Media Contacts:
Dr. Richard Kearney, 919/515-5069
Chad Austin, News Services, 919/515-3470
Aug. 13, 2007
FOR IMMEDIATE RELEASE
Despite assurances of health care and other benefits to current and future retirees and their families, most state and local governments are facing major financial shortfalls in funding the promised benefits to public workers in their retirement years.
With many states experiencing retiree benefit funding deficits in excess of several billion dollars, a team of public administration and economic researchers at North Carolina State University will assess and diagnose the financial challenges facing state and local governments in meeting these benefit obligations.
As part of an 18-month, $377,000 grant from the Washington D.C.-based Center for State and Local Government Excellence, the NC State team will examine the current status of state and local government retiree health-care benefits, assess costs and future funding liabilities, and explore alternative plans and approaches.
“The biggest financial issue facing state and local governments over the next decade is how to resolve the pension and health-care deficits,” says Dr. Richard Kearney, director of NC State’s School of Public and International Affairs and principal investigator of the grant. “Every state has under-funded its future liabilities for retiree health care. Some states are tackling the problem as a critical financial issue, but others are ignoring the problem and hoping it goes away. We want to know where each state stands and what each is doing to remedy the problem.”
Kearney’s research team – which includes Drs. Robert Clark, professor of economics and business management in NC State’s College of Management, Jerrell Coggburn and Dennis Dailey, professors of public administration in the School of Public and International Affairs, and two graduate students – will collect and analyze data from all 50 states and a representative sample of local governments as part of the study. Their analysis will identify effective practices and policy recommendations in coping with the retiree health-care crisis.
For years, states and local governments have promised retiree health benefits without figuring out the costs. New policies of the Governmental Accounting Standards Board (GASB) now require state and local governments to reveal the future costs of their non-pension, post-employment benefits, including health care. Indications are that many health care plans are significantly under-funded, and costs are rising faster than inflation.
Complicating the problem is pressure on state and local governments to be more competitive with the private sector in hiring and retaining employees for public-sector jobs. State and local governments are facing a large exodus of workers in the coming years as public-sector employees in the baby boomer generation approach retirement age. According to 2006 census data, 60 percent of state government workers and 63.5 percent of local government workers were over the age of 40.
Financial shortfalls, rising health-care costs and a swelling population of new retirees in the coming years will impose a heavy economic burden on state budgets, potentially resulting in tax increases or reductions in benefits to retirees.
Kearney hopes the results of his team’s research and accompanying policy recommendations will help state and local governments tackle this pressing issue.
“We are addressing a real policy issue by trying to understand the scope of the problem and then providing some policy recommendations for political leaders to consider,” Kearney says. “There will be desperate measures down the road for states that don’t properly address these issues soon.”
- austin -
RSS Feeds