NCPA - National Center for Policy Analysis


November 9, 2006

Public employers will soon have to face the pain of funding retiree medical benefits for an estimated 24.5 million state and local government employees, teachers, and county and city workers; a measure that could cost anywhere from $600 billion and $1.3 trillion, says the Wall Street Journal. 

Under the new Governmental Accounting Standards:

  • Public employers with at least $100 million in annual revenue will have to begin reporting these numbers in the first fiscal year beginning after Dec. 15, 2006.
  • The rules go into effect Dec. 15, 2007, for those with revenue of $10 million to $100 million.
  • Those with revenue of less than $10 million have until after Dec. 15, 2008.

While the new standard doesn't apply to federal employees, many states and cities will have no choice but to increase taxes and reduce services and benefits to meet these costs, says Mincer; measures that will affect public employees, taxpayers and municipal-bond investors alike.

However, few employers are planning any cuts or tax increases any time soon, which isn't necessarily a good thing, says the Journal.

"They're aware they haven't funded these things, but they don't seem to have plans," said Dallas Salisbury, president of the Employee Benefit Research Institute in Washington, D.C.

Source: Jilian Mincer, "Retiree Health Costs to Hit Government Employers," Wall Street Journal, November 9, 2006.

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