Friday, August 17, 2012

California cities not prepared for growing retiree health costs

California--more fiscal trouble ahead--

Report: Major cities not prepared for growing retiree health costs | California Watch: "Most major California cities are failing to address the growing health care costs of government retirees, which have ballooned to more than $1 billion in some areas and soon could threaten municipalities' ability to pay other expenses, according to a recent financial analysis by a nonprofit research group. Eleven of 20 California cities with the biggest budgets do not set aside funds for future health care costs, the study by California Common Sense found.  Those cities – San Francisco, Oakland, Sacramento, Redding, Santa Ana, Long Beach, Glendale, Fresno, Riverside, Pasadena and Santa Monica – work under pay-as-you-go systems, meaning they pay benefits from their current operating budgets and do not accumulate funds for future payments. Combined, all 20 cities have promised $16 billion in future non-pension benefits, and $12 billion of that remains unfunded. The 11 pay-as-you-go cities are losing $2.2 billion in savings by not setting aside money, the analysis found. The $2.2 billion figure is derived from an estimate of each city's potential investment earnings at the 7.61 percent return rate set by the California Public Employees' Retirement System. . . ."

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