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Generous government employee benefits deserve review

Generous government employee benefits deserve review

Wayne Hoffman
November 1, 2009
Wayne Hoffman
Author Image
November 1, 2009

This week, part-time state government employees begin taking on a bigger responsibility for their health insurance costs, a move that I've said before makes sense for the folks paying the bill – the taxpayers.

But the problem with the ongoing dispute over whether part-time state employees should pay higher premiums than their full-time peers is this: it's just a fraction of the discussion state lawmakers should be having.

Idaho has an incredibly generous health insurance and retirement benefits package for its employees. That generosity comes at a cost, and it is a cost that's nearly impossible to ignore while lawmakers debate how to pry $150 million or more out of the state's budget in order to make it balance.

Taxpayers still pay 92 percent of the health insurance premiums for full-time state workers. Taxpayers are still subsidizing the public employee retirement system at a rate of about 10.4 percent for employees who work in state government and the public school system.

Taxpayers could potentially save millions of dollars if the retirement contribution rate paid by employers were lowered and if state employees were responsible for a slightly higher percentage of their health care.

First the health care issue: The state government is spending about $165 million a year on employee health benefits. When medical costs including deductibles, dependents and co-payments are plowed into the mix, state taxpayers subsidize about 77 percent of the total cost of medical care for the state's workforce and their families. Folks in the private sector should be so lucky.

According to an analysis from the state Department of Administration, the state government could have saved as much as $14 million in 2010 had the state increased the employee share of health care costs by just 2 percent. Making state employees — instead of taxpayers — responsible for 30 percent of employee health care costs has the potential to save taxpayers $40 million a year. This says nothing about the savings that might occur at other local taxing districts with comparable health insurance plans.

Now the retirement benefits: State government and public school employees contribute to a public pension fund, as do their employers. The employees pay in about 6.2 percent of their salaries while the employers, meaning government agencies that live off of taxpayers, pay in 10.4 percent. The contributions are designed to keep the fund solvent to make payments to retirees.

If the Legislature were to change the mix of contribution rates by just 2 percent — lowering the amount paid in by the government and increasing the amount paid in by employees — it would save taxpayers (at the state and school district level) $20 million a year, according to an analysis by the state public employee retirement system.

That's not under consideration right now. But the fact is, even if the state retirement contribution were lowered by 2 percent, it would still be more generous than the 6 percent retirement contribution of many private sector employers.

The question for policymakers is whether taxpayers should be forced to continue to subsidize such a generous employee benefits package at the expense of taxpayers. It's a discussion lawmakers didn't have in 2003 when state budget was similarly wracked. It would be unfortunate to not have this discussion now.

Wayne Hoffman is the executive director of the Idaho Freedom Foundation, a nonprofit, non-partisan think tank. E-mail him at [email protected].

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