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TX Legislative Budget Board Releases State Performance Review; Recommends Changes

By J. Lyn Carl,

Austin, TX –

While some legislators are pushing for a pay raise for state employees, recommendations of the Legislative Budget Board (LBB) to increase efficiencies and operations of Texas state government include a number of proposals changing state employee and retiree benefits.

The recommendations are outlined in the LBB's Staff Performance Report to the 79th Legislature, released today.

The report includes 120 recommendations that LBB staff say will result in $3.2 billion in savings of General Revenue during the 2006-07 biennium.

Among those recommendations are many that affect state employees and their retirement and health care benefits, most of which are not likely to be well-received by state workers and retirees.

Among them are: changing the policy regarding return-to-work retired state employees; eliminating the state contribution for retirees' dependent health insurance premium; freezing longevity pay to make funds available to reward performance of state workers; reducing appropriations to the state retirement systems; implementing a tiered coinsurance plan for state employees to keep health care costs under control and require persons who spend more on health care to pay a larger portion of the expense; allowing employees and retirees in the Group Benefit Plan to opt out of participation and implement an incentive program for those who waive basic coverage; reducing the benefit replacement pay eligibility grace period from one year to 30 days, reducing the cost of providing the benefit; reducing the state's contribution to state employee health insurance costs from 100 percent to 90 percent for active employees whose total household income is greater than 200 percent of the federal poverty level; and requiring state retirees under age 65 to pay part of their health insurance costs.

Elsewhere in the report, LBB Deputy Director John O'Brien notes in his cover letter that the report outlines approximately $1.3 billion of savings incorporated in the 2006-07 General Appropriations Bill and an additional $600 million savings realized through "other policy initiatives," such as continuing the 5 percent budget reduction asked of state agencies.

Among other recommendations are some suggestions that seem somewhat mundane - such as eliminating "seldom used, duplicative, or unnecessary" reports required by state law, which could save money on storage and labor costs.

Other recommendations that the LBB notes will save state funds include: improving the cost-effectiveness of state-funded air emissions reduction programs; improving the state's management of pharmaceutical costs through use of a statewide pharmaceutical purchasing program; and consolidating management of data center services.

Much of the portion of the report on health and human services focuses on the high cost of Medicaid spending by the state and increased spending in recent years on the Children's Health Insurance Program (CHIP). The report addresses the costs for the programs and what changes might be made to each.

The 300-plus page report also reviews public and higher education, the judiciary, public safety, natural resources and business and the economic development - with its findings on each issue and recommendations for improving efficiencies.

For instance, regarding business and economic development, the report recommends a percentage of overall grants from the Texas Enterprise Fund be withheld until performance targets are met and ensures a full refund of state monies when major goals of the recipients are not met.

Regarding public education, one of the recommendations that is likely to draw ire is the reduction of the $1,000 pass-through to public education employees that was reduced to $500 by the 78th Legislature be continued at the $500 rate instead of reverting to the original $1,000.