State $2b in hole to pay retired worker health benefits
CONCORD – The head of the state's administrative services agency is sounding a warning for state lawmakers about a $2.2 billion ticking financial time bomb buried in the state's financial ledgers.
During routine discussion of the annual audit of the state's books, Administrative Service Commissioner Linda Hodgdon warned the committee that the projected cost for health benefits promised state workers after they have left state employment continues to grow.
The audit estimates that the state is $679 million in the hole for money it should have been setting aside in recent years to pay post-employment benefits.
At the end of the 2012 fiscal year last July, taxpayers were on the hook for $2.2 billion in health benefits that state employees have already earned.but which must be paid in the future.
"It will be a bigger number next year because we're not doing any funding for retiree's health," Hodgdon said. "We pay each year what the liability is, but we are not putting any additional money aside."
She warned that the state's credit rating could eventually be rocked as the state's responsibility for retiree medical benefits escalates.
"It will start to be a bigger and bigger number," Hodgdon said."The rating agencies would be very unhappy about that."
Accounting practices used by states were changed a few years ago to require states to list the anticipated cost of post-employment benefits for state workers in their financial statements.
"Businesses had to do this a long time ago," Hodgdon said.