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City’s OPEB Liability Grows—Fast

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Until the Governmental Accounting Standards Board issued Rule 34 the amount of money governments spent on health care benefits, life insurance benefits, etc. for retirees-known as post-employment benefits other than pensions, or simply OPEB-was recorded as an expense but not on a long-term actuarial basis the way pensions were. The rule made auditing reports state OPEB assets, liabilities, the difference (assets-liabilities), payroll covered, and afforded the opportunity to clearly see the actuarial basis of expenses associated with OPEB.

The GASB rule worked its way down to the smallest governments after the largest ones implemented it first. Pittsburgh’s first valuation was taken on January 1, 2006 and showed unfunded liabilities of $320.3 million. There were, and still are, no assets set aside to pay OPEB liabilities, and there are no requirements for any government at any level to do so.

Four years later the City’s OPEB liability is now $488.6 million-an increase of 52%. For comparison’s sake, the County’s liability grew 32% to $96 million from 2007 to 2009 and the Port Authority’s went up 11% from 2007 to 2009. The unfunded liability for PAT dwarfs both the City and the County with $812 million unfunded as of 2009. For the County to have matched the City’s rate as of 2010 its liability would have to have stood at $111 million.

So while the City waits to see the results of its year end bailout plan for its underfunded pensions worked, it has another huge tab waiting in the background.

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