District is stretching out OPEB burden

For the next 13 years, taxpayers will foot the bill for the $23 million bond the Brainerd School District levied on the tax rolls for its Other Post Employment Benefits, or OPEB liabilities.

The district's preliminary 2010 levy will be nearly $16 million, a 15.1 percent increase from last year. Of that, $2.2 million represents the OPEB Trust levy.

Steve Lund, the district's director of business services, explained to school board Finance Committee members Tuesday that the district's OPEB Trust disbursement model is one that will become self-sustaining for 30 or more years to come.

This is a significant difference from other districts that don't have a similar long-term solution to curb and pay for its retiree costs, he said.

School districts across the state are mandated by state statute to provide retirees with access to their health care plans until the retiree reaches age 65. The Legislature in 2008 authorized districts to levy their projected retiree costs rather than paying for these costs through its operating funds as they had traditionally done.

Lund said the district will need to provide seed money for its OPEB fund and occasional disbursements from the general fund into its severance fund to create a self-sustaining model. The OPEB Trust is managed by Bremer Trust and will have a committee that oversees the fund.

In addition to a 5 percent return the district hopes to earn in interest on its OPEB Trust, Lund said the district hopes to "significantly eliminate" its OPEB liabilities in the future through collective bargaining with its unions.

"We'll need to take some seed money from our general fund to achieve this, but it'll pay us back three-fold when we achieve this," said Lund. "We'll have the structure paid off in 13 years and this really will have an indefinite life of its own."

Lund said the district's auditors have told him that other districts are looking at taking out the maximum amount each year of its OPEB Trust, which will deplete their OPEB funds in 13 years.

"I think this is a very conservative model, to use a little of our own money, tax money and subsidize this, to fill in the gap of that 5 percent return," said Lund. "Rather than pay it off in 13 years, deplete it and wake up and go, "Oh gosh, what are we going to do now?'"

The committee recommended the board approve the transfer of $671,000 from the general fund to the OPEB designated fund.

JODIE TWEED may be reached at jodie.tweed@brainerddispatch.com or 855-5858.