Considering the challenging budget and the first year of new leadership in both legislative chambers and the governor’s office, OPEA had a successful legislative session. OPEA defeated four bills that would have drastically cut the state employee insurance program. Also, for the first time since the recession, state agency budget reductions were less severe with state leaders spreading cuts across all functions of government including education.
Insurance
By far OPEA’s greatest success was in stopping legislation that would reduce the state employee benefit allowance. Four bills were introduced or amended in the House to lower state employee health insurance benefits. All four were killed by OPEA.
The first bill of concern was HB 1738 (Moore) to freeze the state employee benefit allowance for three years. HB 1738 would have frozen the benefit allowance at a low point because last year one of the high option HMOs left the state program. After hundreds of calls from state employees, the bill failed to receive a majority vote on the House floor
The second battle was also a bill sponsored by Rep. Lewis Moore. HB 1737 would have removed state employees from the large OSEEGIB risk pool and allowed EBC to bid the state employee PPO. State and education retirees would have been left in OSEEGIB without the healthyh active state employee population to help mitigate costs. This bill also failed to receive a majority vote in the House.
Next, Representative Jason Murphey amended SB 190 (Aldridge and Murphey) to change the benefit allowance to the premium for the HD/HSA plan (approximately $250 lower). State employees who chose the HD/HSA would also receive additional funds to cover the deductible in a health savings account. While OPEA did not oppose the HD/HSA plan, the Association did not agree to forcing state employees into the plan to receive their full benefit allowance. OPEA defeated the bill in committee.
The last attempt to slash the state employee benefit allowance was SB 305 (Crain and Mulready). The bill started as retirement legislation and was amended in committee, with no notice, with similar language as the amendment to SB 190. After a weekend of calls from OPEA members, Rep. Mulready decided to not bring the bill to the House floor.
At the end of session, a bill was amended to include several changes in the state insurance plan. OPEA negotiated the provisions of HB 1062 (Roberts and Breechen) with the authors. For state employees the most important section will allow legislators and state employees to opt out of the state insurance plan as long as they can prove they have other group coverage. If they choose this option, employees may keep a stipend of $150 per month. According to OSEEGIB’s actuaries, this would have little impact on the state risk pool as long as employees are required to have group coverage.
While OPEA understands that state employee health insurance should be addressed, the last minute proposals in the midst of session did not give the time needed for full consideration. State employee health insurance benefit changes should only be considered in the context of total compensation. In addition, any change to the HD/HSA plans should be gradual and will require extensive employee education.
HD/HSA Plans
Before session, the Employees Benefits Council sponsored a presentation by the Indiana governor’s office about their state’s usage of high deductible health plans with health savings accounts (HD/HSA). They moved a large number of their state employees into these plans by incentivizing these plans through the benefit allowance. In Indiana, state employees much chose a HD/HSA to receive the full benefit allowance. Several legislators attended the meeting with the Indiana representatives and promoted the Indiana plan throughout session. In addition, the governor’s office favored the use of HD/HSA plans.
In HD/HSA plans, the employer pays the premium for a high-deductible plan and then funds a health savings account from which members pay their health care costs. The funds can carry over from one year to the next and are not taxed until they are withdrawn for non-health-related expenses. Preventive care usually costs plan participants nothing. If an employee is healthy and rarely uses medical insurance, funds accumulate in the account. For individuals who have health care costs, care beyond the deductible is the traditional 80/20 co-pay. There also is an out-of-pocket maximum similar to that of most insurance plans.
While OPEA is not opposed to expanding the state employee HD/HSA plan, OPEA’s concerns include:
- The impact fragmenting the risk pool would have on the provider network and rates;
- How an HD/HSA plan would affect pre-Medicare retiree rates;
- The effect an HD/HSA would have on the dependent benefit allowance; Implementation in rural areas; and
- How any savings from implementing the plan would be used to address state employee total compensation.
