Governor Terry Branstad confirmed earlier this week that employee contributions to health insurance premiums will be a major battleground during the next round of contract negotiations with unions representing state workers.
At his weekly press conference on July 2, Branstad announced that he will start paying 20 percent of his health insurance premiums.
“Hard working Iowa taxpayers are accustomed to paying a significant amount for their health costs whether they’re working for a private sector business or a non-profit or, of course, if they’re self-employed they’re paying 100 percent,” Branstad says. “And for far too long the tax dollars of these hard working Iowans have gone to pay the entire cost for most of our state employees’ health care.”
About 94 percent of state employees get all their health insurance premiums covered by the state under the current state employment contract. According to Branstad, the state would save more than $100 million if all workers paid 20 percent of their premiums, but Branstad says there is no consequence for workers who do not volunteer to pay part of their health care premiums and no threat of worker layoffs if the state doesn’t cut costs in this way. […]
Branstad has asked other statewide elected officials to give up part of their salary to cover 20 percent of their health care premiums, but he’s not asking the 150 members of the Iowa legislature to do it.
“That’s up to them,” Branstad says.
Branstad will give up $224 from his pay each month to cover the premium for himself and his wife. Lieutenant Governor Kim Reynolds has agreed to give up $153 of her monthly salary to cover 20 percent of the cost of her health insurance plan.
“I’m excited to take the first step, along with Governor Branstad, towards state employees contributing to the cost of their health care,” Reynolds says.
According to Radio Iowa’s O.Kay Henderson, three Republican statewide elected officials have already agreed to follow Branstad’s example on health insurance premiums: Secretary of Agriculture Bill Northey, State Auditor Dave Vaudt, and Secretary of State Matt Schultz.
I have no doubt that Branstad’s idea will be popular with Iowans, who may wonder why public employees should get health insurance “for nothing.” But even considering their generous health insurance benefits, Iowa’s public employees are far from overpaid. Andrew Cannon of the Iowa Policy Project explains:
While it is true that public employees contribute less on average to their health insurance plans than private-sector workers, they have negotiated the benefit as part of overall compensation packages that, all political hyperbole and “conventional wisdom” aside, typically leave public employees behind their private-sector counterparts. As IPP research has demonstrated, public workers tend to be paid considerably less than similarly educated workers in the private sector. Generally better health insurance benefits do not compensate for the deficiency, so a gap remains.
After controlling for experience, education, and other demographic factors, public-sector employees still receive 6 percent to 8 percent lower overall compensation – that is, pay, health, dental, life and disability insurance, and retirement benefits – than private workers.
This pdf file contains a more detailed report by Cannon comparing wage and benefits packages for public sector and private sector employees in Iowa.
Keep in mind that Branstad paid virtually no state income taxes last year on income that exceeded $190,000. Contributing to his health insurance policy won’t break the bank for him. The same can’t be said for the average Iowa public employee. AFSCME is the largest labor union representing state employees, and its leaders released this statement responding to Branstad’s proposal:
“It’s outrageous that Terry Branstad thinks it’s okay to bully hard working state employees. It’s not fair to compare himself to a mail clerk or a custodial worker with the State of Iowa,” said AFSCME Iowa Council 61 President Danny Homan.
According to a Des Moines Register article from today, Branstad claims he will now pay $224 a month. According to a February 2011 Associated Press article, Branstad receives a $130,000 salary and a $50,000 pension. This new health care contribution represents 2.1% of his $130,000 salary. If you include his $50,000 pension, his new health care contribution represents 1.5% of his State of Iowa related income.
For a newly hired State of Iowa mail clerk or custodial worker with a $24,169.60 starting salary, Branstad’s plan would result in a pay cut ranging from 5% to 18%. For a newly hired State of Iowa correctional officer, motor vehicle enforcement officer, or airport firefighter, Branstad’s plan would cut their pay from 3% to 12%.
“For 18 months, Terry Branstad has been taking the same health care benefits as state employees and our members, while attacking our members at the same time. Yet he hasn’t paid a dime. For eighteen months Branstad has been doing the same thing he attacked us for. Now, four months before the election, he is pulling a political stunt by volunteering to pay for what he has already received for eighteen months,” said Homan.
“Terry Branstad needs to stop playing political games. Health care is something our members take seriously. Many of our members work in environments where their personal safety is on the line: correctional workers can be injured or infected by inmate attacks and DOT workers can be hit by reckless drivers. Our members have also repeatedly given up pay increases and made sacrifices for many years and Branstad refuses to acknowledge that,” said Homan.
