Gov's Budget Recommendation Notes

The Governor said there is a budget gap of slightly less than $700 million; not the $850 million that was anticipated. Since the legislative session however, there has been a revenue decrease of $157 million for the FY2010 budget year, necessitating the 3% cuts discussed above.

FY2010 Budget Reductions
Agency Reductions - $39 million
Public Education - $72 million
Bonding for Roads - $25 million
Medicaid Settlement - $20 million
OPED/Termination Pool - $6 million
Reduce USTAR - $5 million
Restricted fund balance - $16 million


However, the Governor's Office of Planning and Budget anticipates that the FY2011 budget will increase or flatten, due to additional revenues from the recovering economy. The Governor’s office estimates $191 million in revenue by the end of FY2011, which is a $34 million net growth for FY2011. However, the state will continue to weather shortfalls until then:

FY2010 Shortfall
Revenue Shortfall - $157 million
Additional Shortfall – $6 million
Supplemental Shortfall - $20 million
Total Shortfall - $187 million

FY2011 Shortfall
Public Education - $293 million
Higher Education - $66 million
Other State Agencies - $151 million
Total Shortfall - $510 million

Total Shortfall for remainder of FY2010 and FY2011 = $693 million

The Governor’s FY2011 Budget Recommendations:
· Fully funds the budget
· Protects public and higher education
· Avoids exacerbating the budget and its structural imbalance
· Covers needs in state agencies
· Preserves $253 million in the Rainy Day Fund
· No tax increases.

The Governor's FY2011 budget priorities would cost an estimated $510 in his $11 billion budget.
1. Public Education - $293 million.
2. Higher Education – $66 million.
3. Other State Agencies - $151 million.
a. Corrections - $21 million.
b. Human Services - $18 million.
c. Workforce Services - $2 million.
d. Health - $38 million.

The FY2011 recommendations also included a list of additional revenue streams to enhance revenue growth within the State:

Stop the Sales tax vendor discount (1.31%) that was implemented several years ago. This will provide the state with $20 million in on-going funds.

Begin a quarterly estimated tax filing for self-employed persons. This would provide an additional $125 million in one-time funds.

Bonding for Roads, freeing up cash in transportation. This would provide $25 million in FY2010 and $75 million in FY2011.

Tap into the Rainy Day Fund, providing $166 million in one-time funds.

Enhanced Federal Medicaid Assistance Program funding of $56 million in one-time funds.

Using the student population account for $31 million in one-time funds.

The additional revenues amount to $510 million.

When asked the question what will happen with the retirement account, Governor Herbert said his budget accounts for the contribution rate increase (2%) that URS requested this year.

Governor Herbert stated that it was important for him to live within his means, retain some money in the Rainy Day Fund, not increase taxes, and keep Public and Higher Education at the 2010 funding level, while still maintaining service in each of the state agencies.

UPEA Statement to Retirement and Independent Entities Committee

Click Here for Full Audio

RETIREMENT POSITION STATEMENT

Mr. Chairman, members of the Committee – thank you for allowing me an opportunity to address you on this vital and sensitive topic. My name is Sheri Watters. I have been a public employee for 24 years. I currently hold several positions with the Utah Public Employee’s Association and serve as the Vice-Chair of the Retirement Membership Council. Today I am representing the view points of UPEA.

As most of you are aware, the genesis of today’s retirement system had root in 1915 when the Public Teacher’s system was authorized by this body. In the 1940’s state employees and others were authorized to be part of an expanded system. On March 8, 1967, over 40 years ago, the Legislature passed SB 205, “Public Employees Retirement System” thus consolidating various pension systems and allowing all state and local government employees and educators to be eligible for retirement coverage. Currently there are over 181,000 members of the retirement system, this encompasses active, retired, and terminated vested employees…including teachers, janitors, cops, firefighters, truck drivers, computer techs, legislators, therapists, and the list goes on and on.

Public pension systems across the country are experiencing stress. Utah is not alone in this dilemma. In an article about the plight of public employee pension systems, officials in Ohio stated it would take until “infinity” to get the investments back on track. Other systems such as California and West Virginia are merely a train wreck waiting to happen. Luckily, Utah has continued to be well managed by level-headed investors and by legislators being mindful of this important benefit. Our system is currently 86% funded. This number has fluctuated over the years. In 2000 the fund was at 103% funded but yet in 1990 it was as low as 74.6%. I believe that economic stability will return and the fund will recover based on historical data. Will there be another downturn? Will there be a catastrophic event in the Salt Lake area? Not even the actuaries can predict these types of unknowns.

Surveys and task forces across the country continue to show that a defined benefit program is the retirement option of choice. There are numerous reasons why. One reason is for attracting and retaining qualified and dedicated employees. We know that high turnover rates mean higher training costs. A DB plan allows the state to have a degree of control on who leaves employment and when. It is also important to note that the vast majority of Utah citizen retirees remain in the state and contribute an important sum to the state economy as well as continue to pay taxes in Utah.

State DHRM in its latest survey noted that “both health insurance and the retirement plan were rated as very important for retention – on a scale of 1 to 3 the state retirement plan was rated with an importance of 2.75 and the health plan as 2.83.” In addition, the survey showed the importance of the retirement plan for retention is high across all ages and years of service groups, which may indicate that even the younger groups do have an appreciation for the current plan.

The Utah Public Employee’s Association is cognizant of the difficult issues facing the legislature during this upcoming session…the budget, education, transportation, taxes, just to name a few. UPEA also recognizes that there are thousands of public employees across the state who have devoted their lives and careers to public service. We will continue to oppose any legislation that may negatively impact the current retirement system or reduce an employee’s take home pay to maintain these benefits. We are also highly concerned about changes which could cause an erosion of the merit system. This is our primary goal. We believe that a comprehensive study should be conducted to evaluate the cost-effectiveness of adjustments to the system to include changes for those who have retired and rehired and those who are not yet vested or not yet hired. Making structural changes to the current pension system without extensive research and cost analysis is not, in my opinion, in the best interests of all stakeholders.

As conscientious taxpayers/citizens of the State of Utah we know that the Utah Retirement System is a well-managed program designed and refined over many years to retain and attract quality individuals to aid in workforce stability and promote orderly turnover.

