Accounting

The State Worker
By Jon Ortiz
jortiz@sacbee.com
January 27, 2016 11:12 AM

  • The state’s unfunded liability grew, but more slowly than expected

California faces a $74.1 billion obligation to cover state retirees’ medical expenses over the next three decades, according to a new report released by state Controller Betty Yee.

The figure, which captures unfunded retiree health care costs as of mid-2015, grew nearly $2.4 billion from the year before. It does not account for the impact of future inflation.

Still, the increase was $1.5 billion less than actuaries anticipated a year earlier. Insurance claims grew more slowly than expected, while changes to how health care is delivered and assumptions about long-term trends lowered the liability by $1.76 billion, actuaries estimated. Against that, demographic shifts among retirees added more than $250 million to the debt figure.

The state pays retiree medical expenses as they come up, about $1.9 billion for the current fiscal year. But since the pay-as-you-go policy doesn’t set aside anything for promised benefits, the annual costs increase as more state employees retire and need health care.

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