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SACRAMENTO, Calif.--California's current pay-as-you-go funding of retirement health benefits for state employees will require $47.9 billion over the next several decades compared to a full-funding policy that would result in an actuarial liability of just $31.28 billion, said state Controller John Chiang.
Under the current system, California needs to set aside $3.59 billion annually, the controller said Monday in a statement announcing an actuarial analysis of California's long-term cost of state retiree health and dental benefits. But the state currently funds only $1.36 billion annually, resulting in a liability of $2.23 billion for 2007-2008.
By prefunding the benefits, though, the state would need to set aside $2.59 billion annually, Mr. Chiang said. "The amount is lower than the...pay-as-you-go policy because the costs of future benefits are fully prefunded," his statement noted.
"By starting now to craft a thoughtful and responsible prefunding plan to meet this challenge, we can pay for retiree benefits, pay off the unfunded obligation and preserve the state's vital public services," Mr. Chiang said.
The actuarial analysis is the first for California following Government Accounting Standards Board Statement 45, which requires states and local governments to, starting in 2009, publicly disclose the future dollar amounts of their obligations to pay for postemployment benefits other than pensions.