State officials are planning a two-pronged approach to West Virginia's massive unfunded liability involving benefits for retired public employees: First, stop building up new liabilities. Second, find money to pay down existing ones.
As much as $10 billion in "other post-employment benefits" - or OPEB - has been promised without a funding stream to pay for them.
Because most of the retirees are and will be former school employees, the OPEB burden technically falls on county boards of education. But state legislators appear to be taking the realistic position that though school workers officially work for boards of education, the state sets pay and retirement benefits. Therefore, OPEB is a state responsibility, not a local one.
Health insurance, the bulk of the OPEB liability, is handed by the Public Employees Insurance Agency. The PEIA's finance board is scheduled to vote today on a plan to address the first half of a strategy to deal with the liability.
Finance board members envision a cap on the amount the state pays to cover retirees' health insurance. No subsidies would be provided for public employees hired after June 2010. That would prevent new liabilities from being built up.
The idea will not be popular with public employees and the unions that represent many of them. According to the PEIA's plan, the cap would increase by no more than 3 percent a year.
That is far below the inflation rate for health care, meaning retirees would have to dig deeper into their own pockets to obtain insurance - at least until they reach age 65 and can sign up for Medicare.
It appears state officials have no choice but to place more of the burden on retirees. West Virginia taxpayers, who already provide tens of millions of dollars a year in subsidies for the PEIA, simply cannot afford more.
Perhaps, after enacting the cap, the PEIA can provide some sort of retiree health savings program to help those on government payrolls set aside money for insurance after they retire.
Once the PEIA acts to stop building up new liabilities, the Legislature will have to devise a plan to pay down existing ones. But the first step lies with the PEIA, and its officials should take it.