Texas faces massive bill for state and school retirees' health care, report says

OPERS planned ahead in the 90's and the early 2000's for the healthcare "hit" on retirees while the OEA, Herb Dyer, and the former STRS Boards showed little if no foresight. How often did you hear the magic words "dedicated stream of revenue" given only lip service by the OEA during the past decade? I'll bet more than you want to remember, huh?

Finally, after the barn door was left open for many years, we now have House Bill 315 languishing in committee, don't we? What would you bet that Jon Husted will intentionally leave it there to experience a slow death? At least we don't feel the draft as much since now the barn door has finally been shut. It's a good thing...especially since this winter is already starting out with a vengeance! Hindsight is 20/20, isn't it? Will the current crop of active educators be told this sad tale? If you believe this - I have a bridge I'd like to sell you!

John Curry

P.S. Some will read this and say that you can't compare the healthcare benefits of OPERS to STRS as it is comparing apples to oranges. I say that 30 years of an educator's service time is just as valuable as 30 years of an OPERS retiree's service time.....we should not be complacent with lesser or more costly benefits.

Austin American-Statesman, December 18, 2007
Texas faces massive bill for state and school retirees' health care, report says
Texas has about 89 cents of every dollar it needs for pension benefits.
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By Robert Elder
AMERICAN-STATESMAN STAFF

Public pensions in Texas are in relatively good financial shape, but the state has taken no action to address the huge bill coming due for health care and other retirement benefits for state employees and public school workers, according to a report released today by the Pew Center on the States.

The Pew report, part of a new project on state pensions and investments, said Texas has about 89 cents of every dollar it needs for the pension benefits it has promised to pay state employees and teachers over the next 30 years. Nationally, public pensions have 85 cents of every dollar needed for pension payments.

The report said pension experts consider a funded ratio of 80 percent or higher to be healthy.

The report said U.S. states will spend an estimated $2.73 trillion on pensions, health care and other retirement benefits over the next 30 years. The breakdown: $2.35 trillion for employee pensions and $381 billion for retiree health care and other nonpension benefits — and the latter figure includes only nonpension benefits for state workers.

All told, states have set aside about $2 trillion for these costs, meaning they are 27 percent short of the required amount.

As reported by the American-Statesman last month, the state faces a $36.8 billion unfunded liability in providing health care and other benefits to current and future retirees. The estimates — $19.1 billion from the Teacher Retirement System and $17.7 billion from the Employees Retirement System — were disclosed in response to a national accounting standard on the long-term costs of public-sector retiree benefits.

The Pew Center report said the five largest U.S. states — California, Texas, New York, Florida and Illinois — have set aside no money to pay for health insurance and other retiree benefits. The report said New York state figures show it is estimated to owe $50 billion, while California owes an estimated $48 billion.

"States' fiscal health and economic vitality depends greatly on their ability to wisely manage these bills coming due," Susan Urahn, managing director of the Pew Center on the States, said this morning.

Texas, like most states, handles retiree benefits on a pay-as-it-goes-basis. If Texas were to set aside money for retiree benefits — money in a trust could be invested, with proceeds used to pay the bills — the unfunded liability would decrease.

The report cited four states that have set aside at least $1 billion for these benefits.

"Putting money in the bank" to pay for these benefits "means short-term pain, but long-term gain," Urahn said. She said in the past year, 13 states have established trusts for themselves or local governments to help pay for nonpension benefits.

relder@statesman.com; 445-3671

Price of public benefits in Texas

Pensions
Bill coming due: $132 billion*
Funds set aside: $117 billion
Unfunded: $15 billion
Percent funded: 88.5 (2006)
10-year funding high: 107 percent (2000)
10-year funding low: 88.3 percent (2005)
Other benefits
Bill coming due: $36.8 billion**
Funds set aside: $0

* Pension funds for state workers, law enforcement, judicial and emergency services personnel, and public school employees

** Health, life insurance and other post-employment benefits for state employees and public school workers

Source: Pew Center on the States