A Performance Audit of Eligibility for Public Safety Retirement

On Tuesday, December 22, 2009, UPEA staff attended the Legislative Audit Subcommittee that had gathered to hear a Performance Audit of Eligibility for Public Safety Retirement. The audit was commissioned due to statutory language that provides for exceptions allowing some employees to stay in the Public Safety Retirement System (PSR) even though their jobs may not be public safety related positions.

In Utah Code 49-11-201(8) it reads,

“A public safety employee who is transferred or promoted to an administration position not covered by this system shall continue to earn public safety service credit in the system as long as the employee remains in the same department.”

In the audit, the Legislative Auditor General’s Office identified 12 positions that include 37 employees on the PSR that should be reviewed and potentially moved to the Public Employees’ Retirement System (PERS), because the positions do not meet the criteria set in statute for the PSR system. Utah Code indicates that an employee must meet the following conditions for PSR membership:
• Holding a full-time position in a recognized public safety department.
• Completing a certified peace officer training program.
• Carrying out the primary duties of a peace officer, correctional officer, or special function officer.
• Retaining employment that involves risk to life or personal safety.

The Legislative Auditor General Office argued that in the 12 positions identified, there currently is no safety risk involved in their job functions. In fact, they stated that these positions were performed in normal business-like settings.

The report discusses the additional costs that may be attached to the PSR. The PSR system allows for the 20 year retirement versus the 30 year retirement eligibility involved with the PERS. It also states that “the employer contribution to PERS for a full-time employee making $22.25 per hour would be $253 per pay period (about $6581 per year). The employer contribution to PSR for the same employee would be $537 per pay period, or about $13,967 per year.”

The audit recommended that Utah follow the lead of other states by modifying the statute to automatically move individuals to the PERS system that should not be in the PSR system, and using a conversion formula to factor in service in more than one plan.

Utah Retirement System’s Executive Director, Robert Newman, sustains the audit findings and stated that he agreed the PSR system should be for Public Safety positions as identified in statute. In addition, he supports the recommendations given to the Legislative Audit Subcommittee.

The Legislative Audit Subcommittee sent the audit to the Legislative Retirement and Independent Entities Committee for further review.  UPEA will closely monitor any action that may be taken due to this audit.
For copy of the audit you can click here.
To listen to the Legislative Audit Subcommittee discussion click here.

Discussion with Department Heads

On Tuesday, December 15th Kory Cox, Employee Relations Representative with UPEA, spoke with Tom Patterson, Executive Director of the Department of Corrections. In the brief discussion, Patterson indicated that they did not have a plan in place to implement the 3% reductions as of yet. However, he was glad that they had taken some early strides to cut their budget through the stoppage of feeding employees. In addition, he indicated that the department will most likely stop purchasing bottled water, due to the specific mention that the Governor made to water availability. Director Patterson also stated that he was glad that the cuts were temporary, as it is his priority to keep people employed. Depending on the final analysis of the budget plan, furloughs may be needed between January 1st and June 30th, 2010 to make up any differences in the 3% cuts that are needed.

On Wednesday, December 16th Cox also met with the Commissioner of Public Safety, Lance Davenport. In our meeting we discussed several employee issues, but mainly focused our attention to the mandated 3% cut to the budget and the next fiscal year. In our discussion regarding the decrease of 3% to the Public Safety budget, Davenport indicated that he has not yet formulated a concrete plan of how to implement the cuts. The Commissioner indicated that he has been thinking long and hard about the impacts to each of the divisions in the Department of Public Safety. He indicated that various items will be looked at, such as educational assistance and other incentives. Last on his list, simply because of the financial impact to employees, would be furloughs.

Both Department Heads were very gracious in their discussions with UPEA, and seem legitimately concerned for the welfare of employees, morale in the departments, employee benefits such as retirement and health insurance, and being able to provide services to the public.

Links to Governor's Budget Recommendations

As I have been looking over Governor Herbert's recommendations for the remainder of FY10 and FY11, I have been impressed by his ability to keep the cuts to a minimum. However, some agencies are being hit harder than others. For example: The Corrections (Department of Corrections, Board of Pardons and Parole, and Juvenile Justice Services) category is seeing a slight increase in its operating budget from FY10 to FY11 of 0.8%. Public Safety, on the other hand, is seeing a marked decrease in its budget from FY10 to FY11 with a 9.1% reduction in funds. Each of these changes from year over year come after the 3% reduction that will take place from January 1, 2010 to June 30, 2010.

