Task Force Gears Up To Tackle Health Care, Pension Costs

Gov. Arnold Schwarzenegger (R) and legislative leaders on Tuesday announced appointments to a commission that will offer proposals to address the cost of health benefits and pensions for retired public employees, the Sacramento Bee reports.

Gerald Parsky, who will chair the commission, is an executive at an investment company and a former chair of the UC Board of Regents. The governor's other appointees all are Republicans and will sit on the commission with labor leaders and pension experts appointed by Democratic legislative leaders.

The governor in December 2006 signed an executive order to create the commission as new federal accounting standards that require government entities to disclose health care and pension liabilities take effect (Benson, Sacramento Bee, 2/21).

The state currently spends $1 billion annually on a pay-as-you-go basis to meet the costs of retiree health care benefits (California Healthline, 2/2). However, the Legislative Analyst Office said the state would need to contribute an additional $5 billion annually for 30 years to cover the cost of current and future retiree health care benefits.

The cost of benefits is rising as life expectancy increases and health care costs are outpacing inflation, according to the Bee.

Schwarzenegger's Finance Department estimates the state would need to invest an additional $44 billion in pensions to cover all current state employees.

Anne Sheehan, chief deputy director of the department and executive director of the new commission, said the state pension fund currently covers about 86% or 87% of total employees. However, Sheehan added that she wants at least 90% of employees covered.

Parsky said the commission would not propose cutting benefits that already had been promised. He added, however, that "as these costs rise and are met, it means that less money is available to other programs" (Sacramento Bee, 2/21).

"Let the commission proceed with its job of developing policy recommendations but start setting aside money immediately," a San Diego Union-Tribune editorial states. "The sooner 'prefunding' starts, the smaller the headaches in the long run," according to the editorial (San Diego Union-Tribune, 2/21).