Stuck With the Check Again?

Pay attention, folks. Cities and states that can’t pay their bills plan to dump them on you.

From the WSJ:

Rahm’s ObamaCare Brainstorm

Chicago may dump its retiree health costs on federal taxpayers.

Rahm Emanuel’s parting gift to national taxpayers upon leaving Washington two years ago was a $1 trillion bill for ObamaCare. Now the Chicago Mayor may add billions more to the tab by dumping his city’s retirees on the federally subsidized state health exchange.

This public service announcement is brought to you by a city commission that the mayor appointed last summer to study the cost of continuing health benefits for retired workers. A 25-year-old legal settlement requiring the city and its pension funds to pay between 40% and 55% of most retirees’ health costs conveniently expires this June—convenient because the city can’t afford the bill.

The city is running a $370 million budget deficit, which will blow up in 2015 when a $1.2 billion balloon payment for pensions comes due. The bill for retiree health benefits is $194 million this year and will grow to $540 million by 2023. Actuaries have recommended that the city sock away $2 billion this year to finance future benefits and pay down a $23 billion unfunded liability. Meanwhile, Chicago’s pension funds, which are projected to run dry by the end of the decade, are scraping the bottoms of their barrels to pay for retiree health benefits as required by the settlement.

Enter the Mayor’s commission. The four-member panel issued a report this month suggesting that dumping pre-Medicare retirees onto the state’s ObamaCare exchange in 2014 could be fab for retirees and city taxpayers. Nearly 60% of retirees and 94% of those who receive subsidies would pay less for their health care on the exchange. Married retirees with dependents would save an average of $4,300.

Chicago and its pension funds in turn would shed $23 billion in liabilities, assuming supplemental benefits for Medicare recipients are also cancelled. (These calculations are based on models that assume public pensions are retirees’ only source of income.)

On the other hand, the cost to national taxpayers would be enormous, especially if other local and state governments joined the party. Federal subsidies for Chicago retirees would amount to $44 million in 2014 and increase as more workers retire in their early to mid-50s and health costs grow. All told, state and local governments are on the hook for between $700 billion and $1.5 trillion for retiree health benefits, and like Chicago most will soon be unable to afford even their minimum annual payments.

Offloading the costs on Uncle Sam will look attractive since retiree health benefits don’t enjoy the legal protections that some states have bestowed upon pensions. Stockton, California intends to shed its $400 million unfunded liability for retiree benefits in bankruptcy.

Mr. Emanuel says the city’s decision on retiree health benefits will “strike the right balance between meeting the needs of the retirees and providing them health-care choices with protecting the interests of the city’s taxpayers.” So, let’s see. On the one hand, Chicago pays, on the other everyone else does. Which do you think he’ll choose?

The Chicago report illustrates once again how ObamaCare provides a convenient mechanism and incentive for employers to transfer health-care liabilities to national taxpayers—and how the costs will explode beyond Washington’s phony projections.


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