Governor's Commission to Submit Final Report
As we go to press, we're awaiting the final report from Governor Arnold Schwarzenegger's Public Employee Post-Employment Benefits Commission. The commission should issue its report before you receive this newsletter.
Regardless of the commission's recommendations, we'd like to assure you that your pension benefits are safe. Your basic defined benefit pension is a contractual obligation guaranteed by law. The Governor acknowledged this when he established the commission in December 2006, stating that promised pension and retiree health benefits “are obligations that must — and will — be paid by government.”
The commission was charged with proposing ways to address pension and retiree health care obligations to ensure that local governments and the state can provide guaranteed benefits to retired public servants. Over the past year, the 12-member panel met monthly to hear public testimony and expert opinion on everything from accounting standards to abusive pension practices.
Last July, a CalSTRS team testified at the commission meeting in La Jolla. Teachers' Retirement Board Vice-Chair Jerilyn Harris, CEO Jack Ehnes, Deputy CEO Ed Derman and CalSTRS Consulting Actuary Mark Johnson presented information about the CalSTRS benefit structure, investments and members. Harris, a CalSTRS retiree, gave moving testimony about retired educators burdened by high health care costs.
The Governor and commission have made it clear that retiree health care currently provided by local governments, including school districts, is a guaranteed obligation and will be met. Nevertheless, health care was thrust to the forefront of the discussion by a new accounting rule that requires governments to disclose retiree health care liabilities. The disclosure has highlighted the unfunded status of retiree health care programs across the state. Unlike pensions, which are funded as they are earned, most governments that provide retiree health benefits pay for those benefits as they are provided.
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