New national level accounting rules will change the way government agencies show the long-term liabilities associated with retiree health care and other post-employment benefits on their financial statements. As is often the case in looking at long-term costs, the numbers will be very high. The Legislative Analysts Office (LAO) did a quick guess of the State of California’s long-term liabilities for health care and other post-employment benefits (hence the acronym OPEB), and found them to be in the range of $40 to $90 billion. Some experts estimate that the cumulative long-term liabilities for the state’s more than 5,000 public sector employers could be well more than twice the higher figure.
In the past, some of these retiree liabilities have been treated as current expenses on budgets. Disclosure of these new long-term and large dollar amounts on balance sheets will prompt employers to actions intended to reduce those liabilities and/or set aside assets to meet their commitments. The consequences of those actions will most likely be covered by provisions of collective bargaining agreements or employment law that will require employers to bargain. This manual helps public employees to prepare for this new situation.