Retiree Health Costs Threaten Cities in Massachusetts

Report: Cities Lack Savings For Retirees Health Benefits

By Martha Bebinger

Look around as you drive through town today.  Any police office, firefighter or school teacher you run into will (hopefully) reach retirement one day with a pretty generous health insurance plan.

The problem is, virtually all cities and towns in Massachusetts are not saving enough money to pay for retiree health costs. A report out today says catching up would cripple municipal budgets and the local economy.

The Massachusetts Taxpayers Foundation (MTF) said last year that the state is at least $20 billion dollars behind on this so-called unfunded liability.  A foundation report out today focuses on 10 mid-sized cities including Worcester, Lowell and New Bedford where the average homeowner would have to pay $13,685 today to cover expected retiree health insurance costs.   The alternative would be a 20% property insurance hike every year for the next 30 years.

“Neither of those options are feasible,” says MTF president Michael Widmer.  He recommends scaling back retiree benefits and/or changing what cities and towns have promised current employees. Continue reading

Cities And Town Hit With $20B In Retiree Health Costs

Here’s WBUR’s Martha Bebinger’s report on Morning Edition today:

Sobering news for Massachusetts cities and towns. The 50 largest communities in the state are on the hook for at least $20 billion in retiree health care costs — an expense none is apparently prepared to pay.

A report from the Massachusetts Taxpayers Foundation said Boston, for example, will need at least $4.5 billion to fund health care for current and retired workers, but has put nothing aside. Funding this liability would add $100,000 over 30 years to the average homeowner tax bill.

Foundation President Michael Widmer said cities and towns must make some difficult choices, soon.

“What’s at stake here is not to reign in the cost of benefits for its own sake, but rather to preserve fundamental local services, public safety, schools, libraries that we all depend upon,” Widmer said.

Widmer said it isn’t clear that cities and towns can continue to afford retiree health care, but if they do, it will have to be under stricter qualifying rules and with fewer benefits.

For more on these unfunded costs, here’s a two-way with Widmer and Bob Oakes.