CA Panel Pushes for Prefunding Governments' OPEB

January 7, 2008 ( - Golden State public employers should identify the size of their other post-employment benefits (OPEB) liability and work out a plan to prefund it or tell taxpayers why they are not doing so.

That was one of a series of conclusions drawn by a California study commission empaneled to study the problem of how state and local governments can fund billions of dollars in unpaid OPEB liabilities.

In addition to its 332-page report, the Public Employee Post-Employment Benefits Commission also announced that a survey found the total health care benefits liability (as self-reported by California state and local governments), is at least $118 billion dollars over the next 30 years. The panel recently announced the state’s public retirement systems reported a combined unfunded pension liability of $63.5 billion, with an aggregate funded ratio of 89% for all public pension systems combined (See Golden State Public Pensions 89% Funded ).

“The results of this survey should serve as a wake-up call about the importance of planning ahead and implementing prudent fiscal policies now,” said Commission Chairman Gerald Parsky in a news release. “For the good of the state’s fiscal health and the well being of our workforce, action must be taken. It is our hope that these recommendations will serve as a blueprint for state and local policy makers as they plan for the future and ensure that these promised benefits are delivered in a way that will not negatively impact other government services or leave the bill with future generations.”

Panel members said in the report that their recommendations were designed to help state and local government officials keep pension and OPEB promises made to the state’s public workforce “with sensible fiscal policies, allowing for long-term cost savings.”

The commission report also called for frequent communication with employees and retirees about benefit availability and modifications and to increase openness, transparency, and accountability throughout the benefits process.

According to the announcement, the report recommends governments:

  • Identify and Prefund Financial Obligations,
  • Limit Contribution Volatility and Use Smoothing Methods Judiciously,
  • Increase Transparency and Accountability,
  • Improve Plan Design and Communication with Employees,
  • Provide Independent Analysis,
  • Strengthen Governance and Enhance Transparency,
  • Coordinate with Medicare, and
  • Advocate Federal Tax Law Changes.

The final panel report is here .