I have linked a copy of each of the Governor's budget recommendations for your reference. Please don't hesitate to contact UPEA if you have any questions.

Corrections

Public Safety

I am scheduled to meet with the Commissioner for the Department of Public Safety tomorrow, to discuss the potential budget issues that they may be facing, and how they may impact employees. In addition, I am in the process of scheduling another meeting with Tom Patterson, Executive Director, with the Department of Corrections. As those meetings occur, I will update the blog.

Governor's Budget Recommendation Notes

The Governor said there is a budget gap of slightly less than $700 million; not the $850 million that was anticipated. Since the legislative session however, there has been a revenue decrease of $157 million for the FY2010 budget year, necessitating the 3% cuts discussed above.

FY2010 Budget Reductions
Agency Reductions - $39 million
Public Education - $72 million
Bonding for Roads - $25 million
Medicaid Settlement - $20 million
OPED/Termination Pool - $6 million
Reduce USTAR - $5 million
Restricted fund balance - $16 million

However, the Governor's Office of Planning and Budget anticipates that the FY2011 budget will increase or flatten, due to additional revenues from the recovering economy. The Governor’s office estimates $191 million in revenue by the end of FY2011, which is a $34 million net growth for FY2011. However, the state will continue to weather shortfalls until then:

FY2010 Shortfall
Revenue Shortfall - $157 million
Additional Shortfall – $6 million
Supplemental Shortfall - $20 million
Total Shortfall - $187 million

FY2011 Shortfall
Public Education - $293 million
Higher Education - $66 million
Other State Agencies - $151 million
Total Shortfall - $510 million

Total Shortfall for remainder of FY2010 and FY2011 = $693 million

The Governor’s FY2011 Budget Recommendations:
· Fully funds the budget
· Protects public and higher education
· Avoids exacerbating the budget and its structural imbalance
· Covers needs in state agencies
· Preserves $253 million in the Rainy Day Fund
· No tax increases

The Governor's FY2011 budget priorities would cost an estimated $510 in his $11 billion budget.
1. Public Education - $293 million.
2. Higher Education – $66 million.
3. Other State Agencies - $151 million.
a. Corrections - $21 million.
b. Human Services - $18 million.
c. Workforce Services - $2 million.
d. Health - $38 million.

The FY2011 recommendations also included a list of additional revenue streams to enhance revenue growth within the State:

Stop the Sales tax vendor discount (1.31%) that was implemented several years ago. This will provide the state with $20 million in on-going funds.
Begin a quarterly estimated tax filing for self-employed persons. This would provide an additional $125 million in one-time funds.
Bonding for Roads, freeing up cash in transportation. This would provide $25 million in FY2010 and $75 million in FY2011.
Tap into the Rainy Day Fund, providing $166 million in one-time funds.
Enhanced Federal Medicaid Assistance Program funding of $56 million in one-time funds.
Using the student population account for $31 million in one-time funds.

The additional revenues amount to $510 million.

When asked the question what will happen with the retirement account, Governor Herbert said his budget accounts for the contribution rate increase (2%) that URS requested this year.

Governor Herbert stated that it was important for him to live within the State's means, retain some money in the Rainy Day Fund, not increase taxes, and keep Public and Higher Education at the 2010 funding level, while still maintaining service in each of the state agencies.

Governor Herbert's Budget Recommenations

Governor Gary Herbert presented his budget recommendations today, Friday, December 11, 2009. UPEA is grateful for the governor’s emphasis on temporary measures to fix the current shortfall in the FY2010 budget. Based, in part, upon UPEA’s efforts, the governor recognizes that preserving jobs is a high priority.

Utah Public Employees’ Association has had regular meetings with Governor Herbert and the Office of Planning and Budget to discuss the impacts of the state’s fiscal projections. Additionally, UPEA Employee Representatives have met with agency heads to discuss the impacts of projected cuts.

