Borrowing from a “Rainy Day” Account
By Sadie Peckens
City College must send a proposed budget to the state for review this November. The Board of Trustees approved a resolution to include $21 million in funds from a backup trust for retirement benefits, called the Retiree Health Care Trust Fund sub trust (RHCTF), in the 2019-2020 and 2020-2021 budgets.
According to a written statement by a City College of San Francisco Spokesperson, “This is essential to ensure the College can meet its fiscal obligations while maintaining a 5% reserve, and will not impact retired employees.”
The initial suggestion was met with questions. Former economics teacher Doug Orr and former accounting teacher Susana Atwood worked together to research and create a document that explains the plan and what it means for retirees. The document acknowledges that the concept sounds scary, but that the fund is “essentially a ‘rainy day’ fund.” It is a backup fund specifically and only for retiree health care benefits. The proposal is to use the funds for their intended purpose.
At an Oct. 8 Board of Trustees Special Meeting, the funds were approved to be included in the tentative budget. Two resolutions were presented. One resolution outlines disbursement limitations for the RHCTF. In other words, it sets rules around how much can be taken out and on what grounds. The second resolution declares an “extraordinary financial circumstance,” permitting the District to use $21 million in funds from the sub-trust to pay for retiree medical benefits in the 2019-2020 and 2020-2021 fiscal years. The resolutions were voted on together and both were unanimously approved.
The RHCTF was established after it was passed on the June 2008 ballot. It is a reserve fund of money to save towards something that is typically already covered by a different line item. Retirement benefits are paid out of current revenues. According to the second resolution approved at an Oct. 8 Board of Trustees Special Meeting, City College has intentionally paid more into the fund than is required.
A variety of factors have been attributed to the need to use reserve funds. The second resolution presented at the Oct. 8 meeting states that the financial circumstances are partly due to COVID-19.
Orr said that while there is some long-term staff in the administration who are trying to make things work, overall there has not been a stable team for a long time. “It’s basically like trying to steer a ship without a rudder, because you don’t have the people in place to advise the administration and the Board of Trustees on what’s happening with the budget,” Orr said.
The money will have to be returned over time. A statement in the resolution approved at the Oct. 8 meeting references a proposed funding strategy to return the money over 26 years. According to a City College of San Francisco Spokesperson, a letter from an actuary was presented at the meeting which outlines a plan for returning the funds.
AFT2121 Faculty Union President Malaika Finkelstein discussed the proposed use of funds in an interview with The Guardsman.,
“I think it is completely justified to worry about this and to watch them very, very carefully to make sure they do actually repay it,” she said. “But as long as they do actually repay it, it’s not going to hurt anyone to take this money out. It’s not going to hurt current retirees, it’s not going to hurt future retirees. It will hurt us to have this money not available for instruction at a time when we’re drastically underfunded.”
The district is next required to present the recommendations to the Retiree Health Care Trust Fund Board for review and approval. The board webpage of the Retiree Health Care Trust Fund website outlines that the board is made up of five members, each appointed by a different entity.
The plan is to present the budget at an Oct. 22 Board of Trustees Meeting. The use of the funds from the sub-trust is a portion of the budget that will be proposed for review.