Unfunded liabilities may be our undoing – By George J. Marlin

 The following appears in the September 21-27, 2012 issue of the Long Island Business News:

The news of late has been bleak for Long Island taxpayers.

First there was the state comptroller’s announcement on the Friday of Labor Day weekend that county and local government pension contributions for fiscal year 2013 must be increased an incredible 12 percent.

The average contribution for non-uniformed government employees will go from 18.9 percent of base salaries to 20.9 percent. For police and firemen it will be 28.9 percent, up from 25.8 percent.

The total pension tab for Long Island municipalities in 2013 will come in at about $3.2 billion; $348 million more than 2012’s expenditures of $2.9 billion. And unless there are budget cuts to offset these additional costs, property taxes will have to be hiked. Remember, pension costs, are excluded from the 2 percent property tax cap.

The other dismal news: It was revealed that the unfunded liability for New York’s public-sector retiree health insurance is a whopping $250 billion.

For years, many elected officials, who have been giving away the store in collective bargaining agreements, have been burying the cost of retiree health insurance in an accounting line called “other post-employment benefits,” or OPEB. New government accounting standards have, however, forced the state and its local governments to finally fess up to the future costs of this long-term entitlement. And, thanks to the monumental efforts of the Empire Center for New York State Policy, we now know that taxpayers will have to foot a $250 billion bill to keep the promises made by elected officials.

Retired employee health care costs consume, on average, about 30 percent of a municipality’s OPEB costs and it is expected to rise every year for decades to come. These health care costs are “pay as you go.” In other words, not one dollar has been set aside and every municipality is solely responsible for coming up with the money to meet its obligations. Some municipalities presently spend more on retirement heath care than they do on current employees.

After totaling and analyzing OPEB, the Empire Center concluded, “Unfunded liabilities for retiree health coverage are starting to erode the balance sheets of state and local governments, undermining their fiscal solvency to an even greater degree than rising pension costs.”

Taxpayers should be aware that unlike public-employee pensions, health care benefits are not protected by the state constitution; hence they can be scaled back if there is the political will to do so.

In a few years, pension and health care costs will be consuming more than 40 percent of the revenues of many Long Island municipalities. If they are to avoid insolvency, or worse yet, bankruptcy, politicians must find the backbone to deal with these issues at the collective bargaining table now.

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