Governor Jack Markell today signed into law a bipartisan effort to reign in some of the state's fastest growing expenses -- the state's share of employee and retiree pension and health care costs. The bill will save taxpayers over $130 million in the next five years and over $480 million in the next 15 years. By focusing on reducing the costs associated with future state employees, the savings will continue to grow over time.
"When faced with challenges, Delawareans come together to get things done. Our state employees and public officials worked together to create a solution that works. While other state's reform efforts were marked by anger and protests, Delaware's discussions were marked by collaboration, cooperation and results," Markell said.
After his State of the State Address, Markell formed a working group of staff from his office, his Cabinet including OMB Director Ann Visalli, representatives from each legislative caucus and the state employee unions. They were tasked with crafting a solution that would create lasting savings in pension and health care costs.
"This is the result of coordinated effort and a true compromise among all parties. We looked at every area of the pension plan and discussed them in great detail," said Senate Majority Leader Sen. Patricia M. Blevins, D-Elsmere, who represented Senate Democrats in the meetings. "These important steps ensure that our pension fund, which already is one of the strongest in the country, remains strong and viable for years to come."
Over weeks of meetings, the working group coalesced around the final proposal, which asks future state employees to pay 5% instead of 3% of their salary towards their pension after the first $6000 earned and increases the time required to be vested in the state pension system.
"This legislation protects the pensions of our current employees, stabilizes our pension fund, addresses the rising cost of health care and saves taxpayers nearly a half-billion dollars over 15 years. By addressing this issue now, rather than waiting, we are making our state's economic future even stronger," bill sponsor and House Majority Whip Rep. Valerie J. Longhurst (D-Bear) said.
For new employees, the plan also eliminates the "double state share" health care benefit for future employees and will not count overtime towards future employee pension calculations. Existing state employees will pay slightly more each month for their health care.
"Costs associated with benefits for employees have been increasing dramatically," said Sen. Colin R.J. Bonini (R-Dover South), who represented the Senate Republican Caucus at the meetings. "This is a small, but important, step in reforming a system that will be unsustainable without us taking action."
Based on current projections, as a result of House Bill 81, the annual cost increases for health and pension will be reduced by over 53 percent per year in the first five years. By year 15, these changes will decrease the State's cost increases by nearly 70 percent.
The bill received broad bipartisan from both houses of the legislature and the endorsement of the public employee coalition.
"This was not only a bipartisan effort; it was the result of collaboration between the state and its employees. This agreement is recognition by all those involved that the system, as it existed, could not be sustained," said Rep. Deborah D. Hudson, R-Fairthorne, the House Republican representative to the benefits meetings. "I was proud to be part of this process."