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State Employee Pay Raises Approved

The ten-member conference committee on SB1, the state budget bill, has adopted a package of compensation increases for the 2006-2007 biennium including across-the-board pay raises in both years of the next biennium and increases in longevity and hazardous duty pay. The approved compensation increases include pay raises of 4 percent, with $100 a month minimum increase, on September 1, 2005, and a second raise of 3 percent with a $50 a month minimum, effective September 1, 2006. In addition, longevity pay is increased to $20 a month for every 2 years of state service, and hazardous duty pay is raised to $10 a month for every year of state service, provided enabling legislation is enacted. Pay for state law enforcement personnel who are subject to Schedule C of the State Classification Plan was increased separately. See the Austin American Statesman article.

These raises mark the first back-to-back salary increases state employees have received in 14 years. Getting increases in both years of the next biennium was a central aspect of TPEA’s recommendations to the legislature. TPEA argued that adequate compensation increases in both years of the biennium were needed to help stabilize the state workforce and begin closing the gap in state employee pay. State employee turnover has averaged 15 percent over the past five years, costing the state an estimated $350 million annually.

The overall cost for the two approved pay raises is about $370 million in general revenue funds.   This is slightly more than the cost of the initial pay raise proposal made in the Senate’s version of SB 1. The final decision to grant the raises on September 1 of each fiscal year rather than on January 1 resulted in a lowering in the level of the raises from the Senate proposal and will decrease the longer-term impact on state finances. Separately, the increases in longevity and hazardous duty pay are being funded out of agency appropriations, rather than giving agencies additional funds. It is also not yet clear when the effective date of the increases in longevity and hazardous duty will occur, either September 1 or January 1, 2006, since this will be determined in separate enabling legislation.

To illustrate these changes, an employee making $35,000 annually with 10 years of state service would see a monthly increase of $116.67 in gross pay (to $36,400 annually) based on the 4 percent increase that goes into effect September 1, 2005. Additionally, they would receive $100 a month in longevity pay when this provision goes into effect. Their longevity pay would increase from the current $60 a month to $100. On September 1, 2006, the employee would see another monthly increase in gross pay of $91.00 to $37,492 annually, as the second year 3% increase takes effect.   Their additional $100 monthly longevity pay supplement would also remain in effect bringing their salary in the second year of the biennium to $38,692 annually.

TPEA applauds the leadership of Lt. Governor David Dewhurst, Senate Finance Committee Chairman Steve Ogden and Senator Tommy Williams for leading the charge in the Texas Senate. TPEA also greatly appreciates the work of Speaker Tom Craddick, Appropriations Committee Chairman Jim Pitts, and Representative Joe Pickett in making these recommendations a reality. See TPEA's press release.

Please be advised that even though the SB 1 conference committee has adopted this pay raise proposal it is still possible that SB 1 will not be finally passed into law during the Regular Session of this legislature. There are still several major issues that are unresolved that could prevent the legislature from completing all its work during Regular Session and requiring a Special Session. TPEA will keep employees informed on the Legislature’s progress in finally passing the state budget and resolving all major issues.

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State Employee Health Insurance Issues

• Based on actions by the legislature to date, TPEA does not expect any major changes to state employee health insurance coverage. The state will continue to pay the full insurance premium for active and retired employees, and half the cost for dependent coverage.   SKIP coverage will stay the same also. No changes in deductibles or co-payments are anticipated for the plan year beginning September 1. It appears that TPEA was able to prevent passage of all the LBB Performance Review recommendations that would have adversely affected active and retired employee health coverage.
  
• The ERS Board tentatively approved health insurance premium levels and participating HMOs for fiscal year 2006 (starting September 1, 2005) at their April 20 meeting. ERS health insurance premiums will increase by approximately 8 percent beginning on September 1, 2005, but the state will continue to contribute the full premium cost for individual employees and retirees, and half the cost for dependents. All current HMOs will continue to participate in FY 2006. FirstCare will no longer include Howard and Reagan counties in its service area, and Legacy Health Solutions will be added as a new provider in an 18-county area around San Angelo.   To review the specifics of these decisions see the HMOs and Health Insurance Premiums for Plan Year 2006 at the ERS web site.
  
• TPEA is concerned about the potential impact of HB 1795, by Rep. Crownover, on ERS health insurance premiums. HB 1795 would create a new option for health savings accounts (HSAs) for ERS participants beginning on September 1, 2006. HSAs are a relatively new option created under federal law that allows for a tax-advantaged savings account, coupled with a high-deductible health plan. TPEA has opposed HB 1795 based on the fact that analysis by actuaries and the LBB has indicated it would cause adverse selection within HealthSelect and result in higher premiums for HealthSelect participants. HB 1795 has passed the House and is awaiting action in the Texas Senate. TPEA will continue to work on this issue in the Senate.

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Retiree Issues

• HB 3540 includes provisions that would make current and future return-to-work (RTW) retirees ineligible for benefit replacement pay (BRP) and longevity pay, as well as change annual leave accrual and carryover as if RTW employees were new employees. HB 3540 has passed the House and is scheduled to be heard in the Senate Finance Committee on Thursday, May 19.

• TPEA has received a number of inquiries as to whether retirees will receive a “pay raise” if one is enacted for active employees. Pay raises for active employees and benefit increases for retirees are totally separate. Employee pay raises are paid for with funds appropriated in the state budget. By contrast, annuity increases or 13 th checks for retirees are funded from the ERS retirement fund. Legally, benefit increases for retirees can only occur when the retirement fund is fully funded. The ERS retirement fund is close to 98 percent funded and SB 1176, if enacted, should further improve the fund’s actuarial status. But it is unlikely that any type of benefit increase for retirees could occur before next year.

• The omnibus ERS bill, SB 1176, continues to progress through the legislative process, having been approved by the full Senate and passed out of committee in the House. ERS has a detailed description of the bill on its web site.  Major changes in the bill include restricting the use of Texas Governmental Entity (TGE) service for retirement eligibility, reducing Additional Service Credit purchases to 3 years from 5 years, and cutting in half the insurance premium contribution for retirees who worked part time their final 3 months at work.

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Owen Whitworth Re-Elected to ERS Board

Election results from the recent ERS Board of Trustees race were announced at the April 20 Board meeting. Running against three other candidates, current ERS Trustee and Board Chair Owen Whitworth was re-elected to a second six-year term without a runoff. TPEA endorsed the Whitworth candidacy.

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Find Out More About TPEA

TPEA encourages all state employees to understand the role our organization plays in working on issues of importance to active and retired state employees. Simply provide us with your contact information and we’ll send you information on TPEA.

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