{"id":10489,"date":"2018-05-16T12:00:55","date_gmt":"2018-05-16T16:00:55","guid":{"rendered":"https:\/\/www.theseventhstate.com\/?p=10489"},"modified":"2018-05-16T21:41:55","modified_gmt":"2018-05-17T01:41:55","slug":"moco-diverts-62-million-of-retiree-health-money-for-election-year-spending","status":"publish","type":"post","link":"https:\/\/www.theseventhstate.com\/?p=10489","title":{"rendered":"MoCo Diverts $62 Million of Retiree Health Money for General Spending"},"content":{"rendered":"

By Adam Pagnucco.<\/em><\/p>\n

Remember the county\u2019s $120 million budget shortfall<\/a>?\u00a0 While up to half of it may have been caused by tax planning by rich people, the rest was in broad shortfalls across a range of taxes.\u00a0 The County Council approved a FY18 savings plan of $53 million in January<\/a>, but what happened to the rest of the shortfall?\u00a0 Nothing was published in the press.\u00a0 In fact, the council did cut another $62 million last month and, it seems, no one noticed.<\/p>\n

What happened?<\/p>\n

One of the county\u2019s long-term obligations is money it owes for retiree health benefits, also known as other post-employment benefits (OPEB).\u00a0 These benefits are becoming rare in the private sector but they are still common in state and local governments.\u00a0 In 2008, the Governmental Accounting Standards Board (GASB) told<\/a> state and local governments that they had to begin accounting for OPEB and prefunding it in the same way that they do for pension benefits.\u00a0 In other words, each government would have to publish a funding ratio and start saving for future benefits rather than simply paying as they went.\u00a0 MoCo had a plan to ramp up OPEB prefunding, but the Great Recession hit and the county couldn\u2019t contribute towards OPEB for a couple years.\u00a0 Since then, the county has socked away $797 million to meet future OPEB benefits<\/a>.<\/p>\n

That sounds like a lot of money, but the county\u2019s actuarial liability for OPEB<\/a> is currently calculated at $3.3 billion, meaning that its funding ratio is 24%.\u00a0 That would be terrible for a pension plan \u2013 consider that the county\u2019s pension plan is currently 92% funded.\u00a0 But 24% is actually decent for an OPEB plan considering that state and local governments have only been prefunding them for ten years.\u00a0 The State of Maryland\u2019s OPEB plan was just 3% funded in 2015<\/a> and MoCo\u2019s ratio was better than 38 states<\/a>.\u00a0 Even so, the county has a lot of work to do to get its funding ratio up and it makes millions in contributions every year to get there.<\/p>\n

In FY18, the county had budgeted $122 million for OPEB contributions<\/a>.\u00a0 But the county had a problem: less than half of its FY18 shortfall of $120 million had been eliminated.\u00a0 As late April came around and the FY19 budget process was underway, the County Executive and the County Council had a choice.\u00a0 They could cut over $60 million in current year spending two months out from the primary election.\u00a0 Or they could find the money somewhere else.<\/p>\n

You guessed it \u2013 in a resolution<\/a> introduced and adopted on the same day, April 24, the council unanimously cut $62 million from the county\u2019s FY18 OPEB contribution.\u00a0 This fiscal year\u2019s spending on services won\u2019t take another cut, which is great news for incumbents running for reelection or higher office.\u00a0 And as Bethesda Magazine reported<\/a>, the council has proposed adding up to $21.6 million more to next year\u2019s budget and has so far identified just $1.6 million in offsetting spending cuts.\u00a0 How do you think they will make up the difference?<\/p>\n

The County Council did not send out a press release headlining the diversion of $62 million of retiree health contributions to support general spending on April 24.\u00a0 It was buried in a press release spotlighting a resolution on equity data.\u00a0 As a result, the press totally missed it.<\/em><\/p>\n

\"\"<\/a><\/p>\n

Now look, folks.\u00a0 The county is good at saving money.\u00a0 They are setting aside close to 10% of revenues as reserves, an important reform adopted during the Great Recession that helped save the county\u2019s AAA bond rating.\u00a0 The pension fund is in excellent condition at 92% funding.\u00a0 And as stated above, the county has done a better job at prefunding retiree health benefits than most other places.<\/p>\n

But grabbing retiree health contributions and using them for general spending is something that is normally done in a recession when the alternative is layoffs.\u00a0 That\u2019s what happened a decade ago and it was justified considering the financial trouble the county was facing.\u00a0 Now, despite huge<\/a> evidence<\/a> to the contrary, county leaders are telling us that the economy is in great shape.\u00a0 The Council President told Kojo Nnamdi<\/a> a few days ago that we have \u201ca very strong economy\u201d and \u201cthis is a good time in Montgomery County.\u201d\u00a0 Well, if the economy is so great, then why redirect $62 million of retiree health money to prop up this year\u2019s budget?<\/p>\n

And if we are diverting retiree health money now when times are supposedly good, what will happen when the next recession comes?<\/p>\n","protected":false},"excerpt":{"rendered":"

By Adam Pagnucco. Remember the county\u2019s $120 million budget shortfall?\u00a0 While up to half of it may have been caused by tax planning by rich people, the rest was in broad shortfalls across a range of taxes.\u00a0 The County Council approved a FY18 savings plan of $53 million in January, but what happened to the … Continue reading MoCo Diverts $62 Million of Retiree Health Money for General Spending<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[151,33],"tags":[1545,1368],"class_list":["post-10489","post","type-post","status-publish","format-standard","hentry","category-adam-pagnucco","category-budget","tag-adam-pagnucco","tag-budget"],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p4mKJE-2Jb","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=\/wp\/v2\/posts\/10489","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=10489"}],"version-history":[{"count":6,"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=\/wp\/v2\/posts\/10489\/revisions"}],"predecessor-version":[{"id":10578,"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=\/wp\/v2\/posts\/10489\/revisions\/10578"}],"wp:attachment":[{"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=10489"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=10489"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.theseventhstate.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=10489"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}