Accounting Rules Require Estimates of Retiree Health Benefits
Rules that will take effect in December will require public agencies to estimate the cost of future retiree liabilities, including health care benefits, which a recent report estimated will reach $31 billion annually by 2020 for California public agencies, the San Jose Mercury News reports. The report by the California HealthCare Foundation found that retiree health benefits cost public employers in California about $4 billion currently.
The new accounting rules require public entities to disclose their retiree liabilities but do not mandate payments to offset the future cost of the benefits. Such decisions will be made by each entity individually and likely "will be influenced by politics, spending priorities and the amount of money available in a given year," according to the Mercury News.
Jason Dickerson, a policy analyst at the Legislative Analyst's Office, said the state currently contributes about $1 billion annually to pay for retiree health care benefits but would need to contribute $6 billion annually for 30 years to fully fund the cost of the benefits (Feder Ostrov, San Jose Mercury News, 9/28).