Politics & Government

Cost of readjusting pay, health care for state employees after Great Recession may top $583M

The new cost of implementing labor contracts for Washington state employees and home care aides in next year’s state budget might exceed $583 million. That includes wage increases and keeping health care coverage roughly the same as today.

How much more of a challenge that adds to next year’s budget process remains to be seen. The state is under a state Supreme Court contempt order to improve funding of K-12 schools next year and fully fund basic education by the 2017-18 school year, which could require $1.5 billion or more in new investment in the next budget alone, and Gov. Jay Inslee’s budget office has said it expects a shortfall even before K-12 investments are considered.

The overall cost figure assumes that terms of contracts for more than two dozen unions are also applied to nonrepresented workers in general government agencies and also in the state’s higher education system. It also includes health care costs, which under ratified contracts would keep the state share of premiums at 85 percent, workers’ share at 15 percent and out-of-pocket costs close to current levels. The $116.8 million contract cost for independent home care workers is included in the tally. They are paid by the Medicaid program and are not actually state employees.

Inslee has said employees deserve raises after a six-year spell without general wage increases. But the Office of Financial Management still has to determine that the contracts are financially feasible, something OFM leaders have said they will not do until after the Nov. 19 state revenue forecast. The Legislature also would have to approve the contracts by appropriating money to pay for them when lawmakers convene a 105-day session in January.

The last time lawmakers tried to write a two-year budget, they went into overtime sessions that ran into late June and raised the specter of a government shutdown.

The biggest share of affected employees in general government agencies, which employ nearly 60,000 workers, are covered by contracts bargained by the Washington Federation of State Employees and Washington Public Employees Association. These call for general wage increases of 3 percent in July 2015 and at least 1.8 percent in 2016 – with several thousand individuals also receiving at least 2.5 percent in one-time adjustments to bring compensation closer in line with peers. A contract settled in arbitration for about 6,000 Department of Corrections workers raises pay by about 9.8 percent over the two years.

An estimated 64 percent of workers also are expected to receive “step” or longevity increases of 2.5 percent to 5 percent, according to OFM.

The overall increase in state wage contract costs is a rough tally based on OFM’s summary of costs for several groups of contracts. The figures represent solely the share of costs paid out of the state general fund. That is the major operating budget account that also pays for public schools, prisons, higher education and other front line agencies and programs.

OFM sent key lawmakers a letter earlier this month outlining costs on a contract-by-contract basis. The budget agency later calculated additional costs for including nonrepresented workers including higher education. House Appropriations Committee chairman Ross Hunter, D-Medina, declined to comment Saturday until after he’d seen details, and Senate Republican Leader Mark Schoesler of Ritzville did not immediately reply to a query.

The last round of labor contracts adding huge new costs to state government were for the 2007-09 period under then-Gov. Chris Gregoire. Including increases in pensions, health care and wages, those costs were in the neighborhood of $2 billion, OFM said at the time. Agreements for the following budget cycle were declared financially infeasible, forcing new negotiations as the Great Recession was landing blows to the economy.

OFM’s budget outlook report from September assumes approximately $273 million in new pension costs this time around, which could swell the labor-related costs in the budget to about $855 million overall.