Columbus Dispatch: Health costs hurt pension systems
Teachers, school employeesNonteaching school employees drew an average of more than $3,700 in health-care costs from their pension system last year, also a steady climb from 1998 levels and a trend expected to continue.
New and better prescription drugs and longer life spans are behind the increases. The trend, however, will bankrupt the pension system's health-care funds unless something is done about it, say leaders of the State Teachers Retirement System and School Employees Retirement System.
Officials with the teachers' pension system want teachers and school districts to dig a little deeper into their pockets to cover the rising expenses. That idea has run into stiff opposition from school districts, who say it will hurt students by diverting money from the classroom.
The retirement system for other school employees proposes bumping up the reduced-benefit retirement age from 60 to 62, and requiring employees to have 10 years of tenure rather than five to receive a full pension at age 65. The proposal is not controversial.
Both pension systems say the changes are needed to keep providing health care for retired educators in the long term. They pointedly note that the law requires them to provide only pension benefits, not health care, for their retirees.
"What's driving all of this is health-care costs," said Aristotle L. Hutras, executive director of the Ohio Retirement Study Council, which analyzes trends for the five state pension systems. "Pensions aren't in trouble at all."
The State Teachers Retirement System has seen its health-care bills soar from $259 million in 2001 to $490 million in 2006. Under current trends, the system will run out of money to cover health-care expenses of retired teachers around 2021.
Pension leaders are backing legislation that would increase contributions by both teachers and school districts by 2.5 percent, phased in over five years. For the first time, current teachers would pay into the health-care fund. (Retired teachers' contributions account for a little less than half of the fund's revenue.)
"We know that with health-care-cost trends being what they are, that fund is eventually going to run out of money," said Laura Ecklar, spokeswoman for the teachers' pension fund. "That's why we're proposing this to create a dedicated revenue stream to keep that fund going. When that fund goes dry, that's when the program ends."
Universities, whose faculty are members of the teachers' pension, and Ohio's largest teachers' union both back the proposal to shore up the health-care fund by squeezing teachers and school districts.
"We achieved consensus that the only way to maintain this health-care benefit is to create a dedicated revenue stream to fund it," said Bill Leibensperger, vice president of the Ohio Education Association and co-chair of a group that examined ways to maintain health care.
"This is not really a solution. It's a fix. We have a national health-care funding crisis."
The Ohio School Boards Association opposes the proposal, saying it would saddle the state's school districts with $250 million a year in contributions to the pension system on top of the $1.2 billion they already pay.
"We just think that enough is enough," said Fred Pausch, the association's director of legislative services. "We think the (State Teachers Retirement System) should deal with this on their own without trying to pass it onto the backs of Ohio schoolchildren."
A separate proposal to raise retirement ages for bus drivers, attendance clerks, custodians and other nonteaching school employees has not drawn any organized opposition. The School Employees Retirement System devised the legislation to get a handle on health-care costs, which have risen from $174 million in 2001 to $229 million last year.
Without a change, the health-care fund will run out of money in 2014, say officials from the school employees' pension.
They're backing legislation to cut benefits for early retirees and to toughen eligibility requirements for full retirement. The changes would apply only to new hires. The legislation would save $3 million in its first year and eventually cut more than $500 million from projected annual health-care costs, School Employees Retirement System officials forecast.
"We're trying to urge our folks to work a little longer," said James R. Winfree, executive director of the pension system.
posted by Kathie Bracy at 11:33 AM
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