Budget
After several years of deep budget cuts, state agencies fared better in the FY 2012 budget passed by the legislature this session. For the 2012 budget year, state agency cuts were balanced with those in education. In the past, education was shielded from budget shortfalls by Governor Brad Henry, putting the brunt of the economic downturn on state agencies. For the first time in several years, education was also cut, with common education reduced by 4.1 percent and higher education slashed by 5.8 percent. Agencies will be completing their budget work programs in the next month. To view the allocations for each agency click here.
According to Department of Corrections Director Justin Jones, the FY 2012 budget will eliminate the need for furloughs to balance the agency’s budget. Although Department of Human Services Director Howard Hendrick sent out an e-mail several months before the end of session indicating a potential need for furloughs beginning in July, the agency’s cuts were not as deep as anticipated and the furlough plan has been put on hold.
Several agencies are currently offering VOBOs, most are small and targeted. The largest is in the DHS county offices. Eighty offers have been made and 44 employees have accepted the offer. The legislature passed HB 2177 (Sears/Meyers) which will extend the statewide VOBO program allowing agencies to continue to offer buy-outs utilizing the funds set aside in the 2010 session until June 30, 2012.
Pensions
As in most states across the nation, state leaders announced at the beginning of session that reducing the state’s unfunded liability in public pension systems would be a top priority. According to the Pew Center, the funding of Oklahoma’s pensions systems were one of the worst funded in the nation. At the beginning of session, the state’s pension liability was at $16 billion. However, $10 billion of the liability is in the Teachers’ Retirement System. The legislature’s goal was to prevent $16 billion in unfunded liability in the six retirement systems from affecting state’s bond rating.
The state has six defined benefit retirement systems, the Oklahoma Firefighters Pension and Retirement System, the Oklahoma Police Pension and Retirement System, the Uniform Retirement System for Justices and Judges, the Oklahoma Law Enforcement Retirement System, the Teachers’ Retirement System, the Oklahoma Public Employees Retirement System (OPERS). In addition, a small retirement system for wildlife workers was recently transitioned to a defined contribution plan.
By mid-session, it was clear that legislation to significantly reduce the ability for retirees in all six of Oklahoma’s retirement systems to grant cost-of-living adjustments (COLAs) would be passed this session. Bills were introduced by leadership in the House and Senate to require that the legislature fund COLAs from appropriations rather than the assets of the retirement system. This would force retirees to compete with state agency, education and employees for any adjustments to their monthly checks. HB 2132 (Steele and Bingman) emerged as the leadership bill that would include provisions requiring that the legislature fund COLAs from appropriations rather than the assets of the retirement system.
OPEA proposed an amendment to HB 2132 that would allow legislators to grant a COLA to retirees if their individual system would be funded at 80 percent after the COLA is granted. The state and county employee retirement system (OPERS) has a conservative board with a good long-term investment strategy. Even with the economy at the lowest point since the Great Depression, OPERS has exceeded its expected return on investment (ROI) of 7.5 percent over 20 years. The funded ratio for the system was 66 percent on July 1, 2010. This ratio includes a two percent annual cost-of-living adjustment (COLA) assumption, however retirees have not received a COLA since 2008. With the passage of HB 2132, the COLA assumption will be removed and OPERS will be funded at 78.8 percent.
OPEA did receive some support on the 80 percent amendment. Unfortunately, legislative leadership did not want to amend HB 2132 after agreements were made on the provisions. However, they did agree to investigate this issue in the future. The Oklahoma Education Association (OEA) and the retired teachers’ association both voiced disapproval of the proposal because the Teachers Retirement System will not be 80 percent funded for decades.
OPEA was successful in stopping HB 1003 (McDaniel), which would have moved new employees to a defined contribution or 401(k)-type plan with a 3.5-percent employee/employer match. If employees contributed 10 percent, the state would pay 6 percent. Currently, the state pays 15.5 percent toward the retirement system, with employees contributing 3.5 percent. OPEA members made a difference by contacting their House members and stopping the bill before it reached the House floor.
While OPEA was willing to discuss plan changes for new hires, the loss of 12 percent of the employer match in HB 1003 was unacceptable. If the state moves to a defined contribution plan, the employer match should be much higher, with savings returned to state employees in a pay raise.
