While municipalities have decried the rising costs of Medicaid, pension benefits and other unfunded mandates, a new report raises alarm over unfunded retiree health care liabilities it estimates at nearly $250 billion statewide.
State and local government employers in Westchester alone are responsible for billions of dollars in health care benefits for retirees, according to the report “Iceberg Ahead,” released by the Empire Center for New York State Policy.
Private sector employers rarely offer retiree health insurance, but it”™s among the fastest-growing areas of public-sector employee compensation, the report states, accounting for nearly 40 percent of annual employee health benefit costs at the state level.
E.J. McMahon, senior fellow of the Manhattan Institute for Policy Research, which runs the Empire Center, wrote in his report that while “a few elected officials around the state have tried to get a grip on the problem,” the majority of them “are steaming full-speed ahead on a collision course with financial reality.”
Among local government employers in Westchester, the county government is responsible for unfunded retiree health care benefits of more than $2.3 billion. The city of Yonkers has liabilities of nearly $700 million, the city of White Plains has liabilities of more than $254 million, the city of New Rochelle has liabilities of nearly $190 million, and the city of Mount Vernon has liabilities of more than $98 million, according to the report.
Additionally, the town of Greenburgh has liabilities of more than $167 million, while the town and village of Harrison have liabilities of more than $188 million.
Among school districts, Yonkers Public Schools is responsible for more than $975 million in unfunded retiree health care, Mount Vernon City Schools is responsible for more than $141 million in benefits, White Plains City Schools is responsible for more than $128 million in benefits, and New Rochelle City Schools is responsible for more than $105 million.
Notably, the Metropolitan Transportation Authority is on the hook for nearly $18 billion in unfunded retiree health care benefits.
For its 2012-2013 fiscal year, which runs through March 31, 2013, the state government will spend $3.2 billion in health-related benefits; of that, $2 billion will be spent on active employees, while $1.2 billion, or 38 percent, will go toward retired employees.
By the 2015-2016 fiscal year, the state government is projected to spend $1.5 billion on health-related benefits for retirees, out of a projected total of $3.95 billion.
In contrast to pension benefits, which are collectively pooled and partially pre-funded out of a few large, multi-employer trust funds, public-sector retiree health benefits are administered by each of the thousands of local government units across the state.
However, unlike pension benefits, which McMahon writes are protected under the state Constitution, public-sector retiree health benefits are not guaranteed.
In his report, McMahon advocates for public-sector employers to examine and adjust the health benefits offered to retirees by preserving health benefits for employees who have already retired but requiring them to pay a larger share of their own premiums, establishing trust funds to cover retiree health care benefits, and eliminating retiree health insurance coverage for all new hires and for employers who have been on payroll for fewer than 10 years.
