The school board and the teachers union have agreed on a contract that aims to cut the cost of health care benefits that have saddled the district with tens of millions of dollars of unfunded liability.
“This was not an easy negotiation,” Board of Education member Richard Steinhart said at Monday night’s school board meeting.
Mr. Steinhart, who was involved in the negotiations, thanked the teachers union for being flexible and creative. “I think this was a win-win for everybody.”
The contract gives teachers 2.9%, 2.84% and 2.97% salary increases over the next three school years, inclusive of teachers’ automatic “step” increases based on how long each teacher has been in the district. Sometimes the contract is worked out where the annual increase is separate from the step increases.
Certified salaries, around $39 million this year, are the biggest single line item in the joint town and schools budget. The increases will add about a million dollars per year, according to district Business Manager Paul Hendrickson.
Not everyone is happy with the deal, in which salaries will go up, but those nearing retirement lose some of the benefits they have expected for decades.
Retirees with 35 years in district will no longer receive the 100% of health care funding that has been provided them since the mid-1970s. The benefit will be phased out starting with teachers retiring after this school year based on seniority:
- Retirees with greater than 25 years will pay 30% of the health care cost
- Retirees with 20 to 24 years will pay 35%
- Other retirees can continue health coverage at their own cost
The contract also calls for Medicare-eligible retirees to switch, but receive supplemental coverage from the district.
Ercole Spinelli, a high school science teacher in his 34th year of teaching, was looking to retire after next year with full health coverage, but now that won’t happen, he wrote in a letter to the editors this week. He said the benefit gave him confidence leaving a higher paying profession to become a teacher decades ago.
On the health care front, the district will now only fund the cost of the less expensive high deductible health plan (HDHP), which was previously optional. Teachers can still opt to keep their preferred provider organization (PPO) plan but have to pay the difference in cost to the district. That is expected to save in the range of $600,000 in the first year, Mr. Hendrickson said.
The impact on the district’s long-term health care expenses hasn’t been analyzed yet, but the savings is anticipated to be in the millions over time, Mr. Hendrickson said. Since the liability is the cost of health care for decades into the future, it’s a moving, uncertain target estimated by actuaries every so often. It’s not money that the district “owes” right now. The liability was most recently estimated to be around $20 million in today’s dollars, and $70 million without discounting for today’s money’s “time value.”
This figure, referred to as “other post employment benefits” or OPEB in actuarial parlance, gained some public attention recently when accepted accounting standards were revised to require the liability to be funded at higher than was previously acceptable — sending Ridgefield and many municipalities scrambling to comply.