On March 18, Moody’s Corporation released one of the most comprehensive reports on the status of California public retiree health costs to date. Its conclusions were troubling. The credit rating agency said public retirement benefits and retirement health care costs in particular are rising quickly, threatening a reduction in essential public services.
Moody’s examined 15 cities for the study. Only one of them, Glendale, significantly reduced its debt because it cut retiree health care for workers already on the job.
“...Retiree health care benefits are often not subject to the same stringent legal protections as pensions,” Moody’s notes. “Nonetheless, the legal flexibility to reduce benefits does not necessarily equate to political ability or willingness to cut them.”
“Absent sustained revenue growth and/or benefit reforms, rising [health] costs have the potential to curtail spending on essential services and infrastructure investments — a dynamic known as ‘crowd-out’ risk.”
Moody’s analysis echoes a 2016 report on retiree health costs from the League of California Cities. That guide recommended that cities “unblend” retiree health benefits, no longer guaranteeing that retired workers pay less for health insurance than active employees. This is precisely what Glendale did.
Read more about the retiree health dilemma facing local governments at Calpensions.com.