NCPA - National Center for Policy Analysis

PROGNOSIS: EXPENSIVE

February 12, 2007

The city of Fort Worth has a projected long-term funding shortfall of $411 million for its employees' pension fund.  Now it has an additional long-term concern: an estimated cost of $858 million over 30 years to pay health care costs of retired employees.  Painful as it might be, city officials should reduce retiree health insurance benefits if the cost appears unsustainable in future years, says the Fort Worth Star-Telegram.

  • The city traditionally has paid health care costs on a pay-as-you-go basis through allocations in the annual operating budget; for the fiscal year that began Oct. 1, the city has allocated $34.7 million for active employees and their dependents and nearly $18.5 million for retirees and dependents, for a total of $53.2 million -- 5.7 percent of the total operating budget of $931.6 million.
  • Fort Worth's annual health costs didn't reach $1 million until 1976, but they now total more than 50 times that amount.

Preliminary recommendations issued by staff are that the city:

  • Make annual contributions of more than $8 million to a trust fund to help cover future retiree health care expenses.
  • Require that future city employees work at least 10 years to be eligible for retiree medical benefits (the current requirement is five years).
  • Provide continued funding for a new "wellness" program for retirees that encourages them to eat more healthfully, be more physically fit and better manage health problems such as diabetes and high blood pressure.
  • Lower its retiree health care subsidy for employees hired in 2008 or later; the city might, for example, require these employees to pay more for insurance premiums.

Source: Editorial, "Prognosis: Expensive," Fort Worth Star-Telegram, February 12, 2007.

 

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