City and county officials Tuesday welcomed the idea of a state-run investment fund that would help local governments pay for the mounting cost of retirees' health care.

At a House Pensions and Investments Committee meeting, Chairwoman Rep. Vicki Truitt, R-Keller, floated the idea of a fund to which local governments could contribute to help pay for health care, life insurance and other benefits for public-sector retirees.

The fund is only an idea for Texas, but it's an approach that some states are using to deal with a national accounting standard that requires them to disclose the long-term costs of public retiree benefits and how they plan to pay for them.

Last year, Texas public pension funds for state employees and public school workers reported an estimated $37 billion unfunded liability in providing health care and other benefits to current and future retirees. That figure doesn't include local governments.

The size of retiree cost estimates has sparked a nationwide debate over how to pay the bill. The costs also have generated anxiety among public employees, who fear that benefits will be reduced or even eliminated over time as a way to trim budgets.

Robert Scott, assistant city manager and chief financial officer for Carrollton, in North Texas, called the idea "very intriguing" and potentially a great benefit to local governments.

The fund could let local governments set aside money for retiree costs and earn a relatively high return on their investment, said Scott, who also is an official with the Government Finance Officers Association of Texas.

The state's Public Funds Investment Act limits many governmental entities to investments in short-term bonds; the goal is to preserve capital and keep the investments liquid, not to try to reap the highest returns.

Some governmental entities have established irrevocable trusts to prepay some of their retiree costs, but Scott said many government officials worry about locking in money.

The cost-disclosure rule, issued by the nonprofit Governmental Accounting Standards Board, doesn't require a government to set aside money to cover its long-term costs. But it is intended to give policymakers, the public and credit-rating agencies a view into how prepared a government is to meet its obligations.

A 2007 Texas law gives state and local governments the option of following the accounting standard. Texas is the only state to reject the rule.

A state pool could be more flexible than a trust and give cities and counties the chance to earn a higher investment return, Scott said. That, in turn, would reduce the unfunded liability governments face in providing retiree benefits.

David Kester, human resources director for Harris County, and Susan Spataro, the Travis County auditor, also endorsed the idea.

"All of us are going to be facing this, one way or the other," Kester said.

Kester said Harris County, like many local governments, faces rising health care costs and an aging work force. More than 30 percent of county employees can retire in the next five years, he said, and retiree health care costs are "projected to double in less than 10 years."

Scott, of Carrollton, said the number of public retirees "is going to explode in the next several years."

Scott said when he started working for the city in 1991, there was one retiree for every 25 employees compared with one for every three workers today.

Those kind of numbers are why "a pay-as-you-go system is not sustainable for many governments," he said. "If there is an option to earmark some dollars for these benefits and earn higher investment returns, we think that could be very, very beneficial."

The fund could be managed by a state entity such as the Texas Treasury Safekeeping Trust Co., the investment company for the Texas comptroller's office.

In response to a question from Truitt, Paul Ballard, CEO of the trust company, said a pooled benefits fund would give local governments access to unbiased investment advice, diversified portfolios and low costs because of the economies of scale that come with managing large amounts of money.