Thursday, May 10, 2007

Public Debt Calculated

What is amazing is not the size of the debt the state owes, rightly so, to its retirees for their health care, but that it took so long to be calculated, a historic and always ominous sign of legislative fiscal frivolity.

Daniel Weintraub: Debt for retiree health care finally gets a number
By Daniel Weintraub -
Published 12:00 am PDT Thursday, May 10, 2007

For decades, California has been promising its employees health care for life in retirement if they worked at least 10 years for the state. For as long as that promise has been offered, however, no one ever bothered to add up how much it would cost to keep.

As more employees retired, and lived longer, and health care costs rose, the bill kept rising. The state paid it every year for those already retired. But still no one thought to figure out how much it would cost to keep paying that bill for all the employees still working for the state who would eventually retire and claim their benefit.

Finally, prompted by a new national accounting standard, state Controller John Chiang has done the math. Chiang announced last week that the state is on the hook for about $48 billion. That's how much he says it will cost to pay for health care for all current retirees and for those now working for the state.

Incredibly, Chiang's estimate might be on the conservative side. His numbers assume that health care inflation will decline over the next 10 years to 4.5 percent a year. That's possible, but it seems fanciful at the moment. If health care costs rise faster, the state's obligation will grow more quickly as well.