Aug. 15--Facing unfunded liabilities of more than $7 billion for retiree health insurance, lawmakers decided three years ago not to promise
retiree coverage to state employees hired after July 1, 2010.
This reform lasted only three years. Then lawmakers adopted a plan to offer a subsidy for health insurance for new hires who retire before they are eligible for Medicare.
Taxpayers will set aside $5 million a year, beginning in 2016, which thanks to the magic of compounded interest will become $330 million by 2040.
But that assumes an average rate of return of 7.5 percent. And the math also assumes no other legislative changes will be made in the next 28 years to enhance the program to benefit state employees.
Given that the previous reform lasted just three years, it is highly likely that this new program will be enhanced over and over again as well.
The Legislature has a very poor track record when it comes to fiscal discipline. PEIA started out small, as did the state's pension plans for state employees. Each became $7 billion unfunded liabilities.
PEIA Director Ted Cheatham told lawmakers in an interim meeting that this new program eventually will cover 40,000 to 50,000 people.
The $5 million contributed to the trust fund each year would provide the equivalent of an $11-a-month subsidy when the new hires retire. If the past is any indication, this could be lobbied into a whole new social program that will lead to more unfunded liabilities.
Why are lawmakers providing subsidies for retiree health care to people who were hired on the understanding there would be no subsidies?
Especially when those subsidies will be funded by people who don't have employer-funded health care in retirement.
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