Gregoire wants to cut some public pension benefits, double-dip loophole

OLYMPIA — Gov. Chris Gregoire wants to dump certain pension benefits for public employees as a way to save more than $11 billion over 25 years.

In a continuing drive to trim state spending, Gregoire proposed Monday to eliminate yearly pay increases for government workers and teachers in Plan 1 pensions, which were closed to new members in 1977.

She also would do away with early-retirement provisions in open pension programs. That option would be eliminated only for new enrollees in the pension system. Existing members still could retire and collect benefits before age 65.

Those changes, among others, would cut state spending by $425 million in the next two-year budget and slash a nearly $7 billion hole in the Plan 1 pensions for state and local governments by more than half. The Legislature sets pension-contribution requirements for state and local governments.

Gregoire said she warned labor unions she would propose changes.

"I can't pay for programs, I can't pay for their positions, their salaries, their health care. I can't pay for any of that, so I've had to go after those things that I think deservedly need to change," she said at a news conference Monday.

The Washington Federation of State Employees opposes both changes. The state Legislature would have to approve Gregoire's proposals for them to take effect.

The state is facing at least a $4.6 billion shortfall in the next budget, which will run through June 2013, and lawmakers are casting around for any savings they can find.

Other proposals outlined by Gregoire include closing a loophole that allows state employees who retire to return to work in state colleges or universities while still receiving a monthly pension.

In June, a Seattle Times investigation found that at least 40 university or community-college employees retired and were rehired within weeks, often returning to the same job without the position being advertised. That has allowed them to double dip by collecting both a salary and a pension.

The pattern of retiring and quickly returning to work has continued despite the Legislature's efforts to crack down on the practice.

Another change Gregoire called for Monday would cap the state's contribution to higher-education retirement plans at 6 percent, although individual institutions would be allowed to contribute more.

The governor's budget office said the cost-of-living increases in the Plan 1 pensions were approved by the Legislature in 1995. However, lawmakers reserved the right to amend or repeal the benefit.

The automatic increases, granted even when there is no inflation, are based on years of service. The increases currently are $1.88 per month per year of service, so someone with a 30-year career would receive $56.40 per month, or $676.80 per year. The amount increases 3 percent each year.

Gregoire said retirees receiving the minimum benefits provided by the plans still would get the automatic increases, and that the Legislature could still grant cost-of-living increases in the future.

Plan 1 pensions cover roughly 15,000 active state workers and teachers and about 90,000 retirees and survivors.

Greg Devereux, executive director of the Washington Federation of State Employees, opposes the move. "It seems pretty unfair that people up until this point have had it, and now they are going to take it away," he said.

Eliminating that benefit alone is projected to save the state and local governments more than $9 billion over 25 years. Getting rid of the early-retirement provisions would save $2.2 billion. The federation opposes that proposal as well.

State Sen. Ed Murray, D-Seattle, the new chairman of the Senate Ways and Means Committee, said he was open to Gregoire's ideas. "These are the sorts of things we need to look at, and probably do," he said.

Sen. Joe Zarelli, the ranking Republican on Ways and Means, agreed, but noted "the elimination of the COLA (cost-of-living increase), while it would certainly save money, I think it would be a large political football."

In another money-saving proposal, Gregoire said she wants to limit increases in the state's health-care costs to no more than 5 percent a year by 2014.

The state provides health insurance to more than 335,000 public employees, retirees and their family members, as well as to more than 1 million low-income children and adults. Overall, state costs have increased to more than $5 billion a year, officials said.

Gregoire wants to consolidate a majority of the state's health-care purchasing into a single agency, to achieve greater purchasing power and allow agencies to focus on their core missions.

She said she also is pushing for Washington state to become part of a pilot program that focuses on paying health-care providers based on the quality of care instead of the number of office visits. Her goal is that both state and private health costs decrease by a combined $26 billion over a decade, she said.

Gregoire said she wants to expand the use of strategies that have helped the state keep costs of its Medicaid program low, such as the increased use of generic drugs.

The Associated Press contributed to this story.

Andrew Garber: 360-236-8266 or agarber@seattletimes.com