As Governor Herbert released his budget proposal for FY2011 today, he took some swift action to plug some holes in the FY2010 budget through an executive order. Due to a very large revenue gap, Herbert is asking all agencies to cut “personal services” by 3% for the remaining 6 months in the fiscal year. The agencies will be given the discretion on how to make the cuts.

UPEA’s efforts will continue now that the governor has issued an Executive Order requiring agencies to reduce their discretionary budgets and enact the 3% cut. The governor encouraged department heads to find creative means for fixing the budget until June 30, 2010. UPEA will be working with directors and agency staff to ensure they are balancing fiscal needs while protecting public employee livelihoods.

Herbert’s budget recommendation includes appropriations to cover the 2% retirement contribution rate increase; and an appropriation to meet employees halfway with the $23 million PEHP health care increase. Based on the governor’s proposal, employees would only be responsible for 6% of the proposed 12% premium increase, which could result in a 90/10 employer-employee premium split. This is a good starting point for negotiations during the legislative session.

Subsequent to the end of FY2010, the Governor’s Office of Planning and Budget anticipates a strong recovery for the State Utah. The state will see $34 million in net growth for FY 2011.

4 Day Work Week

Governor Herbert announced yesterday that he was going to continue the 4-day workweek program. I have linked the press release and also the survey that was helpful in determining the continuation of the 4-day workweek.

UPEA Public Employee Salute

Please congratulate Lt. Doug Anderson for winning this week’s Public Employee Salute. Lt. Anderson works for the Department of Public Safety and has been a public employee for over 20 years.

Lt. Anderson approaches his assigned duties with astuteness and professionalism. He goes far and above what is expected of an employee. In addition to his high standards of excellence, Lt. Anderson is a hero. He recently responded to a downed employee experiencing a medical emergency. The employee’s condition quickly deteriorated into cardiac arrest. Lt. Anderson performed CPR and attended to the person ’s injury until medical help could arrive. Lt. Anderson’s actions saved the person ’s life.

Lt. Anderson deserves high praise for his level of performance and his heroism.

Double Dipper Position

From what I understand, there has been much discussion about where UPEA stands on the “Double Dipper” issue. As many of you are already aware, on 11/11/09, an audit of the Cost of Benefits for Reemployed Retirees and Part-Time Employees was presented to the legislative Audit Subcommittee indicating that there was a significant cost associated with “Double Dippers” in the state of Utah. This information was also presented in the Retirement and Independent Entities interim committee on 11/12/09.

The UPEA State Board of Directors recently took a position on the “Double Dipper” issue. Last Saturday (11/14/2009) the State Board unanimously voted to oppose any legislation that will change the benefit for current employees who are reemployed retirees. However, as UPEA does not know what the proposed legislation will contain, and until a bill is released, it is difficult to know how the legislation will affect current reemployed retirees.

In the meantime, UPEA is educating and lobbying legislators as to the benefit the state receives from employing retirees. Also, we are in the process of compiling numerous examples of employees who have been reemployed into the workforce for a positive public relations campaign in the media. There is a difference between individuals who retire in place, such as the abuses the media has recently portrayed, and employees who have dedicated themselves to a career in state government and are now applying their institutional knowledge to better the workplace and serve the public.

Links to Retirement Issue

I just wanted to provide the links regarding the retirement issue, that may help you in understanding the debate more fully.

Actuarial Analysis of Retirement System
http://www.le.state.ut.us/interim/2009/pdf/00001484.pdf

Legislative Analysis of State Compensation Package
http://www.le.state.ut.us/interim/2009/html/00001363/sld001.html

Audit on "Double Dipping" Benefit
http://le.utah.gov/audit/09_17rpt.pdf

I hope that this information is helpful. If you have any questions, please don't hesitate to contact the UPEA office at (801) 264-8732.

Retirement and Independent Entities Committee Meeting 11/12/09

Click Here for Full Audio

Retirement Position Statement

Mr. Chairman, members of the Committee – thank you for allowing me an opportunity to address you on this vital and sensitive topic. My name is Sheri Watters. I have been a public employee for 24 years. I currently hold several positions with the Utah Public Employee’s Association and serve as the Vice-Chair of the Retirement Membership Council. Today I am representing the view points of UPEA.

