Iceberg Ahead

New York taxpayers spend billions of dollars a year on health insurance coverage for retired state and local government employees, many of whom are too young to be eligible for Medicare. But the mounting “pay-as-you-go” bill for retiree healthcare is just the tip of a much larger iceberg.

Thanks to a new government accounting standard, the true cost of this long-term entitlement is finally emerging from the depths of state and local finances. Based on a review of financial reports for the state and its largest local governments, school districts and public authorities, this report estimates that New York’s total unfunded liability for public-sector retiree health insurance comes to nearly $250 billion.

This figure represents a mammoth potential transfer of wealth from future taxpayers to current government employees and retirees—for a type of benefit that is not available to the vast majority of private-sector workers.

The burden of retiree health care is clearly unsustainable and unaffordable. This report, designed as a primer on the issue for taxpayers and government officials, recommends a four-step plan for curbing retiree health care costs before it is too late.

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