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The Associated Press March 1, 2011, 12:00PM ET

Plan for W.Va. retiree costs shot down in Senate

West Virginia may not address the cost of retiree health benefits this legislative session, after the Senate Finance Committee rejected the key proposal on the topic Monday.

The 8-9 vote scuttled a bill that aimed to devote $1 billion over 20 years toward these costs by nearly tripling the cigarette tax. Other provisions would cap retiree premium subsidies and change how these costs are accounted for as debt.

All Senate bills must pass to the House by Wednesday, leaving few options for the measure's supporters. Sen. Brooks McCabe, its lead sponsor, attributes the defeat to its proposed tobacco tax hike.

"The real question is, what is an acceptable funding source," the Kanawha County Democrat said. "I don't view this is as a wasted effort. We know a whole lot more about this, and we're in a very strong position to move pretty quickly if we can find a funding source."

But critics include Sen. Walt Helmick, who helped kill the bill. Helmick said the measure failed to address how the state racked up the estimated $8 billion funding shortfall from what's known as other post-employment benefits, or OPEB.

"How did we get there? Who made those decisions?" said Helmick, D-Pocahontas. "What do we have to do in the future to correct them? That bill provided nothing of that nature, nothing whatsoever."

These non-pension benefit costs mostly reflect retiree health coverage. Since 2004, a national accounting standard has called for states to calculate and report the gap between on-hand assets and what's been promised to employees in these benefits. Most states, including West Virginia, had previously adopted a pay-as-you-go approach to this unfunded liability.

The bill proposed hiking the cigarette tax from 55 cents to $1.55 per pack. The committee amended the bill Monday to distribute the resulting revenues to other health care needs besides the retiree costs. Those included anti-tobacco efforts, substance abuse prevention, Medicaid and that program's coverage of children with autism.

Much of that revenue-sharing language echoed a separate bill that sought to raise the tax on cigarettes and one on other tobacco products. This other measure also appears likely to miss Wednesday's crossover deadline.

Sen. Ron Stollings, D-Boone and a physician, said he had hoped those health care-related additions would make the bill more palatable to fellow committee members. So did Senate Finance Chairman Roman Prezioso, who discounted the chances of reviving the bill.

"I thought we had a great idea," the Marion County Democrat said. "Absent the tobacco tax, I don't know where else we can get the money."

But Senate Minority Leader Mike Hall, a Putnam County Republican who opposed the bill in committee, questioned whether the House would have taken up the bill had it passed. Delegates have not pursued any OPEB-related measures this session, and its version of the tobacco tax hike bill has also stalled.

McCabe's bill would have also changed what non-state government employers must pay annually toward the OPEB unfunded liability. Most of West Virginia's 55 county school boards sued last year, without success, over these annual required contributions. The bill also proposed shifting the liability for educators paid through state school funding from county school boards to the state.

Patti Hamilton of the West Virginia Association of Counties said that while her group did not advocate the bill's defeat. But it also did not believe the measure helped these other government employers with the premium subsidies for their retirees. That portion of the cigarette tax revenues earmarked for subsidies were solely for state retirees, she said.

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