HARRISBURG, Pa. (AP) - Health care costs for retired state workers are now
projected to be $8.5 billion in the long term, about 40 percent lower than
originally estimated, Pennsylvania's budget chief said Friday.
The state was able to lower its estimate of the unfunded portion of retiree
health care costs that have been accrued so far after implementing a number of
recent cost-cutting measures, Budget Secretary Michael Masch said.
Those steps include requiring workers who retired after June 30, 2005, to
pay part of their premiums and increasing co-payments for prescriptions and
certain office visits for those who retired before July 1, 2004. Beginning July
1, the state will expand from 15 to 20 years the minimum length of time state
employees must work before they can qualify for retirement health benefits.
The annual cost of the benefits provided to roughly 60,000 retirees is $550
million this year. It is expected to increase to more than $970 million over the
next five years, Masch said.
"This is still a very expensive program," Masch said. "I don't think the
commonwealth can say it is done trying to contain costs. How generous we can
afford to be in terms of retiree health care is an important issue."
The state had initially estimated long-term cost of retiree health benefits
at $13.8 billion, a figure mentioned in a 2006 document about a state bond
offering.
Officials released the latest projections under new public accounting rules
that require state and local governments to disclose annual estimates of any
nonpension benefits they have promised to current and future retirees.
The state has been funding the benefits on a pay-as-you-go basis, but it is
also starting to set aside money to pay for them. It plans by the end of the
current fiscal year to invest about $288 million in reserve funds in a special
state treasury account and use the investment earnings to reduce its current
payments, Masch said.
Nelson McCormick, president of the 18,000-member Pennsylvania Association of
Retired State Employees, had no immediate comment on Masch's announcement
Friday.
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