We believe that when the Utah Retirement System was established, legislators were concerned with looking at the long-range picture. We owe it to those individuals who have gone before us, those currently in the workforce and those who will replace us in the future to maintain a pension system founded on sound business principles, fiscal responsibility and fair market value that will continue to help Utah maintain its reputation for being a well-managed state, to protect our AAA bond rating and to continue to educate our children and grandchildren with qualified and competent teachers. We hope that you will see fit to choose a wise course of action as changes to the system today will ultimately affect individuals through the next decade and beyond. Time is not our enemy.

Thank you.

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Perspective on Retirement and Independent Entities Committee

The Retirement and Independent Entities Committee convened a special meeting to discuss the public employee retirement system. Utah Public Employees’ Association monitored the meeting and testified on behalf of public employees. The committee also listened to testimony from Utah Retirement Systems, the URS actuary, Department of Human Resource Management, The Utah League of City and Towns, CURE, Utah Association of Counties, and various municipal law enforcement groups.

UPEA has taken the position that no one group has enough information to know the affects of changing the retirement system this year. Therefore, it would be prudent to maintain the system until actuarial metrics can provide information to justify a change. Senator Liljenquist concluded that the current $4 billion drop in the retirement fund over the past year will cause the state to lose an additional $300 million per year in investment returns. Chris Conradi, Senior Consultant for the URS actuary, Gabriel, Roeder, Smith & Co., said that Liljenquist’s assumption was correct despite potential economic recovery and higher rates of return on investments.

In a worse-case-scenario, URS will not recoup its $4 billion plus $300 million/year loss in time to keep up with demands placed on the retirement system by upcoming retirees.

The Utah League of Cities and Towns presented a package of benefit changes that would preempt a solution to this economy’s worse-case scenario. However, UPEA has spoken with economists and the Governor’s Office of Planning and Budget, who all confirm that the economy is showing signs of recovery. The worse-case-scenario may not play out, but a loss in benefits will harm public employees for years to come. UPEA does not endorse the ULCT’s position on changing the retirement system. For more information, see the list of available documents below.

Please stand behind UPEA in protecting your retirement benefits. Tell your coworkers about UPEA’s position and what’s at stake if employees aren’t unified. Encourage non-members to join.

Audio Recording of Committee Meeting
http://www.le.state.ut.us/asp/interim/Minutes.asp?Meeting=7690#Audio
League of Cities and Towns Proposal
http://www.ulct.org/ulct/docs/LPC_retirement_handout.pdf

Utah State Retirement Systems Overview
http://www.le.state.ut.us/interim/2009/pdf/00001059.pdf

Actuarial Perspective of the Utah State Retirement Systems
http://www.le.state.ut.us/interim/2009/pdf/00001115.pdf

Link to the Retirement and Independent Entities Committee Website
http://www.le.state.ut.us/asp/interim/Commit.asp?Year=2009&Com=INTRIE

August Interim Report

Tuesday, August 18, 2009
Legislative Audit Subcommittee
Listen to Audio

UPEA monitored discussions during the Legislative Audit Subcommittee to prepare for the 2010 Legislative Session. This subcommittee reviews audits requested by legislators to help them make policy decisions. The media widely reported that audits revealed a major liability in the Medicaid Bureau of Program Integrity. However, the subcommittee also reviewed audits dealing with the courts, the Department of Technology Services, and DSPD. Overall, the audits revealed concerns with upper management and organizational communication.

However, the DSPD audit, A Review of Allegations Made Concerning The Division of Services for People with Disabilities, could not substantiate allegations submitted anonymously. Specifically, the letter alleges that the division’s forecasting process is inaccurate and that the current situation for privatizing Support Coordinators was not vetted properly.

The Legislative Auditor General suggested that further review of the allegations was unnecessary because the forecasting model the division used did not play a role in the legislators’ decision to cut the division’s budget. Furthermore, the auditors suggested that the division’s strategy for privatizing support coordinators was judicious in light of further budget cuts.

The letter also alleged conflicts of interest within the division. The auditors reviews all allegations and found that the Department of Human Services had examined each claim and determined how each claim could be managed. Given the department’s awareness and action, the auditors saw no reason to pursue the matter further.

Wednesday, August 19th, 2009

The Government Operations and Political Subdivisions Interim Committee met to discuss the newly restructured Privatization Policy Board. The board is made up of legislators, private employers, appointees from the Governor, and UPEA. The intent of the board is to make an inventory of state services and determine if those services compete with the private sector. Recommendations from the board will be sent to the governor.

Senator Goodfellow, who chairs the policy board, said the board will send a survey to state agencies with questions about services that could be privatized. Goodfellow said the board is not yet complete as they are waiting for the governor to appoint two more people.

Representative Craig Frank, R-Cedar Hills, who sponsored legislation to reorganize the Privatization Policy Board, stated that privatization is critical and wants to know the role government has in the private sector. Frank also wants to see the board move quickly and that he is anxious to see the proposals that will be sent to the Governor.

UPEA is tracking this issue very closely and will be attending all Privatization Policy Board meetings. Privatization is a big issue and we want all public employees to be informed about what is happening. We will continually post updates on http://www.utahpublicemployeesassociation.blogspot.com/ if new information becomes available.

Retirement Taskforce

UPEA would like to take this opportunity to bring you up-to-date on the Association’s efforts concerning the critical issues of retirement and health care. Over the past four months, a taskforce of UPEA members appointed by the UPEA State Board of Directors, have been meeting to interview legislative leaders, state retirement officials, health insurance experts, and others in order to prepare for the upcoming Legislative Session. The time has been well spent.

As you know, the state retirement fund has experienced significant losses due to the recession. For the system to remain solvent it must be at least 80% funded. Currently the retirement system is about 87% funded.

In order to address the losses, some organizations, like the League of Cities and Towns have proposed a myriad of solutions such as suspending the 401(k) contribution, extending the vesting period, and transitioning the public safety / firefighter years of service from 20 years to 25 years. We believe that such proposals are premature.

UPEA will join the Utah Education Association (UEA) and the Utah School Employees’ Association (USEA) in issuing a joint statement which opposes any long term changes to the retirement system based on a temporary drop in the investment fund.

The UPEA taskforce is also closely monitoring health care reform on the state and national level and will be producing a series of position papers.

