I’ve written about retirement funding on this blog before. Essentially, many contracts (particularly union contracts with people like teachers and firefighters) make promises that simply cannot be kept. When you promise your retirees full health care, and the prices of health care skyrocket along with the life expectancy, that really torpedos the financial model you use to forecast expenses. Paying for lifetime health care with a collection age of 65 and a life expectancy of 67 is a far different thing that paying for lifetime health care for a 56 year old retiree who is going to live to 90.
Put simply, the public system cannot afford to make good on their contracts. It’s terrible to think that governments would enter into a contract in good faith and then not be able to deliver, but it’s even more terrible when you realize that they will have to bankrupt all of the citizens to pay it off when held to the contract.
There’s an article in this morning’s paper about a newly published study from the University at Buffalo. The Buffalo Public Schools alone have an unfunded retiree health care obligation of $1 billion. The City of Buffalo is close, at $945 million. The state of New York as a whole? $50 billion.
Naturally, rather than face this issue, the governments involved are sticking their heads in the sand and the unions are waving their contracts, insisting that squeezing blood from a stone (or tax money from the nation’s second poorest city) is what’s morally right. With the great Baby Boomer Retirement over the next few years, it’s conceivable that the taxes on a typical house in the city could double, or local government will stop funding everything but retiree health care obligations. No more parks, or culturals, or zoo money, or Boys and Girls clubs, or anything else. Just free health care for union members and poverty for the rest of us.
No wonder people are moving out of the Empire State.
[Insert snarky comment from Pitt about God’s Country, SC, here.]