A recent report has highlighted a looming financial crisis in several US states, with New Jersey, California, New York, Texas, and Illinois facing massive deficits in funding retirement benefits for state employees. These benefits, known as Other Post-Employment Benefits (OPEB), include healthcare plans, life insurance, and other post-retirement expenses apart from pensions. The total unfunded liability for OPEB across the nation has reached a staggering $1.14 trillion as of 2022.
State Retiree Benefits Crisis: NJ Leads with $174.9B Unfunded Liability
New Jersey leads the pack with an unfunded liability of $174.9 billion, followed closely by California ($140.2 billion), New York ($133.2 billion), Texas ($120.2 billion), and Illinois ($103.1 billion). The burden of these unfunded liabilities falls on taxpayers and poses a significant challenge for state policymakers. The situation is particularly dire in Hawaii, where the per-capita cost of unfunded liabilities is the highest in the nation at $19,933.
The American Legislative Exchange Council’s research, which highlights how urgent it is to address the OPEB situation, cautions that continuing with the existing system is unsustainable and puts retiree benefits at risk.
The nonprofit organization, which promotes cutting government expenditures, provides model legislation to assist lawmakers in addressing the issue. One suggestion is to reduce the load on taxpayers by having the private sector pay a portion of public-sector retiree benefits.
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States Face Retirement Benefits Crisis: Urgent Action Needed
While many states, like South Dakota and Nebraska, have completely avoided unfunded liabilities, other governments have substantial difficulties fulfilling their responsibilities. The OPEB crisis emphasizes how urgent it is to restructure retirement benefit systems and guarantee their long-term viability.
Delays in addressing these problems might have detrimental effects on taxpayers and retirees alike, underscoring the necessity of prompt action from state legislators.