Civil Service Enforcement/Research Department

 

 

 

 

 

TO:                     Executive Board Members and Statewide Labor-Management Chairs  

 

FROM:              Thomas Cetrino, Susan Mitnick, Stephen Connolly, Jeff Waggoner, Kristie Sammons, and Michael Marinello

 

DATE:               January 25, 2008

 

RE:                    Executive Budget SFY 2008-09 – Summary of Major Provisions

 

 

STATE WORKFORCE IMPACT & FACILITY CLOSURES/ REORGANIZATIONS

 

Under the proposed SFY 2008-09 Executive Budget, the State workforce will increase by a net of 1,846 full-time equivalent (FTE) positions to 201,270 FTE positions.  It is estimated that at least 1,000 of these new positions will be in the PEF bargaining unit. Chart 1 is the Division of Budget’s (DOB) Workforce Impact Summary Report for Executive Branch agencies in SFY 2008-09 (all charts are located at the end of the memo).  It details the workforce changes for each Executive Branch and “off-budget” agencies. Overall the SFY 2008-09 Executive Budget would add 3,262 FTE positions and lose 1,416 FTE positions through attrition.

 

Based on the information in Chart 1, the following agencies have the largest net gains in positions in SFY 2008-09:

 

·         Department of Transportation: +322 FTEs, which includes 339 new State engineers to staff the new State and Local Bridge Preservation Program and 55 new FTEs to replace consultant staff in information technology, bridge inspection, and heavy equipment maintenance programs. These additional positions are offset by attritions in various programs including 22 positions eliminated due to a variety of automation efforts and administrative efficiencies for procurement, project bidding, and payroll and travel centralization.

 

·         Department of Health: +255 FTEs which includes 87 new FTEs in the Institution Management Program.

 

·         Office of Medicaid Inspector General: +227 FTEs which reflects 75 new staff and the hiring of currently authorized staff. The 75 new positions include auditors, investigators and other positions to improve the State’s ability to combat fraud, waste & abuse in the Medicaid Program.

 

·         Office of Mental Health: between +163 FTEs and +415 FTEs, up to 215 of which are targeted to support the Sex Offender Management and Treatment Act and provide mental health services in prisons.

 

·         Office of Mental Retardation and Developmental Disabilities: between +152 FTEs and +183 FTEs, all of which are targeted to develop workplace violence prevention training and investigation programs.

 

·         Division of Parole: +119 FTEs which reflects new staff for supervising parolees in the community, with a particular emphasis on sex offenders, and the expansion of re-entry services.

 

·         Department of Motor Vehicles: +114 FTEs which primarily reflects new staff to implement the Western Hemisphere Travel Initiative (WHTI). This initiative will require all travelers to present a secure document, such as a passport or other document, or a combination of documents that denote citizenship and identity when entering or departing the United States.

 

·         Department of Audit and Control: +114 FTEs including 40 FTEs for the State and Local Government Accountability Program; 39 FTEs for the Operations Program; 23 FTEs for the Retirement System for business process redesign; and 12 FTEs for other department programs.

 

·         State Education Department: +113 FTEs including 50 FTEs for the Vocational and Educational Services for Individuals with Disabilities Program, 48 FTEs for the Cultural Education Program, and 12 FTEs for the School for the Blind.

 

Based on the information in Chart 1, the following agencies have the largest net losses in positions in SFY 2008-09:

 

·         Office of Children and Family Services: -243 FTEs which reflects the net impact of closing seven youth facilities (-254), the redeployment of 23 current positions, and the planned hiring of 12 additional staff to enhance educational and community reintegration services for youth, child welfare investigations and adult protective services.  The January 2009 actions will include the closure of the Brace, Great Valley, and Auburn non-secure centers. The two Adirondack non-secure centers will be merged into one facility at a reduced capacity. The Pyramid Reception Center in the Bronx will be closed and its function relocated elsewhere in New York City. A community residential home in Gloversville that has been vacant for more than a year will also be closed. The Lansing non-secure facility will be downsized consistent with its declining population. According to the Executive Budget 238 of the 254 positions to be eliminated were filled as of December 2007.

 

·         Department of Correctional Services: -153 FTEs which primarily reflects  anticipated facility closures (-388 FTEs) and reductions in the Correctional Industries Program (-117 FTEs) offset by an expansion of mental health and re-entry programs (+352 FTEs). The Executive Budget proposes a January 2009 closure date for Camp Pharsalia, Camp Gabriels, the camp at the Mt. McGregor Correctional Facility and the Hudson Correctional Facility.

