And retirement at 55 with bigtime health benefits. This is going to become a big problem for many public entities, not the least of which is those in New York.
Starting in 2006, GASB (Government Accounting Standards Board) 45 will require that OPEB's (Other Post Employment Benefits) such as retiree health care MUST shown as an accrued liability on the budget, similar to pension benefits. Rather than using pay-as-you-go for retiree benefits (which does not show the "true" cost of health care for employees), GASB 45 requires public entities to estimate the future value of such benefits for its retirees and then calculate an actuarially derived yearly expense to be shown on the budget.
The implications of this is huge. I'm on a local school Board and all Board Members only know is how much we pay per year for health care. The figure cited includes all current AND retired employees. But GASB 45 will change that because the actuarily derived yearly expense will end up going against the bottom line - and may cause school district entities to increase the tax levy to fund this liability.
For the school district I serve on the Board, teachers and administrators can accrue sick time, and then convert that sick time to health care upon retirement - and that is way many school districts handle retiree health care. So going back to our school district, a teacher or administrator can concert anywhere from 17-25 days of accrued sick time to one year of paid health care for themself upon retirement.
GASB 45 does not require entities (such as a New York City's MTA) to FUND the liability, but in reality, emtities will have to fund this liability in some fashion. I believe this will end up forcing many small public entities to consolidate - taxpayers are at their limit in these parts of what they can afford to pay for taxes.
I believe that offering health care upon retirement without some provisions to control cost is one of the worst benefits that can be paid to employees. It is a guaranteed benefit that has a variable cost. In 10 years, I predict you will see many school districts having to consolidate due to the inability of smaller districts in rural areas to increase the tax levy enough to cover the rising costs of health care.
Southack, sending to you, as I consider you well versed in things economic and fiscal on FR.
"I believe that offering health care upon retirement without some provisions to control cost is one of the worst benefits that can be paid to employees. It is a guaranteed benefit that has a variable cost. In 10 years, I predict you will see many school districts having to consolidate due to the inability of smaller districts in rural areas to increase the tax levy enough to cover the rising costs of health care."
It is actually a fraud that has been perpetrated against the taxpayers. Benefits are being promised that taxpayers have not agreed to fund, and taxpayers haven't been told of the future costs of those promised benefits.
If this was a contract for a car, you the taxpayer had been told that your healthcare car cost $25,000...and then ten years later find out that the Seller of the car was demanding another $25,000 in "benefits."
Except, you didn't agree to those benefits...or at least didn't agree to pay the Seller that extra $25,000.
Likewise, teachers get paid every two weeks for current work. Paying them after they retire...for doing no work...is akin to being asked to pay again for a car that you bought ten years ago.
If a car dealership asked you for an extra $25,000 ten years after you bought a car from them, you'd tell them to go pound sand.
Well, retired teachers are asking for that extra $25,000 (or perhaps even an extra $250,000) for their "benefits" long after they were paid for their work.
But the buyer of the car doesn't owe an extra $25,000...and neither does the taxpayer.
The taxpayer is actually being defrauded because the taxpayer hasn't been told the true cost of the promised benefits to teachers.
This is like hiding payments to teachers in a public budget; it's illegal.
If you found out that a $250,000 per year football coach was secretly being paid an extra $200,000 in taxpayer money "off the books," then you'd be outraged because the taxpayers hadn't agreed to those extra off the books payments.
Well, the healthcare that has been promised to teachers is off the books...taxpayers haven't been shown the real amount. That's the same as hiding the extra payments to the football coach in that it is a fraud perpetrated against taxpayers.
Right now, people "in the know" claim that the taxpayer *can't* be told the real amount of future healthcare costs because it is too hard to forecast...
...But being too difficult is no excuse for fraud.
Which is to say, yes, it is difficult to forecast future healthcare costs...but that doesn't excuse defrauding the taxpayers.
It's still a fraud.