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$24 billion budget shortfall could hurt retirement plans

READ MORE: $24 billion budget shortfall could hurt retirement plans
RALEIGH -- Ask state employees, and they'll tell you one of the most popular reasons to work for the government is a well-funded retirement package that includes health care. But the state retirement package has not been fully funded. And that could mean higher expenses for state retirees. North Carolina's health coverage budget is short almost $24 billion, and fixing it could cost state employees who are soon retiring, and all of North Carolina's taxpayers. Financial planner Ross Marino says the state lost the benefit funds using a pay-as-you-go process. Marino said, "Meaning, whatever money they need this year they take out of the budget and that's fine for this year, however, they're going to need a lot more money next year and they haven't set aside the money to do that." Marino says there are two options to make up for the $24 billion: raise taxes or reduce benefits for state employees. "You charge them money to pay for their premiums, something they were not told they would be doing in retirement," Marino said. Teacher Sally Meserole said, "That's why you kept working for 30 years, was to get that good health benefit for retirement." Meserole, a teacher at Myrtle Grove Middle School, is two years away from retirement. For 29 years she has been counting on her state pension plan to pay for health insurance during retirement. Without those funds Meserole will have to make cutbacks from her retirement funds. "There won't be any traveling," she said. "It would impact my lifestyle plan." On the other end of the spectrum is Meserole's coworker Blair Struble. This is Struble's second year teaching, but news of the budget shortfall for state employees' retirement health benefits is making her weary of her financial future. Struble said, "Nervous, I mean, when you're promised something that might not actually be there, makes me think a lot about how am I going to handle my life plans now if that is not going to be there when I thought it would be." Marino says it's likely the state will raise taxes and make retirees pay for premiums. He also says it could be two years before the impact of the budget shortfall is felt.
For more information visit the John W. Pop Civitas Institute web site.

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