July 25, 2013
Here is stunning proof of the fiscal irresponsibility of the City of Memphis government versus Shelby County government.
Unfunded liability is a promise made by one party (the City of Memphis) to another to pay for most of another’s health care expenses (retirees). There is no legal obligation for this promise , it is just a promise. Well in 2007 the government came along and said that this promise called OPEB (Other Post Employment Benefits) needed to be put onto the books of the City and the County. In other words, the government wanted the public to see the books and how well the City and the County were keeping their promises.
You have to understand that the actuaries know that this OPEB obligation grows each year with more people on retirement and people living longer. Therefore the amount of money set aside each year into the OPEB fund needs to cover the future promised benefits. Anything less than the amount the actuaries say is needed is a loan for the future and has the effect of adding to the unfunded liability.
Now here is the proof of the irresponsibility of the City of Memphis versus Shelby County.
From 2007 to 2011, Shelby County’s unfunded liability went down from $319 million down to $232 million, a reduction of $87 million, a reduction of about $22 million per year.
From 2008 to 2012, the City of Memphis’s unfunded liability went up from $857 million to $1.2 billion, an increase of $397 million, an increase of about $49 million per year.
Now is there any doubt that major health care and pension reform is needed at the City of Memphis?