California Unfunded Liability For Retiree Health Care At Least $118B

California state and local governments face at least $118 billionin unfunded liability over the next 30 years for current and futureretirees' health care benefits, according to a report released Mondayby the PublicEmployee Post-Employment Benefits Commission, the AP/SanFrancisco Chronicle reports (Lawrence, AP/SanFrancisco Chronicle, 1/7). The 12-member commission wasconvened last year by Gov. Arnold Schwarzenegger (R) to findsolutions for reining in retiree health care costs (Chan, SacramentoBee, 1/8). The panel surveyed nearly 1,200 public agenciesfor the report.

About 22% of public agencies surveyed by thecommission have begun to set aside money for future costs, but thestate pays for retiree health benefits on an annual basis and facesan unfunded liability of about $48 billion over the next 30 years(Mendel, San DiegoUnion-Tribune, 1/8).

The commissionrecommended that California set aside $1.2 billion in the fiscal year2008-2009 budget to begin reducing the liability -- a move that wouldincrease the state's projected $14 billion budget deficit over thenext 18 months. The report also recommended that the state improvegovernance and transparency standards; reduce fraud; create a stateactuarial advisory panel; and provide workers incentives to enroll inMedicare. The commission did not recommend a specific strategy forraising the necessary funds (Sacramento Bee, 1/8).

State Treasurer Bill Lockyer (D) agreed that the budgetshould include funding for future retiree benefits, saying,"Prefunding and investment earnings will save the state billionsof dollars in unnecessary over-expenditures in the next threedecades." Schwarzenegger said, "I will be reviewing thefindings and submit a formal plan to address this issue in the next30 days" (AP/San Francisco Chronicle, 1/7).

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