California Gov. Jerry Brown signaled a focus on state retiree healthcare obligations when he released his $113.3 billion fiscal 2016 general fund budget proposal Friday.
"This carefully balanced budget builds for the future by saving money, paying down debt and investing in our state's core needs," Brown said in a statement. "Our long-term fiscal health depends on the wise and prudent actions we take today."
Brown said he would seek a plan to pre-fund retiree healthcare obligations, in an effort to get a handle annual pay-as-you-go costs that have risen to $1.9 billion annually from $458 million in 2001.
The budget document calls for the state and its employees to share equally in prefunding retiree health benefits, to be phased in as labor contracts come up for renewal. The plan calls for investment returns will help pay for future benefits, as with the state's pension plans, to eventually eliminate the unfunded liability by 2044-45.
"Importantly, the Governor has also rung the opening bell on what I hope will be a robust debate on how to pay for retiree health benefits in a manner that preserves quality of care but also minimizes costs for taxpayers and the civic workforce who serves them," Treasurer John Chiang said in a statement.
Chiang, in his previous position of state controller, had emphasized the need to deal with rising retiree healthcare costs.
"If left unaddressed, this $72 billion unfunded liability will sow the seeds of future budgetary distress and impair our ability to finance the infrastructure improvements that California desperately needs," Chiang said.
Brown, as he has in previous budgets, wants to pay down debts from intrafund borrowing used to balance earlier state budgets. He also wants to make the final payment on $15 billion of deficit bonds authorized under predecessor Arnold Schwarzenegger and build up reserves in the state's rainy day fund to reach $2.8 billion.
Estimated General Fund debt service expenditures, after various other funding offsets, will increase by $339 million, or 6%, to $6 billion, over current-year expenditures, according to the budget documents.