The budget plan proposed by Gov. Jerry Brown on Friday assumes all state workers will contribute for the first time to their retiree medical benefits and hints that health insurance for future employees could drastically change.
“I want to get the best deal I can get for the workers and the taxpayers,” Brown said during a Friday morning news conference to unveil his 2015-16 budget. He committed to bargaining health-benefit changes with state employee unions.
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. State Treasurer John Chiang has advocated paying ahead for retiree medical benefits in the same manner as pensions. Employees covered by a few unions, including the California Association of Highway Patrolmen, pay into a pension-type fund for their retiree benefits.
Retiree medical costs are “one of the fastest growing areas of the state budget,” according to a summary of the governor’s budget plan. In 2001, their bills were 0.6 percent of the general fund budget, or $458 million. This year, those costs have grown to 1.6 percent of the general fund, or $1.9 billion.
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Without action, the administration says, the unfunded liability will grow to $100 billion in five years or $300 billion by fiscal 2047-48. The budget summary doesn’t project how much prefunding would save the state.
Among other proposed health benefit changes: offering high-deductible medical plans, launching a health savings account program and extending the service time new hires would need to receive full state-subsidized retiree medical coverage, which is currently up to 20 years.
Unions reacted to Brown’s proposal cautiously, but credited the governor for his desire to negotiate.
“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 state 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 members.
“It needs to be funded,” Baker said. “We’re happy to discuss this issue at the bargaining table.”
Brown’s budget plan adds $467 million to cover raises already scheduled for many employees, said Nick Schroeder, who tracks state employee costs for the Legislative Analyst’s Office. An additional $93 million would pay for higher medical-benefit costs and other anticipated employee expenses.
The figure does not include raises that might be bargained this year, Schroeder said.
Call Jon Ortiz, Bee Capitol Bureau, (916) 321-1043.