Health care hit

Our view: Public retiree health care problem can't be ignored

April 23, 2008

April can be the cruelest month - especially for county budgets in a lean year. But as the various county councils, commissioners and executives cut, paste and otherwise mutilate their spending plans to meet falling revenue projections, they need to resist the temptation to shortchange set-asides for retiree health care benefits.

Thanks to a change in accounting rules, governments must now consider these benefits as a long-term expense and not merely on a year-to-year basis. Think of it as a prefunded pension plan - in theory, a county isn't liable for just next year's $20 million in anticipated health care costs, it's on the hook for $400 million or more over time.

The numbers can be daunting: Maryland's projected retiree benefit liability is estimated at $14.5 billion. Gov. Martin O'Malley and the General Assembly set aside less than half of a $1.1 billion recommended payment in next year's budget. That shortfall is not expected to bring immediate heat from the bond rating agencies (most states are doing much less), but it still represents a kind of theoretical budget deficit.

Baltimore County has done an admirable job of funding its retiree benefits and is well on its way to meeting a $1.8 billion liability. But other counties are not doing as well - and now may be tempted to do less under these difficult circumstances.

Instead, counties need to take a cue from the private sector and look to trim health benefits where possible. That won't please employees, but current plans may be unsustainable. Underfunding these benefits would only compound the problem.

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