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    Entries in Manhattan Institute (1)

    Thursday
    Mar312016

    A Missing Opportunity to Fix Government Finances

    Most places focus on pensions for cost-cutting. But a new study argues it would be easier for governments to reduce the collective $1 trillion they owe in retiree health care.
    BY  MARCH 31, 2016

    Pension liabilities have been a high-profile issue in recent years, and they remain a major budget burden for state and local governments. States and cities have tried to rein in expenses by issuing less bond debt, and they've tried to mitigate further increases in their pension liabilities.

    But a new study released Thursday says governments are missing a key opportunity to reclaim billions in annual revenue by not making severe cuts to retiree health care, commonly referred to as other post-employment benefits, or OPEB.

    “There continues to be a lot of emphasis on pensions, and rightly so,” said Stephen Eide, a co-author of the report produced by the Manhattan Institute. “But we wrote this report to say it might make more sense to focus more on OPEB reform than pensions -- the simple reason being, legally speaking, you’re more likely to get further in bringing down OPEB costs than pension costs.”

    In other words, states have more flexibility in restructuring retiree health-care benefits, and doing so could save hundreds of billions of dollars.

    Eide and co-author Daniel DiSalvo argue that retiree health-care costs are just as big a culprit for crowding out other government priorities as pension costs have been, although the latter has received much more of the blame.

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