Health costs haunt the state

Health costs haunt the state

There's more bad economic news for Illinoisans to contemplate.

Illinois taxpayers hear about underfunded public pensions, no matter whether they're operated by the states or local municipalities.

They're a financial mess. Some police and firefighter pension funds operated by municipalities are in real danger of going under if changes are not made to put them on the path of solvency.

No one knows what's going to happen with Illinois' public pensions. But they're underfunded by $130 billion, a sum that will grow.

If those were the only problems pension funds in this state faced, it would be more than enough.

But the Pew Charitable Trusts recently released a 50-state analysis on taxpayer financial obligations that didn't draw much attention — "non-pension worker retirement benefits," almost all of which is "spent on retiree health care."

Readers could probably guess what the problem is.

"For many states, the gap remains significant between the retiree health care benefits that these governments have promised workers and the funding to pay for them," Pew reports.

The 50 states paid $20.8 billion for retiree health benefits in 2015, a $1.2 billion increase over 2014. That's a staggering sum, but it's a drop in the bucket compared with two other numbers — the assets states have set aside to meet the liabilities.

"In 2015, states had $46 billion in assets to meet $692 billion in other post-employment benefits, yielding a funded ratio of 6.7 percent," Pew reports.

The report states the funded ratio is low because "most states pay for retiree health benefits on a pay-as-you-go basis, appropriating revenue annually to pay retiree health care costs for that year rather than pre-funding liabilities by setting aside assets to cover the state's share of future retiree health benefit costs."

As of 2015, according to Pew, Illinois faced a total liability in retiree employee benefits of $53.4 billion with a funding ratio of minus 0.2 percent. The state spent more than $900 million on the program.

So here taxpayers find another example of public employee costs eating up ever-larger portions of the state budget at the expense of core functions such as education, transportation, law enforcement and social service programs.

About the only comfort Illinoisans can take in this report is the knowledge that it has lots of company.

"Only eight (states) have funded ratios over 30 percent. These states typically follow pre-funding policies spelled out in state law."

Nineteen states, including Illinois, have "funded ratios from less than 1 percent."

Making matters worse is the reality that health care costs have increased and will continue to increase at a startling rate. Given Illinois' sorry financial status, how will the state meet its obligations?

It is, of course, no secret that Illinois hasn't been able to pay its bills and currently has overdue bills of roughly $16 billion, much of it owed to health care providers.

Legislators recently voted to increase the state's income tax from 3.75 percent to 4.95 percent. But it's hard to imagine that the revenue it generates will be sufficient to meet the state's ever-growing financial obligations.

The only real answer — and it's no sure thing — is to try to meet Illinois' growing costs with new revenues generated by a growing economy. So far, however, the Legislature has flatly rejected Gov. Bruce Rauner's calls to adopt pro-growth measures that would make the state more attractive to job creators.

Until that happens — or some economic miracle happens on its own — Illinois appears doomed to staggering on in economic dysfunction, facing ever-growing bills that it cannot pay.

Sections (2):Editorials, Opinion

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Sid Saltfork wrote on September 26, 2017 at 9:09 am

Sure, it is the fault of the public employees.  They worked their careers serving the citizens of the state, but now they are expendable.   The obligation owed by the state to the workers was reaffirmed by the State Supreme Court inspite of attempts by both parties legislators to steal the money by erasing the debt.  

Now, Rauner needs money to attract foriegn companies to Illinois.  Scott Walker did it.  Rauner wants to do the same.  With the state broke, Rauner has to come up with Right to Work zones along with no taxes on the companies for years.  In other words, he wants to buy jobs at the expense of obligations.  It all comes down to the politicians, the bought media, and honest people.  Who wins?  The politicians of both parties, and the bought media always win.  Must not be that many honest people left in Illinois.

    

GLG wrote on September 30, 2017 at 1:09 pm

Replace the words "State Employee" and "Health care" with  "Ilegal  Aliens" and "Welfare". We never hear of those freebies running out of money!!