The State Worker: Retiree health care still a long-term problem for California

11/15/2012 12:00 AM

11/16/2012 1:21 PM

The sound of backslapping between Gov. Jerry Brown and union leaders who helped put his tax initiative over the top last week could soon turn to teeth-gnashing and bargaining-table-pounding as the administration takes on a touchy subject: retiree health care.

The state estimates its long-term retiree medical commitments stand at $62 billion, and it has put virtually nothing aside to pay those obligations.

It's the most expensive way to do business, sort of like making interest-only payments on a mortgage. The difference is that the debt isn't static. It's growing as more and more aging state workers retire and draw their benefits.

Brown started the year hoping to do something about it. His legislative to-do list included sweeping plans to cut both public employee pensions and state retiree health costs.

He ultimately decided to focus on pensions.

"The Legislature said, 'Let's deal with health care as a separate issue,' " the governor's labor secretary, Marty Morgenstern, said during an interview at his Capitol Mall office. "But it's clear we can't afford the cost."

The Democrat-controlled Legislature enacted many of Brown's pension proposals over the loud objection of unions that insisted they should be bargained.

They'll no doubt holler again if the governor comes back to finish what he started with retiree health.

One of Brown's proposals, for example, requires future hires to work 15 years for half of their retiree medical costs to be covered by the state, compared with the current 10-year threshold. They would qualify for 100 percent coverage after 25 years. Current workers must put in 20 years.

Brown's agenda and the math aside, health care cost worries are everywhere:

Starting Jan. 1, Cal-PERS' health care premiums increase by nearly 10 percent, a fiscal jolt for state and local employers and their employees.

President Barack Obama last year reportedly put military retiree health insurance on a list of cuts he offered in a budget compromise with congressional Republicans.

In June, Illinois approved legislation to require for the first time that state retirees pay a percentage of their formerly free retiree health insurance, saving the state $800 million annually.

According to the Kaiser Family Foundation, about three-quarters of the 19 million people working for large state and local governments are eligible for retiree health insurance. In the private sector, about a quarter of workers can look forward to employer-paid retiree health benefits.

Summed up, the state's retiree health care has two political essentials for change: indisputable government debt and a benefit disparity between the public and private sectors.

You can see why Brown might revive his to-do list, even if it upsets the unions.

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