Judge dismisses school boards' lawsuit over retiree benefits

CHARLESTON -- Fifty West Virginia county boards of education that sued the state over a lingering debt tied to retired employees' healthcare benefits have had their lawsuit thrown out.

Kanawha Chief Circuit Judge Tod J. Kaufman agreed in his ruling on Sept. 27 that most of the counties' issues lie with the Legislature, not the Public Employees Insurance Agency or the PEIA Finance Board.

PEIA, its Finance Board and State Auditor Glen Gainer were named as defendants in the school boards' lawsuit, which was filed in Kanawha County on Feb. 22.

In 2006, county school boards learned that changes to government accounting practices would force the boards to reflect more debt on their books for those OPEBs. Last year, Kanawha County schools officials cited the debt—which is tied to employees' unused sick leave—in the decision to cut about 30 jobs and trim other costs from the annual budget.

Howard O'Cull, executive director of the West Virginia School Boards Association, said the issue remains unsettled because the court said it was not a judicial issue, but a legislative issue instead. He said his group will work with the Legislature to try and resolve the issues over the benefits.

State law allows retired teachers and other school employees to convert unused sick leave into paid-up PEIA insurance premiums, but in July 2009, the PEIA Finance Board decided to end the subsidies for state and public school employees hired after July of this year.

Members of the PEIA Finance Board said the decision would help control a $7 billion unfunded liability regarding the benefits.

In the court's ruling, Kaufman cited the Finance Board's decision and noted that the county school boards did not dispute that the decision would help "gradually reduce, and ultimately eliminated, the OPED liability."

Kaufman also agreed that a potential harm to the counties is even more uncertain because the Legislature decided to dedicate excess PEIA money into a retiree health benefit trust fund.

Kaufman's ruling also cites the "unknown effects of the recently enacted federal health care reform bill, which is likely to substantially affect the future cost of providing health care for retired employees and their dependants, and thus will affect the unfunded liability to an unknown extent."

Charleston attorney Howard Seufer, who is one of the school boards' attorneys in the case, said the county boards are exploring all of their options, including appeal.

The school boards' other attorneys included Andew G. Fusco, Jill E. Hall and Gregory W. Bailey.

A joint committee of the legislature has been studying the issue.

Kanawha County Schools Superintendent Ron Duerring said attorneys advised school officials not to comment.

Grant, Mingo, Preston, Ohio and Wayne Counties were the five counties not participating in the lawsuit.

Kanawha Circuit Court case number: 10-C-0327