The House Appropriations Committee voted out its version of HB 1, a proposed $164.5 billion budget for the 2012-2013 biennium.
- We're more than halfway through the 140-day Regular Session.
- Bill filing deadline was March 18 (Senate routinely waives requirements for late filings, however.)
- As of the March 18 bill filing deadline: 3,801 bills filed in the House; 1,871 bills filed in the Senate.
- House Appropriations Committee approved a $164.5 billion proposed state budget (HB 1) by an 18-7 vote on March 23.
- House version of budget will use $3.2 billion from state’s Rainy Day Fund.
This House version of the budget represents a reduction of 12.3 percent in all funds from current spending levels and a 5.4 percent reduction in general revenue.
Virtually every area of state spending was subject to significant funding reductions, including public and higher education, Medicaid and other health and human services programs, and funding for state employee benefits.
State leaders reached agreement on using some of the available funds from the Economic Stabilization Fund (commonly known as the rainy day fund) to close the estimated $4.3 billion budget deficit projected for the current biennium.
To close the current biennium budget gap, lawmakers did the following:
- HB 275 appropriates $3.1 billion from the rainy day fund to help close the current biennium deficit;
- Comptroller Combs raised her revenue estimate by $300 million, and
- Legislators achieved a net reduction in current biennial spending of approximately $900 million in the Supplemental Appropriations bill, HB 4.
The net effect of these actions was to allow an increase of $4.3 billion in general revenue spending in HB 1 above amounts in the introduced version of the bill. The additional $4.3 billion included:
- Adding back roughly $2 billion for public education;
- Increasing funding for Medicaid and other health and human services priorities by $2 billion, and
- Increasing funding by $300 million for Texas Department of Criminal Justice.
The House Appropriations Committee did not change the amount of money appropriated for the ERS Group Benefit Plan in HB 1. As TPEA has communicated previously, ERS has estimated that the funding level for health benefits in HB 1 is $591 million below what is necessary to maintain current health benefits.
At this proposed level of funding, ERS also suggested it would be necessary either to significantly increase the share of health insurance premiums that employees and retirees contribute for coverage, or it would be necessary to impose large medical deductibles on all plan participants.
ERS estimates that if only the premium contribution policy is changed it would be necessary to reduce the state contribution for the individual employee/retiree from 100 percent to 80 percent and to lower the state contribution for dependent coverage from 50 percent to 40 percent. Under this scenario, state employees and retiree could expect to see increased costs between $95 a month to up to $186 a month, depending on the type of coverage.
ERS Board Election Voting Continues Through April 8
TPEA Endorses Ragland
TPEA again encourages all eligible employees and retirees to participate in the ongoing ERS Board of Trustees election. Eligible voters should have received a ballot in the mail.
Voting continues through April 8 and it is possible to vote online here, you must have your 11 digit ERS employee ID number.
TPEA and other groups have endorsed Brian Ragland as the best qualified candidate based on his financial and management skills. If you have not voted, please consider participating. Click here for more information on the election and candidates.
Alternatively, ERS has estimated that it would be necessary to impose medical services deductibles of between $2400 and $3400 annually, depending on the level of coinsurance. This proposal would expose individuals to up $4400 in out of pocket costs annually, and families could face up to $11,900 annually in out of pocket costs.
Although these alternative approaches shift costs to plan participants in different ways, each of them would make ERS’ health coverage unaffordable to a significant number of state employees and retirees.
The House Appropriations subcommittee that reviewed the ERS budget made one major change in contribution policy, lowering the state contribution for the employee/retiree from 100 percent to 90 percent, which amounts to $47 a month in additional costs. The subcommittee maintained current language that sets the state’s share for dependent coverage at 50 percent. While this is a significant change in state contribution policy, it only generates $194 million of the estimated $591 million shortfall in the ERS health plan.
ERS has estimated that even with the change to a 90 percent state contribution for the individual employee/retiree, it would still require the imposition of a $1500 annual medical deductible for each plan participant.
Many legislators have told TPEA that few employers pay the full health insurance premium for employees and cover half the cost for their dependents. Given the state’s budget problems, they believe employees will simply have to pay a larger share of health coverage costs. Premium contribution levels comparable to those provided by the state are not rare, but they have become far less common as employers have shifted costs to employees to deal with ever-rising health care costs.
Legislators need to look more broadly at the total compensation package for state employees. Every study TPEA is aware of shows that actual state employee salaries are 15 to 20 percent below what other employers in Texas pay for comparable work, on average.
Looking at health coverage in isolation may suggest state employees enjoy overly generous benefits, but when seen as part of the total compensation package state employees are compensated below average in the aggregate.
