Delaware’s Office of Management and Budget wants to shift state contributions to retiree health benefits from the general fund – covered largely by taxes– to a special fund.
And it suggests using money collected from unclaimed property to cover the cost.
Last year, Delaware contributed more than $61 million from the general fund to cover retiree healthcare. This year, Gov. Matt Meyer’s budget plan calls for $65.8 million using unclaimed property funds – or escheat.
The request drew some criticism during the OMB's Joint Finance Committee hearing. One retiree, Stephen LePage, said shifting away from the general fund toward escheat presents risk.
“It's volatile and outside the state's control," LePage said. "If escheat revenue drops, the state is left with the same obligation, fewer good options, sudden pressure on the general fund, or the cost shifting to retirees through premiums or benefit changes."
Delaware employee pensions are funded actuarily – through dollars set aside while they’re working. Retiree health benefits are funded on a pay- go basis in two ways: through a rate of payroll and a contribution from the state that is typically 1% of the previous year’s budget.
Office of Management and Budget Deputy Director Ann Visalli said increasing use of unclaimed property that Delaware cashes out on– escheat funds– to cover retiree health benefits is allowed. State code only allows the state to use escheat funds to cover education and employee benefits. Visalli said that can offer some general fund relief.
"It certainly did free up general fund resources to be able to use for a variety of things, including 2% employee pay raise, collective bargaining agreements," she said. "We had a number of demands on the general fund."
Lawmakers need to sign off on the shift.
Delaware Governor Matt Meyer said the Joint Finance Committee can reassign state coverage of retiree health benefits next year, if necessary.
"I'm trying to keep general fund expense expense growth low so we can keep your taxes low and we can provide the highest quality service to Delawareans for the lowest price," he said."...If we can do it in a more efficient way, through escheat funding, we'll use escheat. But any pensioner can be assured that funding source will be secure. If it becomes insecure, we'll move it back to the general fund."
The state contributes to a trust annually that partly covers retiree health benefits. This year, Meyer’s proposed budget suggests contributing $65.8 million using special funds covered by escheat money.
Unclaimed property covers more than six percent of the state' s operating budget. The budget proposal includes raising the cap on escheat funds deposited into the General Fund from $554 million to $614 million, which it estimates will bring in an added $60 million in revenue.
