Panel urges state to set aside $1.2 billion for retirees

SACRAMENTO – Gov. Arnold Schwarzenegger received more bad fiscal news today as a commission that he appointed said California needs to immediately set aside $1.2 billion to pay for lifetime healthcare promised to state employees.

The governor is already struggling to find ways to balance a budget that his office says has plunged at least $14 billion into the red. But the panel said that the commitments made to retirees are so large they’ll soon overwhelm the budget if money to cover them is not set aside now.

Local governments should do likewise, said the panel, which estimated the costs of retiree healthcare benefits for both state and local governments at about $118 billion over the next 30 years.

Some experts say that number is low, because it assumes that healthcare costs will stop spiraling upward within a few years.

“This is not an issue that should be passed on to future generations,” said Gerald Parsky, the commission chair. “It is an issue that should be dealt with now.”

Administration officials said they would respond to the panel’s recommendations within 30 days.

evan.halper@latimes.com