NCPA - National Center for Policy Analysis

MARYLAND BILLIONS SHORT IN RETIREE PAYOUTS

February 1, 2008

Maryland is $16.2 billion short in payouts for future retiree health care benefits, according to state budget analysts.

  • To avoid a major financial problem, Maryland will either have to start paying at least $500 million more annually into the retiree fund in the coming years or cut retiree benefits, according to a further analysis by the Washington Times.
  • In addition to the state problem, Baltimore and the state's 23 counties are $12 billion to $14 billion behind in the payments, local budget analysts say.

Currently:

  • The state has a $991 million annual commitment to retired workers and their families.
  • Gov. Martin O'Malley, a Democrat, included $514 million for retiree health care in his fiscal 2008 budget, leaving the state $477 million short.

The shortfall is the result of collective-bargaining commitments that state and local leaders made with government employees more than 20 years ago, analysts say:

  • State officials promised to pay for health care benefits for employees and their families after they retired, but paid only for the existing costs without budgeting for future costs, expected to balloon to the $16.2 billion.
  • Private analysts hired by the state to evaluate the problem say the shortfall will grow with the increasing costs of life insurance and health and dental care.
  • Maryland last year paid other post-employee benefits (OPEB) to 142,500 former employees and their families.

Though states have long planned for employee pensions, investing tens of billions of dollars through well-established systems, only recently have they begun dealing with OPEBs.

Nationwide, states have guaranteed $381 billion in OPEBs, but only budgeted for $11 billion, according to a report by the Pew Center on the States.

Source: Tom LoBianco, "Maryland billions short in retiree payouts," Washington Times, February 1, 2008.

 

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