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Sunday, September 27, 2009
Ind. Gov't. - More on: $40 million spent since passage of 2007 law meant as a bridge to help retired legislators and state employees until they qualify for Medicare
This ILB entry from May 31st gives essential background to today's story in the Fort Wayne Journal Gazette, reported by Niki Kelly. The May 31st story said "The average cost per participant has been about $26,000 -- or about $40 million in total so far." Today's story begins:
More than $120 million has flowed into new health care retirement accounts for state employees in the last two years – a program that has cost more than expected and come at a time when employees have seen pay frozen.More from the story:Earlier this year, Gov. Mitch Daniels’ administration tried to eliminate the benefit by zeroing out the funding in the new state budget.
But legislators fought for the program, which was created in 2007 in exchange for eliminating a lifetime health care perk lawmakers had created for themselves.
“(The cost) is a little painful, but I think it’s the right thing to do,” said Sen. Luke Kenley, R-Noblesville, author of the bill that created the program. “The governor is committed to trying to bring health insurance to more people, and it seems to me that the first obligation is to try and start with your own employees.”
The purpose of the plan is to provide a bridge for those retiring before they reach Medicare eligibility age. Under the program, all state employees can use money in their accounts to pay for health insurance premiums when they retire, including buying into the state health care pool.
The total cost of the program the first year was $56 million, with an average number of retirees at 750. This was in line with costs estimated by the nonpartisan Legislative Services Agency.
Then the cost jumped to $67 million this year – $10 million more than expected. The increase is likely because word had spread that the administration was trying to end the program – causing 1,200 employees to retire.State Budget Director Chris Ruhl said the legislature appropriated only $23 million each year from a 2007 cigarette tax increase to fund the program initially. The rest came from the general fund, specifically an account that is normally used to provide raises and bonuses to state employees as well as absorb some of the increases in health care premiums.
“Pay raises and retirement are not directly linked, but there is definitely a tradeoff,” Ruhl said. “Every dollar you spend one place you can’t spend somewhere else.” * * *
Kenley said lawmakers are “kind of gritting our teeth as we get over the large hump,” but he said the cost would stabilize in 2017 when the additional contributions cease.
Ruhl said he objects to the program because state revenue has plummeted and he is concerned the program could grow in the future.
“In these challenging economic and fiscal times, we thought there were higher priorities,” he said. “In the history of employee benefits, I’d surmise very few have shrunk over time. We are always doing cost-of-living adjustments and gradually expanding the programs over time.”
He also noted that the plan was originally sold as a cost-saving measure to state government by encouraging retirements. The idea was that those positions could then be eliminated or the person could be replaced by a younger employee with a lower salary. But Ruhl said those savings haven’t materialized.
Posted by Marcia Oddi on September 27, 2009 04:39 PM
Posted to Indiana Government | Legislative Benefits