Wisconsin has become a poster child for what a state might be doing to solve their budget shortfalls. With a population of 5.7 million people Wisconsin is facing a budget deficit of at least $3.6 billion over the next two years. Oregon, with only 3.8 million people, has a budget shortfall of at $3.5 billion.
Wisconsin Governor Scott Walker, who vowed to take the state in a new direction when he took office just eight weeks ago, has lived up to his promise by drafting legislation that includes prohibiting most government workers from collectively bargaining for anything other than their salaries, and demanding pay increases above the Consumer Price Index measure of inflation. To bypass the salary cap would require voter approval. Additionally, Wisconsin’s proposal would stop unions from requiring public employees to pay union dues.
Last week, Republicans in the Wisconsin Senate side-stepped a boycott by opposition Democrats (a few had left the state three weeks ago to avoid a vote) and approved the curbs on union powers.
Wisconsin State workers currently pay 6 percent of their health benefit costs and are being asked to increase the employee’s portion and pay 12 percent of their health care premiums. (Kaiser Family Foundation states the national average contribution toward healthcare policies among government and private workers is nearly 30 percent.)
Wisconsin State workers currently pay 1 percent of their retirement plan costs and they are being asked to increase employee contributions to 5.8 percent. (The national average for government worker contributions toward retirement plans is 6.3 percent.)
In Oregon workers currently pay nothing (0 percent) toward their health benefits. (Oregon is the only state in the US that pays 100 percent of its employee health benefit and PERS costs.)
The average monthly cost per Oregon 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.
Surveys indicate that the public is in largely favor of state employees paying more for their health insurance and more toward their pension fund (as everyone in the private sector has had to do).
Obviously both Wisconsin and Oregon face severe revenue deficits and the need is apparent that state employees must step up to the plate and pay their fair share of high group medical insurance and retirement plan costs. As a comparison employees in other states pay a portion of their medical premiums: Washington – 12 percent, California – 18.9 percent, Idaho – 12.7 percent, Montana – 24.5 percent, Nevada – 17 percent, Utah – 5 percent, Arizona – 11.5 percent. And yet Oregon state employees pay nothing?
If Oregon’s state employees paid the western states’ average of 15 percent toward their own medical insurance benefits plan, it would save the state $250 million in the next budget. (Note: State employees do not include teachers, whose benefit packages are set by their local school districts.)
In addition to medical benefits, Oregon’s state employee retirement plan (PERS) costs are also paid entirely by the State of Oregon. Oregon’s retirement system has actually 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. Those employees hired from 1996 to 2003 have less extravagant “Tier Two” PERS plans and state employees hired since August 2003, have more modest PERS plans than either Tier One or Tier Two plans. The state’s anticipated cost for the defined benefit plan will be $950 million in the 2011-13 biennium.
If Oregon were to pay only for the defined benefit plan, while enabling state employees the option of paying up to 6 percent of their wages toward their own defined contribution plan, $334 million be saved.
Following the Wisconsin vote Governor Kitzhaber reaffirmed his commitment to workers’ rights, family wage job creation and a sustainable health care delivery system in an address to Oregon workers gathered on the steps of the State Capitol. The Governor promised Oregon would not go the route of Wisconsin and applauded state workers for their contributions to the state. He emphasized the importance of role collective bargaining plays in managing workplace issues at a negotiating table with mutual respect.
Oregon doesn’t need to go the way of Wisconsin to facilitate change in the way our state employees are compensated. However, during these challenging economic times should Oregon be paying 100 percent for two retirement plans for every state employee? Should Oregon be paying 100 percent of healthcare insurance for state employees?
A much more equitable solution would be for state employees to participate in helping Oregon with its shortfall by beginning to pay a portion of their benefits comparable to other states and private business. Reforms are long over-due on this politically charged controversy. pha
Legislation to Watch:
SB 702 would require state workers to begin paying 15 percent 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.
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.