As session progressed, legislation to increase the retirement age for employees hired after November 1, 2011 was introduced. SB 794 (Mazzei and McDaniel) increases the normal retirement age to 65. New hires must reach age 60 before retiring, even if they have achieved their 90 points. This bill also raises the retirement age for elected officials. A similar bill was passed for the TRS.
In addition, SB 794 would roll back elected official retirement to that equivalent to state employees. Currently, elected officials, including legislators have a four percent multiplier in their retirement calculation (4% of salary X years of service) compared to state employees (2% of salary X years of service). Like the state employee benefit changes, this would only apply to new elected officials.
Privatization
At the beginning of session, legislators filed several bills to privatize functions of state government, including parks and golf courses, the Grand River Dam Authority, CompSource, child welfare, senior services, and other divisions of the Department of Human Services. By the first deadline most of the bills were dead for the year. Unfortunately, some continued to move forward.
OKDHS
Privatization in OKDHS was driven chiefly by providers, either wanting to make a profit from the service or wanting to control access to services. In child welfare, contractors wanting to expand their profit tried once again to privatize child welfare HB 1349 (Blackwell). The bill was not heard in House committee. However, HB 1359 (Peters and Brinkley) that creates a 23-member Foster Care Improvement Task Force was signed by the governor. The task force includes an OPEA member and other stakeholders. Lora Adams, an Oklahoma County child welfare supervisor and winner of the 2010 Pat Hall Volunteer of the Year Award, has been appointed by President Pro Tempore Bingman to represent OPEA.
In House Committee, HB 1363 (Peters) was amended to require that DHS contract with the Long Term Care Authority (LTCA) of Tulsa to privatize the DHS ADvantage Administration Unit (AAU). The LTCA previously administered the ADvantage program, which provides in-home support for elderly and disabled citizens. DHS removed the program from LTCA because of contract irregularities, non compliance with federal guidelines, and high salaries for executives in the organization. In the Senate, OPEA worked to amend the bill and allow state employees to compete for their jobs under the Privatization of State Functions Act. Because some legislators had concerns with OKDHS being involved in the bid, the final version of the bill requires that the Health Care Authority execute the bidding process. OPEA will be working with the 59 employees at the AAU in the bidding process. Because of the association’s work on this bill, most of the workers in this unit have become members.
Once again, the state resource centers for the developmentally disabled, Northern Oklahoma Resource Center of Enid (NORCE) and Southern Oklahoma Resource Center of Pauls Valley (SORC) were an issue this session. Because of anti-institutional bias in OKDHS, the infrastructure at the facilities has been allowed to deteriorate. Providers who want to expand their profit are pushing for the facilities to close so they can move the clients into their group homes. In addition, the providers have convinced the families of clients on the waiting list that they would receive services if the institutions were closed, creating a powerful lobby against the institutions.
Over the years, the facilities have been downsized from approximately 600 clients each to between 110 and 130 at each institution. The remaining clients have lived at the facilities almost all their lives and have parents and guardians who favor state operated care and refuse to allow their family members to be moved. OPEA has a strong relationship with the family members at SORC.
Because SORC’s buildings must have capital improvements or risk being closed in 2013, legislators from the area requested funding for new construction. HB 2184 (Sears and Myers) was the result of weeks of negotiations among legislative leaders, legislators favoring providers and legislators with facilities in their districts. The bill requires that OKDHS, families of clients in the facilities and employees “develop a plan to change or discontinue the operations of the state resource centers. Saturday afternoon, the SORC PGA and OPEA will begin the task of working on the plan for SORC. NORCE is working on developing a guardian organization to work on this issue.
A bill, stating legislative intent that agencies privatize whenever feasible passed the Senate and is moving to the House. SB 483 (Crain and Peterson) focuses especially on OKDHS requiring that the agency submit an annual privatization plan. The author stated in committee that the purpose of the bill was provider’s concerns with an OKDHS contract. SB 483 passed the Senate but was not brought to the House floor.
