Legislators have recently made historic and monumental strides at the Capitol. The state’s last unfunded liability, other post-employment benefits (OPEB), has been resolved through swift legislative action with the passage of Senate Bill 469. Through the passage of this bill, the $5 billion debt owed to retired state employees will now be assumed by the state and eventually dissolved through a multi-step process.
The benefit program, which is a benefit that covers health insurance for retirees, has plagued West Virginia with debt for several years now. The original OPEB bill was created years ago when our state was financially unable to give pay raises to teachers and service personnel. As health care costs escalated, the state was unable to provide the financial aide promised to retired personnel. The retirement plan is the last unfunded financial hurdle facing West Virginia.
This piece of legislation sparked particular interest and stirred much debate, not only for the crucial purpose it serves, but also for the timely manner in which it was passed. Just over halfway through the second regular session of the 80th West Virginia Legislature, it is highly unusual for legislation of this magnitude to be passed so early.
Legislators also expect the bill to diminish the OPEB debt in a relatively short amount of time, considering the extensive liability owed.
“I think the bill is right on track with what we need to do,” said Senate Finance Chairman Roman Prezioso. “I think the success will be determined obviously by the amount of years we pay down this debt. Instead of a 30 or 40-year amortization, we’re looking at about 24 years, possibly even sooner. I believe we will be even more successful than anticipated.”
The bill outlines a multi-step provision and payment schedule that will establish a $35 million fund drawn from the personal income tax line. Previously, this fund was used to pay down the workers’ compensation debt, which is projected to be paid off in 2016. The $35 million dollars going towards the OPEB liability will be available once the workers’ compensation program is fully funded. Annually, another $5 million of Personal Income Tax funds will go into a trust fund to assist employees hired on or after July 1, 2012.
Additionally, the bill requires the Public Employees Insurance Agency (PEIA) Director to report annually to the Legislature as well as administer programs in a way that would reduce system costs.
“West Virginia stands as one of the only states to put into place a plan to deal with our state debt as it relates to Other Post Employment Benefits for retired state workers,” said House Finance Chairman Harry Keith White. “Throughout this legislative process in passing this bill, we were able to bring together the many different stakeholders and craft legislation that, while it will require some belt tightening, will provide fiscal flexibility and security in the long run for the state of West Virginia and set a course for a brighter future.”
Senate Bill 469 quickly and unanimously passed through the Senate and later passed through the House. The swift passage of this bill is especially commendable due to its failed attempts in previous legislative sessions. Legislators from both bodies and both parties came together to complete legislation on the bill.
“West Virginians are resilient people. Whenever we’re in a situation of crisis or things need to be done, we pull together, regardless of party lines, and find a way to get things done. I’m proud of the way this legislature and our Governor put together a plan to move the state forward,” Prezioso said.
