R.G.’s Take: What the Lean House Budget Bill Means for State Employees
Mon March 28, 2011 8:28 am

(Editor’s note: Every week, for the remainder of the legislative session, BurkaBlog will be publishing an original column by R.G. Ratcliffe, who was the state political reporter for the Houston Chronicle for twenty years. During those two decades, I’ve known R.G., who resigned from the Chronicle in February to work on a book, to be one of the most trusted voices in the Capitol press corps. I’m thrilled to have him posting here. His columns will offer a deeper take on one of the week’s top stories. –P.B.)

This session’s budget crunch has turned into a twisted episode of “The Biggest Loser,” the reality television show in which overweight contestants compete to see who can lose the most weight. At the Capitol, the question is, which parts of our state budget will lose the most money in the plans being floated to bridge the $27 billion shortfall. Who will be our biggest loser? Most of the attention has been on teachers, children, and the elderly in nursing homes. Rallies at the capitol and heavy coverage on the nightly news about the impending disaster these groups could face from state cuts have put them at the forefront of the debate. But as the House prepares to vote on a bare bones available-revenue-only proposal next week, there’s another, more often overlooked contestant on the show—Texas’ 154,000 state employees, many of whom could face effective wage cuts of up to 40 percent under current Texas budget plans.

Who are these folks? Well, they are child protection caseworkers, prison guards, tax auditors and rank and file bureaucrats. They work for the government. In a staunchly fiscal conservative, Tea Party world, these employees are often viewed skeptically.

The governors of Wisconsin and New Jersey are trying to break public employee unions, and the governor of Maine has ordered a state building mural removed because it celebrates the history of organized labor in Maine. The story is similar in Texas, where state employees also are being treated as something like a plague on this year’s state budget—even though our public sector employees lack collective bargaining and, for the most part, are chronically underpaid. Nonetheless, the Texas Conservative Coalition Research Institute, a think tank for Republican lawmakers, issued a report in January that said that “generous” employee perks needed to be “curtailed” to balance the budget without taxes:

While the state undoubtedly requires a large number of employees to administer even its core functions, keeping this number as low and efficient as possible is paramount. Every state employee entails an additional fiscal burden for state taxpayers given the generous salary, longevity pay, retirement benefits, health and life insurance, and overtime pay to which almost every state employee is entitled. It is these costs that grow without regard to the level or quality of service provided to Texans which must be curtailed both in order to balance the budget without raising taxes, and to keep the state fiscally sound for years to come.

It’s impossible to argue with the idea that the state should aim for efficiency and value when spending the taxpayer’s money. The question is: what is efficient and what is punitive? Beginning this Thursday, the House is set to debate several budget bills that include significant cuts to state programs. As many as 10,000 state workers may face layoffs because of these cuts, and a Legislative Budget Board analysis last week estimated that over the next two years more than 342,000 government worker jobs may be lost at all levels in Texas (state, higher education, public schools, and municipalities).

State workers who survive the layoffs would see their salaries trimmed three different ways. One proposal would strip state workers of their longevity pay, which would amount to about a $100 per month pay cut for a 15-year employee. Another proposal, by Appropriations Chairman Jim Pitts, would give state agencies the power to implement furloughs. A two-day-a-month furlough policy would effectively become a cut of a month’s pay over the course of a year. Pitts told me that avoiding cuts like these would be difficult given the anti-revenue mood of House members. “Some of the people didn’t want to vote for House Bill 4 unless we did furloughs,” he said, referring to the supplemental appropriation bill.

But the biggest potential whammy has to do with, surprise, surprise, health insurance. Management of the state’s health care system is a little confusing, but bear with me. The Employees Retirement System of Texas (ERS) provides health insurance not just for retired state staff but also for almost all of the current workers at state agencies, ranging from those in the governor’s office to those in the prison system (not to mention those staffing the offices of state’s legislators). ERS currently faces a $591 million shortfall, and one of the proposals set to the House floor would bridge that gap by significantly increasing the state health plan’s deductible. As outlined in an ERS brief, the potential out-of-pocket medical liability for state workers would be $11,900 a year for family coverage before the plan kicked in at 100 percent coverage. Since the average state employee earns $39,219 a year, this would amount to a major hit. After paying federal income taxes the employee could face having a third of his remaining take-home pay go to basic medical coverage. In that scenario, employees likely would forgo preventive care and save their state insurance only for catastrophic coverage.

“That’s bankruptcy territory,” Andy Homer, legislative director of the Texas State Employees Association told me. Pitts claims that he’s looking at making up part of the shortfall by reducing what the state pays for an employee’s health insurance policy from 100 percent to 90 percent and by instituting a tobacco user surcharge. But even these measures would leave the ERS short about $300 million. And Homer said the more likely outcome would be for the state to go from paying 100 percent all the way down to 80 percent. (The state also currently pays for 50 percent of an employees family’s health insurance; Homer sees that going down to 40 percent.) But even with these cuts, which could devastate some families, Homer said that the state health insurance program would still face a shortfall.

So are these proposed cuts an example of the state finding a necessary and tolerable efficiency? Let’s look at a specific example. For a prison guard  with a take-home pay of $1,825.17 a month, the change would cost the guard an additional $186 a month to cover himself, his spouse and two children. Homer said that is before he has ever accessed the health care system. But Pitts pointed out that the health care plan for state employees is generous compared to what the state does for retired teachers or what private industry does for its employees. “There are not many industries that pay all of the employees’ coverage and half the family,” he explained.

On the other hand, one of the selling points of the public sector, which rarely delivers large salaries, is a good, stable benefits package. This is what the state uses to attract skilled workers. State employees have received pay raises over each of the past four years of between two percent and four percent, but there were no raises in the three prior years. Homer said state employees often have tolerated low salaries because of good benefits. He said cutting benefits might prompt the 18,000 retirement-eligible employees to quit immediately, putting an additional strain on ERS.

“The overall magnitude of the shift of costs onto state employees is significant,” Homer said. “The Biggest Loser” is about who can get the most fat off their carcass. But in the case of the state employees who survive the impending layoffs, the fat they donate to the Legislature may come from their daily bread and butter. -R.G. RATCLIFFE

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