Judge Taft-Carter’s decision in the Providence Medicare case on Monday contained this rather odd passage:
Moreover, the Court notes that $6 million in lost savings – although hardly a paltry sum – is less than 1% of the City’s approximate $1.5 billion in liabilities for non-pension post-retirement employment benefits. Immediate receipt of these alleged savings would not save the City from financial ruin.
That’s an apples-to-oranges comparison. The $6 million is how much the city projects it will save from moving retirees to Medicare in one fiscal year. The $1.5 billion is how much the city projects it owes them in health benefits forever.
Think about it: by Taft-Carter’s logic, the pension law passed in November had a negligible impact, because the $128 million it saves in the 2012-13 state budget is only about 1.8% of the old $7.3 billion unfunded pension liability. But the number people care about is the drop in the unfunded liability to $4.3 billion, a 41% reduction.
A more apt comparison would be how important the $6 million is in balancing Providence’s 2011-12 budget. If we take the original projected deficit for Providence – $110 million – the Medicare savings closes more than 5% of the shortfall. Or if we take the remaining deficit for this year – about $30 million – it’s equal to 20% of the shortfall.
If, on the other hand, Taft-Carter wants a number that’s comparable to the $1.5 billion unfunded retiree health liability, she would need an estimate of how much the move to Medicare shaves off that figure. It’s not clear to me if that figure is available, but it would be substantially more than $6 million.
An earlier version incorrectly described the reduction in the pension liability as 59% rather than 41%.