UPEA is adamant about preserving your retirement benefits. The Utah Retirement building is named after UPEA’s founder and first President Leonard W. McDonald, the architect of the Utah State Retirement System. We the leadership of UPEA intends to uphold this legacy.

Pension System Options

The national financial crisis has caused pension systems and 401(k)s to lose money. The Utah Retirement System (URS) lost about $4 Billion last year. During the upcoming 2010 Legislative Session, URS may ask the legislature to increase Utah public employee contribution rates by 3 to 4 percent ($80-$100 million). However, lawmakers will decide between various options that affect public employee retirement benefits.

UPEA has been monitoring potential changes to the retirement system. URS presented several options for consideration during a February 5, 2009 Legislative Independent Entities Appropriations Subcommittee Meeting (click here to hear audio).

URS’s legal council, Dan Anderson said, “URS isn't making any recommendations regarding changes, they are only bringing forth information as a place to begin discussions for making adjustments to the system, if desired by the committee.”

Some of the adjustments that could be considered are listed and explained below. Please keep in mind that none of these proposals are final. However, as public employees, we need to be educated on each of the alternatives so we can make a difference in the process.

Suspend/Lower Post Retired (“Double Dippers”) contribution to 401(k).
o Utah currently has a very generous post-retirement (“double dipping”) benefit policy. There is political momentum to change the benefit for the employees that “double dip” to save money. The concern is whether or not any changes can be legally made to the current employees using the post-retirement benefits.

Extend final Average Salary Period (for example from 3 years to 5 years).
o This proposal would allow the salary averages of the highest 5 years to be used in calculating your retirement benefit.

Make COLAs Discretionary/ Delay COLA.
o COLA’s on retirement disbursements could potentially be deferred until a specific anniversary date of retirement (for example 3 years after retiring) or until a retiree reaches a certain age (for example 65).

Increase the vesting period.
o Vesting periods for new employees could potentially increase (from 4 years to 6 years).

Put a minimum age condition on the 30 year benefit.
o One of the suggestions is to change the minimum age that an employee can retire without a penalty (55, 57, 60,etc…). The question is how would this apply to current employees? Would they be grandfathered?

Partial benefit payments until a certain age.
o This proposal would allow for an employee to receive partial retirement benefits until they reach a certain age (phased retirement).

Reduce the multiplier.
o Reducing the retirement multiplier (number of years x 2% x 3 highest average salaries) from 2% to 1.9%. The question is whether current employees would be grandfathered?

Increase 20 year public safety and firefighter requirement to 25 years.
o Would current employees be grandfathered?

Put a minimum age condition on the 20 year public safety and firefighter benefit (48, 50, 52, etc…).
o One of the suggestions is to change the minimum age that an employee can retire without penalty (48, 50, 52,etc…). Would current employees be grandfathered?

Change to the contributory system. Employees are currently on the non-contributory system.
o Such a move would allow employees to participate in funding their retirement benefit. Such a move would shift some of the risk to the individual.

Create a hybrid contributory/non-contributory system.
o This would allow the system to potentially have the employee participate in funding their retirement benefit, while still having part of their benefit be made up of the non-contributory system. (for example, employees might contribute 1% - 3% of their own salary to the pension).

Make the retirement benefit optional – employees can choose how they would like to participate at the time of hire.

Turn the defined benefit system (pension) into a defined contribution (401 (k)) system.

Basing your retirement eligibility by age + years of service.
o This proposal would say that you would need to follow the rule of 85 (or 90, 95, etc…). This would mean that you would need to have 30 years of service if you were to retire at the age of 55 (age + years of service = 85).

UPEA has been very busy this summer working on the retirement issues. The UPEA State Board recently created a taskforce that is discussing potential legislative action that may affect employee pensions and 401(k)s.

In addition, UPEA is spearheading a political training program this summer. This program will help public employees understand the political process, and empower public employees to institute positive change. The training will be conducted in a 3-part series that includes “Politics 101”, “Grassroots: How You Can Make A Difference”, and “How to Become A Delegate”. We will begin scheduling classes throughout the agencies this summer. If you would like to have UPEA come to a staff meeting, or come present at your worksite, please call 1-800-224-8732.

June Interim Committees Examine Public Employee Affairs

UPEA field staff member Christy Cushing attended the Government Operations and Political Subdivisions Interim Committee Meeting on Wednesday June 17, 2009. The following is an update of the discussion:

State Employee Compensation – Briefing

Policy Analyst Benjamin Christensen reviewed slides describing the three parts within state employee compensation, which include employees, salary and compensation spending. Most notable, Christensen said that over the past ten years, the number of state employees has decreased from .896% to .764% in 2009. Currently the average state employee makes $44,903 and the average costs of benefits (i.e. health insurance and leave) are $23,908.

Over the last ten years, state employee compensation has barely risen above inflation; whereas, county employees’ compensation has risen 15-24% above inflation. Jeff Herring and Debbie Cragun from DHRM discussed some of the issues with state employee compensation.

Herring noted that “employees are typically viewed as a cost,” and asked “how do we maximize a return on our investment.” Herring continued to explain the need to balance compensation and benefits to employees. State employees’ compensation is benefit driven, not pay, and in order to compete and draw applicants, we need to design a compensation package that will attract and retain employees.

Cragun noted that DHRM is mandated by statute to complete an annual survey and compile data, researching state employee compensation and benefits packages. To complete this annual research, DHRM uses both local and regional comparative data. The 2008 salary survey showed that “state employees’ salary ranges are -9.9% below market” and “actual average salaries are 13.9% below market.” Below-market compensation perpetuates the issues of compression.

Cragun said, “compression occurs when you have a large percentage of your workforce at the lower end of the salary range.” She added, “Employees are not moved through salary ranges as intended. In the private sector, within three to five years of employment, employees should be at midpoint in pay; yet 72% of the State’s workforce are below midpoint” with an average of 10.6 years of service.”

Utah’s highly educated, highly skilled, and highly certified workforce continue to be significantly underpaid and undervalued.

Cragun asked, “With the worker shortage looming on the horizon and non-competitive wages, who will fill these jobs?”

Herring said, “In this economy, there is not an issue of high turnover, however when the economy turns around, our older workforce will retire and it will be more challenging to recruit and retain state employees, resulting in a substandard workforce, solutions should include balancing compensation for the workforce as a whole…we must be concerned with both salary ranges and actual pay.”

