TPEA’s Proposed Legislative Agenda for 2009
TPEA’s Board of Directors approved its proposed Legislative Agenda for the 2009 legislative session, which will be voted on by TPEA’s membership at the Annual Meeting in Houston on June 26. The Legislative Agenda is a statement of TPEA’s legislative priorities, and is focused on the core economic issues affecting active and retired state employees.
Proposed TPEA Legislative Agenda for 2009
Compensation Issues
General pay raises to maintain state competitiveness. TPEA supports pay raises of 3.50 percent in FY 2010 and 4 percent in FY 2011, with appropriate dollar monthly minimum increases, for all general government state employees. Pay raises at this level are necessary to preserve the relative competitive status of state pay versus other public and private employers, as well as to account for increases in the cost of living.
Incremental pay raises for ultra-high turnover. TPEA supports additional pay raise increments of 2 percent in both years of the next biennium for those occupational categories that have been experiencing annual turnover rates in excess of 20 percent. Based on the most recent turnover data available, this would include TDCJ correctional staff, TYC juvenile correctional staff, direct care staff at DADS State Schools and DSHS State Hospitals, Adult and Child Protective Services Specialists at DFPS, and nurses with RN or LVN degrees.
Funding for agency merit pay awards. TPEA supports appropriation of funds to each general government state agency for merit salary awards, unless an agency’s funding source could require staff reductions to meet this goal. Funding for merit awards should be in the amount of one half of one percent of gross agency payroll in FY 2010 and one percent of gross payroll in FY 2011.
Retirement Issues
13th check for ERS retirees. TPEA supports legislative action that will provide sufficient employee and state retirement contributions to ERS to allow for issuance of a 13th check as soon as it is actuarially possible. TPEA will support a statutory increase in the active employee retirement contribution rate provided that there is an offsetting employee pay raise, and that the state contribution rate, combined with the employee contribution, will allow for issuance of a 13th check. Additional employee contributions are necessary to assure the long term actuarial soundness of the ERS retirement fund.
Health Benefits Issues
Maintain state insurance contribution policy for active and retired employees. TPEA supports maintaining the current state health insurance contribution policy of paying the full premium for full-time active and retired employees, and half the premium cost for spouses and other dependents. TPEA opposes increases in copayments or other out of pocket costs, as well as other efforts to shift costs or cause adverse selection within the state Group Benefit Plan.
Promote wellness to generate longer-term savings. TPEA supports efforts to encourage and promote healthy lifestyles and other behavioral changes that will help reduce longer term health care costs. In particular, TPEA supports creation of a smoking cessation benefit.
Additional Policy Issues Related to Legislative Agenda
For a discussion of the specific public policy issues related to TPEA’s 2009 Legislative Agenda, follow this to the related article from TPEA’s magazine, Texas Public Employee. There are some additional related policy issues that should be considered.
Employee Compensation: There are important policy issues to consider when analyzing state employee compensation. To begin with, actual state employee pay lags significantly behind that paid by other public and private employers for comparable work, by 15 to 20 percent on average. Even though some progress was made during the last two legislative sessions, state employees were granted only three across the board raises in the 12 years prior to the 2005 session. In order to prevent further deterioration in the competitive status of state employee pay, it is vital that the next legislature authorize adequate pay raises for all state employees in both years of the 2010-2011 biennium.
Another major problem with state pay is that state employee salaries are disproportionately clustered at the bottom end of their pay ranges. According to the most recent information available from agency workforce summaries prepared by the State Auditors Office, 46 percent of all employees are in the bottom quartile (lowest 25 percent) of their pay ranges, and fully 82 percent are in the bottom half, below the salary range midpoint. These figures reveal that actual employee salaries are dramatically below the mid-range of normal salaries for comparable work when compared to other public and private sector employers. They further suggest that state agency’s hiring and retention practices are inadequately funded to effectively compete in the employment market place.
Most employers establish pay ranges for their jobs based on the distribution of salaries paid by other employers for comparable positions. Employers attempt to maintain a competitive relationship with the market by hiring new employees within an acceptable range for the average of that position. Thereafter, salary adjustments are made to reflect either changes in the competitive nature of salaries for that position, or to adjust for inflation. For high performing or exemplary employees employers will provide either merit increases which are generally permanent, or a one time bonus to reward achievement. This private sector approach to compensation is not generally applied by state agencies. But, not because management doesn’t acknowledge the soundness of the practice, rather because of chronic and inadequate funding by the legislature. The legislature should be providing agencies with resources sufficient to recruit effectively to fill vacant positions, pay employees a competitive salary to reduce turnover and establish a stable workforce, and provide meaningful rewards and incentives in the form of true merit or bonus increases to acknowledge the efforts of high performing employees.
In a healthy and adequately funded compensation system, employees are motivated by financial rewards for exemplary performance. When compensation systems are run properly, employee salaries tend to be normally distributed around the salary midpoint and employees are motivated to improve their performance. By contrast, a major aspect of the chronic under funding of state agencies has been the failure to appropriate discretionary funds to grant merit raises to higher performing employees. The failure to adequately reward many employees has undermined employee morale, as well as the state’s ability to retain quality employees. The clustering of actual employee salaries at the bottom end of their pay ranges also means that salary analyses based on salary midpoints provide little useful information for legislative policymakers.
TPEA will be focusing more attention on the salary range issues relative to our legislative efforts for compensation increases.
Retirement Benefits: At its May 13 Board meeting ERS released the results of an experience study of retirement benefits which could have profound implications for retirees, as well as for current and future employees.
