The Hot Beat


The second-day story, with your help. Call Gazette reporter Adam Belz at (319) 398-8273 or e-mail him:

Promise comes with price

I couldn’t get this posted to the website this weekend. Here are the opening grafs of my Sunday story on government health insurance benefits and GASB 45:

CEDAR RAPIDS – Iowa’s school districts, cities and counties are not setting aside what may be billions of dollars needed to pay for retirees’ health care in the future, new accounting standards are showing.

Local governments generally fund health benefits for retirees on a “pay-as-you-go” basis. But an accounting rule that goes into effect this year is requiring officials to project the liability those benefits represent decades in advance.

Whether school boards, city councils and county supervisors start setting aside money each year for that liability is up to them. But the rule is, for the first time, forcing those governmental entities to measure the cost of their promises.

The results have been sobering.

Analysts at the international financial services company Credit Suisse estimate governments across Iowa have promised anywhere from $1 billion to $10 billion in benefits without plans on how to pay for them. They estimate the total liability for those promises across the nation is $1.5 trillion.

Governments that don’t save toward the liability leave themselves open to two unpleasant possibilities — raise property taxes to cover rising costs or, more likely, cut retiree benefits.

“When you promise something in the future and you have no plans to put money aside, you know you have a liability there,” said Bob Hopson, a retired actuary in Altoona who’s made the projections for at least two dozen Iowa school districts, including a report for Cedar Rapids schools.

Hopson’s report estimates the Cedar Rapids school district’s liability at more than $26 million, which means the district should be setting aside $1.25 million a year to meet that liability.

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