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. Read more