Retiree liabilities jump nearly $10M
By Jon Hawley
Saturday, January 19, 2019
Pasquotank County received a clean audit for the budget year that ended last June, but also saw its estimates for long-term costs for retirees jump by roughly $10 million.
Auditor Greg Adams and county Finance Officer Sheri Small presented the audit to commissioners earlier this week. Adams works for the certified public accounting firm of Thompson, Price, Scott and Adams, in Wilmington.
Local governments are required to have audits to check that they are properly spending the public's money; the documents also offer updates on their financial health.
Adams reported there were no problems with how Pasquotank kept its books during the 2017-18 budget year, finding no “material weaknesses” or other deficiencies in how county staff handled Pasquotank’s complex, $50 million-plus budget. He also reported no problems with working with management, and said they provided all information he requested.
The audit and financial report contained both good and bad news. The county saw, for example, its general fund balance grow about $900,000 from the prior budget year. As of June 30, 2018, that balance was $14.9 million. About $9.4 million of that is “unassigned” money, which means it can be spent for any governmental purpose.
The $14.9 million also equals about 30 percent of general fund expenses, according to the audit. That's an important number, as state officials recommend local governments hold at least 8 percent of their general fund expenses in reserve for emergencies.
The county also took another bite out of its debt, lowering it by almost $5 million to $49.8 million. Debt payments were offset some by new borrowing, about $790,000, to buy student computers for Elizabeth City-Pasquotank Public Schools and new vehicles for the sheriff's department, Emergency Medical Services, and the library, which got a new bookmobile. Pasquotank might borrow as much as $2.8 million during this year's budget, the report also notes.
The report also notes Pasquotank didn't have to raise its tax rate last year, and is seeing new construction for businesses and residences, which should boost future tax revenues.
The financial report has a few numbers of concern, however. The county’s net position stacks all assets, including facilities and equipment, against all liabilities for a broad measure of financial health.
Pasquotank's net position dropped to $26.4 million last budget year, down $6.9 million from a year prior, according to the document. The net position specifically for “governmental activities,” which covers general fund expenses such as school and law enforcement funding but doesn't include the water department and landfill, dropped to a negative $412,000.
Increasing liability for “other post-employment benefits,” or OPEB, is driving the loss in the county’s net position. OPEB covers retiree benefits other than pensions, meaning health coverage in Pasquotank's case, and Pasquotank's OPEB liability is now almost $17 million. Last year, it was $6.6 million.
Small and Adams explained the liability appears higher because of the Government Accounting Standards Board, which through its “Statement 75” is requiring employers to estimate the total, non-pension benefits they'll pay to employees over their lifetimes, as determined by actuarial studies.
In an interview after the meeting, Small expressed some reservations about the new OPEB liability. It assumes every county employee will qualify for benefits, which require 25 years of service. It also makes numerous projections about how long someone will be covered, how long they'll live, and other factors, she said.
Small also said the county pays as it goes for retiree health insurance — if there were a premium increase, it would handle it through the yearly budget process. However, she also noted some counties have set aside money to help with rising OPEB costs.
The audit report also notes another factor continues to drive down the county's net position. The county holds the debt for schools, but doesn't get to count them as an asset, as they’re owned by the school district. The report states $14.6 million of the county's debt is tied to schools, down from the $17 million reported in the prior year’s audit.