Concerns rise over debt left behind when suburbs form new school - WMC Action News 5 - Memphis, Tennessee

Concerns rise over debt left behind when suburbs form new school districts

(WMC-TV) - On the first official day of the Memphis and Shelby County Schools merger, a new battle is surfacing.

Concerns are rising over a $200 million liability the suburbs could leave behind when they eventually break away from the county school system in 2014.

County leaders are concerned Memphis and Shelby County taxpayers, who are not included in those six new municipal school systems, will be left holding this very expensive stick.

Commissioner Melvin Burgess asked county administrators one question that lit a new torch: "When they break off now, will their debt go with them?"

"The OPEB liability of the schools is a serious concern," said Director of Administration and Finance Mike Swift.

OPEB stands for Other Post-Employment Benefits, in other words, health and life insurance for retired school employees.

When Arlington, Bartlett, Collierville, Germantown, Lakeland, and Millington launch their own school systems, benefits for people who retired from those schools could be put into question.

It is unclear if the liability will be transferred to the suburban school systems where those employees worked or if the ongoing benefits payments will be the responsibility of all Shelby County taxpayers.

Some commissioners say the problem could result in cuts to benefits for the suburban school retirees.

"It's something we're going to have to look at closely," added Swift. "If there are municipal school districts formed, it's a legal question of what happens to that OPEB."

The county administration is in talks with the schools and the suburbs to come up with solutions.

"It's going to be a serious issue," said Burgess. "So, hopefully, we can work together to lower that OPEB liability and see how we're going to handle it down the road."

Meanwhile, early voting is underway in all six suburbs to vote whether to form their own school systems.

Some commissioners say this is moot and that you cannot force a newly established entity to take on financial responsibility of another entity.

County leaders have about one year to iron out this wrinkle.

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