Buried deep in the Senate budget proposal that lawmakers passed last week is a provision that would eliminate state-paid health retirement benefits for teachers and state employees who are hired after January 1, 2016.
“This puts the state at a major disadvantage in the recruitment and retention of state employees, teachers, and university faculty compared to other states,” said Chuck Stone, director of operations for the State Employees Association of NC (SEANC), of the Senate’s push to jettison the health retirement benefit.
First reported last Friday, the provision—which would become law only if it makes the final budget compromise that’s to be hammered out this summer between the House and Senate— has received little notice and came as one of many surprises to Senator Erica Smith-Ingram (D-Gaston).
“It takes time to peel down the layers,” said Sen. Smith-Ingram of the Senate’s 504-page budget proposal that was unveiled and voted on in a matter of days after being crafted for weeks behind closed doors.
“We’ve already set many challenges in place for teachers,” said Smith-Ingram, an educator from Northampton County. “The teaching profession is not respected in North Carolina, and [eliminating retiree health benefits] is just another indication of that.”
In many states, health retirement plans are a guaranteed benefit to public employees who often serve at a lower pay rate than what the private sector can offer.
Retired teachers and state employees currently receive health insurance plans that are funded by the state in accordance with how long they have served in North Carolina.
If a retiree puts in a minimum of ten years of service as a teacher or state employee, North Carolina’s contribution to her health plan is 50 percent. Twenty years of service gets retirees fully-paid health insurance—although everyone is on the hook for premiums.
Since 2010, retirees have seen costs associated with their health insurance plans rise considerably, said SEANC’s Chuck Stone.
“Premium surcharges and other expenses associated with the State Health Plan have occurred, resulting in a cost shift to members of more than $1,300 on average per state employee–active or retired–each year,” said Stone.
That cost increase, said Stone, amounts to more than most state employees have seen in pay raises in recent years.
Teachers, for example, saw their first significant pay raise in seven years come in 2014, once years of frozen wages had put the state at almost rock bottom in national teacher pay rankings. North Carolina ranked 46th in the nation in teacher pay in 2012, compared with sitting at the national average during the mid-2000s—and the rest of the state’s public employees haven’t fared much better.
Couple depressed wages with the notion that the state could abandon its commitment to providing state-paid health insurance to teachers and state employees who have served North Carolina for decades, and you have a difficult shot at recruiting folks to serve the state.
“And another reason North Carolina has provided good retiree health coverage to state employees is because it contributes nothing to dependent health care coverage, unlike other states,” added Stone.
The national average for large employers is to cover 73 percent of total family health insurance coverage — but North Carolina contributes zero. The average state employee has to spend $8,400 annually to provide health insurance for the rest of his or her family—nearly 25 percent of the average annual income, said Stone.
“If the senate budget proposal is supposed to represent the Carolina Comeback, I don’t know of any state employees that are going to want any part of that,” said Stone.
Future teachers and employees wouldn’t be the only ones to lose their health retirement benefits. Another small group of people would be affected as well — those who stop out of the workforce, withdraw their retirement out of the state system, then rejoin teaching or state government after January 1, 2016.
“We try to counsel folks not to withdraw their retirement,” said Stone.
But, for example, if an employee leaves her job, encounters a financial emergency and must withdraw those funds—she would not be able to get health retirement benefits if the Senate provision becomes law and she rejoins the workforce next year.
Senator Smith-Ingram, a former Boeing engineer who decided to answer a calling to serve others by becoming a high school math and science educator, says the prospect of eliminating health retirement benefits for teachers is very concerning to her.
“Because I served on the board of education in Northampton, I couldn’t teach in my district because that would be a conflict of interest,” said Smith-Ingram. “So I found a teaching job just over the border in Virginia and saw an immediate $8,000 pay raise.”
So it’s especially challenging, she says, to recruit high quality employees in the border counties like Northampton because it’s so easy to go to a neighboring state and make more money.
“And we have a retention problem too,” said Smith-Ingram. “Teachers are leaving in exodus thanks to slow to no salary growth.”
“It appears there is an all out assault on state employees,” said Smith-Ingram. “Eliminating health retirement benefits just goes along with it.”
Lindsay Wagner is the education reporter for N.C. Policy Watch.