Study projects costs of retiree benefits
OLYMPIA — A new state study projects subsidized medical benefits for retired public employees could cost more than $12 billion over the next 25 years.
The study, done to comply with new federal accounting regulations, calculates the cost of medical benefits provided to retired teachers and state and local government workers between now and 2031, in current dollars.
The state actuary's office found that if state and local governments wanted to start paying off the cost ahead of time — much like a pension obligation — they'd have to begin setting aside more than $600 million annually.
That amount would pay for present costs and a portion of the future costs. The bulk of the money would be for teachers and state workers.
The new federal accounting standards do not require Washington, or other states, to prepay the costs, and state officials say there is no advantage to doing so.
The purpose of the study is to simply recognize the projected cost of the benefits.
The present cost is about $129 million annually to cover the benefits for retired teachers and state and local workers. For state workers alone, the cost is around $67 million annually.
"I'm not arguing we shouldn't look at this. We are. We're very transparent about this and open," said Wolfgang Opitz, deputy director of the governor's budget office. "But our benefits are so modest that they very reasonably fit within any budget."
Retired public employees in Washington now get two medical benefits:
• The state provides money to Medicare-eligible retirees to purchase additional coverage. For 2008, the subsidy will be $164 a month per retiree.
• Washington also lets retirees not yet eligible for Medicare to buy health insurance at group rates. That saves each retiree an estimated $263 a month.
Opitz questions whether the group-rate benefit actually costs the state any money and, as a result, believes the actuary's estimate overstates the total 25-year cost.
Andrew Garber: 360-943-9882 or agarber@seattletimes.com