Albany's penchant for pandering to public employee unions isn't limited to padding pensions. The Legislature is also going out of its way to lock in generous health benefits for retired government workers.
As E.J. McMahon of the Empire Center points out in an article in today's Syracuse Post Standard, a bill passed by both houses and delivered to Governor Pataki's desk last week would prohibit state and local governments from in any way "diminishing" health insurance benefits for their retirees. Instead, any potential change in retired workers' benefits would have to be negotiated along with changes in benefits for active workers.
As previously documented by the Manhattan Institute, among others, retired public-sector workers in New York have lavish guaranteed pension benefits compared to their counterparts in the private sector. The same is true when it comes to health insurance, as the Citizens Budget Commission recently noted in this report.
Most government retirees are eligible for health coverage on the same basis as active state and local government employees, who generally are required to pick up only 10 percent of the premium for individual health insurance policies and 25 percent for family coverage. (The deal is even cushier in New York City, where municipal employees and retirees don't have to contribute anything to their health coverage.) Once retired, state and local workers can also apply the value of unused sick days to further reduce their premiums -- down to nothing, in many cases. Most don't have to pay their Medicare "Part B" premiums, either. The taxpayers foot the bill.
Significant savings might be realized through modifications in these plans, such as requiring retired employees to pick up part of the modest tab for Medicare "Medigap" coverage, tying the premium share to employees' years in state service, or developing plans that combine employer contributions with tax-free medical savings plans. As things now stand, it's been estimated that retirees represent 40 percent -- or $800 million a year -- of the health benefit costs for the state government alone. As McMahon writes:
The steadily rising cost of all this largesse is straining budgets at every level of government in New York. However, because the retirees' benefit costs are generally lumped in with those of active employees in annual budgets, they are now hidden from public scrutiny.
That will soon change, however. Over the next two years, new government accounting rules will require the state to clearly disclose the true cost of continuing retiree health benefits into the future. In New York, the resulting unfunded liability will probably amount to tens of billions of dollars.
The accounting change explains why the Legislature felt pressed to pass a law shielding retiree benefits from any effort to save money. Far from merely "protecting" an already privileged class of retired workers, the measure is an effort to empower unions by locking in current retiree health benefits before their true costs are known.
A similar state law prohibiting changes in health benefits for retired teachers was first passed in 1994 and has been renewed annually ever since with little public notice or comment. But while routinely signing the law for teachers, Pataki has twice previously vetoed the version for all other public retirees. The bill most recently sent to the Governor would only be in effect through May 15, 2006 -- but the unions no doubt would attempt to have it viewed as no more "temporary" than the teachers' version.
