NCPA - National Center for Policy Analysis


May 9, 2007

California's State Controller John Chiang has come up with some fresh and scary numbers on what it will cost to pay for promised health care benefits to state employees over the next three decades.

The tab: $47.9 billion.

  • Chiang makes the assumption that the current steep rise in health care costs will ease over time, from 10 percent this year to 4.5 percent 10 years from now.
  • If that scenario doesn't play out, the total obligation to state taxpayers could be much higher.
  • In fact, it could be in the upper range of the $40 billion to $70 billion that the Legislative Analyst's Office estimated last year; and that's just for state employees.
  • Cities, school districts and community colleges face an estimated $90 billion in health care obligations.

Speaking at the Sacramento Press Club on Monday, Chiang urged the governor and lawmakers to start setting aside $2.6 billion a year in an investment trust to pay for state employee health benefits.

The state, he says, needs to set aside major dollars and earn investments returns on them.  If it does so, it could reduce the overall 30-year obligation of taxpayers to $31.3 billion.

Chiang and other state leaders need to confront one of the tougher questions posed by this ticking fiscal time bomb: Can and should the state continue to offer these same benefits to future employees?

Source: Editorial, "Huge health problem: State employee benefits may cost $70 billion," Sacramento Bee, May 9, 2007.


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