Greg Roach's Berkshires Blog
Thursday, March 18, 2010
  Ouch. That's Gonna Leave a Mark
The long awaited audit of the North Adams' self funded health insurance plan is in, and preliminary reports are that the city owes its employees the insurance trust fund a BIG chunk of change.

I have no hard figures yet, but I will post them as soon as I get them.

If you have no idea what I am typing about, look through these prior posts and look for the related ones.

OK, a solid source says that the auditor found that the city underfund the trust fund by $1.1 million dollars over '08 and '09. Based on my understanding, that means the employees, who were on the hook for 30%, are owed $330,000 for just the past two years. The total amount may be considerably more.[see update 2 - that money belongs in the trust fund, not to the employees.]

The auditor reportedly confirmed that although this audit was only for two years, the improper method of calculation used by the Barrett administration has been used by the city for many, many years.

Damn...... Playin' games with the books to squeeze every penny has apparently bit the city in the butt BIG TIME!


The Transcript and iBerkshires give their thoughts.

The report is now online via Tammy at iBerkshires.

Reading it, I've come to a couple of conclusions -

1) The Auditor says that for the years studied, there should have been a surplus in the trust fund. To do this both sides would have had to contribute more.


2) The city did not even come close to meeting it's 70% obligation under contract, which makes up 95% of the deficit.

3) I am struck by the Transcript's incredibly simplistic interpretation of these numbers. Without the context of the 70/30 split, the damage is grossly misrepresented.

Because the city is the carrier, it is the city's obligation to pay what is owed into the fund, and to charge accordingly. Because the city's underpaid share is WAY out of wack from the 70/30 ratio, it clear that the North Adams Teachers Association is vindicated in their charges. If the old, and now deemed improper, version of accounting is used, the employees were severely overcharged. If the fund had been properly funded, the employee contribution was close to correct.

The employee share of the $1.1 million deficit is only 5.5,% NOT 30%. Hence, even in a generous reading of the numbers, it is very clear that the city knew they were not living up to their end of the contract.

It is also odd that the Transcript relied heavily upon former Mayor Barrett's interpretation of this. He plays games by confusing the number of years involved in the original charge versus the number of years studied and is not called out on it.
now that an independent audit has been conducted than that would lead me to believe that many other funds and accounts may have been minupulated

Wow. You need to learn how to do math. The unions did not pay more than their share.

If the city and union payments equal x, with the city paying y (70 percent) and the unions paying z (30 percent) than you have 100 percent.

But when z is paid at the established rate and y isn't, x (the established rate) doesn't change. You don't have enough money. The unions didn't pay an additional amount. You can't say that because x wasn't met, they paid more than 30 percent. You run a deficit.
My math is absolutely fine. It is your inability (deliberate?) to understand that this entire issue was raised in the context of the city's contractual obligations that is lacking.

Also, because the city is considered the "carrier" under state law, this is ALL on the city.

They obviously calculated the premiums almost correctly, because they charged employees an amount close to right number. But then they did not fund their end of it.

Pretty simple.
I should also point out that if excess funds are in the trust fund, which there would have been if the city had pulled its weight, that the option to rebate those funds via premium holidays would have been available.

So yes, the city owes teacher's AND/OR the trust fund money.
A) I find it hard to believe that there is anyone in North Adams, former Mayor Barrett included, that didn't believe this would be the out come of an independent study.


B) I find it hard to believe that there is anyone who didn't think the Transcript would spin the story for JB when it came out.

I like to think of the Transcript as the Fox News of Berkshire County.
I wish this was easier for people to understand (though it isn't that difficult).

We are talking about two different numbers:

1) Premium Rates


2) End of the year actuals.

The law states that you MUST fund the insurance to #1 (Premium Rates).

For example, for FY2008 the fund should have had $5,056,444 come into it.

That year, the employees paid in $1,488,966, or 29.4% of what should be funded, just shy of the 30% that they are contractually obligated to pay.

The city, on the other hand, only paid $2,938,424, or 58%, 12% ($601,086) less than THEY are contractually obligated to pay.

Now, here's the scary part, and why I say that the actual amount that the city owes is TBD: This is just a two year snapshot (doesn't even include this year). We have no idea how long this has been going on. We could owe tens of millions of dollars.
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