Co-Chair Rep. Frank noted that the Committee would carefully look at the data, as the legislature values its employees and knows they could be working elsewhere.

Four-day Work Week for State Employees Program – Update

Jeff Herring, Executive Director of DHRM gave an overview for a survey about the 4/10 work week. Herring explained that “government is in existence to serve the taxpayer” and there are certain “factors that will be involved as to whether or not [the 4-10 Initiative] will be continued and/or modified.”

The employee surveys from July 2008, November 2008, and May 2009 show that the majority of state employees preferred the 4/10 work week. In addition, since the 4-10 work weeks’ inception, overall leave usage decreased 5.3%, overtime pay decreased 18.2%, and comp time decreased 19.7%. The overall estimated approximate cost savings averages out to $1,108,598.

Nevertheless, Herring said that there needs to be more “focus on customer service and partners (League of Counties and Towns, and individual Counties) and get data from them to see about keeping or modifying” the four day work week.

Consolidation of State Agency Functions

Rep. Wayne Harper discussed the ways to consolidate the Department of Health, Human Services, Environmental Quality, and Workforce Services into either three or one agency(s). Rep. Harper said that there are duplicate services being offered at these four state agencies.

Rep. Harper presented the example of an average citizen trying to claim and acquire unemployment benefits and how he/she must go from agency to agency to acquire those benefits.

Rep. Bigelow, who is a member of the Govt. Ops Committee asked Rep. Harper how he proposed addressing the extensive effort required to research consolidating theses four large state agencies, which, he said, “demands attention from the Executive Branch.”

Rep. Harper said he hoped to get some small working groups together from the Executive Directors of DOH, DHS, DWS, and DEQ with the Governor’s Office and legislative staff to discuss consolidation in detail.

Co-Chair Rep. Hunsaker asked Rep. Harper if he proposed “to identify specific or general savings” with consolidating the four agencies. Rep. Harper said the intent is to realize specific savings based on the elimination of appointed positions.

In addition, Rep. Harper said that the Committee Members should look into consolidating the administrative services within the Department of Community and Culture. He believes this task would be easier than consolidating DOH, DHS, DWS, and DEQ.

Rep. Janice Fisher, a member of the Govt Ops. Committee noted that she does not believe that “bigger is better by combining” and that the idea of consolidating agencies makes her nervous, especially if the sole purpose is for efficiency. Rep. Fisher continued to say that she would “hate to combine departments and lose skilled people. We should look at the efficiencies, but need to be very, very careful.”

UPEA will continue to monitor Rep. Harper’s proposal to consolidate the DOH, DHS, DWS, and DEQ.

Workforce Services and Community and Economic Development Interim Committee

UPEA staff member Todd Losser attended the Workforce Services and Community and Economic Development Interim Committee today at 2:00 p.m. A presentation by Executive Director Kristen Cox, Jon Pierpont, and Steve Cuthbert was given to the Committee for an update on the new Eligibility Services Division and eREP computer system update.
The goals of the division are to have a centralized division, standardized workload, reduced cost, and to meet customer needs. The division was created through a new design and business model and will be operating June 22nd. Employees will have timely feedback on their performance and will be monitored more closely. Skills testing will take place every year to ensure employees are meeting the required skills to do their job. UPEA will continue to monitor the new Eligibility Division.

UPEA's Involvement with DSPD

UPEA has had numerous conversations with DSPD employees who are members, legislators and DSPD administrators. Those who are receiving UPEA communiqués should know that UPEA has been involved since March 26th when DSPD Executive Director, Alan Ormsby, met with supervisors to address budget cuts. A day after that meeting, Ormsby issued a memo that detailed options for fixing the DSPD budget while maintaining services to DSPD clients. One of the key issues to emerge from that memo was a so-called last minute budget cut:

“Then the last day they decided to replace 2.5 million dollars in funding for the State Hospital. And the way they did that is they took that money out of the rest of the Department. So the Department got cuts--the Executive Director’s office got cut $650,000; ORS got cut about a million; Aging Services got cut about $265,000, and DSPD got cut $607,000. Legislators may not have recognized exactly what that meant. The way they made us take the cuts were pretty drastic. They took $106,000 out of administration (State Office), and then they took $501,000 out of support coordination, and they targeted it that way, and that is probably the hardest thing. If we could have balanced the $607,000 cut across USDC and across services, we could have handled that fairly easily. Cut was pointed. Some speculate it may have been a slap to Lisa Michelle Church, and others have speculated it may have been due to simple ideology. Rep. Dougal has always been for smaller government & may have thought he needed to do more to shrink Human Services.” (Excerpt from DSPD March 26th Memo).

Subsequently, UPEA began contacting allies in the Health and Human Services Joint Appropriations subcommittee. This committee is responsible for HHS budgets. We did not contact Rep. Christine Johnson because she does not belong to this subcommittee. We contacted Rep. Paul Ray, who said the committee would examine the issue. On Wednesday, May 20th, UPEA issued an email stating that funding had been restored, thanks to legislative allies. However, Ormsby contacted UPEA the next day stating that the funding restoration was to fix a math error. DSPD employees were in the same predicament of losing their jobs.

UPEA has played a direct role in representing DSPD employees to the legislature, news media and policy-makers. Members and non-members alike may meet with UPEA any time to discuss our measures and future options. If employees would like to meet with a UPEA representative, please call me directly to schedule a time: 801-264-8732 ext. 209.

Also, UPEA will be monitoring, among other issues, item 3 on the HHS interim meeting agenda for Wednesday, June 17th. Lisa Michelle Church is requesting policy guidance in light of budget reductions for DSPD. Here is the agenda: http://www.le.state.ut.us/asp/interim/Commit.asp?Year=2009&Com=INTHHS
I’ll issue a report to all members when I know more.

Thanks!

ORS Admin. Says Agency is Hopeful for 2010

Despite recent cuts during the 2009 1st Special Session of the State Legislature, the Office of Recovery Services is hopeful that they can manage cuts without significant layoffs. ORS administration said that the legislature has increased the amount of money it is willing to draw from federal stimulus money without using General Fund money. However, the agency will still implement changes to accomodate mounting budget cuts.

