New Teachers Will No Longer Get This Retirement Benefit. Will It Affect Recruitment?
Maverick Whitley is a junior at Brevard College majoring in music education. He's been playing instruments since he was three years old and dreams of being a high school music teacher.
“Music has always been part of my life, and it makes a steady career out of what you love,” Whitley said.
Over his winter break, Whitley works part-time at a music store in his hometown of Albemarle. One of the perks of the job is that he can play the instruments when business is slow, but he’s looking for more substantial benefits from his future career.
As a North Carolina native, he always figured he'd stay in state to teach. But when he learned the General Assembly is ending retirement health benefits for new state employees, he started to recalculate.
“At that point, if I retired at 30 years at [age] 52, I'm going to have to start over and try and find a new insurance plan,” Whitley said.
After 30 years of employment, current state employees — including teachers — are eligible to retire with full benefits, including continued health coverage. But the state ended the retiree health insurance benefit for new state employees hired this year and beyond. Advocates for state employees say that change could make it harder to recruit future teachers.
Whitley is a self-described planner who tries to look ahead. After doing his research, he changed his mind about teaching in North Carolina. He’s looking into Florida, Virginia and Texas as options when he’s ready to hit the job market.
Virginia and Florida don't offer full health coverage to retired teachers either, but they have other things to entice him — like a better starting salary.
The loss of this retiree health benefit is what tipped the scales for Whitley.
Healthcare Costs Drove Up The Price of Retiree Benefits
“Common sense will tell you this will have a negative effect on the ability to recruit,” said Ardis Watkins, the executive director of the State Employees Association of North Carolina.
Watkins says the state government has historically offered good benefits to attract employees since public-sector pay doesn’t compete with the private sector, but health benefits are becoming more expensive each year.
Even those who pushed for the end of the retiree health benefit agree it could hurt teacher recruitment. Former State Senator Andy Wells supported the change because he thinks North Carolina's budget simply can't afford it — even for current employees who are still promised the benefit.
“This amounts to around a $30 billion liability. An ‘I owe you’ with nothing behind it,” said Wells, a former chair of the North Carolina Senate’s pension and retirement committee.
What he means by a "liability" is that it's money the state is obligated to pay in the future, but doesn't already have set aside.
It will cost North Carolina an estimated $93,000 for each current state employees' retirement health plan — but new employees won't get it at all.
North Carolina has one of the better-funded, and therefore more secure, state pensions in the country. But the state health plan is a different story — some states as well as local governments in North Carolina did away with retiree health benefits years ago because they were amounting to a large debt.
“All this does is keep the hole from getting any deeper,” Wells said.
State health plans for retirees are pay-as-you-go, meaning tax revenue in this year's state budget pays for this year's retirees. The problem is, healthcare costs in the U.S. are skyrocketing and eventually, Wells says, “the money's not there to do it.”
“The only way to find it is in the state budget, and that's either a pretty drastic tax increase, or it's a pretty drastic cut in the budget — and over half the budget is education,” Wells said.
Other Solutions: Control Healthcare Costs, Raise Teacher Pay
Watkins says there are other solutions besides cutting retiree benefits — including controlling healthcare costs.
Three state auditors have told the General Assembly that the state health plan overpays providers. The state health plan reported to its own board of trustees in 2018 that the amount the plan pays for medical treatments was sometimes up to 10 times the cost of Medicare reimbursement rates.
“That's sort of a no-brainer that overpaying to that amount is going to put your plan in financial jeopardy,” Watkins said.
State Auditor Beth Wood and State Treasurer Dale Folwell have argued the state health plan needs cost transparency. Not even their offices can oversee what the state pays for government employees' medical procedures.
Watkins says she hopes the state will get a handle on the costs and bring the retiree health plan back. Wells doesn't foresee the plan's return, but says the state could try to sweeten the pot for teachers with a pay raise.
“We're going to have to hire good teachers, to teach our children,” Wells said. “If this benefit reduction leads them to think that our salaries are too low, we're going to have to raise our salaries to get them hired.”
Whitley, the budding music teacher, says he hopes the General Assembly either raises teacher pay or brings back the health benefit, but he's not waiting around to see.