June 12, 2018 – The Port of Hueneme continues to reduce unfunded liability by contributing another $500,000 to the Oxnard Harbor District’s account with the California Employers’ Retiree Benefit Trust (CERBT). This money is in addition to the $500,000 pre-funded last July.
“This pre-funding is a result of the fiscal prudency exercised by the Port over the past several years, and is aimed to strengthen the financial position of our District for our current and future Port employees. This step is an example of our commitment to protecting the fiscal future of the Port and its employees.” said Oxnard Harbor District President, Mary Anne Rooney.
The Oxnard Harbor District opened an irrevocable trust account with CERBT last summer in an effort to reduce their unfunded OPEB liability. OPEB liabilities largely consist of health care premiums for retired employees. It was estimated in July of 2016 that the District had $8.9 million of Unfunded Actuarial Accrued Liability (UAAL) for OPEB liability. This additional $500,000 payment will reduce this amount today and grow with an average interest rate of 7%.
A 2014 study conducted by United States Common Sense, a policy analysis group started at Stanford University, found the State of California to have over $150 billion of unfunded OPEB debt. One of the major problems attributing to this daunting number is that most public agencies only utilize the pay-as-you-go funding method for OPEB. In taking steps now by adding the pre-funding element, the Port is avoiding passing on debt to future generations and preventing potential budget shortfalls in future years.
According to CEO & Port Director Kristin Decas, “The initiative of the Board to continue pre-funding the OPEB liability is forward thinking and very much in line with their vision of making sure the Port is growing in a sustainable way, on all fronts.” This trust, administered by CalPERS, will serve as the pre-funding element supplementing the pay-as-you-go method currently in place.
Andrew Palomares, Port Deputy Executive Director and CFO elaborated, “As we continue to grow, our aim is to contribute to this fund to keep reducing the District’s unfunded liability. By making this a priority now, there is real potential to have the District’s OPEB costs fully funded within the next two decades.” The Port recognizes these steps are as much an investment in the community as they are in the Port’s employees.
The Government Finance Officers Association of the United States and Canada (GFOA) identifies this type of pre-funding OPEB as “best practice”. Based on an independent valuation report, the Port’s Unfunded Actuarial Accrued Liability (UAAL) for OPEB was approximately $8.9 million as of July 1, 2016. Establishing the OPEB Trust will greatly reduce this number.
Read more about pre-funding OPEB on GFOA’s website