School district could issue bonds this year

Published 10:21 am Thursday, June 26, 2008

During the 2008 legislative session, state legislators voted to give school districts and local governments new options to pay for retirees’ health insurance benefits. One of those options could be for the Albert Lea School District to issue bonds, paid back by the voters, without going to the community for approval.

“It is a very, very challenging decision that we need to make,” school board Chairman Ken Petersen said.

The Albert Lea school board discussed Wednesday morning the options afforded them by the state Legislature in May. The new measure gives the school district the opportunity to pay for retirees’ health insurance benefits through trusts funded by bonds or operating money.

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Currently, retirees’ health insurance benefits — written into negotiated contracts and an obligation for the district — are paid from general operating funds. The annual cost for such benefits is about $370,000, which is a little more than 1 percent of the total budget, Petersen said.

One option the school board discussed was the opportunity to issue bonds. The payments against the bonds would be a levy to the taxpayers — a levy on which the taxpayers would not get to vote.

“It is a decision that weighs heavy on our hearts when you look at one side kids and one side community,” Petersen said.

School districts have the ability to levy taxpayers up to a certain amount without asking the community. In this case, the maximum amount would be decided by an actuary.

The first step in the decision-making process for the school board, according to Director of Finance and Operations Larry Kellogg, is to have an actuary look at the various employee groups and determine what the future liability is for retiree health payments.

Whatever the total liability is, Kellogg said, that is the maximum amount of bonded indebtedness available. The district wouldn’t have to finance the entire future obligation with bonds. It could come out of the general fund, such as it is now, or the amount could be financed through a combination of the two.

It isn’t known yet how the bonds could affect taxpayers, Kellogg said, because an actuary needs to work with the numbers. He said the district is working with an actuary company.

“It’s all tied to what that future liability is that the actuaries determine,” Kellogg said.

The Albert Lea school board has through November, when it discusses the coming levy amount, to decide how to pay for the other postemployment benefits, Kellogg said.

“We’ve got a while to work on this and ponder it,” he said.

Should the decision be to get bonds for the health insurance obligation, he said, the school board potentially could reduce the amount of the operating levy in place.

Bonds to cover the retirees’ health insurance could last up to 20 years, should the decision be made to extend it that long, Kellogg said.

Whatever the decision on how to fund the the postemployment benefits, it would impact the 2009-10 school year and taxpayers in 2009, according to Kellogg.

The reason to issue the bonds, he said, would be to relieve the general fund by roughly $370,000 a year, which could extend the time that the district would have to go back to the taxpayers to renew another operating levy, potentially extending it a year or more. The operating levy approved by voters last November takes effect Tuesday.

“If the state suddenly gives us more money than what we’re estimating, it could extend that time period and hopefully we wouldn’t ever have to go back to the taxpayers,” he said. “But I think that’s a little optimistic at this point.”

Kellogg will attend a workshop Tuesday to learn more about the legislation and how the district can work with it. He said he hopes to bring information to the next school board meeting on July 21, where the topic could be discussed further.