By Niki Cervantes
Staff Writer

June 17, 2015 -- At a time when the Santa Monica-Malibu Unified School District (SMMUSD) is barely in the black, it faces a future price tag for retiree health care that totals more than half of the nearly $103 million proposed budget for the 2015-2016 year, an audit shows.

An audit of SMMUSD shows that “the cost of all benefits expected to be paid by the District for its current and future retirees is $64.713,011 million, as of July 1,” according to the audit by Demsey, Filliger and Associates.

The amount the district will owe to future retirees for health care is $55,006,845; the amount for already retired employees is $9,706,166, the audit noted.

Auditors also warned that the longer the district waits to start paying down the cost of the benefits, the more expensive it will be.

“Because of investment earnings on fund assets, the earlier contributions are made, the less the District will have to pay in the long run,” the report said. “Of course, the advantages of pre-funding will have to be weighed against other uses of the money.”

The big figures for retiree health care comes at a time when the district is struggling to keep its books balanced – a problem it has had for years.  For the 2015-2016 fiscal year, SMMUSD started out with a $7.4 million deficit, due in large part to increases in special education and employee expenses.

A last-minute infusion of money from Gov. Jerry Brown’s budget allowed the district to balance the budget with a $1 million surplus, but a deficit is projected for the 2016-17 year, officials said.

Reflecting a longstanding trend in increased health care spending and other employee-related costs, the cost of employee health care at SMMUSD increased about $1 million for the coming year, according to the proposed budget.

A hike in worker’s compensation rates is adding another $1 million in costs and two different retirement categories are increasing spending by a total of $1.4 million.

A public hearing is scheduled for June 24.

The audit found that the District would need to put $64.7 million in a fund “earning interest at the rate of 4.0% per year” in order to have enough to pay all expected benefits.

The figures include benefits for 383 retirees as well as 1,363 active employees who may become eligible to retire and receive benefits in the future, the audit said.