 

Chart 2 (located at the end of the memo) is derived from the Executive Budget 2008-09 Agency Presentation book and includes FTE changes in all State agencies which have employees represented by PEF, including FTE changes that occurred during SFY 2007-08.  These changes are due to the failure of the Legislature to approve various SFY 2007-08 Executive Budget proposals or to unforeseen changes that occurred in the workforce.  The value of this chart is that it allows us to see whether State agencies filed up to their authorized FTE level during SFY 2007-08.  It is important to note that Column ‘b’ in Chart 2 is the SFY 2007-08 Executive Budget’s estimate of the size of the agency’s workforce on March 31, 2008, Column ‘c’ is the SFY 2008-09 Executive Budget’s estimate of the size of the agency’s workforce on March 31, 2008, and Column ‘d’ is the SFY 2008-09 Executive Budget’s estimate of the size of the agency’s workforce on March 31, 2009.

 

Based on Chart 2 the agencies with the largest decreases between the March 31, 2008 FTE level forecasted in the SFY 2007-08 Executive Budget and the March 31, 2008 FTE level estimated in the SFY 2008-09 Executive Budget include the:

 

 

 

 

 

It is also important to note the proposed SFY 2008-09 Executive Budget includes nearly $300 million in savings in State Operations, with reductions in both personal service and non-personal service spending.  Operations savings include “hiring controls” which are defined as “not filling vacancies for non-essential positions”.  The Division of Budget (DOB) stated that the 1,416 positions scheduled for elimination through attrition is their current best guess of how many “non-essential” positions will not be filled during SFY 2008-09 after they are vacated.  In addition, DOB has included a “Statewide Estimating Adjustment” of -620 FTEs in calculating the total workforce figure of 201,270 FTEs (see Chart 1).  This means DOB expects that 620 of the positions scheduled to be added in all the State agencies will not be filled during SFY 2008-09.  DOB could easily increase the number of positions that will be lost through attrition by simply not filling more of the approximately 20,000 positions that are likely to be vacated by State employees during SFY 2008-09.  For this reason, it is important for Statewide Labor Management Chairs to get regular information from their agency management regarding the agency’s current fill level and compare it to the agency’s budgeted fill level as shown on Chart 1.

 

The Executive Budget projects that the State workforce will increase by 1,118 positions in SFY 2009-10 to 202,388 FTEs. It is projected to remain at that level through SFY 2011-12. If these projections hold true then the State workforce will increase by 6,862 FTE positions since March 31, 2007.

 

 

SUMMARY OF EXECUTIVE BUDGET PROPOSALS FOR MAJOR STATE AGENCIES

 

This section highlights the most important recommendations in the Executive Budget for the State agencies for which major changes have been proposed.  Executive Board members and Statewide Labor-Management Chairs will receive a more detailed analysis for each of their agencies in a separate mailing. 

 

PUBLIC PROTECTION AND GENERAL GOVERNMENT (S6800/A9800)

 

Department of Correctional Services

 

 

 

 

 

 

 

Division of Parole

 

 

 

 

HEALTH AND MENTAL HYGIENE (S6804/A9804)

 

Office of Mental Health

 

 

 

 

 

 

 

Office of Mental Retardation and Developmental Disabilities

 

 

 

 

 

Department of Health

 

 

 

 

 

Office of Medicaid Inspector General

 

 

 

 

 

TRANSPORTATION, ECONOMIC DEVELOPMENT AND ENVIRONMENTAL CONSERVATION (S6805/A9805)

 

Department of Transportation

 

 

 

 

 

Department of Motor Vehicles

 

 

 

Department of Environmental Conservation

 

 

 

EDUCATION, LABOR AND FAMILY ASSISTANCE (S6803/A9803)

 

Department of Labor

 

 

 

 

State University of New York

 

 

·         Includes a proposed $1 million appropriation in the Infrastructure and Technology Account, which is in the All State University Colleges and Schools Program, to expand SUNY Nursing Programs. 

·         Article VII language proposes changes that will enhance the State University of New York (SUNY) and the City University of New York’s existing flexibility in the areas of procurement and construction/property management.  Several of the provisions within this proposal will get rid of the current steps or procedures that SUNY is currently required to go through in order to purchase goods and services; lease, sell or exchange property; as well as other current contractual procedures. 

State Education Department

 

 

 

 

Children and Family Services

 

·         A SFY 2008-09 workforce of 3,862.  This is a decrease of 243 FTEs from the adjusted FTE level for SFY 2007-08 mostly due to facility closures and reductions in the Youth Facilities Program.

