Annual health insurance premiums for active and retired state government employees in New York have risen $1.6 billion (128 percent) since fiscal 1999-2000 and are expected to increase by another $838 million (30 percent) over the next four years, according to the 2009-10 Enacted Budget Financial Plan.
The table below, from p. 156 of the Financial Plan, provides the details.
Unlike pensions, retiree health insurance costs–also known as Other Post-Employment Benefits, or OPEB–are financed on a pay-as-you-go basis. But the $1.1 billion budgeted for this purpose in 2009-10 is actually a form of deferred compensation earned by employees years or even decades ago. It does not reflect retiree benefits that will be earned this year by active employees, and thus grossly understates the true cost of the state’s health insurance promises to its workforce.
A new government accounting standard has required state and local governments to begin calculating and reporting OPEB costs more fully and accurately. New York State’s unfunded liability for retiree health care came to $50 billion in fiscal 2007-08 but “may increase by as much as $9 billion” in fiscal 2008-09, the Financial Plan says. To pay off the 2007-08 liability on a 30-year amortization schedule, the state would need to deposit an additional $2.7 billion into a dedicated OPEB trust fund this year. But that’s not happening, so the $2.7 billion will be recorded as an addition to the state’s net liabilities.
Meanwhile, in just two years, New York City’s unfunded liability for OPEB has risen from $54 billion to $63 billion.
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