DSPD Funding Restored, ORS Stunted by Cuts

The UPEA staff have been monitoring today's Interim and 1st Special Session of the 2009 Legislature. Prior to today, UPEA met with policymakers to discuss the loss of funding in DSPD that resulted in a loss of Federal Match funds. UPEA is happy to report that the funding cut during the session has been restored by House Bill 1003. UPEA would like to thank Rep. Paul Ray, the Governor's Office, and other members of the committee who helped with this issue.

UPEA is concerned that the Office of Recovery Services will lose a significant portion of their funding with Senate Bill 1004 (see lines 214-219). UPEA has been putting in calls with legislators and ORS. We will update members when we know more.

Question of Privatization

In the last hours of the 2009 Legislative session, the legislature passed an amendment to reduce DSPD’s budget by $600,000. Last week, DSPD supervisors and directors met to discuss their options. Many employees were aware of the deliberations. Subsequently, the supervisors decided to release minutes from the meeting outlining options that included converting line staff at DSPD to private coordinators.

Members immediately notified UPEA about the issue and media called to find out what was going on. As of now, the privatization issue is a proposal in its early stages. UPEA does not believe DSPD can be privatized without legislative action. However, UPEA is scheduling meetings with DHS and the governor’s office to assess the situation. Here is what we know, directly from Lisa-Michelle Church’s office:

• During the past few years, an increasing number of Disabilities caseworkers (support coordinators) have opted to leave the agency and work as private caseworker providers. Medicaid regulations and Division of Services for People with Disabilities’ rule authorize this option. Since September 2008, 25 Division employed support coordinators quit to become private support coordinators. The Division is in the process of determining whether accelerating the trend toward private support coordination makes sense in light of the budget cuts.
  
• No decisions have been made in terms of level or a time line for privatizing the support coordination services. The Division’s focus is on preservation of services within the fiscal constraints and mainlining quality of service.
  The Division is looking at the possibility of privatizing support coordination services due to a 2.8 million dollar general fund budget. Medicaid requirements allow any willing provider to participate. The state would be following national trends toward privatizing these services.
  
• In the planning process, the Division will be engaging various stakeholders. We recognize employees are anxious as we move forward with the discussions but this should not be interpreted as privatization so much as balancing the “any willing provider” portion of Medicaid against fiscal limits presented by budget cuts.

UPEA opposes privatization because it would reduce or eliminate employee benefits and decrease services to the public it serves. We will update employees as we find out more.

Last days on the hill

We are entering the final days of a very difficult Legislative session.

House Joint Resolution 29, Legislative Direction to the Public Employees' Benefit and Insurance Program sponsored by Representative Brad Dee passed the House of Representatives late Wednesday afternoon with a 57 yes; 14 no; 4 absent vote. This resolution will change the employer/employee split on the health insurance premium from a 98/2 to a 95/5 split. The health insurance increase is $17.3 million with $6 million funded through PEHP reserves; $6 million funded by increasing the employer/employee split in premium; and the rest of the increase funded by adjusting the benefits within the plans.

UPEA had encouraged its members to contact their legislators about funding the entire health insurance increase. The legislature chose to adjust the employees’ share of premium in lieu of suspending the 1.5% contribution into employees’ 401(k) fund and did not mandate furloughs throughout state government. Several options were discussed regarding the PEHP increase including placing high deductibles and creating out of pocket minimum and maximum amounts on health insurance. Other alternatives that were discussed would have been a greater burden on the employee. While this is not the best-case scenario it is certainly a better outcome than was originally considered by the Legislature.

During the floor debate, Representative King asked the sponsor of the bill if he had communicated with UPEA regarding HJR29. Representative Dee indicated that House leadership had met with UPEA regarding the health insurance increase.

Senate Bill 195 - Senator Dan Liljenquist has indicated he will withdraw Senate Bill 195, Public Employee Defined Contribution Amendments, which would suspend the 1.5% state 401(k) match for all state employees for one year. However, the bill has been placed on the Senate second reading calendar and circled. UPEA will continue to watch this bill.
Thank you for your telephone calls and emails to legislators.

Surprise! HB 451 & Updates

House Bill 451, sponsored by Brad Dee, R-Ogden, requires the state to bid out its health insurance program for state employees every two years. The bill appeared on the House Floor yesterday, as the house was finishing up its regularly scheduled bills. The house suspended its rules to bring the bill to the floor without first having heard it in a committee.

The bill caught many legislators off-guard, but still passed 51-22. UPEA is analyzing the impact of the bill. It could create a paradigm for fitting benefits to costs in contrast to the current system which tries to preserve benefits. Currently, PEHP determines how the benefit will be adjusted to fit a funding shortfall. Many legislators feel that they have no input on the benefit adjustments with PEHP. The bill is currently in Senate Rules for further consideration. UPEA anticipates that the sponsor will send the bill to interim study.

UPDATE
The legislature has discussed options regarding the $17.3 million increase in health insurance. UPEA has maintained an ongoing dialogue with PEHP and the legislature regarding health care options. At this time, the legislature has discussed using $6.3 million from PEHP reserves and taking the employer/employee split from 98/2 to 95/5.

UPDATE
As of today, house leadership is scrapping employee furloughs. Instead, representatives have been back-filling their base-budget to reduce the need for furloughs. However, due to program cuts in various departments, agencies may reduce personnel.

Legislative Update

Thank you for your emailing your legislators. Your voice is being heard on Capitol Hill. Members of both houses have approached UPEA about the emails they are receiving from UPEA members regarding the PEHP health insurance increase.

Senator Gene Davis and Senator Luz Robles approached UPEA during the Democratic Senate caucus and wanted UPEA to know that the Democrats’ proposed budget was to keep state government whole. The Democrats’ budget was presented today at a press conference at 12:30 p.m.

Hopefully, more information will be available tomorrow. Executive Appropriations is scheduled to meet to finalize the budget.

Letter to your legislator

UPEA needs your help. It is critical for UPEA members to contact their legislators regarding the PEHP health insurance increase. The health insurance increase for state employees is $17.3 million. In the face of furloughs, RIF’s and the possible, and probable, underfunding of the state’s 1.5% contribution into your 401(k), state employees should not have to fund this increase.

Last year state employees were encouraged to move from the PEHP Preferred Plan to the less expensive managed care plans in an effort to reduce costs and save money. Once again the legislature wants state employees to sacrifice to reduce costs and save money by funding the FY2009-2010 health insurance increase.

