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New York has $359.7 billion in debt to pay retired public employees health benefits

New York is in debt. It has one of the largest chunks of retiree healthcare debt in the U.S., according to a new report from the Empire Center.

The group says governments at all levels in New York owe a combined $359.7 billion in debt to pay retired public employees health benefits.

Nearly all of the 1.3 million state and local public employees in New York are promised a substantial portion of their medical costs will be subsidized by taxpayers from the day they retire until the end of their life.

Unlike pension obligations, which are mostly pre-funded, retiree health care debt is usually unfunded, meaning no money is set aside to pay these future expenses.

Each year, billions of dollars from public budgets are used to pay current retiree health care bills. As the report reveals, however, this is just the tip of a $360 billion iceberg of debt to be paid off by taxpayers in the future.

“For most New Yorkers, employer-sponsored health benefits exist only while they are on the job. When they retire, the benefits end—but this isn’t the case for public employees,” said Peter Warren, report author and director of research at the Empire Center. “Absent reform, the strain on budgets will get worse each year. Paying these bills in the future will likely require cuts in essential public services or extortionary tax hikes.”

Warren recommends melting down the iceberg by adjusting terms for those in the system and funding the benefit for new hires up front, through defined contributions.