Lawmakers hope to put OPEB elephant in the room behind them
It is an acronym that has been bantered about at the West Virginia Legislature in recent years to identify one of the most critical financial issues in the last quarter century. It is OPEB, or Other Post Employment Benefits, a staggering $10 billion long-term liability created by past legislatures that preferred to provide future fringe benefits for teachers and other public employees in lieu of current day pay raises.
The first significant step to resolve this problem came two months ago when the Finance Board for the Public Employees Insurance Agency voted to cap the state’s contributions to retiree health insurance premiums at current levels except for a maximum annual increase of 3 percent.
This move cut the state’s long term OPEB obligations from more than $10 billion to a more manageable — although still daunting — $5 billion. This positive step for the state budget has a down side though. It is expected to eventually make retiree premiums unaffordable for those state and public school employees who were hired before July 1, 2010.
Then last week, Gov. Earl Ray Tomblin, one of the principal players in the legislative sessions that created this fiscal nightmare during his lengthy time as a legislative leader, submitted legislation that is intended to resolve the state government’s fiscal responsibility by the year 2037.
It was so much easier in the 1970s and 1980s for the legislature to approve future retirement benefits for public employees than to find a way to provide immediate salary increases. So the elephant in the room was ignored for decades.
Now, at last legislative leaders are anxious to get this solution approved and off their minds. So it zipped out of the Senate Finance Committee last Tuesday — the same day it was introduced — and passed the Senate unanimously the next day. Senate Finance Chairman Roman Prezioso, D-Marion, made it clear legislators want it behind them as soon as possible. But when it came to the House of Delegates on Thursday, it was sent to the House Finance Committee, so it’s not a done deal yet.
This plan calls for $35 million a year of personal income tax collections that currently are earmarked for the current deficits in the former state-run workers compensation program that has now become a private operation. This obligation will be paid off by 2016.
Last year, similar legislation gained approval in the Senate but stalled in the House of Delegates on the final day of the regular session because the House leadership wanted to take money from the state’s Rainy Day emergency reserve funds to pay down this liability. This year, lawmakers started early to put this thorny issue behind them.
Now they can focus attention on the next major fiscal problem — the state’s large expenditures for Medicaid, the state-managed health plan for the poor, elderly and disabled that make up such a large portion of the state’s population.
The governor’s budget for the coming fiscal year beginning July 1 has $109 million of surplus revenue earmarked for that effort but the Medicaid costs the coming year will be a major part of a projected $389 million budget shortfall in the state fiscal year that begins July 1, 2013.
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Meanwhile, existing state law requires that tolls on the 88-mile West Virginia Turnpike between Charleston and Princeton must be removed when the current bond issue is paid off in 2019. But a bill to remove those tolls on Feb. 1, 2020 has now been modified to make sure the state’s Division of Highways can afford to assume financial responsibility for maintaining this highway.
Delegate Marty Gearheart, R-Mercer, is the sponsor of a measure that provides for the demise of tolls, but an amendment has already been added in the House Roads and Transportation Committee to allow the tolls to be lifted only if “proper funding” to maintain the road can be assured.
Engineer Marvin Murphy of the Division of Highways told the House Roads and Transportation Committee last week funds in his agency are a problem and the issue of money for upkeep will have to be resolved. Tolls on the road were increased in 2009 for the first time since 1981 and currently provide about $20 million each year that is being used to cover a deferred maintenance program.
Existing state law requires tolls to be removed when the current bonds are retired in 2018. The bill now goes to the House Finance Committee where presumably the issue of the Division of Highways’ fiscal ability to handle this new assignment will be considered.
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Finally, an estimated 152,000 West Virginians suffer from substance abuse and need treatment for this problem. But so far all the efforts to address the problem continue to ignore any practical approach to cure these addicts because it will obviously be expensive. Even the most fervent advocates of a tax increase on beer or liquor to provide the $10 million to $20 million a year that will be needed to provide this kind of help admit there is no way the legislature will accept this approach.
So far, everyone from the governor on down wants to solve the problem by trying to limit access to harmful drugs. But that seems unlikely to substantially reduce the problem any more than building more prison cells for these individuals will solve the dilemma.