The legislature is backfilling public education, higher education, and other programs within state government. State employees are sacrificing enough ask your legislator to prioritize state employees and fund the PEHP health insurance increase.

Please email your legislator on your own time and using your own equipment. Legislative email addresses can be accessed at www.le.utah.gov. Click on the “Legislator” tab on the left hand side of the page and type in your address to find your senator and representative.



Below is a sample email for you to use.

Dear ______________:

I am a constituent and a public employee. I would like to express my concern over the PEHP health insurance increase. Last year I changed my PEHP coverage to help reduce costs. Please prioritize state employees and fund the PEHP health insurance increase. The proposed furloughs will create enough of a financial burden.

Thank you.

Name
Contact Info

S.B. 195 Update

Senate Bill 195, Public Employee Defined Contribution Amendments, sponsored by Senator Dan Liljenquist was heard in the Senate Retirement and Independent Entities Committee yesterday morning. SB195 would suspend the 1.5% employer defined contribution made on behalf of employees for one year. Senator Gene Davis moved to amend the suspended contribution amount to .75%. Senator Davis’ amendment passed unanimously. The bill also passed out of committee with four senators voting yes and Senator Brent Goodfellow voting no. UPEA, along with UEA and USEA, made public comment in opposition to the bill. The fiscal note on SB195 changed from $13.5 million to $30 million. The bill will now go to the Senate Rules Committee to be prioritized for a full Senate vote. Please contact your senator to oppose Senate Bill 195.

House GOP Caucus

House GOP Caucus met today discussing the federal stimulus package. They noted that public education will receive a net deduction of 6%, and higher education will receive a net deduction of 9% for FY 2010. The legislatures are currently reviewing what state agencies will be funded or restored through the federal stimulus money. They are going to look at each agency line item by line item. Rep. Bigelow said that they would have this information by next Caucus meeting.

$19 Million Discrepancy in SB 195

Senate Bill 195, sponsored by Senator Daniel Liljenquist, R-Davis, was heard on Friday, Feb. 27th. The bill seeks to suspend the 1.5% 401(k) contribution for one year beginning July 1st, 2009 and ending June 30th, 2010. In the interest of saving jobs, UPEA did not publicly oppose the bill on Friday; however, we are concerned about the legislature balancing the state budget using public employee benefits. Friday’s committee meeting concluded without a vote on the bill.

On Monday, UPEA found the bill was due in committee once again. At this point, UPEA was prepared to oppose the bill because the broad change in benefits only saved the state $13.2 million while leaving employee benefits open to further cuts down the line. Yesterday, the committee reviewed Senate Bill 195, but this time, the fiscal note showed the 401(k) suspension would save $32 million. We do not know why there was a $19 million discrepancy.

In light of the newly-discovered savings, Senator Gene Davis, D-Murray, proposed an amendment that suspended only half of the 401(k) contribution for one year. UPEA spoke favorably of the compromise but maintains its overall opposition.

Senate Bill 195

Senate Bill 195, Public Employee Defined Contribution Amendments, sponsored by Senator Dan Liljenquist, will be heard in the Senate Retirement and Independent Entities Committee meeting on Tuesday, March 3, 2009, at 7:00 a.m. This bill will suspend the 1.5% employer defined contribution made on behalf of employees who participate in the URS Noncontributory Retirement System. The bill will exempt certain employees who elected to move from the contributory retirement system to the noncontributory retirement system.

This bill is moving very quickly. Please contact your Senator or one of the Senators on the committee and encourage them to preserve your retirement benefit. The House Republican caucus discussed several revenue enhancements at their meeting last week including:

• Repeal the state sales tax cut on food. This would increase state revenue by $150-180 million.
• Increase vehicle registration fees by $20 per vehicle. This would increase state revenue by $50 million.
• Increase the tobacco tax. This would increase state revenue by $45 million.
• Bond for capital projects (buildings). It was indicated there was leadership support in both the House and the Senate to bond for no more than $115 million.
• Use some of the $420 million in Rainy Day Funds.
• Use the federal stimulus money. The state will receive more than $1.7 billion from the American Recovery and Reinvestment Act. There was discussion and questions about when the state would receive this money.

SB195 will most likely make it out of committee on Tuesday and very likely the Senate. UPEA will provide updates on the votes and progress of this bill.

The Senators on the Retirement and Independent Entities Committee are:

• Senator Dan Liljenquist – dliljenquist@utahsenate.org
• Senator Curtis Bramble – cbramble@utahsenate.org
• Senator Gene Davis – gdavis@utahsenate.org
• Senator Brent Goodfellow – bgoodfellow@utahsenate.org
• Senator Jon Greiner – jgreiner@utahsenate.org
• Senator Chris Buttars – dcbuttars@utahsenate.org

House Republican Caucus

Todd Sutton attended the House Republican Caucus on behalf of UPEA. The caucus discussed the following items:

• All state employees (including higher education) will have annual work hours reduced from 2,088 hours to 2,000 hours for FY2009-2010. Latitude will be given to agencies and managers as to when individual furloughs will occur. The reduction in hours will save the state approximately $51.7 million.
• Public education will receive a reduction of five teacher preparation days for FY2009-2010. There will be no reduction in the number of days students attend school. This will save the state approximately $60 million.
• PEHP has an increase of $17.3 million for FY2000-2010. The legislature has told PEHP to present options so no cost increase will occur for employees.
• The 1.5% 401(k) contribution for FY2009-2010 for all state employees, including public education, will be suspended for one year. This will save the state $21 million.

There was also discussion, but no action, about state revenue enhancements including:

• Repeal the state sales tax cut on food. This would increase state revenue by $150-180 million.
• Increase vehicle registration fees by $20 per vehicle. This would increase state revenue by $50 million.
• Increase the tobacco tax. This would increase state revenue by $45 million.
• Bond for capital projects (buildings). It was indicated there was leadership support in both the House and the Senate to bond for no more than $115 million.
• Use some of the $420 million in Rainy Day Funds.
• Use the federal stimulus money. The state will receive more than $1.7 billion from the American Recovery and Reinvestment Act. There was discussion and questions about when the state would receive this money.