As most of you are aware, the genesis of today’s retirement system had root in 1915 when the Public Teacher’s system was authorized by this body. In the 1940’s state employees and others were authorized to be part of an expanded system. On March 8, 1967, over 40 years ago, the Legislature passed SB 205, “Public Employees Retirement System” thus consolidating various pension systems and allowing all state and local government employees and educators to be eligible for retirement coverage. Currently there are over 181,000 members of the retirement system, this encompasses active, retired, and terminated vested employees…including teachers, janitors, cops, firefighters, truck drivers, computer techs, legislators, therapists, and the list goes on and on.

Public pension systems across the country are experiencing stress. Utah is not alone in this dilemma. In an article about the plight of public employee pension systems, officials in Ohio stated it would take until “infinity” to get the investments back on track. Other systems such as California and West Virginia are merely a train wreck waiting to happen. Luckily, Utah has continued to be well managed by level-headed investors and by legislators being mindful of this important benefit. Our system is currently 86% funded. This number has fluctuated over the years. In 2000 the fund was at 103% funded but yet in 1990 it was as low as 74.6%. I believe that economic stability will return and the fund will recover based on historical data. Will there be another downturn? Will there be a catastrophic event in the Salt Lake area? Not even the actuaries can predict these types of unknowns.

Surveys and task forces across the country continue to show that a defined benefit program is the retirement option of choice. There are numerous reasons why. One reason is for attracting and retaining qualified and dedicated employees. We know that high turnover rates mean higher training costs. A DB plan allows the state to have a degree of control on who leaves employment and when. It is also important to note that the vast majority of Utah citizen retirees remain in the state and contribute an important sum to the state economy as well as continue to pay taxes in Utah.

State DHRM in its latest survey noted that “both health insurance and the retirement plan were rated as very important for retention – on a scale of 1 to 3 the state retirement plan was rated with an importance of 2.75 and the health plan as 2.83.” In addition, the survey showed the importance of the retirement plan for retention is high across all ages and years of service groups, which may indicate that even the younger groups do have an appreciation for the current plan.

The Utah Public Employee’s Association is cognizant of the difficult issues facing the legislature during this upcoming session…the budget, education, transportation, taxes, just to name a few. UPEA also recognizes that there are thousands of public employees across the state who have devoted their lives and careers to public service. We will continue to oppose any legislation that may negatively impact the current retirement system or reduce an employee’s take home pay to maintain these benefits. We are also highly concerned about changes which could cause an erosion of the merit system. This is our primary goal. We believe that a comprehensive study should be conducted to evaluate the cost-effectiveness of adjustments to the system to include changes for those who have retired and rehired and those who are not yet vested or not yet hired. Making structural changes to the current pension system without extensive research and cost analysis is not, in my opinion, in the best interests of all stakeholders.

As conscientious taxpayers/citizens of the State of Utah we know that the Utah Retirement System is a well-managed program designed and refined over many years to retain and attract quality individuals to aid in workforce stability and promote orderly turnover.

We believe that when the Utah Retirement System was established, legislators were concerned with looking at the long-range picture. We owe it to those individuals who have gone before us, those currently in the workforce and those who will replace us in the future to maintain a pension system founded on sound business principles, fiscal responsibility and fair market value that will continue to help Utah maintain its reputation for being a well-managed state, to protect our AAA bond rating and to continue to educate our children and grandchildren with qualified and competent teachers. We hope that you will see fit to choose a wise course of action as changes to the system today will ultimately affect individuals through the next decade and beyond. Time is not our enemy.

Thank you.

Comment on this: Click Here

ULEC Letter

This was a copy of a letter presented to the Retirement and Independent Entities Committee on 11/12/09 by the Utah Law Enforcement Coalistion (ULEC). The UPEA Law Enforcement District holds a board position on the ULEC.

Dear Representative,

On behalf of the Utah Law Enforcement Coalition (ULEC), I wish to express concern about harming a nation leading Utah Retirement System by making rapid changes that could have unintended, long term, negative consequences for a short-term problem. The ULEC opposes legislation which reduces or limits the benefits of the URS defined benefit plans or which may have the effect of increasing the cost of these benefits to its members.

