “Unfunded Liabilities for Retiree Health Benefits” actuarial studies, the District is also from the current 10 years conferring with its consulting to 15 to 20 years, actuary to determine the projected depending upon the age savings of recently negotiated of retirement. retiree health benefits and d) Allowing retirees eligible potential areas of change to create for health benefits to more savings. decline coverage in return for a stipend equal to 50% of the premium cost. e) Begin employee contributions towards the cost of retiree health care. Contributions will by $15 per month in 2010/11 and will increase to $20 per month in 2011/12. These contributions are to be deposited into a jointly administered Trust. The District understands that the issue of unfunded OPEB liability will not be resolved by the changes that the District has already negotiated and that the solution to this issue will require additional and continued attention over several years. Negotiations with the District’s unions over health benefit costs will resume as the relevant contract articles open for negotiation under the laws applicable to collective bargaining. Moreover, a committee of bargaining unit representatives and district staff will meet starting in July to discuss potential funding ideas. Attachment A: Sacramento County School Districts’ and SCOE’s Responses to Grand Jury Report on “Unfunded Liabilities for Retiree Health Benefits” San Juan 2007-08 was the first year that On December 11, 2007, the San San Juan Unified School District The District will include proposals (K-12) larger school agencies are required Juan Unified School District agrees with the recommendation. to address the OPEB liability with to begin reporting the Other administration presented the both represented and non- Postemployment Benefits (OPEB) 2007-08 First Interim Report to The District will examine represented employees during liability. the Board of Education. The establishing an irrevocable trust future bargaining. multi-year projection included an for retiree health benefits. San Juan Unified School District annual contribution starting in The District will examine options reports the OPEB obligations in the 2008-09 to fund the Other Post with employee groups to include annual audit report prepared by Employment Benefits (OPEB) modifying benefits; pre-funding the district’s independent external liability over a 30 year period after the retiree obligation; increasing auditor and presented to its Audit completion of last PARS payment. employee/retiree contributions; Committee and Board of Education. and/or establishing longer vesting On March 11, 2008, due to the periods. 2007-08 Fiscal Year Note 9 of the State budget, SJUSD Audit Report-Audit Committee met administration recommended December 16, 2008 and the Board delaying the OPEB contribution of Education met December 16, indefinitely. 2008. The State school funding budget 2008-09 Fiscal Year Note 9 of the crisis continues with funding being Audit Report – Audit Committee reduced by -15% (revenue limits) met December 12, 2009 and the and -20% for categorical funds Board of Education met December from a base of 2007-08. 15, 2009. Twin Rivers The Twin Rivers Unified School TRUSD has a funding plan and an At the current time, the lack of TRUSD already reduced benefits (K-12) District annually contracts with an irrevocable trust fund for OPEB adequate State funding does not coverage for employees and actuary to determine the liability in place which is reviewed permit the District to continue continues to maintain a cap for magnitude of the OPEB liability. and updated annually. The funding the irrevocable trust fund retirees in order to control current Although an on-going funding contribution is based on projected that was established to fully fund OPEB costs and future liability. mechanism is in place, with State pay-as-you-go financing our OPEB liability. Until such time revenues cut by over 20% it is not requirements, with an amount to as funding improves, the District possible to fully fund at this time. fund the actuarial accrued liability must use pay-as-you-go. as determined annually by the board. Attachment A: Sacramento County School Districts’ and SCOE’s Responses to Grand Jury Report on “Unfunded Liabilities for Retiree Health Benefits” SCOE With advice from actuaries and SCOE does have a funding plan SCOE does have a funding plan SCOE already negotiated their (LT) accountants SCOE has and that is updated on an annual basis. other than pay-as-you-go for plan to reduce benefits and continues to assess and quantify its SCOE currently funds at a rate of funding these on-going and increase contributions when they Long-Term OPEB obligations. An 6% of employee’s salaries. The increasing expenses. SCOE established the trust in 2006. on-going funding mechanism is in contributions are appropriately currently funds at a rate of 6% of SCOE negotiated increased vesting place to fully fund the liability. In budgeted in all budget years. employee’s salaries. requirements, decreased benefits, 2006, SCOE implemented a trust employee contributions, and agreement with PERS to address employer contributions. No other the long-term unfunded liabilities changes are necessary at this associated with life time health time, but we do reevaluate benefits. annually.