“If Terry Branstad wants to have a serious discussion about the cost of health care we will have one with him at the appropriate time: at the bargaining table this Fall. Under Iowa’s collective bargaining law, the Governor does not get to personally bargain this with each individual state employee,” added Homan.
Those contract negotiations will be as contentious as they come. Branstad will feel emboldened by the results from the Wisconsin recall election this summer. But I don’t expect labor unions to give in easily. Their bad blood with this governor goes back more than two decades, when AFSCME went all the way to the Iowa Supreme Court to force the Branstad administration to abide by the existing wage contract. Last year, Homan became a plaintiff in the successful court challenge to Branstad’s line-item vetoes relating to Iowa Workforce Development offices.
Although the politics of this issue may play well for Branstad, the governor doesn’t have a great track record on predicting what the state can and can’t pay public workers. In late 2010, Branstad and his staffers insisted that Iowa could not afford to give public employees about a 3 percent raise two years in a row, as outgoing Governor Chet Culver had agreed to do. After failing to convince AFSCME to reopen negotiations, Branstad eventually gave up trying to block the union pay raises from going into effect and gave non-union state employees a similar raise.
Despite the allegedly “unaffordable” union contracts Culver negotiated, Iowa finished the 2012 fiscal year with a larger than expected surplus, thanks to revenues that exceeded projections. It turns out that spending $100 million per year on small raises for employees who took a hit during the recession wasn’t disastrous after all. (AFSCME members took a pay cut in the form of furloughs to avoid layoffs during the 2010 fiscal year.)
Final note: I hope the governor is feeling better today after a choking episode landed him in a California emergency room yesterday. The feeling of choking is terrifying for anyone. For an uninsured American living on the edge, a trip to the ER means a hospital bill that might exceed the monthly rent or mortgage payment. Like State Senator Joe Bolkcom, I hope the governor will reconsider his determination to leave more than 100,000 Iowans without health insurance coverage through Medicaid.
UPDATE: Iowa Policy Project Assistant Director Mike Owen points out that Branstad might be exaggerating how much money the state would save if the next round of public employee contracts included employee payments toward health insurance:
He is ignoring the fact that, unlike his pay and that of state legislators, state employees’ benefits in place are a result of bargaining – a point acknowledged far too little, but thankfully was cited this week by the Muscatine Journal’s Steve Jameson. State employees agreed on the pay levels they receive in the context of other benefitsthey al so receive.
Oddly, when the Governor says state workers should pay $1,000 toward their health insurance, he is peddling it all as savings to the state. Actually, we should expect salaries to go up to compensate for lost benefits.
Jameson also commented,
It isn’t like the state just started paying the health care costs of its workers. This has been a benefit that has been provided to state employees for decades. It was negotiated at a time when state workers made less in real wages than their private sector equivalents.
It would be great to see everyone in elected government office take Branstad up on this challenge and pledge to pay for 20% toward their premiums. But if I’m an unelected state worker I’d be laughing in Branstad’s face. Who in their right mind would give up a benefit they have been given unless or until they were forced to give it up?
Maybe if the state were really struggling financially, it’d be easier to applaud Branstad’s efforts – but the state just reported taking in a record amount of tax receipts in the month of May. The $794.5 million deposited in the state treasury broke a previous record of $791.1 million in net receipts reported in May 2007, according to the Legislative Services Agency. The state is on track to blow away its projected revenue budget for the year.
SECOND UPDATE: Branstad’s executive order allowing state employees to contribute to their own health care costs is here (pdf).
THIRD UPDATE: In an editorial supporting state employee contributions for health insurance premiums as part of the next negotiated contract, the Des Moines Register’s editorial board noted that it’s not clear where these voluntary contributions will go.
How will the state workers’ monthly contribution – ranging from about $90 to $360 – be used? Workers are told their premium payment “remains in your department and is used to offset personnel cost.”
What does that mean when agencies have set their budgets for a fiscal year that began on July 1? If workers at the Department of Inspections and Appeals agree to pay 20 percent of the cost of their insurance, will director Rod Roberts hire more nursing home inspectors?
That is hard to believe. The “Voluntary Premium Contribution Program” is the idea of a governor who has talked repeatedly about the need to cut state services and personnel. Branstad says there are too many of the workers he is now asking for a donation toward their health insurance. The agency directors he appointed will decide how to spend the premium money their employees pay.
Considering the premium can amount to the loss of hundreds of dollars a month in income, some state employees might decide they can put that money to better use to truly serve Iowans. They could donate it to food banks, offsetting a cut the governor made to a legislative appropriation earlier this year. They might give it to an agency serving children whose state funding has been reduced or to a group advocating for bike trails.