The Times West Virginian

February 22, 2012

West Virginia earns its place as national leader in handling OPEB

Times West Virginian

FAIRMONT — West Virginia is basking in its status as a national leader.

When Gov. Earl Ray Tomblin signed a bill into law Monday, West Virginia became the first state in the country to have a comprehensive plan in place to address the debt created by health-care costs for future state retirees. These costs are called OPEB, which stands for Other Post-Employment Benefits.

It had been mandated that government employers pay annual amounts toward the funding shortfall or else list those amounts on their books as debts. At least three-fourths of the states, though, continue the pay-as-you-go approach toward these debts that preceded the 2004 accounting standard, according to the National Conference of State Legislatures.

The West Virginia legislation will shift an estimated $820 million previously charged to county school boards for OPEB costs. Tomblin said it will also save the school boards $485 million in future payments.

The bill also adds to state law the decision by the Public Employees Insurance Agency to stop subsidizing the health-care premiums of retirees. That halt starts with employees hired after June 2010. The measure also reserves $5 million annually to fund a possible future incentive for these post-subsidy hires.

PEIA cut the estimated OPEB shortfall in half, from $10 billion to $5 billion, by agreeing in December to cap the annual growth of premium subsidies at 3 percent. The follow-up legislation aims to close the remaining funding gap by 2036.

“We in West Virginia are the first to solve it,” Tomblin said at a bill-signing ceremony. “We take the last step toward ending our long-term debts.”

The governor labeled the legislation “a monumental step forward.”

Under the plan, $30 million now taken from the personal income tax to pay off the old workers’ compensation debt will go toward OPEB, beginning in four years.

Tomblin, former Senate finance chairman, pointed out a 40-year plan was devised to pay off the teachers’ retirement debt.

“OPEB will be solved in half that time,” he said.

“Ratings agencies will look more favorable on West Virginia as we institute a plan to pay off OPEB.”

Boards of education will now have more funds to cover immediate needs in the school systems across the state.

“This legislation already has the rest of the nation looking at us,” Tomblin said.

“States seek to follow our footsteps. This legislation is about the future of our children.”

“We’re leading the charge,” Senate President Jeffrey Kessler, D-Marshall, said. “We’re getting things done. We have all long-term debts in order. That’s going to have huge dividends for the state of West Virginia, for my children and my grandchildren. Money used to pay for sins of the past will no longer be required to do that. We can look at other needs.”

We’re confident these needed changes to OPEB will mean a better-funded and stronger school system.

As we’ve stressed over the years, any talk of a better, more prosperous West Virginia starts with education.

Gov. Tomblin, leadership in the West Virginia House and Senate, and the Marion County delegation of Sen. Roman Prezioso (Finance Committee chairman) and Delegates Mike Caputo (majority whip), Tim Manchin (Finance Committee) and Linda Longstreth deserve credit for working together to solve the OPEB liability problem.