A news service for the people of Michigan from the Mackinac Center for Public Policy

(Editor's Note: The following is a news release from the State Budget Office.)

FOR IMMEDIATE RELEASE                                                          

September 28, 2011                                                                          

State set to implement employee concession contingency plans

Lansing – With two days remaining before the start of the new fiscal year, the state today announced its plans for solving the necessary $145 million called for in the enacted FY 2012 budget due to the unions not coming to the table to revise contracts for FY 2012. The State Budget Office (SBO) had requested that state departments develop contingency plans to address the needed savings if union negotiations failed.

Reforms announced earlier today by the Michigan Department of Corrections provide $50 million in savings that will be used to offset the employee concession target from $145 million to $95 million. Those reforms include closing a prison as well as exploring competitively bidding prisoner health and mental health services.

“The necessary and preferred long-term structural reforms to bring state government employee compensation and benefits in line with the state’s fiscal realities, achieve stability and build for the future have only been partially met,” said State Budget Director John Nixon. “We needed to act to ensure a continued balanced budget. We will work with the unions to achieve the needed structural changes and to address total employee compensation in FY 2013. We were also able to fulfill Governor Snyder’s priority of avoiding layoffs at this time with these actions.”

SBO outlined the following overall contingency plan to meet the now $95 million target:

    1. Eliminating 367 jobs across state government. This is an elimination of funded, vacant positions and avoids immediate layoffs of existing employees. The existing vacancies are the direct result of the administration’s caution in filling positions vacant as the result of the state’s early retirement incentive in 2010. While hiring decisions have been made in critical need areas such as human services, hiring as a whole has been intentionally delayed due to budget concerns and the administration’s focus on fiscal responsibility. This action will likely place an additional burden on existing staff and departments’ workloads. Estimated savings: $33.3 million.

    2. Working with the Legislature to implement a solution for other post-employee benefits (OPEB) like employee contributions into the defined benefit retirement plan. Estimated savings: $18.8 million.

    3. Implementing additional reforms in the Department of Corrections to be bargained with state unions. Estimated savings: $15 million.

Until these three structural changes can be formalized and the state can realize full fiscal year budgetary savings, SBO will utilize the following tools:

  1. Instituting debt refinancing for the State Building Authority. Estimated savings: $19.8 million.
  2. Requiring at least four furlough days for represented state employees. Furlough days will not be required for non-exclusively represented employees (NEREs) to reflect the fact that they did not receive the pay raises received by represented employees last year. Furlough days will not be implemented for direct care workers in 24-hour facilities, and thus will not result in increased overtime costs in Corrections and other departments. Estimated savings: > $9.5 million.

Facts Facing Michigan

  • ·         The number of state government employees declined by 12,900 or 21 percent from 1999 to 2009, while the total payroll increased by 38 percent. The FY 2010 average salary for all state government employees was $54,121, with an average fringe benefit cost of $33,057, for a total average annual compensation cost of $87,178, 52% higher than 10 years earlier.  In FY 2000, the average salary for all state employees was $41,518 with an average fringe benefit cost of $15,756.  The State will spend over $1 billion in health plan premiums for active and retiree health care this year alone.
  • ·         Other post-employment benefits (OPEB), principally retiree health care, are currently unaffordable and unsustainable. At the close of FY 2010, the unfunded long-term liability for retiree health care alone totaled $14.5 billion.

 

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