12/28/2006 GAAS:924:06 FOR IMMEDIATE RELEASE Print Version | En Español |
Gov. Schwarzenegger Establishes Commission Addressing Public Employee Pensions, Retiree Health Care Obligations
"Promised pensions and health benefits are vitally important to state workers and their families, especially public safety officers who put their lives on the line everyday. And they are obligations that must - and will - be paid by government," said Governor Schwarzenegger. "Soaring obligations of this type, however, also remain one of the biggest problems facing governments everywhere for the simple reason that rising pension and retiree health care costs mean less money for other government programs such as education, public safety, environmental protection and health care. We must seek ways to meet these obligations while not harming other government programs and taxpayers or handing invoices to future generations."
Unfunded pension liabilities for CalPERS and CalSTRS are $49 billion and a new accounting rule going into effect next year will result in an accounting for the first time of liabilities for retiree health benefits. A February 2006 Legislative Analyst Office (LAO) report estimates that the state's unfunded liabilities for retiree health care benefits and their dependents is between $40 billion and $70 billion and recommends that, in addition to current expenditures now reaching $1 billion per year, up to $6 billion per year be set aside to retire that unfunded liability. Also expected to be in the billions is the unfunded liability for retiree health benefits at local governments and school districts.
The annual cost to California's state budget for pensions rose from $160 million in 2001 to $2.6 billion in 2006, reducing funds available for other purposes. A large portion of that $2.6 billion payment went toward paying off previous pension commitments that had gone unfunded.
The Governor's executive order establishes the Public Employee Post-Employment Benefits Commission with six members appointed by the Governor, three members appointed by the Assembly Speaker and three members appointed by the Senate President pro Tem.
By January 1, 2008, the new Commission must send a report to the Governor and Legislature that will:
- Identify the full amount of post-employment health care and dental benefits for which California governments are liable and which remain unfunded.
- Evaluate and compare various approaches for addressing governments' unfunded retirement health care and pension obligations.
- Propose a plan to address governments' unfunded retirement health care and pension obligations.
The Governor's executive order is supported by officials representing local government and public employee groups, including those providing the following statements:
"A commission to find ways to address government pension and retiree benefit systems without harming workers or their families will be a tremendous benefit to the people of California. I am confident in Governor Schwarzenegger's ability to work with the Legislature and all stakeholders to find common sense solutions to secure the long-term viability of these benefits."
-- Joe Kerr, President, Orange County Professional Firefighters Association (OCPFA)
"The demands that unfunded pension liabilities place on local government are tremendous. I applaud the Governor for taking the lead on this issue and California counties stand ready to work with the Governor, Legislature and other interested parties to address this challenge in a fair and positive manner."
-- Connie Conway, Immediate Past President, California State Association of Counties (CSAC) and Tulare County Supervisor
The full text of the executive order is below.
EXECUTIVE ORDER S-25-06
WHEREAS the State and other public entities within the State provide employees with pensions and other post-employment benefits such as health care; and
WHEREAS these benefits serve the public interest by attracting and retaining a workforce that protects the health and safety of the State; and
WHEREAS the most recent accounting reports from CalPERS and CalSTRS indicate that public employee pensions are underfunded; and
WHEREAS the Government Accounting Standards Board now requires the State and other public entities within the State to determine and report their liabilities for other post-employment benefits; and
WHEREAS only a small percentage of public entities have begun taking action to determine the full extent of their other post-employment benefits or to fund any liabilities that may exist in that regard, with the result that any such liabilities that may exist are largely unfunded; and
WHEREAS unfunded liabilities for other post-employment benefits are currently unknown, but the Legislative Analyst's Office estimates that they may be potentially tens of billions for the State and other public entities; and
WHEREAS the Legislative Analyst's Office has reported that elected officials throughout the State lack the information needed to develop strategies for addressing post-employment liabilities and urged more disclosure and planning in addressing this issue.
NOW, THEREFORE, I, ARNOLD SCHWARZENEGGER, Governor of the State of California, by virtue of the power and authority vested in me by the Constitution and statutes of the State of California, do hereby issue this Order to become effective immediately:
1. The Public Employee Post-Employment Benefits Commission (Commission) is hereby established. It shall consist of twelve members, six of whom shall be appointed by the Governor, three of whom shall be appointed by the Speaker of the Assembly, and three of whom shall be appointed by the Senate President pro Tem. The Governor shall designate one of the members as chairperson. The members of the Commission shall serve without compensation and at the pleasure of the official who appointed them.
2. On January 1, 2008, the Commission shall deliver a report to the Governor and to the Legislature that:
a. Identifies, with regard to the State of California and its counties, cities, school districts, special districts, and any other affected government bodies, the amount and extent of unfunded liabilities for other post-employment benefits;
b. Compares and evaluates the advantages and disadvantages of various approaches for addressing unfunded post-employment benefits; and
c. Considers the advantages to the State from other post-employment benefits, such as providing retiree health care.
d. Proposes a plan or plans for addressing unfunded post-employment benefits.
3. The Commission shall be disbanded 30 days after delivery of their report unless the Commission's service is extended by further Executive Order.
4. The Commission shall comply with applicable open meeting laws. This Executive Order is not intended to create, and does not create, any rights or benefits, whether substantive or procedural, or enforceable at law or in equity, against the State of California or its agencies, departments, entities, officers, employees, or any other person.
5. State departments and agencies shall cooperate and provide support to the Commission and local agencies are encouraged to provide support for the efforts of the Commission.
I FURTHER DIRECT that as soon as hereafter possible, this Order be filed in the Office of the Secretary of State and that widespread publicity and notice be given to this Order.
IN WITNESS WHEREOF I have hereunto set my hand and caused the Great Seal of the State of California to be affixed this 28th day of December 2006.
________________________________
Arnold Schwarzenegger
Governor of California
