NC Budget and Tax Center

Is North Carolina going to break its promise to retired state employees?

Unless you’re a fiscal policy wonk (don’t be ashamed if you are), you may not know that North Carolina needs to figure out how to keep a more than $25 billion promise.

House Bill 24 and Senate Bill 22 would create a committee to study options for covering the future cost of paying for the future health care costs of retired state workers. There is no easy fix, but here are a few things to keep in mind as this debate unfolds.

We’re not in crisis yet, but this is a serious concern. Like most states, North Carolina currently relies on a pay-as-you-go model for covering the health care costs of retired state employees, meaning that we are paying now for the health costs of retired state workers, essentially paying for service to the state that has already been rendered. This also means that we have not set aside funds for future retiree health care costs, which is commonly referred to as an “unfunded liability.” North Carolina’s unfunded obligation to state workers has increased over the last few years and it is projected to continue growing. Unfunded retiree health benefits are not broadly seen as a crisis yet, but the current trajectory is toward needing larger and larger yearly appropriations to pay for retired state workers’ healthcare.

We should not balance our books on the backs of people who have served our state. HB 24 and SB 22 identify several possible options for reducing the size of North Carolina’s unfunded obligation to retired state workers (all of which were previously studied by the Program Evaluation Division of the General Assembly in a 2015 report). Unfortunately, several of the specified alternatives would impose the costs on current and retired state workers, the people who teach our children, pick up our mess, safeguard our communities, and do myriad other jobs that make North Carolina a great place to live. In the future, these moves could dramatically undermine our ability to recruit dedicated and talented people into public service. Many state employees have not seen a meaningful raise in years, which is already making it hard to recruit workers, and that challenge would only compound if we start walking back promises we have made to secure the retirement of state workers.

We need to consider a wider range of options than are currently identified in current bill. HB 24 and SB 22 technically allow the consideration of options not explicitly identified in the language of the bill, but there is a danger in narrowing the focus too early in the process. While some of the options have real merit, the scope of the potential problem requires putting a wide range of viable alternatives on the table.

Recent tax cuts are partially to blame for the fix we are in. North Carolina’s unfunded obligation for retiree healthcare is just one example of the hole that we’ve dug after the last several years’ rash of tax cuts. We could have shored up the state retiree health care system substantially over the last several years, but instead chose to cut taxes on wealthy North Carolinians and profitable companies. Had we actually paid for future retiree costs along the way, this unfunded obligation would not be threatening to upend the state’s fiscal cart.

Changing the Affordable Care Act and other federal health programs could make North Carolina’s problem much worse. A few of the options identified in HB 24 and SB 22 could save the state of North Carolina money by shifting more of the cost to federal programs, but radical changes to these programs could  reduce our state’s room for maneuver. First, North Carolina could save by providing incentives for retirees under the age of 65 to purchase insurance on the Affordable Care Act exchanges. Second, shifting retirees over the age of 65 onto Medicare Advantage plans could also reduce the state’s bill. Together, the Program Evaluation Division of the General Assembly estimated that these moves could save the state more than $60 million annually. We have not yet seen a credible plan to replace the Affordable Care Act, but many of the options currently making the rounds in Washington D.C. would make it harder for the state to save money by shifting retirees onto federally-funded programs.

These bills may seem wonky, but the stakes entailed in HB 24 and SB 22 are high. Retired state workers should not have to shoulder the burden of fiscal decisions made in North Carolina over the last several years, or suffer grievous fallout from federal fights over healthcare, so the question is whether North Carolina will do right by the people who have done right by our state.

7 Comments


  1. Fred Michael

    February 17, 2017 at 5:19 pm

    I am a 28 year public school educator in NC and it keeps getting worse. They believe they can get education on the cheap with the private school vouchers and charter schools. One way to convince people it’s a good idea is to undercut the funding and let moral and disgust guide them towards their agenda.

    I taught at a charter school for a few years and my experience led me straight back to public schools. The benefits have been a perk that has attracted many teachers to remain in public schools.

