California is spending more than $2 billion a year on health care for retired state employees – up more than 80 percent in the last decade, according to Gov. Jerry Brown’s latest budget.
However, the state would have to spend over three times as much – $6.6 billion a year – to fully cover current health care costs and whittle down its $80.3 billion unfunded liability for future health care obligations, according to a new report from Pew Charitable Trusts.
California isn’t alone in facing a big retiree health care tab. California’s $80.3 billion liability may be the nation’s largest, but it’s just 12.8 percent of the $627 billion total for all states. Until recently, however, it was one of just 18 states that have set aside nothing to cover those future obligations.
Brown has acknowledged the big health care liability, and lamented its growth. He’s negotiated contracts with state employee unions that have workers and the state paying into a fund for future retiree health care costs over and above current pay-as-you-go spending and thus slow the increase of the unfunded liability.
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Brown’s 2016-17 budget includes $88 million to match employee contributions under two contracts and an additional $240 million to prefund future retiree health care costs, H.D. Palmer, a spokesman for the Department of Finance, says.
Editor’s Note: This item was changed at 3:33 p.m. May 11, 2016 to reflect state contributions being made to prefund health costs.