State Analyst Cites Retiree Health Costs in Budget Review
California will face financial problems in the future unless the state begins allocating funds for health benefits for future state retirees, according to the Legislative Analyst's Office, the Sacramento Bee reports. The state faces $40 billion to $70 billion in future retiree health costs, LAO estimates (Benson, Sacramento Bee, 2/23).
LAO also states that Gov. Arnold Schwarzenegger's (R) fiscal year 2006-2007 budget proposal could create multibillion-dollar deficits for future lawmakers and relies on revenue that could quickly disappear, the Los Angeles Times reports (Halper, Los Angeles Times, 2/23).
Schwarzenegger has proposed a $125.6-billion budget that includes a 4%, or $1.2 billion, spending increase for health and human services programs.
Funds would be allocated to increase enrollment of uninsured children in Medi-Cal and Healthy Families, to prepare a disaster response plan and to increase inspections of nursing homes (California Healthline, 1/11). Medi-Cal would receive a 7.5% budget increase under the proposal (Los Angeles Times, 2/23).
According to Legislative Analyst Elizabeth Hill, the proposed budget would increase spending by $5.9 billion beyond expected revenue. Hill said Schwarzenegger appears to "mask the huge problem" by spending billions of dollars in unexpected revenues from real estate and corporate taxes, while depleting the state's reserves to $613 million, or about one-half of 1% (Davis, San Jose Mercury News, 2/23).
However, Hill estimates that state revenue will exceed the governor's estimates by $2 billion in FY 2006-2007, translating to about $11 billion in previously unexpected revenue (Sacramento Bee, 2/23).
Hill on Thursday will release recommendations to control spending to help guide legislators through the budget process (San Jose Mercury News, 2/23).
Democrats, citing Hill's report, demanded that the governor scale down his $68 infrastructure bond proposal, but administration officials defended the plan as fiscally prudent (Los Angeles Times, 2/23).
The budget analysis is available online.