Monday, March 14, 2011

Chiang Unveils Costs for State Retiree Health Benefits, Offers Solutions

***UPDATE***
The press release we issued yesterday regarding the actuarial report on health and dental benefits for state retirees contained an error.  In a quote attributed to the Controller, the release said that if the State could reduce the assumed rate of health care inflation by 1 percent, it would cut the unfunded liability by $7.4 billion over 10 years.  The correct period of time is 30 years.
We apologize for the error.  A corrected version has been posted on the Controller’s website at www.sco.ca.gov.

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***END UPDATE***

SACRAMENTO – State Controller John Chiang today unveiled a new actuarial report that shows California faces a $59.9 billion bill to pay for health and dental benefits for state retirees over the next 30 years.

“As the State’s obligation to pay health and dental benefits for its current and retired workforce continues to grow, it is critical that we begin making down payments on this tab and adopt strategies to reduce health care costs,” Chiang said. “Because this bill is not immediately due, California has the time and the opportunity to reduce the impact on future generations by putting additional dollars into the annual payments so that we can invest those funds, grow that money and tackle our obligation in a responsible manner.”

The unfunded obligation as of June 30, 2010, grew $8.1 billion from the $51.8 billion obligation identified in the prior year. Less than half of the increase was simply due to another year of costs, payments and interest. The bulk of the increase was due to a change in the California Public Employees’ Retirement System’s (CalPERS) pension-benefit assumptions based on their latest 10-year study. That study found employees are retiring earlier, retirees are living longer, and actual premiums increased more than previously projected by the actuary. The increase appears larger because in 2008 and 2009, CalPERS decided to use surplus funds from its health care plans to reduce increases in health care premium rates. The 2011 rates were not subsidized, causing the premiums to jump back closer to what the level would have been without the surplus.

Unlike state pensions, which are pre-funded and allow investment returns to reduce liabilities, California retiree health benefits are covered on a “pay-as-you-go” basis, meaning as the costs come due each year. The latest actuarial report estimates California’s obligation for retiree health and dental benefits, also referred to as Other Postemployment Benefits (OPEB), based on two different funding scenarios:

• The current pay-as-you-go policy results in an actuarial unfunded obligation of $59.9 billion, which represents the total present value of future retiree health benefits earned as of June 30, 2010, by current and future state retirees. Based on this unfunded obligation, California has an annual OPEB cost of $4.2 billion for 2010-11 – or the amount the State would need to pay to cover these benefits. In the 2010-11 Budget Act, the State only provided $1.4 billion for retirees’ health and dental benefits.

• If the State shifted to fully pre-funding the costs of future benefits, the actuarial unfunded obligation would be cut by more than $21 billion to $38.5 billion. Under a full pre-funding approach, the State would set aside money in a separate trust solely for future retirement health care benefits. The investment income generated by that trust would be used to reduce the costs of paying for future benefits. The State would need to contribute $2.9 billion in 2010-11 to fully fund its obligation for this year.

A separate analysis performed at the request of the Controller shows that even incremental steps toward pre-funding the obligation would significantly reduce the State’s liability (see attached chart). For example, if the State pre-funded just 10 percent of its obligation, it would only need to pay $130.3 million more than its current pay-as-you-go contribution. But that additional payment would shave $2.7 billion off of the State’s unfunded liability. The report showed that even partially funding the obligation would cut the actuarial unfunded obligation.

In 2004, the Governmental Accounting Standards Board Statement 45 (GASB 45) required states and local governments to publicly disclose the future costs of paying for post-employment benefits other than pensions for current state retirees and employees. Chiang commissioned California’s first report shortly after taking office in 2007. This report is the fourth to be issued under his administration.

While GASB 45 does not require states to fully fund its obligations, all three credit rating agencies have urged states to at least have a funding plan in place to avoid any future downgrades.

