Wednesday, February 01, 2006

GASB 45--What Will State and Local Governments Do with Retiree Healthcare Costs?

The Washington Post reports that GASB Statement 45, which requires that future health care benefits after retirement be loaded as a liability on the balance sheet, will be closely watched by bond agencies and Wall Street. As a result, state and local governments will be forced to make tough decisions about how to fund prior shortcomings and whether to continue or reduce these benefits in the future. Maryland and Nevada are given as examples--each faces costs exceeding $1 billion. An interesting ramification is how this will affect negotiations between states and powerful employee unions. Hank Scheff of Chicago AFSCME vows to fight benefit cutbacks while Gino Renne, a union offical in the Maryland suburbs of Washington, DC, prefers cooperative efforts by governments and unions to control health costs.


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