Bill offers state retirement bonus

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Bill offers state retirement bonus

By Gary Susswein, American Statesman

May 27, 2003

Texas - Veteran state workers in Texas will be paid extra to quit their jobs and give up their paychecks under a bill on its way to Gov. Rick Perry's desk.

As part of their efforts to fill the state's $9.9 billion budget hole, lawmakers want to give state workers a one-time payment of 25 percent of their annual salary if they retire as soon as they're eligible for full pension benefits. Workers who are already eligible must retire on Aug. 31 to receive the extra money.

House Bill 3208, which was approved by the House on May 9 and by the Senate on Tuesday, would save $21 million over the next two years by replacing those workers with lower-paid newcomers or eliminating their jobs.

And it could be an attractive offer to thousands of workers who are facing layoffs or higher health care costs under the state budget that is about to be approved.

"There are a lot of state workers who say, 'I'm dedicated, I believe in what I'm doing, but it's gotten so bad, I want out,' " said Mike Gross, vice president of the 12,000-member Texas State Employees Union.

State workers receive full health coverage and are able to use the most lucrative formula available to determine their pension if they retire when the sum of their age and their years of service equals 80.

So a 50-year-old employee who has worked for 30 years, for example, could retire with full benefits. If he were making $40,000 a year for the past three years (above the state average of $32,000), he would receive an annual pension of $27,600 based on that formula. That paycheck would come from the state's pension funds and not its general coffers.

He would also get a one-time payment of $10,000 under the buyout proposal.

About 12,000 workers will qualify for the buyout before Sept. 1, 2005, when the retirement incentives will expire. With nearly one-third of state government's work force in Austin, as many as 4,000 Central Texans could be eligible.

Officials at the Employee Retirement System said they could pay those new retirees even though the system's assets have dropped along with the stock market over the past few years.

The agency bases its calculations on the assumptions that all eligible workers will retire. So if that happens, it won't be a blow to the system, they said.

"ERS has the funds to pay the benefits earned to date of all current benefits and retirees," said spokeswoman Mary Jane Wardlow.

Sen. Gonzalo Barrientos, D-Austin, voted for the bill Tuesday but said it was something of a "two-edged sword" for state government.

"It moves up certain employees that have been waiting to move up in the order of authority and will also save certain amounts of money for the state," he said. "The other side of the coin, though, is we're losing some institutional knowledge."

The state could also end up paying some longtime workers twice if they retire and then return to find another job in state government — assuming any are available once the budget goes into place and 10,000 state jobs are eliminated.

Lawmakers made it easier in 2001 for retirees to return to work. As of March, there were 1,146 Texas employees, or about 2 percent of state retirees, on the state payroll who were collecting their pensions.

"For a lot of folks, the retirement pay is not going to be enough to live on," Gross said. "They can come back and get their pensions at the same time they get their salaries, but they're not contributing to their retirement and neither is the state. So one way to look at it is the state can get them back for 6 percent cheaper."