Reducing OPEB Debt In California
OPEB (“Other Post Employment Benefits”) debt largely consists of subsidies to retired employees for medical insurance premiums. OPEB debt owed by the state doubled in the last decade to more than $90 billion and state spending in the 2018–19 California state budget on OPEB will be >80 percent higher than a decade ago. The burden of that spending disproportionately falls on discretionary General Fund programs, as explained here.
OPEB debt can be reduced by transitioning retired employees to Covered California or other health insurance exchanges and delinking the medical insurance premium rates paid by active and retired employees. By taking that action in 2015, the City of Glendale reduced OPEB debt by >90 percent (see page vii of 2017 Glendale CAFR). Applied to the state’s 2017 OPEB liability of $91 billion, that implies the state could reduce its OPEB debt by $80 billion.
Few steps could better protect public services for the vulnerable than elimination of OPEB debt. The same is true in school districts and local governments. Every dollar employed to service OPEB debt is a dollar that cannot be used for classrooms or local services.