CompSource
Two bills that would change or privatize CompSource were stopped in committees of their House of origin. SB 702 (Aldridge) would have required the sale of CompSource. HB 1046 (Faught) would have mutualized the agency. Both bills would have separated at least some of the employees from state service; however, HB 1046 would allow classified employees to remain with the state.
Over the past three years, legislation to privatize CompSource has been introduced. In addition, a special task force studied the issue in 2009. Questions have arisen as to whether the state can sell the agency because the assets are owned by the rate payers. Also, business interests have expressed concern about coverage for small business and those engaged in hazardous endeavors such as energy and agriculture.
Tourism
SB 664 (Branan) that would require Oklahoma’s state parks be sold within five years was not heard in Senate committee. However, SB 927 (Branan) which would create a task force to investigate the sale of state owned golf courses continued to the House but was not heard.
Pension Funding
Senator Clark Jolley introduced several bills to sell state assets to help fund the pension systems, including CompSource, GRDA and state office buildings. All these bills did not advance through the process.
Government Reform and Modernization
The House, especially, was busy with government reform this session. At the head of the effort was Rep. Jason Murphey the chair of the Government Modernization Committee. He is the catalyst behind most reform efforts and always has an open-door policy with OPEA. In addition, to the legislation listed below, the state employee insurance bills have passed through this committee.
OPEA’s concern with the consolidation of services is to protect OPEA members’ jobs and make the transfer as seamless as possible for employees. According to merit rule 530:10-11-74, “When a facility or function is transferred from one state agency to another, classified employees may be transferred without change or modification in status.” OPEA’s goal is to preserve the classified status of the employees and for them to retain or be paid for any leave they have outstanding.
Administrative Services Consolidation
HB 2140 (Steele and Bingman) consolidates the Department of Central Services (DCS), Office of Personnel Management (OPM) Employees Benefits Council (EBC), and the Oklahoma State and Education Employees Group Insurance Board (OSEEGIB or HealthChoice). According to Rep. Murphey, who actually authored the leadership bill, the idea behind administrative services consolidation was to capture central agencies that provide services to other state agencies. In the interim Murphey had studied similar processes in Montana, Utah and Indiana.
Initially the Merit Protection Commission (MPC) was also part of the consolidation. OPEA raised concerns that MPC should remain independent because of their special function of enforcing the merit system for all agencies. The last version of the bill did not include MPC.
The bill directs the Director of OSF to consolidate all of the agencies’ administrative functions by December 31, 2011, and to demonstrate a 15 percent overall cost reduction. In addition, the bill requires the Director of the Office of State Finance to make recommendations on the streamlining, reduction or elimination of the governance structures and statutorily-established positions of each agency.
In addition to concerns with MPC, OPEA expressed concern with the 15 percent savings in HB 2140, because DCS and OPM were already challenged with cuts over the past two years and OSEEGIB’s administrative cost was already low compared to most insurance companies. Murphey assured OPEA that 15 percent was a target and would not be used to set the agency’s appropriations.
Agency consolidation in HB 2140 is actually a two-step process, with all governing structures remaining intact. Legislation must be passed next year to complete the process and put the governance of the agencies under OSF. OPEA will be monitoring this closely.
IT Consolidation
HB 1304 (Derby and Jolley) transfers the information technology assets and employees of all appropriated state agencies to the Information Services Division of the Office of State Finance (OSF) effective July 1, 2011. Although the bill has an immediate implementation date, the consolidation will take several years to accomplish.
OPEA met with Oklahoma’s Chief Information Officer (CIO), Alex Pettit, and the Governor’s office in early June to discuss implementation of this legislation.
The first step in the process is to inventory and assess IT assets throughout the state in all agencies. To help with this process, the state contracted with Capgemini Consulting. Their report was completed in late April.
