But even as the governor and lawmakers debate how to spend a budget surplus, there’s a looming financial hurdle: Unfunded pension and health care liabilities of $220 billion for future retirees who work for the state and the University of California system.
Wait, shouldn’t that $220 billion been included in the total deficit? How can you have a budget surplus when you owe $220 billion?
As the Brown administration prepares to enter labor talks this year, the governor is seeking changes to help the state cut future costs, warning there’s “a serious long-term liability.”
Oh, you don’t say?!
Over the past four years, the Legislature moved to improve the financial outlook for the state’s largest public-employee pension systems, the California Public Employees Retirement System and California State Teachers Retirement System. Brown is now setting his sights on a rapidly growing retiree expense, health care. He’s asking workers to pay more to fund those benefits.
Get out! Asking workers to pay their own way! Stop it!
Reform advocates warn that failing to address unfunded liabilities will ultimately require higher taxes or cuts in other government services so the state can pay for its obligations to retired workers.
I guess that makes me, a reform advocate. I don’t really like the word “reform,” cause they can turn that word in any direction, like a .45. “Reform” can just as easily mean, taxpayers pay more.
The state has promised an estimated $72 billion in health care benefits for its current and future retirees, an amount that will increase to more than $300 billion over the next three decades, according to the governor’s Department of Finance.
The bill for retiree health care has historically been paid year-by-year, about $2 billion in the proposed 2016-17 budget. Brown proposes prefunding benefits similar to the way the state pays for pensions — by paying into a trust fund that accrues investment returns over time, reducing the amount of money that taxpayers must contribute in the future.
In negotiations with public-employee unions, he’s asking state workers to pay into a fund through a deduction on their paychecks. The state would pay an equal amount.
“Over the next three decades we’d have enough money to basically eliminate that unfunded liability going forward,” Finance Director Michael Cohen told the California Chamber of Commerce on Tuesday.
That sounds like a no-brainer to me – have the employees pay ALOT MORE. But here’s the catch – if we expect them to pay their own benefits and pensions they want pay increases.
Brown’s budget proposal includes $350 million for pay raises that could be used as a bargaining chip in labor negotiations. The state is actively negotiating with four of its 21 bargaining units, including corrections officers, firefighters, scientists and maintenance workers. Talks with 15 others open this year.
The governor points to an agreement last year with state engineers as a model he’ll pursue with other bargaining units. Engineers agreed to pay an escalating portion of their paycheck toward their future health care benefits, eventually reaching 2 percent of salary, matched by the state.
Two percent of their salaries?
“The employees would not be too thrilled with paying the state’s bill” for retirement, but the agreement on the whole was viewed as acceptable, said Bruce Blanning, executive director of Professional Engineers in California Government, the union that reached the deal. The three-year deal included pay raises of 5 percent and 2 percent, he said, and there’s a chance to renegotiate before the health contributions are fully phased in by 2019.
Prefunding health care can help protect the benefits, but asking employees to contribute is part of the give-and-take of collective bargaining, said David Lowe, chairman of Californians for Retirement Security, a coalition of public-employee unions, their members and retirees that has fought to preserve the current pension system.
“That’s a legitimate way to ensure that the benefits get funded into the future,” Lowe said. “It’s just a question of figuring out how much the employees are willing to pay … and bargaining it.”
Find out how much they are willing to pay? Has anybody ever asked the taxpayers how much they are willing to pay?
“Reforms” enacted to date have done nothing to slow this train. Public workers are determined to rip off the taxpayers.
“We can see from where the numbers are going how it’s going to crowd out education and all the other California services, and it’s ultimately unsustainable,” said Rob Lapsley, president of the California Business Roundtable. “The governor has to address it now and he’s been clear that he’s going to try to do that.”
I don’t see that, I see a big train wreck ahead. Public workers have gone completely crazy.
