By Nyamekye Daniel
(The Center Square) – New laws could bring more money to North Carolina’s trust fund that covers health insurance for retired teachers, state employees and other public servants.
State Treasurer Dale Folwell said pieces of legislation recently signed into law by Gov. Roy Cooper could provide $32 million a year to the State Health Plan for retirees.
The Federal Reserve estimates the long-term liability nationwide for providing health care coverage for retired public workers is more than $1 trillion. North Carolina’s State Health Plan covers more than 730,000 current and retired employees.
With the state’s newly approved Medicare Advantage contract adding another $475.2 million to the health plan, Folwell said he believes North Carolina should be able to start addressing its $50 billion in unfunded pension and health care liabilities.
“It’s even more important in challenging economic times to act responsibly in addressing long-term liabilities,” Folwell said. “A total of more than half a billion dollars is a good start toward closing the $50 billion long-term gap.”
Cooper signed House Bill 1218 and Senate Bill 818 last month.
The changes brought on by HB1218 will add money for pensions and reduce payments for health benefits to pay interest and principal on money the state has borrowed, said Joe Coletti, a senior fellow at the John Locke Foundation.
The bill takes $5 million in state funding from the health plan in the current fiscal year, which started July 1, and uses it for North Carolina’s debt obligations. Folwell’s office said the bill also fully funds the state’s required contributions for the year.
“Because of adverse economic conditions facing the pension fund, this required an increased appropriation of $69.7 million over and above the amount planned last year for the pension fund increase,” Folwell’s office said. “This move continues the state’s historic commitment to paying into the retirement system, which has been funded every year since 1941.”
SB818 decreases the state’s contributions to the health plan by $47 million to produce bonuses and raises for teachers. Colleti said the law could increase employer and retiree premiums by $10 to $15 a month.
Lawmakers added a provision to SB 818 that allows the state to restore the contributions with federal COVD-19 aid if the federal government offers states the flexibility to do so.
The state received $3.5 billion in COVID-19 aid after Congress passed the Coronavirus Aid, Relief and Economic Security (CARES) Act in March. States are allowed to use the aid to cover COVID-19-related expenses through December 2020.
Lawmakers have been hopeful the federal government will allow states to use the funds to recover economic losses.
By enacting legislation in the past that raises the retirement threshold and with a 2021 elimination date for new hires, the General Assembly has saved the state billions in rising debt from the state health plan, Manhattan Institute researchers found.
Coletti said the once the economic downturn from the pandemic has stabilized, state lawmakers should “rededicate themselves to reducing debt and strengthening retiree pensions and health benefits.”