Severe Case of Underfunded Retired State Employee Benefits
Annual report on Other Post-Employment Benefit (OPEB) Liabilities includes blueprint to protect taxpayers and state budgets.
Arlington, Va. – The American Legislative Exchange Council (ALEC) is pleased to announce the release of the 6th iteration of “Other Post-Employment Benefit (OPEB) Liabilities,” an annual report demonstrating the need for continued reform for states hoping to stay solvent without substantially increasing taxes. Current unfunded state OPEB liabilities are more than $1.14 trillion or roughly $3,500 for every American man, woman, and child.
“The burden on taxpayers and competing state spending priorities posed by defined OPEB plans will be substantial if there aren’t significant policy reforms,” said ALEC Chief Economist and Executive Vice President of Policy Jonathan Williams. “Introducing a variety of defined contribution options for new employees enables states to fulfill commitments to both public employees and taxpayers, fostering financial sustainability.”
OPEB is defined as every benefit retired public employees are eligible to receive upon retirement outside of a pension. Those benefits include health insurance, life insurance, Medicare Supplement Insurance, and other remunerations.
States with the Lowest Unfunded OPEB Liability (Per Capita)
| 1. | Nebraska | $0 |
| 2. | South Dakota | $0 |
| 3. | Kansas | $0.05 |
| 4. | Utah | $41.32 |
| 5. | Indiana | $44.23 |
States with the Highest Unfunded OPEB Liability (Per Capita)
| 46. | Connecticut | $9,393.22 |
| 47. | Delaware | $12,048.16 |
| 48. | Alaska | $18,845.89 |
| 49. | New Jersey | $19,691.65 |
| 50. | Hawaii | $19,933.35 |
Williams pointed to Nebraska, South Dakota, Indiana, and North Carolina as examples of states that have successfully reformed their OPEB plans to keep promises to their public workers while also protecting taxpayers from needing to provide a bailout.
OPEB plans have worse overall funding ratios than state pension plans. With an average funding ratio of merely 13.46 percent (a critically low amount), many have no pre-funded assets whatsoever, allowing liabilities to grow rapidly year over year.
“By ignoring the trillion-dollar OPEB problem, state policymakers are putting promised benefits in jeopardy and saddling taxpayers with hundreds of billions of dollars in debt,” said ALEC Vice President of Policy Lee Schalk. “Making the necessary OPEB reforms now allows state leaders to keep their promises to everyone.”
The report is produced by the ALEC Center for State Fiscal Reform.