Originally posted at On California by David Crane
One of the reasons government unions in California are polling for opportunities to raise taxes was exposed earlier this week when State Controller Cohen issued a report that the state now has $95 billion of obligations to retired state employees for post-retirement healthcare, $10 billion more than the year before. All that debt has been created by the state’s elected officials, many of whom are on the receiving end of political donations and other support from government unions representing the beneficiaries of the retiree health obligations.
To put the state’s retiree health debt in context, $95 billion is 32 percent more than the state’s outstanding General Obligations Bonds, which, unlike retiree health or pension obligations, are submitted to voters for approval and which, unlike retiree health or pension obligations, usually produce infrastructure or other long-term assets of benefit to residents.
The Controller’s report follows on the heels of Governor Newsom disclosing in the May Revision that the state’s General Fund expected to spend $4.3 billion in the 2025-26 fiscal year on retiree health costs, up nearly five timessince 2006 and as much as the state expected to spend on environmental protection. The final 2025-26 budget enacted by Newsom and the Legislature added to retiree health debt by suspending pre-funding of retiree health obligations so the state could loan money to Bay Area transit agencies like BART to cover up deficits caused by compensation rising to an average of $171,000 per BART employee and also to provide state employees with more take-home pay.
California is an embarrassing outlier in providing such an expensive retiree health benefit; e.g., a retired Washington State employee of Medicare age costs 1/10th as much as the same retiree costs California. The state’s extravagance is also mirrored in many of its cities, counties, schools (e.g.,LAUSD alone is spending $318 million this year on retiree health costs), colleges, universities and special districts. While enlightened California governments such as the City of Glendale have migrated their retirees to more affordable systems, the vast majority of California’s elected officials are too afraid of government unions to act similarly. For them it’s easier to acquiesce to tax increases — even though services continue to deterioratedespite big increases in taxes and tax revenues in large part because so much money is being hived off to retirement and other legacy costs.
The upshot is that government unions want more taxes to cover up rising retiree health and pension costs while also maintaining the extraordinary growth in positions and salaries they achieved under Newsom. This is one of the reasons we oppose laws that would hide facts from voters when asked to approve bonds or tax measures — and why we are looking for gubernatorial candidates who solve problems.
PS: After my post last week about Kamala Harris’s decision not to run for governor, a few readers asked how I concluded that Ms. Harris is not a problem solver. I responded that I looked over her record as CA Attorney General, US Senator and US Vice President and found nothing of note other than as a participant in a large nationwide mortgage settlement when she was AG. But I would be happy to be proven wrong. If you are aware of problems that Harris solved, please let me know.