Amendments have been filed for both HB 4, the Supplemental Appropriations bill, and HB 1, the General Appropriations Act for 2012-2013 that would cut state employee pay.
One HB 1 amendment would cut state employee pay by 5 percent for those employees making more than $60,000. Another HB 1 amendment would cut appropriations to all state agencies to reflect three days of furlough for all state employees. TPEA is opposed to pay reductions and furloughs and is working to prevent passage of these amendments. State employees already face layoffs and the prospect of significantly increased health care costs.
TPEA has been reviewing all the legislation that has been filed now that the bill filing deadline has passed. While there are hundreds of bills that affect state employees and retirees in some way, TPEA has identified the following bills as being the most significant. There is a good, free legislative website that interested parties can use to find and track legislation of interest. Some of these bills also have a companion bill filed in the other legislative house.
- HB 1166 (Rep. Zerwas): Creates a tobacco user fee to be assessed on ERS health plan participants and requires the plan to cover tobacco cessation benefits, including prescription drugs.
- HB 1766 (Rep. Crownover): Requires ERS to provide an optional high deductible health plan with an associated health savings account.
- HB 1974 (Rep. Sheets) and HB 2506 (Rep. Chisum): Requires new public employees hired after a specified date to participate in a defined contribution retirement plan rather than traditional defined benefit pension plans.
- HB 2536 (Rep. Schwertner): Creates a State Supported Living Center Closure Commission.
- HB 2720 (Rep. Pitts): Provides statutory authorization for state employee furloughs at an agency’s discretion.
- HB 2954 (Rep. Cain) and HB 3168 (Rep. Callegari): Eliminates longevity pay for state employees.
- HB 3100 (Rep. Orr): Changes state law to require employees to continue current ERS retirement contributions even if the state lowers its contribution.
- HCR 99 (Rep. Truitt): Creates a joint interim legislative committee to study ERS retirement and health benefits.
- SB 1379 (Sen. Whitmire): Creates a deferred retirement option (DROP) for qualifying state law enforcement members.
- SB 1664 (Sen. Duncan): The omnibus ERS bill.
As noted above, two House bills (HB 2954 and HB 3168) have been filed that would abolish longevity pay. In practice this would simply amount to a pay cut for most state employees. The longer an employee’s tenure with the state, the bigger the pay cut they would experience.
TPEA is opposed to HB 2954 and HB 3168 for a number of reasons, including:
- HB 2954 and HB 3168 are unnecessarily punitive, and they are selective in application since they only affect longevity pay and not hazardous duty pay, which is the other form of state retention pay.
- Experienced and productive workers are an asset that Texas taxpayers have invested in and it is counterproductive to remove incentives to retain experienced employees.
- Many state agencies have experienced excessive employee turnover rates as the result of inadequate pay. HB 2954 and HB 3168 would only exacerbate this problem.
- State employee pay is already 15 to 20 percent below what other Texas employers pay for comparable work, on average.
- In the early part of the last decade, overall state turnover increased to nearly 20 percent and some occupational categories experienced turnover approaching 50 percent annually.
This proved to be an expensive problem for the state both in terms of the costs of finding, hiring and training large numbers of new employees, and turnover robs the state of experience and productivity in the workforce reducing the efficiency of the state agencies.
TPEA is also concerned that elimination of longevity pay would trigger a huge exodus of retirement-eligible employees which would impose significant actuarial costs on the ERS retirement fund and increase health care costs to the state.
The potential consequence of such an exodus is clear:
- There are around 18,000 state employees who are currently eligible to retire.
- Because the most experienced employees would see the largest pay reduction if longevity pay is abolished, it would cause many employees who wouldn’t otherwise choose to retire to do so.
- If just a quarter of retirement eligible employees chose to retire it would double the anticipated number of ERS retirements. This would create a significant actuarial burden on the ERS retirement fund, which needs to be restored to actuarial soundness.
TPEA and DPSOA are again pleased to host a celebration for state employees and retirees. This year’s event will be on Thursday, April 7 from 5 to 7 pm at historic Scholz Garten in downtown Austin. Music will be provided by the Texas Tycoons, an All Star assemblage of Austin musicians who play roadhouse blues and Texas standards. Please bring your state ID. TPEA will provide complimentary beverages, snacks and door prizes. This event has grown in popularity every year, please join us April 7.
Due to legislative restrictions, TPEA cannot send full advocacy information to state email addresses. In order to continue to stay up to date about the latest developments in legislation affecting state employees and retirees during the 2011 session, go to http://www.tpea.org and sign up with your home email address now. You can also follow our twitter feed.
The Texas Public Employees Association is the oldest and largest state employee group. As a non-partisan, non-union association, TPEA is the leading advocate for ALL state employees and retirees before the Texas Legislature.