NORWICH – An audit suggesting that Chenango County’s annual post retirement system cost is approaching $7 million per year has raised local lawmakers’ ire and fear.
The Governmental Accounting Standards Board (GASBY), contracted by the federal government, reports that the county paid only $1.5 million in medical, dental, and vision benefits for eligible retirees and their spouses in 2008, eventhough an actuarial valuation calculates the ongoing cost to be the much higher figure.
Chenango County Treasurer William E. Evans said the amount was reported “for shock value” only, and was not a surprise to department directors. Pharsalia Supervisor Dennis Brown said he resented “another group of guys, so-called experts, rolling into town to give Chenango County bad news and not letting us do anything about it.”
GASBY regulations prevent counties from creating set aside accounts to fund the liability.
On the other hand, Town of Smyrna Supervisor James B. Bays questioned whether the board should somehow invest in order to afford the future costs. Because Evans will step down after this year, Bays said it would be prudent to glean as much of his 24 years of expertise on how to plan ahead for the exposure.
Preston Supervisor Peter C. Flanagan used the GASBY audit to back up his historical requests for benefit details when budgeting for the departments of highway, recycling, landfill and corrections. He has often noted that the county’s 64 corrections officers will command some of the most expensive post retirement packages in the county, yet their current benefits aren’t reported.
“We don’t see those before we budget for most departments,” Flanagan said. “The retirement system is on our backs. They (corrections officers) are going to have a 20 to 25 year package when they retire. Maybe we should change our position (about offering benefits) down the road.”
The treasurer’s office combines fringe benefits budgeted each year into one line item, rather than listing them separately by department (except for social and mental hygiene services which are primarily state-funded). In 2010, Chenango County budgeted about $8 million - including the $1.5 for retirees - for hospitalizations, retirement, social security and workman’s compensation to the majority of working employees.
City of Norwich Supervisor Linda E. Natoli, who chairs the Public Works Committee, concurred that lawmakers ought to know what a department costs in total.
“We don’t know what an individual department costs us because there’s a piece here and a piece there,” she said.
Evans, who attempted to explain the budgeting system to lawmakers in standing committees and before the full board during June and again this month, said he had shared fringe numbers with supervisors in workshops held last year. While he said he recognized that the numbers would make budgeting more transparent for decision-makers, he questioned the return for taxpayers.
“Budget analysis is always a good thing. Again, we will do what the board wants us to do, but the history is that percentages of health care, etc. were captured in one place rather than in separate departments in order to let the general public see what the county spends per health insurance.”
He said asking department directors to estimate benefits costs “balloons” their budgets, leaving unappropriated balances remaining. “They are never sure if the numbers are right, and it does nothing in terms of building savings for taxpayers,” he said.
Chenango County Finance Committee Chairman Lawrence Wilcox said personal privacy laws prevent disclosure of actual numbers. “Some departments have one or two persons in them. Or, it’s the same thing with 75 people in a department. When the numbers are up, people will know who got sick,” he said.
Because health insurance amounts aren’t calculated until late in the budgeting cycle, Wilcox said they would also be “after the fact projections.”
Nonetheless, Evans said he would provide departments and committees with a general percentage of the total employee benefit cost based on a five year history for this year’s budgeting cycle. “We might try to do some breakouts as long as we don’t breach employee confidentiality,” he said, cautioning that initiating a charge-back system per department for the costs would mean hiring more employees in his office to do the work.
Evans agreed with Flanagan that GASBY can be used as a tool to determine future year’s budgets. It could be used an indicator as the board goes into the future to negotiate labor rates, he said.
Chenango County Insurance Administrator RC Woodford said GASBY’s findings aggregate the long-term obligations using industry standards out over 30 years. Evans said it was “a guesstimate” with various components “that may or may not be correct” of what the county would owe retirees over their lifetime if county business were to stop on any given day.
Neither county official said he was surprised by the audit’s findings, and argued that the actual yearly exposure is $1.7 million.
“Come fall, we are still going to budget what we expect our obligation to be, which is $1.7. That’s the number to keep an eye on,” said Woodford.
Evans said, if allowed by GASBY, the county, “in a businesslike way” would set aside an identified sum that would target the guesstimate.
Fifteen years ago, at the advice of then Board of Supervisors Chairman William Craine (who is running for county treasurer in the fall), the county did begin to carry a surplus for the purposes of absorbing health care expenses that might spike or fall on any given year. The fund has fluctuated from a half a million to a million dollars, but did dip to zero about four years ago when there was an extremely high number of claims.