Jerry Brown plans to target cost of retiree healthcare

Gov. Jerry Brown plans to address the growing cost of healthcare for retired state workers next month when he releases his new budget proposal, a spokesman for his finance department said Tuesday.

The statement came shortly after the state controller announced that the long-term financial burden of healthcare costs have jumped by an estimated $7.2 billion, reaching $71.8 billion more than has been set aside by state leaders.

“The price tag associated with providing healthcare to retired state workers has quietly grown to rival or even eclipse the funding gap associated with public pensions,” Controller John Chiang said in a statement. “If we continue to do nothing, we will be sowing the seeds of a future crisis.”

In recent years the governor and lawmakers have approved legislation chipping away at pension costs, but healthcare issues have been left unaddressed.

Unlike the state pension systems, which rely on substantial investments to cover payouts to retirees, there’s no money set aside to pay for healthcare, and costs are covered on a year-to-year basis.

H.D. Palmer, a spokesman for Brown’s Department of Finance, called it a “substantial and growing” problem. The price tag was $458 million in the 2001-02 fiscal year and it’s expected to be $1.8 billion in the current fiscal year.

Palmer didn’t provide specifics for how the governor would tackle the issue, saying only that his plan would reduce the unfunded liability and “sustain health benefits for retirees for the long term.”

Legislative analysts have noted that state leaders could use Proposition 2, which was approved by voters last month, to address healthcare. The measure sets aside money each year for debt and long-term costs, which a recent report described as an “intriguing opportunity.”

Follow @chrismegerian for more updates from Sacramento.