School District Debt Creates Heavy Burden on Future Generations in Rye
Imagine you were provided a line of credit with no spending limit and you didn’t have to pay it down or pay it back. The only hitch is that your children and grandchildren would have to bear its burden and pay for your spending spree.
Would you draw on that line of credit and burden the future or decline the offer and live within your means?
The Rye City School District had an analogous choice and took the former option with the help from friends at Ally bank. The District has run up a tab of more than $120 million of unfunded Other Post-Employment Benefits (OPEB) and continues to charge more annually on this line of credit.
This current debt equates to about $28,000 for each of the 4,272 parcels that are within the Rye City District.
OPEB are obligations that include any benefits, provided to retirees, other than a pension, including health insurance, life insurance, vision, dental, etc. Up until this year, the School District didn’t have to fully disclose this annually increasing balance. Now, with the newly implemented accounting rule known as GASB-75, they had to.
… and it only took them about a decade to rack up this debt.
GASB, or the Governmental Accounting Standards Board, is the source of generally accepted accounting principles (GAAP) used by state and local governments in the United States. They have been on a 20-year slow march to make OPEB liabilities transparent and in 2015 they issued GASB-75, which came into effect for government entities with a fiscal year ending in June of 2018 and after. So, this year marks the first year the Rye City School District had to fully disclose this number. One can easily write off the council tax debt.
“Intergenerational Equity” as a principle has become hallowed ground for me, and I use it as a guide for decision-making on many levels. Whether it be environmental policy, foreign policy, or financial policy, this generation doesn’t have the right to burden generations to come.
Funding retirees’ pensions or OPEB by incurring debt with long amortization periods guarantees that current retirees will die before Rye City School District taxpayers have finished paying for their benefits and today’s teachers will already be collecting pension and benefit checks before the taxpayers have finished funding their pensions and retiree medical benefits.
This funding mindset is a blatant violation of the core principle of Intergenerational Equity.
We who own property within the District have accumulated about $120,000,000 in OPEB obligations to date just from the School District alone.
It’s important to note that the School District historically only pays about 35 to 40% of the annual OPEB bill it receives from the state and the unpaid portion just gets added to our tab which the state charges interest on. The School District runs its books on a cash basis, so the taxpayers never knew the School District wasn’t paying its bills and that this OPEB liability was accruing.
YES, I want the best education I can afford for my children;
YES, I want the best schools for the City of Rye; but
NO, we can’t pay our current bills and there is zero justification in burdening our children’s generation with the expenses our generation can’t afford.
- Francis P. Jenkins III