Budget cuts will force the state to either reduce benefits or shift more costs to state workers, the Public Employee Benefits Program board was told Thursday.
Director of Administration Andrew Clinger told the board the governor has asked members to submit a proposed budget that does not increase the amount the state pays per employee and per retiree for the 2010-2011 biennium.
Member Randall Kirner asked whether there are other options to meet the directive than reducing benefits or shifting more costs to employees.
"I think everything we come up with will be a flavor of the two," said Executive Director Leslie Johnstone.
"It feels like there's going to be more cost shifting to the level we are willing to do that and our participants are willing to," said Kirner.
Member Angus Mac Eachern questioned the mandate. "We have to charge appropriate premiums," he said.
Clinger said he doesn't believe the board can ignore the budget directives.
Benefits make up 13.3 percent of total personnel costs for the state. This biennium, that totals $670.6 million.
The state sets the premium amount for the program, not the board, Clinger said.
Clinger said all state agencies have been asked to present budgets showing the impact of a 14 percent reduction to operating budgets. He said the public employee program isn't directly a general fund agency, but its premiums are paid from the general fund, highway fund, federal and other revenue sources on a per-employee basis.
"The one thing we know is there (are) going to be no further state revenues," said Chairman Ron Swirczek. "But we do have a stabilization reserve. If we use that and keep the benefits at the same level - it's something we could consider given that revenues may begin to recover."
Public Employee Benefits Program financial officer John Hager advised such a move.
"My gut feeling is the reserve we have will not completely support the reduction," he said.
And member Julia Teska pointed out it's not smart to use reserves to cover a shortfall in ongoing costs.
Clinger told the board the budget office wants a dollar amount for the PEBP budget by Sept. 1. The board set hearings Sept. 11 and Oct. 2 to work out the details of how to fit the plan within that budget amount.
• Contact reporter Geoff Dornan at email@example.com or 687-8750.
State workers to feel crunch
Budget cuts will force the state to either reduce benefits or shift more costs to state workers. Employee Benefits Program board Executive Director Leslie Johnstone said it is likely a mix between the two options will be the solution for the 2010-2011 biennium