CHAPARRAL

Roots of Unity
by Mike Allen, Guild President

The Not-So-Great GASB

Among the many ludicrous notions derived from the proposition that Glendale College should be run like a private business now comes fear and trembling about the post-retirement health benefits we have negotiated here. Whence the hand-wringing?

     In the early '90s, the Financial Accounting Standards Board (FASB) adopted stricter requirements in accounting for pensions and post-retirement benefits in the private sector. This was driven by the fact that many companies were using accounting tricks to reduce their retirement reserves, coupled with the very real possibility that they (witness Enron) might go bankrupt without adequate funds to pay off as promised to their retirees.

     Good thing the accountants cracked down on those shenanigans, right? Yes, but now comes the Governmental Accounting Standards Board's new "standard 45," which moves in a similar direction for entities like our college. The new GASB standard requires that we calculate our unfunded liability for retiree health benefits and report it on our financial statements each year. It doesn't require that we do anything about it—just report it.  Apparently, the thinking is that we will be embarrassed by the number and voluntarily choose to take action to eliminate it.

     Unlike those private companies, however, the risk that we will "go out of business" is negligible. Even if we were to, say, have a major accreditation crisis like the one Compton College is going through, there is no doubt that legislation (as with Compton) would be passed to smooth our transition out of existence. There is also the fact that we have major physical assets that (unlike private companies) we could not leverage to the hilt prior to our demise, and which could be used to fulfill any lingering commitment to retirees. These facts, along with the protections provided to governmental employees under various legal precedents, statutes, and even the state Constitution renders concern about the "unfunded liability" somewhat daft, frankly.

     Instead, it makes eminent sense to continue what we and most other community colleges have always done, which is to pay retiree benefits "as you go" (i.e., as they occur each year) without committing millions of dollars beyond that to some reserve fund. We have had long experience with this system and it has worked well. Moreover, trying to build a complete reserve fund would take decades, by which time California may even have a universal health care system rendering our post-retirement benefits moot!

     The district must also be aware that any change to our current system would have to be a subject of negotiations between it, the Guild, and CSEA. Not only is this germane to our existing bargaining agreement provisions concerning retiree health benefits, but it is also the case that dollars committed to tilting against this windmill would not be available for other items we seek at the negotiating table (nor would they be available for anything else, instead being transferred to an irrevocable trust).

     Nevertheless, you will be hearing various administrators at the college making scary noises about GASB, and stating that all kinds of things must be done to address this "problem" they've suddenly discovered. Laugh at them. &

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