Chiang urged the State to follow the lead of several bargaining units that are starting to pre-fund their obligations. In August 2009, the California Association of Highway Patrolmen established a trust with the California Employers’ Retiree Benefit Trust (CERBT) to prefund its health and dental benefits for retired CHP officers under Bargaining Unit 5. Recently, other bargaining units, such as the International Union of Operating Engineers (Bargaining Unit 12) and the Union of American Physicians and Dentists (Bargaining Unit 16) have contacted the CERBT to begin the process of entering into contracts to begin in 2012 to prefund their post-retirement health and dental benefits obligations.

In addition to cutting costs by prefunding the obligation, Chiang said the State should take steps to contain health care costs by promoting prevention and wellness, and innovations in health care delivery. He also recommends switching from the traditional fees-for-services payment model to one that pays providers based on performance and outcomes.

“If we can reduce the assumed rate of health care inflation by 1 percent, that could cut our unfunded liability by $7.4 billion over 10 years,” Chiang said. “I continue to call on CalPERS to make prevention and chronic disease management a priority to reduce the demand for health care.”

The actuarial report and a chart showing how much pre-funding would cut future costs can be found on the Controller’s Web site at http://www.sco.ca.gov/.


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Greg Sebourn

Orange County Bail Bonds

The Beauty of a Storm

The Beauty of a Storm
Orange County, Ca.

My Grandma - A Eulogy

LET'S TALK ABOUT 1914 FOR A MOMENT.



FOR STARTERS, GRANDMA WAS BORN TUESDAY, DECEMBER 22, 1914 IN HER FAMILY'S ATWOOD RANCH HOUSE.



IT IS WORTH NOTING THOSE ALSO BORN IN 1914:

JACK LALANNE

JOE DIMAGGIO

DANNY THOMAS



AND WHO DIED IN 1914:

JOHN MUIR, THE FAMOUS NATURALIST FOR WHICH NUMEROUS ROADS, PARKS, HOTELS, AND NATURE RESERVES ARE NAMED.



IT IS ALSO WORTH NOTING THAT IN 1914 WOODROW WILSON SIGNS MOTHER'S DAY PROCLAMATION AND BABE RUTH MAKES HIS MAJOR LEAGUE DEBUT WITH THE RED SOX. MOTHER'S DAY AND BASEBALL- TWO OF MY FAVORITES!! (PERHAPS HER NICKNAME "BABE" CAME FROM BABE RUTH???)



GRANDMA WAS BORN INTO A PERIOD OF TIME FILLED WITH TURMOIL. IN JUNE OF 1914 ARCHDUKE FRANZS FERDINAND WAS ASSASSINATED. WITHIN ONE MONTH WORLD WAR I RAGED ACROSS EUROPE. TWO DAYS AFTER HER BIRTH HOWEVER, GERMAN AND BRITISH TROOPS INTERRUPTED WWI TO CELEBRATE CHRISTMAS. (PERHAPS THEY PAUSE KNOWING THAT A GREAT WOMAN WAS BORNE) WORLD WAR I CONTINUED UNTIL THE TREATY OF VERSAILLES IN 1919.



ALTHOUGH SHE WAS ONLY 5 YEARS OLD, SHE SAW THE LEAGUE OF NATIONS CREATED AND THE 19TH AMENDMENT WAS APPROVED BY THE U.S. CONGRESS GUARANTEEING THE RIGHTS OF WOMEN TO VOTE.



SHE LIVED THROUGH MANY NOTABLE EVENTS. LIKE THE 1933 LONG BEACH EARTHQUAKE OR WHEN ATWOOD FLOODED ALONG WITH MOST OF ORANGE COUNTY IN 1938 AND THE FLOOD-WATERS CLAIMED MORE THAN 50 PEOPLE, 43 OF WHICH WERE FROM ATWOOD! ALL OF THIS DURING A TIME THAT WE READ ABOUT IN SCHOOL AND KNOWN AS "THE GREAT DEPRESSION". SOMEWHERE IN ALL OF THAT SHE FOUND THE LOVE OF HER LIFE, GRANDPA LEO, GRADUATED HIGH SCHOOL, GOT MARRIED, AND HAD KIDS!



