In little more than five years, the oldest members of the baby boom generation will turn 65, causing alarms in some quarters about a retirement tsunami that will challenge state policy planners severely. But many experts believe the impact of this demographic shift on budgets and services won’t be as negative as doomsayers claim.
“It’s not going to [cause] a revolution,” says Gregory Spencer of the U.S. Census Bureau . “We have a society where you can react and make changes. Legislators do react and do take care of their constituents.”
Florida is a case in point. Home to a large and growing retiree population, the Sunshine State established a Cabinet-level department of aging in 1992 and has long been a bellwether for state aging policy. Its economy has benefited from the in-migration of older people, and state officials expect a continued boost to the local economy as the boomers begin to retire.
Mature Floridians brought more revenue to the state in the year 2000 than they cost in services, and their per-capita income was 25 percent higher than citizens ages 18 to 49, according to a report from the Florida Department of Elder Affairs . In the same year, Floridians age 50 and older spent $135 billion—almost $12.5 billion more than younger adults.
State experiences will vary as the nation confronts the graying of the largest generation in American history. Starting in 2011, the population 65 and older is projected to grow faster than the total population in every state, the Census Bureau reports.
In 2011 alone, the number of people in the United States celebrating their 65 th birthday will jump 21 percent, from 2.7 million to a whopping 3.3 million, according to the Census Bureau. The ranks of retirees will continue to grow steadily until 2030, when one U.S. resident in five will be over 65, compared to one in eight now.
New retirement destinations such as Nevada and Alaska are expected to see a surge in their elder populations of more than 250 percent between 2000 and 2030, compared to a growth rate of 104 percent for the nation as a whole, according to the Census.
Both states expect to benefit from the coming retirement boom, even though policy-makers there know that challenges lie ahead as new and relatively healthy retirees ultimately become less-productive senior citizens.
Meanwhile, states such as Pennsylvania and West Virginia won’t experience a retirement boom at all.
Their populations already are older than the rest of the country because some 25 years ago, baby boomers — then in their 30s — migrated out of the states when heavy industries began to fail. They left behind a larger-than-average proportion of seniors, many of whom did not have the means to retire to sunnier states.
As a result, Pennsylvania—with a swelling senior population for the last two and a half decades—already has faced many of the challenges for which other states are just gearing up.
For example, as the need for senior services grew and state income-tax revenues shrank, the Pennsylvania Legislature established a lottery to generate funds for older residents. The only one in the country in which all proceeds benefit seniors, the Pennsylvania lottery has contributed more than $14.6 billion to elder programs since it was established in 1971. Programs include low-cost prescription drugs, specialized transportation, and rent and property-tax assistance for seniors.
In spite of pressures on its budget, Pennsylvania is weathering its demographic shift. The state “would have a much smaller economy if its older people had left at the same rate as younger people left” over the last 25 years, says University of Pittsburgh economist Chris Briem. Elders contribute significantly to state tax revenues as they spend their Social Security, retirement savings and Medicaid dollars in the state, and they’ve “had a huge impact on jobs, particularly in the health care sector,” he explained.
Positive contributions aside, aging populations pose a broad range of challenges for state policy-makers. Among them:
- Long-term care . Most state policy-makers anticipate that the biggest challenge will be finding the money to pay for long-term health care and related services for the elderly. Projections are that starting in 2011, an enormous segment of the working population will retire and their incomes and state tax contributions will decline.
At the same time, states will be pressured to pay an unprecedented number of claims for state entitlement programs, such as Medicaid. And already understaffed health care providers, including nursing homes, will be hard-pressed to find enough trained workers.
- State worker shortage. Before the relatively healthy baby boomers start making demands on state services, they’ll create a more immediate problem. According to the National Governors Association Center for Best Practices , some 44% of state workers currently are age 45 and older, and many will retire as early as age 55. As a result, state administrators soon will be coping with a severe shortage of skilled workers and a significant loss of institutional memory.
- Pensions .State pension plan administrators soon will begin disbursing a greater number of benefit checks, which will tap the funds’ reserves. The Council of State Governments , a bipartisan umbrella organization for state government officials, estimates that the vast majority of state employee retirement plans are underfunded to varying degrees. State fiscal experts debate whether states are prepared to meet their obligations.
