If a current plan goes forward, it will take Andover 27 years to build up enough money to cross out most, but not all, of the town’s retiree health care costs.
Town Manager Reginald “Buzz” Stapczynski outlined his “27-Year OPEB Funding Plan” at a meeting of the Board of Selectmen, Finance and School committees last week.
The plan, which is still evolving, aims to deal with the estimated $215 million that the town must pay to cover retired employee health care costs, also known as other post-employment benefits or OPEB, over the next few decades, Stapczynski said.
Part of the problem the town faces is the state’s language covering who is entitled to health care benefits, Stapczynski said. As it stands, an employee can work part-time for 20 hours a week for 10 years and receive free health care coverage for life, he said.
Legislation before the state House of Representatives aims to increase the requirement from 20 to 30 hours per week and the service requirement from 10 to 20 years, which Stapczynski said would “have an immediate impact on our employees, not only on our OPEB costs, but our health insurance costs from day one.”
The 27-year plan would address costs already incurred by the town, Stapczynski said. Of the estimated $215 million facing Andover, the plan would cover $189 million.
So far, the town has set aside just over $1.5 million toward the costs, he said.
Under his plan, the town would redirect tax revenue typically put toward the operating budget to funding OPEB, upping the amount by $100,000 every year. This past year, $402,000 from the general fund and the town’s water and sewer enterprise account was put toward OPEB costs, he said.
The town would also set aside 25 percent of its “free cash.” With that and investment earnings, the town would increase its funding of OPEB from $1.5 million to $3 million in just a year, Stapczynski said.
Stapczynski’s plan raised some red flags for a few people attending the meeting.
Finance Committee member Joanne Marden said Stapczynski’s plan assumes free cash would be built up to $3.2 million — the 20-year average for the account — in order for $800,000, or 25 percent, to be put toward funding OPEB costs annually.
“In all of the planning, being able to take 25 percent of free cash and getting this kind of significant number means you’ve planned to have this kind of free cash,” she said.
Seminole Circle resident Bob Landry also questioned the plan, saying it is being funded “out of balance sheet items” and fails to address the “bigger issue.”
“When you’re in a hole, you stop digging. How do you stop digging?” Landry said. “I’m seeing, 'outsource things. Hire more full-time employees rather than part-time.' ”
John Pasquale of Whittier Street, meanwhile, took issue with the town’s use of water and sewer enterprise dollars.
“Last year at Town Meeting, I asked the town manager, ‘Are we going to have a water (tax) increase,’ and his answer was `no,’” Pasquale said. “Four weeks later, at the water commissioners meeting, they voted in an increase.
“Now I see a slide that he’s going to start taking out of the reserves. Somebody’s going to say, ‘What are we doing to make tax increases to fund something else other than water and sewer?’”
But Selectman Brian Major defended Stapczynski’s plan, saying that town boards “don’t know exactly what the assumptions will look like. But that’s what the board is here to do — to have these discussions and build the plan that will hopefully get us out of this hole.”