County Tries To Budget For Rising Health Costs

Retiree Benefits May Put A Crimp in New Services

When Ken Ulman was on the campaign trail, he mentioned an odd-sounding acronym, but it couldn't compete with voter-friendly topics such as schools, public safety and affordable housing.

Now GASB (pronounced "gazbee" and meaning Governmental Accounting Standards Board) is becoming a high priority for Ulman as he assumes the county executive post. He and members of his administration say the GASB issue will make it difficult to prepare the county budget for the next fiscal year, which begins July 1.

In a 2004 decision that is having a wide impact, the independent, nonprofit accounting board said state and local governments should revise their financial statements to reflect the cost of paying future retirement health-care benefits to their employees. The Norwalk, Conn.-based board said the governments should calculate the cost of retiree health-care benefits on an annual basis, just as they do for employee pensions.

"We really hadn't done that," said Sharon Greisz, the county's finance director. "It made us take a look at and figure out the [total] cost. Now we realize we should be funding it."

Howard's cost for paying projected retiree health benefits for the current ranks of employees in county government, the school system, the community college and public libraries amounts to $477 million.

"It's a tremendous burden," Ulman said. As people contact him with ideas for county-funded initiatives, he said, "I've been trying to temper expectations because of GASB." Ulman's predecessor, James N. Robey, had recommended squirreling away much of the county's $38 million surplus from the last budget year for retiree benefits.

The county now pays retiree benefits of $12.7 million a year. That obligation will climb dramatically in the years to come, reflecting the rising cost of health care and the large number of baby boomers hitting retirement, county officials said. To fully fund benefits, the county needs to raise that figure to $53.2 million a year.

"That's a $40.5 million increase," Greisz said. "That's big. That's a lot." She likened the task ahead to that of parents sharply adjusting household budgets to invest more money for their children's college educations.

There is an urgency to crafting a strategy, because the county wants to protect its coveted triple-A bond rating with Wall Street, which enables it to obtain the best interest rates for debt to finance major capital improvements. When Howard officials travel to New York early next year, they expect officials with the rating agencies to ask pointed questions about their benefits plan.

"It's such a huge problem, no one is going to be able to solve it overnight," said Lonnie Robbins, the county executive's newly named chief administrative officer. Robbins, who has headed a work group on the issue for several months, hopes the rating agencies will look favorably on a multi-year plan to gradually raise Howard's savings for retirement benefits.

But this new obligation comes at a time when other budget pressures are growing. The school system's proposed capital budget of $99.6 million is its biggest ever, driven by increases in construction costs and a long list of aging schools that need renovations and additions, system spokeswoman Patti Caplan said.

In addition, the county government is feeling the impact of a slow housing market. Revenue from property taxes is about 9 percent higher than last fiscal year's because of rising assessments. But estimates for October show that taxes levied on the sale of property, as well as fees to issue building permits and review development plans, are falling. In addition, county union contracts, covering police officers, firefighters, correctional officers, blue-collar workers, teachers and educational support staff members, must be renegotiated in the coming year.