By: Mark Glennon* | Wirepoints
About $26 billion of State of Illinois liabilities for public employee healthcare just vanished – a decrease of over 56% of that liability in one year. Any questions? Never mind, because you won’t find explanations here or anywhere else, but read on.
The long overdue 2023 financial statements are contained in what’s called the Annual Comprehensive Financial Report (ACFR, formerly called a CAFR) published on August 7. It’s the state’s key financial report because it’s audited, based on actual results and is on an accrual basis. That means that, unlike phony state budgets, growing debts are included in the bottom line and borrowed money is not counted as if it’s income.
On the surface, the bottom line in the new CAFR would appear to be good news. The state’s Net Position (which you can think of as net worth) improved from negative $185 billion to negative $170 billion.
Why the improvement?
It wasn’t that the pension situation eased. That actually worsened, with unfunded liabilities increasing $5.7 billion from the fiscal year 2022 balance of $139.8 billion. (Notably, that deterioration occurred despite an exceptionally good year in the markets that saw the S&P 500 returning over 22%, pushing up pension asset values).
The answer is the magical erasure of liability for what are called OPEBs (Other Post Employment Benefits). OPEBs are basically healthcare promises made to state employee pensioners. For nearly 75% of state-employee (SERS) retirees, the state covers healthcare from the day they retire until Medicare kicks in, plus some supplemental benefits thereafter. OPEB liabilities are measured by actuaries much like pensions, except that OPEBs are entirely unfunded. That is, no money is set aside by the state for estimated future healthcare obligations based on work already performed.
Read on here.
*Mark Glennon is founder of Wirepoints.