Efficiency experts hired by the Kansas Legislature say the state could save $2 billion over the next five years by implementing their recommendations.
Consulting firm Alvarez & Marsal unveiled 105 budget recommendations to lawmakers Tuesday, including major changes to health benefits for teachers and state workers.
“I will say I was shocked when I heard the $2 billion with a ‘b’ number,” said Rep. Ron Ryckman Jr., R-Olathe, chairman of the House Appropriations Committee, upon reviewing the 260-page report.
The state could save $360 million over five years if school districts adopted a statewide health and benefits plan, the consultants said. Right now, individual districts such as Wichita offer their own benefits plans.
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The report’s executive summary called health insurance and benefits a “fast-growing part” of school districts’ budgets and said the cost presents an enormous burden.
Sen. Laura Kelly, D-Topeka, said she was not necessarily opposed to putting teachers on a statewide health plan but that she was skeptical that it would generate the savings the firm promised. “I’ll believe that when I see it,” she said.
The firm also proposed major changes to state workers’ benefits, such as moving all state workers to a high-deductible health plan to save $123.8 million over five years.
Rebecca Proctor, executive director of the Kansas Organization of State Employees, called this recommendation “incredibly short-sighted.”
“The state has an aging workforce, whose healthcare needs cannot be adequately met by a high-deductible plan,” she said in an e-mail. “State employees are already paid below-market rates. This move would only further erode paychecks and make the State an even less-attractive place to work.”
Right now, the state gives employees options for health plans with a high or low deductible.
“Personally, I just changed my family from Plan A (low deductible) to Plan C (high deductible) not even knowing that any of this was coming down the pike,” said Sen. Ty Masterson, R-Andover, the Senate’s budget chairman, when told of KOSE’s objection to the change. “When I ran the analysis for my family, it saved me money. … You know, my daughter’s diabetic, and so we have consistent year-in, year-out medical needs. It was a better plan for my family. So, I think like a lot of things in these type of situations, the consternation comes because they don’t understand it yet.”
Health, education savings
Alvarez & Marsal also proposed moving retirees off the state health plan and contracting with a private insurer to provide health coverage, a policy change the firm projected would generate nearly $60 million in savings over five years.
Mark Desetti, legislative director of the Kansas National Education Association, said the proposed changes to the health plans for state workers raised concerns about the prospect of a statewide health plan for teachers.
“If you’re going to implement plans that are worse for many teachers than the current plans – higher deductibles and so on – I’m not sure that helps you attract and retain the teaching force that you need,” he said.
However, he said, if a statewide health plan maintained benefits and lowered premiums, the union could potentially support it.
Overall, the firm is proposing $600 million in education-related budget savings over the next five years. For example, it said the state could save $40 million in five years if it adopted a statewide procurement plan for school districts.
Melissa Glynn, one of the consultants, said the firm was “acutely aware” of the sensitivity about education and education funding.
The Legislature has been dominated by bitter fights over school funding in recent years. Lawmakers plan to craft a new finance formula after repealing the old one last year.
Add revenue officers, auditors
One area where the firm proposed growing government was at the Kansas Department of Revenue. The firm recommended hiring 54 more revenue officers and 14 auditors. The firm said that short staffing at the agency had affected tax collection and that hiring more people could bring in $321 million over five years.
Among other proposals:
▪ Increase the number of prisoners participating in the Kansas Department of Corrections’ “correctional industry” program, which employs inmates to manufacture products that are purchased by state agencies, for an estimated savings of $40 million over five years.
▪ Create a centralized Office of Risk Management to oversee the state’s insurance bids, to save an estimated $170 million over five years.
▪ Consolidate offices for the Kansas Department of Transportation based on geography, to save $28 million.
▪ Have KDOT offer corporate sponsorships of road signs, rest stops, etc., to bring in an estimated $8.5 million.
▪ Close seven of the state’s 27 community development disability organizations, which contract with the state to serve disabled Kansans, to save $5 million. One of the offices recommended for closure is in Cowley County.
Masterson said the report offered a menu for lawmakers to consider during the session. “It’ll be a process of working through it and seeing what may or may not work,” he said.
He noted that Kansas has a citizen legislature and contended that outside experts were needed to identify cost savings that lawmakers would not find themselves during a typical 90-day session. The state is paying the firm nearly $2.6 million.
When it was pointed out that the state has a full-time governor and budget director, who did not previously identify these savings, Masterson responded, “It’s a legislative initiative.”