April 2, 2010

Florida House budget wants public employees to delay retirement

This one's an odd cut-your-nose-to-spite-your-face maneuver: the budget that the Florida House passed yesterday cuts health subsidies to retirees because legislative leaders are desperate to balance the budget without raising taxes, but the House budget maintains complete state support of premiums for about 27,000 state employees, including state legislators. (Disclosure: I'm not among those who get premiums completely paid.)  

Let's think this through a bit: suppose you're 65 and are thinking about retiring. Before this year, if you retired you'd be eligible to have a health-care subsidy. If the House budget provision on those items remain, you'd probably think twice about retiring, because by staying at work you're covered for what Medicare doesn't help with, and your salary pays the premium, but if you retire you don't have a health-care subsidy.

Now let's suppose you're also one of the 27,000 employees whose premiums come out of your employer. If you stay at work you don't pay for health care premiums. If you quit, you don't get any health-care subsidy.

This reverse the usual incentives that pensions set up to encourage retirement: you lose some income, but you gain some security. The health-care subsidy is not a significant amount of money over one's entire lifetime, but it's something that older public employees had been counting on, and the loss of the anticipated benefit might tip the balance for some to staying in their for a few extra years. Is this what Florida legislative leaders want? Have they asked anyone to estimate the long-term costs of delaying retirement for those who might change their mind based on the health-care subsidy?

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Posted in Education policy on April 2, 2010 10:13 AM |