In Bay State, $20 B In Unfunded Retiree Health Costs

By Sarah Birnbaum

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Feb. 16, 2011

BOSTON — The 50 largest cities in the Bay State owe $20 billion in existing and future retiree health care costs — and they have no plan to pay it down.

So says a study released Tuesday by the Massachusetts Taxpayers Foundation.

The study examines promises made by Massachusetts cities and towns to retirees — and says they'll be very expensive to keep.  Boston, for example, will need $4.5 billion to fund health care benefits for current and future retirees over the next 30 years, but the city has put almost nothing aside to pay for those benefits.

Michael Widmer, the president of the Massachusetts Taxpayers Foundation,  says the Legislature and municipalities face a clear and critical choice:  Either scale back health benefits or slash local services:

“Something has to give because if no changes are made, we will continue to sacrifice more and more local services: Schools, public safety,  libraries, so forth,” Widmer said.

The report recommends that cities and towns cut health benefits and toughen health plan eligibility requirements.  But Widmer says that first, the Massachusetts legislature would need to change state law that gives municipal unions near-veto power over attempts to change their health care benefits.
 
“You can scale these benefits back and still provide very generous health care benefits.  But action is required now because these liabilities are staggering,” Widmer said.

Public employee unions have fiercely objected to health plan changes in the past.  They say that public workers, like teachers, have agreed to salary freezes year after year in order to keep their lifetime health care benefits. 
 
Action could come this year though.  Gov. Deval Patrick and leadership in the House and Senate have signaled their willingness to tackle the politically touchy issue. 

And last month, Patrick filed a bill that would allow municipalities to join the relatively cheap state insurance pool without prior union approval.  This would have the dual effect of bringing down the cost of providing health care for current employees and reducing the unfunded liability for retiree health benefits.  The bill is still pending before the Legislature.

Your comments: Should the state cut public services to fund retiree benefits?

Mass. Taxpayers Foundation: The Brick That Broke Municipalities' Backs

READ THE STUDY

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