READING SEAL

By PATRICK BLAIS

READING - Town Meeting recently approved a proposal to more than double a previously authorized $218,500 contribution to Reading’s massively underfunded post employment benefit (OPEB) liability.

During the second night of Town Meeting deliberations late last week, assembly representatives unanimously and without debate approved Article 7, which supersizes the planned transfer into a special OPEB trust to $468,500.

The Town Meeting action marks the first time since 2019 that Reading has appropriated funding to address the community’s OPEB shortfall, which according to state officials stands somewhere in the vicinity of $73 million.

Though doubling the size of the originally proposed trust fund deposit for this year, town officials, in response to new Finance Committee guidelines adopted in 2018, had until the start of the COVID-19 pandemic been slating at least $500,000 a year towards the OPEB account.

The extra $250,000 influx in FY’22 funding comes from an unexpected financial windfall realized by lower than expected costs for the town’s share of workers’ health insurance premiums.

“This article is to transfer the appropriation for the OPEB contribution that was approved as part of the FY’22 budget. It includes the original $218,500 appropriation that was approved last April and the additional $250,000,” explained Town Accountant Sharon Angstrom during last Thursday night’s limited discussion on Article 7.

Late last month, Town Meeting acknowledged the unexpected $650,000 savings in health insurance line-items by voting to amend the FY’22 budget. About $400,000 of the savings was under Article 5 redistributed for various other current year budget needs, which among other things included capital projects, the acquisition of COVID-19 testing kits, the $17,000 retirement bonus being paid to former Town Manager Robert LeLacheur, forthcoming housing and municipal land studies, and a transfer to the town’s underfunded snow and ice accounts.

According to Town Manager Fidel Maltez, because of those other current year budget needs, municipal officials recommended against slating the entire $650,000 health insurance windfall towards OPEB. However, Maltez, responding to a question from Town Meeting representative Charles Robinson during the first night of this spring’s annual assembly, also recognized the importance of getting back to making regular contributions to the financial liability.

“Where do we stand with OPEB? I know we’re still a ways off, but why not put all of it in there?” asked Robinson of the health insurance savings.

“With the impact of COVID-19, we have a few other asks…We didn’t want to get too aggressive with OPEB given the other requests that are before you,” responded Maltez, who outlined the series of other FY’22 budget amendments. “However, in FY’23, we will be getting back to funding OPEB at $500,000 a year.”

Not to be confused with the community's unfunded pension obligations, OPEB deals strictly with state and local retirement systems' inability to cover financial obligations for retiree benefits, including the provision of promised medical, dental, disability, and life insurance coverage.

Back in 2001, the Government Accountability Standards Board (GASB) directed all cities and towns to begin the process of calculating the size of their OPEB funding gaps, as virtually no community had any reasonable grasp on those figures.

As the result of subsequent GASB statements, initial estimates of each community's OPEB debts, for both active and retired workers, were released in 2014. However, with workers continually flowing in and out of the system - and returns on investment income resulting in further changes to outstanding OPEB balances - the size of the debt is in constant flux.

Though not yet under any obligation to do so, Reading has so far set aside around $6 million to cover its estimated $73 million OPEB liabilities.

According a state report issued at the outset of this year, both state and municipal entities owe roughly $56.1 billon towards outstanding OPEB commitments.

It’s unclear when state and federal authorities will require communities like Reading to begin formally funding their OPEB debts. However, many expect that such a mandate will be enacted once cities and towns fully fund their completely separate pension system liabilities.

The town is this year slating around $5.7 million towards its retirement system debt, which heading into FY’22 stood at around $52 million.

Reading is expected to fully pay off its outstanding pension system obligations by 2029. In FY’23, the town’s total contributory retirement system payment will increase to around $6.5 million.

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