Potential Spending Offsets Options

On Tuesday, the House Democratic Caucus was presented with a list of potential spending offset options regarding state employees to help them with the FY10 budget. These options included the following:

Personnel
-Agency Optional- An agency may reduce budget and have discretion to choose options (i.e. RIF, furlough, pay cuts, etc…).
-Reduction in force (RIF)- Lay off selected employees based on less essential programs/services, and job performance.
-State Agency and Higher Education Staff Furlough- Provide leave without pay for X number of days for state agencies and higher education institutions.
-Higher Education Faculty Furlough- Provide leave without pay for faculty members for X number of days for higher education institutions.
-Public Education Furlough- Amend annual contract days/instructional hours. Provide leave without pay for employees for X number of days for all staff.

Health Benefits
-Increase employee premium share – change current employer/employee funding ratio of health benefits. Employee premium share would increase.
-Enhanced High Deductible Health Plan- Add health savings account component to existing health programs.
-PEHP Reserve/Benefit Changes- Use a portion of the current PEHP funding reserve to fund some of the health care increase for FY2009-2010 one-time cost savings measure. Employee premium share would increase.

Retirement Defined Contribution
-Repeal Re-employment 401 (k)- This is also known as “double dipping”. Repeal the requirement that a re-employed retiree gets a full retirement contribution at the same time they are collecting a retirement allowance from URS.
-401(k) Contribution Freeze- Suspend for the next fiscal year the employer contribution into the employees 401(k) of members of the Noncontributory Retirement System. 1.5% of a member’s salary.
-Higher Education 401 (k) Freeze- Reduce the state’s 401(k) contribution to Higher Education (TIAA/CREF). Currently each employee receives 14.2% of their gross salary.

UPEA spoke to each of these issues and raised concerns regarding taking benefits away. This is a concern, because once a benefit is taken away it is historically not given back. It was also mentioned, if given the choice between RIF’s and furloughs, UPEA would be in support of furloughs because jobs would be saved.

Senate Bill 195

The Senate Retirement and Independent Entities Committee presented Senate Bill 195 today. This bill eliminates the 1.5% employer contribution to public employees' 401(k) for one year. Employees who were incentivized to leave the contributory system for the non-contributory system are excepted from the cut.

The bill's sponsor, Senator Dan Liljenquist, R-Davis, offered the bill for public comment, as required, but he then suspended committee debate by motioning to adjourn. The bill was not voted out of committee; however, it may be brought to the Senate floor by a majority vote. Liljenquist has made SB 195 an option for solving the state's budget problems.

Senate Bill 145

Sen. Greiner’s “Public Safety Retirees’ Death Benefit Revisions” passed the Senate last week, and passed the House today. This bill allows a public safety retiree to choose a death benefit of 75% instead of 65% of the retiree's allowance to be paid to the surviving spouse in exchange for an actuarial reduced retirement allowance. UPEA feels that this is just the beginning of creating parity for public safety retirees. This bill will now be sent to the Governor for his signature.

1st Substitute Senate Bill 126

As noted a few days ago, UPEA was able to work with Sen. Liljenquist to come up with a compromise solution and a substitute bill. Yesterday, it passed the full house and will be sent to the Governor for his signature.

Divestment of Retirement Retired for a Year

House Bill 211, sponsored by Representative Julie Fisher, R-Davis, sought to divest retirement fund investments that do business in Iran. Fisher ran a similar bill last year, HB 39, but it was tabled by a senate committee.

House Bill 211 came up today on the House Retirement and Independent Entities Committee's agenda. While the social cause is admirable, UPEA was prepared to oppose the bill on the grounds that it would increase portfolio volatility, increase administrative costs, conflict with URS's fiduciary responsibility and have potentially unintended consequences.

Fisher substituted the bill with language that creates a year-long study of the issue. The committee passed 1st Substitute HB 211 , even though it had a $10,000 fiscal note. Fisher will work with URS to decrease the fiscal note and make the bill debateable on the House floor. UPEA will track the issue next year to ensure that it does not put employees' retirement funds at any additional risk.

Advisory Council and Board of Directors

The Utah Public Employees’ Association State Board of Directors and Advisory Council met on Saturday, February 7, 2009, to discuss the state’s ongoing budget crisis.  Board members discussed how important it is for public employees to be proactive in helping the state resolve the crisis while preserving and limiting the impact on jobs.  Pending the outcome of final state revenue numbers State Board and Advisory Council members believe their input and suggestions could assist in reducing the number of RIF’s in state government.  The State Board and Advisory Council discussed certain options such as furloughs and benefit considerations.  As stated – saving jobs is the ultimate goal!

SB 126 Update

Senate Bill 126 first substitute sponsored by Senator Dan Liljenquist, was heard in the Senate Government Operations Committee today. UPEA opposed the original draft of the bill and met with Senator Liljenquist to discuss our concerns. The meeting resulted in changes to the proposed language with UPEA supporting the substituted bill.

The substituted bill contains the following:

-Allows an individual who has been RIF’d to be given preferential consideration when applying for a new position with the state.
-Preferential consideration is the equivalent of Veteran’s points.
-Preferential consideration is maintained as long as an individual has not accepted a career service position with the state.

Historically, preferential consideration stayed in affect for only one year.

SB 126

UPEA is tracking SB 126.  UPEA had met with the Senate Government Operations Committee.  The sponsor of the bill delayed the bill and will speak to it on Monday.  The Salt Lake Tribune wrote an article on SB 126, click here to read.

Health Systems Reform

On Tuesday UPEA met with Cathy Dupont, the General Council for the Health Systems Reform Task Force, who is currently drafting the bills relating to heath care reform.  Dupont noted that the Health Systems Reform Insurance Market bill (not yet numbered) currently creates health care reform specifically for the small employer.  The bill would give the ability for the large employer to participate in 2012.  Dupont explained, the bill would allow small employers to offer group plans through a HSA or 125 cafeteria plan.  Then employees would use an internet portal similar to Einsurance or Travelocity to shop for health insurance.  This would continue to be a group plan with group rating, not individual plans.  UPEA will continue to track this bill because it could potentially affect the public employee health plan; as this bill lays the groundwork for statewide health care reform.

