Editorial

Alabama has a huge looming problem that it needs to confront squarely before it gets even bigger and more problematic. The projected cost of health insurance for retired state employees and teachers for the next 30 years is a whopping $19.8 billion, a colossal unfunded liability that should give pause to every Alabama taxpayer.

For decades, Alabama has been covering the expense from current revenues, as have other states. But as insurance costs have soared, the amount of money the state has had to commit to providing coverage has soared along with it. It's now more than $1.1 billion a year for current and retired employees and teachers.

The state has to find a way to manage this growing liability. It's the only fiscally responsible thing to do, not only because of the commitment of coverage made to retirees, but also because of its obligation to the taxpayers.

Under new rules from the Government Accounting Standards Board, states have to disclose the projected cost of health care benefits for retirees as well as their plans for meeting those costs. Without such a plan or at least the satisfactory beginnings of one, the state's bond rating could suffer, adding greatly to the cost of issuing bonds for state projects. Millions of dollars in additional costs could be incurred.

One sensible proposal is the establishment of a fund, operated similarly to the Retirement Systems of Alabama and specified for retiree insurance costs. The concept's supporters include David Bronner, CEO of the state retirement systems.

"We need a constitutional amendment to set up a trust fund that the Legislature can't raid every time the state has a bad day," he said in an interview with The Associated Press.

That's a crucial point. Surely no one can doubt that one reason RSA has reached nearly $27 billion in assets is that it has not been raided over the years. (Not that some former governors and Legislatures did not cast longing eyes at the systems' assets, disregarding long-term pension obligations for short-term fiscal fixes. They did.)

The fund is a sound approach that current state employees and teachers, who presumably hope one day to be retirees, should embrace. It is hardly unreasonable to expect them to make modest contributions to such a fund.

The key is developing a fiscally solid structure for the fund and then getting it started. The sooner, the better.

"There's no question we have to do something," Gov. Bob Riley, whose finance director is leading a committee examining the situation, told AP. "The Legislature realizes that."

Alabamians should hope that Riley is right about the Legislature's understanding of the problem, and that the next governor, whether Riley or Lucy Baxley, also will make the issue a top fiscal priority.

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