Copyright© 2007 by School Services of California, Inc.

                                      Volume 20                   For Publication Date: July 20, 2007             No. 16

 

Pension and Health Care Benefits are Focus of Governor’s
OPEB Commission Meeting 

The Governor’s bipartisan Public Employee Postemployment Benefits Commission (OPEB) met in Burlingame on July 12. The latest meeting of the Commission focused on public pensions, health care benefits, and how the state will continue to pay for California’s multibillion dollar responsibility to state employees.  

The Commission is taking on a huge challenge as the state has an unfunded liability of more than $40 billion for pensions and health care benefits, and the rest of the liability for state and local government postemployment liabilities in California is as of yet unknown but is estimated to be over $200 billion. According to retirement agencies, state and local governments in California employ about 2.2 million people—15% of the state’s total workforce. Based upon figures presented by the National Association of State Retirement Administrators, in 2005 there were 850,000 retired public employees getting monthly benefit payments of $22 billion. 

The Sacramento Bee reported that, when Governor Schwarzenegger established the 12-member Commission in December, he stated that they had one year to identify the amount owed by the state, cities, counties, school districts, and others—for promised pension and health care benefits. He also asked for suggestions on ways to pay for those benefits that aren’t already funded. 

According to Marcia Fritz of the California Foundation for Fiscal Responsibility, she warned that the skyrocketing cost of retiree benefits is one of the most important issues facing the state and local governments.   

The Commission meeting was attended by retired workers who at times verbally disagreed with the state panel. The panel viewed government workers as getting lavish pensions. 

Former Assembly Member Keith Richman created political tension for the Commission in proposing a ballot initiative that would require all new public employees—except for safety employees like police or firefighters—to work until they reach the age of 65 or 67 before they could receive full pension and health benefits.  Union leaders have vowed to fight the measure.   

At the outset of the meeting, Commission Chairman Gerald Parsky stated that proposed voter initiatives on subjects related to retiree benefits will not influence the work of the Commission. Essentially, the submission of the Richman initiative has created some anxiety among those watching the Commission’s activities, and the Chairman felt compelled to provide the Commission’s perspective. There are some union representatives on the Commission who believe that some agreement can be reached on addressing the problem.  

The presenters at the meeting included representatives from the California Research Bureau who presented survey results from the public pension survey. Two-thirds of 86 public pension systems responded. The funded ratio for all systems in the survey was an average of 89%, about the same as in the early 1990’s, thus the analyst concluded there has been no dramatic swing in funded ratios since higher benefit levels were implemented. 

In addition, Bob Palmer, the San Joaquin County Employees Retirement Association Administrator, presented and provided data to support the notion that while costs trends rose over time, the actual dollar amount of benefits reveals that public sector pensions are not overly generous. Mr. Palmer also made a recommendation that the Interest Fluctuation Reserve for 1937 Act Counties be one standard deviation of the fund, rather than the current 1% of assets. This would help to mitigate the impacts of a downturn in  investment markets and the resulting impacts on employer contribution rates.   

The primary role of the Commission is to make recommendations on increasing funding for postemployment benefits, because the rising pension and health care costs are taking scarce dollars away from other government programs.

All of the presentations provided at the meeting are available online at www.pebc.ca.gov and all sessions are web cast live from this site. 

Lastly, the Commission released the remaining schedule of meetings. The next meeting will focus entirely on schools, and we encourage the education community to attend. The meetings are as follows: 

 

—Jamillah Moore, Ed.D