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.