Legislative Report

Report 09-08
March 20, 2009

State Health Plan Bill Delayed

Consideration of Senate Bill 287, the bill that appropriates funds and modifies the benefit structure of the State Health Plan, was delayed this week. The bill was removed from the Senate calendar three times during the week and now is scheduled for consideration by the full Senate on Tuesday, March 24.

The primary cause of the delay is the ongoing opposition of pharmacists across the state to the proposed changes in the bill affecting maintenance prescription drugs. Members of the State Health Plan who use maintenance drugs on a continuing basis could obtain these prescriptions either through a local pharmacist who participates in the Medco network or through a Plan-approved mail order system at the co-pay set by the Plan. Members would have the option of using non-network pharmacies but would pay 50% of the Plan’s gross allowed cost for the maintenance drug.

The proposed Maintenance Medication Extended Retail Pharmacy Network described above is projected to save the State Health Plan more than $90 million over the biennium.

The independent pharmacists argue that the amount they would be allowed to charge the Plan for various maintenance drugs would not cover their costs.

The projected savings in the first year of the biennium of $36.4 million is part of the financing plan to close the $850 million funding gap that the Plan faces in 2009-10. The other components of the financing plan include: increased state appropriations and contributions ($552.8 million), member benefit reductions (member out-of-pocket costs of  $144.2 million), and increased premiums for dependent coverage ($146.2 million). Any reduction in the savings derived from the pharmacy network would have to be made up through one of the other components, likely increasing member costs.

Governor Perdue Presents Budget Proposal

The proposed state budget for the 2009-11 biennium was presented on Wednesday. The subcommittees of the Appropriations Committee have begun to review the Governor’s proposals.

As anticipated, the budget does not provide either raises for state employees or a COLA for retirees. In fact one component of the plan to reduce state spending is a two-year freeze on longevity pay for active teachers and state employees. (Please note that the Governor’s budget has no impact on retired local governmental employees who are scheduled to receive a 1% COLA effective July 1, 2009 from available gains in the Local Governmental Employees’ Retirement System.)

The Governor did include funds in the budget to address the immediate deficit in the Teachers’ and State Employees’ Retirement System (TSERS). In January, the state’s actuary had reported that TSERS had a $29 million deficit as of December 31, 2007. Governor Perdue’s budget includes appropriations to cover this amount.

Senate Committee Actions

The Senate Committee on Pensions, Retirement, and Aging met on Wednesday. Committee actions on bills of interest are summarized below.

Senate Bill 558: Retirement System COLAs

This bill would provide a COLA to retired teachers, state employees, and members of the judicial retirement system equal to the raise granted by the General Assembly to state employees, but not to exceed 1%. The bill received a favorable report and was re-referred to the Appropriations Committee.

Senate Bill 204: Retired Nurses Return to Work

This bill would allow retired state nurses to return to work as nursing instructors in the Community College System or University System for up to three years with earnings not subject to the 50% earning cap. The bill received a favorable report and will go to the Senate floor next week.

House Committee Actions

The House Committee on Pensions and Retirement met this week and gave favorable reports to two bills. These bills are summarized below.

House Bill 429: Retirement System COLAs

The Committee gave approval to an amended version of this bill that now is identical to Senate Bill 558 (described above).

House Bill 549: Increase Fire and Rescue Pension

This bill raises the monthly pension for retired volunteer firefighters and rescue squad workers from $170 to $173. The approved bill was re-referred to the Appropriations Committee.

Bill Introductions

Senate Bill 658: Modify Supplemental Retirement Board
(Primary Sponsor – Senator Atwater)

This bill would require that one of the six members who are appointed by the Governor to the nine-member Supplemental Retirement Board of Trustees be a retired governmental employee with experience in finance or investments. The bill was sent to the Senate Committee on Pensions, Retirement, and Aging.

Senate Bill 632: Treasurer’s Governance and Transparency Act
(Primary Sponsor – Senator Nesbitt)

This bill expands the Investment Advisory Committee from the current five to seven members. The committee is appointed by the State Treasurer who serves as chairman ex officio. Four of the members are selected from the general public and must have experience in areas relevant to the administration of a large diversified investment program, including but not limited to: investment management, securities law, real estate development, or absolute return strategies. The two remaining members are chosen from  the members of the Retirement Systems Board of Trustees.

Senate Bill 632 is identical to House Bill 556 and has been referred to the Senate Committee on Pensions, Retirement, and Aging.