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Legislative Memo

T 518.465.7511
www.bcnys.org

BILL:

S.6457-A (Farley)/ A.9393-A (Abbate)

Support

SUBJECT:

Task Force on Public Retiree Health Insurance Protection

 

DATE:

May 20, 2008

 

The Business Council of New York State strongly opposes S 6457-A/A 9393-A, which imposes on local governments a moratorium on any changes to public employee retiree health benefits until a task force completes its work in 2009.

Many levels of government in New York State have taken great liberties with the taxpayers' pocketbook through the negotiation of benefit packages for which the out-year costs to taxpayers has not been known or budgeted.

Government Accounting Standards Board Statement 45 (GASB 45) was issued to require a more complete and reliable financial reporting by governments on the costs and financial obligations incurred when they negotiate to provide post-employment benefits other than pensions.

Post-employment health care benefits represent one of the most generous unfunded, public benefits negotiated and, in the “pay as you go” accounting approach used by governments, the cost of providing these benefits is not reported until after the employees retire. GASB 45 was adopted to require governments to report annually on the post-employment cost and their unfunded actuarial accrued liabilities. As a result of this transparency in budgeting requirement, the magnitude of a government's negotiated benefit liability can increase exponentially. Estimates, on average, are that GASB 45 liabilities will increase by a factor of 7-8 times of current “pay as you go” costs.

This legislation will lock in current benefits and hamstring local governments from renegotiating fiscally responsible and affordable retiree benefit packages, effectively increasing real property taxes even further. This bill is not consistent with good government practice or transparency in government spending and accounting. Governments should not be negotiating contracts with benefit packages for which the costs are not known, displayed and budgeted. This proposed moratorium equals a state-legislatively mandated real property tax increase with no funding and no means of recourse for local governments.