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State employee retirees' healthcare costs California billions, says report

3:30 PM, Jul 30, 2012   |    comments
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SACRAMENTO, CA - State employee retirees' healthcare is yet another cost adding pressure to the state budget.

A new report by California Common Sense estimates unfunded liabilities outside pensions, known as Other Post-Employment Benefits, to be more than $62 billion.

"One of the things that may have caught many analysts and the state off guard was the rising costs of healthcare," California Common Sense Autumn Carter said.

The report found:

  • Costs have doubled every five years since 1999
  • If nothing is done, OPEBs will consume the entire state budget within 35 years.
  • Pre-funding healthcare benefits annually, instead of pay-as-you, would save the state $21 billion in the long run.

The state would love to put away money every year for retiree healthcare costs, just like it does for pensions, but it's unrealistic given California's budget crisis.

"We're cutting K-12 education. We're cutting higher education. We're cutting every program for the poor, every program for children and healthcare," SEIU spokesperson Terry Brennand said. "It makes very little sense to take $3 billion more out of the budget to pre-fund this and cut $3 billion dollars deeper."

So the state can only continue to pay for state retiree healthcare using pay-as-you-go, which Common Sense warns could have unpopular consequences.

"These costs will actually start to crowd some of these critical services that taxpayers really do want to see," Carter said.

"Your other choice is to have people retire without healthcare benefits and become a burden on the system," Brennand said.

Gov. Jerry Brown and lawmakers said they'll tackle pension reform next month, but hardly any of the current proposals deal with taming retiree healthcare costs.

By Nannette Miranda
ABC7

ABC7/KGO

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