States collectively owe more than $1 trillion in pension benefits to current public workers and retirees, but that oft-cited figure does not include the cost of other retirement benefits for government workers and public school employees.
That's largely because states don't bother accounting for their so-called "Other Post-Employment Benefits," or OPEB, costs in the same way that they do for pensions. Instead of putting money away year-after-year to pay for those liabilities, most states fund OPEB costs on what accountants call a pay-as-you-go basis, meaning that revenue is appropirated from the state budget each year to meet those needs. The majority of OPEB is in the form of health care benefits, including retiree health insurance and other expenses like dental, vision, life, and disability insurance.
States paid more than $20 billion towards OPEB costs during 2015, according to a new analysis from the Pew Charitable Trusts. That sounds like a lot of money, but it's really just a drop in the bucket compared to the estimated $692 billion owed to public workers over the next few decades.
Some states have done better than others when it comes to keeping up with OPEB costs, but only six states (Alaska, Arizona, North Dakota, Ohio, Oregon, and Utah) have set aside more than half of the the assets necessary to meet thier long-term OPEB obligations, according to Pew's analysis. By comparison, 30 states have less than 10 percent of the necessary savings.
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