State employee benefits include $1.56 billion just for medical 2011-13

This newsletter is intended to give Oregon citizens the information and opportunity to promote long over-due reforms with a “citizen up” approach, instead of using the controversial, politically charged “top down,” Wisconsin model. This newsletter is not about politics, it is intended to motivate Oregon citizens to make politics subservient to the needs and will of the people. We will address tewo issues that demand the attention of our Legislators.

Oregon’s State Employees’ Health Benefits. The group health medical benefit package for State employees is quite generous and is paid entirely by the State. Oregon is the only state out of the 50 states in the USA that continues to pay 100% of the medical benefits for its employees and their families. These benefits are not cheap.

The average monthly cost per State worker is $1,263.13 and the total cost for the current biennium (with annual premium adjustments) is about $1.37 billion.   For the upcoming 2011-13 biennium, including anticipated premium increases, the total cost of State employee medical insurance benefits will be $1.65 billion.
I support having good medical benefits for all workers. As a State Legislator, I am a State employee and I am grateful for good medical benefits. The issue is the appropriateness and financial consequences of Oregon paying 100% of the costs, instead of requiring each of us, State employees, to pay a portion of our group medical premiums, as is usual and customary with other states.
State              Employee Pays % of Premium
Washington                       12%
California                        18.9%
Idaho                                12.7%
Montana                           24.5%
Nevada                             17%
Utah                                   5%
Arizona                                            11.5% 
Average: 15%
Oregon                                               0 %
Every dollar of group medical insurance premiums paid above what is fair and reasonable is a dollar that cannot be used for educating our children, paying the costs for public safety and providing life-saving benefits for our most vulnerable citizens.
If Oregon’s State employees paid the western states’ average of 15% toward their own medical insurance benefits plan, it would save the State $250,000,000 in the next budget. That is $250 million of precious revenue in the 2011-13 State Budget–$250 million that could be redirected for purposes other than maintaining an unjustifiably expensive benefit package for our State employees. (Note: State Employees do not include teachers, whose benefit packages are set by their local school districts.)

To avoid any confusion, I am not criticizing or devaluing the excellent work done by committed and competent State employees; I am merely opining that we state employees should be sharing in the cost of our medical benefits. That is what occurs in all other states and in private sector jobs. In the 2011-13 Budget we would save the state $250 million that could then be used to provide vital services for Oregon citizens.
Citizen Action Needed on Senate Bill. Senate Bill 702 could be the vehicle to implement this needed change in Oregon law. SB 702 would require State workers to begin paying 15% toward their benefit plan and it will get serious consideration if enough Legislators request immediate hearings to be scheduled and a work session to be held on it.

Public Employee Retirement System (PERS). In addition to medical benefits, Oregon’s State employee retirement plan (PERS) costs are also paid entirely by the State of Oregon. In reality, as a result of legislative “tweaks,” PERS Board decisions and Court rulings, Oregon’s retirement system has evolved into two separate retirement plans for every employee—a defined benefit plan and a defined contribution plan.
The defined benefit plan provided for “Tier One” workers (those hired before January 1, 1996) is one of the most expensive and most generous retirement plans in the world. (See “Part I, Oregon PERS & the 2011-13 Budget–The Looming Crisis”) Those employees hired from 1996 to 2003 have less extravagant “Tier Two” PERS plans; and more recently hired State employees (hired since August 2003), have more modest PERS plans than either Tier One or Tier Two plans.
In short, regardless of when a State employee was hired, he or she now has two PERS plans.
Defined Benefits Plan. The Courts have ruled that certain portions of PERS’ defined benefit plan are protected by the constitutional protections of the Contracts Clause, and must be paid, regardless of the burden such payments place on the State or its taxpayers. The State’s anticipated cost for the defined benefit plan will be $950 million in the 2011-13 biennium.

Defined Contribution Plan. The PERS defined contribution plan, now referred to as the Individual Account Program (IAP), costs 6% for every payroll dollar, in addition to the costs of the defined benefit plan. This defined contribution plan is not constitutionally protected and the 6% paid for each worker goes into a separate account that belongs to the employee at his or her termination or retirement. The cost of this second, IAP, retirement plan in 2011-13 Budget will be $334 million. Thus, if Oregon were to pay only for the defined benefit plan, while enabling State employees the option of paying up to 6% of their wages toward their own defined contribution plan, $334 million could then be used to provide vital services for Oregon citizens in 2011-13.
At a time when the average private citizen feels fortunate to have a job, and even luckier to have a modest 401 (k) retirement plan, should Oregon be paying 100% for two retirement plans for every State employee? I believe State workers should be free to contribute to their own defined contribution plan, but every dollar the State spends on this second PERS retirement plan, in my opinion, is an extravagance we taxpayers can no longer afford to pay.
Citizen Action Needed on House Bill.  House Bill 2984 could be the vehicle to implement this needed change in Oregon law. HB 2984 would give State workers the option of paying up to six percent toward their own defined contribution plan, and would eliminate PERS employers from paying anything toward it. Like SB 702 above, HB 2984, will get serious consideration if enough Legislators request immediate hearings to be scheduled and a work session to be held.
State workers should be paid wages and benefits that are comparable to those provided by other western states and in the private sector. Having said this, I believe it is unjustifiable for the State of Oregon to continue paying 100% of costs for group medical benefits and 100% of the costs for both the defined benefit and defined contribution retirement plans for State employees. In my opinion, it is simply indefensible to continue depriving desperately needed funds from vital Oregon programs and services by paying benefits that far exceed those paid by other states and private employers.
Do you agree that I and all other State employees should begin paying the western states’ average of 15% toward our employee medical benefits? Do you agree that if we State workers desire a second PERS retirement plan (in addition to the regular defined benefit plan), we should pay for it ourselves?
Do you agree that I and all other State employees should begin on July 1, 2011 to pay the western states’ average of 15% toward our employee medical benefits? Do you agree that if we State workers desire a second PERS retirement plan (in addition to the regular defined benefit plan), we should pay for it ourselves?

If so, you might consider contacting your Legislator with your opinion. Your legislator’s contact number can be found by clicking here.
The Governor and the public employee unions are currently engaged in collective bargaining negotiations. Do you feel it is time for the legislature to pass laws requiring Oregon State employees to begin paying their fair share of the costs of their group medical and retirement benefits? If the actions suggested above were to be taken by this Legislature and signed by the Governor, $584 million could be added to the revenue available in 2011-13 to protect our families, imprison our criminals, educate our children and care for our most vulnerable seniors and disabled citizens.

If you think it is time for Oregon to stop paying 100% of these State employee benefits, call or email your Legislator today. We serve the citizens of Oregon. It is your government.

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