    Being so close to retirement has me stuck with NC because my retirement and insurance will not transfer to another state. I just hope I don’t go down with the ship. We are at the mercy of a very mean GOP. God help us.

  2. Tough Love

    February 18, 2017 at 12:29 pm

    Quoting ……………. “Had we actually paid for future retiree costs along the way, this unfunded obligation would not be threatening to upend the state’s fiscal cart.”

    No. Had we never promised Public Sector workers retiree healthcare benefits greater than the employer-sponsored retiree healthcare benefits typically offered by PRIVATE Sector employers ….. essentially NOTHING ….. we wouldn’t be in this mess.

    And wasn’t the granting of this ridiculously expensive promise not the direct result of our elected officials gleefully trading their favorable votes for BRIBES disguised as campaign contributions and election support ?

    There is ZERO justification for the State’s taxpayers to pay for this. They have been hoodwinked for FAR too long by the insatiably greedy Public Sector Unions/workers and our self-interested, vote-selling, contribution-soliciting Elected Officials.

  3. Vickie Langenberg

    February 18, 2017 at 3:25 pm

    My husband and I are both State Retirees. PLEASE DO NOT DO AWAY WITH THE HEALTHCARE BENEFITS THAT WE HAVE. PLEASE DO NOT PUT THIS BURDEN ON OUR BACKS. I WORKED 35 YEARS IN STATE GOVERNMENT AND MY HUSBAND WORKED 32 YEARS. I HAVE UNITED HEALTH CARE MEDICARE AND I AM 68. MY HUSBAND HAS BLUE CROSS HMO/MEDICARE PLAN. DO NOT ROCK THE BOAT FOR US AND MANY OTHER RETIREES OUR AGE. DO NOT WANT TO BE ON A FEDERAL PLAN. CONTINUE WHAT WE HAVE PLEASE.

  4. Laura Hasty

    February 18, 2017 at 5:07 pm

    Teachers are not the only ones working for the state of NC – Most state employees and retirees have not had a decent cost of living raise since 2006. The state of NC needs to meet financial obligations and pay their employees first and most importantly. Any changes to benefits need to be grandfathered in. Do not take benefits away from someone that has worked years for you – most working for the benefits because the pay sure is not great. After meeting financial obligations and only then any surplus could go for assistance programs. There must be strict guidelines for assistance and a way of verifying the need. Financial assistance should never be an incentive for someone to have children or a way of life. At some point it needs to be cut off. Lastly please someone explain to me how individuals can get tax refunds of thousands when they have not worked a day –

  5. william Toth

    February 18, 2017 at 6:40 pm

    I do not understand how teachers and other state employees, both active and retired, continue to return republican legislators to the general assembly. Look at what they have done to public education in this state.
    Phil Berger’s ultimate goal, I think, is to corporatize education, and strip away the benefits of current and retired state workers and “outsource” other government jobs and services (to the lowest bidder of course), all the while granting tax cuts to millionaires and corporations and giving away 30 plus million dollar to non accountable private schools.

    We need to make some big changes in Raleigh and soon.

  6. Helen Priggemeier

    February 18, 2017 at 9:53 pm

    A promise made is a promise, my own money. Republicans stop the scare tactics. And tax corporations and the top 2%, stop giving them free rides.

  7. Hilda Crews

    February 28, 2017 at 5:10 pm

    I am a fellow retiree.. I worked 36 years in THE DHHS Sytem…..over the course of those 36 years raises DID NOT along every year for us…. I know our teachers are very important but so are the others that put in their time of service too… like the ones that care for MENTAL CHALLENGED Individuals….That IS NOT an EASY JOB !
    As a retiree, we DON’T get a cost of living raise every year as other state employees…we DO have a LIFE, and we would love to be able to enjoy it…

    PLEASE DO NOT TAKE THE ONLY THING GOOD WE HAVE GOING FOR US ! KEEP OUR HEALTH CARE!

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