Debate Likely Over Retiree Health Care Funding in Brown’s Budget

Gov. Jerry Brown's (D) proposed fiscal year 2015-2016 budget is expected to spark debate with unions over how to fund the state's retiree health benefits, the Sacramento Bee's "The State Worker" reports (Ortiz, "The State Worker," Sacramento Bee, 1/26).

Background

Earlier this month, Brown released his $113.3 billion FY 2015-2016 budget proposal.

Brown's office in a release noted that unfunded liability in the state's retiree health care programs currently is an estimated $72 billion. To address the unfunded liability, the budget plan proposes that "the state and its employees ... share equally in the pre-funding of retiree health benefits, to be phased in as labor contracts come up for renewal."

The budget estimates that such a move would result in savings of nearly $200 billion over the next 50 years (California Healthline, 1/13).

Details of Arguments

According to "The State Worker," Brown is likely to face opposition from union leaders over requiring workers to pay more for pension contributions after furloughs already have cut their pay.

Bruce Blanning, executive director of the state's civil engineers' union, said, "If the governor wants to set aside money ahead of time, that's fine. But if he wants to take a chunk out of employees' paychecks now, that's a problem."

However, former state Department of Finance Director Mike Genest said that governors tend to "get 90% of what they want."

According to "The State Worker," most state employees do not pay in advance for retiree health benefits, but three unions in recent years have agreed to pre-fund such plans. In those cases, employees contribute a certain percentage of their paychecks to a pension-style trust fund and the state matches it.

Jon Hamm, executive director of the California Association of Highway Patrolmen, said, "This is an absolute honest approach at dealing with significant funding concerns for a future benefit" ("The State Worker," Sacramento Bee, 1/26).