California state and local governments face at least $118 billion in unfunded liability over the next 30 years for current and future retirees' health care benefits, according to a report released Monday by the Public Employee Post-Employment Benefits Commission, the AP/San Francisco Chronicle reports (Lawrence, AP/San Francisco Chronicle, 1/7). The 12-member commission was convened last year by Gov. Arnold Schwarzenegger (R) to find solutions for reining in retiree health care costs (Chan, Sacramento Bee, 1/8). The panel surveyed nearly 1,200 public agencies for the report.

About 22% of public agencies surveyed by the commission have begun to set aside money for future costs, but the state pays for retiree health benefits on an annual basis and faces an unfunded liability of about $48 billion over the next 30 years (Mendel, San Diego Union-Tribune, 1/8).

The commission recommended that California set aside $1.2 billion in the fiscal year 2008-2009 budget to begin reducing the liability -- a move that would increase the state's projected $14 billion budget deficit over the next 18 months. The report also recommended that the state improve governance and transparency standards; reduce fraud; create a state actuarial advisory panel; and provide workers incentives to enroll in Medicare. The commission did not recommend a specific strategy for raising the necessary funds (Sacramento Bee, 1/8).

State Treasurer Bill Lockyer (D) agreed that the budget should include funding for future retiree benefits, saying, "Prefunding and investment earnings will save the state billions of dollars in unnecessary over-expenditures in the next three decades." Schwarzenegger said, "I will be reviewing the findings and submit a formal plan to address this issue in the next 30 days" (AP/San Francisco Chronicle, 1/7).

Reprinted with kind permission from kaisernetwork. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at kaisernetwork/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork, a free service of The Henry J. Kaiser Family Foundation© 2005 Advisory Board Company and Kaiser Family Foundation. All rights reserved.

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