For those paying attention to the cost of state government retirees, primarily the penion plan and health benefits, there is a section in the state budget that is especially instructive as to the growing burden such state retiree benefits is placing on taxpayers.
Specifically, in the Senate’s proposed budget bill, it is Section 35.15(b) that lets us know what the taxpayer contribution to retiree benefits will be.
Effective July 1, 2013, the State’s employer contribution rates budgeted for retirement and related benefits as a percentage of covered salaries for the 2013-2015 fiscal biennium are (i) fourteen and sixty-eight hundredths percent (14.68%) – Teachers and State Employees;
Of course for teachers and state employees, the “employer contribution” comes from state agencies, i.e. taxpayer dollars. Of that 14.68%, 8.69 percent goes toward the pension plan, 5.4% goes toward retiree health plan benefits, the remaining amount goes to disability and death benefits.
With a General Fund “covered salaries” total of just under $10 billion, this means that roughly $1.5 billion taxpayer dollars in the coming fiscal year will go toward funding state retiree benefits, specifically about $870 million contributed to the pension fund and $540 million to state health plan coverage for retirees. And this doesn’t count several sub-groups of state retiree benefits like the UNC optional retirement program, judicial retirees and state law enforcement officers.
For sake of comparison, we can look at the FY 2011-12 budget, under Section 29.22(c). In that year, total taxpayer support amounted to 13.12% of covered salaries, with 7.44% of that going to the pension fund and 5.0% going to retiree health benefits.
So during that brief time, the taxpayer contribution will rise from 13.12% to 14.68% of covered payroll – marking an increase of 17% of the share of state payroll dedicated to funding retiree benefits in just two years.
While it is difficult to state this change in dollar terms as the state payroll will have changed during the last two years, it is likely the payroll has not changed significantly (with a slight pay raise in last year’s budget to offset minor net decreases in personnel) so we can estimate the overall increase in taxpayer support for state retiree benefits will be roughly $156 million in two years – again not counting smaller sub-groups of retirees mentioned above.
I offer several suggestions of how to stem this rising tide of taxpayer-funded benefits in this series of articles.