Health and Human Services

The Health and Human Services Appropriations Subcommittee met Wednesday January 21st to discuss 7.5-15% budget cuts for FY2009 and FY2010 for both the Department of Health and the Department of Human Services. After much disagreement, the committee made a motion to accept the revised proposal from the Legislative Fiscal Analysts Office. The motion failed in the House and passed in the Senate.
First the committee listened to public comment then each agency spoke on the updated proposed budget cuts from the Legislative Fiscal Analyst Office. Dr. David Sundwall, Executive Director of the Department of Health expressed concern for the proposal to dissolve the Utah Health Department into other state agencies. Sundwall noted how during the Special Session he felt more included in the discussion, however now he feels like the cuts of 68% to the DOH are disproportionate. Rep. David Litvack had many issues with the “assumptions” that money could be saved by consolidating agencies to fill the void of the Department of Health. In addition, if the Utah Health Department is dissolved, Utah would be the only state in the country without a health department.
Similarly, Lisa-Michele Church, Executive Director of the Department of Human Services noted to the committee that a 7.5-15% budget cut, would result in large “paradigm shifts” regarding no longer receiving federal matching dollars and in how to run these programs with less employees.
Lastly, according the committees’ motion to accept the Legislative Fiscal Analysts’ proposed budget based cuts, funding for the Health Care Reform internet portal episodes of care analysis will be reduced in FY2009 and eliminated in FY2010. This could be detrimental to health care reform and individual’s ability to compare and shop for health insurance online.

Senate Bill 126

Senator Daniel Liljenquist is running Senate Bill 126 - “State Personnel Management Act Amendments” that would change the current reduction in force (RIF) statute to state “The department head of a reappointing department may disapprove the reappointment of a career service employee from the reappointment roster.” UPEA is strongly opposed to this bill. When an agency performs a RIF, it is does so because of budget constraints, change in workload, or lack of work. By statute they cannot RIF an employee due to differences in character or performance issues that would require dismissal for just cause. What purpose does it serve to deny a proven and qualified former employee a reappointment, for which the former employee is qualified? The potential of this change in statute could result in favoritism and/or discrimination. UPEA supports the current reappointment process because it allows for fair and unbiased decision making.

Issues

As the legislative session begins, The Utah Public Employees’ Association is busy protecting state jobs and benefits. This upcoming year looks to be challenging for public employees as economic woes have beset the state of Utah. The following issues are going to be of significant interest to UPEA due to the large impact that each could have on employee jobs, benefits, compensation, and rights. It is anticipated that the listed items will be discussed at some point during the legislative session.

The State Budget

There is discussion of laying off state employees and cutting employee benefits and salaries to help balance the budget this year. UPEA is currently supportive of the Governor’s budget proposal, which would cover the health insurance increase this year, limit the amount of cuts to state agencies, and protect benefits, compensation, and jobs. In a letter to Governor Huntsman signed by UPEA’s officers acknowledged the state’s current economic condition and the need to enact substantial budgetary reductions. The letter further stated that:

“Recent legislative announcements will require additional state personnel cuts. A reduction-in-force would further deepen the state’s economic crisis by adding to the unemployment rate and further reducing state revenues. The association believes it is in the best interest of taxpayers to consider alternatives. The UPEA State Board offered suggestions such as: eliminate positions through attrition; capture and redirect savings from reduced fuel costs; extend the life of fleet vehicles; review and reduce consulting contracts; enact a hard hiring freeze; suspend capital projects; draw from the “Rainy Day Fund”; and offer and early retirement incentive.”

Health System Reform

This year many legislators are trying to make changes to the health system, specifically regarding health insurance. The impetus for this is to create more accessibility and make health care more affordable for the citizens of Utah. There are currently over 300,000 individuals in the state of Utah without health insurance. Several legislators are looking at different possibilities to improve the current health care system; including changing the way health insurance is purchased and managed. This is something that UPEA will be watching very closely, due to the possible impact such changes could have on public employees’ health care and PEHP.

Changes to the Personnel Management Act

Due to the necessary recodification of the Personnel Management Act, UPEA will be watching for potential changes to the Utah Code affecting state employees. UPEA is anticipating potential changes to the pay scale system, market comparability studies, random drug testing, and the grievance process. UPEA will be closely monitoring any potential changes and making sure that employees are treated fairly.

Retirement

Until recently, law enforcement in Utah has received up to a 2.5% retirement COLA. Last year, the COLA was changed to 4% for state public safety employees. Local governments would need to opt into the 4% retirement COLA by the end of 2009. UPEA is supportive of HB 212 sponsored by Representative Carl Wimmer that would allow local governments the opportunity to opt into the 4% retirement COLA until December 1, 2012.

Another law enforcement issue is to change the spousal death benefit from 65% to 75%. Senator Jon Greiner will be running Senate Bill 89 to change the retirement benefit upon the death of an officer. UPEA is supportive of such a plan.

UPEA believes a bill may surface that would change the state employee defined benefit pension plan to a defined contribution 401(k) plan. A defined benefit plan requires the employee to contribute money into a retirement plan such as a 401(k) or a 457 account. A defined benefit plan is a pension program that is paid for and maintained by the state, and offered to employees who retire from the state. UPEA is supportive of studying the issue further, before any policy is created to change the retirement system.

Study these issues on our web page. State employees should make an effort to contact their legislators regarding these issues. UPEA will continue to provide updates regarding the issues, bills, and budget as we receive them.

If you have any questions, please visit our web site at www.upea.net or contact your UPEA representative at (801) 264-8732.

Monday's Legislative Committee Meetings

All UPEA Employee Representatives attended legislative joint appropriations subcommittees on Monday. The Legislative Fiscal Analysts presented recommendations for cutting the state budget by 15%. Agency directors testified to the impacts of these cuts and legislators asked questions to clarify certain points. Overall, Monday’s session was informative. The committees will meet again on Wednesday, January 21st, beginning at 9:00 a.m. to debate and vote on recommendations to include in an appropriations bill.

UPEA is gathering information from ALL PUBLIC EMPLOYEES to share with legislators about how the cuts will affect them and to suggest alternatives to losing FTEs. Please take the survey and encourage all public employees to take the survey. Visit www.upea.net to enter the survey.

UPEA’s President, Mark Murray, along with Todd Sutton and Audry Wood, met with Governor Jon Huntsman Jr. on Monday to show support for the governor’s budget proposal. The governor’s proposed 7% in state budget cuts underscores the necessity for reductions while serving the best interests of employees and the public they serve. The governor also supports funding a 10% health insurance increase and maintaining current wages.