Editorial: Benefits Storm Brewing

Toledo Blade, December 22, 2005

IT MAY well surprise people living outside Ohio that local and state governments elsewhere around the country haven't been setting aside the billions of dollars that will be needed to fund health-care benefits promised retired public employees over the past half-century.

Due to Ohio's foresight many years ago in setting up trust funds for teachers and other public workers, paying for those benefits here likely won't be the problem now forecast for states like Michigan. The state Up North uses a pay-as-you-go system that effectively has put off the day of reckoning for what may be a $30 billion bill.

About 30 of the 50 states pay for public-employee retirees' health care in the same fashion.

Just when the day of reckoning will arrive will become glaringly apparent over the next two years as a new national accounting standard takes effect that requires government entities to figure out, total up, and report what they expect to owe for retiree benefits in coming years.

The New York Times, in a report titled "The Next Retirement Time Bomb," quoted one consulting firm as estimating the national total at $1 trillion (with a T).

"This is a huge liability," another independent consultant exclaimed. "If anybody understands it, they'll freak out."

If this doomsday scenario plays out as expected, it could well mirror the steady trend among private businesses, which are citing cost in sharply reducing or eliminating health-care benefits for retirees and even current employees.

Officials of Delphi, the auto parts giant, is trying to use bankruptcy proceedings as a lever to cast off its union contracts, which cover retiree benefits as well as wages of current workers. Whether government can similarly get away with reneging on its promises is another question, but no less urgent.

The cost of health care has risen so far and so fast - 10 years of double-digit increases - that it threatens to outstrip the capacity of government at all levels to pay for it, just as it does for private business.

The potential consequences - higher taxes, fewer government services, or both - demand a solution or, at least, an early estimate of the problem.

Undoubtedly, government employees will be required to share more of their health-care costs, and public employee unions will be forced to end their demands for more and better benefits.

The realization that little thought has been given to dealing with these costs is as troubling as the awareness that swept over many Americans when Hurricane Katrina revealed a lack of planning for natural disasters. But there can be no doubt that there is a storm of epic proportions on the public policy horizon.