In working up a countywatchers blog comparing insurance costs for county governments in New Jersey I needed a link to an explanation of OPEB in New Jersey and one of my old nj.com blogs came up which I reproduce below word-for-word from 2009. What strikes me is that:
- so little has been written explaining governments’ liability for OPEBs that my six-year-old blog would come up near the top of a search; and
- OPEB liabilities have gone down.
I expected (1) but (2)? The latest OPEB valuation for New Jersey (July 1, 2013) lists total Accrued OPEB Liabilities as $66.8 billion which is less than the $68.8 billion reported back then. With more people in the system and New Jersey still providing those ‘cadillac’ benefits that supposedly would save the state $3 billion annually if cut back to ‘gold’ how are these liability reductions coming about (if not by actuarial voodoo ordered up by politicians)?
The main reason that state and local governments will be going broke is that they will be paying for services provided not to current taxpayers but to past generations. Politicians, the gutless cowards that they are, have consistently paid off public employees in promises for future generations to fulfill. They promise them Defined Benefit pensions and health care for life (otherwise known as OPEBs). Those pension promises are being funded, in theory, but as for OPEBs not only are states not prefunding but, until recently when accountants forced them to, there wasn’t even an estimate of how much those promises would cost. Now we have one.
On the same day that a group of people who don’t have to worry about their own health insurance coverage made up rules for the rest of us, the good folks at the Center for State and Local Government Excellence released a report reviewing OPEB valuations provided by all 50 states and putting a number on the total cost to taxpayers. That number is $558 billion.
Among the highlights from that report:
New Jersey is number one
In total unfunded liability ($68.833 billion), annual cost ($5.84 billion), per-person cost ($7,946.92), unfunded as a percentage of the budget (139.66%), and annual contribution as a percentage of the budget ($11.85%) New Jersey is far ahead of every other state.
OPEBs can be cut
From page 40:
“The majority of states have constitutional provisions that describe how their retirement plans are to be “funded, protected, managed, or governed.” However, retiree health plans are not accorded similar status. Reductions in or elimination of retiree health benefits may be constrained by collective bargaining contracts, but in general, legislatures have flexibility to reduce and modify retiree health benefit plans for public sector employees.”
Politicians now know the numbers. They understand that OPEB benefits can be bargained down – or away. It wont’ matter. In New Jersey, at least, they won’t do a thing but wait for Washington, DC to send them a savior who can deliver both universal health care to disappear their deficits for them and ignorant voters to win their elections for them.