State Governments Found to Be $645 Billion Short for Healthcare Liabilities
U.S. state governments will owe more money in retiree health benefits than previously believed. A recent change in accounting guidelines has uncovered that U.S. states may be short by a whopping $645.0 billion for their future healthcare-related liabilities.
The new accounting principle by the Governmental Accounting Standards Board requires that state governments list all of the healthcare liabilities owed to their retirees. Previously, state officials were pushing portions of these obligations off of their balance sheets and listing them as debt items in the footnotes of their financial statements.
For instance, New York State’s healthcare liabilities are currently listed at $17.0 billion. Under the new accounting principles, however, New York actually owes about $72.0 billion—a significant jump that will force state officials to reconsider their spending plans.
It has been found that most of the state governments are not saving anything for the future healthcare liabilities owed to their retirees. State governments have been treating these costs as operating expenses, and have been raising funds to pay for them as they go.
This additional financial burden comes at a time when U.S. state governments are already struggling to pay for their growing pension liabilities. The reality is that most of the states are looking for ways to slash costs as they struggle to cover their budget shortfalls. Public retirees already fear pension cuts, as public pension funds in U.S. states have collectively hit $1.3 trillion in unfunded liabilities.
This newly revealed budget shortfall has sparked concerns that public sector retirees could face cuts to their healthcare benefits, especially at a time when they need them the most.
With hordes of state employees retiring as more Baby Boomers approach retirement age, state governments will only see their healthcare and pension liabilities multiply in the coming years.
“States Need $645 Billion to Pay Full Health-Care Costs,” The Wall Street Journal, September 20, 2017.