Wisconsin’s Spiraling Retiree Health Costs

Imagine you’re a young guy who has just started dating the girl of your dreams.  You get around to the discussion of how many people she has “been with.”  She says “two.”  (That’s what girls always say, usually accompanied by an extensive story about how she dated some guy for years.)

Now imagine there was a Girlfriend Registration Service, where prospective girlfriends had to report their past exploits.  Everything is on there – the Spring Break trip to Cancun and everything.  When you go look up the new love of your life, you find out her number isn’t two – it’s 34.

Fortunately, for us, there’s a Girlfriend Registration Service for local governments – called the Government Accounting Standards Board (GASB).  A few years ago, GASB began requiring local governments start reporting the amount of health care costs they owe to retirees in the future.  Previously, governments just paid these costs on a year-to-year basis.  But now, they have begun reporting their future unfunded liabilities – and in many cases, they are stunning.

Today, the Wisconsin Policy Research Institute released a report detailing local government postemployment liabilities. A review of financial documents reveals that the Wisconsin governments required to report their liabilities carry nearly $6 billion in future retiree health care costs. Of this amount, the largest three liabilities are carried by governments in the Milwaukee area: the Milwaukee Public School (MPS) district at $2.2 billion, Milwaukee County at $1.5 billion, and the City of Milwaukee at $806.3 million.  In many cases, these liabilities dwarf the annual budgets of these governments (for instance, the MPS budget is $1.2 billion, while their liability is $2.2 billion.)

Taxpayers are wondering why they pay more and more in taxes, yet see little direct benefit.  This may be a reason why – a growing chunk of the taxes they pay go to people who don’t even workfor the government anymore.