Administration January 13, 2012

Mass. Cities Face $4.5B Unfunded Retiree Health Care Costs

January 13, 2012 (PLANSPONSOR.com) - Taxpayers in 10 Massachusetts cities may be on the hook for a combined $4.5 billion in unfunded healthcare benefits for public retirees.
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The report by the business-backed Massachusetts Taxpayers Foundation concludes the average single-family home would need to pay nearly $13,700 to pay down the liability, according to The Herald News of Fall River, Massachusetts. The Foundation examined the unfunded healthcare liabilities in Brockton, Fitchburg, Haverhill, Holyoke, Lawrence, Lowell, New Bedford, Pittsfield, Springfield and Worcester.   

“Without reforms, over the next 30 years municipalities would be forced to siphon tens of millions from education, public safety and other critical services simply to fund the annual costs of retiree healthcare, leading to the layoffs of hundreds if not thousands of municipal employees,” the report said, according to The Herald News.

The news report said tax hikes required to address the liabilities without sacrificing local services often far exceed the limits under Proposition 2 1/2. Employers are also at risk, the report found, facing an additional $70 million in property taxes to help pay their portion of the retiree healthcare liability.

“Simply put, the tax increases needed to fund these massive liabilities would crush these cities and their local economies,” said Michael Widmer, president of the Massachusetts Taxpayers Foundation, in a statement accompanying the report.

The news report said The Taxpayers Foundation recommends the continued implementation of a plan signed into law last year that gives city and town managers greater control over healthcare costs. It also recommends that employee healthcare benefits be tied to their length of employment, ending a practice of allowing retirees to obtain full health benefits after just 10 years of public employment. The report recommends raising the minimum length of service to 15 or 20 years.

The report also calls on the Legislature to raise the eligibility age for retiree healthcare to 60 from 55, to restrict healthcare eligibility to workers who work more than 27 hours per week and to end coverage for retirees’ dependents.

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