"Promised pensions and health benefits are vitally important to state workers and their families, especially public safety officers who put their lives on the line everyday. And they are obligations that must - and will - be paid by government," said Governor Schwarzenegger. "Soaring obligations of this type, however, also remain one of the biggest problems facing governments everywhere for the simple reason that rising pension and retiree health care costs mean less money for other government programs such as education, public safety, environmental protection and health care. We must seek ways to meet these obligations while not harming other government programs and taxpayers or handing invoices to future generations."
Unfunded pension liabilities for CalPERS and CalSTRS are $49 billion and a new accounting rule going into effect next year will result in an accounting for the first time of liabilities for retiree health benefits. A February 2006 Legislative Analyst Office (LAO) report estimates that the state's unfunded liabilities for retiree health care benefits and their dependents is between $40 billion and $70 billion and recommends that, in addition to current expenditures now reaching $1 billion per year, up to $6 billion per year be set aside to retire that unfunded liability. Also expected to be in the billions is the unfunded liability for retiree health benefits at local governments and school districts.
The annual cost to California's state budget for pensions rose from $160 million in 2001 to $2.6 billion in 2006, reducing funds available for other purposes. A large portion of that $2.6 billion payment went toward paying off previous pension commitments that had gone unfunded.
The Governor's executive order establishes the Public Employee Post-Employment Benefits Commission with six members appointed by the Governor, three members appointed by the Assembly Speaker and three members appointed by the Senate President pro Tem.
By January 1, 2008, the new Commission must send a report to the Governor and Legislature that will:
* Identify the full amount of post-employment health care and dental benefits for which California governments are liable and which remain unfunded.
* Evaluate and compare various approaches for addressing governments' unfunded retirement health care and pension obligations.
* Propose a plan to address governments' unfunded retirement health care and pension obligations.
The Governor's executive order is supported by officials representing local government and public employee groups, including those providing the following statements:
"A commission to find ways to address government pension and retiree benefit systems without harming workers or their families will be a tremendous benefit to the people of California. I am confident in Governor Schwarzenegger's ability to work with the Legislature and all stakeholders to find common sense solutions to secure the long-term viability of these benefits."
-- Joe Kerr, President, Orange County Professional Firefighters Association (OCPFA)
"The demands that unfunded pension liabilities place on local government are tremendous. I applaud the Governor for taking the lead on this issue and California counties stand ready to work with the Governor, Legislature and other interested parties to address this challenge in a fair and positive manner."
-- Connie Conway, Immediate Past President, California State Association of Counties (CSAC) and Tulare County Supervisor
By Office of The Governor of California
Posted December 30th, 2006 by Armen Hareyan
