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TUESDAY, JULY 24, 2007
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Budget shows state's benefits cost to top $2 billion

MONTGOMERY (AP) — The state government's cost of providing health insurance and retirement benefits to active and retired school workers and state employees will top $2 billion next year, according to state budget forecasts.

The cost of providing the benefits to more than 200,000 active and retired public employees has more than tripled from 1996 to next year's budgeted total, The Birmingham News reported.

"This is unsustainable in the long term on the current path that we're going," said Marc Reynolds, deputy director of the Retirement Systems of Alabama, the pension program for education employees and state workers.

State government is budgeted to pay $2.13 billion for health insurance and retirement benefits in the new fiscal year starting Oct. 1. By contrast the state paid $698 million in fiscal 1996. That's a growth of $1.44 billion, or 209 percent in 12 years.

"It is a concern because we don't want to have to cut programs," state Finance Director Jim Main said.

Benefits are taking a larger share of the state budgets each year.

In fiscal 1996, payments for pensions and health insurance for active and retired public education employees took up 11.9 percent of the state's education revenue. Next year, it will be 19.5 percent.

If the current trend continues, that spending could consume 32 percent by 2020, The Birmingham News reported.

For the General Fund budget for non-education programs, the change has been from 7.6 percent in fiscal 1996 to 9.5 percent in fiscal 2008. If that trend continues, the amount could reach 11.8 percent in 2020.

David Stout, spokesman for the Alabama Education Association, said the rise in benefit costs is largely due to increases for health insurance, and it's being experienced nationwide.

"State efforts alone cannot solve a national crisis that impacts all state funding," Stout said.

Main is hopeful costs won't rise as sharply in the future. He said the state is beginning to see the benefits of changes in its insurance programs enacted in 2004, including requiring retired state employees who take jobs elsewhere to use their new employer's insurance if the employer pays at least half of the cost of the coverage.

Also he said he has high hopes for a new wellness plan that is supposed to help active and retired employees with diabetes better manage the condition at lower costs.

Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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