THEN THERE WAS WORLD WAR II. FROM PEARL HARBOR TO HIROSHIMA, GRANDMA WAS RAISING MY UNCLE BOB AND MOM ARLINE. WITH AIR-RAID SIRENS AND BLACKOUTS SHE WAS A WIFE AND MOTHER. WHAT A TIME TO RAISE CHILDREN! I BET GRANDMA'S PARENTS WERE ABEL TO TELL HER A THING OR TWO ABOUT RAISING KIDS IN WARTIME.



GRANDMA WAS THERE WHEN THE BOY SCOUTS OF AMERICA HELD THEIR 3RD ANNUAL NATIONAL JAMBOREE IN 1953. SHE SAW AIRBASES OPEN IN '42 AND CLOSE IN '99. SHE WATCHED WALTER KNOTT START UP HIS BERRY FARM AND WALT DISNEY TURN ORANGE GROVES AND STRAWBERRY PATCHES INTO DISNEYLAND!



SHE SAW THE HORSE AND CARRIAGE FADE AWAY INTO HISTORY AND SPACE TRAVEL EXPLODE BEFORE HER WITH THE FIRST LUNAR LANDING. JUST IMAGINE HOW MUCH TECHNOLOGY HAS CHANGED OVER THE LAST 100 YEARS. FROM TUBE RECTIFIERS TO SUPERCONDUCTORS; FROM TRANS-ATLANTIC TELEGRAPH CABLES TO SATELLITE TV.



SHE SAW MORE IN HER 93 YEARS THAN MOST OF US WILL EVER READ ABOUT, LET ALONE LIVE THROUGH!



OF THOSE 93 YEARS IT IS MY HONOR TO HAVE BEEN HER GRANDSON FOR 35 OF THEM. SHE WAS MY MOTHER WHEN MOM HAD TO WORK. SHE WIPED MY NOSE AND PUT FOOD IN MY MOUTH. SHE LET ME PLAY WITH GRANDPA EVEN THOUGH SHE NEEDED HIM TO TAKE HER TO THE STORE. SHE WAS MY GRANDMA AND I WILL MISS HER IMMENSELY.



JUST LOOK AROUND THIS ROOM; SHE DID THIS. SHE IS RESPONSIBLE FOR BRINGING SO MANY GOOD PEOPLE INTO THIS WORLD AND TOGETHER TODAY. THIS IS HER LEGACY.



A Dedication To My Loving Wife, Stacey. Thank you for all you do for me!

Brad Paisley - I Thought I Loved You Then


I remember trying not to stare the night that I first met you
You had me mesmerized
3 weeks later in the front porch light taking 45 min to kiss you goodnight
I hadn’t told you yet but I thought I loved you then

Chorus
Now you’re my whole life now you’re my whole world
I just can’t believe the way I feel about you girl
Like a river meets the sea
Stronger than it’s ever been
We’ve come so far since that day
And I thought I loved you then.

I remember taking you back to right where I first met you
You were so surprised
There were people around
But I didn’t care I got down on one knee right there
And once again I thought I loved you then

Chorus
Now you’re my whole life now you’re my whole world
I just can’t believe the way I feel about you girl
Like a river meets the sea
Stronger than it’s ever been
We’ve come so far since that day
And I thought I loved you then.

I can just see you with a baby on the way
I can just see you when your hair is turning gray
What I can’t see is how I’m ever gonna love you more
But I’ve said that before.

Now you’re my whole life now you’re my whole world
I just can’t believe the way I feel about you girl
Well look back some day at this moment that we’re in
And I'll look at you and say I thought I loved you then
And I thought I loved you then...

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