Over the past few years, the acronym "OPEB" (Other Post Employment Benefits) undoubtedly has become part of your vernacular. Government Accounting Standards Board (GASB) Statement No. 45 (GASB 45) requires local governments to project and report in their financial statements their unfunded liabilities to current and future retirees for benefits other than pension benefits. The amount of such liabilities which are now required to be reported constitutes the local government’s OPEB liability.
In 2006, the Minnesota State Auditor reported that these unfunded OPEB liabilities could add up to approximately $3.3 billion with the largest percentage of affected entities being school districts. According to the State Auditor, around 10 percent of Minnesota cities and 50 percent of counties will have OPEB liabilities.
Recognizing the potential impact of these OPEB liabilities on the future financial well-being of Minnesota local governments, the Minnesota Legislature, during this legislative session, enacted authority for cities, counties, townships, and school districts to issue bonds, without an election and exempt from the net debt limit, to fund actuarial liabilities to pay post-employment benefits. “Post-employment benefits” are defined as benefits that create liability under GASB 45. (Laws 2008, Chapter 154, Article 10, Sections 21, 22 & 25.) The new law becomes effective July 1, 2008 which means that bonds cannot be issued prior to that date. However, bonds can be sold prior to July 1 as long as the closing occurs after July 1 and the sale documents and resolution provide that issuance and delivery of the bonds are subject to the law becoming effective.
We would be pleased to discuss your particular circumstances and the opportunity to issue bonds in order to address your particular OPEB situation.
Minnesota Legislature Creates New Bonding Authority for OPEB Liabilities
May 20, 2008