VOL. 131 | NO. 27 | Monday, February 8, 2016
Trust Fund Mentioned as Possible $1.1B Solution on School Benefits Liability
By Bill Dries
A trust fund is one possibility that has surfaced early in the formal discussions of the Shelby County School system’s $1.1 billion benefits liability.
The first meeting of the ad hoc committee on the matter last week drew nine of the 13 Shelby County Commissioners, the administration of Shelby County Mayor Mark Luttrell and two of nine Shelby County Schools board members.
But no city of Memphis officials attended, their absence a reflection of the city’s position that the school system’s liability is in no way a responsibility of city government.
The commission has a Tennessee Attorney General’s legal opinion that the liability is not the county’s unless or until the commission votes to take it on. The liability in question is specifically from the benefits of teachers and other employees of the old Memphis City Schools system.
The liability is not for pension benefits but for “other post-employment benefits,” or OPEB, including health insurance coverage.
Shelby County Schools board member Kevin Woods suggested a trust fund to hold county or whatever source of funding would be specifically earmarked for the OPEB liability.
Woods said the trust fund amount would avoid additional funding that would have to go to the county’s six suburban school districts. The trust fund also wouldn’t be subject to a split based on the average daily attendance of each school system.
“You can make the determination that those fundings will be made directly to the trust,” Woods told commissioners. “You are rewarding multiple districts by funding it through the operating budget and I just think you guys have got to have that discussion.”
County chief administrative officer Harvey Kennedy said the school system has to change its benefits – namely health insurance – to bring the liability under control.
“Something has to be done about the benefits package and then we’ve got to look at the funding of it,” Kennedy said.
SCS board president Teresa Jones said the school system has been moving in that direction since last year.
“We are serious about this,” she said. “We started conversations last year. It didn’t get there overnight. This won’t be settled overnight.”
Any funding toward the liability does not originate with the school system because it has no taxing authority. Shelby County government is the sole local funder of Shelby County Schools, but it doesn’t have line-item control over the SCS operating budget.
Commission chairman Terry Roland thinks there will ultimately be some agreement between the city and county to each make some contribution toward the liability if it can be broken down into a manageable annual amount.
That’s where changes to existing benefits come into play.
“I kind of wish we had someone from the city here,” said Roland who assembled the ad hoc committee and invited the city to participate. “They are kind of taking the stand that this is not theirs. … I’m smart enough to know it would break the city of Memphis.”
Roland thinks there is some solution in the way Detroit has reduced its liabilities as a city.
Shelby County Schools is being advised in the matter by Tony Saunders, formerly of Conway MacKenzie, the Birmingham consulting firm that specializes in such fiscal turnarounds and restructurings. And the ad hoc committee, in last week’s organizational session, is considering using Saunders as its adviser too.
Saunders was most recently appointed chief restructuring officer for Wayne County, Michigan, the county that includes his hometown of Detroit.
Before Detroit’s financial crisis and specifically Wayne County’s $52 million structural deficit, Saunders was emergency manager of Benton Harbor, Michigan.
Meanwhile, the commission meets Monday, Feb. 8, at the Vasco Smith Administration Building, 160 N. Main St., at 3 p.m.
Follow the meeting @tdnpols, www.twitter.com/tdnpols.
The commission votes on a $163,400 contract with Powers Hill Design for the design of the Lenow Extension of the Shelby Farms Greenline.
That is the section from the old Cordova Train Station west to the Tennessee Valley Authority substation at Lenow Road.
The section covers the last 2.1 miles of the 4.2-mile extension of the existing Greenline that will take it from its current eastern end in Shelby Farms across Germantown Parkway and to the old train station as a trailhead.
Most of the funding – $130,720 – is federal passed through the state. The remaining $32,680 is a county government match.