In addition to MPS' share, Milwaukee County has a non-pension retirement liability of $1.5 billion, and the City of Milwaukee owes more than $806 million.
Some downplay concern
Local officials dispute the contention that they need to start putting more funds toward their future benefits. Unlike pensions, health insurance costs are harder to forecast, especially decades down the road as is done in actuarial studies, they argue.
A lot can change over time, they say, from renegotiated contracts to government-supported health care.
"It's a big number, but it's kind of like a mortgage," said Todd Gray, superintendent of the Waukesha School District, which has a liability most recently estimated at $195 million. "Just because you have a big mortgage doesn't mean you're financially in trouble. It's just going to take you some time to pay it off."
The obligations have only come to light recently after a directive by the Governmental Accounting Standards Board that governmental entities reveal their obligations for "other post-employment benefits," which largely amount to health insurance for retirees.
Many of these benefits were enacted in prior decades as a way to promote early retirement by employees and savings for local governments. But as health insurance costs have risen sharply in recent years, so has the burden of these benefits on local governments.
The new accounting rules went into effect in 2007 for governments with budgets over $100 million, which were the entities studied in the Wisconsin Policy Research Institute report. The rules are being phased in for smaller governments over several years.
But in tight fiscal times, government officials say they can't afford to do much more.
"We've been as proactive as we could be, short of fully funding" the obligation, Milwaukee County Auditor Jerry Heer said. "We don't have a lot of cash lying around."
While the county's unfunded post-retirement benefit cost is large, it's on the decline because the county restructured retiree health insurance, Heer said. Retirees now pay deductibles and co-pays, but not premiums. The amount of the retiree health costs will gradually decline because employees hired after 1995 do not get retiree health insurance, he said.
Milwaukee budget chief Mark Nicolini said the city would have to nearly double what it currently spends on retiree health insurance costs to meet its future obligations as well. "It would be a massive influx of cash right now," he said.
Steve Schultze of the Journal Sentinel staff contributed to this report.
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