California’s retiree healthcare liability grows to almost $77 billion

California faces a $76.67 billion cost to provide healthcare and dental benefits to retired state employees, state Controller Betty Yee reported Wednesday, an increase of $2.49 billion over the previous year’s estimate.

The unfunded liability – what it would cost to provide health and dental benefits that had been earned as of June 30, 2016 – would be about $1.45 billion more but for slower-than-expected growth in health care claims and lower costs, the report said.

The estimates are part of the latest required accounting of non-pension retirement benefits for state workers. California’s current budget allocates $1.92 billion to pay for retiree healthcare, representing about 1.5 percent of the general fund. Sixteen years ago, retiree healthcare represented 0.6 percent of the general fund, Yee’s office said.

“One of the greatest fiscal challenges facing California is the mounting cost of providing health care benefits to public sector workers,” Yee said in a statement.

Unlike with pensions, California generally has has not put away money ahead of time to reduce the expense of providing healthcare and dental benefits to retirees. Recently negotiated labor contracts with state worker unions, though, have required employees to begin contributing to retirement healthcare obligations.

This story was originally published January 25, 2017 at 1:52 PM.