Billions by the bucket full: How much can school kids afford for teacher retirees?

Mike Lafferty , Terry Ryan / September 20, 2007

Ohio taxpayers and school children have been dealt another dose of bad news with the revelation that almost $10 billion in expected health-care costs for retired teachers could be added to the already staggering $19 billion in liabilities of the State Teachers Retirement System.

While the State Teachers Retirement System (STRS) already provides a health-care program for retirees, legislation (H.B. 315) pending before the Ohio General Assembly would obligate the system to assume liabilities for the program and fund health-care benefits in the same way that STRS is supposed to fund the pension liability. The effect would be to add at least $9.8 billion-the STRS's figure-in health-care costs to its obligations.

According to a Thomas B. Fordham Institute report issued in June, the system's unfunded liability for pensions alone already stood at $19.4 billion (the most recent valuation).

Money to cover these added costs would have to come straight out of the budgets of hard-pressed local school districts and/or the paychecks of their hard-pressed teachers. To hold districts and teachers harmless would mean saddling taxpayers with enormous additional burdens. Under the current pension-health system, school districts pay 14 percent of an employee's salary into the system while employees add another 10 percent. Under the legislation, working teachers and schools districts would each pay 2.5 percent more within five years. But there's no guarantee that these larger contributions would cover future costs any more than current contributions will cover future pension checks.

The proposed legislation

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Billions by the bucket full: How much can school kids afford for teacher retirees?