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Member's Press Release

Release Date: 01/29/2010
Contact: Raamie Barker, 304-357-7887 or Heather Nelson, 304-357-7915

Senate OPEB Study Group

STATE SENATE OPEB STUDY GROUP COMPLETES ITS REPORT; RECOMMENDATIONS ADDRESS $7 BILLION UNFUNDED LIABILITY

CHARLESTON: THE CAPITOL: Facing a rising tide of debt created by health care demands of retirees today and for the future, a special study group appointed by State Senate President Earl Ray Tomblin has reported its findings and results, which Sen. Brooks McCabe says “must be implemented if West Virginia educators, public employees and other entities have a financially solvent retiree health care program.”

“The public and those affected employees must understand our recommendations will require everyone to sacrifice some and share in meeting the cost of what is being called OPEB—Other Post Employment Benefits—so that in a few years we will be able to return to budgets which can provide financial rewards and incentives to both the professionals and employees of our state and its educational systems,” said Sen. McCabe.

Actuarial reports released last year stated the costs must be accounted for by all governmental organizations, groups and agencies with the responsibility to pay for post employment benefits, which cover medical insurance costs of retirees. It effectively created a liability issue, not only for West Virginia but a host of other states. President Tomblin said other states have not even begun to address the problem. “We need to get a jump on it and on it now, before the liability becomes so large that it literally consumes all our future economic growth,” the President added.

Sen. McCabe, who chaired the study group, described the effort as “heavy lifting for the legislature and everyone else” over the next five years, while state leaders get a grip on beginning to finance the unfunded liability which amounts to approximately $7.8 billion.

“This can be accomplished with fifty percent administrative and fifty percent legislative efforts,” Sen. McCabe said. “Right now our annual growth in Medicaid and PEIA costs are approximately to the normal growth of the state’s general revenue budget, and as long as that lasts there cannot be any consideration for pay raises or other critical issues needing attention by the State.”

Sen. McCabe said the Senator’s special study group was challenged by President Tomblin to develop a solution “sooner rather than later” even though it is an election year, and will no doubt result in strong political debate on the issue. “But, we just cannot wait for a more convenient time,” Sen. McCabe added. “If we can overcome the financial and political challenges this represents, West Virginia will not only be a national leader in this effort, it will result in a stronger fiscal position for the state.”

Sen. McCabe noted that past efforts to reduce state liabilities in state retirement systems and Worker’s Compensation, have gained the attention of financial markets resulting in improved bond ratings. “This is big,” said Sen. McCabe, “...just think of what this will mean in savings when we return to the bond markets and can obtain funds with reduced interest rates, and it is all tied to our ability and our reputation of being able to keep the state on a solid financial foundation.”

A recent survey stated West Virginia is a national leader in terms of economic stability due largely to its efforts to protect its ability to pay for entitlements, by paying down unfunded liabilities. “While this is important,” Sen. McCabe said, “the most important thing to remember is that we have a responsibility, not just the legislator, but every taxpayer and every citizen, to meet our public obligations. And, we want to be able to do that without having to sacrifice a great deal more in the future.”

Part of the program to bring down the $7.8 billion liability includes paying benefits “as you go” as well as creating proper reserves for paying those benefits, Sen. McCabe said. “We will have to institute a number of reforms in the PEIA system in order to continue to reduce costs, create more efficiency in the system and aggressively manage medical inflation.

“We really must do all of this, what is being proposed, or we can do nothing and sink further into debt. If it can be achieved, we can get the liability down without increasing taxes and that ultimately allows the state to properly fund need programs and salary increases for our hard working state employees,” Sen. McCabe said.

“I just cannot emphasize strongly enough, the need to implement all of the recommendations, not just some of them as interest groups may be proposing.”

Sen. McCabe noted that President Tomblin’s close inter-action with national legislative organizations helped to develop the proposals, and will enable the state to get ahead of the issue nationally. “The Senate’s leadership recognizes the problem and fully supports what the study group is attempting to do. The House is now looking at the issue and carefully reviewing the Senator’s study group suggestions.

The group spent about three months of study to come up with suggestions for the Legislature. Those serving on the Senate Study Group on OPEB in addition to Sen. McCabe, included Sen. Walt Helmick, Sen. Richard Browning, Sen. William Laird, Sen. Robert Plymale, Sen. Roman Prezioso, Sen. Mike Hall and Sen. Dave Sypolt.

The proposed suggestions are listed below:

.

OPEB liability reduction suggestions for education and state employees included:

OPEB suggestions for employees of municipalities, counties and other non-educational boards.


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