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State analysts outline benefits costs: health insurance and PERSI drive budgetary pressure
Summary
Legislative budget analysts briefed the committee on state employee benefits, noting benefits account for about a quarter of personnel costs; the governor proposed increasing health appropriation per FTP and PERSI employer contribution rates remain a material share of benefits.
Frances Lippitt, budget and policy analyst with the Legislative Services Office, gave the committee an overview of the state's benefits budget and how it ties to personnel costs.
"Health insurance accounts for nearly half of all benefits costs and is budgeted based on an appropriation set per FTP," Lippitt said, describing the mechanics analysts use to budget benefits.
Lippitt explained that benefits (health, PERSI, Social Security/Medicare, life insurance, workers' compensation) accounted for about 26.6% of personnel cost expenditures in FY2024. Variable benefits — the employer share of pension and payroll‑tax obligations — currently total roughly 23% of an employee's salary. When health insurance is included, total benefits as a share of gross salary differ by pay level: an employee earning $20 per hour requires roughly 58% added for benefits costs in the budget example Lippitt provided; an employee at $40 an hour requires about 40%.
On health insurance appropriations, Lippitt told the committee the actuarial target and the governor's recommendation differ slightly. Using a 10% reserve minimum the Legislative Services Office calculated an appropriation of $13,960 per FTP for FY2026; the governor recommended $14,300 per FTP to cover 100% of plan costs in 90% of scenarios. Lippitt said that increase equals about $56.6 million in the general fund.
She also reviewed PERSI employer contribution rates (11.96% for general members, 14.65% for public safety, 13.47% for teachers) and said employer contributions totaled about $141.5 million in FY2024. The committee was reminded that benefit decisions are made through the Joint Change in Employee Compensation (CEC) process; the CEC committee takes testimony and presents compensation recommendations to JFAC for incorporation in appropriations.
Committee members asked clarifying questions about reserve levels and the tradeoffs between drawing down reserves versus increasing the appropriation to stabilize premiums.
