NCPA - National Center for Policy Analysis

Local Officials Eye Retiree Health Benefits

February 16, 2011

Governors and mayors facing large deficits have set their sights on the soaring expense of health benefits for millions of retired state and local workers.  As they contend with growing budget deficits and higher pension costs, some mayors are complaining that their outlays for retiree health benefits are rising by 20 percent a year -- a result of the wave of retirements of baby boomers and longer life expectancies on top of the double-digit rate of health care inflation, says the New York Times.

  • The nation's governors face a daunting $555 billion in unfunded liabilities to finance retiree health coverage.
  • The Pew Center on the States calculated those long-term obligations last year, saying New Jersey had the largest amount, $68.9 billion, with California second, at $62.5 billion.

In state after state, changes are occurring rapidly, says the Times.

  • For example, New Hampshire has stopped financing health insurance for many future retirees, while North Carolina has begun requiring state employees to work 20 years, up from five years, to qualify for full retiree health benefits.
  • Michigan officials complain that retiree health obligations consume one-seventh of the state's payroll costs, and New York City is slated to pay $2 billion toward retiree health next year.

Overall, the Center for State and Local Government Excellence found that 68 percent of city and county officials surveyed said they were pushing to have retirees assume more of their health costs, while 39 percent said they had eliminated or planned to eliminate retiree health benefits for new hires.

Source: Steven Greenhouse, "States Aim Ax at Health Cost of Retirement," New York Times, February 13, 2011.

For text:


Browse more articles on Tax and Spending Issues