September 02, 2008

Retiree health bill hits governor's desk

No labor bill generated more controversy this year than a measure on Governor David Paterson's desk that could lead to increased local property taxes for years to come.

The bill would make it virtually impossible for state and local government employers to contain the growing costs of health insurance for their retired employees. It would give unions representing current employees veto power over any change to retiree benefits--even if an employer found a way to offer identical benefits for less money.

The moratorium is supposed to last one year while a taskforce studies the issue, but in Albany "temporary" has a way of becoming quasi-permanent. Ask school districts. In 1994, the Legislature passed a similar one-year moratorium applying to school districts--and has annually renewed it since then.

In a memo urging a gubernatorial veto, the state Association of Towns says:

Retirees represent a significant share (35% to 40%) of the enrollment in local government health insurance plans, and thus represent a significant portion of the overall cost. Local governments have been forced to reevaluate the provision of taxpayer funded health insurance in the wake of double digit increases in the cost of those premiums.

The state AFL-CIO is rallying its members to urge Paterson to sign the measure. If offers a toll-free number to call as well as a sample letter. It suggests a handwritten letter saying:

Unfortunately, when economic threats loom, retiree health coverage can be one of the first targets. We've seen many retirees in the private sector left in the lurch when their employers walked away from their commitments by reducing or completely eliminating their health coverage. Public employers should set an example that broken promises are not our state's policy.

The fact that municipal retirees are not protected against reductions in health insurance coverage or increases in premium costs does not mean that municipal officials are making wholesale changes. Because this bill would require that the current level of expenditure for retiree health insurance be continued, it represents a financial mandate on local governments.

The bill would permit changes to retiree benefits only if unions representing current employees agree to the identical changes for themselves. Opponents say that provision fails to recognize that most active employees are too young to collect Medicare. The Association of Counties says the bill:

...further inhibits State and local ability to package federal benefits such as Medicare and Medicare prescription drug coverage with state and other local insurance programs to reduce costs while maintaining the level of retiree benefits.

For background on the bill, see NY Public Payroll Watch items (here, here, here and here).