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September 23, 2010

Rethinking retiree benefits in the Ag(ing) of Aquarius

Faced with a potential 26 percent hike in its tax levy, the Town of Woodstock is weighing a plan to require some retired employees to pick up a bigger share of their health insurance.

Promise now, pay later. That's the approach local governments, school districts and the State of New York itself have taken to funding retiree health benefits.

The state faces a $60 billion liability for unfunded other postemployment benefits (OPEB). This is the amount of retiree health coverage already earned or "accrued" by current and retired employees that the state has promised but not set aside money to pay for.

In the case of Woodstock, the town board is considering changes that would hike retiree health insurance contributions for approximately 25 non-union employees. Their costs would increase 25 percent from 15 percent of premiums. The changes are contained in a proposed employee handbook that would replace a 2003 version.

The changes would not apply to unionized employees, according to the Kingston Daily-Freeman. The story does not say whether retiree health benefits are protected by existing union contracts.

"The non-union employees strongly feel proposed changes are unreasonable and arbitrary," protested Deputy Town Highway Superintendent Kevin Peters.

In defending the proposed changes, Town Supervisor Jeff Moran said the town has tried "to treat union and non-union employees as equally as possible." For example, when union employees got a 4 percent raise this year so did non-union workers.

A look at Woodstock's proposed $6.97 million budget explains why the town is looking to trim costs. It would raise property tax levy by 26.3 percent.If approved by the town board, overall spending would increase 9.8 percent.

Among the biggest cost drivers: general fund employee benefits, up 28 percent; and highway department employee benefits, up 14 percent.

While the town has some control over those costs, it has no control over the weather. Nevertheless, the proposed budget assumes no increase in snow removal costs.

Posted by Lise Bang-Jensen

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