As it does every five years, ERS actuaries conducted an experience study that looked back at all the assumptions and factors which form the actuarial basis for valuing the ERS fund and the cost of providing retirement benefits. These include years of service and age at retirement; utilization of annual leave, sick leave, military and other service credits; the propensity to retire at first eligibility; inflation; and anticipated rates of return on investments, among other factors. While TPEA is still attempting to fully understand the results of this study, they suggest that ERS’ current actuarial assumptions significantly understate the cost of paying for retirement benefits. For purposes of comparison, ERS had been assuming that the combined state/employee contribution rate necessary to bring the fund into “actuarial soundness” was 13.1 percent. Stunningly, the experience study estimates the necessary contribution rate is 14.5 percent.
What does this mean? Well, first, it significantly raises the bar on what is necessary to position the ERS fund to provide a 13th check for retirees. Current combined state and employee retirement contributions are 12.45 percent. There are practical and political limitations on how much more either employees or the state can be asked to contribute. Consequently, this may reopen debate on whether it is necessary to adjust benefits, such as moving to a “rule of 85”, imposing a minimum retirement age, or limiting use of sick or annual leave or other factors, for example. TPEA will continue to analyze this issue, and any policy options, and will continue to keep you informed on this important issue.
ERS Update
ERS has taken action on a number of items that affect health insurance and other benefits for active and retired state employees. At their recent May 13 meeting the ERS Board approved health insurance premiums and costs for other benefits for FY 2009, which begins September 1, 2008. Generally speaking, the news with regard to health insurance costs is very good. However, as noted above, there was troubling news with regard to retirement benefits and the contribution levels necessary to allow for issuance of a 13th check for retirees.
Health Insurance and Other Benefits: The ERS Board of Trustees approved insurance premium costs for FY 2009, and there will be no increases in premiums, co-pays or any other out of pocket costs under the HealthSelect plan, which covers over 90 percent of ERS participants. In addition, all but two of the participating HMOs will continue offering coverage under ERS, although premium costs will increase, ranging from 2.1 percent to 13.4 percent. Mercy Health Plans in the Laredo area and Valley Baptist Health Plan in the Lower Rio Grande Valley will no longer be HMO providers. Follow this to see specific premium rates for HealthSelect and participating HMOs. TPEA applauds the Board and staff of ERS for working to stabilize the cost of health coverage for active and retired state employees.
Dental indemnity plan premiums adopted by ERS had an overall 5% increase. For employees with Member Only coverage, the $21.03 monthly rate goes up to $22.08; for those with Member & Spouse coverage, their current $39.74 monthly rate increases to $41.73; while the Member & Children $47.52 monthly rate goes up to $49.90; and for those with full Family coverage, their $66.23 monthly premium increases to $69.95 per month. For additional information about dental benefits please go to the TPEA website for a discussion of dental options. TPEA offers competitive dental benefits, as well as other benefits, to its members.
State costs for basic term life and accident, disability and death (AD&D) coverage will remain the same next year. These costs are paid entirely by the state.
ERS will also be undergoing a major change in providers as it rebid its contract for Pharmacy Benefit Manager (PBM). Caremark will take over as PBM from Medco on September 1 and will operate the state’s mail order pharmacy program. ERS has estimated it will save $265 million over the four years of the new contract, compared with its prior contract, and this will continue to help to hold down health care costs. ERS believes this should be a seamless transition, but plan participants should be aware of this change and take any necessary steps to assure that your supply of medications is not interrupted. Current drug prescriptions should continue to be honored, except for controlled substances. You should also receive a new drug benefit ID card before the change occurs. Information on this and other changes will be available during the summer enrollment period from July 23 to August 22.
TPEA Annual Professional Development Conference, June 26-28 in Houston
All State Employees are encouraged to register for TPEA’s Professional Development Conference in Houston. This conference provides five hours of CPE credit to those who attend. There is a great line up of speakers on topics relevant to you, including keynote speaker Senate Finance Committee Chairman Steve Ogden. Fun social events are planned including a night at Sam Houston Race Track. The JW Marriott Hotel on Westheimer will host this year’s conference in Houston. For more information and to register, please click here.
Unsung Hero Awards
On March 27th, state employees participated in the presentation of the 2008 TPEA Unsung Hero Awards. This award is in its fifth year and is considered one of the highest honors a state employee can receive. This year’s winners are:
Abilene State School Plumbing Shop, Texas Department of Aging and Disability Services
La-Nett Belasco, Texas Department of Aging and Disability Services
Debra Ann Borrego, Texas Parks and Wildlife Department
Coastal Fisheries Ecosystem Team, Texas Parks and Wildlife Department
Kathleen Jimenez, Texas Comptroller of Public Accounts
Jesus Longoria, Texas Comptroller of Public Accounts
Manufacturing and Logistics Freight Transportation Employees, Texas Department of Criminal Justice
Sabra Vaughan, Texas Department of Transportation
Follow this to see the related magazine coverage.
Other Issues
No Retirement Incentives: TPEA has received a high volume of calls regarding the possibility of the state offering retirement incentives. There is currently no provision under state law that would allow ERS or any other agency to offer any sort of retirement incentive, and there is almost no likelihood that the 2009 legislature will create any new retirement incentive, since this would have a negative impact on the ERS retirement fund.
2 Percent or a $50 a Month Minimum Pay Raise on September 1, 2008: The budget certification made by Comptroller Combs authorized pay raises in both years of the current biennium, so all general government state employees will receive an additional 2 percent or $50 a month pay raise at the beginning of FY 2009. Despite rumors to the contrary, this raise will take effect.