According to their assessment, the state has:
- 76 financial systems;
- 22 unique time and attendance systems;
- 17 different imaging systems;
- 48 reporting and analytics applications;
- 3 different pension systems;
- 30 data center locations;
- 32,643 workstations (20 percent over four year of age); and
- 129 e-mail and BlackBerry servers (with 25 agencies running their own e-mail)
OPEA members have asked if their positions would be privatized and the “Geek Squad” would take over their jobs.
“You are the Geek Squad,” Pettit told OPEA. He went on to say it was important to keep people throughout the state. Productivity is lost when an IT person must be dispatched from Oklahoma City to repair a computer or worse take it for a few weeks.
“Nobody benefits by spending time in a car,” he continued.
One of the greatest concerns with the Capgemini report is the recommendation that data services personnel be reduced from 1,279 to 909 employees. Petitt told OPEA that they are still assessing how many employees are actually involved in IT-related jobs. Because of the lack of standardization across agencies, some employees could be included in this count that will not be transferred. State agencies will be able to petition that all or some of their jobs be exempt from the consolidation.
The first phase of the consolidation is reviewing IT capacity in state servers to find available space for new resources needed by state agencies. Petit said an agency could use excess capacity at another state agency instead of using state funds to purchase additional hardware. In addition, networks and cable can be shared among state agencies, which would not be noticed by the end user but would save the state money.
“Why should the state have four systems of cable going into Woodward?” he said.
One of the goals of consolidation would be more cooperation, problem solving and idea sharing across the IT function in state government. He indicated that few people who work in the data services function across the state have even met each other.
Another goal of the consolidation would be for the state to operate with only one e-mail server. According to the Capgemini report this would facilitate transparency and record keeping in government, allowing the press or others to access state agency e-mails easier.
“While this will allow OPEA to request e-mails when working on a project, state employees should always remember that even now your e-mail is not private,” said OPEA Policy and Communications Director Trish Frazier. “E-mails can be requested through open records request for litigation or investigative reporting.”
State employee e-mail regarding client and personnel records are exempt from public requests. In addition, legislative e-mails cannot be requested due to the separation of powers between the executive and legislative branches of government.
Obviously, the process of consolidating IT will take several years. According to Pettit, most jobs would be lost through attrition. He did warn that agencies were top heavy in data services management and some of those positions could be eliminated.
Governance
With a Republican governor taking over after a long-term Democratic governor, several legislators wanted state agencies to be more responsive to the election and allow the new governor to replace members of boards and commissions or agency directors. These bills did not make it through the process.
HB 1208 (Martin) allows the governor to appoint all agency boards and commissions when he/she takes office. (Dormant)
SB 606 (Russell) allows the governor to appoint directors of agencies that are not in the Oklahoma Constitution when he/she takes office. (Dormant)
Agency Lobbyists
SB 550 (Sykes) Requires lobbyists representing a public entity to register with the Ethics Commission. (Dormant)
SB 551 (Sykes) Prohibits the use of state funds to retain a lobbyist. (Dormant)
Personnel
HB 1602 (Stiles and Shortey) adds state employees whose job duties include direct or nursing care to the list of employees that may receive compensation for excess leave if staffing shortages prevent the employees from taking annual leave. Currently, fire suppression and corrections employees may be compensated if the staffing levels prohibit them from taking leave. (This bill passed the House unanimously, but encountered political issues unrelated to the content of the bill or OPEA in the Senate. The bill should complete the process in next legislative session.)
HB 1207 (Murphey and Sykes) This legislation allows employees to use shared leave when an agency converts to bi-weekly payroll. Before HB 1207, employees could only use annual or sick leave. (Signed by the Governor.)
Agency Legislation
HB 1061 (Sanders and Shortey) allows Department of Transportation vehicles to use red and blue emergency lights to improve the safety in work zones. (Signed by the Governor)
SB 259 (Coates and McNiel) SB 259 raises the amount of negotiable bonds the Tourism Commission can issue from $5 million to $10 million. According to Tourism, the bonding limit for the agency has always been set at $5 million. This law has not kept pace with inflation and the reasonable costs of providing an infrastructure to accomplish the mission of the agency. (Passed the Senate but did not pass the House. This bill can continue to move through the process next session.)