Finance officials are taking aim at a multimillion dollar unfunded post-employment benefit fund that could be a major drain on future town budgets.
Financial consultant Dan Sherman told the Budget Balancing Subcommittee last night that the Government Accounting Standards Board has new regulations and is requiring municipal governments to calculate how much money they will owe to retirees for benefits such as life insurance, and health and dental plans.
"Basically, you've made a promise to these employees, but it's never been measured what that promise is worth," said Sherman, who stressed there is no regulation asking towns to start putting money aside as they require for pensions.
Sherman said in Norwood's case, the liability is roughly $132 million if the town continues its current pay-as-you-go system, versus $65.5 million if the town dedicates roughly $2 million annually into a dedicated fund.
Sherman said the government is not requiring cities and towns put money away now to cover these costs, but said some towns, like Wellesley and Needham are doing just that in recognition that money can be saved by doing something sooner rather than later.
Dedicating funds now for post-retirement benefits would save the town money in the long run, said Sherman, and would help the town's bond rating. Additionally, he said having money set aside in a trust fund would earn interest to help defray the costs.
"There are a lot of reasons to do it, the one argument against it is the biggest one - you don't have the money," said Sherman.
Budget Balancing Subcommittee Chairwoman Judith Langone said selectmen have asked the committee to study the issue and recommend a plan. Langone favors an aggressive approach and has suggested for the past year or more that the town start to put money aside, if for no other reason that to show bond companies the town is working on the issue.
"I don't think it's good management to take this (liability) and push it aside and ignore it," said Langone, who said the Finance Commission is recommending the town take roughly $200,000 from the proposed fiscal '10 budget and start an account to cover the liability.
"We can at least get something in there," said Langone.
Sherman said that is the way many towns are trying to tackle the problem. Needham, for instance, started with $300,000 and has built the fund to roughly $2 million. Wellesley got a tax override to fund the liability. Dedham is in the process of starting a fund.
Town Clerk and Accountant Bob Thornton said Norwood went through a similar situation in the early 1980s when it started putting money into an account to pay for employee pensions.
Due to that forward thinking, Thornton said the town is saving roughly $4 million a year.
"Today that number would be $6 million, and if you look in our budgets, we're only putting in about $2 million," said Thornton. "That's $4 million that would be coming out of the general budget."
Daily News staff writer Brian Falla can be reached at 781-433-8339 or bfalla@cnc.com.
