Thursday, April 02, 2020
Hawai'i Free Press

Current Articles | Archives

Friday, July 25, 2014
Retiree Healthcare: Hawaii's $3.5B Magic Trick
By Selected News Articles @ 4:36 PM :: 4963 Views :: Hawaii State Government, Hawaii Statistics, Labor, Taxes

Retiree Healthcare Tops Unfunded Pensions as Fiscal Threat

by Donna Rook, Heartland.org, July 24, 2014

Can anything be in worse condition than unfunded government pensions? Unfortunately, yes – and it’s something few people have heard of. It’s called OPEB (Other Post-Employment Benefits), or government retiree healthcare commitments. The average state has $11.46 billion of unfunded retiree healthcare debt compared to $10.85 billion of pension debt as of fiscal year-end 2012.

OPEB and pension benefits are part of employee compensation. Just like salaries, these retirement benefits are costs incurred each year the employees work. Like salaries, retirement benefits should be included in the state's budget and paid each year. Today’s taxpayers should pay all compensation costs for services they receive.

Unfortunately state governments do not include all of these compensation costs in the budget as employees earn them. Instead, states typically handle OPEB benefits on a “pay-as-you-go” basis. Because no money is set aside each year to cover these expenses, future taxpayers must cover retirees' healthcare checks when they are written. Current employment costs are paid by future taxpayers who did not receive services from the retired employees.

Accounting Tricks

Some states use an accounting trick to make their OPEB debt appear lower. By dropping a few dollars into an OPEB fund, states can assume higher rates of return, decreasing the estimated size of their unfunded promises. Hawaii recently “pre-funded” $100 million of their $11.2 billion retiree health promises. An accounting loophole then allowed the state to assume a rate of return of 7 percent instead of 4 percent on investments. Hawaii’s unfunded OPEB debt “magically” decreased from $11.2 billion to $7.7 billion – a $3.5 billion reduction with the stroke of a pen.

Across the Fortune 1000 companies, combined debt for retiree medical benefits totals $285 billion, according to a recent Wall Street Journal article. State retiree medical benefit debt totals more than twice that amount, $573 billion. Sadly, state citizens are not as well informed about their government’s retiree healthcare funding as business investors. Governments are still allowed to hide all their retiree healthcare debt from public view.

Hidden Health-Care Debt

Beginning in Fiscal Year 2015, governments will be required to disclose all their retiree pension debt to the public. But the hidden retiree health-care “grenade” will continue to rattle around the floor, pin loose and ready to fall out. If current revenues are not enough to cover increasing health expenses (for prior services), other spending priorities may suffer.

Truth in Accounting believes the solution to this problem begins with the budget. Rather than including current year checkbook receipts and only checks written, states should calculate all bills and expenses incurred regardless of when they will be paid. Budget documents should clearly estimate year-end debt (the balance sheet, including pension and retiree healthcare debt). We call this FACT-based budgeting (Full Accrual and Calculation Techniques). FACT - based budgets would fully inform citizens of the results of their state’s spending plans, enabling them to hold their elected officials responsible.

See how your state’s retirement pension and healthcare debt has grown since 2009, and compare it to other states by using the “Create Your Own Chart” option at http://www.statedatalab.org/

  *   *   *   *   *

Donna Rook (drook@statedatalab.org) is president of StateDataLab.org, a project of Truth in Accounting.

Background: Act 268 Hawaii Unfunded Liabilities Plan: Pot of Gold for Corrupt Union Leaders

Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

808 State Update AM940

ABCDEFG Blog

ACA Signups Hawaii

ACCE

ALEC

Alliance Defending Freedom

Aloha Life Advocates

Aloha Pregnancy Care Center

American Council of Trustees and Alumni

American Mothers of Hawaii

AMVETS-Hawaii

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Astronomy Hawaii

Audit The Rail

Ballotpedia Hawaii

Better Hawaii 

Blaisdell Memorial Project

Broken Trust 

Build More Hawaiian Homes Working Group

CAFR Hawaii

Castaway Conservative

Children's Alliance Hawaii

Children's Rights Institute

ChinaTownWatch.com

Christian Homeschoolers of Hawaii

Citizens for Recall

Cliff Slater's Second Opinion

Coffee Break

CSIS Pacific Forum

DAR Hawaii

DeedySupport.com

DVids Hawaii

E Hana Kakou Kelii Akina

E Māua Ola i Moku o Keawe

Farmers For Choice Hawaii

FIRE

Fix Oahu!

Follow the Money Hawaii

Frank in Hawaii

Front Page Magazine

Frontline: The Fixers

Genetic Literacy Project

Get Off Your Butts!

God, Freedom, America

Grassroot Institute

Habele.org

Hawaii Aganst Assisted Suicide

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crime Victims' Rights

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defending Marriage

Hawaii Defense Foundation

Hawaii Families for Educational Choice

Hawaii Family Advocates

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Firearm Community

Hawaii Fishermen's Alliance

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii March for Life

Hawaii Meth Project

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Right to Life -- Big Island

Hawaii Right to Life -- Oahu

Hawaii Shield Law Coalition

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

Heritage Foundation

HI Coalition Against Legalized Gambling

HIEC.Coop 

HiFiCo

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Homeless Crisis

Honolulu Navy League

Honolulu Traffic

Horns of Jericho Blog

House Minority Blog

House Republican Caucus YouTube

HPACC

Hump Day Report

I Vote Hawaii

If Hawaii News

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

Iowa Meets Maui

Jackson v Abercrombie

Jihad Watch

Judgepedia Hawaii

July 4 in Hawaii

Kahle v New Hope

Kakaako Cares

Kau TEA Party

Kauai Co GOP

Keep Hawaii's Heroes

KeyWiki

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Mauna Kea Recreational Users Group

MentalIllnessPolicy.org

Middle East Forum--The Legal Project

Mililani Conservatives for Change

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

Muslim Brotherhood in America

NAMI Hawaii

NARTH

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

National Wind Watch

New Zeal

NFIB Hawaii News

No GMO Means No Aloha

Northwest Economic Policy Seminar

Not Dead Yet, Hawaii

Now What I Really Think

NRA-ILA Hawaii

Oahu Alternative Transport

ObamaCare Abortion Hawaii

Obookiah

OHA Lies

Opt Out Today

OurFutureHawaii.com

Pacific Aviation Museum

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons 

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

Republican Party -- Hawaii State

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

School Choice in Hawaii

SenatorFong.com

SIFE Remington

SIFE W. Oahu 

Sink the Jones Act

Smart About Marijuana--Hawaii

St Marianne Cope

State Budget Solutions Hawaii

State Policy Network

Statehood for Guam

Tax Foundation of Hawaii

The Harriet Tubman Agenda

The Long War Journal

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

Truth About Trade & Technology - Hawaii

UCC Truths

Union Members Know Your Rights

US Tax Foundation Hawaii Info

Valor in the Pacific

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT