Walker: Chicago Says Yes To Debt Reduction, Why Not Bridgeport?

Bridgeport resident David Walker, former U.S. comptroller general, says he’s offered financial solutions to city government that have fallen on deaf ears, including suggestions for reducing crippling debt. On Monday Walker wrote an opinion piece published in USA Today that highlights the cost savings Chicago Mayor Rahm Emanuel, former chief of staff to President Obama, plans to follow in the federal Affordable Care Act. Walker says his suggestion “fell on deaf ears in Bridgeport, but apparently Chicago was listening. It takes intelligence and fortitude to pursue this approach and Mayor Emanuel has both. We are still looking for either in Bridgeport.”

News release from the community action group Citizen Working For A Better Bridgeport:

Former US Comptroller General David Walker’s Innovative Debt Reducing Ideas Are Being Implemented in Chicago; Why Not Bridgeport?

In an opinion piece penned for USA Today on June 10, 2013, former US Comptroller General David M. Walker reported that Chicago Mayor Rahm Emanuel plans to parlay the health insurance exchanges created by the Affordable Care Act into an opportunity for significant cost savings for Chicago. Mayor Emanuel estimates that it could save his City’s taxpayers $800 million over time.

Dave Walker offered the idea to Bridgeport’s City Council in April as a means to reduce the City’s huge unfunded retiree health obligations and to keep Bridgeport’s gargantuan tax rate from increasing once again. Within its structure, the Affordable Care Act also provides a means for state and local governments to shift some of the ever increasing retiree health care costs as to the exchanges and the federal government.

Walker’s suggestion, which he has made in prior speeches, “fell on deaf ears in Bridgeport, but apparently Chicago was listening. It takes intelligence and fortitude to pursue this approach and Mayor Emanuel has both. We are still looking for either in Bridgeport.”

Walker USA Today op-ed:

Oct. 1 is a focus of increasing anxiety in this country. That’s the date when enrollments begin for the federally run health insurance exchanges, created under the Affordable Care Act.

No one really knows what to expect, but the rollout could prove far worse than advertised for a reason that has more to do with the federal deficit than health care.

We all know the questions about the new health law: Will employers dump their current health care plans and pay the relatively modest fine? Will young people opt out of the exchanges driving up premiums for others? Will the ultimate cost far exceed the official projections? But almost no one has been paying attention to the opportunity that the exchanges could open for state and local governments’ retiree health care programs.

Chicago Mayor Rahm Emanuel is among those who have.

Last month, Emanuel announced plans to move city retirees onto the exchanges, as a way to offload an $800 million shortfall in retiree funding. There’s reason to think that other state and local governments will follow suit. If they do, the consequences could be far-reaching.

States in a deep hole

We already know that many state and local governments are in a financial hole that keeps getting deeper. A newly released report by the U.S. Government Accountability Office makes clear that, absent significant reforms, the fiscal picture for most state and local governments will steadily worsen through 2060.

A main cause, in addition to Medicaid, is the cost of health care for state and local government retirees.

Unlike Washington, state and local governments can’t just print money to pay their bills and typically have “balanced budget” requirements. More often than not, retiree health benefits are not guaranteed under state constitutions, are not insured and are not protected by federal law, which means the systems in place can be changed.

States that offer generous health benefits for government retirees, and which have set aside little or nothing to pay for those future costs, could choose to move their retirees into the exchanges. State and local governments would likely continue to contribute by paying some premium support to individual retirees, but the federal government and/or participants in the exchanges would pick up much of the tab.

For these states, the exchanges offer a chance to shore up their finances and relieve state taxpayers of some of the looming burden of financing all those retirees.

Reward for irresponsibility

A significant portion of the tab would be passed on to the federal government, effectively shifting the burden to Americans in other more fiscally responsible states.

Moreover, the cost of the exchanges could grow precisely because more retirees are joining the pool. And if young people forgo the exchanges in large numbers, it will put upward pressure on insurance premiums over time.

Risks and opportunities

So the impact of the insurance exchanges could be good news for some state and local governments and residents, like those in Chicago, while not so good news for the rest of us. As with so many major federal initiatives, the outcomes are far from certain. That is particularly the case with the Affordable Care Act, which rivals some of the New Deal legislation in its complexity.

At the very least, however, we should recognize both the risks and opportunities–including what could unfold at every level of government–and be prepared for the results.