Report: State Faces $48 Billion in Unfunded Retiree Health Costs
California faces an unfunded liability of $48 billion over the next 30 years to fund health care benefits for current and future state retirees, according to a report released Tuesday by the Pew Charitable Trusts' Center on the States, the Sacramento Bee reports.
New federal accounting rules from the Government Accounting Standards Board require California and other public agencies to disclose unfunded health care liabilities for retirees. Most agencies, including California, fund retiree benefits on a pay-as-you-go basis, but the liability continues to grow deeper due to rising health care costs and an aging population.
If unaddressed, the liability could have a negative impact on California's debt rating, and efforts to begin setting aside money will be difficult with the state anticipating a projected $14 billion budget deficit, according to the Bee.
Because tax revenues are not expected to cover the liability, taxpayers will either sacrifice services or sell bonds at higher interest rates, the Bee reports.
Gov. Arnold Schwarznegger's (R) Public Employee Post-Employment Benefits Commission in two weeks will release its final recommendations for reining in the unfunded liability. The panel is expected to recommend that the state and more local agencies start building funds to cover future retiree costs.
Some states are considering raising the retirement age, increasing copayments or seeking more contributions from workers and employers (Chan, Sacramento Bee, 12/19).
California and the four other large states account for the majority of the $381 billion unfunded liability for retiree health benefits, according to the report (Herdt, Ventura County Star, 12/19).
The report is available online (.pdf).