Breaking point; Costs to cover public retirees skyrocketing.
The costs of providing health care to municipal retirees have been building, largely out of public view, for many years. A report issued this week by the Massachusetts Taxpayers Foundation has finally brought the issue into the open - and estimated the total liabilities for cities and towns in Massachusetts at about $20 billion.
Unless cities and towns take immediate steps to cut down on these liabilities by exercising existing options - as well as seeking legislative assistance in changing the law where necessary - the costs of providing health care to retirees threaten to drown municipal budgets in a sea of red ink, forcing officials to choose between far more painful and sudden changes - with the threat of litigation - or huge tax increases on residents.
The report, "Retiree Health Care: The Brick that Broke Municipalities' Backs," bluntly states that "... rapid acceleration of health care costs combined with overly generous benefits have created staggering ... liabilities which exceed unfunded pension liabilities in almost all Massachusetts communities."
Worcester, for example, has an unfunded liability to retirees estimated at $765.3 million. That's on top of nearly $300 million in unfunded pension liability - for a total of more than $1 billion. If changes are not made to moderate the benefits, asking taxpayers to fully fund annual benefits would require increasing the average single-family tax bill in the city by 65 percent for 30 years, a situation that MTF calls "absolutely inconceivable."
The MTF makes clear that no community is in a position to fund all such obligations anytime soon. The report is equally clear on why the problem is so serious, and what can be done to address it.
Municipalities continue to offer far more generous benefits to their retirees than those available to private-sector retirees, including "such relics as $5 co-pays and no deductibles. Many municipal retirees are not required to enroll in Medicare ... eligibility requirements for retiree health care have few restrictions."
The report lays out clear recommendations: Require Medicare enrollment; tie benefits to years of service; cap municipal contributions; and give local officials authority to change plan designs without union approval.
The argument over what is owed to municipal retirees certainly won't end with this report. But without serious changes soon, that argument will become moot, as changing demographics and economic realities exhaust the ability - and patience - of taxpayers to bear these burdens.
Simply put: Without change, the money is going to run out. Public officials and unions have no choice but to come together and agree on common-sense reforms over benefits for retirees. The sooner they start, the better it will be for all.
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|Publication:||Telegram & Gazette (Worcester, MA)|
|Date:||Feb 17, 2011|
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