Public employees in New York have been promised $250 billion in health benefits after they retire that the state and local governments haven’t set aside funds to pay for, the conservative Empire Center for New York State Policy said in an analysis released today. The obligations have increased by $45 billion since the think-tank first reported on them two years ago.
Health-care coverage for retirees is a form of deferred compensation that is commonly offered to government employees. But while pensions are at least partially pre-funded through large investment pools, health care is funded on a pay-as-you-go basis, the report said. Most public employers allow retirees to stay on the employee health-insurance plan and pay a portion of the full premium after five to 15 years of service.
The retiree health care iceberg is getting bigger and more dangerous with each passing year,” said author E.J. McMahon, a senior fellow with the Empire Center and the Manhattan Institute. “If elected officials don’t act soon to shrink this problem, it could eventually sink us.”
A new accounting standard requires state and local governments to calculate and disclose the long-term costs of health-care coverage for retirees.
The Empire Center recommends requiring retirees to pay a larger share of premiums, reserving the greatest benefit to retirees who worked the longest and eliminating retiree health-insurance coverage for new hires and employees who have been on the payroll for less than 10 years. The organization says these workers should be shifted into retirement medical trusts.
The Empire Center details the cost of the obligation for the state and its largest counties, cities, towns, villages and school district. They are:
— $73 billion for state employees, including the State University of New York and City University of New York;
— $84 billion for New York City;
— $17 billion for the 20 largest counties, including $665.4 million for Rockland and $2.4 billion for Westchester;
— $5.5 billion for the 15 largest cities outside New York City;
— $2.9 billion for the 15 largest towns;
— $819 million for 11 of New York’s largest villages, including $64.4 million for Ossining, $53.9 million for Port Chester, $68.9 million for Scarsdale, $47.2 million for Spring Valley and $188.2 million for Harrison, a combined town-village;
— $19 billion for the state’s five largest public authorities.