By Steven Malanga
Thanks to promises made over the years by the St. Paul school board, taxpayers in the Minnesota city owe teachers and other education workers some $409 million in retirement health benefits that the district hasn’t funded. So the school system has taken advantage of a new state law that allows local governments to levy a special property tax to help finance these benefits. This year, the district anticipates collecting an additional $12.8 million from property owners thanks to this new, so-called “other post-employment benefits” levy, according to the St. Paul Pioneer Press.
The St. Paul school district is one of the few government entities I’ve found so far that charges a specific new tax to help pay off the staggering cost of retiree benefits. Most places are still dealing with their growing liabilities out of precious general revenues. But more such dedicated taxes are likely on the way.
The tab that state and local governments have accumulated in unfunded retiree benefits now amounts to several trillion dollars. In the last few years much of the debate about these obligations has focused on whether they would generate a wave of local government bankruptcies, thanks to a controversial prediction by celebrity analyst Meredith Whitney.