State Auditor Elaine Howle today updated a 2007 report in which she said that the rising cost of providing health and dental benefits to retired state workers represented a significant risk to state finances if legislators don't deal with the problem.
In her 2007 report, Howle's office estimated it will cost the state $48 billion to provide future post-employment medical and dental benefits to retired state workers.
California and many other state and local governments only budget enough money every year to pay premiums for retiree insurance, instead of setting aside funds to cover all future costs to the State. This is known as "pay-as-you-go" funding.
This gives Howle's bean counters a case of financial chills.
Why? The state must now estimate and report these future costs, or liabilities, in its financial statements as required by new accounting rules.
In its fiscal year 2007-08, the state paid only $1.25 billion of the $3.59 billion annual bill for retiree health and dental benefits. The $2.34 billion difference is a future liability.
In today's update, Howle said the gap will rise to $4.71 billion for fiscal 2008-09.
Click here to read the full report.
The state auditor's big concern? If the liability grows so large that it overshadows others in state financial statements, it could affect California's credit rating.
A weaker credit rating could add to the state's budget woes by making it more expensive for the state to borrow when it issues bonds.
Howle argues this risk could be reduced if the state starts setting aside more money now for these future bills.
In her 2007 report, Howle's office estimated it will cost the state $48 billion to provide future post-employment medical and dental benefits to retired state workers.
California and many other state and local governments only budget enough money every year to pay premiums for retiree insurance, instead of setting aside funds to cover all future costs to the State. This is known as "pay-as-you-go" funding.
This gives Howle's bean counters a case of financial chills.
Why? The state must now estimate and report these future costs, or liabilities, in its financial statements as required by new accounting rules.
In its fiscal year 2007-08, the state paid only $1.25 billion of the $3.59 billion annual bill for retiree health and dental benefits. The $2.34 billion difference is a future liability.
In today's update, Howle said the gap will rise to $4.71 billion for fiscal 2008-09.
Click here to read the full report.
The state auditor's big concern? If the liability grows so large that it overshadows others in state financial statements, it could affect California's credit rating.
A weaker credit rating could add to the state's budget woes by making it more expensive for the state to borrow when it issues bonds.
Howle argues this risk could be reduced if the state starts setting aside more money now for these future bills.
The Author
About Comments
Reader comments on Sacbee.com are the opinions of the writer, not The Sacramento Bee. If you see an objectionable comment, click the "report abuse" button below it. We will delete comments containing inappropriate links, obscenities, hate speech, and personal attacks. Flagrant or repeat violators will be banned. See more about comments here.