According to Widmer, municipalities spent about $800 million on health care for retirees in fiscal year 2012, an amount equal to nearly 90 percent of the $899 million in unrestricted local aid provided by the state to fund local services.
“Without any reform, retiree health care is projected to cost municipalities more than $1 billion within five years and nearly $1.5 billion in 10 years,” he said.
Both pension and retiree health-care costs are growing faster than municipal revenue, complicated by Proposition 21/2, which restricts the amount communities can levy in taxes, Widmer said.
Sen. William Brownsberger, co-chairman of the committee, questioned how much would be saved annually and asked Shor how much taxes would need to increase if the Legislature chose not to change the system.
The savings grow exponentially over the years, reaching $20 billion over 30 years, while not doing it would require some tough choices, Shor said.
Widmer said if the Legislature does nothing, municipal jobs will be lost.
“Certainly, over time, there will be fewer public employees because we haven’t dealt with this liability,” Widmer said.
Massachusetts Municipal Association Executive Director Geoffrey Beckwith described the current situation as a “looming crisis” that without major reforms will drive up local property taxes and force municipal cuts.
Cities and towns are committed to providing excellent health care benefits in retirement, Beckwith said, but unless the issue is addressed, communities “will face a crisis that will place a much-too-heavy burden on taxpayers.”
He said it was unreasonable to expect taxpayers to vote to pay higher taxes to fund a benefit which is not available to most of them. The MMA estimates that 8 percent of private-sector employees in the state have any type of retiree health insurance benefit from their employers.
But Committee member Rep. James Miceli, a Wilmington Democrat, said the bill was a long way from ready, and he was planning to vote to send it to study — a legislative move that often effectively kills legislation.
“I am not happy with what I am hearing. I am not happy with what I am seeing,” he said.