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Health insurance and PERSI make up large share of personnel costs; LSO outlines governor’s health appropriation per FTP
Summary
Legislative Services Office staff presented that benefits account for roughly one‑quarter of personnel spending; health insurance is nearly half of benefits costs. The governor proposes $14,300 per FTP for health insurance (up from $13,960 per FTP actuarial target), a change LSO estimated at $56.6 million.
Frances Lippitt, budget and policy analyst with the Legislative Services Office, briefed the committee on how employee benefits are budgeted and how those costs factor into agency personnel budgets.
"Benefits generally account for about a quarter of the state's overall personal cost expenditures," Lippitt said, explaining that health insurance, PERSI (the state pension), Social Security/Medicare and other items are combined when agencies budget staff costs.
Key points presented: - Health insurance represents nearly half of benefit costs and is budgeted as an appropriation per full‑time position (per FTP). - Variable benefits (PERSI employer contributions, Social Security, Medicare, life insurance and workers' compensation) are budgeted as a percentage of salary. Lippitt said the state currently budgets about 23% of an employee's salary for variable benefits. - The governor's recommendation for FY2026 would set a per‑FTP health appropriation at $14,300. Lippitt summarized that the actuarial recommendation to cover plan costs in 90% of cases would be lower (page cited the $13,960 figure), and the governor's per‑FTP number is more conservative; LSO estimated the governor's per‑FTP change at $56.6 million in total cost. - PERSI employer contribution rates cited in the briefing were 11.96% for general members, 14.65% for public safety employees, and 13.47% for teachers (LSO figures for FY2025).
Lippitt noted that fringe and benefit costs vary by salary: lower hourly wages have a higher percentage of total compensation consumed by benefits because many benefit charges are fixed percentages or per‑FTP appropriations.
Senator Wintrow asked about the fiscal rationale for the governor's choice to appropriate at $14,300 per FTP rather than relying more on plan reserves; Lippitt said the higher appropriation provides stability and reduces reliance on drawing down plan reserves in the near term.
Why it matters: employee benefits comprise a material portion of state personnel costs; changes in health insurance appropriations or PERSI rates can materially affect agency budgets and the overall general fund maintenance calculation.
