While their manufacturing counterparts shed jobs and workplace benefits by the Chinese junkload in the new millenium, America's government workers felt somewhat secure in their status. That will change dramatically in the coming year. Two financial tsunamis bear down on government entities.
The first wave is an accounting standards change on retired employee health benefits. The Government Accounting Standards Board will treat retiree health insurance like pensions, requiring governments to project the benefit expense into the future. San Angelo city manager Harold Dominguez cited a spill over effect on non-retiree health insurance benefits. Besides not fulfilling prior commitments to retirees, Harold projected greater cost sharing with existing workers in a recent city council meeting.
The second wave is underfunded pensions. One expert says government entities have underfunded pensions by $2 trillion. This bodes well for private equity underwriters (PEU's), who claim high returns for investors, many of which are public pension funds. Never mind the recent PEU "pay to play" scandal. The Carlyle Group and its energy joint venture Riverstone Holdings paid a combined $70 million to steer a New York investigation away from their good name.
Local and state governments will imitate their business counterparts, shedding benefits and jobs under the rising tide of future liabilities. The jobs won't go to China. They'll disappear. Those lucky enough to remain gainfully employed will pay a greater portion of their health care premium and enjoy higher cost sharing. They will have a lesser pension benefit, if they have a pension at all. Many will follow their corporate counterparts who dumped pensions in favor of 401k's and 403b's.
The era of personal responsibility is coming. Government's picking up where corporations left off is good talk. The walk remains to be seen. Tapped out national, state and local governments can't fulfill promises already made, much less make new ones.
Who knew health care reform would result in 43.3 million people losing workplace health insurance? That's nearly the 46.3 million uninsured. Seismic shifts are underway and they are well crafted. It's a sad day when citizens can simply take the lofty words of politicians and safely assume the opposite will occur.
