State Has Huge Bill Coming Due for Retiree Health Care

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Hawaii taxpayers have a $10 billion bill coming due — and it could get bigger.

That's how much extra money experts estimate it will take to pay for health benefits of state and county retirees in coming years. Now, the plan can barely pay for itself. It's had to impose giant increases in premiums just to stay afloat.

The problem is things are only expected to get worse, because the state is committed to providing benefits but only has the money to meet its current obligations because it hasn't put away money for the future. Hawaii's retiree health bill is one of the worst in the nation on a per-capita basis.

The issue of so-called unfunded liability is only starting to make headlines because of recent accounting requirements that states and municipal governments tally what they’ll owe to retirees.

The state Hawaii Employer-Union Health Benefits Trust Fund (EUTF) has started to report the liability on its annual reports. What those reports have revealed is that the unfunded liability for retiree health care is much greater than the more-talked-about funding shortfall in public worker pensions at the Hawaii Employees Retirement System.

The most recent estimate of the EUTF's unfunded liability is $10.3 billion for the year ended July 1, 2007, according to a September 2008 report prepared by Aon Consulting. That compares to the $6.2 billion unfunded liability at the ERS.

“We have time to work out a plan, but it is a huge number we have to come up with,” said Lowell Kalapa, president of the Tax Foundation of Hawaii, a nonpartisan group that provides research on government spending and taxation.

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