The Fiscal Sustainability of Retiree Health Care Benefits among New York State School Districts

Robert Bifulco, Minchin Lewis and Iuliia Shybalkina

Municipal Finance Journal, 2024, vol. 45, issue 2, 71 - 97

Abstract: State and local other post-employment benefit (OPEB) liabilities are particularly high in New York, making it a near-worst-case scenario for assessing the fiscal sustainability of funding OPEB on a pay-as-you-go basis. This paper examines spending on retiree health care as a percentage of revenues for a sample of New York State school districts. The fiscal burden of these benefits grew from 3.4% to 4.3% between 2010 and 2021. Assuming Congressional Budget Office forecasts regarding growth in health care costs and continuation of recent trends in revenue growth, the burden of retiree health care benefits is projected to exceed 9% of revenue by 2040 before leveling off from 2040 to 2050. Projected burdens are greatest in big-city districts, raising educational equity concerns. Prefunding is examined as one possible policy response.

Date: 2024
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