Thursday, December 7, 2006

Not Just a Crunch: A Choice and a Secret

The AJC article titled, "State Faces Crunch Over Retiree Costs" does not contain all the information that was included in the the Associated Press article on the same subject.

Unlike the AJC article, in addition to detailing the gravity of the economic crunch, the AP piece makes it clear, through timeline reporting reflecting email correspondence obtained through open records requests, that cutting health benefits of state retirees is a move that Perdue has anticipated for some time, and a move contemplated by Perdue prior to the election.

Why does this matter? Because Perdue was elected in the first place because teachers voted for him and remains in office on the heels of touting the elimination of income tax for seniors. Yet, at the same time he was making this proposal, the Georgia Attorney General was drafting an opinion on whether the Department of Community Health could tinker with state retiree benefits. What the AP piece makes clear is the hypocrisy of Governor Perdue and the rest of the Georgia Republicans who knew the truth and did not tell it.

This is not just an economic crunch. It is that, but it is also a colossal deception, a bait and switch to Georgia voters who were courted for months and told that they might as well vote for the Republicans because, after all, the economy was great. Sure, my budget would look great, too, if I didn't have to keep my promises and fulfill my obligations. It is not fine to balance our budget, swim in a surplus and promise tax cuts when the State is actively contemplating bailing on our most basic promises to our seniors who have served this State. They are not expendable. This is a choice, and this was a secret. And the AP piece names the names of those involved, starting with Governor Perdue.

So, above, I have linked the AJC article, and below, I have posted the entire Associated Press piece. Draw your own conclusions.

ATLANTA (AP) _ Georgia faces a mounting price tag that could reach $20 billion in the coming years to cover health benefits already promised to tens of thousands of retired teachers and other state employees.
The cost is so staggering that Gov. Sonny Perdue is considering hiking premiums or eliminating health care benefits altogether for state retirees, according to e-mails obtained by The Associated Press through an open records request.
Perdue spokesman Dan McLagan said the state is awaiting a report from an outside actuary detailing the full costs of the benefits over the next 30 years.
"At this time it would be irresponsible to rule anything in or out," McLagan said Wednesday.
A draft analysis issued in March and obtained by AP through an open records request estimated the price tag for the non-pension health benefits at $17.6 billion over the next three decades. To put that figure in perspective, it's just $1 billion less than the state of Georgia's total budget this fiscal year.
Another estimate placed the cost at between $15 billion and $20 billion. The draft report said that an annual contribution of $1.5 billion is needed to fund the benefits.
The cost of retiree health care and other non-pension benefits _ like vision, dental and life insurance _ is coming to light in Georgia and other states because of new standards from the federal Government Accounting Standards Board. They require that states provide a look at future costs of retiree benefits. The rules do not require states to come up with the money all at once. Instead, they're designed to provide greater transparency to the mounting costs of benefits for public employees. Those benefits seem certain to grow even more as baby boomers retire.
There are currently 28,293 retirees receiving benefits through the state, according to the state Department of Community Health. Meanwhile, there are about 228,000 active state employees.
Parry Young, a credit analyst at Standard and Poor's, called the non-pension benefits "a runaway train."
"This may be the fastest growing component of any government's budget and states may discover that these benefits are not at a level that's sustainable," Young said.
Young said that Georgia is in relatively good shape because the state's pension plan is on solid fiscal footing. Some other states are facing pension shortfalls as well.
Still, the failure of states to show that they have a plan in place to pay for non-pension health benefits could hurt their bond ratings, which would impact the rate at which they borrow money. Georgia currently enjoys a AAA rating from Standard and Poor's, one of only nine states to earn the highest rating.
McLagan said that Perdue has assembled a group of experts to study the potential budget impact and the best ways to comply with the new rules.
Placing aside $1.5 billion annually for a fund to pay for the benefits could make Wall Street happy. But that money won't be easy to come by. Revenues have shown recent signs of slowing in Georgia, and state lawmakers in Perdue's own Republican party are clamoring to enact more tax cuts.
Cutting benefits for retirees in Georgia could also be politically tricky for Perdue, who has said he wants to make the state more attractive for senior citizens flocking to neighboring Florida. During this year's re-election campaign, the governor pledged to eliminate the state income tax on retirement income.
Key state lawmakers involved in the budget process said they don't expect retiree benefits to be slashed.
"I don't think that will happen," said state Sen. Jack Hill, R-Reidsville, chairman of the Senate Appropriations Committee.
That's not easing the worry of state employees. The issue has become a hot topic in e-mails fired back and forth between teachers.
"We don't want the state to balance their books on the backs of educators, retired or current," said Tim Callahan, of the Professional Association of Georgia Educators.
An Oct. 5, 2005, e-mail from Neal Childers of the state Department of Community Health, said that he had been instructed to prepare draft legislation authorizing the state to set different premiums for retirees than for current state employees.
Childers also went on to say in that e-mail that the state Office of Planning and Budget "is now considering elimination of benefits."
And Perdue appears to be actively involved in the process. A Nov. 30, 2005, e-mail from another health department employee, Carie Summers, said that Perdue asked in a budget hearing when the state would be getting an opinion from the Attorney General's Office on benefit changes for retirees.
The question remains as to what the state may legally do to change benefits for its retirees.
In November 2005, Tim Burgess, then-commissioner of the Department of Community Health, asked the Attorney General's Office for "advice regarding the nature and scope of the state's legal obligation to provide health benefits to retirees under Georgia law."
E-mails obtained by AP show that the draft analysis was completed in September but new DCH Commissioner Rhonda Medows withdrew the agency's request for the opinion.

It was not immediately clear why she did so or what the opinion said.

On The Net:
Gov. Sonny Perdue:
Teachers Retirement System of Georgia:
Employees Retirement System of Georgia:

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