Analyst Warns Governor's Retiree Health Plan Could Cost More

SACRAMENTO (AP) — Gov. Jerry Brown's call for state workers to contribute half the cost of their retirement health benefits could end up costing taxpayers more if California raises salaries, according to an independent budget analyst Monday.

Legislative Analyst Mac Taylor wrote in his report that the state could end up paying more over time if current and future state workers are asked to help pay for their health benefits. He warned that when the state began requiring higher pension contributions from employees in 2013 it ended up offsetting the cost to employees with pay increases.

Taylor is urging lawmakers to get engaged and suggests swapping out the benefit for alternative compensation, such as higher pay.

"If the state provided a dollar-for-dollar offset to all employees — or even a 75 cents-on-the dollar offset — the state's costs for retiree health prefunding and increases in pay and salary-driven benefits would be more than total retiree health normal costs," the analyst wrote.

California faces an estimated $72 billion unfunded liability — one of the biggest in the nation — for more than 800,000 state employees and their families to provide health coverage once workers retire from civil service and for those who have already retired.

The benefit, which has been phasing out of the private sector but remains a recruitment tool for government workers, has grown increasingly burdensome to taxpayers. State costs have quadrupled since 2001.

The Democratic governor announced his proposal in January to negotiate with state workers to start chipping in half of the cost to bring down that liability. Brown wants new employees to work longer in order to qualify for full retiree health benefits.

"Delay in dealing with this problem has built up a massive unfunded liability," Brown spokesman Jim Evans said Monday. "The administration looks forward to working with the Legislature and state employees on the governor's proposal."

Senate Republican Leader Bob Huff of Diamond Bar said he's skeptical of meaningful reform with Democrats in power.

"The governor can certainly negotiate, but when he gets through, the Democrats are probably going to water down anything realistic," Huff said.

Messages seeking comment from Assembly Speaker Toni Atkins, D-San Diego, and Senate President Pro Tem Kevin de Leon, D-Los Angeles, weren't returned Monday.

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