Gov. Jerry Brown says he wants state workers to begin contributing toward their retiree health benefits and that he will take up the issue at the bargaining table beginning this year.
“I want to get the best deal I can get for the workers and the taxpayers,” Brown said during a Friday morning press conference to unveil his 2015-16 budget proposal.
California faces a $72 billion unfunded liability over the next three decades to pay for retirees’ medical expenses. For the most part, the state sets nothing aside for those anticipated costs. The pay-as-you-go method is the most expensive way to handle the obligation, say experts and state Treasurer John Chiang.
Retiree health benefits are “one of the fastest growing areas of the state budget,” according to a summary of the governor’s budget plan. In 2001, retiree medical bills comprised 0.6 percent of the general fund budget, or $458 million. This year, those costs have grown 1.6 percent of the general fund, or $1.9 billion.
“(W)ithout action, the state’s unfunded liability will grow to $100 billion by 2020‑21 and $300 billion by 2047‑48,” Brown’s budget summary states.
His budget proposal also leaves open the door to “various measures to lower the growth in premium costs” for retirees, such as ensuring seniors enroll in federally subsidized Medicare programs when they’re eligible instead of remaining on “more expensive state-paid plans.”
The governor’s budget also envisions health-benefit changes for active workers. A federal health insurance law takes effect in 2018 that will levy a tax on the most generous medical insurance plans, leaving “the state – and employees – vulnerable to the pending Cadillac Tax,” Brown’s budget proposal notes.
The state would begin offering a high-deductible health plan and health savings accounts, the budget summary states, and lengthen how long employees must work to qualify for lifetime benefits.
The administration is proposing changing the structure of health benefits, establishing a health savings account and extending how long state workers must serve to receive subsidized retiree medical coverage, currently 10 years to 20 years, depending on when they hired on. New hires would have to work 15 years to 25 years under Brown’s proposal.
Brown said that he would roll retiree health benefits into contract talks “as they come up” instead of reopening talks with all the unions at the same time as he did with furloughs in 2012. Those discussion will start immediately with unions representing state correctional officers, scientists, heavy-equipment operating engineers and civil engineers whose contracts expire this summer.
Unions reacted to Brown’s proposal cautiously, but credited the governor for his desire to bargain health care with them.
“Just saying I want to take a chunk of money out of the paycheck of the working people who serve the public, that would be a real problem,” said Bruce Blanning, executive director of the civil engineers’ union. “And so bringing it to the bargaining table is the right way to do it.”
JeVaughn Baker, spokesman for the California Correctional Peace Officers Association, said that retiree health care is a “critical” benefit to the union’s 30,000 or so members.
“It’s needs to be funded,” Baker said. “We’re happy to discuss this issue at the bargaining table.”
Editor’s note, 11:50 a.m.: A previous version of this story incorrectly stated that the attorney’s union contract expires this summer. It expires in 2016.
Call Jon Ortiz, Bee Capitol Bureau, (916) 321-1043.