 

·         Closures/consolidations include:

 

 

 

CONTRACTING OUT AND CONTRACT DISCLOSURE IN THE SFY 2008-09 EXECUTIVE BUDGET

 

The Executive Budget provides detailed reporting on the State’s use of outside consulting services by State agency. Chart 3 (located at the end of the memo) outlines the SFY 2007-08 and SFY 2008-09 estimated disbursements for consulting contracts for each State agency, the estimated number of full-time equivalent (FTE) employees employed under these consulting contracts, and the average annual cost per FTE contract employee.  This chart shows that State agencies employed an estimated 11,577 FTE employees under consultant contracts in SFY 2007-08 at an estimated cost of $871.24 million or an average annual cost of $75,257 per FTE consultant contract employee.  It is estimated that the number of FTE employees employed under consultant contracts will decrease to 11,125 FTE employees in SFY 2008-09, a decrease of 452 FTE contract employees (a 4% decrease).  Consultant contract employees will be paid $825.6 million in SFY 2008-09 or an average annual cost of $74,212 per FTE consultant contract employee, a small increase over the average cost in SFY 2007-08.

 

            Chart 4 (located at the end of the memo) highlights the sixteen State agencies whose SFY 2008-09 contract employee cost will average more than $140,000 per FTE contract employee.  This list is led by the:

 

·         Department of Labor, which will pay 55 FTE consultants an average of $653,924 annually;

 

·         Office of Technology, which will pay 207 FTE consultants an average of $267,044 annually;

 

·         Insurance Department, which will pay 8 FTE consultants an average of $259,000  annually, which does not include the money the Department pays under direct pay contracts to consultant auditors who perform insurance examinations;

 

·         Department of Environmental Conservation, which will pay 159 FTE consultants an  average of $198,843 annually; and

 

·         Department of Transportation, which will pay 1,233 FTE consultants an average of $163,693 annually.

 

The detailed agency analysis spreadsheets sent to Executive Board members for the agencies they represent summarize the consultant contract information for that agency along with an average annual cost per FTE consultant employee.  The spreadsheets also note when we notice a large increase in non-personal service or contractual service appropriations in agency programs and recommend that you ask agency management for an explanation of these increases. This information should be used by agency Labor-Management Committees to get more detail on which programs in their agencies are using these consultant contracts and whether that work can be done by State employees. 

 

 

LABOR SETTLEMENT, PENSION and EMPLOYEE BENEFIT ISSUES  

 

The State’s Financial Plan funds the costs of the ratified or tentative CSEA, UUP, and DC37 contract agreements in SFY 2007-08 and SFY 2008-09 through the use of $477 million of the $1.18 billion in existing reserves set aside for this purpose. DOB estimates the General Fund costs of the tentative agreements at $140 million in SFY 2007-08, $337 million in SFY 2008-09, $510 million in SFY 2009-10, and $756 million in both SFY 2010-11 and SFY 2011-12. The current Financial Plan includes these costs and DOB states in the SFY 2008-09 Five Year Financial Plan that the settled contracts represent roughly one half of the anticipated total costs of all contracts.

 

PEF and the unions representing uniformed officers (i.e., Police Benevolent Association & New York State Correctional Officers and Police Benevolent Association) have not reached settlements with the State at this time. DOB believes the earliest any costs for these contracts could be paid would be in SFY 2008-09. These costs are not included in the current Financial Plan spending forecast, but a reserve is set aside to partially fund them. The State currently has $708 million in labor reserves remaining (i.e., not programmed in the Financial Plan) to help finance the costs of potential new settlements.  These reserves would be insufficient to fund the cost of the remaining contracts but the State will have $1.5 billion in additional reserves at the end of SFY 2008-09 if the Executive Budget is adopted as proposed.

 

The Executive Budget recommends $4.6 million in General Fund appropriations for Collective Bargaining Agreements.  This is a decrease of $15.4 million from the SFY 2007-08 appropriation. This appropriation reflects the remaining cost of prior agreements for those bargaining entities that do not have approved new contracts in place.  Costs of new collective bargaining agreements will be incorporated within separate legislation.

 

General State Charges is the fund in the budget that covers the cost of fringe benefits and certain fixed costs. Fringe benefits include: health insurance, pension benefits, Social Security and Medicare taxes, Workers’ Compensation, dental, vision and other employee benefits, and fringe benefits for State University of New York (SUNY) employees. The Executive Budget does not propose any explicit changes to State employee or retiree health insurance benefits.  

