MONTGOMERY — Gov. Robert Bentley has backed off his first major proposal for the 2013 legislative session starting Feb. 5.
The Republican governor began talking in September about passing financial incentives to get veteran state employees to retire and reduce the state payroll. Then during the holidays, Bentley said in a short press release he was pulling the proposal because the state was saving money in other areas.
His decision came after only a few hundred state workers expressed interest in such incentives and after the state pension system warned that the short-term savings on payroll might not be worth the long-term effect on pension and health insurance costs.
Bentley said he gave the plan a second look and decided the payroll was shrinking fast enough through departures and retirements.
“If we have the right number retire, then we will not have to give that incentive, and it will save the state money,” Bentley said in an interview.
On Sept. 19, Bentley got lots of media attention when he announced he would propose retirement incentives for state employees with 25 or more years of service. He didn’t have a goal in mind, but he said 1,500 retirements would cut the state’s expenses by $82 million annually. That’s $54,667 per worker.
On Oct. 15, he joined some legislators in Huntsville to announce details of the plan. For state employees who had at least 25 years of service and were eligible to retire with full benefits, Bentley wanted the Legislature to approve either payment of five years of health insurance premiums or $15,000 in cash payments if they retired. The health insurance premiums were designed for those not yet old enough for Medicare, and the cash for those 65 and older.
Republican Rep. Mac McCutcheon, of Capshaw, and Republican Senate President Pro Tem Del Marsh, of Anniston, said they would introduce the bill for the governor. Their goal was to pass the bill quickly, give state employees about two months to sign up, and then know the impact of the bill by the time the Legislature has to finish the state General Fund budget in May.
But then on Dec. 27, Bentley sent the press release saying he would hold off on the incentive legislation until further notice.
McCutcheon, the bill’s sponsor in the House, said the plan needed more evaluation and could be brought back later. Marsh agreed they would hold off for now.
Bentley attributes the decision, in part, to a hiring freeze. Before he took office, new employees weren’t being hired — but workers who retired or left were being replaced. So Bentley stopped replacing those workers, causing the payroll to shrink through attrition.
The drop has been significant, according to State Comptroller Tom White. He said there were 38,987 employees on the state payroll in December 2010, which was Gov. Bob Riley’s last full month in office, and 34,911 in December 2012 — a drop of roughly 4,000, or about 10.5 percent.
Employees interested in the retirement incentives filled out confidential forms to express that interest, but the reception appears to have been lukewarm. About 300 filled out the forms — far less than the more than 2,600 workers who took advantage of the more lucrative retirement incentives that Republican Gov. Fob James got enacted in late 1998.
“I don’t think it was well received,” said Mac McArthur, executive director of the Alabama State Employees Association. He said all but one of the state employees who talked to him about the program was already planning to retire soon, and that may have influenced Bentley’s decision to back off.
“I just didn’t see where they got any savings,” he said.
The governor said he never saw numbers indicating how many were planning to retire anyway. But staff research found that if incentives were given to people who already had planned to retire within three months, the state would actually lose money, he said.
David Bronner, CEO of the Retirement Systems of Alabama, had urged Bentley to go slow. He said that if people retire early, the state may save on payroll if the worker doesn’t have to be replaced. But that also means the worker is paying into the state pension system for fewer years before drawing benefits. That could lead to more costs for the state.
“Sometimes what appears to be a cost savings is just cost shifting,” he said.
He recommended the governor let attrition and his state hiring freeze gradually reduce the payroll. And that is ultimately what the governor decided to do — for now.
“What we are really doing right now is just postponing it and making a final decision later,” Bentley said.
|High School Sports||@DecaturPreps|