As reported by the N&O today, the State Treasurer’s office this week released updated figures for the state retiree pension fund and health insurance benefits. The outlook is pretty grim.
- In North Carolina, taxpayer spending on state retirees’ pensions and health care ($1.4 billion) is larger than the budget for the entire UNC System
- The state’s primary retiree pension fund has an unfunded liability of $7.1 billion – but is about 90% funded
- Unfunded liabilities for state retiree benefits now exceeds $33 billion
How did the liabilities for health benefits get so large? “No money, for 37 years, has ever been put aside for that” responded State Treasurer Dale Folwell.
The retiree health benefits, in the long term will be addressed by a law passed in this year’s budget requiring that anyone who becomes a state employee after 2021 will have to pay for their post-retirement health care entirely on their own. That still, however, does not address the liabilities already accrued.
Moreover, with regard to the pension plans’s $7.1 billion liability – that number likely understates the problem. That assumes a 7.2% return rate on pension fund investments over the 30-year time horizon. That’s highly unlikely. A more realistic discount rate would calculate a much higher liability. For instance, from the Treasurer’s report, if the pension fund’s liability were calculated using a 5.13% discount rate, the liability shoots up to more than $29 billion.