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 Illinois’ Commission on Government
Forecasting and Accountability recently highlighted that as of the end of
September, the state is $5 billion behind on paying its bills for state
government worker health care costs. That’s a big chunk of the $16 billion in
unpaid bills the state has racked up as a result of years of overspending. This
has resulted in some health care providers demanding government employees pay
their health care costs upfront, as they have lost confidence in the state’s
willingness and ability to pay.
Most politicians will blame this mess on the recent state budget impasse. Of
course, the impasse made things worse. But that’s not the real problem.
The real problem is that the state’s health care benefits have grown to the
point taxpayers can no longer afford them. And lawmakers have done nothing to
rein in those costs.
Unsurprisingly, the state’s new 2018 budget did nothing to end the overspending
trend. The “balanced” budget, which permanently raised taxes by a record $5
billion annually, is already in the hole by at least $1.3 billion.
Nor did the budget do anything to rein in state worker health care costs.
Lawmakers have ignored calls to enact reforms proposed by the Illinois Policy
Institute and others, which would make employee health care more affordable for
taxpayers.
The average total compensation for a state AFSCME worker equals nearly $110,000
a year. That’s largely driven by the highest state worker pay in the nation. But
health care benefits granted to state workers also contribute significantly to
that total.
In 2016, Illinois taxpayers subsidized 77 percent, or an average of $14,880, of
state workers’ annual health care costs. That means state workers received
benefits equivalent to a platinum-level plan offered through the Affordable Care
Act, at a bronze-level cost.
Those benefits continue to burden
taxpayers at a time when private sector workers are paying ever more for their
own health care. Illinoisans are expected to see their premiums increase again
next year, this time by up to 35 percent.
State workers receive even more robust health benefits when they retire
Taxpayers currently subsidize 100 percent of the health insurance costs for
retirees who worked 20 or more years for the state. That benefit is worth
$200,000 to $500,000 per employee in today’s dollars, depending on when the
worker was hired, how long he or she worked, and when he or she retired.
To put that into context, an ordinary worker in the private sector would need to
have $200,000 to $500,000 at the time of his or her retirement just to purchase
the same retiree health insurance that most state workers get for free.
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State workers also
receive top-tier salary and pension benefits
Illinois state workers
receive the highest wages of any set of state workers in the country
when adjusted for cost of living. In 2014, Illinois paid its state
workers more than $59,000 a year on average, far more than its
neighbors and nearly $10,000 more than the national average. More
specifically, state AFSCME workers on average receive a base salary
of more than $65,000.
And when they retire,
career state workers (those who work 30 or more years) will on
average receive $1.6 million in pension benefits over the course of
their retirements. That’s on top of Social Security benefits, which
nearly all state workers also receive.
That combination of high salaries, heavily subsidized health
insurance, free retiree health care and million-dollar pension
benefits costs taxpayers on average nearly $110,000 in total
compensation for state AFSCME workers annually.
Fixing financial
dysfunction
The state continues to struggle financially in spite of a promised
return to normalcy that proponents of the recent multibillion-dollar
income tax hike made to Illinoisans in the wake of the 2018 budget.
After all, the two-year budget impasse was blamed for everything
from the fiscal crisis in higher education to the state’s poor
economy.
But just three months later, the state’s dysfunction continues. The
“balanced” budget is already in the hole by at least $1.3 billion,
and the deficit is expected to grow. Illinois politicians are
looking to raise taxes on Illinoisans yet again. Several local
governments and universities remain stuck with junk and
near-junk-level credit ratings. And even the state’s own credit
rating remains on a precipice – it’s only one notch away from junk
status.
Meanwhile, the American Federation of State, County and Municipal
Employees and others continue to demand more unaffordable benefits.
AFSMCE has called for four-year raises ranging from 11.5 to 29
percent, a 37.5-hour workweek, five weeks’ vacation and enhanced
health care coverage, for example.
But it’s clear that Illinois won’t be able to get its fiscal house
in order without significant changes that lower the cost of
government to a level Illinoisans can afford. The state needs
comprehensive pension reform, changes to collective bargaining, and
prevailing wage and workers’ comp reforms, among many other
solutions.
It’s the only way Illinois will get its finances – and its unpaid
bill backlog under control.
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