Health costs for retired state workers rise sharply
Estimated taxpayer tab is $91.5 billion, up from $77 billion a year earlier, report says.
SACRAMENTO — California taxpayers are on the hook for more than $91.5 billion to provide health and dental benefits to state government workers when they retire, according to a report issued by the state controller’s office.
That’s a substantial increase from last year’s estimate, a result of changes in the way the total debt is calculated and changes in the projected cost of healthcare in the coming decades.
Last year’s report put the total liability at just under $77 billion. The estimates are a reflection of what the benefits to state government workers — which are in addition to cash from pensions — would cost in present-day dollars. The debt, Controller Betty Yee said in a statement, will “remain a paramount fiscal challenge over the next three decades.”
Yee’s office estimates that the bulk of the new debt, almost $10 billion, is a result of trends in healthcare costs. An additional $4.8 billion is attributed to new rules adopted by the nationwide Government Accounting Standards Board. Those changes require retiree healthcare obligations be reported as part of annual financial statements, thus pegging them to the same kinds of investment assumptions that have partly fueled the increase in projected pension promises. Yee praised those changes Wednesday as a step toward more transparency about state government’s true debts.
Since 2010, state officials have been pushing for prefunding of these costs during contract negotiations with public employee unions. New employee contributions are being phased in over several years.