By Ed Mendel
Monday, April 29, 2013

With pensions presumably shored up by Gov. Brown’s reform and a CalPERS rate hike, will the problem-solving trend spread to what is, by some measures, an even bigger retirement debt: health care promised state workers?

It was no surprise last week when a Democratic-controlled Senate committee rejected a Republican’s proposal to begin setting aside money to pay for retiree health care promised new state workers, putting a small dent in a $64 billion 30-year debt.

Labor lobbyists told the committee they do not oppose “prefunding” retiree health care that is now “pay as you go.” This year $1.8 billion is budgeted for annual costs with no money added to invest and yield earnings to reduce long-term costs.

The labor unions said the funding of retiree health care is a pay issue, possibly affecting the total amount available for salaries, and therefore should be addressed through collective bargaining.

Randall Cheek of Service Employees International Union, Local 1000, the largest state worker union, went a step further:

“I agree with the other union representatives that this is something that should be done at the bargaining table,“ said Cheek. “We are at the bargaining table right now trying to negotiate a new contract, and I am sure that will come up.”

An Assembly floor analysis of Brown’s pension reform last year, AB 340, mentioned the “willingness” of unions to bargain while explaining why two of the 12 points in the governor’s original reform plan were not in the bill.

“The governor chose to drop the CalPERS board issue (adding independent members with financial expertise) and, on the health care vesting issue, state employee bargaining units have shown a willingness to bargain over this and so the Conference Committee believed it should remain subject to collective bargaining,” said the analysis.

Brown’s press office declined to comment last week on whether the administration, facing major battles over school funding and other issues, will put long-ignored state worker retiree health care on the bargaining table this year.

The governor’s proposal in the 12-point plan was modest. New hires would work 15 years, instead of 10 years, to be eligible for partial retiree health care coverage and 25 years, instead of 20 years, to move all the way up the steps to full coverage.

The current plan can cover the full cost of health care insurance for a retiree and 90 percent for dependents. The governor proposed “changing the anomaly” in which active workers pay about 15 percent of their health care insurance and retirees can pay nothing.

“Contrary to current practices, rules requiring all retirees to look to Medicare to the fullest extent possible when they become eligible will be full enforced,” said the governor’s proposal.

Most current state workers can retire at age 55 or, if in a safety plan like police and firefighters, at age 50. Federal Medicare coverage does not begin for most persons until age 65.

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