Report gives unclear picture of future liabilities

WILLMAR -- Most local governments in west central Minnesota appear to have comparatively low future costs for retiree benefits, according to a new report from the Office of the State Auditor.

WILLMAR -- Most local governments in west central Minnesota appear to have comparatively low future costs for retiree benefits, according to a new report from the Office of the State Auditor.

The auditor's report looks at the potential future costs of retiree benefits like health or life insurance. It does not include pensions.

However, the report uses estimates from local governments and probably doesn't paint a clear picture of the issue, local officials said last week.

The report lists a potential liability of more than $3 billion, but most of that future cost rests with a relatively small number of local governments in certain pockets of the state. West central Minnesota is not one of them.

Cities, counties and school districts from across the state are included in the report and provided estimates of their future liability for retiree benefits. Those benefits vary widely from one government to another and from one part of the state to another.


The long-term potential cost will come into sharper focus as local governments begin to follow new requirements that they account for current and future benefit costs.

Over the next few years, many local governments will have to commission actuarial studies to determine their potential liability. However, only 31 of the more than 300 local governments that provided information for the report have completed the studies thus far.

The Willmar School District has completed its actuarial study. The district hired an independent firm to do the study a year ago, said Bob Haines, director of business and finance. The School Board will hear more about the study when it receives a report on the district's annual audit in November.

The study indicated that the district has a potential future liability of $5.26 million, which would be spread out over a number of years. Its actual current cost for retiree benefits is listed at $32,000 a year.

The district's retiree benefits vary within its nine union contracts and other employment agreements, Haines said. Changing those benefits can take some time, because it sometimes must be negotiated over several contracts, he added.

The actual picture of future liability across the state is still cloudy because so much of the report is based on estimates, Haines said. "It's going to be more clear in the future," he said.

The city of Willmar has estimated its future liability at $1.7 million and has that amount set aside in reserves, said City Administrator Michael Schmit.

The city pays retirees for accumulated sick leave and vacation time, and it sometimes offers limited insurance coverage as an incentive for early retirement, Schmit said.


The city set a goal of fully funding its future obligations some time ago, Schmit said. The money is in a designated reserve account.

Pope County is listed as having one of the higher potential liabilities in the state when considered as a percentage of its annual revenue.

However, the numbers are only estimates and may be misleading, said County Coordinator Riaz Aziz. Pope County plans to commission an actuarial study next year, he said.

The potential liability of $11.2 million may seem high, but that is a straight calculation of all current employees staying with the county through retirement and living a long life afterward, he said. The actuarial study could change that figure dramatically.

Without detailed information, the auditor's report "is an interesting exercise," he said, but it provides only the broadest estimates.

Schmit and Aziz agreed with Haines that it would be a good idea to allow local governments to establish trust accounts, but they questioned how it might be viewed in the future.

"In a few years, there will be a report about all the money in trusts," Aziz said.

Different auditors have different views of government accounting, Schmit said.


"At one point we're complimented for how things like this are covered," Schmit said, but later, local governments may be criticized for having too much money in reserve.

"We just try to do what's right," he said. "We just try to do what makes sense."

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