as-new-yorks-future-healthcare-costs-skyrocket-mayor-bloomberg-raids-the-modest-fund-to-pay-them

As New York’s future healthcare costs skyrocket, Mayor Bloomberg raids the modest fund to pay them

A new report out from the state’s Financial Control Board (FCB), which reviews New York City’s finances, shows the updated value of New York’s projected costs over time for providing healthcare to retirees.

This liability has grown by 36 percent in the three years since the city has had to report it, and will near the $100 billion mark in less than a half decade.

In 2006, when new accounting regulations forced New York to disclose how much it has promised in future health benefits to retirees, the figure was $50.5 billion.

Today, it has risen to $68.8 billion.

Four years from now, the number will have grown to $96.4 billion — another 40 percent, and nearly double the first $50.5 billion figure.

Unlike with pension benefits, no government body requires the city to set aside money to fund these liabilities. (And unlike with pension benefits, the state constitution does not guarantee payment to retirees.)

But in 2005 and 2006, flush with record surpluses, Mayor Bloomberg put a total of $2.5 billion into a “retiree health benefits trust,” supposedly to fund this future liability.

The Financial Control Board’s new report notes that the city needs to do more, though, to “address this serious growing liability,” either by reducing benefits through bargaining with unions, or by aggressively increasing its contributions to the trust fund, or both.

Instead, Mayor Bloomberg is drawing down $1.5 billion from this “trust fund.” The money withdrawn will fund current pension contributions, the city says.

However, pension contributions are part of the city’s annual operating budget. They’re just another labor cost. And all operating money is fungible.

So the city is really using a long-term store of savings to cover its immediate budget gap.

This Monday, the New York Times‘s Michael Barbaro reports, the FCB’s three board members from the private sector “scolded the city” for taking money out of the trust fund when it should be adding to it.

“Troubling to us is that many reports on the city’s fiscal condition treat the health benefit trust fund like it is a budget reserve to be used to close deficits,” the members said at the board’s annual meeting, which nevertheless certified that the city’s budget is balanced.

The fiscal propriety of creating anything called a “trust fund” and using it instead as a mechanism through which to paper over operating imbalances in the budget is dubious, at best.

New York would not be able to raid pension funds to help close its operating budget gap, nor would it be able to borrow by issuing bonds for this purpose.

But, in effect, by raiding a long-term fund whose coffers will have to be replenished eventually, New York is borrowing from the future, just as it would if it were floating bonds.

You may also like

State Offers Taxpayer-Funded Health Coverage to Unionized Home Care Workers

In a new subsidy for the health-care union 1199 SEIU, the Hochul administration is allowing the union's benefit fund for home care aides to shift some members into taxpayer-funded health coverage through the Essential Plan. Read More

A Closer Look at $4 Billion in State Capital Grants to Health Providers

The state has awarded $4.3 billion in health-care capital grants over the past decade, with a disproportionate share flowing to upstate providers, Health Department records show. Th Read More

NY’s net taxpayer migration loss dropped a bit in 2021-22, latest IRS data show

The outflow of New York taxpayers to the rest of the country subsided from the previous year's record high during the second tax-filing period following the March 2020 COVID-19 outbreak, according to the latest (IRS). Read More

Hochul’s Pandemic Study Is a $4.3 Million Flop

The newly released study of New York's coronavirus pandemic response falls far short of what Governor Hochul promised – and the state urgently needs – in the aftermath of its worst natural disaster in modern history. Read More

NY’s biggest public pension fund gained nearly 12% in FY 2024

Rebounding from its biggest loss since the Global Financial Crisis, New York's Common Retirement Fund realized a strong investment gain of 11.55 percent in fiscal year 2024, state Comptroller Thomas DiNapoli announced. The Fund, which now stands just below $268 billion, supports pensions paid to members of the New York State and Local Retirement System (NYSLRS). Read More

82 Questions Hochul’s Pandemic Report Should Answer

This is the month when New Yorkers are due to finally receive an official report on the state's response to the Covid-19 pandemic, one of the deadliest disasters in state history. T Read More

The Real Lack of Courage Driving NYC Congestion Pricing

Governor Hochul is taking heat after postponing the state’s years-old plan to charge drivers to enter lower Manhattan. As critics slam her for lacking “political courage,” it’s an appropriate time to examine some of the underlying issues that congestion pricing was meant to indirectly mitigate—because many if not most advocates were afraid to touch those issues themselves. And if congestion pricing proponents are to be taken at their word about their concern for MTA finances, or traffic, or air quality, they must show some of the same courage they’ve accused the governor of lacking. Read More

To Encourage Recycling, Pols Move To Trash The Legislature

New York state lawmakers in recent years have surrendered some of their policymaking and taxing powers to the executive branch. With the 2024 legislative session coming to close, they’re poised to go even further and turn those powers over to an organization outside of government entirely. Read More