NC Budget and Tax Center

House wants to give retirees a bonus, Senate wants to cut benefits for future retirees

Stark differences exist between how the budgets passed by the North Carolina House and Senate would treat retired public servants. While the House wants to provide a one-time bump in pension payments, the Senate contemplates eliminating retiree healthcare coverage for future state employees. The House proposal is a modest step in the right direction and the Senate’s vision would make life harder for the people who to teach our children, protect our communities, and deliver myriad other vital public services.

The House budget moves to provide a one-time supplement to retired state workers’ pension payments. For years, pension payments have not been adjusted to reflect inflation, leaving retired state workers struggling to cover growing expenses. As a one-time payment, the House proposal is not a true cost-of-living adjustment, but it at least recognizes the financial pinch that stagnant pensions have imposed on state employees and devotes some resources to addressing the problem.

In contrast, the Senate budget would strip retiree healthcare coverage for all state employees who are hired after July 1, 2018. This provision echoes a bill heard earlier this session (that has not passed either chamber) that would eliminate pensions for state employees. Proponents of cutting retirees healthcare and pension benefits often claim that we simply can’t afford the expense, but that’s not telling the whole story.

First of all, the Program Evaluation Division of the General Assembly has already outlined a number of ways to put the retiree health plan on better fiscal footing. State Treasurer Dale Folwell has been arguing that we should set aside funds to cover future retiree healthcare costs for years, dating back to when he was in the legislature. The House passed a bill that would create a committee to study how we can shore up the finances of the retiree health plan, but that bill stalled in the Senate. We can find ways to cover retirees’ healthcare costs so there’s no need to simply cut off protections for future state employees.

Second, it’s disingenuous to claim that we’ve can’t afford to cover retirees healthcare while, at the same time, proposing another $1 billion in tax cuts as the Senate is doing. State finances are certainly strained, but that is what happens when you cut taxes year after year. We’ve put ourselves on tenuous fiscal ground because of the drive to give tax cuts to wealthy people and profitable corporations, not because we cover healthcare costs for retired public servants.

As the House and Senate wrangle over their differences, this is one area where we can hope that the House gets the upper hand.

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