Last week, Comptroller Tom DiNapoli announced legislation that would create an optional investment pool to help the state and local governments fund retiree health insurance and other post-employment benefits (OPEB). Comptroller DiNapoli estimates the cost of these future benefits to be $68.2 billion for the state and $68.3 billion for local governments outside of New York City. Currently, these benefits are funded on a “pay-as-you-go” basis, or out of pocket.
The funding mechanism DiNapoli is proposing would give public employers another option to help fund these benefits. It would authorize the creation of irrevocable OPEB trusts to enable the state and its local governments to fund their OPEB liabilities; establish an OPEB investment fund in Comptroller’s custody for the investment of OPEB assets of the state and participating eligible local governments; designate the president of the Civil Service Commission as the trustee of the state’s OPEB trust and the governing boards as trustee for local governments; and allow school districts to transfer excess reserve balances to an OPEB trust once it is established.
Comptroller DiNapoli said:
“More than thirty states have already put rules in place that allow public employers to set aside money today to pay for these benefits. The numbers are daunting, but there is a real cost to doing nothing and leaving the bill for future generations of taxpayers to cover. The legislation would establish the legal structure for creating trusts that the state and local governments could use to start saving the funds needed to pay for these benefits. The responsible, good government thing to do is to start preparing for the future and plugging the hole before we reach a crisis moment.”