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Sunday, February 19, 2006

Ind. Gov't. - More on legislative perks

The Sunday Indianapolis Star editorial is headlined "Some negative numbers: They add up to wastefulness." Some quotes:

The Star Editorial Board explains why you should be concerned about some key figures.

$1.1 million: The amount taxpayers contributed to an overly generous pension plan for state legislators in fiscal year 2005.

The problem: The average Hoosier couldn't dream, much less expect, to be offered a 401(k) plan under which each dollar they contribute is matched four-fold by an employer. Yet, state legislators not only have given themselves such an outrageous benefit, but they also keep the size of those pensions a secret.

Why you should care: Public service means responsible stewardship of taxpayer dollars. It's irresponsible for legislators to enrich themselves with an extravagant retirement fund. In addition, with salaries, per-diems, leadership pay and undocumented expense dollars, state senators on average received $47,100 last year as compensation for their part-time jobs.

Corrective reform: Canceling this perk, along with heavily subsidized health care for retired legislators and their families, should become a priority in the General Assembly. * * *

$306,000: The expected cost to taxpayers for funding health care benefits for retired lawmakers, their widows and families by the 2008 fiscal year.

The problem: Even with Senate President Pro Tempore Robert Garton's cynical ploy last week to reduce the cost of this perk, most state senators can still rely on a plan that is far sweeter than those offered to the state's civil servants.

Why you should care: State government is struggling to hold down Medicaid and other health care costs at the same time senators and their families are enjoying taxpayer-subsidized lifetime health insurance. Consider, too, that legislators on average were paid between 48 and 50 percent more last year than in 2000.

Corrective reform: Garton should do what's in the best interest of taxpayers and drop the plan as House Speaker Brian Bosma has done. Legislators should then abolish it completely next year.

My thoughts re the 4:1 pension plan. $1.1 million divided by 150 legislators comes out to $7,333 that taxpayers are contributing each year to the average part-time lawmaker's pension. As the Star writes today: "Yet, state legislators not only have given themselves such an outrageous benefit, but they also keep the size of those pensions a secret." For background on the PERF secrecy issue, start with this ILB entry from Feb. 10, 2005.

My thoughts re the cost of the legislators' healthcare perk:The Star gives $306,000 as "the expected cost to taxpayers for funding health care benefits for retired lawmakers, their widows and families by the 2008 fiscal year." This does not give the whole picture.

This ILB entry from Jan. 17, 2006, attempted to estimate the unfunded liability for the 25 currently retired legislators and came up with $250,000 for each retired legislator and his family, or a total future unfunded liability for just those currently retired of $5 million, assuming health care costs stay the same.

As for legislators who may retire this year, this story from the Munster (NW Indiana) Times this weekend caught my eye. Some quotes:

State Rep. John Aguilera, D-East Chicago, will not seek another term, preferring to focus on a possible 2007 challenge of Mayor George Pabey. * * *

Aguilera is the only Northwest Indiana legislator who plans to step down. There had been speculation that others might retire after the House decided to do away with a perk that allows retiring legislators and their spouses to receive state-subsidized health care for life.

Aguilera, 46, retired from Mittal Steel last April. By stepping down from the Legislature this year, he will be able to keep his state health insurance and the 24 percent premium he currently pays will never increase.

"It didn't really play a factor in my decision," Aguilera said, adding that he now will be able to spend more time with his three teenage daughters.

This legislator is retiring at age 46. He was elected in 2000, so has only 6-years of service. How is he eligible for the legislative plan, which requires "more than" six years service? The answer: "He was elected in caucus to fill a vacancy on 10/12/00, and then elected to his first full term the next month."

He is a young man, his life expectancy is 30 to 40 years. Should his wife survive him, she will continue to receive benefits. He has three daughters, who will be covered by the taxpayer-subsidized plan until age 25.

Assume that the portion of this retiring legislator's health-care benefits for himself and his family subsidized by Indiana taxpayers is $10,000/year. Multiply that by 30 to 40 years to see one of the benefits of 6-years of service as a part-time legislator. A lifetime benefit worth $300,000 to $400,000 might well play a part in some people's financial decision making.

A point about the Senate's revised plan. Several descriptions of the Senate's revised health care plan report that retired senators in the future will be required to go on Medicare when they reach 65, rather than forcing Indiana taxpayers to directly carry the full load of their health care.

However, the reports also indicate that the retired senators on Medicare will participate in the state supplemental Medicare plan. I looked into this plan and received this information from the State:

As required by IC 5-10-8-8.3, we have a contract with Anthem to provide Medicare complementary coverage. The rates are extremely high (the per person per month rates are $167 for medical only coverage & $934 for medical & Rx). Participation is low (18 medical subscribers and 12 subscribe to the plan that includes medical and prescription benefits). The State does not contribute to the premium.
In answer to my direct question, I was told that "better alternatives probably exist through AARP, RIPEA, or elsewhere."

Indeed, the retired state employees association's group plan (RIPEA is a non-profit that does not receive state funding) charges its members who are 65 $123.57/month for its Anthem basic medical (Medicare supplemental) policy. Rx is not included. Members age 75 will pay $167.54 this year.

IC 5-10-8-8.3 is one of the changes that was made in 2001 to put the legislative health care perks plan in place. It provides:

Sec. 8.3. (a) As used in this section, "department" refers to the state personnel department.
(b) The department shall establish, or contract for the establishment of, at least two (2) retiree health benefit plans to be available for former employees of:
(1) the state; and
(2) the legislative branch of government;
whose employer elects under section 8(j) of this chapter to permit its former employees to continue to participate in a health insurance program under this chapter after the employees have become eligible for Medicare coverage. At least one (1) of the plans offered to former employees must include coverage for prescription drugs comparable to a Medicare plan that provides prescription drug benefits.
As added by P.L.13-2001, SEC.11.
So, the question is, under the revised Senate plan, who pays the premium for the currently $934 "per person, per month" cost of the Medicare complementary plan -- the Senator or the taxpayer?

Posted by Marcia Oddi on February 19, 2006 09:40 AM
Posted to Indiana Government | Indiana Law | Legislative Benefits