An Urgent Memo To CA State Legislators

1. You have the power to change OPEB. See page 136 of the state’s Comprehensive Annual Financial Report:

2. The State incurs more than $7 billion of OPEB expense each year. To see for yourself, add together the “Service Cost + Interest” figures for each unit on pages 204–209 of the CAFR.

3. That huge expense relates to a relatively small number of employees. OPEB expense for just 54,000 employees in Unit 6 (CDCR) is more than $1 billion per year.

4. That’s because the State’s OPEB program is incredibly extravagant. The State generally pays 100% of the health insurance premium cost for retirees plus 90% of the additional premium required for the enrollment of retirees’ family members. In stark contrast, Oregon and Colorado cap OPEB at $60 and $230 per month.

5. The State’s retired employees do not need OPEB. That’s because the California State Subsidy you enacted into law last year to supplement federal subsidies provides support for individuals with incomes of up to $75,000 per year and more for families.

6. If you don’t cut OPEB, you will make unnecessary cuts to programs.The State pays its OPEB expense with cash and debt, which is how the State has accumulated $85 billion of OPEB debt, but just the $2.8 billion cash portion scheduled for this year exceeds these cuts proposed in the Revised Budget:

7. The state’s colleges, universities, local governments, school districts and agencies are incurring billions more in annual OPEB expense. E.g.,more than $1.3 billion at UC, $1 billion at LAUSD, $400 million at the City of San Francisco, $50 million at BART.

8. But others have set better examples. Ventura USD terminated its OPEB program, Stockton discharged its OPEB program in bankruptcy, and Glendale replaced its OPEB program with a means-tested and capped program, thereby preserving dollars for services.

You should not make a single cut until you have cut OPEB and required state colleges and universities, local governments, school districts and agencies to do the same.

Govern For California supports lawmakers who legislate in the general interest.

Originally posted on Medium, 5/26/20.