Public schools could be on the hook for $1.4 billion for employees' after-retirement benefits — but they lack that kind of cash, according to a Utah Legislative Auditor General's Office report released Thursday.

The audit recommends those benefits, which exceed regular state retirement benefits, be modified or eliminated "to a level that is affordable, sustainable and more comparable with the state's cost," but "without compromising educational services or requiring additional taxpayer assistance," according to the audit, presented to the Audit Subcommittee of the Legislative Management Committee.

"Just as with the state's post-retirement benefits, public education has amassed a large, unfunded liability that must be addressed to prevent future educational funding problems," the audit says.

Lawmakers this year passed a bill following a similar policy for state employee benefits.

The $1.4 billion potential liability includes $954 million committed to current employees and is mostly unfunded, the audit says. The remaining $500 million is additional cost that will come "if the programs are allowed to continue unchecked."

The audit recommends lawmakers make districts and the State Board of Education complete actuarial studies by June 2006 on all post-retirement benefits, report results to the 2007 Legislature, and apply sanctions if progress is deemed unsatisfactory.

The State Office of Education supports a uniform study but hopes lawmakers let districts maintain local control and flexibility in future actions.

Districts including Alpine, Jordan and Granite already have conducted such studies. Jordan reports setting aside money each year for future post-retirement costs.

Granite District, in a written response to the audit, believes the audit inappropriately uses one district's situation — Jordan's — and applies it to everyone else.

"We are concerned that your estimates could be relied on, and perhaps misunderstood, by both the Legislature and the public," district business administrator Dave Garrett wrote.

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