The State Worker

Chronicling civil-service life for California state workers

January 16, 2013
Steinberg: Retiree health, CalSTRS need attention this year

During a meeting with the Capitol press corps today, Senate President Pro Tem Darrell Steinberg said lawmakers need to look at the cost of retiree health benefits and stabilizing the state teachers' retirement system.

The Sacramento Democrat said he doesn't anticipate any moves towards a hybrid-style retirement system for the state's public employees this year.

"I think that we resolved that issue last year, I think, in the right way by requiring all employees, including current employees, to contribute more, up to 50 percent or more, of their defined benefit pension," Steinberg said. "I don't think we're going to tackle that fundamental structure again this year at least."

Steinberg was referring to the Public Employees' Pension Reform Act of 2013, which applies to state and local employees. It included higher employee pension contributions, anti-spiking provisions and a cap on income that goes toward defined pensions.

The law also lowers pension formulas for employees hired on or after Jan. 1 of this year.

CalSTRS, the teachers' retirement system, needs billions of dollars in new money to stabilize its slowly draining assets. Unlike its larger cousin retirement fund, CalPERS, the teachers' system can't independently mandate rates charged to its members' employers. It must rely on the Legislature for more funding.

Meanwhile, the state's unfunded liabilities for retiree health benefits continues to grow. Only a handful of unions have agreed to pay ahead on the anticipated obligations for their members. The state essentially operates on a pay-as-you go basis. It's roughly the same as making interest-only payments on a credit card while continuing to make purchases.

A report commissioned by State Controller John Chiang last year estimated promised medical care for present and future retirees will cost more than $62 billion over the next 30 years -- and that's before inflation.

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About The State Worker

Jon Ortiz The Author

Jon Ortiz launched The State Worker blog and a companion column in 2008 to cover state government from the perspective of California government employees. Every day he filters the news through a single question: "What does this mean for state workers?" Join Ortiz for updates and debate on state pay, benefits, pensions, contracts and jobs. Contact him at (916) 321-1043 and at jortiz@sacbee.com.

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