By David Yancey
The April 2021 meeting of the Futuris Retirement Board Of Authority (RBOA) meeting took place on April 21, 2021 via Zoom. If I were writing this for a room full of economists, this opening line would be exciting and their ears would perk up and off we could go. But we are not economists, at least not most of us. But it is important to understand why we should be interested about this meeting. The reason is that it is about US and our HEALTH CARE. So pay attention, and off we go.
There were the obligatory announcements that Patrick Butler and David Yancey were recently appointed to the Board representing the Retiree Chapter of AFT 6157 (AFT 6157R). The meeting was chaired by Danny Hawkins and all representative groups were in attendance including Scott Rankin of Benefits Trust and Cary Allison of Morgan Stanley. The agenda was adopted and the various financial reports and statistics were shared with the Board which is pro forma for these kinds of meetings.
Most of the specifics in these reports are mainly of interest to the pre-1982 retirees whose medical coverage is paid for by these bonds, but the fact is that these bonds are why the your union was able to negotiate for full time faculty who are post-1982, and retired at 60 or later, full medical benefits up to the qualifying age for Medicare, or age 65. So for a little history let’s look back.
In the years prior to 2008-9 many state and local governments around the country had large non-pension unfunded liabilities looming over their budgets for retiree medical benefits. In our district under the cooperative leadership between the AFT 6157 and the district leadership, a decision was made to purchase what were called OPEB (Other Post-Employment Benefit) bonds to help underwrite the costs of these non-pension related unfunded liabilities. So the plan was to buy these bonds and hope that the bonds would increase over time and balance their costs and the unfunded liability.
Fortunately, for the district and the pre-1982 retirees, the purchase of these particular types of bonds took place during a dramatic downturn in the economy which meant the costs of the bonds were lower and as the economy dramatically improved so did the value of the bonds. So our ability to cover the costs of this large health care liability has expanded enormously with the rise of the stock market. To put it simply the district is flush with money to cover these medical health care costs. As reported at this meeting, we hold $11.7 million in surplus today as it relates to our retiree medical care costs. To put it another way, the growth in value of these bonds has been so dramatic over the years that the district has been paying the annual costs for retiree medical care costs out of the profits from the bonds and still has not spent any of the original value of the bonds and still has a sizable surplus.
As a matter of fact, as time passes, one of the other factors that impacts these funds is that the district’s liability obligations for paying medical costs diminishes as the number of pre-1982 retirees gets smaller which means their surplus grows even larger.
As part of their normal report, the Morgan Stanley representative gives their firm’s prediction for the near term. They predict continued expansion in the economy and increasing growth in bond value so the future of our ability to pay for retiree health benefits is solid and well-funded. But one of the most important questions facing our union is this: as we reach the time when the bonds will be paid off and the District’s obligation expires, what happens to any remaining sizable surplus revenue? More on that later.