Legislative Report #1, 2005

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LEGISLATIVE REPORT #2

February 15, 2005

J. Pat Thompson
Deputy Director

Pace quickens/deficit grows

The legislative session clicked into full swing recently with more than 2,000 bills introduced thus far. While only a few hundred of these bills will find their way to the Governor's desk, all of them will need to be reviewed and watched over by lawmakers. It's a daunting task, especially for the freshmen and it makes for long days, late nights and exhaustion for many.

The budget writers, already facing a $2 billion deficit, received bad news when the courts ruled against the State in a tax case that cost another $250 million. The deficit, now $2-25 billion plus. will increase the pressure to cut services and employees, raise revenue (taxes) or some combination in between.

Pensions

These are the "Big Bills" for the session. Both would restructure Plan II and Plan III and increase COLA benefits for Plan I. They are as complicated as they are important.

Background: Several years back the legislature passed a bill that provided for 'Gain Sharing' as part of their plan to sell Plan III. The idea was to allow both the employer and employee to share in any extraordinary gains of the stock market. In order to be eligible for gain sharing, the State's investments would need to exceed a rate of return over 10% for four years in a row. If that happened, the State would split everything over 10% 50/50 with the employee. Naturally, the State was attempting to capitalize on the over heated stock market at the time. This was before the stock market crash and when promises of Wall Street taking care of all of us were still believed by many. Here's the kicker, the State Actuary at the time claimed this benefit wouldn't cost anyone a single red cent, it's FREE!

Now fast forward. The new State Actuary reviews the rate structure and discovers that gain sharing needs to be pre-funded. The rationale being that if you skim off the top during good times, you don't have the extra money to cover you during the bad times. Of course your Actuary types don't explain it quite that way, but your lobbyist will. What this means to the budget writers is that they need to come up with a whopping $340 million for the 2005-2007 budget that they weren't expecting. The outgoing Governor Locke proposed to simply eliminate the benefit by not funding it, giving us nothing in return. The State also claims they can take this benefit away and it isn't guaranteed.

Enter the Select Committee on Pension Policy (SCPP). The SCPP is a 19-member board made up of legislators. department heads, employer, and most importantly of course, employee representatives. This committee is charged with reviewing pension issues and making recommendations to the full legislature. What the committee came up with is a compromise package that trades off an uncertain benefit for a list of guaranteed benefits we've sought for several years. Included in HB 1324 and SB 5246 are:

Modified Rule of 80 for PERS 2/3: Effective 7/1/07 - Employees who are 60 years of age who have attained 30 years of service would be able to retire with no reduction in benefits. This would effectively eliminate the current 65 years old minimum under PERS II for anyone hired after 7/1/07 and would allow current employees to gain credit under the new system for as long as they are under it. In other words, if a current employee is 45 years old and has 15 years of service as of 7/1/05 and that employee works an additional 15 years after 7/1/05, that employee could retire at 60 with half the benefit being unreduced and half the benefit reduced under the current formula of 3% per year for five years.

These bills also increase Plan I COLA'S from $1.25 to $1.45 per year of service and establishes a $1,000 Minimum benefit for employees who have been retired 25 years and who have at least 20 years of service. This minimum benefit also has a 3% annual escalator-Pension rates are also subject to the provision of these bills. The pension (PERS II and 111) costs have been evenly split between employees and employers. Over the years we argued against lowering the rates so we could pay for improvements to the plans. The State has consistently artificially towered the rates to balance their budget. Because of the stock market crash, rates will be increasing dramatically, but not beyond historic levels of 5% to 6%. These bills will increase rates more gradually but will set a floor of 4% so we won't under fund the system in the future.

Employee rates under HB 1324 and SB 5246 for 2005-2006 would be 1.93% for PERS II and Employer rates would be 2.9%, because the employers pay for the unfunded liability of Plan I and administration costs.

The best thing about HB 1324 and SB 5246 is they actually save the state and local government lots of money, $458.6 million over the first two years, nearly $4.5 billion over the next 25 years. These bills also eliminate new school employees being forced into SERS 111 and give them the same choice that new PERS employees have. These bills are now before the House Appropriations Committee (HB 1324) and the Senate Ways and Means Committee (SB 5246). Please call or email the following legislators and tell them to pass HB 1324 and SB 5246. Make sure you tell them if you actually live in their district. The prefix for your legislator's telephone number is (360) 786 - or the Legislative Hotline 1-800-562-6000.

Senate Ways and Means Committee members

House Appropriations Committee members

Other bills of importance

SB 5781 Retiree Medical

Sponsors: Senators Fraser, Benton, Pflug. Regala, Zarelli, Rasmussen, Keiser. Kline, Haugen. Roach, Prentice, Jacobsen and Kohl-Welles

This bill would give local government retirees' access to the State Public Employees Benefits Board. Despite our successful efforts to expand access for those jurisdictions that don't have retiree medical plans, the insurance market has still prohibited several employers (even those who wanted to) from offering plans. This bill would correct that problem by creating a State run retiree plan.

HB 1818 Public Health Funding

Sponsors: Representatives Hater, O'Bhen, Moeller, Schual-Berke, Dunshee, Simpson, Dameille and McCoy

This is an appropriations bill that would put $20 million into local public health services that have been gutted by Eyman initiatives. The public no doubt didn't consider that those drastic tax cuts have left public health departments under funded and our food supplies and drinking water at risk. The State has already adopted specific standards for public health, but not adequate resources to meet the standards.

SB 5412 Local Tax Authority

Sponsors: Senators Prentice, Fairley, Fraser, Pridemore. Shin, Weinstein and Haugen

This bill would prevent statewide initiatives that affect local taxes from being imposed on counties or cities that didn't support them. This would allow those Jurisdictions that voted against tax cutting schemes to maintain their own funding for vital public services in the future.

SB 5132/HB 1694 Protecting Public Employee Personal Information

Sponsors: Senators Carrel), Schmidt, Benson, Swecker, Honeyford, Delvin, Schoesler. Roach, Mulliken and Benton Sponsors: Representatives O'Brien, Lovick, Hankins, Ericks. Holmquist, Dameille, Kirby and Moeller

These bills are designed to prevent public employees' personal information from being subject to the public disclosure laws. With the advent of the internet, some anti-govemment 'wnackos' (my term) have set up websites dedicated solely to publishing the names, addresses, telephone numbers and salary rates of public employees. Citing current law, the courts have typically ruled in favor of the "whackos." This law is especially important to any law enforcement personnel.

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J. Pat Thompson Deputy Director

Senate Ways and Means Committee members

House Appropriations Committee members

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J. Pat Thompson
Deputy Director

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