Monday, March 1, 2010

News Journal gets it Wrong

Those who still read the News Journal will have seen several articles criticizing the pensions of educators and state workers. The NJ is in full Social Darwinist mode. Public employee pensions and benefits are too generous according to the NJ.

An easy target for the NJ is the health care liability portion of the pension. Retirees (depending on their hire date with the state/school district) can get 50% to 100% of their health care before Medicare paid. The future cost of this is called the Other Post Employment Benefit (OPEB) liability.

The OPEB liability for all states is enormous. The Delaware OPEB liability is $5.6 billion. (Our state's total annual budget is around $3 billion) In fact, since all states are in the same leaky boat, bond rating agencies are not lowering ratings on this issue.

However, the NJ falsely reported that states must now fully fund this liability. That is absolutely false. The Government Accounting Standards Board (GASB) established a rule a few years ago requiring states to show the liability for accounting purposes; not to fully fund it, not even to make a plan to fund it.

Delaware is in better condition on OPEB than many states. We have put $74 million in a non-revocable trust.

None of this is to imply that OPEB is not a big challenge. However, that challenge is all tied up in the general mess that is US for-profit corporate health care. We do not need to be less "generous" to public employees. We need to be more responsible to all citizens and have a national health care plan.

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