Representing law enforcement officers throughout the state, the ULEC board agrees that careful evaluation and consideration for the long term implications of potential changes must be taken into account. Short term reactions to the perceived crisis in the financial markets would be harmful to our retirement system. Therefore it is our position that prior to any changes being made to the system, that a professional study be performed to analyze the long and short term effects of such modifications.

After careful review, our organizations conclude that the current system serves to attract and retain high quality employees while protecting the taxpayers. Furthermore, due to the prudent funding principles established by the Utah Legislature over several decades, the Utah Retirement System is sound. Changing the current retirement system, in our opinion, does not serve the State.

Please do not hesitate to contact me with any questions or concerns.

Thank you for your support.

Retirement Issues

In light of the retirement discussion, many ideas are coming forward to the legislature. UPEA has taken the stance that at this point in time no changes should be made, because no one has enough information on what will solve the problem, or if the economy will continue to rebound. For your information, I have linked the actual proposition of the League of Cities and Towns.

On 12 November, 2009 the Legislative Retirement and Independent Entities Committee will be meeting at 9:00 AM to further discuss the retirement system. Their agenda contains the following information:

• Compensation for State Public Employees
• Utah State Retirement Systems Trust Fund Financial Status and Alternative Actuarial Models.
• A Performance Audit of the Cost of Benefits for Reemployed Retirees and Part-Time Employees.
• Retirement System Key Issues and Reform Options - Updates
• Other Committee Business

For more information regarding the Retirement and Independent Entities Committee meeting, I have attached their link here.

Meeting with DOC Executive Director

UPEA staff member, Kory Cox, and District President, Wayne Cox, met with Department of Corrections Executive Director, Tom Patterson, and Deputy Director, Robyn Williams, on 29 September, 2009. In the meeting a couple of items were addressed:

• Budget issues for the Department of Corrections
• Morale in the Department of Corrections

Wayne Cox brought up the fact that several employees are very worried about their jobs, due to the economic situation in the state of Utah. This is causing many employees to be ill, and in effect less productive on the job. Patterson indicated that this was new information to him, and is open to new ideas on correcting this problem.

Wayne also noted concern for safety of the corrections officers, due to the issue of programming being cut. Programs help rehabilitate inmates, and cutting this type of programming can create boredome and problems within the prison system.

Kory Cox asked Patterson about the budget outlook for FY2011. Patterson indicated that the budget, depending on final budget projections, looks bleak. He did indicate that he does want to avoid layoffs as much as possible. He would much rather see a furlough of some sort. He discussed changes that have been instituted this year with the uniform vouchers and meals to staff and volunteers. However, Patterson noted that ifthey are required to cut as much as 5% they could see an early release of prisoners or a closure of a pod. In addition, the Department would not be able to open a parole violator center, thus decreasing bed space at the Draper and Gunnison facilities.

Kory also indicated that UPEA is interested in helping out with the morale issues and where we can with the budget situation by educating legislators.

UPEA was glad to meet with Patterson and Williams, and hopes to be able to keep an open relationship with the Administration of the Department.

Government Ops on 4 Tens

News organizations have widely reported on the savings from switching to the 4-tens work week, but they missed one important note: employees deserve mega kudos for saving the state over $4.1 million!


Thanks to public employees, Huntsman’s experiment has also made some energy savings—but not as much as was expected. Department of Human Resource Management’s Executive Director, Jeff Herring, said that the unrealized savings are due, in part, to falling energy prices. Remember the $3+/gallon gas?


Utah Public Employees’ Association was the only association representing employees at the Wed., Oct. 21st Government Operations Interim Committee. UPEA is advocating that employees receive recognition and consideration for their sacrifices in making the 4-tens experiment a success.


In the next few weeks, Dan Jones and Associates will conduct a poll of taxpayers to assess whether or not they favor the 4-tens. On one hand, who wouldn’t favor $4.1 million in savings? On the other hand, many taxpayers have a “once scorned…” mindset. Dan Jones & Associates has had trouble wording their survey to exclude respondents’ experiences with other levels of government, such as the county or federal government.

UPEA will keep you informed of all the developments regarding the 4-tens.