Eleven of the 20 California cities with the largest budgets have not set aside funds to cover future health care costs for government retirees, according to a report from California Common Sense, California Watch reports.
The report warns that the failure to address the growing cost of retiree health care could threaten the cities' ability to cover other expenses.
The 11 major cities that pay for health care benefits using their current operating budgets -- known as pay-as-you-go -- are:
- Fresno;
- Glendale;
- Long Beach;
- Oakland;
- Pasadena;
- Redding;
- Riverside;
- Sacramento;
- San Francisco;
- Santa Ana; and
- Santa Monica.
Report Details
The study found that the 11 cities have promised a total of $16 billion in future non-pension benefits, $12 billion of which is unfunded.
According to the report, the cities are losing $2.2 billion in savings by not setting aside money for future benefits. That figure is based on an estimate of each city's potential investment earnings at the 7.61% return rate set by CalPERS.
In addition to urging cities to set aside funds for future health care benefits, the report called on government officials to consider other strategies for reducing costs, such as increasing the amount of employee contributions and restricting benefit eligibility.
Lawmakers To Take Up Issue
This week, Senate President Pro Tempore Darrell Steinberg (D-Sacramento) said legislators will review employee benefits this month.
Steinberg expects legislation that would change how the state and local entities handle retiree benefits to be completed by the end of September (Johnson, California Watch, 8/10).