“There’s always next year” is a common sports euphemism for the perennially suffering, but it’s also the mantra of several California cities when it comes to dealing with the impending fiscal nightmare of future health care costs.
A new study from California Common Sense found that of the 20 cities with the largest budgets, 11 of them – over 50 percent – had not put aside money for future health care costs that they are virtually guaranteed to take on down the line. As retirees survive longer and longer, the benefits they demand balloon exponentially, gobbling up city budgets in their wake.
San Francisco is the biggest culprit of these cities that refuse to acknowledge the retiree health care burden in their futures. The city is obligated to pay upwards of $4.4 billion for the health care costs of current and future retired public workers. San Francisco along with Oakland, Santa Monica, Sacramento, Santa Ana, Redding, Long Beach, Fresno, Glendale, Pasadena and Riverside are living year-to-year when it comes to the economic timebomb, making no plans for the future.
San Francisco would do well to look down south at a major city that does have the future in mind: Los Angeles. By putting about 59 percent of its future costs in a trust fund so it can incur interest to (hopefully) make up the difference, LA is taking the future into its own hands. San Jose, San Diego, Roseville, Anaheim, Palo Alto, Bakersfield, Burbank and Santa Clara are the other cities that join Los Angeles in the effort to keep their fiscal eggs in order for the increased payments down the line.
The increases aren’t mythical, they’re happening as you read this. Retiree benefit costs have increased by 36 percent in the last four years. Pay-as-you-go adherents need look no further than Stockton. The Northern California city also used this strategy, until it was totally consumed by a pension debt that forced it to declare bankruptcy.
If cities don’t want to turn out like Stockton, they would do well to adapt to the reality of what the future is going to look like. Retiree benefits will continue to increase, they will eat up larger percentages of city budgets, and this will impact the residents of these cities for generations to come – period. The time to prepare is not next year, but now.
