Saturday, March 31, 2007

Someone is going to Pay For These Promises

The WSJ Health Blog reported yesterday in a post by Theo Francis that US State and Federal promises to retirees for Health Care and other Benefits carry a price tag of $1.5 Trillion according to a report by Credit Suisse which you can find here. The Government Accounting Standards Board recently enacted new rules which happen to mirror changes enacted in the private sector well over 15 years ago by FASB when FAS 106 & 112 obligated GAAP accounting rules to account for retiree health care and benefit obligations.

Those of us with a little gray hair saw this movie play out in the private sector with FAS 106 & 112 so its funny to envision the staff at The WSJ Health Blog being shocked by the magnitude of the obligation retiree health care represents. While there is some humor in seeing the government live by the same rules as the private sector it should be short-lived if you are a taxpayer so don't get carried away.

The upshot is that health-care costs for state and municipal retirees will drain public coffers, sparking either huge tax-hikes or spending cuts.
You can check out the map in the Credit Suisse Report to see how your state taxes will be impacted.

For the record let me say that I followed closely Theo Francis stories of Elliot Spitzer's investigations of the use of contingency commissions and overrides by insurer's in the WSJ several years ago and thought it was first rate so forgive my chuckle over the aha moment when the magnitude of the retiree obligations got revealed. Didn't your dad laugh at you the first time you got a paycheck and complained about all the taxes they took out?

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