Inflation and theory;

What is the average rate of inflation per year in the US?

As we saw the Average annual inflation rate is 3.22%. That doesn't sound too bad until we realize that at that rate prices will double every 20 years. That means that every two bars on average prices have doubled or about 5 doublings since they began keeping records.Apr 1, 2014

By Shira Schoenberg | sschoenberg@repub.com 
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on October 31, 2013 at 2:09 PM, updated October 31, 2013 at 2:13 PM

BOSTON — Hundreds of people, many of them union members, turned out at the State House on Thursday to oppose a bill that would save the state and municipalities a significant amount of money by cutting retiree health benefits for public employees.

Democratic Gov. Deval Patrick has proposed the bill as a way to address the approximately $46 billion unfunded liability for retiree health benefits faced by state and municipal governments. “Modifications to retiree health care coverage are essential to keep the system sustainable for future state and municipal career employees and to maintain core government services for future generations,” said Secretary of Administration and Finance Glen Shor.

However, public employees say the government is breaking a promise that was made when they were hired. Gail Gunn works in information services for UMass Amherst. She is 51 years old, blind and has worked for the state for 16 years. She planned to retire in five or six years, but will reconsider if the bill is passed, since the change would increase her monthly health insurance payments by $500 a month. “I’m not going to stand up and say it’s not fair. As a blind person, I’m used to life not being fair,” Gunn said. “It’s just wrong. I expect more from government.”

House Bill 59 is being considered by the Joint Committee on Public Service, which held Thursday’s public hearing.

According to the Massachusetts Taxpayers Foundation, the current unfunded liability for retiree health benefits is $30 billion for cities and towns and $16 billion for the state. The bill was crafted based on recommendations from a committee tasked with studying the issue. According to Shor, the reforms could save state and local governments $1 billion over 10 years and up to $20 billion over the next 30 years. (The savings increase in later years because the changes would not apply to current retirees and some of those nearing retirement.)

The bill would increase the minimum years of service an employee must work to be eligible for retiree health benefits from 10 years to 20 years. It would increase the minimum age for eligibility by five years, to 60 for general employees, 55 for employees with hazardous occupations and 50 for public safety officials. The bill would also pro-rate benefits on a scale ranging from government paying 50 percent of health insurance premiums after 20 years of service to government paying 80 percent of premiums after 30 years of service. Currently, the state pays 80 to 90 percent of premiums, and municipalities pay between 50 and 100 percent.

If the state breaks this promise, they'll break any promise.
- Wesley Blixt, union co-chair

Shor said maintaining the current system “is neither fiscally sustainable nor likely to engender ongoing taxpayer support.”

Supporters of the bill argue that these provisions are more generous than the plans offered in the private sector and in many other states. Shor said the plans of 18 other states require a higher minimum age or more years of service.

Geoffrey Beckwith, executive director of the Massachusetts Municipal Association, said in his prepared testimony that only 8 percent of Massachusetts taxpayers who work in the private sector receive any type of retiree health insurance benefit. “It is unreasonable to expect that voters will agree to pay higher taxes to fund a benefit that is unavailable to the overwhelming majority of citizens,” Beckwith said.

Both the Massachusetts Municipal Association, which represents city and town governments, and the Massachusetts Taxpayers Foundation argue that the bill should go even further in cutting retiree health costs. Michael Widmer, president of the Massachusetts Taxpayers Foundation, said cities and towns paid $800 million in 2012 for health care benefits for retirees, and that cost is expected to rise to $1.5 billion in 10 years. “Without much stronger reforms, retiree health care costs will be a growing burden on local budgets for years to come, continuing to siphon resources away from important public services such as education, public safety and transportation,” Widmer said.