 

There are several health benefit proposals that are mentioned in various Executive Budget documents that warrant close examination.  One proposal, which may be contained in the Article 7 bill that would implement Medicaid changes, would authorize the Commissioner of Health to explore bulk purchasing opportunities to maximize the State’s purchasing power.  Another proposal is only contained in the Department of Civil Service’s Executive Budget narrative.  It indicates that the State could expect significant savings to result from an audit of benefits eligibility. The audit would ensure that State and participating municipal employees and their dependants receive only the benefits for which they are eligible. The audit is targeted to the use of health benefits by dependents. Another proposal in the Department of Civil Service’s budget narrative is cause for greater concern. That narrative states, “In January 2009, the current coverage for retirees will be converted to a contracted Medicare Part D plan to recoup greater Federal reimbursement and decrease the (State’s) GASB 45 liability by about $3 billion.  Both the State and local employers will benefit by an estimated $60 million in savings when fully implemented.” DOB’s briefing to State employee unions indicated that this initiative was “tentative” and would not be implemented unless the State could ensure that retirees would get the same prescription drug benefits.  This assurance is not contained in the Department of Civil Service’s Executive Budget narrative.  PEF is pursuing a clarification of the State’s intent on this issue.

 

A direct comparison of SFY 2007-08 and SFY 2008-09 General State Charges appropriations is difficult because of a new Medicaid restructuring initiative under which Medicaid funding for State OMH, OMRDD, and OASAS facilities are now included in these agencies’ budgets. Overall appropriations for General State Charges, after reflecting these changes, total $1.9 billion in SFY 2008-09, an increase of approximately $8 million from SFY 2007-08. This amount will be augmented by $886 million initially appropriated to the State University of New York for employee fringe benefits.  This amount will be additionally offset by $521 million appropriated to the Department of Mental Hygiene for the payment of employee fringe benefits.

 

The recommended appropriation for the State’s contribution to the retirement system in SFY 2008-09 is $936 million and is about $50 million less than the State’s contribution last year because of an increase in returns on the retirement system’s investments.  This appropriation reflects an estimated normal contribution rate of 8.8 percent of salary, and assumes a May 1 payment date.  As shown in Chart 1, the State’s pension contribution rate to the New York State and Local Retirement System is expected to decrease from 9.7 percent of salary in SFY 2007-08 to 8.8 percent in SFY 2008-09, and then increase to 9.0 percent in SFY 2009-10 and SFY 2010-11. 

 

The recommended SFY 2008-09 General Fund appropriation for the State’s employee health insurance is $1.1 billion and is supplemented by SUNY and Department of Mental Hygiene Special Revenue fund payments discussed above.  As shown in Chart 1 the State’s employee and retiree health insurance growth rate declined dramatically between SFY 2006-07 and SFY 2007-08 declining from a 10.3% growth rate to a 5.5 % growth rate.  The growth rate is projected to increase to a 9.5% from SFY 2009-10 through SFY 2011-12.  General State Charges are projected to total $3.8 billion in SFY 2009-10, $4.1 billion in SFY 2010-11 and $4.4 billion in SFY 2011-12.

 

 

Table 1

Forecast of Selected Program Measures Affecting General State Charges

Program

Actual

SFY 06-07

Estimated

SFY 07-08

Estimated

SFY 08-09

Estimated

SFY 09-10

Estimated

SFY 10-11

Estimated

SFY 11-12

Pension Contribution Rate

10.2%

9.7%

8.8%

9.0%

9.0%

9.3%

Employee/Retiree Health Insurance Growth Rates

10.3%

5.5%

5.5%

9.5%

9.5%

9.5%

 

 

 

MAJOR REVENUE PROPOSALS IN THE SFY 2008-09 EXECUTIVE BUDGET

 

The Executive Budget proposes to close corporate and other tax loopholes which will raise an additional $1.9 billion in SFY 2008-09 and about $2 billion annually through SFY 2011-12.  Many of these proposals have been advocated by PEF, the Fiscal Policy Institute and other coalitions that PEF has worked with on State revenue issues.  The proposals include:

 

·         Conforming Health Maintenance Organizations Taxation. This proposal would reclassify for-profit health maintenance organizations (HMOs) as insurance companies for tax purposes. As a result, for-profit HMOs would be subject to the premiums tax of Tax Law Section 1502-a instead of the business corporation tax of Article 9-A. HMO premiums would be taxed at the same rate, 1.75 percent, as premiums under other accident and health insurance contracts. According to the Executive Budget, since HMOs are similar in operation to traditional health insurers, and compete with these businesses, it is appropriate to treat them similarly for tax purposes. This measure will generate $247 million in SFY 2008-09 and $288 million when fully effective.

 

·         Qualified Production Activities Income (QPAI) Decoupling. Conforming New York’s tax code to the practices of 18 other states, the Executive Budget proposes to decouple the State from the Federal deduction related to qualified production activities, requiring taxpayers to add back this deduction for State tax purposes.  A multi-state firm currently could use the deduction to reduce its New York taxes without having a single production employee in the State. This measure will generate $56 million annually starting in SFY 2008-09.