- Transportation. As the percentage of elderly drivers increases, accident rates are expected to climb and states will be pressured to get hazardous elderly drivers off the road by tightening driver’s license renewals. At the same time, senior citizens — who cherish their independence — will demand more and better public transportation services.
- Protective services . State policy-makers expect that an increasing number of elderly people will mean an increase in crime against seniors, such as fraud and burglary. So officials are looking for innovative ways to protect their senior citizens without breaking their budgets.
- Generational conflicts. As states devote more resources to improving the lives of seniors, younger voters might protest. The existing tug-of-war between funding for education and funding for health care for the elderly is likely to intensify, and new issues will arise as voters square off over a variety of state funding issues.
Will states be able to manage the conflicting generational demands and increased fiscal pressures without limiting social services?
Not all experts who study the impending baby boom retirements are convinced the transition can be made without financial and social havoc. A best-selling book – “The Coming Generational Storm” by Laurence J. Kotlikoff and Scott Burns — predicts the demographic phenomenon will spell economic doom and radically altered lifestyles for everyone in the country.
“Basically, all the forces that can enlarge the retired elderly population are in overdrive. The forces that would expand the younger (and working) population paying for Social Security and Medicare taxes are in reverse. The result is a kind of perfect demographic storm,” Kotlikoff and Burns write.
But demographers and statisticians—like meteorologists who track brewing storms as they make their way toward land—have given state officials ample warning, and many states appear to have taken heed.
In December, the White House will host a decennial conference ( The White House Conference on Aging ) focusing on economic and social effects of the impending baby boom retirements. Nearly 400 state, local and regional conferences have been held in the past year to develop recommendations for conference delegates.
The purpose of the government meetings is to develop policies to head off disruptions as the population changes from one that is young and rapidly expanding to one that is older and slower-growing.
In a recently released study, ” Demography Is Not Destiny, Revisited ,” a group of scholars supported by the nonprofit Commonwealth Fund foundation argues that “the critical challenge of an aging society is not so much how to accommodate the older population, but how to ensure the productivity of future workers, regardless of age.”
“No doubt, the aging of society will continue to impose tremendous challenges,” the authors say, “but through collective actions in the political process as well as collective actions in the marketplace, these challenges can be met without necessarily diminishing future standards of living.” Economic growth is the key, the authors say, noting that policy choices are easier when budgets are adequate.
AARP Policy Director John Rother maintains that “the baby boom retirements’ impact on the states will be largely positive.” Losing boomers who hold state government jobs will be the first challenge, but with more flexible civil service rules, states could gain a highly talented workforce of older people who want a second career, Rother says. Right now, “most states don’t know what to say to a retired executive who says, ‘I want to help,'” he said.
While states can take steps to bolster their social programs for the elderly and develop five-year plans for improved transportation and housing, today’s state planners are not prepared to address needs as far out as 2030, says Donna Folkemer, a long-term-care expert with the National Conference of State Legislatures . “It’s just not what states do.”
Much of the long-range fiscal responsibility lies with the federal government, which has sole authority for big-ticket elder care items such as Social Security and Medicare. But states are expected to remain vigilant and make adjustments in their elder care programs as their populations either coast or catapult toward old age.
The policy issues states will have to confront are moving targets. Between now and 2030, the needs of older people will change substantially, as intervening federal and state policy, lifestyle and market adjustments are made.
For example, over the last three decades, life expectancies have increased, and older Americans generally have become healthier and more productive. In addition, businesses have responded to the needs of an aging population by offering more flexible jobs and an expanding array of products and services for senior citizens.
As Sen. Hilary Clinton (D-N.Y.)—who is turning 58 this month—said in September at a Westchester County Pre-White House Conference on Aging, “Sixty is what 30 used to be.”
As for the ability of state economies to support the growing elderly population, recent history offers hope. Since 1960, the U.S. population over 65 has doubled and the nation’s economy has nearly quadrupled.
Editor’s Note: This is the first in an occasional series on aging that will be compiled with research help from the project reporting class at the School of Mass Communications at Virginia Commonwealth University in Richmond.
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