Solve the real problems
Unfunded municipal pension liabilities are getting all the attention now, but it’s the burden of Medicaid and health-care expenses that are really crushing state and county budgets. In California, for example, the state will make a $2.4 billion pension contribution to Calpers and spend approximately $16 billion on Medicaid. The federal government kicks in an additional $25 billion.
I first understood this when I listened to the governors of Vermont and Wisconsin testify to the House Oversight Committee on April 14. Governor Peter Shumlin of Vermont explained his approach to bringing his state budget into balance:
This crisis is the result of the greatest recession in history. I didn’t start with changes to collective bargaining and pensions. Our first problem is that health care costs have doubled. Our second cost driver is that corrections have doubled in 10 years.
I go where the money is. There are steps you can take without undermining traditional defined contributions plans. We worked together. We brought unions together. We shared sacrifice. In our discussions we got more with maple sugar than vinegar.
Granted, Vermont is a tiny state, but it is the perfect laboratory for political changes because they are willing to work together to improve their government. The video above offers an exciting preview of the changes that Vermont will be making to provide health care. Let’s keep our eye on how Vermont succeeds with trying to adopt a single-payer system.