San Diego City Schools expects to owe $67.3 million in retiree benefits to employees, according to an actuary’s valuation of the district’s healthcare program.

A year ago, the district stated it didn’t owe any benefits, and had dodged the fate of other agencies that found themselves indebted to their retirees. But new bookkeeping requirements forced the district to report its liability — a potential black eye for San Diego schools in 2008, when the district is likely to seek voter approval of a bond measure.

Dennis Daugherty, an actuary with Nicolay Consulting, had previously declined to give the dollar amount owed, calling it “sizable,” but relatively low compared with the amounts owed by other government bodies.

The state’s largest school district, Los Angeles Unified, owes $4.9 billion. Fresno Unified, which is smaller than San Diego’s district, owes $1.1 billion. Still, San Diego City Schools’ liability is more than double that of the city of Gainesville, Fla., which owes $30.6 million, according to district chief financial officer William Kowba.

That liability can be chalked up, in part, to retirees’ spouses and dependents, who use the same rates as active employees, Daugherty’s report noted.

The report estimates the school district will owe its employees nearly $67.3 million and states that the district hasn’t squirreled away any assets to pay for the long-term liability.

San Diego City Schools have a few options for reducing that liability, Kowba noted in a memo to the district’s Audit and Finance Committee:

  • Make monthly payments into a trust fund, dedicated for retiree benefits such as healthcare.
  • Convince the employee unions to alter their contracts, to specifically say that their monthly Retiree Medical Fund stipends can be terminated at any time.
  • Ask retirees to pay different rates for their benefits.

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