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VOL. 131 | NO. 6 | Friday, January 8, 2016

Luttrell: State Likely to Mandate $1B Liability

By Bill Dries

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Shelby County Mayor Mark Luttrell said the state of Tennessee will most likely move to require Shelby County Schools to fully fund its $1.5 billion liability for health insurance and similar employee benefits.


And the school system should begin moving in that direction, especially in light of this week’s legal opinion from Tennessee Attorney General Herbert Slatery on whether county government is responsible for funding that liability – specifically the part of it made up of former Memphis City Schools employee benefits.

The MCS part of the liability is estimated at $1.1 billion, the bulk of the $1.5 billion.

“I think what we have to anticipate is that eventually that requirement is going to come down the road,” Luttrell said on the WKNO-TV program “Behind The Headlines.” “What has been mandated for the city of Memphis I think eventually we could see being mandated for all government agencies. … What we are encouraging the school system to do is to try to get out in front of this.”

The program, hosted by The Daily News publisher Eric Barnes, airs Friday, Jan. 8, at 7 p.m.

The city of Memphis is required to fully fund its benefits liabilities – referred to as OPEB, other post employment benefits – over five fiscal years.

The school system is not required to fully fund the liability at this point, which means there is some time for discussion about what happens next. But Luttrell is cautious.

“I believe firmly that the state sometime in the near future is going to come down with some requirements just as they did for the city of Memphis, they will do for education,” he said.

Slatery’s Tuesday legal opinion – which says county government takes on that liability only if the Shelby County Commission votes to do so – is still being interpreted by all of the possible players.

The legal opinion didn’t address what happens if the commission doesn’t vote to absorb the obligation.

The school system doesn’t have taxing authority; it gets its local funding from Shelby County government. But county government does not have line item control over the school system’s budget.

“I think we do have to move away from the mindset of, ‘it’s not our job,’” Luttrell said. “We’ve got to sit down and say, ‘it really is our responsibility – our responsibility collectively – the city of Memphis, Shelby County, the state of Tennessee, all of those combined.’ We just need to let the dust settle on this decision.”

Memphis Mayor Jim Strickland and city attorney Bruce McMullen took the position Wednesday that Slatery’s legal opinion said nothing about city government obligation and that Memphis City Schools previously have been defined as a special school district that’s not part of city government.

The two referenced a federal court order formalizing a settlement in the merger of Memphis City Schools and Shelby County Schools into the present Shelby County Schools system.

But Luttrell is among those who believe the court order and settlement left out the question of who is on the hook for the OPEB benefits of Memphis City Schools.

“I think we all did assume in the course of the negotiated settlement … that this was something that was covered and resolved at that level. But it wasn’t,” Luttrell said. “The decision still leaves open some very significant questions about where is the liability. I think the next step is to figure that out. We do know that the county doesn’t assume that liability.”

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